The 50p tax isn't going to greatly enrich the treasury - but private pensions will

Ed Balls's 50p tax is nothing but theatrical politics - pay close attention to the Lifetime Allowance, the cap on pension funds, which has already been lowered and most likely will be again.

“It’s still £98.13 no matter if you have just installed a self-retracting awning sir.”

“But look, look at this picture – four bedrooms, two bathrooms, a recently extended kitchen and planning permission for a loft conversion.”

“It is very nice – would you please take your estate agent's valuation out of my face - but it’s still £98.13 for the groceries, or should I call my Supervisor?”

This is a familiar scene for me and my chosen check-out lady at my local supermarket in Wandsworth. She simply refuses to accept that my house, independently verified by an estate agent, is exchangeable for any amount of goods and services at her retail outlet. No matter how wealthy I tell her I am, she nearly always expects something that looks like ready cash. There is just no pleasing some people.

The distinction between wealth and money should be obvious. Still, it doesn’t stop some people trying to mix the two things up. Ed Ball’s announcement that a Labour administration would reintroduce the 50p tax band has deflected us from the wealth/money problem in a rather pitiful attempt to launch some sort of class war between the haves and the have nots. You can understand the shadow chancellor’s motivation: it is a mathematical certainty that the have nots are always going to be in the majority. The haves wouldn’t be your natural voting group. Besides, they are probably too busy whooping it up in Davos to notice anything you say.

The problem with this kind of theatrics is that although, in the short term, it will have the gallery punching the air in support – a recent YouGov poll shows that 61 per cent of people surveyed support the 50p income tax rate - the passage of time has a terrible way of reclassifying who is defined as wealthy and who is described as poor. For instance, this April a new and little understood change in pensions legislation will come into force, which is subtle but something of a time bomb if you think you aren’t with the haves. Something called a Lifetime Allowance (LTA) is being applied to everyone: the amount that you can have in a pension without penalty is being capped at £1,250,000 – if you have anything in a pension above this limit, when you retire, you will be taxed at up to 55 per cent on the excess.

Now I am sure there are many of you sitting there thinking “Good – make the bankers pay” (it’s always bankers in some people’s minds), while you are also probably thinking that £1,250,000 as a pension fund is outside anything imaginable for most people. And it is – currently.

Estimates I have seen show that about 30,000 people will be captured by it immediately, but that’s still only enough to fill Fulham Football Club’s ground to overflowing. Even with the current limit, about 360,000 people are expected to be captured by the time they retire.

HMRC have a way of calculating what your pension pot equivalent is – they merely multiply your expected pension income by 20. So let’s imagine that you expect to have total pension rights which pay something close to the national average of about £15,000. Well, that would give you a current pension fund size of £300,000 according to HMRC. It’s a big number, but nowhere near the one and a quarter million mark. Now let’s also imagine that we actually start to see pension income rising in line with inflation over the next ten years (as the baby boomers retire). In that case your pension fund will be worth the equivalent of over £400,000. This doesn’t allow for the growth of the underlying investment, so that is a lower limit – it wouldn’t be difficult to show how that number quickly becomes more than £500,000 if you allow for any rise in the value of the underlying investments. If you are lucky enough to have a pension income greater than that and say approaching the present average income then your pension fund could easily look like £900,000, putting you within spitting distance of the current LTA.

History tells us that things like the Lifetime Allowance start off in one place and end up in another – it has already come down from £1,800,000 to £1,250,000. I suspect that, as time progresses and the pensions problem moves from a distant rumble to a deafening roar, that the LTA number will fall to capture a lot more people than the capacity of Craven Cottage. In fact, one day, I doubt you’d be able to get them all in to the total capacity of the Premier League of a Saturday. In other words, a lot of people are about to be reclassified as Haves, and without knowing it, they will have become The New Wealthy Poor – those who have no money but are assessed to be wealthy and to add insult to injury may even have a large tax liability on retirement.

Let’s face it, the money for our pension promises and the care of the elderly is going to have to come from somewhere (we can’t just dump it all on the next generation) and, as we have seen, general taxation and silly gimmicks like Balls's 50p higher tax rates do not transform our public finances no matter what the opinion polls show. The one area that is ripe for raiding is the private wealth of the general public (not just the wealthy elite) and the reduction of the Lifetime Allowance is just the opening salvo in a long and stealthy war to get at it.

Ed Balls speaking to the Confederation of British Industry. Photograph: Getty Images.

Head of Fixed Income and Macro, Old Mutual Global Investors

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Who will win in Copeland? The Labour heartland hangs in the balance

The knife-edge by-election could end 82 years of Labour rule on the West Cumbrian coast.

Fine, relentless drizzle shrouds Whitehaven, a harbour town exposed on the outer edge of Copeland, West Cumbria. It is the most populous part of the coastal north-western constituency, which takes in everything from this old fishing port to Sellafield nuclear power station to England’s tallest mountain Scafell Pike. Sprawling and remote, it protrudes from the heart of the Lake District out into the Irish Sea.

Billy, a 72-year-old Whitehaven resident, is out for a morning walk along the marina with two friends, his woolly-hatted head held high against the whipping rain. He worked down the pit at the Haig Colliery for 27 years until it closed, and now works at Sellafield on contract, where he’s been since the age of 42.

“Whatever happens, a change has got to happen,” he says, hands stuffed into the pockets of his thick fleece. “If I do vote, the Bootle lass talks well for the Tories. They’re the favourites. If me mam heard me saying this now, she’d have battered us!” he laughs. “We were a big Labour family. But their vote has gone. Jeremy Corbyn – what is he?”

