This latest idea from Mr. Yvette Cooper rather fails I'm afraid:
People earning more than £150,000 would get only 20 per cent tax relief on pension contributions, instead of the 45 per cent they receive now. Ed Balls, the shadow chancellor, will set out plans to pay for its Compulsory Jobs Guarantee, the centrepiece of the party’s welfare plans. Every young person jobless for more than 12 months will be given a “starter job” which they will have to take or lose benefits.
Leave aside, for a moment, what the money is to be spent upon. I've no real objection to the idea that it should be welfare and work, not welfare and no work. Look instead at what the tax proposal is.
To tax people who are saving for their old age. And there really is a problem in this, for we don't actually not tax people who save for their old age. What we do is delay the tax that must be paid by people saving for their old age.
We do this by not taxing them on the money that they put into their pension pots. And then we tax them on the pensions they receive when they retire. At, it should be noted, entirely the normal income tax rates.
So, what is being suggested now is that people should be taxed on the money they put into their pensions: and then be taxed again, in the normal manner, on the money they get paid in pensions in decades to come. This is, and I'm afraid that I am indeed the first to point this out, double taxation of the most wincingly bad kind. Because, unlikely though it may seem, we rather like people saving for their old age.
The Guardian puts a different spin on the same story:
Ed Balls, the shadow chancellor, will say on Monday that Labour will move to end the plight of "young people stuck on the dole" when he says that the party's compulsory jobs guarantee, to be funded by a tax on bankers' bonuses, will last the whole parliament.
These are the bonuses that the European Union has just slashed to the bone and which are, including national insurance, already taxed at rates of 60% or so?
That's going to raise a lot of money then, isn't it?
Immoral double taxation or a pittance in revenue raising. This hasn't been thought through as yet, has it?