Labour plot to derail Jeremy Hunt’s pension masterplan
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Labour has vowed to oppose a multi-billion pound tax break on pensions. Chancellor Jeremy Hunt used his Budget today to announce the abolition of the lifetime allowance in a move designed to increase the workforce by removing disincentives to working for longer.
But shadow chancellor Rachel Reeves said tonight that Labour would oppose plans to ditch the lifetime allowance.
She told ITV’s Robert Peston: “I think this could unravel as quickly as it began.
“If you remember last September Liz Truss tried to cut the top rate of tax from 45p to 40p, everybody kicked off about it.
“Next week there will be a vote on this, Labour will force a vote on this next week.
“I would say to Conservative MPs in places like Ashfield or Bolsover or Stoke-on-Trent, whose side are you on?
“Are you on the side of ordinary working people in your constituencies who are seeing their taxes go up or are you going to vote with Rishi Sunak and Jeremy Hunt for a tax cut for the wealthiest in society?
“That’s the wrong priority and I would urge Conservatives to do the right thing and vote with Labour next week.”
The lifetime allowance – the total amount of tax-relieved contributions that an individual can accumulate – had stood at £1.07 million, with people potentially incurring tax charges as high as 55 percent on pension savings above this.
There had been reports it could be increased to £1.8 million but Mr Hunt went far beyond expectations by scrapping it altogether.
The measure is intended to stop an estimated 15,000 high earners – including senior NHS doctors – leaving the workforce.
The Chancellor also announced an increase in the pensions annual allowance – the limit on how much money someone can build up in their pension in any one tax year while still benefiting from tax relief – from £40,000 to £60,000.
The combined cost of the policies will be more than £1.1 billion a year by 2027/28, according to official estimates.
Mr Hunt told MPs he does “not want any doctor to retire early” because of pension rules.
He said: “No one should be pushed out of the workforce for tax reasons. These changes will stop over 80 percent of NHS doctors from receiving a tax charge, incentivise our most experienced and productive workers to stay in work for longer and simplify our tax system, taking thousands of people out of the complexity of pension tax.”
But Labour leader Sir Keir Starmer described it as a tax cut “for the richest 1 percent”.
He told the Commons: “We needed a fix for doctors, but the announcement today is a huge giveaway to some of the very wealthiest.
“The truth is our labour market is the cast-iron example of an economy with weak foundations.
“Our crisis in participation simply hasn’t happened elsewhere, not to this extent; it is a feature of Tory Britain and global excuses simply won’t wash.”
The Office for Budget Responsibility (OBR) financial watchdog estimated that the two policies will increase employment by 15,000 workers.
Paul Johnson, the director of the Institute for Fiscal Studies think tank, said the change would “encourage a relatively small number of better-off workers to stay in the workforce a bit longer”.
He added: “These pension tax changes are unlikely to have a big effect on overall employment.”
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