UR will today spell out a £1bn raid on the pension pots of wealthy savers to fund a jobs guarantee programme for 130,000 unemployed people.
The plan, to be unveiled by shadow chancellor Ed Balls, would restrict the tax relief on pension contributions of people earning over £150,000 to 20 per cent, clashing with coalition plans to free up the limits on pension tax relief.
The £1bn saved by the move would be used to subsidise jobs for adults who are out of work for more than two years, some 130,000.
“When times are tough it cannot be right that we subsidise the pension contributions of the top two per cent of earners at more than double the rate of people on average incomes paying the basic rate of tax,” Balls said.
Savers earning more than £150,000 a year currently get 50 per cent tax relief on contributions into their pension pots. This is set to fall to 45 per cent in April.
People out of work would be offered a job under Labour’s proposed guarantee scheme and would be obliged to take it or face losing their benefits.
The announcement from Labour is the first big tax policy floated by the party as it fights to win back power from the coalition.