CBI urges U-turn over National Insurance rises

The Government must reverse its controversial increase in national insurance contributions as part of a medium-term plan to roll back the tax burden on business, the CBI said today.

In its submission before this month's Budget it said NI was a tax on job creation and would hinder the Government's efforts to boost the economy's long-term growth potential.

It said the Government should opt for an "across the board" tax cut when it could afford one, rather than complex targeted tax breaks. It said further rises in business taxation would do "immense damage" to relations between Government and business.

The two sides have clashed recently over CBI reports that claimed businesses were less likely to invest in the UK because the tax burden has risen under Labour. Digby Jones, the CBI's director-general, said: "The Government should sit up and take notice when top business decision makers start saying the UK is declining as an investment location. Trying to shoot the messenger will not change what's happening on the business frontline."

In terms of the 17 March Budget, Mr Jones acknowledged finances were "tight" but urged Gordon Brown not to impose any more tax rises. He called for a "modest" package of incentives worth £1bn that would include a further extension of the tax credit for research and development, and a widening of the exemptions to the climate change levy.

The CBI also called for more tax incentives to encourage higher levels of pensions savings and said there were still "major concerns" over the proposed £1.4m lifetime limit on payments into pension schemes.

Last week the EEF, the manufacturing organisation, proposed converting capital allowances into a tax credit system. It said its proposal would help promote investment and stability through downturns.