Five-point plan to stimulate growth and ease the squeeze
In its Budget submission, the Association of British Insurers (ABI) sets out how the insurance and long-term savings industry can work constructively with the Government to deliver on its ‘levelling up’ agenda, boost global competitiveness, unlock infrastructure investment, support the transition to net zero, and strengthen the financial resilience of households and businesses across the UK.
The insurance and long-term savings sector is the largest in Europe and fourth largest in the world, adding £29.1 billion a year to the UK economy, managing investments of nearly £1.7trillion, and paying over £16 billion in taxes.
Summary of the submission
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Compete to succeed: In post Brexit Britain the Government has a chance to grasp the nettle of reform and create a complementary tax and regulatory framework that drives competitiveness, attracts overseas capital and promotes the UK as a place to invest, innovate and inspire. The implementation of new global tax rules must not lead to UK insurers incurring a multi-hundred-million-pound tax bill in a year simply because of differences in the timing of the recognition of income and expense under financial accounting and tax accounting rules.
- Unlock investment: Now that we have left the EU, the Government can set the UK apart from its continental competitors if it embraces reforms that enable institutional investors to support the Government’s ambitions to level up across the country and take a leading role in transforming our economy and society to reach ‘net zero’.
- Invest to maintain the UK’s flood defence infrastructure: Access to affordable flood insurance and flood defence investment has been transformed over the last decade but it is vital that the Government recognises the value of investing to maintain this critical infrastructure. A JBA report commissioned by Flood Re and the ABI has shown that every £1 spent on flood defence maintenance saves £7 in capital defence spending.
- Tax – keep it fair and simple: Insurance Premium Tax (IPT) is a regressive stealth tax that drives up the costs of necessary forms of protection, disproportionately affecting the least well off financially while disincentivising those who have more and can relieve the pressure on the public purse, for example through greater uptake of private medical insurance. The rate of IPT should be frozen. As people live longer and retire later, the Government should consider changes to the pension tax relief system that support rather than penalise increased saving for later life – scrapping the Money Purchase Allowance and fixing the ‘net pay anomaly’ which prevents low-income earners from receiving pensions tax relief on their contributions. At the same time necessary changes to the normal minimum pension age should minimise complexity and confusion for savers and unnecessary competitive consumer churn.
- Strengthen Consumer Resilience: The state has an important role to play in driving behaviours and helping markets grow to support consumer resilience. From incentivising social care products, tax clarity on protection in the workplace, funding the fight against economic crime and extending the scope of the Building Safety Fund, the Government has the power to better help consumers help themselves and markets address society’s challenges.
Huw Evans, the ABI’s Director General, said:
“The UK’s world-leading insurance and long-term savings sector has a crucial role to play in boosting our global competitiveness post-Brexit while strengthening the financial resilience of millions of households and businesses who reply on insurance protection.
“Determined reform of financial services regulation inherited from the EU could unlock nearly one trillion pounds over 15 years that could be invested in the UK’s transition to net zero. It is critical that this potential is not diluted by increases in corporate taxes, either as a result of global agreements or domestic drivers.
“Freezing the rate of Insurance Premium Tax, a tax that hits the poorest the hardest, maintaining adequate investment in flood defence infrastructure, and simplifying pensions tax relief to encourage greater saving would all help this Budget and Spending Review lay good foundations for the country’s recovery from the impacts of Covid-19, and enable our sector to play its fullest part in support.”
Notes to Editors
Enquiries to:
Malcolm Tarling 020 7216 7410 Mobile: 07776 147667
Laura Dawson 020 7216 7338 Mobile: 07725 245838
Sarah Aspinall 020 7216 7412 Mobile: 07725 245297
1. The ABI’s Budget submission is available here.
2. The Association of British Insurers is the voice of the UK’s world leading insurance and long-term savings industry. A productive, inclusive and thriving sector, we are an industry that provides peace of mind to households and businesses across the UK and powers the growth of local and regional economies by enabling trade, risk taking, investment and innovation.
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4. More news and information from the ABI is available on our web site, abi.org.uk.