Despite predicting it would eliminate the budget deficit by 2015, then 2017, then 2019, after nearly nine years in power the government has failed to do so. It now only expects to balance the budget by the middle of the next decade. Should the governments’ current fiscal targets prove over optimistic, as they have to date, they may be tempted raise taxes further. This is despite the tax burden being at its highest level for 50 years.
Some opinion formers propose increasing taxes by restricting income tax relief to the basic rate on pension contributions. Whilst raising tax for those trying to save for their future retirement is bad enough, this action would unfairly affect those in the private sector more.
New employees entering the public sector today can already expect to retire on a pension three times higher than their private sector equivalents. The removal of full income tax relief for higher rate taxpayers will further increase the inequality between private and public sector occupational pension schemes.