Think tank says tax breaks should depend on savers’ and investors’ ability to prove they are supporting the public good
Savers and investors should only be eligible for tax relief and other implicit subsidies if they can demonstrate a contribution to the public good, such as supporting much-needed infrastructure or green businesses, a think tank will say today.
The Green Alliance will propose the radical move in a new report detailing how better targeted tax breaks could be used as “an engine for economic stability, social innovation and low-carbon economic transition”.
It says the UK’s low levels of savings (the second-worst among the OECD countries) and short-term investment culture make raising the estimated £450bn to £550bn of capital investment needed to transition to a low-carbon economy and meet the country’s environmental targets all but impossible.
The report argues that attaching new conditions to the nearly £40bn handed out by the government in subsidies for Pension Tax Relief, ISA allowances and Capital Gains Tax could serve to drive green infrastructure investments, while also encouraging more people to increase savings.
It recommends that policymakers and the financial services industry adopt a new principle that, in return for tax relief and implicit subsidy, savers and investors should be able to demonstrate a contribution to the public good.
Practically, this would mean banks and building societies would only be able to offer tax-free ISA savings accounts if they embrace responsible lending practices and provide greater transparency over the types of activity supported by their lending.