Jeremy Hunt’s decision to scrap the pensions lifetime allowance, announced on Wednesday 15th March during his Spring Budget, has been met with controversy.
What was the Lifetime Allowance?
The lifetime allowance previously capped the amount that individuals could save into their private pension before incurring a tax charge. Previous to the Spring Budget, the lifetime allowance was set at £1,073,100, with expectations that Hunt would increase this figure to £1.8 million. However, in a surprise move he instead decided to abolish the lifetime allowance completely.
For most lower and middle earners, the scrapping of the lifetime allowance will not affect them. This decision will mainly affect higher earners as these tend to be the people who can afford to build bigger pension pots.
“It is a pension tax reform that will stop over 80% of NHS doctors from receiving a tax charge and incentivise our most experienced and productive workers to stay in work for longer”
“I have listened to the concerns of many senior NHS clinicians who say unpredictable pension tax charges are making them leave the NHS just when they are needed most”
The decision to scrap the lifetime allowance is aimed to keep people close to retirement in the workforce for longer, as well as encouraging those who have already retired to return to work. This is because there is more incentive for employees to stay in work to continue building their pension as they won’t face tax penalties for doing so. The idea is that this will help stimulate economic activity and produce economic growth.
Criticism
However, this decision has been met with controversy, with some arguing that whilst these changes would indeed combat the issue of 55% tax penalties faced by doctors, they would also give a big boost to many wealthy people.
David Brooks, head of policy at Broadstone, has argued that scrapping the lifetime allowance and increasing the annual pensions contributions has acted as a “huge tax giveaway to the wealthiest people in the country”
The following images is taken from the director of the Social Market Foundation, James Kirkup’s, twitter:
Perhaps the government should be focussing on getting more people to start building pensions, rather than helping those with large pensions make them even bigger.
Shadow Chancellor and Labour MP, Rachel Reeves stated:
“The only surprise in the budget was a huge handout to the richest one percent of pension savers […] Labour believes that the tax burden should be shared fairly. That is why I’ve announced today that Labour will reverse the changes to tax-free pension allowances. It is the wrong priority at the wrong time”
Given that Labour is favoured to win the next general election, it is a real possibility that Hunt’s scheme may not be in place for very long…
To read more about other changes announced in the Spring Budget, check out our previous blog.
by Red Star Wealth
The Protection from Redundancy (Pregnancy and Family Leave) Bill 2022-23, introduced by Labour MP, Dan Jarvis, has passed through the House of Commons and is now progressing through the House of Lords.
Current Regulation
Under Regulation 10 of the Maternity and Paternity Leave Regulations 1999, a woman on maternity leave whose job is being made redundant is entitled to the offer of alternative employment before the end of her current role, with her employer or an associated employer under terms not substantially worse than in the previous job.
Pregnancy and Family Leave Bill
The new bill would grant the Secretary of State power to extend these protections against redundancy for those on maternity leave to cover a longer time period. The period of protection from redundancy would extend to protect pregnant employees from the point of them telling their employer about their pregnancy, until 18 months after the birth.
Parents taking adoption leave or shared parental leave would also be protected from redundancy while on leave and for an 18 month period after their return.
It is currently unclear when these new rights will come into force, and we are unlikely to see changes until 2024 or 2025.
Why is this Protection Necessary?
The Equality and Human Rights Commission found that “around 54,000 new mothers may be forced out of their jobs in Britain each year.” 11% of the 3200 women they interviewed reported being dismissed where others in their workplace weren’t or treated so poorly that they had to leave their jobs themselves.
Dan Jarvis stated, “At the heart of this bill are tens of thousands of women pushed out of the workforce each year simply for being pregnant. I’m proud this new legislation will go some way to providing pregnant women and new mums greater protections in the workplace.”
