Tory MPs’ backlash scuppers Budget tax grab on pensions

A TAX grab on pensions looks likely to be scrapped after a backlash from Conservative MPs.

David Davis yesterday joined those warning against a raid on the retirement pots of prudent savers.

The former Cabinet minister said such a move by new Chancellor Rishi Sunak in next month’s Budget would be a disgrace.

Ministers had been considering cutting pension tax relief for high earners from 40 per cent to 20 per cent, which would have raised £10billion a year.

Four million savers could be affected. But last night sources said Mr Sunak had ditched the proposal. However, he was still understood to be considering a rise to fuel duty, ending a freeze that has been in place since 2010.

Mr Davis, who was Brexit secretary under Theresa May, yesterday warned that the total tax burden was already incredibly high.

Appearing on the BBC’s Andrew Marr Show he said: ‘We certainly don’t want to put more taxes on to pensions.

‘Increasing them further would be a disgrace: a moral disgrace and an economic farce.’ Mr Davis also dismissed the suggestion the Tories could introduce a mansion tax, adding: ‘They’re all bad ideas. The idea of putting on a mansion tax, of copying a Labour policy which was massively unpopular when they put it, is political madness, but it’s also economically nonsensical.’

He added: ‘The thing to remember is why do Tories believe in low taxes? There are two reasons. One’s a moral one, you should keep your own money, but the other one is, economically, lower taxes lead to faster growing economies.

‘We’re at a reset moment in our politics post-Brexit. It’s now a time of grabbing opportunities. We need the growth rate to go up. You don’t do that by putting taxes up, you do that by putting taxes down.’ Mr Davis said the Tories should take advantage of low interest rates to invest in infrastructure.

Boris Johnson and the Chancellor had been facing a clash with MPs over the suggested cuts to pension tax relief.

The Institute for Fiscal Studies warned the proposals were ‘completely incoherent’.

Others said they would undermine the pensions system and be ‘catastrophic for the Conservatives’.

Analysis by investments firm AJ Bell shows those earning over the £50,000 a year threshold where 40 per cent income tax kicks in would be badly hit.

A 30-year-old higher rate taxpayer saving £1,000 a month in their pension could lose almost £285,000 by the age of 65.

A 40-year-old saving the same would stand to be more than £150,000 worse off. This is because they are likely to save less during their working lives.

Meanwhile, Mr Sunak is understood to be preparing to announce a significant number of the 1,500 Treasury jobs will be moved to the North.

It is to show northern voters who defected to the Tories from Labour in the last General Election that the Conservatives are working in their favour.