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From the Queen’s Speech to the next election: what now for the government’s agenda?
From the Queen’s Speech to the next election: what now for the Government’s agenda?

Archive for the ‘Policy Risk Analysis’ Category

Building safety regulations: what to expect from the next phase of reforms

With the return of Parliament from its summer recess, the Building Safety Bill has entered its Committee Stage in the Commons. This marks the latest phase of the government’s plans for far-reaching reform of building regulations. The plans – born of the tragedy of the Grenfell Tower fire – are likely to result in a significantly different operating environment for the construction industry;  investors in the sector will need to pay close attention to the proposals, and the changes are also likely to present a number of opportunities in related sectors.

The fire at the 24-storey Grenfell Tower on 14 June 2017 claimed the lives of 72 people, with dozens more seriously injured. Combustible cladding surrounding the building was found to have exacerbated the disaster, allowing the flames to spread and engulf the tower. As a result, the principal focus of the government’s funding initiatives to date has been to ensure the removal of both aluminium composite material (ACM) cladding and other combustible non-ACM claddings from high-risk buildings. £5 billion has been allocated to cladding-removal schemes, including:

Buildings under 18m tall but over 11m, with a lower safety risk, have access to protection from the costs of cladding removal via long-term, low-interest, government-backed financing arrangements, which will see no leaseholder pay more than £50 per month for cladding removal works. Leaseholder groups have voiced their opposition to leaseholders being liable for the removal of cladding and – while the government has not indicated it will change its approach – it remains under considerable political pressure to do so.

The Hackitt review found widespread shortcomings in current building regulation

The Grenfell Tower disaster has also precipitated a comprehensive review of fire safety and building regulations, led by former Chair of the Health and Safety Executive (HSE) Dame Judith Hackitt. The recommendations of that review have formed the basis for the legislation which the government subsequently introduced.

The Hackitt review published its final report in May 2018, having found a “system failure” in the current regulatory regime. The report found that:

As a result, the review recommended a new, overhauled regulatory framework, designed to be simpler, provide stronger and clearer oversight of dutyholders, and provide more robust means for residents to raise safety concerns than under the previous system. The review recommended that initial focus of this new regime be on multi-occupancy higher-risk residential buildings (HRRBs) or 10 storeys or more, and would include specific safety measures for each of the design, construction, occupation and refurbishment phases of a building’s life.

The Fire Safety Act has been approved by Parliament, but is not yet in force

As part of its efforts to implement the Hackitt review’s recommendations, the government introduced the Fire Safety Bill – amending the existing Regulatory Reform (Fire Safety) Order 2005 – in March 2020. The Bill passed into law on 29 April 2021 but is not yet in force.

The Act applies to all multi-occupancy residential buildings, regardless of their height, and introduces significant new obligations on those in control of multi-occupancy buildings. These “Responsible Persons” (RPs) will now have an obligation to “reduce” as well assess and manage fire risks, and risk assessments will now have to include the risks posed by the structure and external walls of the building, as well as by any individual doors opening on the common parts of the building. In seeking to make these new assessments, there may be increased demand from RPs from specialist fire-safety consultants. Businesses providing these services may represent an opportunity for investors.

The government has said that it will not enforce the Act until it has finalised comprehensive risk-based guidance to aid compliance. The considerable additional duties on RPSs will be accompanied by severe new penalties for non-compliance, with criminal prosecutions and unlimited fines possible in the most significant cases. RPs and investors in the space will therefore want to be very familiar with the guidance, which is likely to be published in the autumn.

The related Building Safety Bill is still before Parliament

The government published the Building Safety Bill in July 2021, having promised it in May’s Queen’s Speech. It will begin its Committee Stage in the Commons on 9 September 2021 and will likely pass into law in early 2023.

As in the case of the Fire Safety Act which it complements, the Building Safety Bill is set to introduce new obligations for the controllers of multi-occupancy builders, and provisions which will have a considerable impact on the sector. Chief among these provisions is the creation of a new regulator – the Building Safety Regulator – which will operate as a division of the HSE and have substantial enforcement and prosecutorial powers. This move represents a centralisation of oversight compared to the current regime, in which developers have been able to choose a local authority of an approved inspector for higher-risk buildings.

The Bill will introduce tougher sanctions for non-compliance. Directors or managers of companies responsible for high-rise residential blocks will be personally liable for safety failures, and the most serious cases will carry the potential for two-year prison sentences. Similarly, neglecting to register buildings with the new regulator, or failure to apply for a buildings assessment certificate when required could result in criminal actions.

