Julian Knight: We can't afford to rob the future to feed the present
Pension money should not go to reduce taxes
Sunday 19 February 2012
I am in a bit of a quandary. You see, I totally agree with Danny Alexander and the Coalition Government's ambition of raising the income tax personal allowance as soon as possible to £10,000 and beyond.
It's by far the quickest and simplest way to help out low-paid staff and to encourage those stuck on benefits to find work. Even senior Tories at the time of the election said that they wished that they had made the £10,000 commitment on the personal allowance. Now it's a key plank of the Coalition agreement.
I am also, apparently, in agreement with Mr Alexander over the potential scrapping of higher-rate tax relief on pension contributions. It's absurd that about three quarters of all the cash paid out in pensions tax relief goes to the 10 per cent of the nation's top earners while the rest have to make do with a far more meagre 20 per cent boost.
This has been a blatant wrong supported for decades by politicians and the pensions industry who themselves benefit hugely from it. It helps exacerbate the income inequalities in the workplace right into old age.
So you'd think I'd be happy about the way in which these twin policies seem to be coming together in time for the Budget. Mr Alexander is believed to favour using the billions saved by scrapping higher-rate pensions tax relief for the personal allowance. But I don't think this is a good idea at all. Let me explain why.
This is effectively a raid on pensions – pensions of the wealthy, admittedly – but a raid nevertheless, and the money could be used to fund a tax break today. Yet again it will be an example of our society choosing the here and now over provision for the future.
Tax cuts are good, and I argued a fortnight ago that we need a small one to boost economic growth and spending, but to fund it from pensions is a truly retrograde idea. This does not mean I want the status quo to stay over tax relief on pensions – it's wrong. What I'd like to see is the end to higher-rate tax relief but for this money to be redirected to give basic-rate taxpayers a higher relief on their pension contributions. This would encourage the millions of people who aren't saving enough right now for their retirement to save more – and stop the gravy train for the rich.
The precious money we already have in pensions needs to stay in that sphere and not be used to supplement current spending. If Mr Alexander wants to achieve the ambitious but worthy goal of the £10,000 personal allowance he needs to fund it from elsewhere. He should not rob the future to pay for the present.
The West's house of paper
Talking about robbing our future, I am reading Planet Ponzi by the former hedge fund manager Mitch Feierstein. It's a description of how we in the West have given away our economic hegemony in a few short years – a sort of "How the West was lost" if you like.
Mr Feierstein outlines, in simple terms, the mistakes that have been made by global policymakers to leave us in a position where we in the West are massively under-competitive, over-indebted and ruled over by, in any truly objective analysis, bankrupt governments, flinging out potentially worthless paper to be gobbled up by investors who are clueless as to what they can buy instead. The description of a Ponzi scheme is very apt. And in a week when Moody's moved the UK to a negative outlook, Mr Feierstein's book is a reminder that things could well get a lot worse in coming years and decades.
Less interest in interest-only
Before the banking crisis, one in three homeowners took out an interest-only mortgage. If you're one of these you probably regret the decision. House prices have fallen in most parts of the UK – although not in London and the south-east – in essence undermining the purpose of interest-only loans in the first place. Now more woe is to be piled on these people with Santander reducing its loan-to-value on interest-only mortgages to 50 from 75 per cent, while there is a rumour that another major lender is set to get out of the market altogether. Other lenders, such as Woolwich and Lloyds, are asking their interest-only borrowers to provide clearer evidence that they have an investment vehicle in place to repay the capital sum owed. In essence, the interest-only market is constricting and anyone with this type of mortgage should urgently review where they stand and consider a remortgage to a repayment home loan quickly.
- 1 Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
- 2 Woman accidentally shoots herself in the head while posing for a selfie
- 3 Art Garfunkel calls Paul Simon a 'monster' with a Napoleon complex
- 4 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...
Day In a Page
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof