Budget 2012: Will the 'granny tax' backlash last?

 

Nick Robinson's Budget explainer

It was the only surprise left in the chancellor's Budget box. It was the only bit of "news" which the media could feast on.

What's more - thanks in large part to the power of Twitter - it quickly acquired a snappy name: the Granny Tax.

The result? A terrible set of headlines for George Osborne on a day he must have hoped his party and the Tory press would have given him a pat him on the back for delivering a tax cut for most people and scrapping the hated 50p rate - even when he had absolutely no money to spend.

Tony Blair once compared angry pensioners to "rottweilers on speed". He learnt the lesson that in a battle between the old and any politician there is only ever one winner.

He and Gordon Brown increased the state pension by 75p a week - in line with inflation and in line with the official advice, but out of line with what pensioners thought was just. Brown was so shaken by the outcry he invented the non means-tested winter fuel allowance to placate his elderly critics. So will George Osborne have to make a similar climbdown?

The chancellor has spent the morning pointing out that no pensioner will lose any cash and that this is a freezing of a tax allowance not a new tax or an increase in an old one. He has pointed to the recommendation to make this change from the Office of Tax Simplification.

This lunchtime the Institute for Fiscal Studies - so long the scourge of the Treasury - came to his rescue on the "granny tax"

"This looks like a relatively modest tax increase on a group hitherto well sheltered from tax and benefit changes. From this Budget we calculate that pensioners will lose on average about one quarter of one per cent of their income in 2014."

By "well sheltered from tax and benefit changes" they mean that the state pension is rising in line with whichever of inflation or earnings is higher and benefits like the free TV licence, free bus pass and the winter fuel allowance have been kept (even though the last increase in winter fuel allowance has not been sustained)

In contrast working families have potentially lost tax credit, child benefit, pay rises and much more besides.

In reply pensioners groups point out that their savings and their private pensions have dwindled in the era of low interest rates.

The Blair/Brown battle involved sending every pensioner a letter informing them that their weekly pension was rising by just 75p. George Osborne is doing nothing so provocative.

However, his critics will soon find a top rate taxpayer gaining thousands of pounds and contrast them with a struggling pensioner who's lost - or, rather, will not gain tax relief - of a few hundred pounds.

In the battle between the chancellor and "the rottweilers on speed" only a brave man would bet on the chancellor.

 
Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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  • rate this
    +19

    Comment number 1.

    Pensioners savings and their private pensions (public or private sector) have decreased because of low interest rates. In fact this group of poeople were the "boomers" who laid the foundation for the wealth of this country - this is the group that were in employment and contributed to the economy - so why the slap?

  • rate this
    +8

    Comment number 2.

    To me it's hard to see the problem with having the same Personal Allowance at all ages. It doesn't seem a big thing for the pensioners to give compared to all the challenges young people are currently facing.

  • rate this
    -27

    Comment number 3.

    Will this effect the millions of pensioners on benefits who struggle with their very existence or does the £38 that they lose effect the people on gold plated pensions cruise ships seem to be full of pensioners and a substantial majority enjoy a life which most pensioners 60 years ago could never imagined

  • rate this
    +1

    Comment number 4.

    This change means 1000s of pensioners will no longer have to complete tax returns, a huge bonus, so why no publicity about this.
    It takes me around 6 hours to sort out Mum's & as she says, if she did not have me she would have to pay someone to do this, which must mean plenty of pensioners do. That's a far greater benefit than a reported loss of a few £ a year, if indeed there is any loss at all.

  • rate this
    +2

    Comment number 5.

    It is disingenuous to suggest pensioners are having money taken from them. The age allowance only ceases for those retiring from next year, by which time there will have been two cost of living rises, and possibly a second rise in allowances. The whole system needed simplifying , nobody will be worse off, but it gives the Labour party something they can lie about to give the impression they care.

 

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