A future Labour government would cut tax relief on the pension pots of people earning over £150,000 in order to fund its job guarantee policy for young people who have been off work for more than a year
Labour's Compulsory Job Guarantee would see people aged 18-24 given a tax-subsidised job which they will have to take up or risk losing their benefits. The scheme will also apply to adults aged 25 or over claiming Jobseeker's Allowance for two years or more.
The party today said the proposal would be fully funded for the life of the next parliament. A tax on bankers' bonuses would fund the first year of the proposed welfare policy raising, on a 'cautious estimate', between £1.5bn and £2bn.
From the second year onwards, funding would come from a reduction in the pensions tax relief enjoyed by top-rate taxpayers to 20%, the same rate as basic-rate taxpayers. The House of Commons Library has estimated this will raise £900m to £1.3bn each year.
No other policy will be funded by the bank bonus tax and the proposed changes to pension tax relief, Labour added.
Shadow Chancellor Ed Balls said: 'It's shocking that the number of young people stuck on the dole for more than a year has doubled under David Cameron. For ten years of thousands of young people who cannot find work this is no recovery at all.
'We've got to put this right. So if Labour wins the next election we will get young people and the long-term unemployed off benefits and into work.
'The government will work with employers to help fund paid work with training for six months. It will mean paid starter jobs for over 50,000 young people who have been left on the dole for over a year by this government.'
Commenting on the proposal, investment management firm Hargreaves Lansdown said it was 'very supportive' of the ambition to help young people into work, but was 'deeply concerned' about the practicalities of the policy.
Head of pensions research Tom McPhail told The Actuary: 'Taking money off a few wealthy individuals and sharing it out in benefits to the young and needy is an easy way to win a popularity contest.
'Unfortunately, those of us forced to pick up the pieces of Labour's last attempt to cap pensions tax relief in 2009 can attest to bewildering complexity it inflicted on the pensions system. This complexity and the cost of administering it far outweighed the relatively modest benefits from introducing the tax relief cap.
'With auto-enrolment in a critical phase over the next two years, this is a very bad moment to start threatening changes to the pension tax relief system, particularly a change which has been tried once already and found wanting.'