Taking up a recommendation of the Hackitt review, the Bill will seek to introduce a “golden thread” of information and documentation sharing through new responsibilities to collaborate between all responsible parties from development to construction, to occupation, to refurbishment. Ensuring that the “golden thread” is comprehensive and robust is likely to require significant digital transformation and expansion activities; investors will want to pay close attention to specialist firms offering promising technologies in support of this goal, as these may present considerable growth opportunities.

The outlook for investors

The new regulations will entail significant changes for the building sector and, while the new regime is unlikely to come into force until next year at the earliest, investors will want to monitor the evolution of the government’s guidance over the next few months in order to ensure that portfolio or target companies remain fully compliant. The new regime also looks set to drive growth in related sectors – not least specialist safety consultants to meet new risk-assessment requirements and digital technologies to ensure reliable information sharing among responsible stakeholders. Investors should pay close attention to these areas to maximise their opportunities under a regime which, the government hopes, will ensure that the tragedies of 2017 are not repeated.

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What ‘tax day’ tells businesses about government fiscal policy

This year, for the first time, the government has chosen to separate its tax announcements from the main Budget. Instead, tax proposals were published three weeks later on so-called ‘tax day’.

While the government has stated this is to improve transparency around tax changes, there is inevitably some truth in saying that the separation of the two events would allow the Budget to be a “good news day” for the government, minimising the risk that coverage of spending commitments would be drowned out by spending cuts or tax rises elsewhere.

The 2021 spring Budget took place on 3 March and contained no immediate tax proposals beyond a statement of intent to increase Corporation Tax to 25% in 2023. Instead, on 23 March the government published a number of tax-related consultations and calls for evidence.

What has ‘tax day’ changed?

Announcements made on ‘tax day’ included measures intended to improve the tax system for both HM Revenue & Customs and for taxpayers, focusing on removing bureaucratic hurdles and improving tax avoidance measures with the overall aim of reducing the UK’s current ‘tax gap’, or the difference between the amount of tax that should be paid to HMRC, and what is actually paid. The current tax gap stands at a record low of 4.7%.  The government also published an interim report in its ongoing review of business rates, though this provided very little detail on what final measures the government will take to reform the system, indicating that there is significant work still being undertaken as part of the review. The government launched the review in March 2020 following years of debate over the effectiveness of the current model. Though expected to report in spring 2021, the pandemic has delayed progress with the final report now expected in autumn 2021.

The biggest ‘tax day’ announcements relate to calls for evidence on how the government can best innovate the tax system. The launch of a call for evidence relating to how HMRC collects revenue, alongside other structural proposals like changes to how and when tax is payable, are clear indications that the government’s focus is on the underlying structure of the system, aiming to improve the existing legislation, rather than overhaul or change tax rates at this time.

The government is also rethinking how the tax system can help shape the green agenda, launching a consultation on how Air Passenger Duty (APD) could support national and regional connectivity while maintaining the commitment to reach net-zero emissions by 2050. It has also announced that a proposed Carbon Emissions Tax will not be taken forward while the government develops its own Emissions Trading System.

The key policy changes for businesses are:

Timely Payment – The government is publishing a call for evidence to begin to explore the possibility of more frequent payment of income tax within Income Tax Self Assessment, and of corporation tax for small companies, based on in-year information;

Residential property developer tax – The government will publish a consultation on a new tax on the largest residential property developers. The tax will be introduced in 2022 to help pay for the costs of cladding remediation.

Tax treatment of pension Superfunds – The government will be reviewing the appropriate taxation framework for Superfunds, which are consolidation vehicles for defined benefit pension schemes. This work will proceed alongside the work under way on the development of the appropriate regulatory regime.

New rules to prevent value shifting for VAT – The government will be publishing a summary of responses this summer to the consultation on ‘VAT and value shifting’. Subject to the responses, the government intends to prepare the new rules for introduction and will be providing an update on next steps later this year.

What comes next?

The announcements of 23 March largely represent updates on the outcome of existing policy consultations, or are designed to address strategic and administrative priorities like tax avoidance and how the overall system should be structured. This approach has left unanswered medium-term questions over taxation levels, including the future of Capital Gains Tax, and whether the government will keep its manifesto commitments to freeze VAT, National Insurance and Income Tax throughout this Parliament. While Chancellor Rishi Sunak recommitted to the freeze ahead of the March 2021 budget, there is uncertainty over whether this position can be maintained for subsequent budgets.

