The current UK general election may produce no decisive result, so that the Liberal Democrat party can dictate terms to either Labour or the Conservatives. This is bad for wealth management clients, as have argued such folk as Andrew Popper, CIO of Societe Generale Private Banking. But then again, none of the likely outcomes of this election are going to cheer up high net worth individuals.

Here is Popper's take on the LibDems: "Since they have in general a strong anti-business approach, this is likely to have a material negative impact on financial markets. It will also prompt many HNW individuals to reconsider their resident status in the UK. The implications will probably be negative for UK equities and government bonds, and lead to pressures on sterling."

This is not a promising picture. The basic issue that has been barely fleshed out in this rather bland campaign so far is a massive shortfall in UK public finances. There is, arguably, not much more room for tax hikes, as we have had a lot of these already, many of which fall on HNW people. But a coalition government, particularly a LibDem-Labour one, may ignore economists' warnings and hike taxes further, although rises could seriously dent growth and wealth creation.

There have been plenty of rises recently: the UK now has a top income tax rate of 50 per cent on those earning £150,000 a year or more, while once changes to National Insurance contributions, tax thresholds and pension allowances are taken into account, means top earners face a marginal tax “bite” of more than 60 per cent on every additional pound earned over the top rate threshold. And we have already seen the introduction of a £30,000-a-year levy on non-doms who want to not pay tax on worldwide income. Plainly, the current administration is unfamiliar with the idea that tax rises, beyond a certain point, reduce, rather than raise, revenues. (This was the insight of the economist Arthur Laffer, famous for his "Laffer Curve").

Proposals

If Nick Clegg’s Liberal Democrats do have a say about the policies of any future coalition government, then there is a chance we could have an even chillier climate for high earners. Vincent Cable, the LibDem’s financial spokesman – a former economist at Shell – is often feted in the media as a wise sage on economic affairs. He’s no friend of the wealthy: his party has proposed imposing a so-called “Mansion tax” equal to an annual payment of 1 per cent on properties worth £2 million or more – a wealth tax by another name.   

Meanwhile, the LibDems are not pledging to reverse the top income tax rate to its previous 40 per cent level. On capital gains tax – currently at a flat rate of 18 per cent – the party wants to raise it to be in line with income tax bands. As a result, we could have a top CGT rate of 50 per cent, potentially a big blow to the venture capital industry and the wider economy. It is hardly good news for the stock market or for the pension funds and other collective investment vehicles aiming at capital growth. Whatever else one can say about Cable or Clegg, they are emphatically not spiritual heirs of such Liberal free marketeers of the 19^th Century such as William Gladstone or Richard Cobden.

As for the Tories, they want to reverse a projected rise in national insurance payments, but they have not vowed to immediately scrap the new 50 per cent top income tax band – fearful of being portrayed as the party of “the rich”; they are, however, promising to cut corporation tax. As for Labour, HNW individuals cannot expect any relief. However, given much of the beating he has taken in the media for letting the public deficit explode, it is worth mentioning that Gordon Brown and his finance minister, Alistair Darling, have presided over a remarkably low and business-friendly CGT rate, even though Labour scrapped the old low band of 10 per cent a few years ago.

On trusts, Labour has been hostile to the industry, tightening reliefs and imposing new restrictions. There are few signs of any help on that quarter from the Tories or LibDems, although Tory finance spokesman, George Osborne, has made cuts to inheritance tax a popular vote-getter in the past. On issues such as offshore amnesties, all three parties are committed to clamping down on undeclared cash. It seems that politicians are forever hunting for spare cash under a mattress.

Ironically, although the past few years have been generally bad for HNW individuals in terms of taxes and regulations, rising burdens have, paradoxically, driven demand for tax planning services of accountants, IFAs and private banks. I can expect this sort of compliance-related workload to increase for many of our readers.

Negotiating the reefs and shoals of the UK’s Byzantine tax code is maddening. According to the Institute of Economic Affairs, a UK think tank - the average length of a UK Finance Act these days is more than three times as long, at 463 pages, than it was in the 1980s. An urgent priority for any genuinely reforming finance minister is to cut the chronic complexity of the UK tax code. 

Away from tax, the other issue currently in the public eye that affects our industry is banking regulation. There have been mutterings, but so far not much more in terms of hard detail, from all three parties on the need to tighten the rules on banks. In the US, for example, there is now a very urgent debate on whether banks' trading arms should be split off in a sort of reversal to the old divisions that existed under the 1932 Glass-Steagall Act. The Goldman Sachs scandal, discussed here last week, adds fuel to the fire. Such a division of functions could, indirectly, affect private wealth management if banks are forced to spin off businesses such as private equity and hedge funds. Where the US leads, the UK often - not always wisely - follows. The UK's Tories have reportedly shown some interest in this idea of splitting up banks' functions, but the details at this stage are sketchy.

In general, this election campaign will be remembered more for its televised debates between party leaders fighting over the centrist, middle ground and for their refusal to talk in details on spending cuts, than for anything else. The wealth management industry should not expect any real changes for the better come 7 May. At the moment, no-one in public affairs seems to like wealthy people or the firms that serve them. In the longer term, the whole economy will pay a price for such soak-the-rich policies.