there's gonna be a compensating cut in national insurance contributions by tuppence in the pound but only up to the threshold of just over 50,000. Um so it'll be uh you know inverted commas close inverted commas working people whose income is less than 50,000 a year. There'll be no change in their pay packet whatsoever. >> Rachel Reeves is set to announce plans to raise income tax while cutting national insurance. A move that could leave many retirees worse off. More than 9 million pensioners are expected to pay an extra £380 a year on average under the chancellor's proposed tax changes. Well, joining me this afternoon is political economist Will Hutton, who hopefully can unpack what this means. Good afternoon, Will. Thanks very much for joining us on Times Radio. C can you can you chat through as you understand it what this possible change to our pension pots might entail? Well, um the the pensions dimension of it is I think uh important but secondary to the kind of centerpiece which is going to be what you described which is um I think the plans are going in on Wednesday next week to the office of budget responsibility. She's going to um raise income tax for everybody by tuppets in the pound and that will include of course pensioners. Um uh >> and that's that's sorry. Well, that's just you think it's 2 p in the pound for both the basic rate of income tax and the higher rates of income tax. >> I'm not sure what she's going she'll freeze the thresholds, but I think she'll leave the I think she's going to leave the top rate unchanged is my information. Um so Tuppets on the basic rate of income tax for everybody. Um, but here's the point and you mentioned it in your intro. There's going to be a compensating cut in national insurance contributions by tuppence in the pound, but only up to the threshold of just over 50,000. Um, so it'll be uh, you know, inverted commas, closed inverted commas, working people whose income is less than 50,000 a year, there'll be no change in their pay packet whatsoever. Is the logic of this so that Rachel Reeves can claim even though she's breaking a manifesto promise and putting up income tax that the tax burden for as you point out quote unquote working ordinary working people that that's not changed. Well, that's going to be that's going to be yes, that's what she's going to try and sell us. And she's she's going to there's also be I think a big cost of living package um help with energy bills, a big reduction. So, I think the the government will take over um the expense of a lot of the kind of green measures which are on your energy bill at the moment and that will cut energy bills. There'll also be a 5% cut in the value added tax on on electricity. It's there's 5% on gas and electricity. She'll leave it on gas. I think uh it's fossil fuel, but she'll take it off electricity and that's going to be worth take quite a lot of the inflation rate and quite a lot of help to kind of lower income families kind of within that category, working people. So, she'll argue that, you know, what she's done is she's raised money. Um she's tried to preserve the spirit of it for the vast bulk of the population. Indeed, many of them will be better off as a result of the budget measures on kind of food prices. Um, I should think she'll freeze um once again excess your duties on fuel, petrol at the pump, and she'll kind of make your energy bills uh lower. So, you know, I you know, that that'll be her pitch. And then, you know, that those with the broader shoulders will will kind of kind of pay up and then God will they pay up. I mean, I think there's going to be a that that'll be um no compensating cuts in national insurance contribution for pensioners, um for landlords, uh for the self-employed. So, that they're all they'll all be kind of um part of this. Also, the freeze on allowances which was meant to stop uh in 2078 will carry on to 289. Indeed. >> And this, sorry, this is the the amount that you um start to earn before you pay the tax or >> That's right. 122,000 what is it?400 personal allowance has been frozen at that level since 2021 and will remain frozen until um effectively the end of the decade. And of course, as inflation, that means more and more people are are drawn into paying tax they wouldn't otherwise pay. >> But but the big question, Will, is is this going to work? I mean, you know, A, is it going to raise enough money to plug the finances? And B, will Rachel Reeves get away with claiming I haven't raised your taxes when patently she will be raising taxes? Uh, especially for those people, you know, a lot of pensioners, uh, yes, they're in the triple lock. Uh, but they they will think they've earned, you know, they put in all the money throughout their life. Why am I suddenly having to pay income tax now or extra income tax, uh, on my pension? Well, I don't think I mean pensioners I mean the uh pensioners will say that I mean and uh and you can open up the argument. I mean actually uh pension of poverty in Britain has been virtually eliminated. I mean this pensioners are now kind of um as a as a category the distribution of income of people over 66 when you start receiving your pension the it's kind of better than the profile for the population as large um because the state pension has been put up by you know the triple lock so kind of much since it was introduced in 2011 that doesn't mean there's no pension of poverty there certainly is I mean there's the kind of 50% of pensioners in