17th March 2015
As the Chancellor George Osborne prepares to deliver his Budget, Tom Elliott, international investment Strategist at deVere Group, the financial adviser shares his thoughts on what is on the wish list for investors…
I believe there are three requests investors demand of the Treasury in this year’s important pre-election Budget.
I’m not talking about specific tax rates, whereby chancellors traditionally give with one hand only to take with another. These are of a more fundamental nature.
1. Firstly, investors want measures to improve labour productivity. All pension funds ultimately depend on the health of the underlying economy in order to ensure promises are kept. This is as true for defined contribution schemes as it is for a public sector defined benefit scheme. A sluggish economy will lead to weaker investment returns for the former, and to changes in pay-out promises in the latter. Both schemes might demand more years of work.
Therefore, Osborne should declare a commitment to address the Achilles heel of the UK economy – which is low labour productivity growth. This requires public and private investment now, in education and training, in order to ensure that the economic pie in the future is big enough to provide the investment returns and tax receipts that future pensioners will need.
2. Secondly, investors want a coherent savings and pension tax policy from the government, which it sticks to. Is it a policy objective to encourage personal savings through the tax system? Assuming it is, what is the optimal level of tax incentives? Investors want this published, and have it made clear that pension and savings tax policy follows from this.
Currently there is a sense that the needs of year-to-year government budget considerations, and vote-pleasing policies, have a more substantial role in the extension or the withdrawal of tax incentives than fundamental policy analysis.
3. Thirdly, investors want accountability on tax policy. Instances of so-called ‘aggressive tax avoidance’ in savings planning, which the government claims to disapprove of, result from legislation passed by the government, either inspired by itself, or because of multi-national agreements.
The government is responsible for the results of what the Treasury was calling, a few years ago, a ‘competitive tax regime’. If they write what turns out to be tax law that they now regret, they should admit this and be held accountable – and not help stir up a witch hunt against companies and individuals engaging in lawful tax planning.