Baroness Altmann warned that the Chancellor was in danger of repeating the mistake of a tax hike
Whitehall sources said the Chancellor was considering measures to “restack the deck for the next generation” in his keynote financial statement next month.
Policy ideas being studied included tax breaks for workers in their 20s and 30s funded by slashing pension tax relief for earners nearer to retirement.
But Tory peer Baroness Altmann, a former Government pensions adviser, feared the proposal was “fraught with danger”.
She said: “The suggestion that older people should be punished to provide more money for the young could harbour potentially lethal political damage.
“The Tories’ core voters are older people, it would be rash in the extreme to risk alienating them in the coming Budget.”
Baroness Altmann warned that the Chancellor was in danger of repeating the mistake of the Tory manifesto for the snap general election earlier this year which promised a tax hike on family assets to fund extra spending on social care.
The peer said: “The lesson from the Election Manifesto is that punishing the old is not a sensible way to attract younger voters, but is a recipe for losing support of older generations.”
Baroness Altmann pointed out that some younger workers earned “huge sums” while many older people had spent their lives on “extremely low incomes”.
She said: “Favouring one age group will potentially alienate others.”
She urged the Chancellor to help young people by directly tackling student debt and housing costs rather than trying to rebalance the tax system across the age divide.
She said: “I urge the Chancellor to avoid knee-jerk panic tax changes that could alienate older voters – let’s focus on policies that are fairer across all age ranges.”
Mr Hammond is understood to be considering radical measures for his Budget on November 22 following the slump in Tory support among voters aged under 45 at the general election in June.
He is fighting to hold onto his job following criticism of his lack of enthusiasm for Brexit from many Tory MPs and a series of clashes with the Prime Minister.
Some MPs fear he could be the first Chancellor to be sacked from the job since Norman Lamont was ousted in 1993.
One idea being considered in Downing Street was a cut in National Insurance contributions for earners in their 20s and 30s funded by cutting pensions tax relief.
It has been backed by George Freeman, the head of Theresa May’s policy unit.
Mr Freeman said: “We need to look at a new model of saving for a generation who will not benefit from the post-war model of National Insurance.”
Another option could be a major cut in Stamp Duty for homebuyers aged under 40.
Philip was warned that plans for a Budget raid on pensions tax relief could trigger a backlash
Favouring one age group will potentially alienate others
Tory former minister David Willetts said: “If you are 30 now you are probably earning less than someone who was aged 30 10 years ago.
“Anything that rebalances and helps young people, I’d be in favour of.”
He told BBC Radio 4’s Today programme tight public finances meant taxes would have to rise on older people if the young received help:
“Any help you give to one part of the population does have to be offset by increases on others,” he said.
The Institute of Economic Affairs, a free-market think tank, said rich young traders in the City of London did not need a tax cut.
Ros pointed out that some younger workers earned ‘huge sums’
Julian Jessop, the chief economist at the IEA, said: “It would be technically possible to apply a lower tax rate on the incomes of younger people.
“The tax office knows your age, and there are precedents for applying different tax rates for different ages; for example, you don’t pay National Insurance after you reach State Pension age unless you’re self-employed and paying Class 4 contributions.
“And there are many other ways in which the tax system discriminates, for example between married and single people.
“But it’s not obvious that merely being young is a good basis for paying less tax.
“Why should a City trader in their 20s pay less tax on the same income than an NHS consultant in their 50s?
David Willetts said he’d be ‘in favour of’ anything that helps the younger generation
“And if a young person has a relatively low income they will pay less tax anyway.
“To the extent that some young people face particular problems – such as high housing costs or student debt – these problems should be tackled directly rather than via the tax system.”
Senior Tories were alarmed at the way support for their party collapsed at the general election.
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Key issues including the Tory plan for funding social care and Labour’s offer at scrapping tuition fees were thought to have caused a sharp divergence in voting patterns between older and younger voters.
Sixty per cent of voters aged between 18 and 24 backed Labour while 61 per cent of those aged over 64 voted Conservative.