Restriction of Mca to Those Reaching 65 Before 2000–01

Part of Orders of the Day — Finance Bill – in the House of Commons at 4:15 pm on 28 April 1999.

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Photo of Mr Howard Flight Mr Howard Flight Conservative, Arundel and South Downs 4:15, 28 April 1999

I listened carefully to the Chancellor's presentation of his Budget. He did not say that the married couples allowance would be retained for current pensioners, but abolished for future pensioners. He used the general word "pensioner". As was reported in the media at the time, he gave the distinct impression that the intention was to retain the married couples allowance as a tax measure to help support pensioners in their retirement.

I spoke at a large meeting in my constituency the week after the Budget, at which I made clear the reality of the Chancellor's proposals. Not surprisingly, there was considerable annoyance in my audience at the Chancellor's Orwellian use of language to secure misleading headlines. I call on the Government to make their intentions and proposals clear, if nothing else. The Budget speech is too important for half truths.

The Chancellor also argued that there was a trade-off. He said that, although it was a good thing to abolish the married couples allowance—because it had got so untidy when it came to deciding who qualified for it, with many contorted questions about whether people were married or divorced, and so on—the trade-off was to be the new child credit.

More Orwellian language was used when it was stated that the proposal was all about the Government's pro-family policy. However, the word "family" does not now mean mother, father and children, as it used to. It now refers to children with perhaps one parent: if there are two parents, it does not matter whether they live together.

It is axiomatic that retired people do not have families. What I said in my intervention in the contribution from the hon. Member for Croydon, Central (Mr. Davies) was mainly in jest, but I was trying to illustrate the very real point that an argument can be made for changing the married couples allowance tax benefit to the new child credit. Such a change would have a redistributive element—the less well-off would be better off and the better off less well-off—but, overall, the benefit to families would be about the same.

There is a fairness to that argument that echoes the Chancellor's favourite phrase about fair tax policies, but there is no fairness in simply removing a substantial tax benefit for elderly people that is not to be made up elsewhere. The figures show that, for people over 75, the married couples allowance is worth more than £5,000. That is quite substantial, and the value of the allowance after tax is quite significant.

I want to expand on the point that has been made already about planning. People plan for their old age. Perhaps many hon. Members have not yet reached the age when they start such planning, but I certainly have. People work out their pensions and savings in building societies so that they can plan their financial arrangements for old age. With the introduction of stakeholder arrangements, the Government are exhorting more and more people to make such provision, but it is too late for people aged 65 to make changes, to begin new careers and take out new insurance policies, and so on.

I submit that a change such as is proposed requires much longer notice than a year. People retiring in the next 10 years, say, will not be able to make up for the tax loss that this change will inflict.

The reduction in the SERPS widows benefit has already been cited. That was announced some 13 years ago, but hon. Members will be aware that hardly anyone knew about it. The Department of Social Security often gives incorrect advice, but the real problem is that people were not aware, even after 13 years, of the changes to that benefit.

A principle of the tax system is that it should not change all the time. The Government made no mention in their election manifesto that they were going to abolish the married couples allowance for retired people. That abolition is part of a considerable and growing attack on the great rump of pensioners in the middle of society. When I listened to the hon. Member for Croydon, Central, I could not help feeling that he was saying that ageism is now politically correct among Labour Members. He seemed to feel that there was something virtuous in deriving pleasure from taxing older people more. Their pension funds are being taxed. They are being stopped from having tax credit on dividends if they pay no tax. The Government are removing tax benefits on insurance policies. Is all that some sadistic attack on elderly people? It seems to be thought that it is politically proper.

My main criticism is that the provision is devious and misleading. It was not made clear, and pensioners are not being compensated for it. The top-up to pensions guarantee applies only to people who have minimal savings or none. The measures will simply make the great mass of older people less well off in their retirement.

Pensioners are not stupid. In New Zealand, Ministers are frightened even to address public meetings because pensioners have been physically assaulting them. The Government seem to think that pensioners are soft prey and that the media are not interested. However, in my experience, the senior part of British society has rumbled the sum total of the fiscal attacks that the Government are mounting. The matters covered by the two amendments are, in the Chancellor's language, unfair and unjust, and the way in which they were announced was downright misleading.