Britain's insurance companies will this week make a last-ditch effort to persuade the Chancellor to scrap a change to capital gains tax (CGT) that could wipe billions off the value of the industry.
The Association of British Insurers (ABI) will warn the Treasury that thousands of jobs will be lost if the Chancellor, Alistair Darling, refuses to back down on CGT reforms affecting the £30bn-a-year insurance bonds arena.
In its proposal, the ABI will argue that failure by Mr Darling to revoke his pre-Budget measures will "threaten significant damage to savings in Britain – at a time when almost everyone agrees that the level of savings is too low".
The ABI said it was alarmed that savers would be pushed into a reduced number of savings vehicles. The cut in CGT to 18 per cent disadvantages top-rate taxpayers looking to invest in products such as insurance bonds. The new plan recommends a reduction in the rate of tax paid on investment bonds to 30 per cent for anyone who would currently pay 40 per cent, which it claims is a "sensible compromise".
"This impact on the savings industry was an unintended consequence of the rush to bring forward changes to CGT in the pre-Budget report," said Stephen Hadrill, director-general at the ABI. "We don't want the public's savings to be the victims of too little consultation, and hasty decision-making."
Lobbying against the changes began days after the hurriedly drawn-up revision to CGT was unveiled. Leading insurance figures are said to be aghast at the continued stubbornness of the Treasury, with one senior figure pointing to a "fundamental lack of understanding".
Last year, analysts at investment bank Lehman Brothers estimated that as much as 10 per cent of the value of Britain's life insurance industry could be wiped away, with names such as Resolution, Standard Life and Legal & General worst affected. Aviva's chief executive, Andrew Moss, has ceded that failure to get a reversal from the Chancellor would knock 2 per cent off the company's life sales.Reuse content