BSA urges Government to promote competition and diversity in financial services

Ahead of the Chancellor's Budget report next week, the Building Societies Association is calling on the Government to take action to assist savers and borrowers and promote competitive and equitable financial markets.

It says a number of key areas should be addressed, including improvements to ISAs, savings for children, and support for struggling home owners and a re-look at stamp duty.

‘The Government's commitment to ISAs is welcome, however we believe that the regime could be further improved by permitting transfers from stocks and shares ISAs to the cash product. This would provide more product flexibility for savers and represent a consistency of approach,’ said Adrian Coles, director general of the BSA.

And he pointed out that the introduction of the Junior ISA will go some way in filling the gap left by the abolition of the Child Trust Fund and mutuals are well placed to offer such accounts. ‘We believe the product should be kept as simple as possible and we encourage HM Treasury to be flexible on the launch date to ensure there is a wide range of providers in place,’ he said.

‘Children's savings products help promote a savings habit among children and the BSA also asks the Government to consider increasing the £100 tax free interest limit on all children's savings accounts to raise it in line with the effect of inflation,’ added Coles.

The BSA believes that the Government's commitment to the continuation of Mortgage Rescue, and the 12 month extension to the Support for Mortgage Interest (SMI) criteria, is sensible. ‘We would, however, urge the Government to consider paying SMI at the same rate as the borrower's mortgage to ensure that vulnerable borrowers continue to receive adequate support,’ said Coles.

‘Obtaining a mortgage remains very challenging for first-time buyers, who must raise a large deposit. Transaction costs act as a further barrier to house purchase, so we call on the Government to make permanent the exemption from stamp duty for first-time buyers on properties under £250,000.  The Government should also go a step further and look at reforming the current slab structure of the tax, it's time stamp duty for all buyers was reviewed,’ he added.

The BSA also welcomes the commitment by the Government to foster diversity, promote mutuals and create a more competitive banking industry. ‘Keeping a reformed Northern Rock independent of the big banks would be good for competition, and we would urge the Government to seriously consider the benefits of remutualisation,’ explained Coles.

‘A re-launched and remutualised Northern Rock can repay the taxpayer stake over time. A deferred payment profile can give the optimum outcome, both returning the full value to the taxpayer and achieving other public policy goals, such as increased stability and competition,’ he added.