Pensioners and Widows (Taxation) (Hansard, 16 December 1976)

§ 7. Mr. Newton
asked the Chancellor of the Exchequer how many representations he has received from members of the public about the taxation of pensioners and widows since the latest increase in national insurance pensions and benefits.

§ Mr. Denzil Davies
I have been receiving around 60 letters a week on the subject of taxation of pensioners and widows since 15th November when the pension increases were introduced. This is about the usual number for this time of the year.

§ Mr. Newton
Whether or not it is the usual number, does the hon. Gentleman agree that it is some sign of the resentment felt by these groups that over £100 million of the increases has been clawed back in tax, partly as a result of the deliberate decision taken earlier this year not to increase tax allowances in line with pension increases? In view of the Chancellor's welcome conversion to the view that income tax is too high, 1712 will the hon. Gentleman at least ensure that pensioners are not hit again in the same way in the coming year and that something is done for working widows?

§ Mr. Davies
In fact, the Government have made sure all along that pensioners have not been hard hit by inflation and other factors. The hon. Gentleman knows very well that since the Government took office pensions have increased by 97 per cent. as compared with an increase of just over 60 per cent. in the cost of living, which has been a definite real increase for pensioners. I accept, because of problems with marginal rates at the lower end of the scale and threshold problems, that some people will have to pay back some of the increase in taxation. Surely the hon. Gentleman could have given us some credit for what we have done for pensioners.

§ Mr. Stan Crowther
Will my hon. Friend have a word with the Secretary of State for the Environment with a view to appropriate circulars being sent to local authorities on rent and rate rebates when pensions are increased? Is it not defeating the whole purpose of a pension increase when the recipients have to pay increased taxation and when a large slice of the increase is removed by a reduction in rent and rate rebates?

§ Mr. Davies
My hon. Friend has raised an important point. The interaction between tax thresholds, benefits and assistance given to pensioners and the increase in pensions is a matter that we keep constantly under review, but it is extremely difficult to solve the problem.

§ Mr. Bowden
Does the hon. Gentleman recall the substantial petition that I recently sent him on widows' pensions? Does he agree that it is wrong that widows who are working and receiving a gross income should receive less net income than a married woman who is working?

§ Mr. Davies
I do not accept that the widow gets less in relation to the married woman. There are allowances available to both groups. It does not follow that the widow gets less. What happens in many cases is that a widow's allowances are set against her pension so that PAYE operates entirely on income from employment, which is taxed at the standard rate. I disagree that at the end of the 1713 day widows are prejudiced as against married women.