Pensions bombshell: Friedmanite19 says slash payments by 20%

written by JoJupiteristic

The Libertarian Party UK has outlined new plans to dramatically cut down income support for pensioners as a part of its goal to reduce public expenditure. One of the key targets of its austerity programme is the Negative Income Tax (NIT), which replaced state pension and most working-age social security payments across the UK. The Libertarian Party’s manifesto pledges to reduce the NIT subsidy rate to 40% from its current level of 50%. This has the effect of reducing the current NIT expenditure of £159.88 billion by approximately 20%.

The LPUK contends that these eye-watering cuts will free up space for tax relief. However, given that a large portion of the party’s proposed tax cuts lie on income, it means that pensioners will not see much in terms of relief. Pension withdrawals are taxed, meaning that those who lack recourse through accumulated savings will bear the brunt of this policy. While the party is pledging to lower the standard rate of VAT from 17.5% to 15%, it is also removing lower-rates on certain essential expenses such as heating, which some have labeled a “heat tax”, and increasing the carbon tax rate by 23%.

Even if there is tax relief on balance, however, IFS research also shows that those who lie within middle-to-upper income deciles would capture much of any tax relief on indirect levies, including that of VAT. This makes the LPUK’s sizable cuts to income support likely much more painful in net for low-income pensioners despite their proposed tax reductions. Such cuts already come on top of previous Conservative-Libertarian welfare reforms that scrapped additional support for pensioners like the Winter Fuel Payment.

These stark reductions would come on the back on a number of radical changes to the pension payment in recent years. After all this fluctuation and turbulence, it is difficult to imagine how pensioners would be able to plan for their retirement, something noted in a recent House of Lords report that analysed the UK pension system in-depth. The LPUK seems to have not necessarily taken heed here, pressing ahead with its cuts regardless of the ability of savers to prepare for their own retirement.

It remains to be seen whether the party can credibly implement such measures in any future budget despite what has been proposed in its manifesto. While its current programme largely resembles the budget its leader authored in January within the past Conservative-Libertarian coalition Government, the bulk of those changes were later reversed by its erstwhile coalition partners, the Conservative Party, this past term. Yet despite those reversals it is also the case that the LPUK is entering this election with a much larger bloc of support. If that translates into more seats, that could mean that the party will be able to wield substantial influence in budget talks with the Tories or even the Liberal Democrats, both of which have endorsed the LPUK and have come to implement shared policy across this past term.

The party is not contesting any seats in the North but due to the fact that the Ulster Unionists and the Alliance Party have both had their sister parties endorse Libertarian candidates in the Westminster elections, these proposals put out by the LPUK may end up being implemented in whole or in part by UUP or APNI MPs returned to Westminster. In contrast, the SDLP has already ruled out such a policy if it enters the House of Commons after polling day.