Consumer Manifesto. Personal finance priorities for the next Government

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1 Personal finance priorities for the next Government May 2017

2 Foreword It has been two years since we published our to coincide with the 2015 General Election. Since then, the political and economic landscape has completely shifted; Britain has voted to leave the EU, we have a new Prime Minister and new opposition leadership. The UK now faces a snap General Election, and one in which fairness, the cost of living and now financial security are all key issues. How the electorate feels about each political party, and how aligned they perceive them to be with their personal finance priorities, could be crucial in determining which way the polls swing on 8 June. All parties vying for power must recognise the effort they need to make in order to persuade the British people that they can trust their vision for the country and that they can deliver policies which will make a material financial difference to the millions of households struggling to make ends meet. Our 2015 found that many people felt worse off than they did in 2010 at the beginning of the Coalition Government. Two years on, the political and economic landscape may have changed, but people remain dissatisfied at the Government s attitude to personal finance issues. In this report, we sought to explore how people view their personal financial situation now versus then; whether they feel better or worse off, who they hold responsible for changes to their financial wellbeing, which political party and party leader - they trust to improve their situation, and the concerns they have as the UK prepares to withdraw from the European Union. Our study, based on the views of more than 6,000 UK adults, sets out to address these questions. All political parties should show some concern at the findings. A substantial number of people feel poorer now than they did two years ago. The results indicate a strong feeling of disillusionment and mistrust towards the Government, its policies, and the ability of political parties and politicians to genuinely understand and positively influence the finances of everyday people something they attribute to political failure. However, this study is not only retrospective. The report also gives a clear indication of people s priorities for the next Government and where they would like to see real changes made. Preventing the cost of energy from rising, increasing state aid to help with elderly care and raising the personal tax allowance are just some of the initiatives which consumers believe would help them better make ends meet. A party looking to win in June could not only gain significant traction among voters by addressing these issues, but could affect real, positive change by making their promises a reality once in power. Jesper With-Fogstrup, Director comparethemarket.com 1

3 Contents Key findings How consumers feel now compared to May Financial insecurity who is to blame?...6 Does the next Government have the ability to enhance our financial wellbeing?...7 The biggest factors which have impacted personal finance since Consumer pessimism: The potential impact of the EU referendum...9 Conclusion Our 6 point plan to help you look after the pennies

4 Key findings According to more than 6,000 UK adults: Personal Finance Priorities The top three personal finance priorities for the next Government are: A freeze in energy price hikes (22%) An increase in the personal tax allowance (18%) More state aid in meeting elderly care costs (14%) Over a fifth of people (24%) agreed that falling inflation had the biggest impact on their personal finances over the last two years, followed by the increase in the personal tax allowance (23%) and lower fuel prices (20%). 79% of people expect the cost of insurance to increase over the next year. Almost half of people polled (46%) thought they would be more likely to need to spend money on private insurance to protect themselves in the event that they need to leave the workforce due to illness or injury, if the next Government were to make further cuts vs More than a third (34%) said that they were either slightly or significantly worse off since the last election. Only 19% said they feel better off than they did at the last election. 87% of people attribute feeling worse off financially to policies implemented by the Government. 41% of people either feel slightly or significantly less financially secure/protected than they did in May One third of people (33%) believe that the financial security of the UK is dependent on Government policies relating to the UK economy, compared to the 20% who believe that it is more dependent on global economic factors. Over half of consumers (54%) do not think that the next Government will have the ability to introduce measures which will enhance personal financial health. Who s the leader? Almost a quarter of people (23%) said that they don t trust any of the major political parties to protect or improve their financial wellbeing. A Conservative Government (33%) only narrowly beats a Labour Government (27%) in terms of which would be most trusted to improve people s personal finances. When asked to what extent the leaders of major UK parties understand the average person s financial worries, all representatives scored poorly. Only 31% of people thought Theresa May understood their personal finance anxieties well, just higher than the amount of trust placed in Jeremy Corbyn (28%). Less than one in five respondents (19%) believe that their local MP has their best interests at heart. Brexit Begins 45% of people believe they will be financially worse off as a result of Britain leaving the EU, with over a fifth (21%) saying they will be significantly worse off a more pessimistic outlook to consumers views in 2015, when 35% said they would be worse off. Nearly two thirds (62%) said that they did not want a second Referendum once the terms of Brexit have been agreed. 3

