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George Osborne sets out his vision of an economy built on savings and investment

OSBORNE speaking Shadow Chancellor George Osborne has just addressed the Association of British Insurers, setting out his vision of a "new economic model" for the country.

You can read the whole speech here, but the two highlights would appear to be as follows.

Firstly, he identified his medium term priority as making the transition "from an economy built on excessive debt to one built on savings and investment" in order that the recovery can be sustainable when it comes:

"We need to start building a pool of domestic savings to drive our growth – that means a structural increase in the amount we save... Encouraging saving through the tax system will be a central task for the next Conservative Government.
"We can start by avoiding the uncertainty and damage caused by unpredictable and rushed changes to the tax system... Reducing uncertainty is one important step towards rebuilding our savings culture. We also proposed at the Budget the abolition of basic rate tax on savings income. We are committed to raising the Inheritance Tax threshold to £1 million so that only millionaires pay tax on what they have saved to pass on to their children."

Secondly, Mr Osborne also outlined his desire to "embed a culture of long term investment at the heart of our financial system" which would see a re-focusing of the economy "from the rush for short term gains to the pursuit of long term returns":

"We need a financial system that measures returns over many years and decades, not just quarters. Part of the solution must be reforming a system of remuneration that emphasised short term gains over long term returns. Some banks are now making big profits again from higher margins, underpinned by taxpayer guarantees. It would be a huge mistake if they pay out huge bonuses this year end on the back of these government-supported profits."
"The banks should be using their profits to rebuild their balance sheets, not to hand out huge bonuses while the rest of the economy picks up the pieces for the follies of finance. But the change of culture needs to go far deeper than bonuses... We also need to embed a new culture in new institutions that value investment in long term assets and technologies."

Jonathan Isaby


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