George Osborne’s “granny tax”, one of the few Budget measures not leaked to the papers, is of huge political significance. It marks the first time in the life of the coalition that the government has squeezed the elderly. The pensioners’ personal allowance (£10,500 for 65-74 year olds and £10,600 for those aged 75 and over) will be frozen until the general personal allowance (currently £8,105) reaches the same level. In other words, if you take into account inflation, Osborne has hit pensioners with a stealth tax. As as result, 4.41 million people will lose an average of £83 a year, while 360,000 will lose £285.
The defence from the Treasury is that the poorest half of pensioners don’t pay income tax, so only the wealthier ones will be affected. But this won’t stop the measure from dominating tomorrow’s front pages. Expect the Mail and the Telegraph, in particular, to lead on “Osborne’s raid on pensioners”. The simultaneous abolition of the 50p rate, which has handed those earning £1m a £40,000 tax cut, heightens the political danger to the Chancellor.