The Spring Budget is an annual political milestone but as we approach the anniversary of the first national lockdown, this Budget will be unlike others. It is expected to be the most significant fiscal event for Boris Johnson’s Government so far and will provide clarity on the question on everyone’s mind: how will the Government pay for the economic damage inflicted by the pandemic? Around every Budget, there are competing voices calling for increased funding but given the events of the last 12 months, the disproportionate economic impact of COVID-19 on working class people and those concentrated in sectors which have been shut down, this Budget has the task of both balancing the books and honouring the Government’s commitment to ‘level up’ the country.
The most obvious mechanism to raise revenue would be by increasing tax, but there are questions around the pace of any increase, whether it would be immediate or long term and who it would fall on. In order to stimulate the economy and encourage spending, it’s thought that any major tax increases will be deferred to a future Budget. We know that any move to increase tax would be done very reluctantly by this Government, considering that a pledge against an increase in the rate of income tax, VAT or national insurance was featured the Conservative Party’s 2019 election manifesto.
There is pressure on the Chancellor to scrap the triple lock on pensions. Later Life Ambitions has long argued that this is essential to ensuring that pensioners have an income that keeps pace with the cost of living. The policy has been criticised by the Institute for Government who argue that the triple lock has become too expensive during the current economic crisis which highlights flaws in its design. However, we know that the UK State Pension remains one of the lowest relative to earnings of 36 leading industrialised countries and at a time of economic crisis, it is a lifeline to millions of pensioners.
As part of the UK’s recovery and when the time is right in terms of COVID-19 restrictions, the Government will be encouraging people to spend money locally, supporting businesses, hospitality and tourism sectors which have suffered over the last year. Older people are an essential part of keeping local high streets and town centres alive and a move to scrap the triple lock would be short-sighted. From a political standpoint, over-65s make-up a significant percentage of the Conversative Party’s voters and although the next election is still a few years away, Boris Johnson will be looking to retain this votership. Furthermore, maintaining the triple lock was a commitment again made in the Conservative Party’s 2019 manifesto. Later Life Ambitions will continue to ardently contest any move to scrap the triple-lock, savings undoubtedly need to be made but this should not be at the cost of older people, especially the most vulnerable.
It is rumoured that the Chancellor is also considering freezing the pensions lifetime allowance of its current level of £1,073,100 for the rest of this Parliament. The move could result in pensioners being faced with a hefty tax bill, and the freeze could mean that thousands more people face additional taxation. Organisations such as PensionBee have spoken out against the idea suggesting that it would penalise older people who are nearing the allowance limit and would deter younger savers from meaningfully contributing towards their retirement. It is estimated that a pension pot of £1 million could reasonably give you an annual income of between £30-40,000 a year. Whilst the £1 million pension pot may sound like it will only impact the very wealthy, it could end up harming workers who have chosen to focus on their pension above all else from an early age.
Throughout the pandemic, we have applauded the strength and resilience of health and social care workers. The Budget will be the opportunity for the Government to demonstrate their support for workers in the sector through financial measures. The recently published White Paper on Health and Social Care reform to be published later this year promised proposals on the future of social care so they can ill afford to continue to kick the metaphorical can down the road. The pandemic has demonstrated the fragility of the social care system, and many across the sector would welcome a commitment of long-term investment including the Chair of the Health and Social Care Committee, Jeremy Hunt who has urged the Government to increase investment in social care by £7bn per year by 2023-24.
The Chancellor’s policy of Stamp Duty Land Tax relief has proved very popular and there are rumours that he will extend the relief period until June to allow more people to benefit. The Government is said to be extending the deadline in order to bring it in line with the easing of lockdown restrictions, but an extension could cost the Government around £1bn. For older people looking to move home or downsize, this policy has been welcomed.
It’s clear that the road to recovery will not be straight forward and unfortunately, we are likely to feel the economic impacts of COVID-19 for years to come. However, older people should not bear the brunt of cuts. Pensioner poverty remains an issue which the Government has failed to tackle. The Budget is an opportunity for the Government to provide assurances around the triple lock to protect older and vulnerable people. Anything less than this will have devastating impacts on the most vulnerable in our society.