My hon. Friend makes an excellent point. He is absolutely right. Already 81% of investors in UK funds are pension funds or insurers, meaning that people’s income in retirement is impaired and fewer funds are available for investment in the real economy. Two-thirds of individuals approaching retirement are contributing to a pension fund from where these charges are taken, and the introduction of automatic enrolment will mean that many more ordinary working people will be saving into a pension for the first time and will be affected.
So there is a double imperative to act now to correct this situation in which funds are moving from being domiciled by choice in this country to overseas. First, any continuing loss of competitiveness by the UK fund management industry risks destroying, possibly for ever, the critical mass and prominent global position that the industry has had. Secondly, we are on the cusp of a once-in-a-generation opportunity for the UK fund management industry, and, with it, the UK economy, because in July the EU’s alternative investment fund managers directive comes into force, creating a much more effective single market across Europe in fund management. It is estimated that €250 billion of funds
may be available for the UK, and other competitors, to play host to. That is to say nothing of the significant growth shown in the emerging economies, where a burgeoning middle class is looking to make investments for which the EU is an attractive home.
7.45 pm
The opportunity for the UK to attract those funds depends on the abolition of schedule 19. That is why the Budget proposed, in pretty high-profile terms, the abolition of schedule 19. The measure will be included in next year’s Finance Bill. The draft legislation, including a tax information and impact note, will be published for consultation in the autumn, to inform the consideration of next year’s Finance Bill—that never happened under the previous Government; this is totally transparent. The costs that have been included very prudently in the Red Book represent a conservative case; they do not include any of the effects or any assumption of what would happen if we reverse this relative decline compared with jurisdictions such as Ireland and Luxembourg so that we have an increasing tax take from people being employed there. The included costs do not reflect the potential boost to stamp duty reserve tax revenue— empirically, investment funds tend to have more active investment strategies than direct investors and are more likely to incur it. Those aspects will be further elaborated during the consultation and the tax information and impact note during the next six months.