8th May 2009
Government must put money where its mouth is - APCIMS resonds to Bischoff report
APCIMS welcomes the general thrust of the Win Bischoff report on the future of financial services in the UK, but warns it lacks credibility in the wake of the recent budget. APCIMS outlines regulation and tax changes which must be put in place to maintain the long term credibility of the UK as a global leader of financial services.
Commenting on the Win Bischoff report deputy CEO John Barrass said:
“Win Bischoff lays out laudable aims for maintaining the UK as a leading financial gateway for Europe and the rest of the world. But this is motherhood and apple pie unless the Government is willing to put its money where its mouth is and establish stable, clear policies on tax and regulation which are appropriate, targeted and proportionate. It is therefore right for the report to focus on appropriate regulation and a stable and sustainable tax system.
“With £400 billion under management the private client investment industry is crucial to the future of the UK economy. The UK is the leading global player in the private wealth management sector with APCIMS members making up 25,000 independent professionals in 500 sites across the country. Yet despite the substantial contributions the industry makes to the economy inappropriate regulation has dogged our sector and the tax environment is far from benign.”
On regulation:
"Regulation carefully and specifically targeted at relevant activities within the banking sector is clearly part of the solution to the current financial crisis in recognition of international activities. However if that regulation overspills into the private wealth management and stockbroking sectors, which are victims of the crisis, we will pay a very high price not only in the UK but globally.
“Unlike banks, stockbroking and wealth management firms do not generally take deposits and lend money. They are therefore not exposed to credit risk, liquidity risk or securitisation risk. And the nature of their counterparty risk is very different from those larger firms trading in exotic instruments across frontiers. The capital adequacy requirements should reflect this much lower risk profile and this in turn should be reflected in a much lower regulatory burden.
“The FSA has all too often applied a ‘one size fits all’ approach, piling unnecessary wrongly targeted regulatory burdens on APCIMS firms. These regulatory burdens have more often than not brought little or no benefit to the clients of our member firms or protection for their clients.
“APCIMS does not believe it is in the interests of our members to have an additional Euro-wide regulator controlled by the Commission and/or European Central Bank, remote from them and their markets. We need thoughtful, targeted regulation, addressing the distinct risks of each business model which will ensure the problems will not recur. Building another super regulatory institution will not of itself necessarily address the issues that gave rise to the crisis.”
On tax Barrass went on to say:
“The Bischoff paper talks about a creating a stable tax environment but the Government’s highest budget has already destabilized the environment. Far from encouraging industry to stay or relocate to the UK through stable and controlled fiscal policies, the Government has dealt a blow to confidence in the UK’s fiscal environment which has detrimental effects in the levels on business activity, GDP growth and employment.
“The Government’s top rate tax and related 42.5% tax on dividends for the new top rate tax payers announced in the budget builds on previous shocks such as the CGT and Non-Dom initiatives and will result in many moving off shore. This is likely to impact both the client base of our industry and result in a brain drain for the financial industry as a whole.
“The Government also failed to show leadership on stamp duty in the budget. Britain’s stamp duty rate of 0.5% is uncompetitive and harmful to share values. The UK has the largest stamp duty rate of any G7 country. France, Germany, Italy, The Netherlands and Luxembourg have abolished stamp duty which, following MiFID, makes the UK increasingly uncompetitive. The US stamp duty rate is 0.0003%. Research undertaken last year for the Corporation of the City of London has suggested that the abolition of stamp duty could add as much as £146bn to the value of UK shares. Other research suggests that stamp duty of 0.5% depresses share values up to 10% and increases volatility.
“If the Bischoff report is to mean anything in practice the Government must review measures introduced at the budget at the earliest opportunity.”
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For more information please contact:
Dirk Paterson, Head of Communications, APCIMS
on 020 7448 7100
Mobile: 07944 866 286
Email: dirkp@apcims.co.uk
Notes to editors:
APCIMS
- More than 12 million people in the UK currently invest directly in stocks and shares and other financial instruments to secure their financial futures
- APCIMS represents over 140 firms all over the UK who deal primarily in stocks and shares on behalf of individuals and the institutions in which we have our money
- Around £400 billion of the country’s wealth is under the management of our members
- Our aim is to ensure that the regulatory, tax and other changes across Europe minimize impact on the investment community
- We want to lead the debate on regulation in Europe, with UK regulators and with British parliamentarians to make sure consumers are protected while at the same time our industry flourishes in the UK.