Ikigai 🏴󠁧󠁢󠁳󠁣󠁴󠁿🍀

Of everything John Healey announced today, my favourite is the Pension Tax Allowance: a tax break for pensioners worth, at the very most, £94 a year, which exists, according to the Treasury's own guidance, to spare them the "administrative burden" of a letter from HMRC asking for "a relatively small amount of tax". Why would a pensioner living on nothing but the state pension be getting a tax bill at all? Because the personal allowance has been frozen at £12,570 since 2021, Labour has stretched the freeze to 2031, and from next April the full state pension, £13,036.40, sails straight over it. So instead of unfreezing the allowance - the honest thing, the thing you could explain to a child - Healey has built a second allowance on top of the first, to cancel out the damage done by the first, for three years, after which it goes "under review", which is Treasury for "in the bin". And since nothing this Treasury makes is permitted to work cleanly, the thing tapers away. Between £13,037 and £13,319 a year, every extra £3 a pensioner earns costs them £1.60 in tax. That is a marginal rate of 53%. A 70-year-old doing a few hours a week behind a till will hand over a bigger share of each extra pound than a millionaire does on his bonus. Meanwhile a 30-year-old cleaner on exactly the same income, £13,036, will pay £93.28 - the very sum Healey's own guidance waives for the pensioner standing next to her at the bus stop. The freeze costs a full-time worker on the minimum wage £759 a year. Labour signed up to taking that off every one of them until 2031, and today Healey expects applause for handing £94 back to some pensioners, for three years, with an expiry date stamped on the bottom. Progress would end the freeze outright. We would restore the personal allowance to the level it would have reached had it never been frozen, about £15,480 today, lock it to inflation for good, and make any future freeze impossible without a vote of Parliament. One allowance, for everyone, worth having. The pensioner comes out of tax, the cleaner comes out of tax, and HMRC is spared the administrative burden of writing to either of them.