Clause
2
Personal
allowances for those aged 65 and
over
Question
proposed, That the clause stand part of the
Bill.
Jane
Kennedy:
Personal allowances provide for a portion of
income on which no tax is due. Older individuals—those aged 65
to 74, and those aged 75 and over—are entitled to higher
personal allowances; as the Committee will be aware, they are known as
age-related allowances. Clause 2 sets the personal allowances for
2008-09 for individuals aged 65 to 74 at £9,030 and for those
aged 75 and over at
£9,180.
The tax
Acts provide that all personal allowances are increased by indexation
each year. The clause overrides the statutory indexation of the
age-related allowances, increasing the allowances by £1,180 over
indexation. That will give more support to older people, and it will
take 600,000 pensioners out of income tax—a point that was
celebrated by the pensioners aged over 65 that I met in my
constituency, where I have spent a considerable time over recent
weeks.
Mr.
Hammond:
The Minister has made her points on the clause,
but lest anyone has missed the point or was inadvertently misled by the
focus that, not surprisingly, the Government put on the increased rates
of personal allowance for those over the ages of 65 and 75, will she
confirm that the clawback remains in place and that anyone earning more
than £20,100 will have the benefit of the additional age
allowance clawed back? Will she confirm at what income the beneficial
effect of the higher allowance is completely removed? I believe that it
is about £24,000. Will she clarify that?
Will the Minister also confirm
that the £20,100 threshold provided under the Income Tax Act
2007 has not been increased by an indexation allowance to reflect
inflation? The clawback is becoming more aggressive, because the amount
has not been increased and there is no provision in existing statute or
in the Bill to index that threshold. Will she give the Committee an
indication about the Government’s policy on indexing that
threshold? If it is not indexed, its value will erode and the effect of
the clawback will become more aggressive.
Mr.
Browne:
I shall be
brief.
The
Chairman:
You have only 90
seconds.
Mr.
Browne:
I support the Government’s proposals, but
pensioners in my constituency and elsewhere would not
thank me if I did not mention that the overall
package incorporating the proposals for those aged over 60 is not as
advantageous as one might believe from reading the clause. That is
particularly so for those aged between 60 and 64 who have retired and
regard themselves as pensioners. They do not benefit from the
changes, but they also lose under other proposals, including the
freezing of the winter fuel payment and the failure to index the basic
state pension with earnings, as the Government promised. Therefore,
many pensioners will find themselves in hard circumstances, even though
those changes are to their immediate
advantage.
Jane
Kennedy:
It would be for the benefit of the Committee, Sir
Nicholas, if we were to check the clock.
The
Chairman:
The clock on the wall is fast; I am going by the
digital clock, which gives the Minister 50
seconds.
Jane
Kennedy:
I shall reply to the questions asked by the hon.
Member for Runnymede and Weybridge. Yes, the clawback remains in place.
The level set is £21,800. It is indexed every year. Those were
his specific questions.
Mr.
Hammond:
Will the right hon. Lady kindly draw my attention
and that of the Committee to the provision that allows for the
indexation of those sums? As far as I can see, section 57(3)(a) of the
Income Taxes Act 2007 indexes the amounts of the allowance but not the
threshold.
The
Chairman:
I am afraid that I cannot allow the right hon.
Lady to reply. However, she will now have time to prepare a full
answer.
It being
One o’clock, The Chairman
adjourned the Committee without Question put, pursuant to the
Standing Order.
Adjourned till this day at
half
-
past Four
o’clock.
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