Independent analysts, including the Institute for Fiscal Studies and the Resolution Foundation, remain publicly convinced that “substantial” tax rises will be required in order to address public finances. Chancellor Rishi Sunak has acknowledged that changes will need to be made, warning that “difficult times” lie ahead, but refusing to be drawn on the future action the Treasury will take while its focus remains on its immediate response to the Covid-19 pandemic and ensuring a swift and stable recovery. While tax rises remain highly likely, the Treasury is conscious of the need to balance increasing the tax take with encouraging the economic growth. Deciding how to achieve this is likely to be one of the key strategic decisions the Treasury and No.10 will need to address in the near future.

With so many questions left unanswered, attention within the Treasury and among business leaders will turn to the expected autumn Budget and multi-year Spending Review. With the Covid-19 vaccination programme continuing to progress at speed, these fiscal events are expected to present greater opportunities for the Treasury to make meaningful changes to address public finances.

The Treasury will begin to make preparations for the autumn fiscal events over the summer months as the scale of what needs to be done to reduce the economic impact of Covid-19 becomes apparent. Decisions will have to be carefully balanced, given the roll-back of pandemic support measures over the summer and latter part of this year. With tax changes still highly likely, businesses can prepare for future changes by ensuring that they are aware of the ongoing tax workstreams within the Treasury and wider government. The Treasury has yet to respond to more recent reviews and consultations, including those relating to Capital Gains Tax, meaning more announcements and policy reviews are likely to be undertaken over the summer in advance of the autumn Budget. Responding to consultations, either as an individual or as part of a collective, to ensure that their views are represented and heard by the government is another key step businesses can take in advance of the next Budget. To ensure that they are prepared for any opportunities or risks that arise as a consequence, developing relationships with advisors with links to Treasury officials and ministers to keep on top of the direction of travel is essential.

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WA Investor Services Supports Chatsworth Schools expansion

WA Investor Services is proud to announce it has supported Synova backed Chatsworth Schools successful acquisition of Riverston School and Beech Hall School from The Riverston Group. The Riverston Group is a privately owned education group, known for providing a mainstream educational environment with the highest levels of pastoral care, for children with moderate and mild learning needs. The acquisitions take the number of schools and nurseries in the Chatsworth Schools family to fourteen.

WA provided political due diligence to support the transaction, with its team of specialist political risk analysts assessing the SEND policy outlook in light of the ongoing government SEND review and reviewing the funding landscape. This insight was supported by the views of experts from across the sector, representing national and local government, parliament, the private sector, and the third sector.

Commenting on the deal, WA Partner and Head of Investor Services Lizzie Wills said: “We are extremely pleased to work with Chatsworth Schools and Synova to support their expansion. WA is recognised as a leading provider of political due diligence to support transactions in the education sector and we look forward to our future work in this area.”

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How to capitalise on the Super Deduction tax benefit

This roundtable was originally published by Real Deals and features WA’s Head of Investor Services, Lizzie Wills. Please find the original here.

In the wake of the UK Spring Budget announcement, Rhiannon Kinghall Were, head of tax policy at Macfarlanes and Lizzie Wills​, head of investor services at WA Communications, discuss how GPs can take advantage of the Super Deduction tax benefit.

Rhiannon Kinghall Were, head of tax policy at Macfarlanes

The Super Deduction was the surprise in the Spring Budget. There was the expectation around an increase in the rate of corporation tax, which has now increased to 25 per cent as the rumours suggested, and the hike in the rate has been tempered by this new investment incentive. The announced Super Deduction should be a significant incentive to businesses, because not only do they get a deduction for the full cost of investments made in the year of acquisition, but they also get an additional 30 per cent, making it a total of 130 per cent that can be deducted against profits. However, as the Super Deduction is only temporary in nature, companies will feel the full impact of the increase in the rate of corporation tax in 2023.

Unprecedented tax policy

From a global policy perspective, it is unusual that they’ve opted for this measure, I haven’t seen any other country go over 100 per cent before. By way of example, through the Super Deduction if a business makes an investment in plant and machinery of £10m then they get a deduction from their profits of £13m. That provides a potential tax saving of £2.47m.

In terms of where the Super Deduction will impact the PE industry, it will largely be the portfolio companies that invest heavily in ‘plant and machinery’ who will benefit. Many operators in manufacturing, infrastructure, pharmaceuticals and biotech, will be the largest benefactors. Interestingly when you look at total capital allowances claims the financial services sector takes third position, following manufacturing and retail.

