Labour's National Insurance raid on pensioners is just step one - step two is terrifying

The idea is gathering momentum and is shaping up to be one of the big Budget stories. It's controversial and would enrage older voters if Chancellor Rachel Reeves presses ahead. The Treasury won't comment on speculation, so we won't know for sure until November 26. If Reeves does go for it, the pensioner backlash will be massive and many will never forgive her.

Labour's favourite think tank, the Resolution Foundation, dreamed up the plan. Think tanks pump out ideas all the time, but this one is wired into Labour's machine.

Former Resolution Foundation boss Torsten Bell is actually writing the Budget, while two foundation alumni will oversee the process. That gives its proposal serious traction.

The plan would cut NI from 8% to 6%, then hike income tax by 2%. Why? Because pensioners don't pay NI, but if they earn enough, they do pay income tax.

Under this tweak, they'll pay an extra 2p in every pound above the £12,570 personal allowance. Buy-to-let landlords and some self-employed workers would also get hit.

Pensioners are already paying way more income tax than before, thanks to the freeze on thresholds by former Tory chancellor Jeremy Hunt.

That stealth raid has steadily pushed millions into higher tax bands, stripping them of valuable perks like the personal savings allowance too.

It's not only pensioners with private pensions, investments or rental income feeling the pain.

From April 2027, anyone getting the full new state pension will get hit as the triple lock pushes it above the personal allowance.

Add Reeves's 2p shift and almost nine million pensioners could pay even more, with the numbers climbing year after year. Especially if Reeves extends the income tax threshold freeze to 2030, as expected.

And that's just the start.

Once the principle of taxing pensioners more heavily is set, the only question is how far to push it. Why stop at 2p? Why not 4p, 6p or the full 8p?

In my view, the Resolution Foundation is playing a long game here. Experts have argued for decades that NI should be merged into income tax.

Originally designed to fund health and social security, in reality all the cash just goes into the main Treasury pot. Folding NI into income tax would tidy things up on paper, but for pensioners it would be a disaster.

Labour won't shed too many tears. Many on the left think older people are cushioned by house price gains and handsome final salary pensions. That makes them a tempting target.

So the 2p shift may only be step one. Once pensioners are inside the NI net, it may draw even more tightly around them. That's step two.

Future chancellors will have a ready-made way of cranking up tax revenues, by converting more and potentially all NI into income tax. The implications are terrifying for pensioners, who already feel taxed enough.

We won't know for sure until November. If Reeves takes the first step, other Chancellors are likely to complete the journey, step by step.