Ham­mond hints at cut to pen­sion tax breaks

Chan­cel­lor calls tax breaks ‘eye-wa­ter­ingly ex­pen­sive’ in clear sign of changes to come in the Bud­get

The Daily Telegraph - - Front Page - By Steven Swin­ford DEPUTY PO­LIT­I­CAL ED­I­TOR

Pen­sion tax breaks have be­come “eye-wa­ter­ingly ex­pen­sive”, Philip Ham­mond has said, in a clear in­di­ca­tion they could be cut in the Bud­get. The Chan­cel­lor said taxes would have to rise to pay for the “very large com­mit­ments” made be­fore the Bud­get, in­clud­ing a £20bil­lion fund­ing boost for the NHS. He made clear that pen­sions tax re­lief, which costs the Trea­sury £39bil­lion a year, is likely to be cut in a move that will pro­voke op­po­si­tion from Tory MPS.

PEN­SION tax breaks have be­come “eye-wa­ter­ingly ex­pen­sive”, Philip Ham­mond has said, in a clear in­di­ca­tion they could be cut in the Bud­get.

The Chan­cel­lor said that taxes would have to rise to pay for the “very large com­mit­ments” made be­fore the Bud­get, in­clud­ing a £20bil­lion fund­ing boost for the NHS. He made clear that pen­sions tax re­lief, which costs the Trea­sury £39bil­lion a year, is likely to be cut in a move that will pro­voke op­po­si­tion from Con­ser­va­tive MPS.

The Daily Tele­graph dis­closed ear­lier this week that Mr Ham­mond was pre­par­ing to cut pen­sions tax re­lief. Pen­sion con­tri­bu­tions ben­e­fit from re­lief paid at the saver’s high­est rate of in­come tax. For ex­am­ple, it costs a ba­s­i­crate payer £80 to make a £100 pen­sion con­tri­bu­tion, while a higher-rate tax­payer pays just £60 for the same ef­fect and an ad­di­tional-rate tax­payer £55. It is un­der­stood the tax re­lief is likely to be amended in one of two ways – ei­ther by cut­ting the tax-free an­nual al­lowance, or by low­er­ing the rate of re­lief.

Asked about re­forms to pen­sions tax re­lief at the IMF’S an­nual meet­ing in Bali yes­ter­day, Mr Ham­mond said: “My gen­eral feel­ing on pen­sions tax re­lief is that it is eye-wa­ter­ingly ex­pen­sive.”

The Gov­ern­ment is also pre­par­ing for a crack­down on work­ers who claim they are self-em­ployed while work­ing for a sin­gle em­ployer, pay­ing sig­nif­i­cantly less tax. Mr Ham­mond said: “In the in­ter­est of fair­ness, we need to en­sure that two peo­ple work­ing side-by­side do­ing the same job for the same em­ployer are pay­ing broadly the same tax.”

The Chan­cel­lor is also con­sid­er­ing ditch­ing a man­i­festo com­mit­ment to scrap a pro­posed in­come tax cut to pay for a climb­down on Univer­sal Credit.

The Gov­ern­ment is un­der mount­ing pres­sure to find an ex­tra £2bil­lion to ease the roll-out of the ben­e­fit scheme af­ter min­is­ters ad­mit­ted that some peo­ple will be left worse off. The Tele­graph dis­closed yes­ter­day that the Gov­ern­ment could post­pone a pledge to raise the per­sonal al­lowance for in­come tax from £11,850 to £12,500 by 2020. It came as Ge­orge Os­borne, the for­mer chan­cel­lor, said that Mr Ham­mond will strug­gle to pay for the NHS fund­ing boost and bol­ster Univer­sal Credit by rais­ing taxes.

He told Chan­nel 4 News: “The most dif­fi­cult times I had as chan­cel­lor, po­lit­i­cally, were not about pub­lic spend­ing cuts – they were about tax rises.

“These were the real po­lit­i­cal trou­bles I found my­self in and had to re­verse out of. And I sus­pect, for all this talk that you could sud­denly find many tens of billions of pounds more for the pub­lic ser­vices, the truth is it’d be dif­fi­cult for any gov­ern­ment to find the tax base to do that.”

The Chan­cel­lor also said that the Gov­ern­ment is not plan­ning to tackle the dom­i­nance of Ama­zon and Face­book with an on­line sales tax.

Mr Ham­mond should slash stamp duty for older peo­ple so they can down­size and free up more fam­ily homes, a lead­ing es­tate agent said. Paul Smith, Haart’s chief ex­ec­u­tive, urged the Chan­cel­lor to do more to help fam­i­lies who are un­able to buy larger prop­er­ties. Mr Smith wants a stamp duty cut for “down­siz­ers” who are de­terred from mov­ing by the costs in­volved.

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