Labour has promised to reverse chancellor Jeremy Hunt’s £1bn pensions tax break for the wealthy if it wins power at the general election expected in 2024.
Shadow chancellor Rachel Reeves said the party will seek to force a Commons vote next week on the Budget decision to scrap the £1.07 million lifetime pensions allowance.
Scrapping the so-called “doctors tax” is designed to prevent senior consultants retiring early from the NHS because the current pension rules mean it is not worth them carrying on working.
But Ms Reeves said a Labour government would reinstate the lifetime allowance and create a targeted scheme for doctors rather than allowing a “free-for-all for the wealthy few”.
She said: “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 said.
Sir Keir Starmer attacked the move as “huge giveaway to some of the very wealthiest” and a tax cut “for the richest 1%”. The Labour leader asked how it could “possibly be a priority for this government”.
Appearing on Sky News on Thursday, Mr Hunt insisted he was “systematically” removing the barriers to work – highlighting that the government was spending five times as much helping with childcare costs.
The Office for Budget Responsibility has estimated that the move – combined with an increase in the pensions annual tax-free allowance from £40,000 to £60,000 – will increase employment by 15,000 workers.
But the Resolution Foundation (RF) think tank said the pension move was “hugely wasteful” costing around £80,000 for everyone brought into the labour market.
“It’s a big victory for NHS consultants but poor value for money for Britain,” said RF chief executive Torsten Bell – saying the rich have no limit on how much they put into their pension pots and can pass it on to their children with no inheritance tax.
“The more you think about this policy the worse it is,” said Mr Bell – adding that Mr Hunt had “basically ignored” Britain’s public services, which now “implausibly tight spending plans”.
Unite general secretary Sharon Graham said it was a “budget of betrayal”, noting there “wasn’t a penny for the NHS pay in the budget”.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), said it had been a “political choice” by Mr Hunt to scrap the pensions allowance cap freeze fuel duty and rather than fund pay awards for striking nurses and teachers.
Phil Brown, director of policy for People’s Partnership, provider of the People’s Pension, also criticised the plan. He said the changes “won’t impact the vast majority of hard-working savers”.
But Treasury sources insisted the policy was the “quickest and most effective way” to stop so many experienced doctors from retiring early.
Mr Hunt accused Labour of shifting their position “overnight” on scrapping the lifetime pension allowance threshold after the opposition party said they would reverse the Budget policy.
“I think if you talk to anyone in the NHS, they will say doctors leaving the workforce because of pension rules is a big problem,” he told Sky News.
The chancellor added: “It is something, incidentally, that Labour advocated last September. [Shadow health secretary] Wes Streeting said we should get rid of the cap on pensions, the lifetime allowance.”
Meanwhile, it emerged that workers will pay an extra £29.3bn a year in five years’ time as millions more are dragged into paying tax or higher rate taxes for the first time.
Mr Hunt decided in his Budget to freeze personal tax thresholds in cash terms, rather than increasing them in line with inflation.
Tory MPs are also unhappy at the rise in corporation tax from 19 to 25 per cent – and the fact that the overall tax burden is predicted to rise to levels not seen since the 1940s.
Former Tory minister David Jones told The Independent: “I’d like to see corporation tax reduced as soon as possible. The Conservatives must be the party of low tax.”
Former home secretary Priti Patel urged Mr Hunt to keep the corporation tax rise “under review”, while Liz Truss loyalist Ranil Jayawardena said it will make Britain “less competitive” and “stifle job creation”.
Despite frustration on the Tory right, Mr Hunt refused to commit to tax cuts ahead of the general election expected in 2024.
The chancellor told ITV’s Peston show: “My job is to do the right thing for the economy … That’s the electoral dividend – I’m not interested in playing games.”
But his Budget was welcomed by other Tory MPs. Daniel Kawczynski said: “He’s just won us the next election by a narrow majority.”