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Jeremy Hunt backed Labour plan last year for tax break on NHS pensions

Jeremy Hunt previously backed Labour’s idea of giving a pensions tax break only to NHS staff, despite ruling out such a move in this week’s budget because it would not come into force quickly enough.

The chancellor was chair of the health select committee last year when members wrote a report calling for the NHS pension scheme to be overhauled to encourage senior doctors to stay in their jobs.

However, this week he went much further, unveiling a £2.75bn tax break for everyone with large pension savings, a move he said was necessary to ensure doctors were helped quickly, but which Labour has said is a costly tax break for the wealthiest savers.

Last June, the health select committee flagged the problem with senior doctors retiring because their pension contributions had reached £1m and were being taxed at a higher rate. The committee said in a report: “It is a national scandal that senior medical staff are being forced to reduce their working contribution to the NHS or to leave it entirely because of NHS pension arrangements.

It added: “The government must act swiftly to reform the NHS pension scheme to prevent senior staff from reducing their hours and retiring early from the NHS.”

Labour said the comments indicated Hunt was aware of the problem long before this week’s budget and could have enacted the more targeted changes he had previously advocated.

Rachel Reeves, the shadow chancellor, said: “These findings make it clear once and for all that the government could have made different choices to get doctors back to work, while also not giving a £1bn bung to the richest 1%.

“At a time when families across the country face rising bills, higher costs and frozen wages, this is the wrong priority, at the wrong time, for the wrong people.”

A Treasury spokesperson said: “With lots of people on NHS waiting lists, we need to move quickly – that’s why we’re implementing pension reforms in a matter of weeks to help keep experienced doctors and consultants in our NHS.”

Under current tax rules, workers are taxed up to 55% on pension contributions they make once they have saved just over £1m across their entire lifetime. But Hunt’s budget measures will mean that lifetime cap no longer applies – although savers will be taxed if they make more than £40,000 in contributions in a single year.

Hunt said last week the tax cut would take effect in two weeks’ time and would stop more than 80% of doctors having to pay tax on their pension savings. The Office for Budget Responsibility has predicted 15,000 people will remain in the workforce as a result, although the government has not said how many of those they expect to be doctors.

Labour has said it will vote against the measure next week. The party has also vowed to reverse the tax break if it gets into government at the next election, even though experts have warned this could encourage savers to maximise their pensions over the next 18 months and then retire if Labour gets into power.

Wes Streeting, the shadow health secretary, said that was a price the party was willing to pay to make sure the wealthiest savers pay their fair share.

“We can’t have a situation on an ongoing basis where the very wealthiest aren’t paying their fair share of tax,” he said.

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