There's going to be compensating cut in national insurance contributions by two pence in the pound but only up to the threshold of just over 50,000. Um so it'll be uh you know inverted commas closing 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. Can Can you Can you chat through as you understand it what this possible change to our pension pots might entail? Well, I 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 uh raise income tax for everybody by two pence in the pound and that will include of course pensioners. Um um uh And that's that's just Sorry, Will. That's just You think it's two pence in the pound for both the basic rate of income tax and the higher rates of income tax. I'm not sure if she's going to She'll freeze the thresholds but I think she'll leave them I think she's going to leave the top rate unchanged is my information. Um so two pence on the basic rate of income tax for everybody. Um but here's the point and that you mentioned in your intro. There's going to be compensating cut in national insurance contributions by two pence in the pound but only up to the threshold of just over 50,000. Um so it'll be uh you know inverted commas closing 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 that's not changed. That's going to be That's going to be Yes, that's what she's going to try and sell sell us and she's got She's going to There's also be a I think a big cost of living package. Um uh help with energy bills and 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 It's 5% on gas and electricity. She'll leave it on on gas, I think. Uh it's a 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 excise 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 will God, will they pay up? I mean, I think there's going to be a that that that'll be um There'll be no compensating uh cuts in national insurance contribution for pensioners and for landlords. Uh for self-employed. So they're they're all they'll all be kind of um uh part of this. Also, the freeze on allowances which which was meant to stop uh in 20 78 will carry on to 289. Indeed, >> And this Sorry, this is the the amount that you um start to or you pay the tax or That's right. 12,000 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 there's inflation, um that means more and more people are are drawn into paying tax who wouldn't otherwise pay. 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 uh you can open up the argument. I mean, actually uh pensioner poverty in Britain has been virtually eliminated. I mean, there's um pen- pensioners are now a kind of um as a as a category, the distribution of income people over 66 when you start receiving your pension. The the it's kind of better than the profile for the population as at 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 pensioner poverty. There certainly is. I mean, there are the kind of 50% of pensioners are in real trouble. But the bulk of the pension population are, you know, more than equipped actually to pay this rate increase in income tax. She will argue. And uh the triple lock will remain. She will recommit the triple lock. She will make sure that sta- that will last till the end of this parliament. There'll be no messing around with the triple lock. Okay. When when is a 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 uh a pension fund that pays the state pension. It'll take kind of um two generations to get it together um and the quid pro quo for that is the gradual phasing out of the triple lock and that would start in 2030 or 2035. You've 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 when me when I live won't live to see it and 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 are moving towards and I think we should copy them. But then uh Well, actually Well, on that point, I mean, Louie, one of our listeners has has just WhatsApped 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 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 a 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 disproportionate number of pensioners are owner-occupiers. They've finished off paying their mortgage. They've got, you know, the triple lock pension and usually a useful private pension on top. They're pretty well off, actually. And and meanwhile, you young people having to live at home with their parents until they're 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 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 pushback. We can both recognize that. But I, you know, there's there's some justice in what she what she's saying. Another listener has actually got in touch, Will, with your for your very for your pension scheme for your pension fund scheme a little bit of the Norwegian oil fund or the South Korean. Paul has said any such pension fund would have to be funded by working people. I'm sure that's a very laudable 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 Labour Party, hasn't it? Look, I mean, just to get that right at Paul. It was Paul whose 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 Lyons who 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 And 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 100 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 uh 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. And working people will only have to contribute uh in the period in which you have to service the interest on the on the 100 billion pounds that you borrowed. And that you do by phasing out um the triple lock. So, that's the idea. I mean, it 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.