Jeremy Hunt has rejected the “bizarre” suggestion that his budget is aimed at helping the wealthiest one per cent in society following his decision to get rid of the lifetime pension allowance.
The lifetime allowance — the total amount workers can accumulate in their pension savings before paying extra tax — was abolished yesterday. Mr Hunt hopes it will stop 80% of NHS doctors from receiving a tax charge.
Announcing the change, the chancellor told the House of Commons: “Some have also asked me to increase the lifetime allowance. … But I have decided not to do that. Instead I will go further and abolish the lifetime allowance altogether”.
Speaking to Sky News today, the chancellor said the move to get rid of the £1.07 million allowance would “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”.
He added that the abolishing the cap is “something, incidentally, that Labour advocated last September — Wes Streeting said that we should get rid of the cap on pensions”.
Labour had called for doctors’ pensions to be uncapped last year. Yesterday, the Conservatives announced all pensions would be uncapped.
Labour has now vowed to reverse the decision to abolish the lifetime pension allowance if it wins power at the next election. The party has said the reforms will “result in the top one per cent of pension savers getting a massive tax break for their retirement”.
Analysis released by the party overnight says the policy proposed in Jeremy Hunt’s budget will save the wealthiest 1% of pensioners £45,000 when they retire.
The shadow chancellor Rachel Reeves outlined this morning: “At a time when families across the country face rising bills, higher costs and frozen wages, this gilded giveaway is the wrong priority, at the wrong time, for the wrong people.
She told Sky News: “That’s why a Labour government will reverse this move. We urge the Chancellor and the Conservative Government to think again too”.
When Labour’s position was put too the chancellor this morning on Times Radio, Mr Hunt said that the fact his fiscal package was being portrayed as a tax giveaway for the very rich “is rather bizarre”.
He added: “The thing to say that when this is a set of measures that mean in two weeks’ time we are going to be spending a total of £94 billion this year”.
“A huge amount of money, giving around £3,000 of cost-of-living support to a typical household, including uprating benefits with inflation, one-off payments to people on low incomes of up to £900.
“We’ve extended the energy price guarantee at £2,500 for another three months, we’ve frozen the rise in fuel duty — these are cost-of-living measures that show we are a country, and indeed a Government, that wants to help people on low incomes through difficult times”.