The Conservatives have their sights on traditional Labour voters like Billy, who have been returning Labour MPs for 82 years, to make the first government gain in a by-election since 1982.

Copeland has become increasingly marginal, held with just 2,564 votes by former frontbencher Jamie Reed, who resigned from Parliament last December to take a job at the nuclear plant. He triggered a by-election now regarded by all sides as too close to call. “I wouldn’t put a penny on it,” is how one local activist sums up the mood.

There are 10,000 people employed at the Sellafield site, and 21,000 jobs are promised for nearby Moorside – a project to build Europe’s largest nuclear power station now thrown into doubt, with Japanese company Toshiba likely to pull out.

Tories believe Jeremy Corbyn’s stance on nuclear power (he limply conceded it could be part of the “energy mix” recently, but his long prevarication betrayed his scepticism) and opposition to Trident, which is hosted in the neighbouring constituency of Barrow-in-Furness, could put off local employees who usually stick to Labour.

But it’s not that simple. The constituency may rely on nuclear for jobs, but I found a notable lack of affection for the industry. While most see the employment benefits, there is less enthusiasm for Sellafield being part of their home’s identity – particularly in Whitehaven, which houses the majority of employees in the constituency. Also, unions representing Sellafield workers have been in a dispute for months with ministers over pension cut plans.

“I worked at Sellafield for 30 years, and I’m against it,” growls Fred, Billy’s friend, a retiree of the same age who also used to work at the colliery. “Can you see nuclear power as safer than coal?” he asks, wild wiry eyebrows raised. “I’m a pit man; there was just nowhere else to work [when the colliery closed]. The pension scheme used to be second-to-none, now they’re trying to cut it, changing the terms.”

Derek Bone, a 51-year-old who has been a storeman at the plant for 15 years, is equally unconvinced. I meet him walking his dog along the seafront. “This county, Cumbria, Copeland, has always been a nuclear area – whether we like it or don’t,” he says, over the impatient barks of his Yorkshire terrier Milo. “But people say it’s only to do with Copeland. It ain’t. It employs a lot of people in the UK, outside the county – then they’re spending the money back where they’re from, not here.”

Such views might be just enough of a buffer against the damage caused by Corbyn’s nuclear reluctance. But the problem for Labour is that neither Fred nor Derek are particularly bothered about the result. While awareness of the by-election is high, many tell me that they won’t be voting this time. “Jeremy Corbyn says he’s against it [nuclear], now he’s not, and he could change his mind – I don’t believe any of them,” says Malcolm Campbell, a 55-year-old lorry driver who is part of the nuclear supply chain.

Also worrying for Labour is the deprivation in Copeland. Everyone I speak to complains about poor infrastructure, shoddy roads, derelict buildings, and lack of investment. This could punish the party that has been in power locally for so long.

The Tory candidate Trudy Harrison, who grew up in the coastal village of Seascale and now lives in Bootle, at the southern end of the constituency, claims local Labour rule has been ineffective. “We’re isolated, we’re remote, we’ve been forgotten and ignored by Labour for far too long,” she says.

I meet her in the town of Millom, at the southern tip of the constituency – the opposite end to Whitehaven. It centres on a small market square dominated by a smart 19th-century town hall with a mint-green domed clock tower. This is good Tory door-knocking territory; Millom has a Conservative-led town council.

While Harrison’s Labour opponents are relying on their legacy vote to turn out, Harrison is hoping that the same people think it’s time for a change, and can be combined with the existing Tory vote in places like Millom. “After 82 years of Labour rule, this is a huge ask,” she admits.

Another challenge for Harrison is the threat to services at Whitehaven’s West Cumberland Hospital. It has been proposed for a downgrade, which would mean those seeking urgent care – including children, stroke sufferers, and those in need of major trauma treatment and maternity care beyond midwifery – would have to travel the 40-mile journey to Carlisle on the notoriously bad A595 road.

Labour is blaming this on Conservative cuts to health spending, and indeed, Theresa May dodged calls to rescue the hospital in her campaign visit last week. “The Lady’s Not For Talking,” was one local paper front page. It also helps that Labour’s candidate, Gillian Troughton, is a St John Ambulance driver, who has driven the dangerous journey on a blue light.

“Seeing the health service having services taken away in the name of centralisation and saving money is just heart-breaking,” she tells me. “People are genuinely frightened . . . If we have a Tory MP, that essentially gives them the green light to say ‘this is OK’.”

But Harrison believes she would be best-placed to reverse the hospital downgrade. “[I] will have the ear of government,” she insists. “I stand the very best chance of making sure we save those essential services.”

Voters are concerned about the hospital, but divided on the idea that a Tory MP would have more power to save it.

“What the Conservatives are doing with the hospitals is disgusting,” a 44-year-old carer from Copeland’s second most-populated town of Egremont tells me. Her partner, Shaun Grant, who works as a labourer, agrees. “You have to travel to Carlisle – it could take one hour 40 minutes; the road is unpredictable.” They will both vote Labour.

Ken, a Conservative voter, counters: “People will lose their lives over it – we need someone in the circle, who can influence the government, to change it. I think the government would reward us for voting Tory.”

Fog engulfs the jagged coastline and rolling hills of Copeland as the sun begins to set on Sunday evening. But for most voters and campaigners here, the dense grey horizon is far clearer than what the result will be after going to the polls on Thursday.

Anoosh Chakelian is senior writer at the New Statesman.