A recent UKIP press release contrasted the withdrawal of the pensioner’s tax allowance, which may increase the Treasury’s revenue by up to £3.5 billion, with the shocking increase of £1.8 billion to the UK’s EU contributions since last November.
And rightly so. It is outrageous that we indiscriminately throw more billions at dysfunctional and unaccountable European institutions (and indeed at foreign aid), while pensioners and hard-working families at home feel the pressure of austerity. Leaving the EU would relieve the UK’s fiscal pressure, and dramatically enhance our economy, both by stopping our EU budget contributions and by freeing industry from the dead hand of Brussels regulation.
Nonetheless (and despite my enthusiasm as a new member of UKIP to criticise this Tory-led Coalition), I feel that some of the hysterical and vitriolic media attacks on the so-called Granny-Tax are a little contrived and over-egged. For a start, it’s not a tax — it’s merely bringing the tax allowance of older people into line with that of working-age people. We hear complaints about ageism — this removes an example of age discrimination.
We are told that many of those older people who are entitled to the higher personal allowance don’t even take advantage of it, so it won’t affect them. For those who do use it, the effect is mitigated by the substantial rise in the general personal allowance, and further mitigated by increases in pension levels already in the pipeline. And it’s not immediate — it will be phased in over time.
Suggestions in the left-wing media that “pensioners have been raided to pay for tax breaks for the rich” is particularly pernicious. The so-called tax break for the rich — the half-hearted cut in the 50% tax rate to 45% — will cost the Treasury very little in the short term, and by promoting growth will increase revenues in the medium term. There is nothing there that could be “paid for by pensioners”, and the left’s line is a cruel and cynical deception. It is whipping up misplaced anxiety amongst older people.
The Institute of Fiscal Studies points out that the main pressure of austerity falls on younger working people and parents, with the elderly bearing only a tiny fraction of the burden. In this context it’s worth noting today’s news that the Revenue is planning a crack-down on families with nannies who pay the nannies cash-in-hand to avoid tax. It seems only months ago that Conservatives were suggesting that the cost of child-care should be tax-deductible, with the express objective of helping highly-qualified young mothers get back into the work-force (and providing employment in child-care for possibly less-well-qualified young women).
That policy would have been a win-win in terms of employment, and in terms of maximising the economic contribution of mothers who might otherwise have to stay at home. The newly announced crack-down on nannies is a sad reflection of the way reality falls short of aspiration.