Our pensions are no longer in safe hands
Labour's solemn election promise not to tax 'working people' has not aged well.
Rachel Reeves promptly used her first Budget to unleash a jobs tax on employers that has helped to see unemployment rise and job vacancies wither.
The Chancellor will argue that this is not a direct tax on workers' pay packets, but she will have been fully aware of the inevitable consequences: wage suppression and higher prices for consumers.
But less than a year after winning power and it seems Labour has given up all pretences that workers do not face tax rises.
This week, HM Revenue and Customs unveiled plans to explore a tax raid on pension contributions made via salary sacrifice work schemes. This would be a blatant and direct tax attack on our pay slips.
The ideas on the table could cost the average earner more than £500 a year in extra income tax and National Insurance – and whittle away their pension pot and their retirement potential.
The most unpalatable suggestion is stripping workers of both income tax and National Insurance relief on contributions. This would be nothing short of theft given retirees are now paying record amounts of income tax on their pensions and at record rates.
Also this week, Reeves pushed ahead with plans to steer pension funds into investing a proportion of their holdings into British companies, with ministers wanting the power to force funds to comply if necessary. None of this is putting the saver's interests first.
This all comes after warnings that the Chancellor could be forced to raise taxes by up to £30bn in the next Budget to fund benefit giveaways and the rising cost of borrowing. It now seems certain that pensions will be targeted again in the Autumn Budget.
It would be the latest in a long line of pension tax raids mooted by this Government.
Reeves has already unleashed an inheritance tax raid on retirement savings, and last year she was considering plans to slash the tax-free pension lump sum down to £100,000. As a rising star in the Labour Party, she also told of her ambition to reduce tax relief for higher earners and to put a lifetime cap on Isa contributions.
This is on top of Angela Rayner's demands to reinstate the pensions lifetime allowance and to force more of us to pay the highest rate of income tax.
This Government has so far proved unashamed in its entitlement to tax whatever it sees fit, but it is more worrying than that. Labour has shown a disregard for the security and confidence workers need when it comes to our retirement savings.
Ministers have been at best naive and at worst incompetent, but the overarching message is that our pensions are no longer in safe hands. The goalposts could move at any point.
Savers need incentives and assurance to put money away for retirement, and a failure to save will mean more pensioners falling back on the state. None of this meddling is helping anyone.
And the dreadful truth is that these tax raids, for which the Chancellor will deflect blame, come after public sector workers were awarded inflation-busting pay rises and bigger pensions.
The Chancellor is mollycoddling one part of Britain and exploiting another to pay for it. It's short-sighted politics at its very worst.
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Yet Reform too had a problem at the ballot box in 2024, which was that voters just wanted the Conservatives out. Putting a cross next to Reform risked complicating matters, while choosing Labour would do the job, so Reform won fewer seats that they otherwise might have. Given that Labour were set to inherit the same problems that the Conservatives had struggled with, Reform's true victory seemed likely to emerge after the election. And so it has turned out. Polls move all the time, but Reform are now polling in the high 20 per cent mark, with Labour polling in the low 20s and the Tories a little lower. This combination of perceived Labour failings on issues like immigration, growth and the NHS, and continued Reform popularity, has propelled Farage for the first time into position as the country's potential next prime minister. It is unfamiliar territory. Successfully evolving from a party of protest to a credible party of power will be a titanic job. 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I got my first taste of this anger in 2004, working on the successful 'North East Says No' campaign against a regional assembly. Our brutal anti-politician message ran like a hot knife through butter. 'Politicians talk, we pay' was our slogan. We were no geniuses; we merely tapped into extreme discontent that was building. Farage's Ukip played a supporting role in this victory. The mainstream parties have never understood Farage because they have never understood the scale of working-class rage. Because the main parties kept winning general elections, they told themselves that the increasingly-common voter revolts were never serious. But these mainstream politicians were not listening to what voters were really saying across England. I ran an in-depth study of the most disaffected voters in the late 2000s – people who said they were openly tempted to junk the main parties or not vote at all. 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It was the Tories' pledge in 2010 to cut immigration to the low tens of thousands that secured them so many working-class votes and ultimately a chance to run government. Later, it was Boris Johnson's proposed 'Australian-style' points system which helped give them an 80-seat majority in 2019. It is hard to appreciate the popularity of the points policy. It remains the joint-most popular policy I have tested in 25 years (alongside making new arrivals pay for NHS care). Partly explained by reality TV shows they had seen about Australian border police, people thought it offered the perfect solution: a system to allow useful workers in, keeping out those that could not or would not work. When immigration rose dramatically after the 2019 election, working-class voters who backed the Tories for more than a decade felt sick with betrayal. It was this broken promise that led directly to the rise of Reform. Starmer's continued failure on immigration explains why Reform tops all the polling charts. Recent polling by Ipsos showed Reform is more trusted than either the Conservatives or Labour on immigration policy. All this takes us back to Farage's speech this week and his position as a prime minister in waiting. How likely is it that Reform will form a government? To answer this, we should first consider how 'sticky' their voters are likely to be. It is one thing to tell a pollster you will vote Reform – or vote for Reform in the local elections – but another thing to put a cross next to a Reform candidate in a general election. But Reform's provincial electoral base has lost all trust in the main parties. While Starmer might be able to bring immigration down significantly, and reduce the flow of small boats, it is unlikely that he will manage to do so on the scale required to soothe Reform voters. 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