Just what is classified as ‘plant and machinery’ isn’t actually defined in legislation but most tangible assets used in business should qualify, whether that’s robots on production lines in factories, electric vehicle charging points or simply computer equipment. If a company is buying new software platforms to be used in business, then that would also qualify. One thing to note is that these deductions do not extend to actually buying a property.

Act quickly

While the 130 per cent deduction is very novel, the extent to which companies will be able to benefit will depend on their circumstances and where they are in their investment cycle.

For instance, the Super Deduction can only be made on new contracts entered into after the budget date. If you had already signed contracts to purchase new equipment that investment would not qualify, as the investment was effectively made before the Super Deduction came into play.

The biggest limitation of the policy is the short window of time. The incentive is only available for two years, from 1 April 2021 through to the end of March 2023. It’s a short timeframe to make a big difference. There is also the caveat that it has to be new items, you cannot deduct the purchase of second-hand items which is significant for manufacturers where there is a good market for second-hand equipment and machinery. My advice to businesses would be to look down the pipeline of where the business is going, if there’s any investments or purchases that you can bring forward now is the time to do it.

Lizzie Wills​, head of investor services at WA Communications

As political risk specialists, WA supports investors and their management teams to understand the often-contradictory messages coming out of government. The last twelve months have shown just how important it is to be able to read these signals, to interpret them, and to be in the strongest possible position to mitigate the risks and capitalise on the opportunities they represent. The Budget has been no exception, and the Super Deduction is a case in point. The announcement has raised several questions about the government’s intentions, not least: What does the announcement tell us about how the government plans to balance the books post-Corona? How is the Treasury going to pull off its ‘spend now, pay later’ promise but minimise the pain that both businesses and taxpayers face in the coming months and years.

Hey Big Spender

The Chancellor’s Budget announcement on the Super Deductions benefit was one of the few that had escaped the extensive media pre-briefing. The Chancellor was understandably keen to soften the ground for many of the planned announcements, not least that the government’s intention to increase corporation tax to 25 per cent in 2023.

Getting to the bottom of the Treasury’s thinking, at least on the face of it, is pretty straightforward. Through measures like the Super Deduction, the Treasury is hoping to supercharge businesses’ appetite to invest – to the tune of £25bn – and to spur on the post-Corona recovery.

It’s an eye-catching pitch, with businesses previously reticent to invest in new plant and machinery potentially now having the impetus to do so. The Government will also be hoping that as an added benefit it supports their headline domestic priority to ‘level up’, given its the big manufacturing firms located outside London and the South East that are most likely to benefit.

What’s the catch? 

There are questions already about whether the Super Deduction is the best way for the Government to spend £25bn. Arguably the majority of the companies benefitting from the tax relief would be making these investments anyway.  It will also add another layer of complexity to a tax regime that already runs to thousands of pages. Not only that, but there are strict eligibility criteria which means that not all firms will be able to access the relief, super deductions are only available to companies subject to corporation tax. Therefore those facing the 25 per cent rise in 2023. Sole traders, partnerships and LLPs are not eligible.

The deduction is also only available for new plant and machinery, rather than second-hand equipment. There may also be additional criteria that firms must meet if they are intending to purchase plant and machinery under a hire purchase agreement, which is pretty standard for SMEs.

A further restriction is the tightly defined period for accessing the deduction, meaning that some businesses might inadvertently miss out. Any investment committed to, ahead of 1 April 2021 won’t be eligible for the relief, and any delays between signing new contracts and incurring costs may have implications for what qualifies as tax deductible expenditure under the new scheme.

Mark Bryant, head of manufacturing at BGF

“Specific improvements in capital allowances that encourage manufacturers to invest in equipment will ultimately improve productivity and competitiveness both internationally and domestically. It is a positive move for the UK economy at large. For many businesses across the country that have faced severe disruption over the last year and are confronting the big challenge of rebuilding their balance sheets, there are still concerns that they may not have the flexibility to make significant capital investments at this time. It will be important to continually assess the extent to which smaller companies are utilising these new tax incentives.”

Simon Wax, partner at Buzzacott 

“The main question for PE firms should be how much do tax deductions influence their buying decisions. Arguably the underlying performance of the business is more significant, however, paying less tax will clearly improve the cash flow forecasts for companies which could be another catalyst for PE houses to get more deals approved in the short term. Another opportunity for PE firms would be where they are looking at buy-and-build strategies that would require their portfolio investment companies to invest in order to see growth and realise returns.”

