Mr Osborne is said to be “considering” reducing the maximum annual tax-free pension contribution below the current level of £50,000, after rejecting the Liberal Democrats’ “mansion tax” proposal for raising revenue from the wealthy.
A new threshold of £40,000 would raise around £600m a year for the Treasury, while a cut to £30,000 would deliver £1.8bn.
Unnamed officials have been quoted as saying that moves to reduce tax relief on pension contributions were “on the table” at a meeting between the Chancellor and coalition colleagues.
As the December 5 Statement approaches, the Chancellor is coming under pressure to balance his planned £10bn squeeze on welfare with measures to hit the rich, to show the Government is sticking to its promise to ensure “we are all in this together”.
Lib Dem calls for a mansion tax on properties worth more than £2m failed to win favour with Prime Minister David Cameron, who believes it would be wrong to raise additional levies on the homes voters have worked and saved to afford.
An alternative scheme to charge more council tax on expensive homes appeared to be ruled out yesterday when Downing Street said the Government had “no plans” to introduce higher bands for more valuable properties.
That scheme could have involved the creation of two or more extra council tax bands for high-value properties, while leaving the system for cheaper homes unchanged.
Another option still believed to be under consideration would be to increase stamp duty land tax on property sales worth £1m or more, although this is expected to raise comparatively little money.
Adding one per cent to sales between £1m and £2m would bring in about £70m, while hiking the seven per cent rate for those worth more than £2m would not yield much more, as there are relatively few deals of this size.
Former Cabinet Secretary Lord O’Donnell yesterday suggested that the Government should not allow its policy on tax, spending and cuts to be driven by the desire to maintain a good credit rating.
Lord O’Donnell, who quit as the Government’s most senior civil servant last year, told BBC2’s Daily Politics: “The policy I hope is not being designed around credit rating agencies.
“The credit rating agencies haven’t exactly got a great, fantastic record on this process, have they?
“I think it’s absolutely right that we try our best to maintain a good credit rating but it’s not, I would say, a goal of policy. The goal of policy should be trying to maximise well-being which should be about a recovery which is employment-rich and which gets us back on track and learns the lessons of the financial crisis.”