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AJ Bell: Osborne could return to pension tax relief in emergency Budget


George Osborne may use a Brexit vote as an excuse to push through controversial changes to pensions tax relief, AJ Bell is warning.

This morning the Chancellor said he would hold an emergency Budget if the UK votes to leave the EU.

He told the BBC a snap Budget would “have to increase taxes and cut spending” to fill a £30bn hole in the public finances.

He said he would need to raise the basic rate of income tax by 2p in the pound, higher rates by 3p and add 5p in the pound to the 40 per cent inheritance tax rate.

AJ Bell notes an increase in income tax would result in higher amount of pensions tax relief flowing out of the Treasury, prompting calls to revisit fundamental reform of the system.

Senior analyst Thomas Selby says: “A post Brexit vote emergency budget that increases income tax would immediately increase the cost of pension tax relief to the Government at a time when the Chancellor claims they would be making cuts in other public spending areas.

“The mounting Treasury bill for pension tax relief has been a concern of policymakers for some time. However, a combination of the EU referendum and the complexity associated with a fundamental overhaul saw the Chancellor put reform on ice at the last Budget.”

The Chancellor appeared set to announce plans to flip the pension system towards the Isa model at the last Budget. However, a backbench rebellion and the upcoming Brexit vote forced a last minute climbdown.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Let’s hope he does not throw his toys out of the pram if brexit wins, because it will a generation before anybody will trust them again. They need to understand the will of the people and not play god with our lives.

  2. Steven Pearman 15th June 2016 at 2:19 pm

    So he is saying a Brexit vote will cost the UK 30 Billion more than staying in. If this is the case surely rather than making threats it would be responsible to show why this is.

    The more cynical may think this latest media outburst is designed to push the not sures to remain in out of self interest.

  3. It would be one of the last things he does as Chancellor, before he and Cameron lose their jobs. Then the next Chancellor undoes it all.

  4. Yet another threat from the remain camp and it clearly is just that.
    If on the morning of the 24th the result indicates the electorate wishes to leave the EU nothing will have happened to alter our terms of trade. Only when the dust has settled and further negotiation is near completion will new terms of trade become apparent.
    Cameron and Osborne are fighting for their political lives having failed to negotiate anything credible in overly rushed negotiations. From a position of strength the PM achieved nothing substantial and his ‘achievements’ will almost undoubtedly be overturned by the European Court. Clearly now the PM has possibly turned a position of strength into one of weakness because if the vote turns out to be remain the UK will have given the EU the go ahead to continue driving on in a direction that even the remain camp, let alone the leavers, do not wish to go.
    It’s probably now too late to get back to a grown up debate about this so the ‘toys’ Ron mentions will probably end up all over the nursery.

  5. @ Stevenpearman whilst team £30billion figure may be wrong that is exactly what the remain campaign should do. Before purdah and before announcing a referendum they should have produced proper costed figures of the benefits of Europe membership. Look at what’s happening in currency and stock markets just at the possibility of Brexit and it is clear that markets believe remaining is best. Because Cameron and Osborne stupidly and complacently did not do this groundwork there are now no easily available facts to support remain. Even though Boris Nigel IDS and Gove are spouting rubbish they have no independently produced analysis to combat their back of a fag packet tripe. So Brexit may well win because their arguments about control of borders and sovereignty will appeal to those who Base the decision on emotions. The lack of facts enables Brexit to possibly happen. It’s not scaremongering to be very very very worried that idiots like Boris and Gove could end up as PM and Chancellor.

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