The Chancellor has unveiled the 2018 Autumn Budget.
Listening to the speech you could be forgiven for thinking there was nothing of interest to the Sustainable and Responsible Investment sector. There were, however, a few interesting announcements hidden away in the budget document itself. The following is a summary of those key points which may be of interest to UKSIF members. Quotes are taken directly from the budget document or the speech itself.
Pension funds and long-term investment
The Government argues that with ‘total AUM expected to exceed £1tn by 2025, DC pension schemes have a vital role to play in long-term financing for UK growth and innovation.’ It therefore makes several announcements:
- Through the British Business Bank, the Government will support pension funds to invest in growing UK businesses. Several of the largest DC pension funds have already committed to work with the bank to explore options for pooled investment in patient capital.
- The FCA will publish a discussion paper by the end of 2018 to explore how effectively the UK’s existing fund regime enables investment in patient capital.
- DWP will consult in 2019 on the function of the pensions charge cap to ensure that it does not unduly restrict the use of performance fees within default pension schemes, while maintaining member protections.
- The FCA will consult by the end of 2018 on updating the permitted links framework to allow unit-linked pension funds to invest in an appropriate range of patient capital assets (NB – this was a Law Commission recommendation in 2017).
The Chancellor pledged to introduce a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic. This is because while disposable plastic products may be ‘convenient for consumers’ they are ‘deadly for our wildlife and our oceans’. The detail and implementation timetable of this new tax will be consulted on.
However, Hammond also said that despite looking at the case for a levy on the production of single use plastic cups he ‘concluded that a tax in isolation would not… deliver the decisive shift from disposable to reusable cups across all beverage types’. Although he did commit to ‘return to this issue is sufficient progress is not made’ by the industry.
In the event of a no deal Brexit, the Treasury has announced it will introduced a carbon emissions tax to help meet the UK’s legally binding carbon reduction commitments under the Climate Change Act. The tax would apply to ‘all stationary installations currently participating in the EU ETS from 1 April 2019… A rate of £16 would apply to each tonne of carbon dioxide emitted over and above an installation’s emissions allowance, which would be based on the installation’s free allowances under the EU ETS.’
Some other announcements which may be of interest to UKSIF members include:
- The Government will ‘review its existing support for infrastructure finance, to ensure that it continues to meet markets needs as the UK leaves the EU.’
- The Treasury will strengthen its investment links with global partners, ‘including becoming a European Partner to the Institutional Investor Round table that brings together leading global investment funds.’
- An Industrial Energy Transformation Fund, ‘backed by up to £315 million of investment, to support business with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency.’
- A call for evidence on a new Business Energy Efficiency Scheme for smaller businesses to help reduce energy bills and carbon emissions.
- A National Infrastructure Strategy in 2019.