Labour has pledged to reverse plans to abolish the lifetime pensions allowance if it wins power, calling it “a Tory tax cut for the rich”.
The party released analysis saying the policy proposed in Jeremy Hunt’s budget will save the wealthiest 1% of pensioners £45,000 when they retire.
Speaking to Sky News, the chancellor accused Labour of shifting its position “overnight”, pointing to remarks by shadow health secretary Wes Streeting in September calling for the limit to be scrapped.
But responding on Twitter, Mr Streeting said he had called for a change specifically for doctors and the Tories opposed it at the time.
Politics live: Chancellor speaks to Sky News after delivering budget
Shadow chancellor Rachel Reeves said the new policy was “the wrong priority, at the wrong time, for the wrong people”, adding: “The budget was a chance for the government to unlock Britain’s promise and potential.
“But the only surprise was a £1bn pensions bung for the 1%, a move that will widen the cost of living chasm.”
Mr Hunt used his budget on Wednesday to announce the abolition of the lifetime pensions allowance.
It means people will be allowed to put aside as much as they can in their private scheme without being taxed – removing the £1.07m limit.
The chancellor also said he would increase the pensions annual tax-free allowance, from £40,000 to £60,000, under measures designed to increase the workforce by removing disincentives to being employed for longer.
The policies will cost the Treasury more than £1.1bn a year by 2027-28, with the aim of stopping an estimated 15,000 high earners – including senior NHS doctors – leaving the workforce.
But Ms Reeves called it a “gilded giveaway” coming at a time when many people across the country face “rising bills, higher costs and frozen wages”.
She added: “That’s why a Labour government will reverse this move. We urge the chancellor and the Conservative government to think again too.”
Asked by Sky News if the NHS needed more nurses rather than encouraging back consultants, the chancellor said the government was recruiting more staff but pensions rules deterring doctors were “a big problem”.
He added: “Wes Streeting said we should get rid of the cap on pensions, the lifetime allowance. 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.
“Well, he was right in September when he said that.”
In response on Twitter, Mr Streeting posted: “Labour called for action on DOCTORS’ pensions to help retention.
“The Tories attacked our suggestion of a tax unregistered scheme on cost grounds. Now you’ve come up with a massive bung to the richest costing £835m a year.”
Labour said they would encourage doctors to stay in work by creating a targeted scheme as the government has done for judges, “rather than create a free-for-all for the wealthy few”.
And experts said that millions of savers will feel no impact from the changes, with Institute for Fiscal Studies (IFS) Director Paul Johnson saying they would “encourage a relatively small number of better-off workers to stay in the workforce a bit longer”.
Meanwhile, the Resolution Foundation warned the policies may actually cause some workers to retire early or use “their now uncapped pensions saving to avoid inheritance tax”.
Chief executive Torsten Bell said the measures are “hugely regressive and wasteful”, adding: “It’s a big victory for NHS consultants but poor value for money for Britain.”
Sir Keir Starmer, the Labour leader, also hit out at the plan, saying: “The only permanent tax cut in the budget is for the richest 1%. How can that happen?”
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Mhari Aurora explains all you need to know about the budget
Budget at a glance
The pensions tax break was one of the headline announcements from Mr Hunt’s budget, alongside a pledge to introduce free childcare for children under three.
Some key policies were revealed ahead of the chancellor’s speech, including keeping the cap on energy prices at £2,500 for a further three months, despite a planned rise to £3,000 in April, and 12 new investment zones.
A number of other plans were unveiled by Mr Hunt, including:
• Bringing charges for prepayment meters in line with direct debit charges, impacting over four million households and saving them an average of £45 per year
• Making duty on draught products in pubs up to 11p lower than supermarkets
• Maintaining the freeze in fuel duty
Read more on the budget:
Tax calculator – see if you’re better off
Ed Conway: There’s a feel-bad factor coming, and this budget won’t help
Unions reacted angrily to a lack of measures on public sector pay, saying Mr Hunt “stuck up two fingers to workers with the budget”.
The announcement took place against the backdrop of an estimated half a million workers, including junior doctors, teachers and civil servants, walking out in disputes over pay, jobs and conditions.
Despite the promises of help with the cost of living, families still face a painful financial squeeze.
Living standards, based on real household disposable income per person, are expected to fall by a cumulative 5.7% over the two financial years 2022-23 and 2023-24 – less than forecast in November but still the largest drop since records began in 1956-57.
Mr Starmer said: “After 13 years of his [the chancellor’s] government, our economy needed major surgery, but like millions across our country, this budget leaves us stuck in the waiting room with only a sticking plaster to hand.
“A country set on a path of managed decline, falling behind our competitors, the sick man of Europe once again.”