They continued to argue that in practice, employers can quite easily ignore Regulation 10, “safe in the knowledge that, having just given birth or been away from the workplace for up to a year, a woman is most unlikely to bring a prohibitively expensive Employment Tribunal claim – the only means of challenging an unfair redundancy” and that “simply extending the period covered by Regulation 10 […] would not address this fundamental flaw.”
Instead, Maternity Action has called for a comprehensive legal ban on making pregnant women or new mothers redundant.
by Red Star Wealth
Government plans for a new law on minimum service levels during industrial action could leave workers being denied their right to strike.
Waves of Strikes
There is a seemingly constant wave of strikes recently due to huge hikes in inflation without adequate wage increases to match. This is causing huge amounts of disruption for the UK public, which can certainly be frustrating, but that is the point of strikes!
If we can recognise that these workers striking is causing this much disruption, we can also recognise how much we rely on their service. If we need their services this much to go about our daily lives, surely we can also understand why they deserve to be fairly paid.
If we take nurses as an example, their average pay has failed to increase in line with inflation or with private sector wage increases for over a decade, meaning real wage decreases over time. Over the course of a year between 2021 and 2022 in England, 1 in 9 nurses left active service. We need to ask ourselves why, and the answer seems quite clear… why would people want to work somewhere heavily understaffed, where they are overworked and underpaid?
Since June 2022, many workers have undergone strikes, including (but not limited to) the following professions:
Rail employees
Civil servants
Nurses
University staff
Border force staff
Ambulance workers
Midwives
Postal workers
Physiotherapists
The Strikes Bill
The Trade Union and Labour Relations Act 1992 has protected employee rights for decades and this protection is now at a real risk of erosion. The Strikes (Minimum Service Levels) Bill would amend the 1992 Act to “enable employers to issue work notices to require the minimum service levels to be delivered for particular strikes in specified services.”
The Union would then be expected to take reasonable steps to ensure the compliance of their members, and if failing to do so, would face paying huge damages. The Bill would essentially force Unions to go against the best interests of their members.
Its Implications
The Strikes Bill has now been passed in the House of Commons (315 votes to 246). It now needs to pass through the House of Lords to come into force.
Grant Shapps, the Secretary of State for Business, Energy and Industrial Strategy, has claimed that Labour, and others in opposition, are “putting lives at risk” by planning to vote against this bill.
However, many have criticised it for removing workers’ rights. If the bill passes, hundreds of thousands of people working in the public sector will be unable to exercise their right to strike. This means that many who have democratically and legally voted for strike action will be required to work during periods of industrial action, and face being sacked if they fail to comply.
The Trades Union Congress have described the bill as a “draconian piece of legislation” and that “forcing unions to send their members across picket lines is a significant infringement of their freedoms.”
UNISON assistant general secretary, Jon Richards, has described it as “a bill that gives all powers to the government and infringes workers’ rights, undermines democracy and doesn’t allow proper oversight by Parliament.”
If you enjoyed reading this blog, you might enjoy our previous post discussing the Government’s new statutory code on ‘fire and rehire’ practices.
by Red Star Wealth
There is a new government bill which should help remove employee barriers to flexible working. Read on to find out more about this Flexible Working Bill…
What is Flexible Working?
Flexible working arrangements include, but are not limited to:
Changing from full time to part time hours
Working compressed hours, where you work the same hours you are currently working, but in a smaller number of days
Changing the hours you work, e.g, changing from night shifts to day shifts or vice versa
Shift working
Flexitime… this is where you normally have core hours where you must be at work with the remainder of your working day being under “flexitime”. In this flexi time, you can choose when you want to work to meet your remaining quota of working hours
Working from home, for either all of your working days or just some of them
The Current Legislation
Employees must wait 26 weeks after starting a new job to make a flexible working request
Employees can make a maximum of one request for flexible working every 12 months
Employers have 3 months to respond to any requests
There is no right to appeal if an employee sees their request denied
There is currently no timescale for this legislation, but it has had its second reading in the House of Commons on 28th October.
