Rachel Reeves, the Labour Party Chancellor, is widely anticipated to be replaced by Ed Miliband should Andy Burnham succeed Sir Keir Starmer as Prime Minister. Ahead of her expected exit from No 11 Downing Street, reports suggest the Treasury is drawing up plans to automatically withhold income tax from the State Pension before it is paid out to recipients.
Treasury Plans to Deduct Tax from State Pension
According to City AM, the proposal would see the Department for Work and Pensions (DWP) deduct income tax ahead of pension payouts, similar to how employers deduct employment taxes from staff salaries via PAYE. This move flies in the face of previous assurances by Ms Reeves that she would not “go after” elderly retirees with fresh tax demands.
Ms Reeves had previously given her assurance that pensioners whose sole source of income was the State Pension would not be forced to pay income tax on the small amount of the pension that falls above the personal tax allowance. The Treasury and DWP have declined to comment, and a final decision on implementing the policy has yet to be made.
Reeves Defends Her Record Amid Speculation
Earlier this week, Ms Reeves made a dramatic last-gasp pitch to stay as Chancellor amid speculation that Mr Miliband could replace her in Mr Burnham's Cabinet. “Andy has been really explicit that he backs those fiscal rules. And the key thing about those fiscal rules: they pay for day-to-day spending through taxes, and that is where the discipline really comes in,” she said.
Getting debt down as a share of the economy, she argued, had allowed the government to unlock £120 billion in capital investment. The chancellor said that she remains “proud” of her record, but acknowledged that Starmer’s government “had very poor results” in May’s local elections and the Scottish and Welsh elections just a few weeks ago.
“Clearly, we need to do more to connect to the country, to tell a better story in government, but also to have a vision for where we want the country to go,” Reeves said. “That is what Andrew will be able to provide as our next prime minister. He is a great communicator,” she explained.
