Labour hypocrisy on axing pensions cap
ON Wednesday the Chancellor announced a sensible measure to boost confidence in the pensions system and persuade senior hospital doctors not to retire early.
The next day, Labour said it would abolish the reform if elected to government. It was adversarial politics at its most cynical.
If there is one thing the pensions system needs, it is long-term stability, so people can properly plan for their retirement.
But since 1997 there has been nothing but upheaval, with first Gordon Brown using pension funds as his personal cash cow and later George Osborne slashing the lifetime tax-free savings limit.
Now Jeremy Hunt’s decision to redress the balance by scrapping the lifetime cap altogether has sent Labour into a frenzy. Another Tory bung to the rich, they say.
But while it’s true that the move would mainly benefit the relatively well-to-do, it also sends out a powerful message about aspiration and the virtue of saving.
Just six months ago, Labour’s own health spokesman Wes Streeting said the cap should be removed for doctors, describing it as ‘crazy’ that they were being deterred from working longer. So opposing the cap’s abolition now is rank hypocrisy.
Also, if it should be abolished for doctors, why not dentists, vets, engineers, university academics or any other professionals? Don’t we want to encourage them to keep working, too?
Meanwhile, wider analysis of the Budget brings home the sheer weight of the tax burden placed on the working families of Britain. Over the next five years, the freezing of tax thresholds alone will extract an extra £120billion from our pockets – not a good look for a Tory chancellor.
And welcome as it is, there is also a question mark over the massive planned expansion of free childcare.
The 30 free hours will be available to working parents who both earn under £100,000. But if one of them goes a pound over that limit, they will lose the whole benefit – at a cost of up to £14,500.
This is a huge disincentive to work which must be fixed, possibly by some form of tapering mechanism.
The backdrop for Mr Hunt’s maiden budget was daunting – low growth, high inflation, massive borrowing costs, poor productivity and an energy crisis. He has made a bold attempt at getting Britain back to work and kick-starting growth.
But overall taxation is at its highest since the Second World War, and this Budget made it worse.
The truth is that until families are able to spend more of the money they earn, UK growth and productivity will remain stuck in the slow lane.