Chancellor faces ‘Granny Tax’ backlash

George Osborne has claimed pensioners will be better off as he faced a mounting backlash over his £1bn “granny tax” raid.

The Chancellor’s move to scrap age-related allowances introduced by Winston Churchill in 1925 has been condemned as “outrageous” by older people’s groups.

Speaking on ITV’s Daybreak this morning, Mr Osborne said: “No pensioner loses cash.

“No one watching this programme is a pensioner who is going to lose any cash.

“They’re not going to lose cash, we’re going to increase the benefit. At the same time they’ll be better off, as the basic state pension is going up in a couple of weeks’ time by more than £5 a week. No one loses any cash from this Budget.”

Mr Osborne used his Budget to cut the 50p top rate for Britain’s wealthiest earners and lift thousands of low-paid workers out of taxation altogether.

But the Treasury acknowledged 4.5 million pensioners would lose out as a result of the decision to phase out age-related allowances.

Under the Chancellor’s plans, the allowances will be withdrawn for new pensioners from April next year, while existing pensioners will have their allowances frozen at £10,500 for the over 65s and £10,660 for the over 75s until overall tax thresholds catch up with them.

Although Mr Osborne insisted there would be no cash loss to pensioners, Treasury sources said existing pensioners would be, on average, £63 a year worse off while new pensioners would lose out to the tune of £197 a year.

Asked about today’s newspaper front pages, Mr Osborne said: “The headline is not about the tax cuts for the rich, or it shouldn’t be.

“Everyone watching this programme who is in work is better off as a result of the Budget.

“There are 23 million people – that’s pretty much all the people on lower middle incomes – who are better off as a result.”

South Shields MP David Miliband said: “This Budget is a massive missed opportunity to help young people, and a kick in the teeth to older people with the changes to pensioners’ tax allowances.”

Jarrow MP Stephen Hepburn said: “Quite simply, a Tory front bench made up of millionaires are looking after their own, with the Lib Dems offering unconditional support as ever.”