Who would have thought that many hard-pressed pensioners would be picked on by Chancellor of the Exchequer Rachel Reeves as she stood up in the House of Commons on Monday to opine on the country’s fragile public finances.
Not me, for sure, and for that matter not other financial commentators — irrespective of political leaning.
Talk about using pensioners as cash cows. I was spitting blood as Reeves said she was axing winter fuel payments for those who are not in receipt of benefits. And not next year, but straightaway, just as energy bills are likely to start rising again. It’s a move that will result in 10 million pensioners losing a payment worth up to £300 a year and will save the public purse £1.5 billion.
Spiteful? Yes. Worse than scrapping the triple lock, screamed Baroness Ros Altmann, a leading pensions expert, a move equivalent to a three per cent pay cut for those on the full basic state pension of £169.50 a week. I’m screaming, too.
To put this public purse saving into some kind of perspective, it’s dwarfed by the £9.4 billion of pay awards that Reeves simultaneously granted to those who work for the bloated public sector — many of whom have caused chaos in the NHS by striking and most of whom can look forward to pensions that we, as taxpayers, underpin. Talk about kowtowing to the unions.
Hypocritical? Absolutely. Before the election, Labour officials vehemently denied they had any intention of means-testing the winter fuel payment. ‘No plans,’ they said.
Chancellor of the Exchequer Rachel Reeves speaks during a press conference on Monday
Indeed, last November, Darren Jones, now Chief Secretary to the Treasury, wrote to the Conservatives asking them to reassure pensioners that they wouldn’t means-test winter fuel payments. ‘Pensioners mustn’t be forced to bear the brunt of Tory economic failure,’ he penned.
How Mr Jones, MP for Bristol North West, can now look at himself in the mirror after writing such a porkie is beyond me. A U-turn to end all U-turns.
Not all pensioners are like the Lord Sugars of this world who don’t want the payment. Many are struggling to get by — either just failing to qualify for pension credit but still feeling the strain financially, or eligible for the benefit and either unable or too proud to claim it. They deserve better.
Together with the scrapping of the £86,000 social care cap that was due to kick in October next year, it seems that it is not just the ‘wealthy’ (I use that term loosely) that Reeves has in her sights for financial plundering.
Pensioners — some of whom are obviously wealthy — are also now seen by Reeves as fair game when it comes to sources of revenue. I dread to think what could be next around the corner.
Indeed, I am now loath to take any promise made to pensioners by Labour at face value, irrespective of whether it got an outing in its election manifesto.
I would hope that a Labour commitment to keeping the state pension triple-lock guarantee will be honoured for the next five years. This ensures that the state pension will rise by the highest out of average earnings, inflation or 2.5 per cent. Yet we shouldn’t take it as a given. The Tories broke the triple-lock guarantee during the pandemic, so a precedent has been set.
If I was a betting man, my guess is that Labour will honour it, but you never know. It could be weakened so that recent increases (10.1 per cent for tax year 2023/24) caused by a spike in inflation do not happen in the future.
What is more likely is that Labour will do absolutely nothing to stop more pensioners paying tax on their household income.
The Chancellor announced the payment – worth up to £300 a year – will be means-tested, meaning that pensioners with incomes as low as £1,000 a month will no longer qualify (file photo)
The freezing of the annual personal allowance — the amount you can earn before tax is applied — by the previous Conservative government has drawn thousands of pensioners into paying income tax for the first time.
According to Her Majesty’s Revenue & Customs, some 140,000 pensioners will get tax bills in the next six weeks because of income exceeding the £12,570 annual allowance.
Increases to the ‘new’ state pension (not the lower ‘basic’ pension for those who reached state pension age before April 2016) have pushed it up to £11,502 a year, prompting more pensioners to pay income tax.
It’s an issue the Conservatives promised to address by ensuring state pensions would never be taxed. But the idea was dismissed by Labour as ‘desperate’.
The personal allowance is set to remain frozen until 2028. This means thousands more pensioners will be drawn into paying tax.
Reeves is unlikely to bring the big freeze to an end. Indeed, some experts believe she could use the parlous state of the UK’s finances to extend it for another year, especially as she has vowed not to increase income tax rates. Reeves could also consider removing the National Insurance (NI) contribution exemption for those who have reached state pension age.
The think tank Intergenerational Foundation (IF) has long argued that the exemption is an anomaly that should be corrected — especially as more people are now working well into their 70s. It argues that NI is a ‘disguised form of income tax which falls disproportionately heavily, and regressively, upon younger generations’, and that the ‘exemption from paying NI contributions by those who continue to work after state pension age should be removed’. Reeves could be receptive to this, especially given her fury over Mr Hunt’s pre-election NI cuts.
Like the winter fuel payment, other pensioner give-aways could attract Reeves’ attention. For example, everyone over the age of 60 gets free prescriptions. Reeves could limit this freebie to those who have reached state pension age — or, like the winter fuel payment, restrict it to those in receipt of pension credit. And the same criteria could also apply to free eyesight tests for the over 60s.
Similarly, it could also apply to free bus travel, available for those who have reached state pension age (age 60 for those who live either in Wales or London where free travel is also available at selected times on the Tube and the railways).
And, of course, in terms of pensioners and their personal wealth, it is highly likely that Reeves will ensure she takes a bigger slice of anything they wish to pass on to loved ones when they die. Inheritance tax is only going one way — and that is up.
Of course, I am painting a picture of what could be around the corner for pensioners, not what will be. We will find out more on October 30, Budget Day. And it won’t stop there.
But in making her move on winter fuel payments, Reeves has laid down a marker. Be scared, be very scared.
A final word: if you are among the 800,000 pensioners who are eligible for pension credit, but have yet to apply for it, please do so today. Go to gov.uk/pension-credit/ how-to-claim.
Do you think Labour is treating pensioners fairly? Email: jeff.prestridge@dailymail.co.uk.
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