real trouble but the bulk of the pension population are, you know, more than equipped actually to pay this increase in income tax. She will argue and uh the triple lock will remain. She will recommmit the triple lock. She will make sure that that will last till the end of this parliament. There be no messing around with the triple lock. >> Okay. When when is the political party going to be brave enough to say we can no longer afford the triple lock? >> Um well, I have a I have the Will Hutton pet scheme on that which is that I think that we have to level with people and say look we should do what the South Koreans do. We should do what the Canadians and Australians are doing. We should actually create a kind of over the next two generations, a pension fund that pays the state pension. It'll take kind of two generations to get it together. Um, and the quid proquo for that is the gradual phasing out of the triple lock and that would start in 2030 or 2035. You got to you can't you can't take it away without offering something tangible in its place. And actually it would be a great thing for the country if uh you know in 60 years time won't mean well I look won't live to see it but you you know my grandchildren will live to see it and so will yours that there won't be no messing you know the state pension is paid as of right from a British pension plan. It's what the South Koreans do. It's what the Australians are moving towards. It's what the Canadians moving towards and I think we should copy them. But ma'am uh >> well actually well on that point I mean Louis one of our our listeners has has just WhatsAppapped in saying pensioners today have lived an entire life in which successive governments have spent beyond their means. The pensioners have benefited from this now that they're old they can't just walk away from this. It's not fair to young people. Uh I mean I think that's how a lot of you know younger younger generation do feel isn't it? >> Well that's what I feel actually. I mean I'm not young. I mean I you know and I think one of the things that's going to be one of the thing things she's going to emphasize in this budget just to kind of speak to your caller well well a very well made point by the way is I'm sure she's going to make the argument this is that this is we've got to get a better bargain between the generations you know the old live in the old have enjoyed all this house price inflation I mean they live in most of them living in they're owner occupied a disproportion number of pensions are owner occupiers they've finished off paying their mortgage they've got you know the triple lock pension and usually so a useful private pion on top. They're pretty well off actually. And and meanwhile, young people having to live at home with their parents until their mid-30s. They can't get on the housing ladder. You know, um careers are very uncertain to build. And the good times have left left us behind. House price for every square meter average house the average price of a square meter of property in the UK is the highest in the world on average across the whole country. So, I mean, I I do think that, you know, raising council tax, trying to trying to get those of us who've benefited from that to kind of chip into the uh common pool is not unreasonable actually. And she will make she'll try to make that argument as fiercely as she can. I mean, there'll be push back. We can both recognize that. But I, you know, there's there's some justice in what she is, in what she's saying. Uh another listener has actually got in touch will uh with for your for your very uh for your pension scheme for your pension fund scheme all sort of the Norwegian oil fund or the South Korean. Uh Paul has said any such pension fund would have to be funded by working people. I'm sure that's a very ludable idea but I just cannot see any party being brave enough to propose it. And surely if there's any party who is the epitome of not really being very brave at being radical and changing our tax system, it's been the current Labor Party, hasn't it? Look, I mean, just to give that reply to Paul, it was Paula who was name, wasn't it? What you my my scheme is, and by the way, it's supported by a number of people in the city like the chair of Phoenix Insurance Company and Nick Lions, was a former mayor of the city of London. My scheme is that the government borrows a hundred billion pounds and immediately invests it in shares and and bonds and corporate bonds and all the things that pension funds invest in. doesn't kind of that and that will double uh in 10 years and double again in 10 years so that in 20 years time the government can repay the hundred billion it's borrowed. Uh and as long as it doesn't kind of kind of as long as it keeps it kind of uh in perpetuity as a kind of nest egg for future generations. It will it will be a buyer of government bonds. It will be a buyer of British shares. uh and it will grow like that. Um working people will only have to contribute uh in the period in which you have to service the interest on the on the hundred billion pounds that you borrowed and that you do by phasing out um the triple lock. So that's the idea. I mean conceptually it's watertight. >> Okay. Well, I I will I will I will take it that it is watertight. Thank you. Thank you very much indeed for joining us. We have to say goodbye now. That was Will Hutton, co-chair of the purposeful company and president of the Academy of Social Sciences.