Jeremy Hunt’s “stealth taxes” will wipe out more than three-quarters of the increase to the state pension, the Liberal Democrats have said. Sir Ed Davey’s party has accused the Chancellor of taking a “bolt cutter to the triple lock” pledge to increase state pensions by whichever is highest of average earnings growth, CPI inflation or 2.5 percent.
People receiving the state pension will get a 8.5 percent increase worth an extra £900 a year to full rate claimants from Monday (April 8).
The Lib Dems say the basic state pension is set to increase by £692 a year due to the triple lock, but a typical basic rate tax-paying pensioner will face a £530 a year hit due to the Government’s freezing of income tax thresholds.
It says that this means 77 percent of the rise in the pension is being “swallowed up” in stealth taxes.
Commons Library research commissioned by the Liberal Democrats found around 1.6 million pensioners will be dragged into paying income tax by 2027-28 as a result of the freezing of income tax thresholds, according to the party.
Liberal Democrat Work and Pensions spokesperson, Wendy Chamberlain MP said: “Jeremy Hunt has taken a bolt cutter to the triple lock. This Conservative government is picking pensioners’ pockets to try and fill the black hole caused by their disastrous economic policy.
“These are people who have played by the rules their whole lives, paid their taxes and contributed so much to our society. They expect that in their older years the government would look after them, not place even more financial hardship upon them during a cost of living crisis.”
She added that millions of pensioners across the UK are sick to the back teeth of being taken for granted by the Conservative Party.
Ms Chamberlain warned: “Rishi Sunak and Jeremy Hunt should expect a reckoning at the ballot box as pensioners abandon this Conservative government in their droves.”
The Lib Dems say due to the personal allowance being frozen at its April 2021 level of £12,570, the House of Commons Library estimates that there could be around one million to 1.2 million additional income taxpayers aged 66 years and over in 2024/25.
Express.co.uk has approached the Department for Work and Pensions for comment.
The Government billed the rise in the state pension as one of a number of measures aimed at backing Britain’s pensioners.
Mel Stride, the Work and Pensions Secretary, said in a statement: “Thanks to the triple lock and our efforts to drive down inflation, we are putting money back in the pockets of pensioners. This is only possible because we have stuck to our plan and our economy has turned a corner.
“This will make a meaningful difference to all those who rely on the state pension and ensure we continue to provide a safety net for those who need it most while making work pay wherever possible.”
Among other measures to help pensioners, the Department for Work and Pensions pointed to last year’s 10.1 percent state pension rise, which it claimed was the highest cash increase in history, plus winter support worth nearly £5billion.
The full state pension rate for last year was £10,600 and will rise to £11,500 a year. Ministers also pointed to the 2p cut to national insurance announced by Mr Hunt at the Budget among measures to help households struggling with living costs.
Mr Stride defended the Government’s cut in national insurance, which pensioners are not in a position to benefit from, as part of their plan to grow the economy “in a way that is not inflationary”.
He said it is worth about £900 over the coming year to the average earner and is part of growing the economy. The Secretary of State told Times Radio: “So what the OBR (Office for Budget Responsibility) tells us is this will lead, with other measures we’ve taken, to about 200,000 more people in the workforce.
“Now it’s going to firstly grow the economy but it’s going to do it in a way that is not inflationary. That matters to pensioners, because if we’re going to afford the triple lock, and if we’re going to keep price rises down – and that’s particularly important for those on fixed incomes – then national insurance cuts is exactly the way that you do that.”
The Commons Library analysis uses the UKMOD policy simulation model version B1.12 developed and maintained by the Centre for Microsimulation and Policy Analysis (CeMPA) at the University of Essex Institute for Social and Economic Research (ISER) supported by the Nuffield Foundation.
Underlying data on household incomes and circumstances was drawn from the 2021/22 Family Resources Survey, adjusted using data from the DWP’s Households Below Average Income and uprated for later years using March 2024 forecasts from the OBR.
