Labour’s first year: A look back and what’s next for investors

It’s now just over a year since Labour returned to power. Since then, it’s been trying to balance big economic plans with a tight grip on public finances – keeping spending in check while stepping up investment in areas like infrastructure and defence.

For investors, that’s created a fairly steady backdrop overall, even as some questions remain – particularly around tax and long-term savings reforms.

In the article below, we look back at what’s happened so far – from Labour’s first Budget and its approach to public spending, to how markets have reacted. We’ll also touch on any recent announcements that could matter to investors, and highlight what to watch for in the run-up to the Autumn Budget – including potential developments around ISAs, tax and long-term savings policy (especially in light of recent comments made by the Chancellor Rachel Reeves).

In recent days, during the Mansion House speech, the Chancellor laid out her plan to get more people to invest by reforming a system which has over-emphasised risk and left millions of people missing out on the benefits of investing.

The government is developing a new initiative to improve the support available to investors. This includes a reform of financial advice and guidance and a multi-year educational campaign on the benefits of investing, which is planned to launch next April.

The Spring Statement in March gave investors a better sense of Labour’s approach. Chancellor Reeves stuck to her commitment not to borrow for everyday spending – though the government still found room to invest in areas like defence, housing and transport.

Some spending cuts were announced too, particularly to welfare and overseas aid. Meanwhile, the Office for Budget Responsibility (OBR) – the government’s independent forecaster – downgraded its growth forecast for the UK.

But overall, the message was clear: this is a government trying to take the long view – investing where it can, but keeping the purse strings tight.

Markets had a fairly calm reaction to the Spring Statement, though there were a few jitters. Sterling slipped slightly after the OBR downgraded the UK’s growth forecast to 1% – a reminder that investors pay close attention to economic signals.

Inflation is still a worry too, with forecasts suggesting it might rise to around 3.8% this summer before gradually falling back – potentially settling near the Bank of England’s long-held 2% target by mid-2026.

Even with a few bumps after the Budget – some triggered by US President Donald Trump’s proposed tariff plans – the FTSE 100, the UK’s main stock market index, has still climbed about 8% since Labour took office and hit an all-time high last week.

Government bonds also welcomed the Budget news, with yields edging lower as markets took confidence from Labour’s disciplined approach to public finances – although more recently they’ve shown some volatility amid ongoing global uncertainties.

In the October 2024 Budget, Labour changed the rules allowing the government to borrow a bit more for public service investments, while still planning to reduce overall debt over time. That means more government bonds are being issued, which can usually push yields higher as investors expect a bit more return.

But because Labour’s approach feels reasonable and steady, markets have mostly kept their cool. Bond yields have nudged up slightly, but overall, since Labour returned to power, investors seem fairly confident about what’s ahead.

Want to understand how government bonds work? Read our quick guide.

ISAs have long been a popular way to save and invest without paying tax on the growth or dividends.

The Chancellor stated she “will continue to consider further changes to ISAs” and we expect any update on this review to be in the Autumn Budget, expected in late October or early November. There’s been no suggestion the £20,000 annual limit will change, however. That is currently frozen until 2030.

While the government says key rates like income tax and VAT won’t rise, a few other ideas are in the mix. It’s likely that government will need to consider tax changes to raise revenue for spending commitments. This could include keeping income tax thresholds frozen for longer – which could see more people pulled into higher tax bands as they get salary increases – and simplifying pension tax relief.

But we might have to wait until the Autumn Budget to see if any of these ideas actually become policy.

It’s always a good idea to regularly check on your investments and whether your portfolio is on track to meet your goals. We’ll keep you informed of changes which could impact your plans.