The 2012 Budget has gone down in history as an “omnishambles”. A series of controversial tax-raising measures were reversed, damaging the government’s credibility and popularity. Few remember, however, that the first row that followed George Osborne’s budget speech was a measure that was implemented, did not provoke a backbench rebellion, and became a settled part of our tax system. At least, until this week.
Age-related allowances, under which pensioners begin paying income tax at a higher level than everyone else, were introduced by Winston Churchill. In 2012, at a time when the personal allowance was rising quickly, Osborne abolished it. At the time, I was the Treasury minister responsible for tax and was an enthusiastic supporter of the policy. It was a sensible tax simplification and I could see no good reason why people of working age should have a lower personal allowance than pensioners.
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