Forget all the howling coming from left field, the mainstream media and the Liberal Democrat bit of the Coalition. In last week’s budget, Chancellor George Osborne did not impose a stealth tax on pensioners. What he has done is abolish an age related tax allowance for new pensioners. So anyone turning 65 and claiming their pension with get the standard allowance before paying tax of £9,200. The raised alowance of £10,500 will continue to apply to those already on pensions. Nobody living on a pension will be getting less than they are now.
Here is what one level headed commentator (in The Independent of all places) said:
Existing pensioners will still avoid paying tax on the first £10,500 of their income, rising to £10,600 for the over-75s, but those benefits will now be frozen until the basic personal allowance catches up.
Pensioners groups, it is said, responded with fury. But pensioners groups always respond with fury. If a chancellor gave pensioners an extra hundred pounds a week they would still furiously claim they are hard done by.
What everyone has overlooked here is that the budget raised the basic old age pension that we pay for through national insurance and should all be claiming if we are on pension age (my wife is over 60 and because we kept our tax and earnings separate she already gets her pension while I have a year to go. So I have done the numbers).
Pensioners who will be hit by the new tax will be paying “up to £322 a year more” but will be getting £275 more in their state pension Now that actually means people who get a state pension and an occupational pension, not the poorest pensioners scraping by of their basic state pension. And note that “up to”. A few new pensioners with good occupational pensions giving them income of around £18,000 a year will pay £47 a year extra in tax over what those who retired before the deadline will pay. Big deal. For many whose taxable income is only slightly above the income threshold the difference will be trivial.
Pensioners who only have the basic state pension will not be affected as their total taxable income does not exceed the tax free personal allowance nor will people who get disability allowances as those payments are not taxable. Meanwhile the government faces a mega crisis of debt that has been building since the first Labour government after World War 2. There are signs that problem is going to get a lot worse very soon.
Any chancellor of any party faces an almost impossible task in trying to stop us being Greeceified by an unnafordable welfare systeminst the efforts of a profligate public sector and keep the professional whiners like pensioners, public sector workers and the unions quiet.
Good luck to George Osborne with his tightrope walking career. He may not be anywhere near the best Chancellor we have had but if Labour were in power, buying votes with borowed money while throwing tax revenues into the pockets of their very very rich supporters things would be a whole lot worse.