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PBR Little for savers and tax on employment will hurt

Maggie Craig, the ABI's acting Director General, said:

                                                                              

"While we welcome the commitment to the role of the financial services industry in restoring growth and employment, as an employer of over 300,000 people the insurance industry is disappointed at the increase in national insurance rates which is a tax on employment.

 

"Once again there is little here to encourage saving, something badly needed to develop a more balanced economy as the country emerges from recession."

 

Pensions tax relief

In the Budget 2009, the Chancellor announced higher rate tax relief will be restricted for high earners. He today clarified that this will include employer pension contributions, affecting those who earn over £130,000. Peter Vipond, Director of Financial Regulation and Taxation at the ABI, said:

 

"We are disappointed at this further change to the pensions tax relief system, which the Red Book confirms is designed to raise £500 million. This can only do further damage to pensions and will not encourage people to make a long-term commitment to saving."

 

"Incentives for Higher rate tax payers are not about perks for the rich, but encouraging people to defer income now to ensure they don`t have to rely on the state when they retire.  This is in everyone's interest. Given the demographic challenges the UK faces, we actually need more measures to encourage long-term saving."

 

Increase in employee and employer National Insurance

Peter Vipond, Director of Financial Regulation and Taxation at the ABI, said:

"The insurance sector employs over 300,000 people and as large employers our members will be disappointed at this tax on employment. This will be bad for the economy and will not help the UK recover."

 

Tax on bankers bonuses

Peter Montagnon, the ABI's Director of Investment Affairs, said

 

"We welcome the fact that insurance company employees are not included in this measure, but we still have to beware the risks to competitiveness and other unintended consequences of this tax. This measure will not help banks in the long run if salaries are increased to replace bonuses. This tax should also not lead to additional cost to shareholders - themselves taxpayers - who own the banks, either directly through the government stake or indirectly through pensions and other savings schemes.

 

"We support the G20 principles, which agreed that bonuses should be deferred and largely paid in shares."

 

Delay to Pensions reform

Maggie Craig, the ABI's acting Director General, said:

 

"We remain extremely disappointed with the delays being introduced to the new pension reforms. We need to get a move on to improve pension provision and help people save for retirement. The Government's plans involve phasing in at the speed of the slowest which saves the Exchequer money in the short-term at the expense of long term pension saving. What we really need is voluntarily early auto-enrolment to private schemes to help people start saving as soon as possible, and the pension industry is ready to deliver that now."

 

Taxation of foreign profits

Peter Vipond, the ABI's Director of Financial Regulation and Taxation, said:

 

"There is still a key "gap" in the competitiveness of the UK - the taxation of foreign profits.  We are therefore pleased that the Chancellor has today signalled progress on reform of rules around Controlled Foreign Companies, which will help firms with subsidiaries abroad.  However, we need action as soon as possible, as good intentions alone will not help the UK become competitive. 

 

"We also welcome a review of taxation of profits made in branches abroad.  Reform here would mean that all aspects of foreign profits taxation are as competitive as possible and would be consistent with the dividend exemption introduced in the Budget 2009."

 

Trade Credit

The Chancellor confirmed that the Government's top-up scheme for trade credit insurance will end 31 December 2009.  Nick Starling, the ABI's Director of General Insurance, said:

 

"The Government's top-up scheme was launched too late and priced too high to make a difference. Nonetheless we did our best and with our members worked hard with the Government to help it develop the scheme; however the root problem has been the drying up of bank credit and many companies turning to pre-pack administrations that leave unsecured creditors and trade credit insurers unable to reclaim any money owed.

 

"Trade credit insurers increased the total value of turnover insured £302.5bn in 2008, up from £282bn in 2007.  Meanwhile in the first quarter of 2009 the total value of claims was £316m, an increase of 166% from £119m in Q1 2008."

 

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Last updated 01/07/2016