The legislation would:
Remove the current requirement for employees to explain in flexible working applications what effect they think it will have on the employer
Allow employees to make a request twice every 12 months (double what they can now)
Require employers to consult with the employee in question before refusing the application
Reduce the deadline for employer responses from 3 months to 2 months
The Positives
The bill would help remove barriers for a lot of employees who are unable to work traditional working patterns.
“Parents of young children, single parents or individuals with disabilities and health conditions so often need flexible working, but access to these arrangements is not equal for all. Improving access would help older people stay in work longer and help parents and carers return to and stay in work.” –Qureshi
An additional effect this bill could have is an increase in people’s pensions as more people would be able to make contributions.
However…
Some have taken a more cynical view of the Flexible Working Bill. Molly Johnson-Jones, founder and CEO of Flexa Careers stated that the bill would be problematic in practice. She said it
“will leave workers with caring responsibilities or disabilities- who start new jobs in good faith that their flexible working needs will be accommodated- in hugely precarious positions if their requests end up being turned down.”
Like with many things in life, time will tell how effective this legislation will be at meeting its aims. At the very least, it seems to be a step in the right direction.
by Red Star Wealth
If you’re feeling a bit dizzy from all the U-turns in economic policy under Truss’ leadership recently, we can’t blame you! It’s difficult to keep up with it all at the moment, so we are here to help. Let’s have a look at what’s been going on…
Goodbye Kwarteng, Hello Hunt
Jeremy Hunt has recently replaced Kwasi Kwarteng as Chancellor, bringing with him even more economic changes.
Liz Truss has stated that Government spending will low grow less rapidly than she planned, meaning lots of U-turns on her previous plans.
The Medium-Term Fiscal Plan
On 26th September 2022, Kwarteng revealed that his Medium-Term Fiscal Plan would be presented on 23rd November.
This announcement is still in place, except now it’s happening earlier than planned and being delivered by a different man (Hunt). The Treasury announced on 10th October that the Chancellor would bring forward the announcement of this plan to the 31st October as opposed to 23rd November.
Triple Lock Confusion
The triple lock means that the state pension rises each year in line with either inflation, average earnings, or 2.5%, depending on which figure is the highest.
On 17th October, Hunt indicated that the Government was considering shelving the triple lock on pensions. However, two days later during Prime Minister’s Questions, Truss confirmed that the triple lock was there to stay.
“Firstly, we will reverse almost all the tax measures announced in the Growth Plan three weeks ago that have not started Parliamentary legislation” -Jeremy Hunt
Income Tax U-Turns
Hunt has announced that he’s reversing the proposed 1% cut in the basic rate of income tax announced in Kwarteng’s mini-budget. Instead, the basic rate will remain at 20%.
He’s also announced that the Government will not proceed with abolishing the 45% additional rate of income tax, as was previously announced in the mini-budget.
Alcohol Duty Freeze U-Turn
Hunt has also abandoned Kwarteng’s plans of freezing alcohol duty rates for a year, commencing 1st February 2023. This freeze is no longer going ahead, which is estimated to save the Treasury £600 million a year.
Corporation Tax Double U-Turn
Kwarteng announced in his mini-budget that the previously planned rise in corporation tax due to come into force in April 2023 would no longer go ahead.
Since his replacement, Truss has stated that the rise will go ahead next year after all, rising from 19% to 25%.
Energy Bill Price Cap
During Prime Minister’s questions on 19th October, Truss seemed to lean heavily on her energy bill price cap as a supportive measure for those most vulnerable. However, this energy bill support to ensure that the typical household’s average bill doesn’t exceed £2,500 is only to last until April 2023. The support is only actually in place for half a year.
Stamp Duty Land Tax
One remaining element of Kwarteng’s mini-budget is the changes to Stamp Duty Land Tax. The nil-rate tax threshold will stay at the increased £250,000, and £425,000 for First-Time Buyers.
So, that’s all of the recent changes summed up… for now! Things may be due to change again with Truss’ resignation, so stay tuned.
