ABI Calls For Chancellor To Promote Saving And Stability

by Jason Gorringe Tax, News.com, London

25 July 2008

With the economy in choppy waters, the Government should promote financial security and the level of savings as well as help UK businesses, says the Association of British Insurers (ABI) in a new report launched on Thursday.

The publication, "Safeguarding the future," outlines a number of policy initiatives to help savers and businesses during the current downturn.

It includes specific measures to encourage individuals to save, through a co-ordinated publicity campaign and higher ISA limits, and also calls for greater financial stability for workers through tax breaks for rehabilitation services to cope with increased sickness in the workplace.

For both consumers and business, the report highlights the importance of tax certainty in these uncertain times.

Stephen Haddrill, Director General at the ABI, commented:

“The Pre-Budget report in the autumn is building up to be one of the most crucial in modern times. As Parliament rises we hope this report will contribute to the work that will go on over the summer.

“The insurance industry plays a key role in a number of policy areas as well as being a major employer and third highest payer of corporation tax. As such we are uniquely placed to work with the Government to address risks it will find increasingly difficult to bear.”

The report makes proposals in three key areas:

Protecting consumers:

• A Government ‘financial health’ publicity campaign encouraging consumers to save rather than rely on debt. This would include encouraging saving through longer-term investments and improving financial literacy through money guidance and generic advice. (Average household consumer debt is GBP21,000)
• Encouraging saving through longer-term investments, not just short-term cash deposits, by increasing total ISA limits to GBP9,600 a year, but with no more than GBP3,600 in cash. (Building society savings have only exceeded returns on equities twice since 1970 over 10 year investment periods)
• Encouraging savings for long–term care. (The average cost of nursing care is over GBP33,000 a year

Promoting UK business:

• Clear protocols for consultation on tax changes, to create greater tax certainty and end ill-considered tax measures.
• Changes to the taxation of overseas earnings to encourage UK headquartered companies to bring profits made offshore back to the UK, through the Foreign Profits review. (Over the last decade more multinational companies left the UK than in any other EU country)

Building a more effective partnership with industry to manage risk:

• Ensuring the personal injury compensation system encourages rapid care and compensation, by changing the current system that promotes legal wrangling and encourages people to stay off work to the detriment of their well being and cost to the taxpayer. (For claims under GBP5,000, every GBP1 paid in compensation comes with 93p of claimant’s legal costs)
• Encouraging UK business to invest more in the health of their employees. The ABI specifically proposes the removal of tax disincentives to employers taking such action. (Cost of absence from work in 2006 was GBP13.4bn)

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