Andrew Aldridge, partner at Deepbridge Capital.

Growth-focused businesses will ultimately be the backbone of economic recovery. Investors will be working with portfolio companies to assist them in utilising Super Deduction and growth schemes which can assist with either short-term working capital or longer-term growth capital. The past twelve-months have seen unprecedented UK Government initiatives for supporting businesses which, coupled with longer-term initiatives such as the EIS, make the UK one of the best places to scale a business.”

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Negotiating the future: What a Labour-led government could mean for investors

Speculation about the likelihood (and outcome) of a snap General Election to break the Brexit deadlock has been rife in recent days. Boris Johnson has been adamant that he won’t call one this side of the Brexit deadline on 31 October. Other commentators believe that a no-confidence vote held shortly after recess might mean he has no other option. The whys and wherefores of how this might play out has been the subject of acres of column inches in recent days. What seems to be increasingly apparent, however, is that even if Labour performs well at an election in the near future, it is more than likely Jeremy Corbyn would have to cut a deal with the SNP, the Liberal Democrats, or both if he wants to form a workable government.

Recent polls show the Conservatives taking just over 30 per cent of the vote in the event of a General Election, with Labour currently sitting in second place on around 25 per cent. Despite the Conservative’s current lead, their polling would not guarantee them an outright majority, potentially opening the door to a Labour-led government.

Labour’s fence-sitting on Brexit has squeezed the party’s vote share, with the Lib Dems the main beneficiaries of Labour’s jumbled message, and the SNP still dominant in Scotland. Boris Johnson’s ‘do or die’ commitment to Brexit has further widened the distance between the Leave and Remain parties, leaving Labour in the middle, and with the SNP and the Lib Dems both hoping to win at least 40 seats should an early election be called. If the SNP and the Lib Dems do achieve this level of success, it will leave them with the greatest number of seats held by minor parties in the modern era, significantly increasing the chances that neither of the major of parties can command a majority in the House of Commons.  If these numbers play out, the two parties will be the kingmakers in a post-election fight for control of the House of Commons.

The art of the deal: What would a Labour-led government look like?

A formal coalition between Labour and either the SNP or the Liberal Democrats is much less likely than dual confidence and supply agreements with each party. The SNP’s aversion to voting on matters that do not affect Scotland largely rules out a formal coalition and the Liberal Democrats will be very wary of going into government with a Corbyn-led Labour party, not least because of their bruising experience as the junior coalition partner with the Conservatives between 2010-2015. For the SNP, any deal would almost certainly only involve their support for key pieces of national legislation, e.g. Brexit and key Finance bills, with a similar arrangement made with the Lib Dems to cover votes that affect England. Depending on parliamentary numbers, this could produce a curious outcome where a Labour-led government has a working majority for UK legislation, but not for legislation only affecting England.

If an election occurs before the UK has officially left the EU, a second referendum or even revocation of Article 50 will be top of each party’s shopping list, and a deal with a more Brexit-agnostic Labour party would be preferable to propping up a pro-Brexit Tory party. John McDonnell, the Shadow Chancellor, has now publicly stated that he would be happy to allow another Scottish independence referendum in return for an alliance with the SNP to keep the Conservatives out of power. Theoretically, if the Conservatives were willing to sacrifice their leader and/or grant a second referendum on Brexit, there could be room for an agreement with the Liberal Democrats. However, given the current mood of both the parties, the probability of this occurring is extremely low. Whatever the outcome, both parties will seek to leverage far more than concessions on Brexit and, in the case of the SNP, a route to a second Scottish independence referendum.

The SNP and the Lib Dems are the two most likely partners for Labour to come to a deal with, given the number of seats they can potentially bring to the negotiating table. But, in a closely run election, smaller parties such as Plaid Cymru and the Green Party could also hold sway. Plaid will echo the demands of the SNP and the Lib Dems on Brexit, along with wanting more powers delegated to the Welsh Assembly, potentially as a first step toward full independence. The Green’s support will come at the price of a much more ambitious decarbonisation agenda, although this could tally well with Labour’s plan for a Green New Deal.

