The Finance for the Future report ‚ÄòMaking Pensions Work’ highlight the fact that by March 2009 almost half of all government borrowing at that time, totalling £619 billion, could be explained by pension tax relief given to the private sector pension industry over the previous decade.
Looking at the data on an annual basis for a selected number of years the relationship between the deficit and the cost of subsiding pensions is clear:
Data comes from table c4 of budget statements on actual out turns of income and spending, aggregating current and investment spending and allowing for depreciation. The pension subsidy data comes from HMRC and includes NIC and excludes the offset (which has no accounting or economic logic to it) of tax paid on pension incomes.
What is then obvious is that we ran a deficit in this country for the six years to 2007-08 to subsides the pension industry: an industry that was so inefficient that in the last year total pensions it paid were less than the subsidy it received.
We cannot afford for this to happen again.