ABI: Pre Budget report: Lack of action for savers disappointing and a missed opportunity

Overall response
Stephen Haddrill, the ABI’s Director General, said:

“After a decade of promoting consumption the Government is unable to break the habit. The crisis is built on debt and credit but the Government has still failed to recognise the importance of savings to our economic health. This is a badly missed opportunity to promote savings and tackle the country’s savings crisis – with 50% of the working population not saving enough for retirement, and saving overall at the lowest level for 50 years, action is needed now.

“Indeed, those in the UK population who are saving the most will have to pay higher taxes as a result of today’s announcement, while pension allowances have been frozen.”

Taxation and financial services
Peter Vipond, the ABI’s Director of Taxation, said:

“The news on foreign profits shows that the Government has listened to the ABI’s arguments on this issue. It sends a positive message to those UK businesses that have been considering relocating abroad. The Government has accepted that fairer treatment of foreign dividends will encourage companies to bring profits back to the UK to invest and spend here. We will examine in detail the implications of the interest debt cap also announced.”

“This has been a vital issue to address. As outlined in the ABI’s submission to the Chancellor, the last decade has seen more multinational companies leave the UK than in any other EU country.”

“However, while the Government points out the challenges facing the financial services sector, resulting in a 35% reduction in tax receipts for 2008, increasing national insurance and income tax rates on those earning over £100,000 is the wrong way to tackle this problem. These tax increases can only make the UK a less attractive place for financial services companies to operate in and in particular, reduces the attractiveness of London as a world financial centre. This is disappointing given the progress on taxation of foreign profits.”

Nick Starling, the ABI’s Director of General Insurance, said

“The Chancellor failed to understand the importance of flood defences last year and has failed once again this year. To bring forward just £20 million of expenditure, from the £850million allocated, is a token gesture and a missed opportunity.

“Building this nation’s flood defences is a much more quicker and straightforward way to spend money and improve the nation’s infrastructure than some of the areas the Chancellor has focused on.”

Reduction in VAT rate
Peter Vipond, the ABI’s Director of Taxation, said:

“This helps insurers as they cannot recover any VAT they pay (for example on property, office expenses etc). Last year the insurance industry lost £495 million in irrecoverable VAT , which means a cut in VAT to 15% could save the industry £71million a year.

“Insurance Premium Tax (IPT) is charged at the same level of the top rate of VAT on the sale of warranties (for vehicles and electrical equipment) and travel insurance. It therefore makes sense that this reduction in VAT should be reflected in a cut in IPT in these areas.”

Rights issue review
Responding to the announcement by the Chancellor to reduce the time taken to raise capital. Peter Montagnon, Director of Investment Affairs at the ABI said:

“It is very important to keep the principle of pre-emption. This Review sets out some useful ideas for speeding up the process, without sacrificing this principle. The ABI Investment Committee will follow through very soon on the proposals for raising headroom limits.”


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2. The ABI is the voice of the insurance and investment industry. Its members constitute over 90 per cent of the insurance market in the UK and 20 per cent across the EU. They control assets equivalent to a quarter of the UK’s capital. They are the risk managers of the UK’s economy and society. Through the ABI their voice is heard in Government and in public debate on insurance, savings and investment matters.

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