SNP policy priorities

The SNP and Labour share a great deal of common ground, largely centred around opposition to austerity – support for the reversal of welfare cuts, increasing public sector pay and tax increases for high earners, so there is scope for the parties to work together. Nevertheless, the SNP has recently made a number of costly commitments in areas such as health and the environment, and any deal with Labour would likely involve ensuring these commitments can be fulfilled. This could be achieved through assurances on the future of the Barnett formula, greater tax-raising powers for the Scottish Parliament and more financial support from Westminster for specific projects.

Energy and transport infrastructure investors will be particularly interested in the SNP’s commitment for Scotland to reach net-zero greenhouse gas emissions by 2045 at the latest – the toughest environmental targets in the world. To achieve this, money will need to be made available by the Scottish government to support an ambitious rollout of electric vehicle infrastructure alongside efforts to significantly decarbonise the electricity generation sector. While Labour will be reluctant to allocate too much cash to Scotland that the SNP can take credit for and given their own spending priorities, bolstering the fight against climate change should be a winnable argument for the SNP.

Scotland has also recently seen its health care bill increase rapidly; the 2019-20 health budget is set to increase by 3.4 per cent in real terms and will account for nearly half of the Scottish government’s overall spending budget. Scotland’s Auditor General has said the extent of the SNP’s health spending would mean real-terms spending cuts in other areas as the Scottish government faces a more than £1 billion shortfall over the next three years. The SNP’s price for supporting a Corbyn government may be that more money is made available to the NHS in Scotland to spare spending cuts elsewhere. This could be welcome news for those operating in the pharmaceutical and health sectors as the SNP will look to continue their investment in health infrastructure and staffing.

Liberal Democrat demands

Parliamentary mathematics mean that any confidence and supply deal may also have to include the Lib Dems. Jo Swinson, the new Lib Dem leader, has ruled out a deal with a Jeremy Corbyn government. This could be read as a tactical stance ahead of any negotiation, though the Lib Dem’s extremely poor showing at the ballot box after their coalition with the Conservatives may mean Swinson’s position is one of party-preservation. The Lib Dem priority is undoubtedly one of stopping Brexit, but there are other policy areas where they will seek concessions, should they come to an agreement with Labour.

Much of Labour’s recent policy platform has been based on nationalising key elements of infrastructure, including water, rail and energy networks, to provide what they envisage to be a better deal for consumers and to increase environmental protection. The Lib Dems are not natural supporters of state monopolies, and Swinson has publicly criticised Corbyn’s nationalisation plans, which suggests Labour may have to water down these commitments in the event of any deal between the parties. This may not involve a complete abandonment of the nationalisation agenda, but the Lib Dems could force Labour to restrict their nationalisation plans to facilitating a more localised approach to utility provision, which would fit in well with their wider devolution ambitions.

Another area where the Liberal Democrats could seek to force change would be by demanding greater devolution to the regions. More powers for ‘metro mayors’ and traditional county councils could have important implications for how local infrastructure spending decisions are made. For example, if other elected mayors were given the same powers as those allocated to the Greater Manchester Combined Authority, it would give them much greater scope to raise and control funding to support locally directed infrastructure projects, opening up the possibility of more spending in areas such as transport and housing.

Labour’s compromise

The conundrum for Labour will be how much moderation of their agenda they are willing to accept as the price of power. It may be that when the results are in, Labour only requires the support of either the SNP or the Lib Dems and can play one potential partner off against the other, protecting much of their policy platform. The SNP is currently warmer to a deal than the Liberal Democrats, and it could be that the Lib Dems will only enter into a deal with Labour if Corbyn steps down; this may seem an unlikely outcome at the moment, but some in the Labour Party may see it as the perfect time for him to make way for a new leader.

If a deal is not possible, Labour will be forced to govern as a minority government (providing it is the largest party). Because of the various alliances that could be built on the issue of Brexit, it is possible the party could sustain itself long enough to recalibrate the Brexit process towards a second referendum. Beyond this, it will be difficult for a Labour government to pursue its radical policy agenda without an outright majority. Both the SNP and the Lib Dems will be willing to support Labour on some issues, but it would effectively give the two smaller parties a veto on any legislation they did not like the look of, which could mean Labour having to push on with a severely diluted set of policies. If this proves to be unsustainable, another election will have to be held. This would be the first time the two elections general elections had taken place within 12 months since 1974.

In any negotiation, Labour will be in an uncomfortable position. The left of the party, in touching distance of power for the first time in several generations, will need to seize its chance or risk losing it forever. The Lib Dems and the SNP will be well aware of this and will seek to extract the maximum possible concessions from any negotiation. If Labour does take power, it could come with several (billion) strings attached.

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