Pensioners are biggest losers of Budget with £1,000 hit hidden in small print
Pensioners will be clobbered by Tory tax changes with millions of retirees facing an average £1,000 hit to their incomes, analysis shows.
Economists warned that older people were the biggest losers from Jeremy Hunt's Budget, with critics hitting out at the "disgraceful £8 billion pensioner tax bombshell" concealed in the small print. The Chancellor is cutting National Insurance by 2p from next month in a £10million bid to woo voters and turn around the Tories dire poll ratings.
But analysis found the elderly will be left counting the cost of the plans. The Resolution Foundation said that all 8 million pensioners would see their taxes increase by an average of £1,000 by 2027/28 due to frozen income tax thresholds
Retirees won't benefit from the Chancellor's tax cuts as they are exempt from National Insurance and they are being hit by stealth tax raids on income tax. Income tax thresholds have been frozen since 2021, which means people are being dragged into higher tax brackets by inflation. Older people still pay tax on income above the personal allowance, which includes pensions.
The think tank said pensioners paying the basic rate of income tax will be around £700 worse off by 2027/28, compared to where they would be without the freeze. The average taxpaying pensioner will lose around £1,000. In total, the policy will have hiked taxes for pensioners by around £8billion.
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Chief executive Torsten Bell said: "The biggest group of losers are pensioners, who face an £8 billion collective hit. Looking at all policy changes announced this parliament reinforces the sense that the Government has reversed course from the approach that dominated during the 2010s. This time it is those aged over 65 and on the highest incomes who are set to lose most."
Institute for Fiscal Studies (IFS) director Paul Johnson said the elderly would be "substantial net losers" from the changes, as 60% of pensioners now pay income tax.
"Income tax changes will leave most of the £650 a year worse off by 2027 and £3,000 a year worse off if they're higher rate taxpayers," he said. "The Chancellor really has focused the money he's got on people of working age rather than on pensioners."
Liberal Democrat Treasury spokesperson Sarah Olney said: "Buried in the small print of this Budget is a disgraceful £8 billion pensioner tax bombshell. People who have worked hard and done the right thing all their lives are being hammered by Jeremy Hunt with years of unfair tax hikes, leaving them an average of £1,000 worse off each."
Dennis Reed, director of Silver Voices campaign group, said: "Older people, including those who have previously voted Tory, are hopping mad about this. Nothing was done in the Budget to help older folk who are struggling with food and fuel bills - and these tax freezes."
As the backlash to the Budget unfolded, the Resolution Foundation found Mr Hunt had unleashed a fresh wave of austerity after the Tories presided over an alarming drop in living standards.
Real disposable income is on course to fall by 0.9%, which makes this the first Parliament in modern history to oversee a fall in living standards. Whoever draws up the next Budget will be forced to wrestle with "implausible" spending cuts, with a £19billion black hole in public finances.
Mr Hunt said spending on public services will rise in real terms by 1% overall, which will likely mean brutal cuts spending on public services outside health, defence and education. IFS boss Mr Johnson accused both the Tories and Labour of engaging in a "conspiracy of silence" about public spending after the election.
He said the Chancellor had not been transparent about the massive black hole in the public finances, which include the need to slash spending on unprotected departments - including courts, prisons and local councils.
Mr Johnson said: "Maybe that is possible, but keeping to these plans would require some staggeringly hard choices which the Government has not been willing to lay out. Indeed, we heard yesterday that the next spending review, in which these choices will have to be announced, will rather conveniently not happen until after the election."
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He added: "Government and opposition are joining in a conspiracy of silence in not acknowledging the scale of the choices and trade-offs that will face us after the election. They, and we, could be in for a rude awakening when those choices become unavoidable."
Research also found it will take until 2026 for real average wages to go back to 2008 levels - which has been dubbed a "staggering near-two lost decades of pay growth". Experts found that if pay had risen at the level it did before the financial crisis, the average worker in 2023 would have been around £14,000 better off.
Shadow Chancellor Rachel Reeves said: "They're giving with one hand and taking twice as much with the other - and they expect people to be grateful." Labour also accused the Chancellor of acting like disaster PM Liz Truss with hints he would scrap National Insurance completely.
Mr Hunt said he wanted to end the "double tax" on work but backtracked and admitted it will not happen "any time soon. "That's a huge job... I don't think it's realistic to say that's going to happen any time soon," he said.
Keir Starmer accused ministers of having learned "absolutely nothing" since Liz Truss's disastrous mini-Budget, where she triggered an economic meltdown with a £45billion package of unfunded tax cuts.
Speaking on a visit to a construction site in London, the Labour leader accused the Tories of making a "staggering" £46 billion unfunded commitment to abolish National Insurance. "That's bigger than Liz Truss's commitment, so they've learned absolutely nothing," he said.
Darren Jones, Shadow Chief Secretary to the Treasury, said: "If the Tories are going to make promises to the electorate, they should say how they're being funded. Mortgage holders across the country know only too well the consequences of pie in the sky, unfunded Tory promises on tax cuts. But today's budget reveals Rishi Sunak is in hock to the reckless voices who want to re-run the Liz Truss experiment."
Meanwhile, Mr Hunt hinted there could be further giveaways before the election. Asked if there could be another fiscal event, he told Times Radio: “No, but if there’s an autumn election which is the working assumption then theoretically it would be possible to have one."
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