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Budget 2010 Lost opportunities on savings and competitiveness

Overall response

Responding to today's Budget speech Kerrie Kelly, Director General of the ABI, said:

"We are relieved that this Budget did not contain any further harmful changes to pension saving, given the damaging and over-complicated reductions in tax relief that will come into effect in 2011.

"This recession has seen people pay off debt rather than start to save, but the government now needs to introduce real measures to encourage a savings culture. The commitment to increasing the ISA limit by inflation is useful and we also welcome the freezing of CGT which benefits holders of mutual funds. But these measures will only help existing savers when the UK's principal challenge is to increase the number of people saving and the amount they are prepared to put aside.

 "With ABI research proving that confidence in the benefits of saving has remained low, we need urgent action which we did not get to promote saving and ensure any economic recovery is built on strong foundations of good personal financial habits.

 "This was a missed opportunity to help global businesses operating in the UK. It was particularly disappointing that the Chancellor found extra money to help the creative industries sector while delaying yet again any commitment on the issue of profits earned abroad not being taxed if brought back to the UK which is a vital issue for the UK insurance sector.  The UK is now lagging behind on areas of corporate and personal taxation at a time when other countries are actively trying to attract businesses away from the UK."

 

Infrastructure Fund

Responding to the setting up of a Green Investment Bank, Peter Montagnon, Director of Investment Affairs at the ABI, said:

"Insurers need long term investments to pay out their long term liabilities such as annuities. The UK insurance industry has been calling for such long term investment opportunities and a government-backed investment fund is an idea worth pursuing. However it must be commercially viable and stand up against other financial instruments, regardless of whether it is aimed at supporting socially useful projects. This will be crucial in determining its ability to sell itself to long-term investors. ABI members and other investors would want to be closely consulted on the design of any new body to ensure it works."

International Bank Levy

Commenting on the Chancellor's comments on a proposed international agreement on a banking levy Peter Montagnon, Director of Investment Affairs at the ABI, said:

"Investors need to be convinced that such a tax would be helpful since it will take money that should be being used to shore up banks' capital. If there is to be such a levy, it must be international and recognise the difference between insurance and banking.  Its focus should be on ensuring banks do not develop excessive leverage based on insufficient capital."

Economics

Commenting on the Chancellor's comments on public borrowing and repaying the national debt, Dr Rebecca Driver, Chief Economist at the ABI, said:

"It is probably appropriate that today's Budget only makes modest headway in unwinding the huge fiscal stimulus over the last few years.  However dealing with Government debt cannot be put off forever and the key issue will be to deliver the adjustments needed without undermining UK competitiveness." 

 

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Last updated 01/07/2016