Andy Burnham could raise more than £1billion by blocking Britain’s wealthiest pensioners from receiving the State Pension, according to a new analysis exploring how the Government could plug a £4.7billion funding gap.
The proposal would see the richest one per cent of retirees lose their State Pension payments, saving the Treasury more than £1billion a year.
The proposal comes from an analysis by tax expert Dan Neidle, founder of Tax Policy Associates, examining how Andy Burnham could plug a £4.7billion funding gap after Sir Keir Starmer pledged an extra £15billion for defence.
Mr Burnham has already suggested there is “some room” for tax changes while staying within Labour’s manifesto commitments.
Speaking to LBC’s Andrew Marr, he said: “I stick by the manifesto and the promises that it made. So, let me be absolutely clear about that, but there is some room within that manifesto for movement on tax.”
Mr Neidle believes tax rises are the most likely option because Labour has ruled out increases to income tax, National Insurance, VAT and corporation tax.
“It seems most likely Mr Burnham will be looking for tax increases,” he wrote.
He added that a future Chancellor could end up “scrabbling for relatively small tax increases here and there”, with changes to pension taxation among the options that could be considered.
One suggestion mentioned in the report is to means test the state pension.
He wrote: “The state pension pays out about £12,500 per year. It’s easy to think that’s an irrelevant amount to wealthy retirees, and we should means test the pension to stop them benefiting.
“Given the Government spends over £150billion each year on pensioner benefits, blocking even just the wealthiest one per cent from pensions would raise over £1billion. It seems a slam dunk.”
How the state pension triple lock has changed over the years | GB NEWS/FIDELITY INTERNATIONAL
However, despite the apparent financial benefit, Mr Neidle ultimately argued against the proposal, saying means testing the State Pension is not as straightforward as it first appears.
He continued: “But that makes an elementary mistake – a pension of £12,500 per year, updated with the “triple lock” is actually a highly valuable asset.
“It would cost the average 66-year old somewhere over £250,000 to buy an asset like that. A family “just” in the wealthiest one per cent has average assets of £1.9million per adult.
“So removing their pension would effectively expropriate over 10 per cent of their wealth. That feels unjust. I doubt any Chancellor would do this.”
Currently, the full new state pension stands at £241.30 weekly | GETTY
While he believes the proposal could raise more than £1billion, he argued the practical and ethical implications make it unlikely to be adopted.
The long-term cost of the State Pension has nevertheless become an increasing focus.
The Office for Budget Responsibility has forecast that spending driven by the triple lock will exceed earnings-linked increases by £15.5billion a year by 2030, around three times higher than originally projected.
According to the Department for Work and Pensions, overall State Pension spending is expected to reach £169billion by 2030
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PAAccording to the Department for Work and Pensions, overall State Pension spending is expected to reach £169billion by 2030.
Concerns have also been raised by figures advising Mr Burnham.
Richard Hughes, the former chair of the OBR, has previously described uncertainty surrounding the triple lock as “an important source of fiscal risk”.
Lord O’Neill, the former Goldman Sachs Asset Management chairman, has reportedly labelled the policy “bonkers” and backed means testing.