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 Article written by Nick Robinson Nick Robinson Political editor

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  • rate this

    Comment number 16.

    Why can't you media hounds stop referring to a 'granny tax'? Some of us are grandads and others single. The fact is we are mostly sitting ducks for this ghoulish Chancellor and his mates, the high street banks, who take our savings, lend them to each other for high interest rates then give us the best part of nothing back until they dwindle to nothing. We owe this country nothing. It owes us.

  • rate this

    Comment number 15.

    oldcynical, young people also enjoy a life which most people 60 years ago could never have imagined.

  • rate this

    Comment number 14.

    It's a recession, everybody steps up and pays to fix it or the country crashes.

    ..what's the problem?

  • rate this

    Comment number 13.

    I'd like to see a 'redistribution' from feather-bedded public sector final salary pensions to highly risky private sector defined contribution schemes, not least since those paying the latter also have to pay for the former. Given pay freezes etc, I reckon pensioners have done pretty well during the recession.

  • rate this

    Comment number 12.

    "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."

    lol and yet the BBC led with the headline "Osborne cuts the 50p tax rate". Clearly you didn't think it was newsworthy yourselves and only because it's now got a catchy name and a bucnh of people moaning it's worth reporting on.

  • rate this

    Comment number 11.

    Why do so many pensioners talk as if they are owed something by the country? Everyone who works and pays taxes is making a contribution and everyone who lives in the UK is getting something back (quality of life). Today's pensioners got to keep a much larger portion of their earnings as savings than most of today's youth will, so they should stop moaning and shoulder their fair share.

  • rate this

    Comment number 10.

    Your politics are shewing Mr Robinson. Sheltered - what about the change from the use of RPI to CPI to upgrade pensions -ensuring the erosion of pensions by about 10%+ a decade and poverty for pensioners and future pensioners and of course billions transfered to the employers that would have otherwise gone into pensions.

  • rate this

    Comment number 9.

    As someone who would have benefitted from the age allowance in a few years time, I really don't think in the overall scheme of things, it's that big a deal. I don't see why pensioners view themselves as exempt from change.

  • rate this

    Comment number 8.

    This "Granny Tax Row" is ridiculous. No-one is losing any money in cash terms, and the country simply cannot afford such bungs to the rapidly growing and relatively rich over-65s.

  • rate this

    Comment number 7.

    Frankly I'm far more concerned that we sort the current mess left by labour out as soon as possible than I am with some theoretical loss in a few years time.

    Lets not forget we were, indeed still are perilously close to following Ireland and Greece thanks to Brown emptying the coffers. I will settle for this if it helps avoid the alternative.

  • rate this

    Comment number 6.

    It really is laughable, nothing short of 'pick pocketing', my Auntie will get the £5 pension rise.... while at the same time her council tax will increase £5, fuel is to go up shortly this will effect everything to do with transport so where is the gain? Of course those with a stash of money won't feel a pinch, especially now they are better off.

    This budget stinks and so does this coalition!

  • rate this

    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.

  • rate this

    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

    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

    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

    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?


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