Thursday, 6 December 2012

Pension pots and welfare payments.

Our government is to freeze increases in welfare payments to 1% per year. which is below the rate of inflation, so effectively a cut.  This will save the public purse some £3.7bn a year.  To make it fair, and so placate we Liberal Democrats, the amount that the wealthy can put  into their pension pots  free of tax is to be reduced from £50 000 a year to £45 000, thus saving the Treasury  £600m a year.

I suppose the disproportionate savings to achieve this "fairness" can be justified by the fact that there are a lot more people receiving welfare payments than there are with £50 000 left over after current expenditure to put into their pensions.  However, the mater of "need" tells a very different story.

Contrary to the George Osborne stereotype that recipients of welfare are scroungers who lie idly in bed and twitch the curtains to watch the "strivers" go off to work, 60% of welfare recipients are actually in work, but paid so little that they cannot maintain a civilised standard of living without help.  Cuts will mean inflicting even further distress which should not be acceptable in a civilised society, whatever the alleged austerity (see previous post.)

At the other end of the scale we have those with high incomes  building up enormous pensions essentially at the state's expense.  If tax were paid on that £45 000 it would,  at the new highest rate of 45%, amount to £20 250.  So effectively, even after the reduction the state will still be contributing over £20 000 a year (an income which would probably be beyond the dreams of avarice for most welfare recipients) to people who are then likely to receive "lump sums" in the millions and annual pensions in the hundreds of thousands.

As I've argued before in this blog, the purpose of a pension is to avoid penury when one's earning days are over.  Tax concessions to achieve a pension  up to the average wage, about £25 000, are perfectly justified.  Beyond that, if people want to make an even more generous provision for themselves, in a Liberal society they are perfectly welcome to do so, but not at the taxpayer's expense.

Arguments that, as a result of the above, George Osborne has achieved some sort of "fairness" are risible: that Liberal Democrats in government mouth their support is disgraceful.

1 comment:

  1. I find Osborne utterly despicable. He shows no understanding of the unemployment created by his policies of 'austerity'. Cheap remarks about the unemployed in bed are worthy of sixth-formers at St Paul's or Eton but totally unsuited to mature political debate. He is a sneering posh boy with no feeling for the reality of working class life, and the sooner he is sacked the better for all of us. He reminds me of the Tories who created the workhouses of the New Poor Law of the 1830s.
    Has he never heard of Keynes and Beveridge?
    'We're all in this together'??? Don't think so.