Before New Labour’s 1997 general election landslide, I learned from reliable sources in the City that the party’s would-be chancellor, Gordon Brown, and his economic adviser, Ed Balls, were planning a tax grab on British pension funds.
Working in secret with the now-defunct accounting firm Arthur Andersen, they were crafting legislation that would remove the tax breaks British companies received on dividends paid to company pension schemes.
The £5 billion the government would raise a year from this scheme would then be used by Brown to fund New Labor’s election promises.
Back when I worked for the Guardian, and when Brown learned that the paper intended to publish my findings, the man once nicknamed “the big clunking fist” by Tony Blair put intense pressure on the publication for her to hold fire or face dire consequences when New Labor comes to power. Cowardly, the left-wing newspaper withdrew the story.
Former Prime Minister and Chancellor Gordon Brown. I have learned from reliable sources in the City that the party’s chancellor-in-waiting, Gordon Brown, and his economic adviser, Ed Balls, are planning a tax grab on Britain’s pension funds.
It soon became clear why Brown had become so angry. This measure, which was a key part of New Labour’s first mini-budget, had devastating consequences.
It effectively killed Britain’s benchmark defined benefit schemes – which paid a fixed pension or lump sum – to death.
Labor loves to trumpet the idea that they are the only party that can be trusted with our pensions, reminding us that Labor was behind the National Insurance Act of 1946, which created the universal pension for the state.
But the fact is, nothing could be further from the truth.
All indications are that, like Brown before him, a Starmer government will wage a savage war on pensioners and their standards of living.
Earlier this month it emerged that shadow chancellor Rachel Reeves’ new tax tsar, Sir Edward Troup, had previously described pensioners as “morons” who were doing “ridiculously well”.
He also said it was “a complete disgrace” that pensioners did not pay national insurance and it was “ridiculous” that they received free TV licenses.
Labor leader Sir Keir Starmer. All indications are that, like Brown before him, a Starmer government will wage a savage war on pensioners and their standards of living.
Shadow Chancellor Rachel Reeves in Blackpool. Earlier this month it emerged that shadow chancellor Rachel Reeves’ new tax tsar, Sir Edward Troup, had previously described pensioners as “morons” who were doing “ridiculously well”.
And this week, Labor leaders have exploited the Conservatives’ efforts to make Labor profitable by cutting workers’ national insurance (NIC) contributions by launching a highly misleading campaign that seeks to strike fear into the hearts of older voters by claiming that mowing down NICs will somehow deprive them of future benefits.
While Reeves refused to oppose Chancellor Jeremy Hunt’s plan to wipe two percentage points from NICs in his November 2023 autumn statement, it amounts to another U-turn from Labor, which has turned them into a art form.
In his March Budget, Hunt went further by cutting employment tax by a further two percentage points – a change which put £900 back into the pocket of the average worker – and revealed that the target of Conservatives was to abolish this tax. quite.
Reeves sought to present this as an unfunded promise of £46 billion, even though the cuts announced so far have been funded without the government breaking budgetary rules as monitored by the Independent Office for Finance. budgetary responsibility.
The truth is that at the heart of Labor’s claim that NIC cuts would put the future of state pensions at risk is a big, unvarnished lie. This is based on the mistaken belief that when working citizens pay their national insurance, they are paying into a special fund intended to finance the NHS and their future retirement.
The reality is that national insurance alone falls far short of paying for the wartime “cradle to grave” promise of the Beveridge Report. Instead, the money collected from employers’ and employees’ salaries goes directly to the public treasury: it is simply another form of income tax imposed exclusively on workers.
In the United Kingdom, there is absolutely no tradition of ring-fenced taxation. Headlines such as National Insurance, Road Tax and Fuel Duty are just a tool used by HMRC to make it appear that funds are being spent on a noble purpose, such as ensuring our retirement is secure , fixing potholes or smoothing the path to net zero.
What’s more, Rachel Reeves is reportedly planning a new Labor raid on private pensions by capping the amount ordinary middle-income earners can pay into their pension funds while benefiting from tax breaks.
Needless to say, no such cap is proposed for public sector workers’ retirement income. Some civil servants receive pensions of up to 71 per cent of their final salary – a featherbed scheme that costs the exchequer a staggering £7.9 billion a year.
Total public sector pension liabilities, estimated at £3 trillion, far exceed the annual output of the entire economy.
Rachel Reeves is believed to be plotting a new Labor raid on private pensions by capping the amount ordinary middle-income earners can pay into their pension funds while still receiving tax breaks.
However, for employees of private sector companies, Britain still has one of the poorest pension systems in the Western world.
The Taypayers’ Alliance recently revealed how private sector workers fare compared to their public sector counterparts using the example of a 25-year-old employee entering the workforce at the national median wage of £35,464 per year and access to a minimum wage. retirement age set at 68 years.
Having contributed to the same level of pension throughout her professional life, in the private sector, she could hope to retire with 19.59 percent of her final salary.
In the public service, the same worker would receive 70.73 percent of her final salary.
The Conservatives have made a concerted effort to correct this imbalance through the “triple lock” — the promise that retirees will still get an annual increase that gives them the best possible increase in their state pension based on what they earn. is the highest: the average salary, consumer price inflation. or 2.5 percent.
Starmer and Reeves have so far refused to give full support to the “triple lock”. There are also fears that they believe the Conservative government’s decision to lift the £1 million lifetime cap on retirement savings is too radical a step.
Prime Minister Rishi Sunak. The Conservatives have made a concerted effort to correct this imbalance through the “triple lock” – the promise that pensioners will still get an annual increase that gives them the best possible increase in state pensions.
A new stealth raid on wealth creators is therefore planned, which could potentially drive some of our best and brightest overseas in search of better incomes and unfettered retirement rules.
Far from being the friends of British workers, as Labor likes to claim, they view private sector pension funds as sources of income to be plundered.
When it comes to national insurance and pensions, Labor has, over the decades, abdicated all moral authority.
The Great Pensions Robbery: How New Labor Betrayed Retirement by Alex Brummer was published by Random House Business
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