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Sajid Javid really ought to have a word with Matt Hancock

Summary:
Normally advising the Chancellor to have a word with the Sec of State for Health is a muttering that someone should tell the latter to stop spending like a drunken sailor. This time around though it’s that the latter should tell the former that there’s some risk to messing with pensions:Sajid Javid, the Chancellor, is considering plans to limit tax relief on pension contributions to 20pc, as revealed by The Telegraph. All taxpayers would only receive a flat rate of tax relief – the current level offered to basic rate taxpayers. This will be instead of some receiving relief at their marginal rate of income tax of 40pc or 45pc.But how much would higher earners lose? Those earning £50,000 or less would not be affected but those who earn between £50,000 and £150,000 would lose the additional

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Normally advising the Chancellor to have a word with the Sec of State for Health is a muttering that someone should tell the latter to stop spending like a drunken sailor. This time around though it’s that the latter should tell the former that there’s some risk to messing with pensions:

Sajid Javid, the Chancellor, is considering plans to limit tax relief on pension contributions to 20pc, as revealed by The Telegraph.

All taxpayers would only receive a flat rate of tax relief – the current level offered to basic rate taxpayers. This will be instead of some receiving relief at their marginal rate of income tax of 40pc or 45pc.

But how much would higher earners lose? Those earning £50,000 or less would not be affected but those who earn between £50,000 and £150,000 would lose the additional 20pc top-up from the Treasury. Those with annual income above £150,000 would lose an additional 25pc relief on all pensions savings.

The thing is, we’ve tested the outer limits of this sort of thing already. And if we’ve tested it to the point that even The Guardian has noted that marginal tax rates are too high then we’ve really, really, tested it, haven’t we?

Ministers have been sent a dossier demonstrating how a shortage of staff caused by medics working fewer shifts to avoid the NHS pensions “tax trap” is affecting frontline care.

The Academy of Medical Royal Colleges, which represents Britain’s 220,000 doctors, has written to the chancellor, Sajid Javid, and the health secretary, Matt Hancock, calling on them to urgently address the pensions tax issue that is causing many of the UK’s most senior doctors to reduce their overtime or leave the NHS altogether.

And:

Senior doctors in the NHS are reducing their hours, turning down extra work and even retiring early to avoid being hit with huge tax bills on their pensions, a report reveals.

We have this vague idea that Javid and Hancock meet regularly to discuss how the country should be governed. Even, so we understand, sit around the same table once a week to chew through such matters. Perhaps, just occasionally, they’d care to note that world outside the Cabinet Room, pay attention to the lessons the real world is trying to teach them?

After all, we do have that evidence that the taxation of pensions can be too high. You know, actual, direct, real time, experience of this. And wouldn’t government by reality be an interesting concept?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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