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.

Photo: Getty
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Rising crime and fewer police show the most damaging impacts of austerity

We need to protect those who protect us.

Today’s revelation that police-recorded crime has risen by 10 per cent across England and Wales shows one of the most damaging impacts of austerity. Behind the cold figures are countless stories of personal misery; 723 homicides, 466,018 crimes with violence resulting in injury, and 205,869 domestic burglaries to take just a few examples.

It is crucial that politicians of all parties seek to address this rising level of violence and offer solutions to halt the increase in violent crime. I challenge any Tory to defend the idea that their constituents are best served by a continued squeeze on police budgets, when the number of officers is already at the lowest level for more than 30 years.

This week saw the launch Chris Bryant's Protect The Protectors Private Member’s Bill, which aims to secure greater protections for emergency service workers. It carries on where my attempts in the last parliament left off, and could not come at a more important time. Cuts to the number of police officers on our streets have not only left our communities less safe, but officers themselves are now more vulnerable as well.

As an MP I work closely with the local neighbourhood policing teams in my constituency of Halifax. There is some outstanding work going on to address the underlying causes of crime, to tackle antisocial behaviour, and to build trust and engagement across communities. I am always amazed that neighbourhood police officers seem to know the name of every kid in their patch. However cuts to West Yorkshire Police, which have totalled more than £160m since 2010, have meant that the number of neighbourhood officers in my district has been cut by half in the last year, as the budget squeeze continues and more resources are drawn into counter-terrorism and other specialisms .

Overall, West Yorkshire Police have seen a loss of around 1,200 officers. West Yorkshire Police Federation chairman Nick Smart is clear about the result: "To say it’s had no effect on frontline policing is just a nonsense.” Yet for years the Conservatives have argued just this, with the Prime Minister recently telling MPs that crime was at a record low, and ministers frequently arguing that the changing nature of crime means that the number of officers is a poor measure of police effectiveness. These figures today completely debunk that myth.

Constituents are also increasingly coming to me with concerns that crimes are not investigated once they are reported. Where the police simply do not have the resources to follow-up and attend or investigate crimes, communities lose faith and the criminals grow in confidence.

A frequently overlooked part of this discussion is that the demands on police have increased hugely, often in some unexpected ways. A clear example of this is that cuts in our mental health services have resulted in police officers having to deal with mental health issues in the custody suite. While on shift with the police last year, I saw how an average night included a series of people detained under the Mental Health Act. Due to a lack of specialist beds, vulnerable patients were held in a police cell, or even in the back of a police car, for their own safety. We should all be concerned that the police are becoming a catch-all for the state’s failures.

While the politically charged campaign to restore police numbers is ongoing, Protect The Protectors is seeking to build cross-party support for measures that would offer greater protections to officers immediately. In February, the Police Federation of England and Wales released the results of its latest welfare survey data which suggest that there were more than two million unarmed physical assaults on officers over a 12-month period, and a further 302,842 assaults using a deadly weapon.

This is partly due to an increase in single crewing, which sees officers sent out on their own into often hostile circumstances. Morale in the police has suffered hugely in recent years and almost every front-line officer will be able to recall a time when they were recently assaulted.

If we want to tackle this undeniable rise in violent crime, then a large part of the solution is protecting those who protect us; strengthening the law to keep them from harm where possible, restoring morale by removing the pay cap, and most importantly, increasing their numbers.

Holly Lynch is the MP for Halifax. The Protect the Protectors bill will get its second reading on the Friday 20th October. 

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