As reported in the Mail on Sunday:
David Davis has warned Boris Johnson not to go ahead with a potential pension tax relief raid at the Budget as the former Cabinet minister said it would be a ‘moral disgrace’.
The ex-Brexit secretary said hitting savers in the pocket would represent an ‘economic farce’ as he urged caution on the issue.
A tax grab on pensions was floated earlier this month as one of the ways that the new Chancellor Rishi Sunak could raise cash to fund the government’s infrastructure plans.
But the suggestion sparked an immediate backlash and accusations that it could ultimately leave workers £10 billion a year worse off.
It came amid reports Mr Sunak will use his first fiscal address to announce that parts of the Treasury will be moved to the north of England.
A new ‘economic decision-making campus’ is expected to be set up in order to ‘shift the gravity’ of economic decision-making away from London.
The Treasury is thought to be planning to cut pension tax relief to 20 per cent for all workers.
The £10 billion a year bill would fall on four million workers who pay into a pension and currently receive relief of 40 per cent or 45 per cent depending on their income tax bracket.
These savers would effectively face being taxed twice on their retirement income – once during their working life and again as pensioners.
There have also been suggestions that the government could introduce some form of mansion tax in order to raise money to fund spending.
Mr Davis told the BBC’s Andrew Marr Show that such proposals were ‘all bad ideas’ as he claimed a mansion tax would be ‘massively unpopular’ and ‘economically nonsensical’.
‘Our tax burden at the moment, the total taxes… are at about their third highest since the war,’ he said.
‘They’re incredibly high already, so we don’t want to be pushing it up. We certainly don’t want to put more taxes onto pensions.’
Attacking the ‘wreckage of the pension system’, Mr Davis added: ‘Increasing them further would be a disgrace: a moral disgrace and an economic farce.’
Mr Davis backed the government’s stated goal of improving the nation’s infrastructure but insisted taxes did not need to be increased to pay for it as he advocated borrowing more money.
‘We have the lowest interest rates in history just about,’ the senior Tory MP said.
‘This is the time when you should be investing, borrowing to invest in infrastructure.
‘So that I think is clear. You don’t need to raise taxes for that.’
Critics have warned a raid on pension tax relief at the Budget on March 11 would undermine the pensions system.
Former Tory pensions minister Baroness Altmann said the Treasury appeared ‘determined to stop people who want to save from saving’.
Analysis by savings and investments firm AJ Bell shows those earning over the £50,000 a year threshold where 40 per cent income tax kicks in would be hammered by cuts to pension tax relief.
A 30-year-old higher rate taxpayer saving £1,000 a month in their pension could stand to lose almost £285,000 by the time they were 65.
A 40-year-old saving the same amount would stand to be more than £150,000 worse off.
This is because they are likely to be able to save less during their working lives. A second hit would come as they missed out on gains this money might have made through years of investing.