The Labour party has vowed to reverse the chancellor’s £1bn budget pensions tax “gilded giveaway” for the wealthiest 1% if it wins the next general election, as Jeremy Hunt defended his decision to scrap the lifetime pensions allowance.
The shadow chancellor, Rachel Reeves, said Labour would seek to force a Commons vote next week on the decision, which critics argue will allow the wealthiest people to put a limitless amount into their pension pots, which can then be passed on to their heirs without paying inheritance tax.
In his budget on Wednesday, Hunt said the measure would prevent medical consultants retiring early from the NHS because the current pension rules meant it was not worth them carrying on working.
The Office for Budget Responsibility has estimated that – combined with an increase in the pensions annual tax-free allowance, from £40,000 to £60,000 – it will increase employment by 15,000 workers.
But 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”.
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She added: “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.
“That’s why a Labour government will reverse this move. We urge the chancellor and the Conservative government to think again.”
Responding to the criticism on Thursday, Hunt accused Labour of shifting their position “overnight”. He argued that the shadow health secretary, Wes Streeting, had called for the cap on pensions to be lifted last September.
“He seems to have changed his mind overnight on that one. He said it was crazy and it would save lives to get rid of that cap,” said Hunt. “Well, he was right in September when he said that.”
Streeting countered on Twitter that Labour had called “for action on DOCTORS’ pensions”, not “a massive bung to the richest costing £835 MILLION A YEAR”.
Asked on Sky News whether the NHS needed more nurses rather than consultants earning more than £100,000, Hunt said: “We need more nurses and we are recruiting many more nurses into the NHS. But yes, 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.”
Speaking on BBC Radio 4’s Today programme, Hunt was asked if it displayed the wrong values to give a large tax break to the very rich. He responded: “There are many doctors who are worried about hitting their pension cap who are deterred from taking on extra hours. So it’s not just the numbers who actually do hit the pension cap, but I don’t think it is the wrong values to support our NHS.”
Dr Vishal Sharma, a cardiologist and British Medical Association pensions committee chair, said the tax break would make a difference to the number of staff leaving the NHS.
Sharma told BBC Breakfast the number of hospital consultants who had taken early retirement had tripled, while the number of GPs had quadrupled in the past decade.
“We are heading towards a sort of precipice where huge numbers were going to go unless things changed. So it’s welcome that the chancellor’s listened to our concerns and has actually taken some decisive action,” he said.
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However, Torsten Bell, the chief executive of the Resolution Foundation thinktank, said the chancellor had “basically ignored” public services, leaving them facing “implausibly tight spending plans” while giving handouts to the richest. “The more you think about this policy, the worse it is,” he said.
Hunt argued that the budget did more for parents of young children than older voters, pointing to changes to childcare that will give 30 hours free to working parents of under-5s from September 2025. “This is the biggest transformation in childcare in my lifetime,” the chancellor told Sky News.
Hunt was asked on the Today programme whether the plans amounted to “jam for the day after tomorrow”, as they would not begin in full for all under-5s until September 2025, while an “ambition” to provide more wraparound care for children in schools would be implemented in 2026.
Hunt said it was a “huge investment” of about £5bn a year and “the biggest expansion of childcare in my lifetime”.
“That’s going to mean that we’re going to need a lot of extra childminders, a lot of extra nursery places. A lot of extra support in schools for the wraparound offer,” he said. “We recognise that if you’re making as ambitious a change as this, that it’s going to take time and that’s why we need to bring it in in stages.”
