Pension News Pensions Will Suffer Under Darling Budgets 15billion Public Spending Cut
20 April 2009 / by Rachael Stiles
When the Chancellor announces this year’s Budget on Wednesday, he is expected to call for a £15billion reduction in public spending.
In his second Budget as Chancellor of the Exchequer, Alistair Darling is expected to cut spending significantly in a bid to restore public finances, amid calls to stem the recent outflow of Government cash.
But in order to do so, one of the things to be sacrificed could be higher-rate income tax relief for pensioners, which would raise an estimated £5 – £7billion in funds, but would also reduce the retirement income of some 3.6million taxpayers.
Commenting on the Government’s plan for cutting pension contributions, Stephen Haddrill, director general of the Association of British Insurers, said that to do so would be “an entirely wrong and short-sighted response to the huge challenges facing the Government, and a direct attack on the hard-working people of middle Britain, who are saving sensibly for their retirement.”
He added: “Half of the UK’s workforce are not saving enough for a comfortable retirement already. We need more people to save, not to punish those who are already doing so.”
The Chancellor is expected to predict that the economy will start to recover in 2010, growing by one per cent in 2010, following this year’s forecasted contraction of three per cent, but this is a more pessimistic outlook than he gave at the end of 2008, which involved a much less significant drop of between 0.75 – 1.25 per cent, followed by growth of between 1.75 – 2.5 per cent.
Talking in a video he posted on YouTube about his preparation for the Budget, Mr Darling said that it needs to meet two prime directives – to “help people now” to cope with the economic downturn, and to “prepare for the future”, so that Britain can “take advantage of a recovery when it comes. And it will come,” he assured viewers.
According to The Times, the areas expected to receive the Budget’s focus include £300million to better insulate existing and new council homes, £200million for taking advantage of the UK’s position with more wind turbines, hydro-electric power and other renewable technologies, underwriting £50billion worth of new mortgage-backed assets to encourage more lending, £2billion to reduce unemployment, tax incentives for North Sea oil companies which explore old or inaccessible fields, and a ‘scrappage scheme’ for the auto industry which will give motorists £2,000 towards buying a new car.
The Treasury is already seeking a £5billion cut in public spending by 2011, and Mr Darling is expected to demand the additional £10billion reduction be made over the following three years.
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