The Conservatives have promised to cut taxes for pensioners by creating a new “age-related” tax-free allowance – dubbed “triple lock plus”.
Currently, people can receive £12,570 a year of their pensions before they start paying income tax on them – the same figure as the personal allowance for those who work.
But if the party wins the next election, a pensioner’s allowance would rise in line with either average earnings, inflation or by 2.5% – whichever is higher – from next April, echoing the rules on annual state pension increases.
Rishi Sunak said the move “demonstrates we are on the side of pensioners”, and would bring people “peace of mind and security in retirement”.
But Labour’s shadow paymaster general, Jonathan Ashworth, called it “another desperate move from a chaotic Tory party torching any remaining facade of its claims to economic credibility”.
He added: “Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?”
The Liberal Democrats said the Conservatives had “hammered pensioners with years of unfair tax hikes”, adding: “People won’t be fooled by yet another empty promise from Rishi Sunak after this record of failure.”
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The Conservatives first brought in the triple lock when they were in a coalition government with the Liberal Democrats in 2010 to tackle pensioner poverty, saying the annual rise would protect retirees from hikes in living costs, and both Labour and the Lib Dems have promised to keep it in place.
However, while the state pension has continued to rise, the threshold for when both pensioners and those of working age pay income tax has remained frozen since April 2021 when Boris Johnson was in power, meaning some of those on lower incomes have been brought into paying tax.
This new measure would change that for pensioners, with a “guarantee in legislation that the pensioners’ personal allowance will always be higher than the level of the new state pension”.
The Tories said eight million people would save around £100 next year and gain further savings each year as the tax-free allowance grew, with the £2.4bn a year policy paid for through “clamping down” on tax avoidance and evasion.
Boris Johnson froze the thresholds for paying income tax in April 2021, but Rishi Sunak is planning to change that for pensioners. Pic: AP
Making the announcement, Mr Sunak said: “I passionately believe that those who have worked hard all their lives should have peace of mind and security in retirement.
“Thanks to the Conservatives’ triple lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.
“This bold action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.”
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But Labour’s Mr Ashworth hit back, saying: “Not only have they promised to spend tens of billions of pounds since this campaign began, they also have a completely unfunded £46bn policy to scrap national insurance that threatens the very basis of the state pension.
“Labour will protect the triple lock. But Rishi Sunak is planning to reward Britain’s pensioners for their loyalty by stabbing them in the back, just like he did to Boris Johnson and just like he has done to his own MPs.”
Sunak turns gaze to older voters – and leaves questions for Labour
This is another bold and very political announcement by the Conservatives.
It was only months ago that there had been discussion in Whitehall of whether the triple lock had a future at all, given its extortionate cost.
Now the Tories have gone in the opposite direction, dressing up an income tax cut for pensioners as a beefing up of the expensive ratchet measure.
It will likely prompt questions of generational fairness, given that tax thresholds for those of working age are still due to stay frozen until 2028, while at the same time the triple lock has seen the state pension rise by 8.5% this year and 10.1% in 2023.
Tory sources pointed out that workers had already had a big national insurance cut. And while they said there were currently no plans to unfreeze allowances more broadly, they did re-emphasise an ambition to keep cutting taxes in other areas if feasible.
This move is political because it will inevitably lead to questions about whether Labour will follow suit and mirror this promise.
If they do not, expect accusations of a Labour tax rise for pensioners.
What’s more, with the state pension expected to rise above the current allowance level in a few years, the Tories are also suggesting that a Labour government would drag everyone who claims the state pension into paying income tax for the first time.
The hobbling irony there, of course, is the main reason that would happen is the tax allowance freezes that the Tories brought in.
Coming off the back of the national service policy blitz, this is clearly another attempt to reach out to the Tory base of older voters.
Combine that with Rishi Sunak’s recent visits to traditional Conservative heartland seats and it’s hard not to conclude that this is a campaign currently in a defensive mode.
What’s maybe more interesting though is that, as yet, neither Labour nor the Liberal Democrats have criticised the substance of the policy change directly, no doubt aware of the political risks of being seen to line up against tax cuts for pensioners.
While the Conservatives will focus on pensioners, Labour will use Tuesday to appeal to businesses as shadow chancellor Rachel Reeves makes her first major speech of the general election campaign.
She will promise to run “the most pro-growth Treasury in our country’s history” if her party takes power on 4 July, and promises to be both “pro-worker and pro-business, in the knowledge that each depends upon the success of the other”.
It comes after more than 120 business leaders, including chef Tom Kerridge and Wikileaks founder Jimmy Wales, signed an open letter giving their backing to Labour to “achieve the UK’s full economic potential”.
The Liberal Democrats will turn their attention to crime on the campaign trail, pledging to introduce “burglary response guarantee” so all domestic burglaries are “attended by the police and properly investigated”.