Thursday, March 22, 2012

My Bob and the "Granny Tax"

My dear husband is not a Granny. And he'd better not be a Grandad for a very long time to come, given that our daughter is not yet a teenager. He is of an age to be affected by the so called "Granny Tax" eventually.

Now, you might, if you wish, feel a bit of sympathy for poor Bob. It must feel sometimes like George Osborne has pulled his name out of a hat and decided just to chip away at his income.

First he decided that in the year Bob reaches 65, the State Pension age will go up to 66 .

Then Gideon took his Child Benefit away, or will, briefly, due to a brief pre retirement spell at higher rate tax, the first such time in his life.

And now, he's going to have to get by on the same personal tax allowance as everyone else. He won't get an extra tax allowance for being over 65. When the starting point for paying tax was as low as five or six thousand, that was fair enough - but is a differential necessary when the tax threshold is significantly higher?

The figure I heard bandied about on the so called "Granny Tax" (what a cynical name, and patronising in the extreme) was that people stood to lose £83 a year. That's around £1.60 a week. This year alone, Lib Dem Pensions Minister Steve Webb, by virtue of his Triple Lock, has raised the State Pension by the biggest cash amount ever, £5.30 a week. In addition, pensioners will be getting £140 a week in a couple of years' time, up from the current round about £100 per week in State Pension.It's worth saying, too, that people who only have the State Pension to live on don't pay tax anyway. Pensioners also get free bus travel and a Winter Fuel Allowance from age 60 that many of them, including us, don't actually need.

Bob certainly grumbled about having to wait an extra year for his Pension, but he sees it as a necessary evil. He's also not wildly chuffed about losing Child Benefit especially when people who earn significantly more than he does will still get it. And the business of the tax allowance has barely bothered him at all. You see, he's heard me go on incessantly for the last year about how the sick and disabled are losing their benefits. When there simply isn't any spare cash for the Government to play with, the hit he's being told he has to take does not seem unreasonable to him. He might grumble a little, but he knows it's better than the alternative. And, unlike most pensioners, he's seeing it in the context of having to put a child through university when he retires. Mind you, I think he's banking on his much younger wife writing a best seller by then...

This whole "Granny Tax" furore, is inflated hyperbole and that relatively innocuous measure needs to be seen in context with the other benefits that pensioners have gained from the Liberal Democrat influence in this Government.

5 comments:

tris said...

First of all, I'd say a big thanks to the Liberals for forcing this heartless millionaire chancellor, who hasn't a clue what it is like not to have a few million to spend, to increase the allowances. It was a good deal more than was expected, or had been trailed (obviously on purpose), and it was and is very welcome.

I have to say though, that it is disingenuous to claim that this will make a big difference to people, and then to say that a reduction of somewhere around double the figure won't be bring too much hardship to many older people. Not everyone is as comfortable as mr Osborne.

It's true that those on the very most modest incomes (ie pension alone which is around £105 + credit taking it to just under £140) don't pay tax at all. It is also worth noting that at around £7,000 pa, they are living at less that half of what is considered to be the poverty level. Surely a scandal.

But those living with small personal/company pensions do not qualify for the pension credit (introduced because it was accepted that the pension was simply not enough to keep body and soul together). On £12,000 people will pay tax (not to mention full council tax often around £1,000) and yet are still living at around £80 a week under the poverty level.

It's not a proud boast, and electorally it is suicide. Old people vote, and from what I see on Facebook, they won't be voting for this.

We've talked before about winter fuel allowances. I'd say two things. Danny Alexander is now in a position to do something about reducing them for the rich. You maintain that it is cheaper than universal payments. If this is so, why does he not do something. It is a large amount, even in its reduced form.

Secondly, I'll repeat my call to all these people whom I hear saying "we don't need it; they shouldn't pay it to us".

Don't accept it. Give it to charity. There are many old people for whom it isn't nearly enough. So write a cheque and give it to help the Aged, or some poor old biddy down the road who is freezing in front of her one bar.

Unknown said...

Disingenuous, I'd say. I'll be 65 in a couple of years, so just get caught by Osborne's manoeuvre. Using this year's figures, that means I'll lose the additional £2465 I would have got. That's equivalent to £493 a year - nearly £9.50 a week. I think you'll agree that £5.30 a week extra doesn't quite cover that. I'm not saying that I think I should get the extra - I'm not even sure what the justification for it is. But - I'd be more impressed if there was any evidence that my loss will be helping those on benefits ... and I haven't seen any.

tris said...

In any case, Unknown, the £5,30 isn't some beneficence of the Tories. It is their own rule that pensions increase by the lower rate of inflation, or the average wage increase, whichever is the higher.

The higher was the inflation figure this year, as most wages have been frozen.

Inflation was at least 5%. There are those who have said that inflation as it affected the poor was far higher (given the massive gas and electricity hikes between 3 and 4 times inflation) and food inflation of 10% and given that poorer people spend a disproportionate amount of their income on these items.

By using that excuse, and I hear him use that this morning to justify it, what he is saying is ...your pensions have increased to more or less keep up with inflation, therefore we're going to take £9 a week off you. We're all in it together.

The reaction is that they will have lost a lot of pensioner votes.

I'd say Labour in England, and the SNP in Scotland can look forward to some gains in the forthcoming council elections.

Caron said...

If what you're saying is that we shouldn't stop at £10,000 for the tax threshold, then I agree with you and I hope that we'll get beyond it. I'd like to think in this Parliament, but certainly in our next manifesto.

Those poorest people you mention won't be paying tax at all - it's not a boast, but it is a fact. And, yes, if that's all they have, it isn't enough to have any sort of life.

I've been banging on about Winter Fuel Allowance for long enough - we could increase the age eligibility or do it by restricting it to basic rate tax payers or something. And, yes, I'd like Danny to fight that one within the Government.

The thing is, if it's there, people will claim it whether they need it or not so the only way to sort that out is to restrict it to those who do need it and extend it to those who currently can't get it.

And where are you getting the idea that the Triple Lock on pensions is a Tory idea - it's all our Steve Webb's and he had to really fight for it, too.

Unknown, I'm not sure your figures are right. Allowances will be frozen at the current level, and not till next year, so you will still get the £10,400 rather than the £9205 that everyone else has.

Anonymous said...

"if it's there, people will claim it"

If only that were true.

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