Finance (No. 4) Bill

Ian Swales Excerpts

Thursday 19th April 2012 Commons Chamber

[Rachel Reeves]

I know that my hon. Friend sticks up for pensioners in his constituency, unlike Government Members, who want to grab the incomes of pensioners in their constituencies.

My hon. Friend points out the evidence that we have commissioned from the House of Commons Library, which shows that a small personal or occupational pension of just £67 a week, or little more than £3,000 a year, would be enough to put someone in the firing line of the additional tax. People with such pensions are not the privileged few, living a life of luxury in retirement. The measure will hit millions of people who have worked hard in ordinary jobs and managed to set aside just enough to give them a small pension that relieves them of reliance on means-tested benefits and allows them to have some security in retirement.

[Ian Swales (Redcar) (LD)]

Can the hon. Lady tell the Committee how much tax somebody getting an occupational pension of £67 a week would pay under the new arrangements?

[Rachel Reeves]

If they were being taxed at 20%, that would mean tax of about £13 a week on their pension. Such pensioners will be hit hard by the changes.

We know how hard it already is for many people to save enough for a modest pension, so why have the Government picked on pensioners to pay more? As the chief executive of Saga has put it:

“Amid all the talk of tax cuts…the main tax-raising measure”

in the Budget

“consisted of a stealth tax increase on older people who did actually work and save hard for their future.”

Gransnet has warned that

“this tax change offers no incentive to save”,

and the National Association of Pension Funds has stated that it will

“come as a blow to millions of pensioners who have paid in to the tax system throughout their working lives. Pensioners with modest amounts of pension saving stand to be the biggest losers.”

Let us be clear that the change will hit people with small pensions who have made sacrifices to save and are now being penalised for doing the right thing.

--- Later in debate ---

[Graeme Morrice]

I am grateful to the hon. Gentleman for his contribution, but I thought we were talking about the proposals in this Bill.

Although we are clear that the granny tax is not right and not fair, the coalition parties have been desperate to try to play down the significant impact of the measure. As we are aware, this is a £3 billion tax raid on our nation’s pensioners. Indeed, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) actually went as far as to insist that there is no granny tax at all. That will no doubt come as a great surprise to the 4.4 million pensioners who will be worse off as a result of the proposal, but it is typical of the increasingly desperate attempts by Liberal Democrats to distance themselves in the media from unpopular Government policies, before voting with the Tories to get those same measures through Parliament.

[Ian Swales]

Will the hon. Gentleman give way?

[Graeme Morrice]

I notice that there are two Lib Dems in the Chamber today, so I will give way to one of them.

[Ian Swales]

The hon. Gentleman has obviously discussed the fairness of this measure with his pensioner constituents. Has he discussed with his other constituents the fact that when his Government left office, people on the minimum wage and hard-working parents were paying £603 a year more tax than their grandparents on the same income? Does he think that that is fair and has he discussed it with his other constituents?

[Graeme Morrice]

I refer the hon. Gentleman to my comment a few moments ago: we are talking about the proposals contained within this Bill.

Whereas some brave souls in the coalition parties were prepared yesterday to rebel over pasties and static caravans, we wait to see if any of them will speak up for millions of pensioners and join us in opposing this squeeze on pensioners’ incomes. I suspect not, and the message today on the granny tax will be clear: only the Opposition will stand up for pensioners and working people in these tough times.

--- Later in debate ---

[Katy Clark]

The hon. Lady is attempting to rewrite history. She will know that the previous Labour Government brought in a whole range of reforms to take account of the increase in the living age. My hon. Friend the Member for Wirral South (Alison McGovern) highlighted the fact that that increase is far from uniform, owing to health inequalities. Life expectancy has not increased so much among people on lower incomes and from lower socio-economic groups, for example.

[Ian Swales]

The hon. Lady mentions the need to give notice of the changes. Does she know how much notice was given of the freezing of the age-related allowance in 2010-11?

[Katy Clark]

Government Members keep trying to return to that point. As I have said, the freeze applied to all allowances, and it is not comparable to what we are debating. This is a specific debate about long-term Government policy towards pensioners and the long-term cumulative effect that this change will have.

As I say, this is the wrong time to come forward with changes of this nature. We heard a well-informed contribution from the hon. Member for Banff and Buchan (Dr Whiteford) on the situation faced by pensioners who rely on private savings. I suspect that many of us as constituency MPs have had a considerable number of representations from individuals who have planned their pension and retirement savings over many years on the assumption that higher rates of interest would apply, enabling them to live off the savings they had made over a long period. I very much hope that in 2013, when these changes come into force, the economic situation will be different, but I suspect that those pensioners will be in a similar position. That is another powerful reason why now is an incredibly bad time to make changes of this kind. In my view, they should have been introduced with far greater notice.

The Government should know that pensioners are being disproportionately affected by the policies they are pursuing. We hear a great deal from Government Members about their ambitious deficit reduction plan—so far, of course, we have only seen the deficit increase. What we are seeing locally, and I suspect they will be seeing it, too—[Interruption.] Government Members are well aware that they are borrowing more and that the deficit is going up. In their constituencies as well as mine, however, local people will be experiencing the start of draconian cuts in public services, which will have and are already having a disproportionate effect on those in retirement. Even before the current economic difficulties, we were all aware of the struggle councils were having in trying to provide the social services required for our changing demographic and our ageing population.