5 Personal finance priorities for the next Government When looking at people s top personal finance concerns for the next Government, action on energy prices ranks highest amongst the 6,000 people we asked. More than a fifth (22%) of consumers said that preventing energy price hikes was their number one priority. When this survey was undertaken in May 2015, Energy price freezes were second on the list, just behind an increase in personal tax allowances, which has fallen to second place this year with 18% listing an increase as their top priority. Increasing state aid in meeting elderly care costs came third in the list of the top personal finance priorities at 14%. The current national crisis around elderly care, and how to fund it, has prompted both parties to address the issue, with the Conservatives rumoured to be considering tax breaks for elderly care, while Labour has vowed to give Britain s unsung hero carers a pay rise. Simplification of tax codes was the fourth highest priority. Tax simplification was a top priority for 7% of people, with that number rising to over one in ten (12%) for year olds. TOP FIVE PERSONAL FINANCE PRIORITIES FOR THE NEXT Government 2017 Rank Priority Percentage of respondents A freeze in energy price hikes 22% 2 1 Increase in personal tax allowance 18% 3 3 More state aid in meeting elderly care costs 14% 4 4 Tax simplification 7% 5 5 Not raising higher rate of income tax 5% WHAT WOULD YOUR NUMBER ONE PERSONAL FINANCE PRIORITY BE FOR THE NEXT Government? A freeze in energy price hikes 2. Increase in personal tax allowance 3. More state aid in meeting elderly care costs 4. Tax simplification 5. Not raising higher rate of income tax 6. Increase in childcare allowance 7. Better advice around pensions 8. Raising the inheritance tax threshold Jesper With-Fogstrup, Director at comparethemarket.com, said: The past two years has been a tricky time for energy customers, particularly those who are floundering on Standard Variable Tariffs who have faced a series of price hikes from the Big Six and other providers. People are clearly worried by the cost of energy and any initiative which seeks to ease the burden of paying for gas and electricity will surely be welcomed by voters. A note of caution, however the Conservatives well-intentioned price cap on energy is not necessarily the same as a freeze in energy price hikes. Indeed, they could be quite different. Depending on how it is implemented, there is a danger that a cap could have the opposite effect, with heightened levels of consumer inertia and reduced competition therefore pushing prices up across the board. Increasing state aid for elderly care ranks high up the list of people s financial worries. The cost of care for the elderly is perceived as a national crisis; recent figures found that 1.2 million elderly people are not receiving the help they need, highlighting just how stretched carers are. With an increasingly aging population, issues such as elderly and health care have become key political battlegrounds, particularly given that the older you are, the more likely you are to vote. Our research makes clear that these are issues the public cares about, and whoever inherits power in June would be wise to take these views seriously. 4

6 How consumers feel now compared to May 2015 When analysing consumers perceptions around their personal finances, the research found that many people feel worse off now compared to the last General Election in May Despite a healthier economy, more than a third (34%) said that they were either slightly or significantly worse off since the last election, while almost half (47%) said that they feel no change in their personal financial situation. Only 19% said they feel better off than they did at the last election, which is significantly down from 30% compared to the last time this survey was undertaken in May TO WHAT EXTENT DO YOU FEEL BETTER OR WORSE OFF THAN YOU DID AT THE LAST General Election? Better or worse off than May 2015 Percentage NET: Worse off 34% Significantly worse off 8% Slightly worse off 26% NET: Better off 19% Significantly better off 3% Slightly better off 16% The same 47% More people also feel less financially secure compared to May 2015, with 41% of people either agreeing that they feel slightly or significantly less secure. With the welfare state under ever-increasing pressure, only 5% responded that they feel more secure compared to their position at the time of the last election in May Just over half (54%) of respondents felt that their financial security was about the same compared to the last election. Almost half of people (46%) thought they would be more likely to need to spend money on private insurance to protect themselves in the event that they need to leave the workforce due to illness or injury, if the next Government were to make further cuts. WITH THE WELFARE STATE UNDER EVER-INCREASING PRESSURE TO CUT COSTS, DO YOU FEEL MORE OR LESS SECURE/PROTECTED THAN MAY 2015? More or less secure than the last election Percentage NET: Less secure/protected 41% Significantly less secure/protected 18% Slightly less secure/protected 23% NET: More secure/protected 5% Significantly more secure/protected 1% Slightly more secure/protected 3% About the same 54% Jesper With-Fogstrup, Director at comparethemarket.com added: There is an overwhelming view that, despite the generally healthy economic data that has been published, people s finances have not improved over the past two years. Both in terms of wealth and financial security, the general public broadly believes that the past Government has had either no impact or a negative impact on them. Our recent research found that household bills rose by almost 200 in 2016, which further highlights the challenge that the next Government faces in ensuring financial stability by reducing everyday costs like energy and insurance. The findings also show the impact of recent austerity measures on people s sense of financial security. The pressure on the welfare state and cuts to funds available to UK citizens in the event of illness or injury mean that a large number are now considering taking out private insurance to protect themselves against loss of income from not being able to work. 5

