Budget 2012: Pensioners ‘will not be worse off’ - minister

NO PENSIONERS in Scotland will be worse off in cash terms because of changes to allowances in the Budget, Scotland Office Minister David Mundell has insisted.

Mr Mundell said senior citizens would not lose out financially because of the Chancellor’s decision to scrap age-related allowances.

However the loss of the allowances, introduced by Winston Churchill in 1925, has been condemned as “outrageous” by older people’s groups.

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And Labour’s Cathy Jamieson branded the move a “tax raid”, saying up to 500,000 pensioners across Scotland could be hit.

George Osborne used his Budget yesterday 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 that 4.5 million pensioners across the UK 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Under the Chancellor’s plans, the allowances will be withdrawn for new pensioners from April next year while existing pensioners will have their allowances frozen at £10,500 for the over-65s and £10,660 for the over-75s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.

Mr Mundell said: “There won’t be any pensioners in Scotland who in cash terms will be worse off because of these measures.”

But he conceded: “There will be pensioners who won’t receive the allowances they receive currently in the future.”

He argued they would benefit from the increased personal allowances, with the Government planning to raise the amount people earn before they start paying income tax to £10,000 before the next general election.

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He also said that in the next few weeks, pensioners would “receive the largest increase in the state pension in most people’s memory”.

Mr Mundell insisted: “So therefore there will be no situation where people will be worse off in cash terms.”

But Ms Jamieson said that while the increase in personal allowances would help a number of people, “overall there are still going to be people who lose out, particularly pensioners”.

The Labour MP said: “Most of this Budget was leaked well in advance - one of the things that wasn’t leaked was this tax raid.

“And this will affect pensioners, people who have worked all their lives, who have maybe got a small works occupational pension and who expected to see a certain standard of living and they’re now going to see their pension reduced.

“At the moment, the estimate is 500,000 pensioners across Scotland may well lose out.”

While the state pension may be rising, Ms Jamieson added: “Pensioners did not expect to be paying for that rise themselves by having their income tax threshold frozen.”