Leave pensions alone

Amid all the excitement over the EU referendum it is easy to forget that the wheels of government continue to grind. On March 16, George Osborne will deliver his eighth Budget, his second as Chancellor in a majority Conservative government. Last July, shortly after winning power, he set a series of rigid borrowing targets based upon projections for economic growth and tax revenues that now look somewhat optimistic.

The Office for Budget Responsibility has just published figures indicating that he will struggle to meet his borrowing target this year despite the biggest January tax surplus since before the financial crisis. Mr Osborne responded by acknowledging that Britain faced “challenges for future tax receipts” against a backdrop of slower growth. It was no time for complacency, he added. The Chancellor, in other words, needs to find some money from somewhere and he will not be able to rely upon the OBR adjusting its forecasts as it did for his Autumn Statement in November to give him £27 billion of leeway.

He is now said to be considering a raid on pensions to make up the shortfall. Mr Osborne is studying a single level of tax relief that would hit higher-rate taxpayers, or an Isa-style system where contributions would be taxed but not withdrawals. At the weekend, Steve Webb, the former Lib Dem pensions minister, said Mr Osborne could even scrap the 25 per cent tax-free lump sum on retirement incomes. If true this is alarming, though the Treasury says no decisions have been taken. We suggest Mr Osborne drops these ideas and abandons any thoughts of meddling further with our pensions. Enough damage has been done already.