Rishi Sunak is gambling on a £2.4 billion tax break to help secure the support of pensioners as he battles to remain in No 10.
The Prime Minister promised to increase the income tax personal allowance for pensioners, giving them a tax cut worth around £95 in 2025-26, rising to £275 in 2029-30.
Labour said it was a “desperate move” from a party which was “torching” what was left of its claims to economic credibility.
Sir Keir Starmer’s party was busy wooing business leaders, with shadow chancellor Rachel Reeves promising to lead “the most pro-growth Treasury in our country’s history”.
The Prime Minister unveiled his landmark pensions policy as he sought to get his campaign back on track.
On Monday, outgo
g Tory MP Lucy Allan was first suspended then resigned after backing the Reform UK candidate to succeed her in the Telford constituency.
Mr Sunak also suffered criticism over his national service plan, with Northern Ireland minister Steve Baker saying it was “sprung” on candidates, including those with relevant ministerial responsibilities.
And Tory peer and former minister Lord Goldsmith said Mr Sunak “has damaged the Party almost beyond repair and all but guaranteed the majority of his MPs will lose their job next month”.
Mr Sunak’s new tax policy would see the age-related allowance rise in line with the increase to the state pension under a “triple lock plus” guarantee.
That would mean that both the state pension and the allowance – the amount that can be earned before being liable to income tax – rising by inflation, average wages or 2.5%, whichever is highest.
The announcement will guarantee in legislation that the pensioners’ personal allowance will always be higher than the level of the new state pension.
The policy will cost £2.4 billion a year by 2029/30 and will be funded through the clamping down on tax dodgers – the same pot of money which will help pay for Mr Sunak’s plan for new mandatory national service for 18-year-olds.
Mr Sunak 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.”
But Institute for Fiscal Studies director Paul Johnson said about half the cost of the plan was from not imposing three more years of frozen personal allowances on pensioners.
“So the £100 ‘saving’ next year is mostly just avoiding a £100 tax increase, rather than an actual giveaway,” he said.
Torsten Bell, chief executive of the Resolution Foundation think tank which focuses on living standards, said the sales pitch is about keeping those on basic state pension out of tax, but the “biggest beneficiaries of another tax system complication will largely be better-off pensioner households”.
Shadow paymaster general Jonathan Ashworth said: ”Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?”
Labour’s own claims to economic credibility received a boost with a letter signed by 121 senior business figures including chef Tom Kerridge and Wikipedia founder Jimmy Wales in The Times.
The shadow chancellor will use a speech in the east Midlands to set out how Labour will be both pro-business and pro-worker.
“If we can bring business back to Labour, then I know we can bring business back to Britain,” she will say.
“To bring investment back to Britain. To bring growth back to Britain. To bring hope back to Britain.”
But Treasury Chief Secretary Laura Trott said Labour would “tie businesses in red tape” with “French-style union laws”.
In other General Election developments:
– Nigel Farage will campaign for Reform UK in Dover, promising “all the solutions” to the “massive problem” of small boat crossings of the English Channel.
– The Reform UK honorary president challenged Mr Sunak to a live TV debate on immigration.
– The Liberal Democrats published figures showing high levels of unsolved burglaries in key Tory-held seats in the so-called blue wall.
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