Brown And Balls Meet With High Level City Group

by Jason Gorringe, Tax-News.com, London

19 October 2006

The UK's Chancellor of the Exchequer, Gordon Brown, and the Economic Secretary, Ed Balls, on Wednesday met for the first time with members of the High-Level City Group to discuss proposals to maintain and enhance the City of London's competitiveness throughout the world.

The Group discussed the following substantive proposals:

• Maintaining cutting-edge principles-based regulation for financial services. The Government set out proposals to reduce administrative burdens of regulation, to take further action against unnecessary gold-plating of European Directives and push for a more de-regulatory stance in the EU under the German presidency. The Government will examine, with the Financial Services Authority, whether the regulatory regime might be lightened for insurance services with low consumer detriment or systemic risk;
• Modernisation of the wholesale insurance market. Working with key players in the sector, Lord Levene will develop a plan to deliver further market reforms to improve efficiency, building on the recent introduction of some electronic trading, and, in parallel, the Government will examine the business environment for the wholesale insurance sector;
• Boosting professional financial skills in London. The Chancellor has asked Teresa Sayers and the Financial Services Skills Council to undertake research on financial skills gaps. At the same time, the Treasury, together with industry, will examine a proposal for a centre of regulatory expertise that would provide teaching and research; and
• Promoting, in a new joined-up strategy, the UK based financial sector in overseas markets, bringing greater coordination of the efforts of public and industry bodies. UK Trade & Investment (UKTI), which will be responsible for coordinating the strategy, will allocate additional resources to the promotion of financial services, with dedicated diplomatic staff and tailored promotional strategies in key overseas markets, including China and India. Roll-out of the strategy will be overseen by a private-public partnership - the Financial Services Sector Advisory Group.

Speaking after the High-Level Group meeting, Gordon Brown observed:

"The message that the City's success sends out to the whole British economy is that we will succeed if we think globally. But we must not be complacent about that success. So today's meeting has discussed concrete steps that will allow us to take forward an agenda, bringing business and government together, to equip us to meet the challenges of global competition and promote the City and its financial service expertise throughout the world. We look forward to continuing our discussions."

As well as the aforementioned proposals, the Government also on Wednesday announced its intention to:

• Act, with HM Revenue & Customs (HMRC) to address business concerns on tax administration through the work being taken forward by Sir David Varney, who will report at the time of the Pre-Budget Report. The review of business links has already had extensive, open and transparent consultation with a wide range of businesses, representative and professional bodies, including those in the financial sector, about their areas of concern and views on how the relationship between HMRC and business can be improved. The ongoing process of engagement has been well received, and the feedback that the review has received through this comprehensive consultation has informed the emerging thinking on review proposals.
• Continue to work with the Financial Services Authority (FSA) and HMRC to modernise the regulatory and tax framework to ensure that it keeps pace with opportunities in markets of traditional UK strength, such as asset management, along with new and innovative areas such as hedge funds and Islamic finance. The UK is the world's third largest asset management centre, and arguably the largest international centre. The UK is also the world's fastest growing centre for hedge fund management.
• Consult with industry to ensure tax rules in the Offshore Funds Regime do not act as a barrier to commercial development of multi-tiered funds. The Investment Manager Exemption (IME) applies to ensure that a fund domiciled outside the UK is not brought within the UK tax net simply because the fund is managed out of the UK. We are also taking steps to ensure that our tax treatment enables fund managers to deal with funds of funds - a modern commercial development in the industry.
• Maintain the reputation of the City by establishing a new supervisors forum, bringing together all UK supervisory agencies with responsibility for preventing money laundering and terrorist financing in the UK, to share best practice on risk-based supervision, investigations and enforcement. The forum is intended to fill a gap in the domestic supervisory architecture for financial crime, bringing together all agencies with responsibility for ensuring compliance with domestic and international anti-money laundering (AML) /counter-terrorism financing (CTF) standards.

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