He spoke as the Chancellor faced a firestorm of protest over his cut in tax allowances for those over 64, which will leave up to 5 million middle-class pensioners worse off.
The Institute for Fiscal Studies yesterday said that those worst-hit by the policy would lose up to £323.
The respected think tank criticised the Chancellor for trying to mislead voters by “dressing up what is clearly a tax increase as merely a simplification”. The Treasury’s own advisers on tax simplification were also said to be “concerned” at the way the Chancellor presented the change.
David Cameron led a fightback over the controversial decision yesterday, arguing that the overall effect of Coalition policies would leave many pensioners better off.
In other developments arising from Mr Osborne’s Budget:
Cabinet ministers, including Mr Osborne and the Prime Minister, faced public scrutiny over their own tax affairs and whether they had benefited from the abolition of the 50p rate of tax.
Economists forecast that changes in tax thresholds would see five million people dragged into the 40 per cent higher rate of tax next year.
Experts warned that Coalition plans for a £140-a-week flat-rate state pension could result in some people losing up to £6,000 a year in income.
It was disclosed that the elderly face paying up to £100,000 for their care under secret government plans.
The tax raid on prudent pensioners was the most controversial part of the Budget package and yesterday left the Coalition scrambling to justify Mr Osborne’s plans.
Mr Gauke told BBC Radio 4: “If you look at what we are doing for pensioners across the board it is clear that they are a group that is relatively well protected on the steps that are necessary to reduce the deficit.” He added: “That’s absolutely right but I think it is reasonable that we remove a complication from the tax system.”
The IFS backed ministers on the impact of the change, describing it as “a relatively modest tax increase on a group hitherto well sheltered from tax and benefit changes”.
However, the suggestion that pensioners have avoided the worst effects of austerity following the debt crisis could be controversial.
Opponents of the change say that pensioners have been suffering severely from post-crisis policies including the Bank of England’s record low interest rates and quantitative easing, both of which have pushed down returns on savings and investments.
Mr Osborne has claimed that his abolition of the age-related tax allowances for people over 64 are simply part of the Coalition’s moves to tidy up the complex British tax code. “[The tax change for pensioners is] a simplification of the tax system. It creates a much simpler system for everyone,” he said. Despite his assertions, Mr Osborne’s own advisers on tax
Source: telegraph
Author: James Kirkup
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