Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent

Shadow Chief Secretary to the Treasury Rachel Reeves explains just how regressive George Osborne’s ‘granny tax’ is.

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Rachel Reeves MP (Labour, Leeds West) is the Shadow Chief Secretary to the Treasury

Today in Parliament, Labour’s Treasury team led a debate on the government’s so-called “granny tax”. This year’s finance bill includes a clause that freezes age-related personal allowances for those currently entitled to them while abolishing them completely for those approaching retirement.

As announced in George Osborne’s March budget (pdf), this measure is designed to raise an extra £83 a year from 4.4 million older people on modest incomes, and an average £285 from 360,000 people reaching 65 next year.

George-Osborne-budget-2012-granny-tax-front-pages
We have been firm in our opposition to this measure because adding to the financial pressure felt by older people on modest incomes is unfair and unnecessary when the government is using the proceeds to fund an irresponsible tax giveaway for millionaires.

Moreover, the way the measure has been introduced adds insult to injury, breaking a promise made just a year ago by the chancellor, and using the language of tax “simplification” to cover up what is actually a simple tax grab.

There has been some mythmaking in the media about how older people in this country have been having it easy, and how only well off pensioners will be hit by this measure. This is far from true.

 


See also:

Osborne’s ‘granny tax’ will sting those on a personal pension of just £67 a week 19 Apr 2012


 

We need to remember the situation most pensioners face, which is that they don’t have ways of making up for a loss of income by going out and finding work. As a result they are particularly vulnerable to rises in the cost of living and unanticipated changes to their financial circumstances. Indeed, this is why old age relief was introduced by Winston Churchill in 1925.

Moreover, pensioners have already been hard hit by this government.

The Winter Fuel Allowance has been cut; pensions have been indexed to a lower measure of inflation; the increase in the state pension age for women has been brought forward; and last year’s VAT rise added £275 to the costs faced by an average pensioner couple.

Analysis by the Institute for Fiscal Studies confirms that as a result of tax and benefit changes implemented by this government, pensioner households have seen their incomes fall by 1.4 per cent. Most have little prospect or opportunity to make up that loss.

Cuts to vital services like the NHS, social care and local transport also hit older people harder. Distributional analysis of the 2010 Spending Review showed that, on average, pensioner couples were set to be hit by cuts to services they use amounting to £1,275 a year, or 6 per cent of their household income, while single pensioners stood to lose services worth £1,305 a year, or 11 per cent of their income.

And as we heard from the Treasury select committee this week, many pensioners are also paying a price for the government’s failure to get the economy moving, because it means government is relying on the Bank of England to undertake more Quantitative Easing to prevent the economy sinking deeper into recession, which means annuity rates and returns on pensioners’ savings are lower.

And it adds insult to injury for the prime minister and other members of this government to tell pensioners they should be grateful for a rise in the basic state pension that merely matches the rate of inflation. That’s not a rise, it just keeps things level at a time when the cost of food is going up, the cost of fuel is going up, and it is getting harder and harder to make ends meet.

It’s also misleading to suggest only well off pensioners will be affected by this measure.

As Left Food Forward reported this morning, analysis we have commissioned from the House of Commons Library shows the vast majority of people losing out from this measure will on below average incomes, and that a small personal or occupational pension of just £67 a week, or little more than £3,000 a year, would be enough to put them in the firing line.

Meanwhile, the richest ten per cent of pensioners will not be affected.

These are not a privileged few living a life of luxury in retirement, but millions of people who have worked in ordinary jobs and who have managed to set aside just enough to give them a small pension that relieves them of reliance on means-tested benefits, and allows them to have some security in retirement.

Pensioners with modest savings are also losing in other ways. Savings credit is being reduced and restricted, and has now been targeted for abolition under the chancellor’s latest plans, costing more than 100,000 new pensioners as much as £897 a year.

So the idea pensioners have been protected from the squeeze on living standards is simply untrue. It’s divisive and distorts reality, concealing the fact many older people are under real pressure, and are especially vulnerable to the impact of cuts and the current economic conditions. We should be doing what we can to help them, not seeing them as a soft target for stealth taxes.

In fact, the only people insulated from the impact of this government’s unfair choices and economic failures are the wealthiest. For the prime beneficiaries of this, the biggest revenue raiser in the budget, won’t be poorer pensioners, or families with children, or young people looking for work. Nor is the money being used to reduce government borrowing.

Instead the money is being spent on a £3 billion tax give-away for the richest one per cent of our society – another measure Labour sought to stop in Parliament this week. The fact the government were said to be surprised by the anger this has aroused shows just how out of touch they are with the tough reality faced by most people today, and how far they have strayed from the values and priorities of the British people.

Times are tough for most people right now, and dealing with the deficit means tough choices on tax, spending and pay. But that makes it even more important to be fair. That’s why Labour MPs voted against this measure today. Unfortunately, however, Conservative and Liberal Democrat MPs chose to vote it through.

But it’s not too late to stop this unfair tax rise which takes effect next April; this is not the end of our campaign, but the beginning.

 


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39 Responses to “Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent”

  1. Selohesra

    So you’d rather keep the 52% tax even if it means collecting less tax revenue overall – I guess that goes some way to explaining why 13 years of your sort of thinking nearly drove the country into bankruptcy

  2. Anonymous

    Since when was not taking money giving it away?

