{"id":27645,"date":"2025-08-15T14:28:39","date_gmt":"2025-08-15T13:28:39","guid":{"rendered":"https:\/\/www.open.ac.uk\/blogs\/news\/?p=27645"},"modified":"2025-08-20T12:29:35","modified_gmt":"2025-08-20T11:29:35","slug":"whats-the-secret-to-fixing-the-uks-public-finances-heres-what-our-panel-of-experts-would-do","status":"publish","type":"post","link":"https:\/\/www.open.ac.uk\/blogs\/news\/arts-social-sciences\/whats-the-secret-to-fixing-the-uks-public-finances-heres-what-our-panel-of-experts-would-do\/","title":{"rendered":"What\u2019s the secret to fixing the UK\u2019s public finances? Here\u2019s what our panel of experts would do"},"content":{"rendered":"

Unexpected growth in the UK economy isn\u2019t enough to detract from the gaping hole in the country\u2019s public finances. Speculation is ramping up about what steps the chancellor of the exchequer, Rachel Reeves, might take to plug the gap come the budget in autumn \u2013 and there are no shortage of ideas. The trouble is, each comes with risks and unknowns. The Conversation’s experts have weighed up the evidence to offer their suggestions.<\/em><\/p>\n

Cutting tax relief for pensions could be a hidden pot of cash<\/h2>\n

Debates about tackling government debt typically centre on cutting spending or raising taxes, says Jonquil Lowe, Senior Lecturer in Economics and Personal Finance, Open University.<\/em> But a third option, often overlooked, is restricting tax reliefs. An obvious candidate is pension tax reliefs over and above the basic rate, which benefit the better-off and are skewed towards men (since women\u2019s ability to save is often suppressed due to unpaid care work).<\/p>\n

The various income tax and national insurance reliefs for pension schemes (tax relief on contributions, tax-free income and gains for pension funds and tax-free lump sum at retirement) cost the government\u00a0\u00a352 billion in 2023-4<\/a>.<\/p>\n

By design, any system that gives people tax relief up to their highest marginal rate is regressive (it benefits the better-off more than those who are less well off), and around\u00a0two-thirds<\/a>\u00a0of pension tax reliefs go to higher-rate and additional-rate taxpayers.<\/p>\n

Advocates may argue that tax reliefs are necessary to encourage people to save for retirement. But the evidence does not support this. First, the only step up in UK pension saving in modern times has been due to the introduction of\u00a0auto-enrolment in 2012<\/a>\u00a0\u2013 not tax reliefs.<\/p>\n

Second,\u00a0research<\/a>\u00a0suggests that when tax-relieved savings schemes are introduced, they prompt a shift of existing savings. That is to say, people tend to move other savings into their pensions for the tax benefits rather than actually putting more money away overall for the future. But clearly, tax relief does not help people to save more if they don\u2019t have the extra funds in the first place. And on social justice grounds, does it make sense for the mass of taxpayers to subsidise the relatively well-off who can readily save anyway?<\/p>\n

Read the full article on The Conversation<\/a><\/p>\n

Picture credit: Suzy Hazelwood on Pexels<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Unexpected growth in the UK economy isn\u2019t enough to detract from the gaping hole in the country\u2019s public finances. Speculation is ramping up about what steps the chancellor of the exchequer, Rachel Reeves, might take to plug the gap come the budget in autumn \u2013 and there are no shortage of ideas. The trouble is, […]<\/p>\n","protected":false},"author":19,"featured_media":27646,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[860,1525,1643],"class_list":["post-27645","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-arts-social-sciences","tag-faculty-of-fass","tag-news-home","tag-ou-news"],"_links":{"self":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts\/27645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/comments?post=27645"}],"version-history":[{"count":1,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts\/27645\/revisions"}],"predecessor-version":[{"id":27647,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/posts\/27645\/revisions\/27647"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/media\/27646"}],"wp:attachment":[{"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/media?parent=27645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/categories?post=27645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.open.ac.uk\/blogs\/news\/wp-json\/wp\/v2\/tags?post=27645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}