7 Financial insecurity who is to blame? Consumers feel worse off compared to the last election. They largely hold the current Government responsible. Almost half (47%) of respondents said that their feeling financially worse off was to a large extent down to policies implemented by the Government, while 39% said to a small extent. These numbers significantly drop when looking at those who feel financially better off as a result of policies implemented by the current Government. Only one in ten (11%) said that to a large extent they attributed their feeling better off to Government policies, while 36% shared the sentiment but to a small extent. With 87% of people blaming the Government for their financial hardship, there is a clear perception that the country s leadership and policies are seriously impacting people s finances. As a result, people are less willing to acknowledge politics as having made a positive difference to their pockets. TO WHAT EXTENT DO YOU ATTRIBUTE YOUR FEELING BETTER OFF FINANCIALLY TO POLICIES IMPLEMENTED BY THE Government? Better off thanks to the Government? Percentage Not at all 53% A small extent 36% A large extent 11% NET: Any extent 47% TO WHAT EXTENT DO YOU ATTRIBUTE YOUR FEELING WORSE OF FINANCIALLY TO POLICIES IMPLEMENTED BY THE Government? Better off thanks to the Government? Percentage Not at all 13% A small extent 39% A large extent 47% NET: Any extent 87% Jesper With-Fogstrup, Director at comparethemarket.com said: People are displaying a slight contradiction here the Government has not been credited for improving some people s financial wellbeing, while they have been blamed for some of the public s financial woes. Clearly, the next Government faces a challenge in communicating its consumer finance credentials to the people. The fact that 87% partly blame the Government for feeling worse off indicates a broader disillusionment with the political approach to the financial situation of the British people. Ultimately people don t believe that politicians can help them improve their financial situation. 6

8 Does the next Government have the ability to enhance our financial wellbeing? Whichever party takes power in Westminster on 8 June, they will struggle to convince the electorate that they can introduce measures to improve their financial well-being. Over one third of people (33%) believe that the financial security of the UK is dependent on Government policies relating to the UK economy, compared to the 20% who believe that it is more dependent on global economic factors. However, over half of consumers (54%) are not convinced that the next Government will have the ability to introduce measures which will improve personal financial health. This distrust is not completely party neutral. When asked which party is most trusted to introduce measures to protect or improve financial well-being, over a fifth (23%) of people said that they don t trust any of the major political parties to protect their interests the third most popular response. A Conservative Government (33%) only narrowly beats a Labour Government (27%) in terms of which would be most trusted to improve people s personal finances. WHICH UK-WIDE POLITICAL PARTY WOULD YOU TRUST MOST TO INTRODUCE MEASURES WHICH WILL PROTECT OR IMPROVE YOUR FINANCIAL WELL-BEING? Conservative 33% Labour 27% None of the above 23% Liberal Democrat 7% UKIP 7% Green 3% Similarly, many people do not feel that the current political leaders identify with their concerns. When asked to what extent the leaders of major UK parties understand the average person s financial worries, all representatives scored poorly. Only 31% of people thought Theresa May understood their personal finance anxieties well, a fraction higher than Jeremy Corbyn (28%). Trust in these leaders was far greater than in Tim Farron (12%), Caroline Lucas (10%) and Paul Nuttall (7%). Conversely, a far greater number of people thought that the current political party leaders fail to understand their financial concerns, with all leaders scoring 40% or higher on this metric. This distrust extends beyond the general into local elections. Almost one in five people we spoke to (19%) believe their local MP has their best interests at heart, with 49% saying they actively do not think their MP has their best interests at heart. TO WHAT EXTENT DO THE FOLLOWING PEOPLE UNDERSTAND YOUR CONCERNS AROUND YOUR PERSONAL FINANCES? Well Badly Theresa May 31% 42% Jeremy Corbyn 28% 45% Tim Farron 12% 45% Paul Nuttall 7% 51% Caroline Lucas 10% 40% Jesper With-Fogstrup, Director at comparethemarket.com, said: These findings show that no political party or leader has convinced the electorate that they understand their money concerns. There is clearly work to be done in communicating how parties would improve the financial situation of UK households. Voters are currently fairly unimpressed by the current efforts made by political parties to tell them how voting one way or the other will impact their wallets. One of the most striking aspects of this research is the clear sense of detachment that many people feel from those they elect to represent them. The majority of consumers feel the next Government, whoever is elected, will be unable to introduce measures which will improve their personal finances, whilst only a small minority think that the various party leaders understand the financial concerns of ordinary people or even that their local MP has their best interests at heart. The current distrust towards political positions on personal finance means consumers are looking to take control of their own personal financial situation. Our research suggests that the number of people taking out private insurance could significantly increase if further changes to state benefits are made. However, given that 79% of people expect the cost of insurance to increase over the next year, they will have to make further savings elsewhere in order to keep costs down. 7

