Steve Webb: Treasury could target salary sacrifice

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Former pensions minister Steve Webb says salary sacrifice could be in the Treasury’s sights ahead of the Conservative Government’s first Budget in July.

Speaking to Money Marketing, Webb, who lost his Thornbury & Yate constituency seat during the general election, says the pledge from the Government not to raise tax rates leaves ministers with little wriggle room to raise extra money to fund spending pledges.

He says: “I certainly think salary sacrifice could go because the sums involved are significant. The Conservatives have said they aren’t going to raise tax rates, so they have to raise some serious money from somewhere.

“You could certainly see action in that space in the Budget. I have never understood why governments allowed it in the first place.”

Webb also reveals automatic enrolment for smaller businesses was under “serious” threat during his tenure. The reforms were eventually delayed for firms employing fewer than 50 people until after the May general election.

Webb says: “The reason that nobody who employs fewer than 50 people has been enrolled until June 2015 is because the election was in May 2015. We had to battle to keep auto-enrolment going and the price for that was to give the next government the chance to stop it before we got to the small firms.

“There were serious discussions about exempting smaller employers altogether. We had the one-in-one-out policy on deregulation and the fragility of the economic to think about in 2012, so there was an obsessive focus on growth.”

Webb also plays down suggestions that a drawdown charge cap is necessary to protect savers in the wake of the pension freedoms.

He says: “We certainly shouldn’t have a charge cap yet because we need innovation in the market, and frankly I don’t think we have a basis for setting a cap.

“There will be a lot of tough talk but I expect the focus to be on regulatory process rather than price.”