Labour’s first official election policy will be to plunder the pension pots of Britain’s wealthiest retirement savers to underwrite the costs of guaranteed jobs for the young.
Under the plan, announced by Shadow chancellor Ed Balls, anyone earning £150,000 or more a year will lose top rate pension contribution relief.
They will see their tax relief cut by more than half from 45% to 20%.
The money will fund a Compulsory Jobs Guarantee that will provide a starter job for everyone under 25 jobless for more than a year, or over 25 who have had no work for more than two years.
If the job was refused, their state benefits would be stopped.
“A life on benefits is simply not an option anymore,” said Balls.
Britain’s wealthiest to fund policy
Labour accepts that the pledge may mean the government will have to fund jobs for many young people and that the policy might not be sustainable beyond the life of the next Parliament.
Raiding pensions is likely to be only one source of income to underwrite the policy, as Labour is also looking at raising a levy on bonuses paid to bankers to fully fund the first year of the jobs guarantee program.
Labour has calculated that grabbing extra cash from the pensions of the wealthiest earners will raise around £1 billion a year.
The party tried to make the policy more palatable for voters by announcing the policy would only affect around 330,000 people.
“We need to make sure any economic recovery benefits everyone, not just the best-off,” said Balls. “It seems fair to make the better-off help pay for the least well-off to find some work.”
50,000 back to work
The Labour announcement comes just days after Lib-Dem Chief Secretary to the Treasury Danny Alexander signalled retirement savers to expect no changes to pension contribution relief in the forthcoming Budget 2014.
Think-tanks and lobbyists had suggested slashing pension relief for high and top rate earners could save the Treasury several billion pounds a year in tax relief and did not really encourage pension saving for the wealthy.
Balls added that his policy would get 50,000 jobless people back to work and would include government funded training for six months.
“If Labour wins the next election, we will get young people and the long-term unemployed off benefits and into work,” he said.