9 The biggest factors which have impacted personal finance since May 2015 When asked which economic or political factors have made the biggest difference to their personal finances since the last General Election, over a fifth of people (24%) agreed that falling inflation had the biggest impact, followed by the increase in the personal tax allowance (23%) and lower fuel prices (20%). TOP 5 BIGGEST ECONOMIC OR POLITICAL FACTORS WHICH HAVE MADE A MATERIAL DIFFERENCE TO PEOPLE S PERSONAL FINANCES SINCE THE LAST General Election No. Factor Percentage of respondents 1 Low inflation 24% 2 Increase in personal tax allowance 23% 3 Lower fuel/petrol prices 20% 4 Energy tariffs freezes 15% 5 Low mortgage repayment rates (e.g. interest rates) 12% Biggest factors that have influenced people s personal finances since May % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Low inflation Increase in personal tax allowance Lower fuel/petrol prices Energy tariffs freezes Low mortgage repayments rates (e.g. interest rates) Introduction of National Living Wage None of these Jesper With-Fogstrup, Director at comparethemarket.com, said: There is a consensus that the biggest factors that have made a material difference to people s personal finances have not been political but economic. Low oil prices and historically low interest rates have put more pounds into people s pockets. These factors are influenced by a range of global issues, many of which are out of the Government s control. However, our research shows that further increases in the personal tax allowance, as well as measures to prevent a rise in energy prices, remain key consumer priorities where the next Government can make a real difference. 8

10 Consummer pessimism: The potential impact of the EU referendum On 24 June 2016, the UK voted for Brexit by 52% to 48%. Since then, we have seen a new Conservative leadership take power and, having triggered Article 50, Prime Minister Theresa May s team is set to begin negotiations with Brussels to take the UK out of the European Union. Before the last General Election, comparethemarket.com s 2015 found that 38% of people thought they would be better off outside the EU, with 18% saying they would be significantly better off. However, people s attitudes appear to have changed towards Brexit since the Referendum, with a more pessimistic outlook. When asked whether they thought that leaving the EU would benefit them financially, the majority of people now disagree, with over a fifth (21%) believing they will be significantly worse off as a result of leaving the EU. TO WHAT EXTENT DO YOU THINK BRITAIN WILL BE FINANCIALLY BETTER OR WORSE OFF AS A RESULT OF LEAVING THE EU? Net worse off 45% 35% Significantly worse off 21% 18% Slightly worse off 24% 17% Net better off 36% 38% Significantly better off 14% 18% Slightly better off 22% 20% No impact 12% 12% Don t know 8% 15% Although pessimistic about the economic outcome of Brexit, people appear to have accepted the decision and seem willing to move on. Nearly two thirds (62%) said that they did not want a second Referendum once the terms of Brexit have been agreed. Jesper With-Fogstrup, Director at comparethemarket.com, adds: It seems Brexit has made many people extremely nervous about their personal finances; our research shows that 53% of people want to see the next Government prioritise Brexit negotiations. The pound s crash on the day of the vote is putting pressure on the price of everyday goods and made holidays abroad more expensive. With the terms of Brexit still unclear, it remains to be seen what the full economic impact on UK households will be. After two General Elections in as many years, an EU referendum, not to mention a referendum on Scottish independence, the UK public seems to be suffering from voter fatigue. For many, a snap vote seems one too many ballot boxes to tick. This is shown by the fact that 62% of people say that they do not want a second referendum on the terms of the EU exit. It appears to be a vote for no more referendums! 9

