Rachel Reeves, the Chancellor of the Exchequer, is under pressure as Labour risks significant electoral repercussions ahead of the upcoming budget announcement on March 15, 2024. A proposed two-year freeze on tax thresholds could leave pensioners up to £800 poorer annually, potentially dragging an additional half a million older adults into the income tax net. Critics argue that this move would violate Labour’s electoral commitment not to increase taxes for working individuals and could prove to be even more unpopular than last year’s controversial withdrawal of the winter fuel payment.
As anticipation builds for the budget, Reeves is also expected to announce measures that could result in a £4 billion reduction in pension benefits by targeting popular salary-sacrifice schemes. Conservative Party leader Kemi Badenoch has sharply criticized Labour’s handling of pensioners’ finances. She stated, “Last year, Rachel Reeves broke her pre-election promise and snatched away the winter fuel allowance, leaving millions of vulnerable pensioners facing an uncertain winter.”
Badenoch further warned, “This year, the Chancellor looks set to drag the state pension into income tax for the first time ever, and she’s coming after pensioners’ savings.” The Conservative leader emphasized her party’s commitment to protecting pensioners, urging Reeves to focus on reducing government spending instead of imposing new taxes.
The backlash against the proposed budget measures is growing, with nearly 200,000 individuals signing a petition urging Reeves to reconsider the tax freeze. Among them is Colette Rogers, a 75-year-old widow who discovered that her combined pension income exceeded the tax threshold for the first time this year. Her small NHS pension of £37 a month, along with a portion of her late husband’s state pension, now subjects her to taxation. Rogers lost her winter fuel payment last winter, adding to her financial strain.
Dennis Reed, director of the Silver Voices campaign group for individuals over 60, expressed his concerns about the proposed changes. He questioned why the state pension, which is funded through a lifetime of National Insurance contributions, would be taxed again. Reed stated, “Labour seems in denial about the impact of its plans for extending the freeze on thresholds on 13 million older people, and millions of retirees in the future.”
The proposed tax changes could affect 9.3 million pensioners, increasing the number of those paying taxes from the current 8.7 million. Baroness Ros Altmann, a former pensions minister, cautioned Reeves to avoid delivering “nasty surprises” for Britain’s pensioners in the forthcoming budget. She highlighted the distress caused by last year’s withdrawal of the winter fuel payment and raised concerns about stealth taxes that could lead to further financial difficulties for the elderly.
Reeves and Labour leader Sir Keir Starmer have consistently assured the public that there will be no increases in taxes for working individuals during the election campaign. They have ruled out rises in VAT, National Insurance, and income tax. Nevertheless, the Chancellor is facing the challenge of addressing an estimated £25 billion shortfall in the nation’s finances.
Treasury data has suggested a range of smaller tax increases on items such as gambling and transportation, but these measures fall short of meeting the financial gap. For example, a proposed mansion tax could generate only around £400 million, insufficient to cover the deficit. Additionally, Reeves is considering scrapping the two-child benefit cap, which may further inflate the welfare budget.
In her statement, Reeves indicated a commitment to making “fair and necessary choices” in the budget. She pledged to tackle NHS waiting lists, reduce national debt, and lower living costs while fostering economic growth. The budget is expected to include measures to keep prescription costs under £10, freeze rail fares for the first time in 30 years, and raise the National Minimum Wage and National Living Wage.
Reeves emphasized her intention to deliver on promises for change without reverting to austerity or reckless borrowing. “I will take action to help families with the cost of living, cut hospital waiting lists, and push ahead with the biggest drive for growth in a generation,” she stated.
As the budget announcement approaches, the potential implications for pensioners and the broader electorate remain a focal point of national conversation. The response to these measures could significantly influence Labour’s standing in the upcoming elections.
