Saving sustainably

We already encourage saving - why not encourage sustainable saving instead?

The post-Budget row over tax relief for charitable giving has obscured the fact that there are many tax reliefs given for profitable activities without any consideration for the public benefit of the activities being effectively subsidised. Around £40bn a year of relief against income or capital gains tax goes to support pension saving, ISAs and protect individual gains from the sale of residential property. In times of austerity shouldn’t we be looking more closely at how this money is used? Could the Government use the policy leverage created by such subsidies to encourage more responsible behaviour in the financial sector that benefits the taxpayer as well as the individual investor?

Britain’s economy before the credit crunch was based on high borrowing to fuel increasing consumption which drove economic growth. As individuals we didn’t save enough for our own financial security, and as a country, we haven’t invested enough in our economic future. To face the long term challenges to our economic prosperity like an ageing population or climate change, we will need a more resilient economy that has far stronger foundations of savings and investment.

So what happens to the money that we combine with the tax subsidy in order to save for the future?

Well, we know that pension funds and institutional investors place much of this in the stock market, but the evidence shows that more and more of this capital is used for high frequency trading rather than long term investing. Andy Haldane of the Bank of England is one high profile regulator who is very concerned with this development. Cash placed in ISAs earns a very low rate of interest and, in as much that these funds bolster bank balance sheets and help fund lending to the economy, we also know that the majority of such lending actually funds property loans and financial speculation. Less than 20 per cent of UK bank lending goes to the productive economy of growing businesses. Finally we know that fees and charges in the investment and banking sectors are notoriously opaque, and competition is far from perfect.

So there is an understandable lack of trust in the finance sector, yet the government has to find a way to convince the public not just to save more, but channel those savings into productive investment. One way to do this is for the government to be more explicit about encouraging savings and investments that apply responsibility criteria and enhance social and environmental well being, as well as financial returns. Moreover, it should be using the existing subsidies to enforce this principle. In an era where all subsidy has to be made to work harder for the public interest, there should be a principle that, in return for tax relief, savers and investors should be able to demonstrate a contribution to the public good. This will not be easy to do, but there is a growing set of voluntary standards and codes of practice which investment organisations can apply to demonstrate they are taking a responsible approach, looking a long term interests, not just short term profits.

In my recent report for Green Alliance, Saving for a sustainable future, I make the case for these principles to be used in public policy and set out a few ways in which it could be applied:

  • Pension tax relief could be made conditional on responsible standards being applied.

  • Banks could only be able to offer tax-free Cash ISA accounts if they could demonstrate responsible and transparent lending practices.

  • Capital gains tax relief for the sale of a residential property could be made conditional on certain energy efficiency improvements being made to the building.

There is political consensus on the need to rebalance our economy and reshape British capitalism in way that better incorporates the values of society. Applying these ideas to existing taxpayer subsidies is a good start.

Green - well, yellow - Britain. Photograph: Getty Images

Chris is an independent environmental policy consultant working on sustainable finance, climate change, energy policy and the green economy. He is a fellow of the Finance Innovation Lab, and an associate of Green Alliance, where he has written on the Green Investment Bank, environmental tax reform and sustainable savings policy.

He was previously head of Climate Change at the Environment Agency and senior research fellow for sustainability at IPPR. Follow @chrisjhewett on twitter.

Getty
Show Hide image

Manchester attack: Theresa May condemns "warped and twisted" terrorist

The Prime Minister said the police were treating the explosion at the Manchester Arena as "an appalling terrorist attack".

At least 22 people are dead and around 59 have been injured, including children, after an explosion at a concert arena in Manchester that is being treated as a terrorist attack.

Police believe the attack was carried out by a single suicide bomber, who also died. However, the police have also announced the arrest of a 23-year-old man in South Manchester in connection with the attack.

Speaking before the announcement, chief constable Ian Hopkins said: "We have been treating this as a terrorist attack." The attacker was named by papers late on Tuesday as Salman Abedi, a British man of Libyan heritage. The source for this is US, rather than British, intelligence.

