Labour MPs have attacked the Government over the lack of a response to the accusation the Budget pension reforms could potentially deprive the Treasury of billions of pounds.
Speaking during the second reading of the Taxation of Pensions Bill, Labour MP for Middlesbrough South and East Cleveland Tom Blenkinsop said it was “profoundly worrying” the Government had failed to give an estimate of how much it expected to lose if people exploited a loophold to avoid paying National Insurance.
He referred to Corporate Adviser editor John Greenwood’s evidence at a Pension Schemes Bill committee meeting last week, where Greenwood explained how employees could avoid paying National Insurance by putting their income through their pension scheme.
Greenwood said if everyone exploited the loophole the Treasury would lose £20bn a year but that experts had estimated the figure would probably be closer to £2bn.
Blenkinsop said he found it “profoundly worrying” that the Treasury could not say what the possible impact would be.
He said: “We do not know what the implications of this are, what we do know is that the Treasury’s policy at the moment is not to respond to Mr. Greenwood.
“I think that is profoundly worrying if we’re potentially looking at quite a considerable amount of money – we’re talking about £2bn to £3bn if it’s 10 per cent – from the Treasury’s coffers.”
Labour MP for Edmonton Andrew Love added that the “most deeply worrying thing” during the Pension Scheme Bill evidence session “was the attitude of the pensions minister, who didn’t think there was a problem”.
Financial Secretary to the Treasury David Gauke claimed Greenwood’s figures were “based on some quite extraordinary assumptions” and that the Office for Budget Responsibility would be producing a cost estimate for the Autumn Statement. However, the Government has not provided its own estimates of the possible tax leakage.
Gauke said: “Mr Greenwood set out some eye-watering numbers in his evidence, but those numbers were based on some quite extraordinary assumptions as to behaviour.
”We don’t recognise some of the numbers that have been floated in terms of the cost here but at this stage numbers have not been certified by the OBR.”