We're all going to feel the pinch, and that includes our older people, says Margot James MP. (PoliticsHome)
Sometimes politics can be a depressingly predictable and low affair. Such has been the case of Labour's opposition to the freezing of older people's tax allowances.
Dubbed a 'granny tax' when it is nothing of the sort, the campaign has set about exploiting legitimate public concern about how we treat older people in order to attack the government. I accept that the Opposition must oppose but the nature of this particular campaign does a grave disservice to those with whom they are attempting to curry favour.
I say this because in highlighting a relatively small slight (the cost of less than £1.00 per week to some older people through the freezing of their preferential tax allowances), they are shining a light on just how protected the population of over sixty five year olds have been so far from the government's deficit reduction measures.
The government have introduced the triple guarantee meaning that the state pension rises by 2.5 per cent, inflation or the growth in earnings whichever is the greater. And this year the chancellor announced a record rise in the pension of £5.30 per week from £102.15 to £107.45. The government have protected universal benefits; namely free prescriptions, bus travel, TV licenses for older pensioners. And those pensioners who are homeowners will benefit from the government grant to local authorities that has enabled a freeze on council tax for the second year running.
Poorer pensioners have seen their pension credit guarantee up-rated to match the cash increase in the basic state pension. And the warm homes discount means more than 600,000 of the most vulnerable pensioners will also benefit from an additional £120.00 discount to their fuel bills. It is also worth noting that five million pensioners do not pay tax at all, hence this much maligned freeze on allowances will not affect them.
Finally older people benefit disproportionately (and I am glad they do) from the increase to the NHS budget. One of only two departments to be receiving real terms increases a very significant part of the NHS is devoted to the care and treatment of older people. The government has also mandated more money to be directed from the NHS budget in to social care.
Really, until the freezing of tax allowances announced last week, the only change that I have been disappointed by, on behalf of the older people I represent, has been the government's decision not to continue the temporary increase to the winter fuel payment, which amounted to a one-off payment of £50 for the over 60s and £100 for the over 80s. Every other benefit and service targeted at the over sixty fives has been maintained or increased.
One lesser known benefit in the tax system is that people of pensionable age do not pay National Insurance (NI) on earned income. The result of the NI exemption, combined with the preferential tax allowance, means that someone of pensionable age who still works and has earnings of £18,000 pa pays half as much tax as someone who earns the same but is not of pensionable age. The difference applied to an income of £12,000 pa is even greater. The person of non pensionable age will pay three times as much tax as the older person earning the same income.
This state of affairs is in clear contrast to virtually every other group in society. The fiscal changes have been applied as fairly as possible; but it is fantasy to suggest that we could repair the damage to our public finances without people being charged and taxed a bit more and putting up with reduced spending all round.
I support the protection of older people, particularly those whose incomes really are very low. I also recognise that many older people are facing a very different retirement to that which they had planned for due to the extremely low interest rates. However, if we had not been able to keep interest rates low then we would all have suffered as the recession deepened with job losses, mortgage arrears and all the other consequences of high interest rates in a struggling world economy; to say nothing of the sheer waste of yet more public money being used to pay the interest on our massive debt.
I believe it is morally right that those older people whose incomes are above the threshold of the poor should be asked to contribute to putting our economy on the road to recovery.
Campaigners for older people who have lashed out at the very modest contribution demanded by the budget last week, would do well to take a look at the analysis by David Willetts in the book he published two years ago called 'The Pinch'. David analyses the growing inequality between the old and the young in society. The reasonable expectation used to be that each generation was able to look forward to a standard of living superior to that in to which they had been born. No longer is that the case and younger people face a more uncertain future. This is borne out by the average age of a first time home buyer now being thirty eight years old.
Most older people I know and see in my constituency recognise that we have to restore sanity to the public finances. Many are actually more concerned about the prospects facing their grandchildren than they are about their own financial situation.
It is ironic that older people's 'new best friends' in the Labour Party treated them so shabbily when they were in office. Yes, when Labour were in a position to make decisions, they decided not only to increase the state pension by just 75 pence per week, but to allow an increase in spending on older people's care services by only 0.1 per cent from 2004 onwards. A time during which public expenditure rose exponentially as Labour threw more and more money at just about every group.