In today’s pre-Budget report, the Chancellor increased national insurance by 0.5 per cent for those earning more than £20,000, claiming it would save £3bn in 2011/12.
However, the ABI director of financial regulation and taxation Peter Vipond says: “This will be bad for the economy and will not help the UK recover.
“The insurance sector employs over 300,000 people and as large employers our members will be disappointed at this tax on employment.”
Vipond also says the ABI is disappointed with Darling’s decision to restrict tax relief on pensions for high earners, and change employer pension contributions.
He says: “This can only do further damage to pensions and will not encourage people to make a long-term commitment to saving.
“Incentives for higher rate tax payers are not about perks for the rich, but encouraging people to defer income now to ensure they don’t have to rely on the state when they retire. Given the demographic challenges the UK faces, we actually need more measures to encourage long-term saving.”
However, Vipond says the ABI supports Darling’s decision to clamp down on offshore profits. He says: “We are pleased that the Chancellor has today signalled progress on reform of rules around controlled foreign companies, which will help firms with subsidiaries abroad. However, we need action as soon as possible, as good intentions alone will not help the UK become competitive.”