New ministers must crackdown on the £6bn discount rate debacle after the General Election, RSA chief executive Stephen Hester said today.
The FTSE 100 insurer revealed it has taken an £85m hit after the government's controversial decision to cut the rate, also known as the Ogden rate, from 2.5 per cent to -0.75 per cent in February.
The decision prompted a backlash from insurance chiefs and led to chancellor Philip Hammond stepping in to find a way to rectify how the rate is calculated.
But Hester said he was concerned about a loss of impetus on reform as a result of the calling of a General Election.
“I do think that there is at a minimum a delay and with any delay there comes the risk that the lawyers lobby nobbles the jury as it were on the way through, so there is that risk," Hester told City A.M..
He added: “Offsetting that fact [the risk] is by far the biggest loser from the Ogden rate change is the taxpayer because the NHS bill and local authority claimants are rather bigger.
I remember the chancellor saying it will cost £6bn extra and so I would have thought if the government wants to be a proper steward of taxpayers money, they can start by trying to get back that £6bn.
Hester admitted he "hadn't spent any time figuring out what the different political parties’ position is on these things". But he hoped whichever party prevailed on 8 June would follow through on the current government's pledge to review how the discount rate is calculated.
"It seems to me since the overriding slogan of both main political parties, both Conservative and Labour, are to try and benefit the many rather than the few… if you put that into practice you would say taxpayers of the country, i.e. 36m people who have insurance policies and pay taxes, would have their interests better balanced versus the legal lobby.”
The former RBS chief executive was speaking as RSA announced its first quarter results.
Gross net written premiums were up 14 per cent to £1.7bn and ahead of the firm's own expectations.
The insurer also managed to reduce its interest bill by around £60m each year. Hester said this equated to giving investors a boost 6p per share. He added: "Last year we made 39p a share, so it’s quite material.”
Shares in the firm rose nearly two per cent in trading today, standing at just over 617p per share at 3pm.