Written by 2:10 pm EU Investment

Britain to help insurers invest in economy, trims bank tax rate

LONDON, Nov 17 (Reuters) – Britain set out more plans on Thursday to help make it the world’s most competitive financial centre by easing capital rules for insurers, trimming a tax rate for banks, and promising to review all financial rules from the European Union.

Leaving the EU allows Britain to write its own financial rules and its parliament is already approving a law to help its financial services and markets keep pace with other international hubs including New York, Singapore and Paris.

Finance minister Jeremy Hunt set out additional steps on Thursday to “make the UK the world’s most innovative, dynamic and competitive global financial centre”.

Britain has faced pressure from insurers to ease and better tailor EU capital rules known as Solvency II to allow it to invest more in infrastructure.

Hunt said the government’s changes would “unlock tens of billions of pounds of investment”.

By the end of next year, Britain would also use its “Brexit freedoms” to decide changes to EU regulations in five growth industries, including financial services.

The Bank of England’s Prudential Regulation Authority and the finance ministry have clashed over reforms of Solvency II, with capital buffers a key point of contention.

“The key decisions will now be for Parliament and we will implement those decisions faithfully,” the PRA said in a statement.

The finance ministry also confirmed it would cut a surcharge on bank profits over and above corporation tax to 3% from 8%, opting not to launch an additional tax raid on the industry.

The move offsets some of the impact of the government’s planned rise in the main rate of corporation tax from 19% to 25% from April 2023, giving banks a combined rate of 28%.

“A strong and internationally competitive banking and finance sector has a key role to play in supporting the economy through the current challenges,” bank lobby group UK Finance said in a statement.

NO CHANGE TO SPREAD

The BoE has warned that easing insurance capital rules must not be a “free lunch” given the need to protect policyholders.

The PRA wanted to tighten the so-called fundamental spread or haircut on how much insurers can ease capital requirements, but in a win for industry the government rejected this move.

“Although the Government has decided not to take forward the PRA’s proposals for reform of the fundamental spread, the Government recognises the importance of policyholder protection,” the finance ministry said.

“With this in mind, the Government recognises that the rules set out in legislation must work in close combination with supervisory tools held by the regulator.”

Industry body ABI said leaving the fundamental spread unchanged will mean less volatile annuity prices and a more stable income for UK pensioners.

Insurer Aviva said Hunt’s plan will be a welcome boost for UK investment and allow the company to invest at least 25 billion pounds over the next 10 years.

Editing by Bernadette Baum and Elaine Hardcastle

Our Standards: The Thomson Reuters Trust Principles.

Source link

Close