Chancellor John Healey has defended his decision to focus tax breaks on pensioners rather than working age people in his first Budget, saying no chancellor can do everything they want in a Budget.
Delivering his first Budget since Andy Burnham became Labour leader, Mr Healey introduced the Pension Tax Allowance, which gives all state pensioners a tax-free allowance boost regardless of age or income source. The measure increases the amount pensioners can earn to £13,037 tax-free, or £13,319 with a tax reduction.
Working age taxpayers face frozen thresholds
Working age people who have not reached state pension age will not receive any tax-free allowance increase. Instead, they face what has been described as "the largest tax increase in recent history" as frozen thresholds remain stuck at £12,570.
Money expert Martin Lewis, quizzing the Chancellor on Thursday night's The Martin Lewis Money Show Live, asked why Mr Healey did not simply raise the tax-free allowance across the board rather than make a specific exemption for state pensioners.
Chancellor's response to Martin Lewis
Pitching a reader's question, Martin asked the Chancellor: "Surely it would have been more beneficial and easier to implement just increasing the Personal Allowance to £13,037 for everyone especially as this was meant to be a Budget for working people. So you're giving the increase to people on the state pension but you're not giving it to people of working age."
Mr Healey replied: "So no chancellor can do everything they want to do in a Budget. My focus was on pensioners who have the basic state pension and focus on them so what I'm doing is to make sure that in this Parliament they're not going to get pulled into and above the income tax threshold. So nearly 300,000 won't pay any tax at all, others will benefit from the tapering arrangements."
Fiscal drag concerns raised
Earlier in the show, Martin Lewis had asked the Chancellor: "Forgive me, you said in your speech yesterday 'we are not raising taxes on working people. But this fiscal drag, the freezing of the tax thresholds, is the biggest tax that has ever been raised in recent history."
The Martin Lewis Money Show Live, Thursday October 29 episode is still available to watch on ITVX.
