Given the scale of inequality in the UK, the Government would, for instance, have been better served by increasing taxes on a banking sector turning in its most profitable results in decades, or via a wealth tax on the very wealthiest in our society

Given that £4.7 billion is to be raised by reducing tax breaks on salary sacrifice pensions, compared to just 0.4 billion for the mansion tax, is illustrative of how many workers across the UK will be impacted by changes to this scheme.

Reform to the salary-sacrifice scheme will limit the pension provisions of savers across the UK, while reducing capital gains tax relief on disposals to employee ownership trusts will unfairly disincentivise owners from transitioning their businesses to employee-owned models.

However, the freezing of income tax thresholds will push 780,000 more people into the basic rate of tax, despite the long-term stagnation of real-term wages.

It is positive to see increased tax receipts from those most able to contribute—including a ‘mansion tax’, a modest rise in dividend taxation and a reform of taxation on the hugely-profitable gambling industry.

At the same time, the Government has missed a clear opportunity to raise revenue from far more profitable sectors and the wealthiest individuals, rather than relying on measures that disproportionately affect ordinary earners.

With the upcoming ‘Pension Schemes Bill’ offering a chance to reform pensions in the interests of savers, it would be a great shame if this was undermined by a curtailment of the salary-sacrifice scheme: t.co/mi4u7MptN2

Government focus should instead be on ensuring employers uphold decent standards on both pay and pensions, as well as improving awareness of the scheme and the benefits it offers.

HPC data shows 57% of FTSE100 firms were living wage accredited, versus just 15% that were living pension or pension quality mark accredited (Dec 2024). This reflects a comparative lack of engagement by firms in meeting good standards of pension provision when compared to wages.

Such a change could lead to employers further reducing their pension contribution rates, effectively resulting in a pay cut. This would only exacerbate the UK’s retirement savings crisis.

Reports that the Chancellor is considering scaling back the salary-sacrifice scheme are therefore concerning, as this enables employees to direct an additional percentage of their salary into their pension pot and avoid national insurance contributions.

One policy idea suggests that companies should be prohibited from distributing profits to shareholders unless employee pay has at least increased with inflation: tompowdrill.substack.com/p/a-policy-i.... This could ensure employees receive a fairer proportion of the value they help to create.

Roughly doubling the basic rate of 8.75% would raise much needed-tax receipts for the treasury, align the UK with rates seen across Europe and reduce the careful management of dividends to avoid paying higher tax rates.

Namely, between 2014 and 2018, FTSE100 returns to shareholders rose by 56%, while the median wage for UK workers increased by just 8.8%. In 27% of cases, returns to shareholders were higher than the company’s net profit.

It is understandable, therefore, that the Chancellor is considering increasing taxes on dividends in the upcoming budget. While concerns regarding the impact on smaller businesses should be taken seriously, share-holders have clearly benefited significantly from return schemes.

Previous HPC/@survation.bsky.social polling showed 72% of respondents believed pension funds should be required to understand members’ attitudes to ethical investment, and 66% stated they want their pension fund to reflect their ethical values and beliefs. highpaycentre.org/high-pay-cen...

The rise of left-economic populism on both sides of the Atlantic shows that discontent with this model of capitalism will only grow. Those who believe in capitalism should be the first to call out this excess and argue for a fairer model if they want the system to survive.