Labour fails to block 'granny tax'

Apr 19 2012

Labour has failed in an effort to block Chancellor George Osborne's so-called "granny tax" in the Commons.

MPs voted by 299 votes to 230, a majority of 69, in favour of the plan announced in last month's Budget.

The freeze in age-related allowances will cost some pensioners on relatively modest incomes up to £323 a year, Labour has warned.

Shadow Treasury chief secretary Rachel Reeves said the Chancellor was so desperate to fund a tax break for millionaires, by cutting the 50p top rate of income tax, that he was prepared to do so on the backs of pensioners.

She told MPs: "His single-minded focus, his overriding priority, was getting through his millionaires' tax break and he was willing to fund this by cutting the incomes of pensioners."

Ms Reeves said the Budget had become an "embarrassment" to MPs on the Government benches and it had shaken confidence in Mr Osborne.

She called on coalition MPs to back Labour's bid to scrap the plan, saying: "They have a choice to make about where they stand: whether they stand with the millions of people who have worked hard and saved what they can, or whether they stand for the Chancellor and his friend the Chief Secretary (Danny Alexander), who see pensioners as a soft touch, ripe for a sneaky tax grab."

But challenged from the Government benches on whether Labour would commit to unfreezing the age-related allowance, Ms Reeves said: "We do not know what the economy is going to look like in three weeks' time, let alone in three years' time. The reality is, the choices the Government are making are making our economic prospects worse and worse and worse."

During committee stage of the Finance Bill, which enshrines the Budget in law, Labour also failed in an effort to prevent the "cliff edge" effect, which means anyone turning 65 after April 2013 will not receive any extra allowance at all, as MPs rejected the party's amendment by 298 votes to 231, majority 67.

Exchequer Secretary to the Treasury David Gauke said: "The idea of having the same personal allowance whether you're 64, 65 or 75 seems to me something that is perfectly sensible. The changes made by this clause will help ensure that people get the allowances they are entitled to, pay the right amount of tax and make it more straightforward for Government to administer, thereby minimising costs to the taxpayer. As a result of these changes, nobody will lose out in cash terms."