Brown urged to restore dividend tax credit
UK– The government should make pension fund membership compulsory, restore the dividend tax credit it removed in 1997 and make schemes tax exempt according to ITEM Club, the London-based economic forecasting group sponsored by Ernst & Young.
Professor Peter Spencer, ITEM’s economic advisor, says the true impact of the removal of the tax credit, which effectively gives the government £5bn (€8bn) in tax annually, has only become clear as the equity markets have fallen and predictions for the UK’s GDP has dropped to 1.7% for this year.
“Gordon Brown’s cunning plan in 1997 is coming back to haunt him. He thought that no-one would notice his £5bn a year tax when he removed the tax credit. The true impact was not seen at the time because the economy was booming and equity markets were soaring.
“However current economic conditions mean the illusion that the private/occupational pension sector would shield the state from its pension responsibilities is now being destroyed,” says Spencer.
ITEM is calling on the chancellor to reinstate the tax credit before the damage it has caused the pensions industry becomes irreversible.
“The economic benefits of restoring the tax credit and allowing pensions to grow tax-free would mean more money going back into the stock markets and reduced pressure on public finance in the long-term,” Spencer adds.