Darling under fire ahead of Budget 2008

By Sam Fleming for MailOnline
Updated:

 

Britain's punch-drunk Chancellor Alistair Darling was hit by a double blow from increasingly restive business leaders.

Chancellor Alistair Darling

The Chancellor speaking in the House of Commons

The top UK insurers launched a broadside at the Treasury for constantly fiddling with the tax and savings rules, claiming repeated U-turns are eroding the public's willingness to save.

Separately, the Confederation of British Industry claimed Darling is rushing into an overhaul of financial legislation that could be as damaging as the Sarbanes Oxley laws imposed by the US Congress after the Enron scandal.

Director- General Richard Lambert said he is 'very uneasy about a great deal of the detail' about the Treasury's reforms to banking regulation, including proposals to create a £13bn fund to protect deposits.

The twin warnings come as Darling struggles to recover his footing following embarrassing climbdowns over reforms to capital gains tax and rules governing non-domiciled taxpayers. The Chancellor is expected to give a gloomy economic outlook in his first Budget next week, with limited scope for electoratepleasing giveaways given the fragile state of the public finances.

Association of British Insurers director-general Stephen Haddrill yesterday wrote a letter to Darling attacking the Treasury for 'ad hoc and too frequent changes of public policy'. He said the recent overhaul of CGT rules was just the latest in a series of policy shocks that are distorting the savings market.

'This record has damaged the Treasury's credibility but, more importantly, hurt prospects for the higher level of savings that the government as well as the industry believes is necessary,' he added. 'Damaging changes to the tax regime around savings erode the public's confidence that it pays to save.'

The ABI and CBI homed in on proposed changes to bank deposit protection, arguing that the current system guaranteeing £35,000 of deposits goes far enough. Lambert said a mooted £13bn fund to protect customer deposits would be 'an expensive irrelevance,' adding: 'Let's take a little time, and get things right.'

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