Liz Truss’ plans to slash taxes could trigger a wave of investment into the UK, the boss of Legal & General has said.
Sir Nigel Wilson, the influential City grandee and chief executive of the UK’s biggest pensions manager, said that cutting taxes on businesses could boost the attractiveness of Britain as a destination for international investors.
"Reducing the tax burden will be seen by international investors that the country is open for business,” he said.
Attracting overseas money could soften the blow as the economy heads into a recession, with the Bank of England predicting the steepest downturn since 2008.
It comes as Ms Truss and former chancellor Rishi Sunak, the two candidates vying to replace Boris Johnson as prime minister, continue to trade blows about whether immediate tax cuts would boost economic growth or stoke inflation.
Ms Truss is in favour of rapidly cutting taxes in the hope it will stimulate economic activity, while Mr Sunak argues that slashing taxes now will only serve to prolong the inflation crisis.
Sir Nigel, one of the highest profile supporters of Brexit in the Square Mile, urged whoever wins the leadership contest to get on with cutting Brexit red tape. He criticised the Government’s slow approach to City regulatory reforms since leaving the EU.
He singled out delays in overhauling the controversial Solvency II rulebook that forces insurers to hold vast sums of cash on their balance sheets and prevents them from investing in illiquid assets, such as infrastructure.
"Brexit happened in 2016 and in 2022 we're still talking about [Solvency II reforms],” Sir Nigel said.
“It was the easiest of Brexit dividends and we still haven’t achieved it. Those who voted for this seemingly illusory Brexit dividend have yet to see anything.
“There is an urgent need for an investment-led recovery.”
Ministers have become increasingly frustrated with the Bank of England’s Prudential Regulation Authority, accusing it of holding up the reforms.
Last month, sources close to a member of the Cabinet said that Threadneedle Street is “100pc” resisting cuts to red tape following a clash over the insurance market.
Sir Nigel’s comments came as Legal & General posted first-half profits of £1.2bn, up from £1.1bn during the same period last year.
Rising interest rates helped Legal & General’s performance as it means they have to set aside less capital now to make future pension payments.
Commenting on the cost of living crisis, Sir Nigel said: “We are committed to providing financial security for our customers and colleagues in a tough economic climate.”
Legal & General was also boosted by strong demand for corporate pension deals, known as bulk annuities, which have bounced back after a lull during the pandemic.
Assets under management at the company's fund management arm, which is one of the biggest investors in Britain, totalled £1.3 trillion. That was a drop of 3pc on the same period last year but compares favourably with rival asset manager abrdn, which posted a 6pc drop in assets under management during the first six months of the year.
Legal & General’s pandemic-related claims were in line with the £57m the company has already set aside to meet its obligations.
Analysts at Bank of America said: “L&G is firing on all cylinders, with each business unit delivering impressive results.”
They added that the company is in “great shape and well-prepared for any macro challenges this winter brings”.