The victims were young concertgoers and their parents. Victims include the 18 year old Georgina Callander and the eight year old Saffie Rose Roussos.

The Prime Minister Theresa May earlier said that the country's "thoughts and prayers" were with those affected by the attack. 

She said: "It is now beyond doubt that the people of Manchester and of this country have fallen victim to a callous terrorist attack, an attack that targeted some of the youngest people in our society with cold calculation.

"This was among the worst terrorist incidents we have ever experienced in the United Kingdom, and although it is not the first time Manchester has suffered in this way, it is the worst attack the city has experienced and the worst ever to hit the north of England."

The blast occurred as an Ariana Grande concert was finishing at Manchester Arena on Monday night. According to May, the terrorist deliberately detonated his device as fans were leaving "to cause maximum carnage". 

May said the country will struggle to understand the "warped and twisted mind" that saw "a room packed with young children" as "an opportunity for carnage". 

"This attack stands out for its appalling, sickening cowardice deliberately targeting innocent and defenceless children," she said. "Young people who should have been enjoying one of the most memorable nights of their lives."

She thanked the emergency services "on behalf of the country" for their "utmost professionalism" and urged anyone with information about the attack to contact the police. 

"The general election campaign has been suspended. I will chair another meeting of Cobra later today."

Getty

Ending her statement, she said: 

"At terrible moments like these it is customary for leaders politicians and others to condemn the perpetrators and declare that the terrorists will not win. But the fact we have been here before and we need to say this again does not make it any less true. For as so often while we experienced the worst of humanity in Manchester last night, we also saw the best.

"The cowardice of the attacker met the bravery of the emergency services and the people of Manchester. The attempt to divide us met countless acts of kindness that brought people together and in the days ahead those must be the things we remember. The images we hold in our minds should not be those of senseless slaughter, but the ordinary men and women who put their own concerns for safety aside and rushed to help."

Emergency services, including hundreds of police, worked overnight to recover the victims and secure the area, while families desperately searched for their children. The dead included children and teenagers. The injured are being treated at eight hospitals in Greater Manchester, and some are in critical condition. 

The so-called Islamic State has claimed responsibility for the attack, although this has not been independently verified, and the organisation has been slow to respond. 

Theresa May chaired a Cobra meeting on Tuesday morning and another in the afternoon. She said police believed they knew the identity of the perpretator, and were working "at speed" to establish whether he was part of a larger network. She met Manchester's chief constable, the Manchester Mayor Andy Burnham, and members of the emergency services. A flat in a Manchester suburb has been raided. 

There were reports overnight of strangers offering their homes to concertgoers, and taxis taking people away from the scene of the explosion for free.

As the news broke, Grande, who had left the stage moments before the attack, tweeted that she felt "broken". 

Manchester's newly elected metro mayor, Andy Burnham, called the explosion "an evil act" and said: "After our darkest of nights Manchester is waking up to the most difficult of dawns."

He thanked the emergency services and the people of Manchester, and said "it will be business as usual as far as possible in our great city". 

Extra police, including armed officers, have been deployed on the streets of the city, and the area around the Manchester Arena remains cordoned off. Victoria Station is closed. 

The main political parties suspended campaigning for the general election for at least 24 hours after the news broke. Labour leader Jeremy Corbyn said: “I am horrified by the horrendous events in Manchester last night. My thoughts are with families and friends of those who have died and been injured.

“Today the whole country will grieve for the people who have lost their lives."

Scotland’s First Minister Nicola Sturgeon said: “My thoughts are with the victims, their families and all those who have been affected by this barbaric attack in Manchester."

Sadiq Khan, the Mayor of London, a city which suffered a terrorist attack two months ago, tweeted that: "London stands with Manchester."

The attack happened while many Brits were sleeping, but international leaders have already been offering their condolences. Justin Trudeau, the Prime Minister of Canada, tweeted that: "Canadians are shocked by the news of the horrific attack in Manchester." The Parliament of Australia paused for a minute's silence in remembrance of the dead. 

 

 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496