11 Conclusion What are consumers telling us? There is a deep sense of disillusionment towards the Government from consumers. People fundamentally don t appear to trust that politicians understand or have the ability to protect or improve their financial situation. Despite a year of historically low interest rates, inflation and fuel prices, many people in the UK feel poorer than they did before the last General Election. They struggle to believe that those in power have their best interests at heart. Widespread economic uncertainty in the wake of the Brexit vote, both on a domestic and more global scale, has left people anxious as to how the UK s new position will impact them financially in the long term. Moreover, people appear to place the blame squarely at the door of Downing Street. The UK does not trust the current Government to deliver on their financial promises. Our research shows that the Conservatives are favoured slightly over the other parties when it comes to protecting people s financial interest, but there is still a sense that when the UK goes to the polls, they will be picking the best of what they view as a bad bunch when it comes to personal finances. What can the next Government do to help consumers? Whilst Brexit negotiations will dominate the political agenda over the next two years, and probably beyond, whoever wins the election in June will need to remember the everyday, domestic concerns of their electorate and should look to deliver measures which will have a material, positive impact on the nation s financial well-being. The first step for any new Government must be to truly listen to the UK s priorities and then prove that their promises are more than rhetoric by delivering on these measures. Consumers are quick to blame those in power for their financial troubles and, in turn, are slow to acknowledge policy measures which improve their lives. Tackling concerns around the cost of living will go a long way towards building trust amongst voters What can consumers do to help themselves? This sense of frustration and disappointment towards politicians to address their financial needs is galvanising people to take money matters into their own hands. Though they cannot rely on the Government to enhance their financial well-being, consumers can take action to cut everyday costs. Spending a small amount of time to review energy bills, insurance, mortgages, supermarket choice, as well as other costs can result in savings of hundreds, if not thousands, of pounds every year. Voting can make a difference. Despite being dissatisfied with politics in general, most people in our research still planned to vote. Heading to the ballot box is the only way to ensure your voice is heard. All the major parties will shortly publish their manifestos so it is a good idea to read them and decide which one you think will work to address and rectify your financial concerns. Jesper With-Fogstrup, Director comparethemarket.com 10

12 Our six point plan to help you look after the pennies: 1. Manage your debt The rate of interest people pay on their debt will generally be greater than what they will receive from any savings product. Whilst always keeping a buffer, consumers should use their savings to pay down as much debt as possible. Moreover, people appear to place the blame squarely at the door of Downing Street. The UK does not trust the current Government to deliver on their financial promises. Our research shows that the Conservatives are favoured slightly over of other parties when it comes to protecting people s financial interest, but there is still a sense that when the UK goes to the polls, they will be picking the best of what they view as a bad bunch when it comes to personal finances. 2. Buy your insurance at the right time Check your renewal quotes carefully. Do not simply automatically renew your home, car and travel policies with your current provider. Be sure that you are getting the best deal and the best price by comparing offers. Motorists should consider switching their car insurance three weeks before the renewal date to take advantage of the optimal saving. By switching at the timeliest moment, our research shows that consumers could stand to save 349 on motor insurance over the course of the year. 3. Keep tabs on your energy tariffs and consumption Irrespective of any changes to the pricing around Standard Variable Tariffs, which could come after the election, switch your energy provider regularly, as this will almost certainly result in meaningful savings. If you use a smart meter, take regular readings to check your consumption and inform your energy provider. Remember that many energy providers are committed to switching you over to their tariffs within 21 days. 4. Kill those zombie accounts Many people have money lying untouched in zombie accounts, as consumers forget about the old accounts they no longer use. But these can contain cash which could be working harder elsewhere. Research we ve previously conducted suggests that each of these accounts holds an average of 141; this equates to 1.2 billion across the UK. Whilst we are in a low interest rate environment, there are still some competitive current account offers available on the market. It is worth regularly reviewing your accounts to see if you could get a better deal or interest rate elsewhere. 5. Watch out online Change your passwords regularly, especially when banking online, as cyber criminals will take any opportunity to strike. Consider making your passwords more complex through the use of upper and lower case letters and numbers. Our research shows that people have an average of 600 stolen from online accounts when they are hacked. 6. Check your terms and conditions Read policy documents carefully to ensure your insurance covers a range of scenarios, from taking valuables out of the home to going bungee jumping on holiday. Terms and conditions can be long and verbose but failure to read them could result in you not being covered if you need to make a claim. Methodology The findings are based on an independent survey, conducted by Populus, the research house, of more than 6,000 UK adults. The poll was undertaken between 26 April and 5 May

13 About comparethemarket.com comparethemarket.com was launched in 2006 and has grown rapidly over the past eleven years to become one of the UK s leading price comparison websites. comparethemarket.com provides customers with an easy way to make the right choice for them on a wide range of products including motor, home, life, travel and pet insurance as well as utilities and money products such as, credit cards and loans. comparethemarket.com actively selects its brand partners, working with the best and most trusted organisations to ensure quality service to consumers. comparethemarket.com is a trading name of BISL Limited. BISL Limited is authorised and regulated by the Financial Conduct Authority. Registered Address: Pegasus House, Bakewell Road, Orton Southgate, Peterborough, PE2 6YS. Registered in England number