State pension ‘won’t ever be taxed below the Tories’ says Rishi Sunak

Rishi Sunak moved to shore up Tory support among the older generation today as he declared that state pensions will never be taxed.

Under the ‘Triple Lock Plus’ policy the PM is vowing to maintain the mechanism that hikes payouts by whichever is highest out of inflation, average wage growth or 2.5 per cent.

But the Conservatives would also guarantee that the personal allowance will rise at the same pace for those over retirement age – ensuring it will always be higher than the state pension.

As clashes ahead of the July 4 election ramped up this morning, Labour dismissed the proposals as ‘desperate’ – but ministers warned that meant Keir Starmer will ‘drag millions of pensioners into tax’. 

The move comes after a backlash from pensioners following two cuts to National Insurance, which do not benefit them, and being dragged closer towards paying income tax by a combination of rising pensions but frozen thresholds.

In other big developments in the general election battle today:

• Nigel Farage has challenged Rishi Sunak to a debate on immigration as he joins Reform’s campaign;
• Senior Tories have pleaded for colleagues to ‘lip it’ after infighting over the National Service policy and early ballot flared;   
• Ousted West Mids mayor Andy Street has announced he will not stand as an MP in a blow for Mr Sunak; 
• Sir Keir is facing complaints of a stitch-up with allies set to be parachuted into plum safe seats after a series of late retirements.

In a round of interviews this morning, Work and Pensions Secretary Mel Stride told Sky News: ‘We will not only up rate by the triple lock across the whole of the next Parliament, but we will also up rate something called the personal allowance, which is the amount you can earn without paying income tax by the triple lock as well.

‘And that will mean millions of pensioners are getting a tax cut through time. Now Labour have dismissed that, they say they wouldn’t do it, which will drag millions pensioners into tax.’

He added that the ‘triple lock plus’ will ‘stop millions of pensioners, as will be the case under Labour, getting dragged into income tax’.

Mr Stride told Times Radio that the Tories could ‘comfortably’ afford the policy.

‘£2.4billion is the cost at the end of the Parliament,’ he said.

‘We can comfortably raise £6billion from clamping down on tax avoidance and evasion and that figure, in fact, is very much in line with the kind of figures that we’ve achieved in the past.

‘And in fact, the head of the National Audit Office has actually stated that that number is achievable and that is where the fully funded costing will be met.’

Mr Sunak said the new plan showed the Tories are ‘on the side of pensioners’.

The Tories said the proposal would equate to a tax cut of around £100 for eight million pensioners next year – increasing to £300 in five years’ time. 

It will cost the Treasury £2.4billion a year by 2029/30 and be funded through a previously announced scheme to raise an extra £6billion a year by the end of the next Parliament by clamping down on tax evasion.

Under the Triple Lock Plus plan, the personal allowance threshold for pensioners across the UK would rise from the current baseline of £12,570 to £13,040 next year. It would then gradually increase to £14,450 by 2029/2030.

The state pension will remain taxable, but would not overtake the level of the personal allowance.   

Mr Sunak, who visited Chesham United football ground in Hertfordshire yesterday, said: ‘Thanks to the Conservatives’ Triple Lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.

‘This bold action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.’ 

The Tories expect the state pension to increase by a further £430 in April next year to more than £11,970; with increases by around £1,700 to £13,200 by the end of the Parliament.

Before 2012, pensioners had more generous tax allowances. But then-chancellor George Osborne axed the policy as he simplified the system – though faced a ‘granny tax’ backlash.

The Tories’ decision to announce an increase to the personal allowance for pensioners only also raises questions over whether they will look to increase the thresholds for working-age adults. The Government has come under fire for continuing to freeze the income tax personal allowance, which would otherwise have risen in line with inflation.

Shadow paymaster general Jonathan Ashworth, responding to the announcement, said last night: ‘Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?

‘This is just another desperate move from a chaotic Tory party torching any remaining facade of its claims to economic credibility.’