    Next you will be saying, Look at all those Labour MPs who repaid that money they stole in the first place, we should be congratulating them on giving the government money.

  3. Anonymous

    This is nonsense. If pensioners require additional income support because of frailty etc. it should be provided through the benefits system, not through a one-size-fits-all tax relief. I would certainly criticise other measures in this budget – including the cut in the 50p tax rate – but the age-related allowance is an anomaly which is long overdue for removal. Everyone should get the same personal allowance, regardless of their age, and any additional needs due to personal circumstances should be met through benefits. Instead of opposing this measure, Labour should campaign for revamping of the benefits system to meet the needs of pensioners better.

  4. Anonymous

    Yes, never mind the freezing and starving, look, I can talk about something else!

  5. Anonymous

    Yes, it’s terrible, the Tories left a bigger debt than Brown had before the crisis.

    You can’t even get the tax rate right, no surprise THERE. And, like Blagger, you’re quite happy to divert attention from your sins.

  6. Anonymous

    “Revamping”.

    Ah, more cuts on the way which need cover then?

  7. Anonymous

    And their answer to criticism is… ‘but we gave them £5 a week of a rise’, conveniently forgetting that the fact that inflation for pensioners was around 10-12% (given the proportion of their income that they spend on heat and on food, and both these having risen by far more than the 5% rise that they were given) and that the £5 doesn’t begin to cover it.

    If I hear it being boasted about one more time, I’ll throw something through the tv screen.

    Of course none of these people will ever be cold or hungry, so why on earth would they give a damn about pesky old people from the lower orders?

  8. Mr. Sensible

    This budget has been a complete and utter shambles.

  9. Martin Hinds

    #bbcqt: Read shadow Chief Sec @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/gc7FHXgV

  10. Daniel Oliver

    #bbcqt: Read shadow Chief Sec @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/gc7FHXgV

  11. Lynne

    Exactly right. Labour’s policies on pensioners have been irrational ever since trying to make up for 75p fiasco.

  12. Foxy52

    #bbcqt: Read shadow Chief Sec @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/gc7FHXgV

  13. Political Planet

    Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent: Shadow Chief Secretary to the Treasury Rache… //t.co/hQ7ppkWV

  14. Anonymous

    Fiasco? Ah yes, following standard procedure. The same thing the Tories have been praised for.

  15. Anonymous

    Fiasco? Ah yes, following standard procedure. The same thing the Tories have been praised for.

  16. Toby Britton

    #bbcqt: Read shadow Chief Sec @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/gc7FHXgV

  17. BevR

    RT @leftfootfwd: Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent //t.co/pFJI2Cg9

  18. paul and lynn hewitt

    RT @leftfootfwd: Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent //t.co/pFJI2Cg9

  19. paul miller

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  20. James Gill

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  21. rental mobil

    Nice article, thanks for the information.

  22. Neil Courtman

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  23. Sarfraiz Hussain

    #bbcqt: Read shadow Chief Sec @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/gc7FHXgV

  24. Patrick McGuire

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  25. BevR

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  26. Bryony Victoria King

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  27. Selohesra

    There you go again – random capitalisation and reference to sins you know nothing of.

    C- do try harder next time.

  28. Martin McIvor

    Frm last nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  29. Jeremy Adams

    Frm earlier 2nite: @RachelReevesMP on how Osborne’s ‘granny tax’ robs pensioners to pay the one per cent: //t.co/WC9YzQJF

  30. Taxclaim Accountants

    Increased resistance against the new national budget as people become more outraged with the new "Granny Tax"… //t.co/tDHFTrt0

  31. Anonymous

    Keep on maundering.

  32. Anonymous

    Absolutely. Praise for…doing the normal thing. Of course, criticisms Labour for doing it was hypocritical, but it shows the division where the Tories are expected to be nasty (even among their own supporters)…

  33. Selohesra

    Scary – psycho Botty knows who I am. Veiled threats?

  34. Anonymous

    Any threats come from your imagination. As usual.

  35. Anonymous

    I wouldn’t know, but seems very likely

  36. Anonymous

    And that’s the key. If you’re not careful enough, and you give the Tories cover for their cuts, then frankly at this stage I’m going to say you’re complicit with them.

    Things are going down the drain in this country with remarkable speed, and responsible caution by anyone known at all (I’m a nobody as far as the press is concerned, and happy to be so) in statements and articles is necessary.

    Because we’re at the point where people are dying, sadly.

  37. Evan Price

    But you ignore the effect of the economic cycle. The UK entered the last recession with debt as a proportion of GDP at the same rate as it left the recession before that … Gordon appears to have really believed that he had abolished the economic cycle and its effects!

    In addition, one of the reasons that we did not have a technical recession in the period immediately following 2001 was that we had a massive and unprecedented increase in Government expenditure – that ignored the fact that we were not raising enough revenue to meet that expenditure.

    No Government is ‘right’ all of the time … and this Government will make mistakes and those mistakes will undoubtedly have a larger impact that the mistakes that are made in a boom (even if that boom is artificially enhanced by the effect of Government policy).

  38. Anonymous

    Capitalism generates cycles of boom and bust, it’s an entire;y artificial construct which you insist on propping up with corporate welfare.

  39. Poll: 68 is too late for state pension, is “unfair” and will hit the poorest hardest | Left Foot Forward

    […] See also: • Osborne’s ‘granny tax’: Robbing pensioners to pay the one per cent 19 Apr […]

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