By Joe Mellor, Deputy Editor
With less then a fortnight until the budget, the Chancellor is worried about a severe backlash from richer voters over his pension proposals.
In response Osborne has had to ditch his package of pension reforms, including tax relief for high earners, due to concern that these changes would annoy Conservative voters.
The proposals included creating a “pensions Isa” that would have eliminated pension tax relief for all those in work.
An ally of the chancellor reportedly said: “There won’t be any changes to tax relief at all in the budget. George has always been clear he wouldn’t do anything to damage saving. He’s listened to what people have said and concluded that now isn’t the right time.”
Tory MPs had been increasingly concerned that Osborne’s scheme would have clobbered higher earners and with the EU referendum looming, they didn’t want any extra distractions.
Mark Garnier, a member of the Treasury select committee, said having “two big things going on at the same time doesn’t necessarily help the arguments of either one or the other”.
Osborne’s reputation as a shrewd political tactician, which he rebuilt after the “omnishambles” budget of 2012, had already been dented by the tax credit U-turn. Bringing in this pension plan could have confirmed to some Conservative backbenchers that the Chancellor losing the confidence of their core voters.
Mick McAteer, director of the Financial Inclusion Centre, scrapping the reforms was an opportunity missed. He remarked: “UK households have around £4.8tn-worth of private pension wealth, the top 20% of those households own about £3.4tn of that wealth, so if you have 10 people in a room, two of those people have more than twice the pension wealth than the other eight put together.
“We have a clear inequality in our pensions system, and this is a really disappointing piece of news, because this was a great opportunity to actually make the pensions system work better for the self-employed, people on zero-hours contracts who are really facing a long-term pensions crisis. Fewer than one in five of the self-employed are currently contributing to a pension at the moment, that’s down from a figure of 60% back in the late 1990s.”
