Taxing pensioners

The government’s plan to reduce the tax allowances of pensioners was clumsily presented. The issue is not, as the IPPR suggested, that pensioners must be expected to bear a greater burden in deficit reduction – that argument seems feeble when the purpose of economies is to support handouts in corporation tax and to reduce the demands made of very high earners. It is, rather, that the distributive implications for pensioners need to be seen in the round. “The net changes made by this government … mean that pensioners are better off.” That is the answer George Osborne has given to criticism, and it is a strong argument.

Pensioners are gaining in some ways, primarily through proposals to increase the level of state pension and in the ratcheting effect of the “triple lock” which means that pensions will rise faster than inflation. They are likely to lose in other ways – through this tax increase, the loss of the state second pension, increases in the pension age, and reductions in housing benefit. (The poorest pensioners, recipients of Pension Credit, will not gain in the short term – but they will nto lose out because of the tax increase, either.) The Chancellor may well be right, but it would be helpful to see the figures laid out more clearly.

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