'Granny tax' slammed by Hampshire MPs (From Romsey Advertiser)

'Granny tax' slammed by Hampshire MPs

9:03am Thursday 22nd March 2012 in Hampshire Business By Tom Moseley , Parliamentary Correspondent

MINISTERS yesterday hailed tax cuts for more than half a million people across Hampshire – but faced a backlash over a “stealth tax” on pensioners.

Hampshire MPs divided across party lines on whether the budget was backing business or a tax cut bung for the wealthiest.

Ministers pointed to the decision to increase the threshold for income tax to £9,205 – a key demand of the Liberal Democrats. They claimed this would lift almost 7,000 people in Southampton – and more than 41,000 in Hampshire – out of income tax altogether by April 2013.

They claimed the move would also be a tax cut for middle earners, benefiting more than 600,000 people across the two areas.

But Labour criticised cuts to tax credits that have previously been announced and the decision to phase out the special tax allowance given to pensioners who work and incur income tax. The change was instantly dubbed a “granny tax”, which would cost pensioners hundreds of pounds.

Allowing for inflation, freezing the allowance will mean an average loss of £63, officials admitted. People becoming pensioners after 2013 will miss out on tax breaks of around £259, Age UK said.

Southampton Itchen Labour MP John Denham said: “He slipped in this tax on pensioners – it’s not just disgraceful that he’s doing it, but also that he was not honest with the House of Commons about what he wanted to do.”

His Labour colleague, Southampton Test MP Alan Whitehead, added: “What we needed today was a budget to put money in the pockets of ordinary families and get the economy moving again.

“What we got was a tax cut bung for the wealthiest one per cent which will do virtually nothing to stimulate the real economy.”

Eastleigh MP Chris Huhne said: “The Chancellor has done the right thing in listening to Liberal Democrat calls for the income tax threshold to be raised further.

“As a Liberal Democrat I want to see a fairer tax system where help is provided for those who need it most and where the richest pay their fair share.”

Tory Steve Brine, the MP for Winchester, said he was delighted with the proposals.

He hailed the decision to increase the personal allowance as a classic Tory tax cut adding: “George Osborne has made his choices – and his choices are to take some of the poorest people out of tax altogether.”

Fellow Conservative, Romsey and Southampton North MP Caroline Nokes, welcomed changes to child benefit, which was set to be scrapped for all higher-rate taxpayers, and a cut in corporation tax.