Following his Budget speech last week, George Osborne received as much praise as any Chancellor ever could hope for when he proposed that restrictions surrounding pension savings should be removed.
From April 2015 pension investors will be able to take the whole of their defined contribution pension funds as a lump sum, at age 55 if they so wish, subject to consultation.
Perhaps the principle reason why this has never been allowed before has been the state’s worry that people would reach 55, draw their pension as a lump sum and immediately go off and do something stupid with it, such as buy a new car or put it all on a three-legged nag in the 2.30 at Uttoxeter.
Patronising? Condescending? Misguided? Absolutely.
The overwhelming majority, probably in excess of 99.5 percent of people who have saved into their pension, are extremely unlikely to blow a lump sum on a new convertible with go-fast stripes, or something equally ridiculous.
Every one of these folks appreciate the value of money and what it takes to accumulate a pension pot. Mr Osborne deserves credit for trusting these people to manage their own finances.
Yet though there was good news for many, the insistence on making the Budget appear as though it balances meant that bookies took a shellacking.
A five percent rise in the duty paid on fixed-odds betting terminals (FOBT), to 25 percent, is the latest in what the government considers its war on ‘addictive’ and ‘damaging’ gambling.
Bookmakers have become an easy touch for ready cash, because in addition to the higher FOBT duty, the industry is also faced with the spectre of a 15 percent point of consumption tax, due to be introduced in December, ostensibly designed to target offshore and online bookmakers.
Immediately following this Budget announcement, shares in William Hill and Ladbrokes fell 8 per cent and 13 percent respectively.
The bookmaking sector is often treated like a much smaller version of the City.
Both make shed-loads of cash and contribute billions in corporation and other taxes, yet they’re frequently depicted as wicked, satanic demons intent on undermining our way of life when in truth, the people working within the financial services and bookmaking sectors are much the same as those anywhere else.
Nevertheless, the cash-rich nature of financial services and bookmaking ensures no Chancellor can resist helping himself to a handful of free money from either industry’s collective coffers and couching such pilfering as an essential element in the state’s righteous drive to protect consumers.
Yet in levying what is, essentially, additional corporation tax, any Chancellor must constantly tread a fine line, as became evident at the Institute of Directors’ magnificent Grade One Georgian building in Pall Mall on Tuesday morning.
Here, the concern was that in the wake of the Budget, bookmakers have two options. Either remove the sizeable portfolio of hugely profitable FOTBs from their high street shops, or else cut back elsewhere, particularly with the sums they contribute to Britain’s racing industry. Even contemplating option one was never a realistic possibility.
Members of the Thoroughbred Breeders’ Association (TBA) and others attending Tuesday’s meeting in central London were concerned that the betting sector might be forced to withdraw support for the horse racing industry, a potential disaster for UK breeders who support an estimated 86,000 jobs.
According to a report commissioned by the TBA and prepared by accountants PwC, our indigenous horse racing sector is becoming over-dependent on foals from abroad.
National hunt racing in particular now has considerably fewer British horses than it did even a decade ago and the breeding industry, worth an estimated £280 million a year and based primarily in rural areas where alternative jobs are thin on the ground, is facing a crisis.
To put this into context, Philip Newton, a TBA board member, said that at this month’s Cheltenham Festival, only 11 of the meeting’s 110 runners were bred in Britain.
Last year, only 647 national hunt foals were born in the UK, compared with 2,400 in Ireland, making Britain’s racing programme almost totally dependent upon imports from Ireland and, to an increasing degree, from France.
The situation is precarious, particularly as Ireland and France have extensive racing programmes of their own.
Despite being up against intense live and televised competition, horse racing remains Britain’s second-largest spectator sport and the nation’s racecourses, responding to sustained consumer demand, host more than 1,400 meetings every year. However, many small breeders are operating at a loss and are unable to keep up with demand generated as a result of the sport’s popularity.
An estimated one third of breeders of flat racing horses are, “in many cases, losing money” says the PwC report, which goes on to suggest that were the industry to lose those breeders, the impact across the racing world would be critical.
“This report has confirmed our worst fears,” commented TBA chairman, Richard Lancaster.
“It has identified some alarming and potentially critical (problems), the most serious of which is the supply base and production of foals, which are vital to fulfil the Great Britain racing fixtures list.” The body already has a number of initiatives in place to assist breeders, but following publication of the report on Tuesday, the TBA plans to investigate additional options for incentive schemes, together with direct financial support for national hunt breeders. It also plans to commission an investigation into the comparative tax regimes in France, Ireland and the UK to establish whether breeders here operate at a disadvantage to their Irish and French counterparts.
A TBA-sponsored series of fillies-only races, designed to retain quality fillies within British horse racing are also planned, as is the ongoing search for what the TBA calls ‘primary financial support for British breeders’. Perhaps the most chilling conclusion was spoken, not written.
“We are a hugely important part of the rural tapestry,” added Mr Newton, who feared that were they to disappear, the jobs within the breeding industry would be extremely difficult to replace.
There’s little chance that pension savers who wrest control of their own destiny by taking charge of their pension pots next April will blow even a tiny proportion of it on a 33/1 outsider at Market Rasen.
However, one fancies that should a collection of small British breeding yards qualify as say, Enterprise Investment Schemes, offering substantial tax relief, interest amongst would-be investors could be significant.
Maybe Mr Osborne could take a look at such a proposal…