Pensions minister Steve Webb is refusing to confirm whether he has seen any government estimate of the potential for lost National Insurance and income tax through the flagship Budget pension reforms.
Asked six times by Corporate Adviser whether he has seen an estimate of potential public purse losses due to increased use of pension over salary, or whether he was aware that such an assessment had been made, Webb refused to reply, saying he would only echo statements from the Treasury that the totality of the NI and tax loss had been assessed in a global figure, and factored into the £3bn-plus gain to the government over the next parliament set out in the Budget.
“The Treasury’s figures have been signed off by the OBR. So they have made an estimate of the global impact of this reform. The OBR have signed it off. I am not going to do a commentary on their numbers,” said Webb.
At a Taxation of Pensions Bill Committee session in October Webb cross-examined at length Corporate Adviser editor John Greenwood’ predictions as to the scale of potential leakage – estimated at £20bn if 100 per cent of people use the loophole, and therefore £2bn if a more realistic 10 per cent did so. Webb was unable to confirm whether he had a figure of his own in mind at the time of this cross-examination.
“You keep asking the same question and I am going to keep giving you the same answer,” said Webb.
Webb rejected suggestions that policymakers had not spotted the potential tax and NI loss through flushing salary through pension, even though the Policy Costings document published alongside the Budget refers solely on the number of people who access their money early. A Treasury response to a Freedom of Information Act enquiry on the issue made by Corporate Adviser contained no details of any prediction of NI loss.
“I don’t think because you have asked the Treasury an FOI question and not got what you wanted, and you ask the DWP minister the same question, I will give you what their response is to that set of questions. I am not going to give different answers for obvious reasons”, he said.
Webb also denies making inaccurate statements to the Pension Schemes Bill Committee that suggested the potential salary sacrifice loss had been covered at length in the press ever since the day after the Budget. Webb told the Committee: “Paul Lewis of BBC’s Moneybox was highlighting exactly the potential for cycling money around in this kind of way”. Paul Lewis has subsequently told Corporate Adviser that he had never covered NI loss through salary sacrifice – he just looked at tax loss. The loss to the Treasury of NI is five times bigger than the loss of income tax for basic rate taxpayers flushing pay through pension.
“It’s the same issue essentially,” said Webb.
Webb declined to detail what constitutes ‘bad’ behaviour that would lead to a government clampdown.
“The idea of salary sacrifice isn’t a revelation to HMRC. They don’t ban salary sacrifice schemes. They will look at it, just as they will look at the tax thing. People using the new system, that is where the £10,000 thing comes from. That’s an initial response and they will go on looking at that. But that’s a matter for the Treasury,” he said.
– For the full interview, see the December issue of Corporate Adviser, out next week