Budget 2023: IE Predictions and Some Ideas From The ABI

It’s nearly time for the Budget, so let’s take a guess on a few things;

IPT up to 20% on all non electric cars.

Roll out of powers to Councils to tax all vehicles on a pay-per-mile basis.

Compulsory purchase powers granted to Councils and regional Governments to acquire more land & property assets

New tax break sweeteners for insurers who throw money into ESG compliant social housing, energy and infrastructure

Fuel duty up 10p per litre on petrol 6p on diesel

Special one off “temporary” taxes on sugary drinks, fast foods etc to clear NHS backlog & pay for recycling

Pensions and benefits rise by 8% to combat inflation, but not until Autumn

Extension of energy payments until June, after that means tested support only

New Green Digital Pound launch by BOE, strict limits on goods/services that can be bought

Tiered Corporation Tax; 25% carbon heavy business, Standard 20% for greener companies

OK, let’s see how many we score on the Budget Bingo card. Meanwhile, here’s some suggestions from the ABI;

The Association of British Insurers (ABI) is calling for changes to health insurance tax and the pension tax relief system to enable insurance and long-term savings providers to help more businesses keep people in work. Alongside pausing the implementation of global tax rules in the UK, these suggested reforms could help the Government with its focus on providing stability and driving economic growth.

The ABI’s submission to the Spring Budget 2023, calls for:

• The rate of insurance premium tax (IPT) on health insurance to be cut. The majority of health insurance is provided through the workplace. With ill-health increasingly responsible for declining workforce participation, insurers have an important role to play in keeping people healthy and able to work. If IPT were to be lowered from its current rate of 12%, it could help reduce barriers to the uptake of health insurance by employers and employees and ease the pressure on the NHS.
• A pensions tax relief system that incentivises work and savings and doesn’t penalise over 55s who choose to return to work. The approach to increasing the Normal Minimum Pension Age should be reconsidered. As it stands, it will add enormous complexity rather than supporting savers. The Money Purchase Annual Allowance should be removed or, at a minimum, changed back to £10,000 to allow over 55s who have returned to work to continue saving towards their retirement.
• The IPT rate for other insurance policies to be frozen. We continue to believe that IPT is a regressive taxation that penalises responsible households and business who are protecting themselves from financial shocks. Since its introduction, IPT has increased more rapidly than the tax rate applied to alcohol and gambling.
• The rate of IPT to be cut on buildings insurance for high-rise, high-risk buildings with dangerous cladding whilst the property is awaiting remediation.  We remain acutely conscious of the challenges facing those affected by the ongoing building safety crisis and continue to work with our members on the development of a risk sharing scheme that can help leaseholders with their insurance premiums. In the meantime, with IPT at 12%, the Government could take immediate action by cutting the rate applicable for affected buildings to reduce costs for leaseholders.
• The delay to the implementation of Pillar Two of the OECD global tax rules in the UK. The UK is moving faster than any other member of the G7 to implement Pillar Two of these rules. Both pillars should be implemented across all countries in a consistent way, at the same time. We urge the Government to pause until global rules are agreed and set.

Hannah Gurga, ABI Director General says: “The insurance and long-term savings industry stands ready to work in partnership with Government and regulators to tackle the economic challenges facing the UK. Changes to the tax regime could help businesses to prevent ill-health and keep employees in work, alongside encouraging more over 55s to return to employment and resume saving for retirement. Changes to insurance premium tax and the pensions tax relief system can enable our sector to support more businesses, more employees, more savers and ultimately help drive growth across the economy.”

 “We are working at pace on the development of a risk sharing scheme and fully recognise the role the insurance industry has to play in supporting leaseholders with the high costs of buildings insurance. However, there are options within the Government’s control that could further help reduce costs for leaseholders and we ask that the IPT rate for affected buildings is considered as one such measure.”

IOFA COMMENT

Commenting on the state pension age and the pension triple lock, Matt Saker from the IOFA said:

“We hope this budget will provide some clarity on how the government will strike a balance between ensuring that State Pension provision protects pensioners from poverty and remains sustainable over the long-term. Increasing longevity has been the driving force behind previous rises in the state pension age and before considering accelerating any planned increase, the government must reassess longevity trends including healthy life expectancy. If, as expected, advances for life expectancy are slower than initially predicted, raising the State Pension Age forward at a quicker rate could have a detrimental impact on the younger generation.

“The forthcoming publication of two key reports on the state pension age, from the Government Actuary’s Department and from Baroness Neville Rolfe, will provide important data-driven considerations for the future of the state pension.”

The government must also consider the role of the pension triple lock. The triple lock has been an important tool in the last decade in helping to tackle pensioner poverty but may now threaten the overall sustainability of the state pension for future generations. The IFoA supports the recommendation in the 2019 Lord’s report on intergenerational fairness to remove the triple lock and move to a system where the State Pension is up-rated annually in line with average earnings.

“The IFoA is keen to encourage policy decisions which provide a stable environment for people to save for the long term through a pension, and which remove unnecessary barriers or disincentives to doing so.”