The Edge

Richard Northedge takes on corporate finance

The rich fund their own fuel allowances

A new campaign to strip high-rate taxpayers of the winter fuel allowance and free bus travel is gaining momentum. But doesn’t anyone paying so much tax deserve this small perk? They’re putting far far more into the pot than they take out.

Someone with a taxable income of £150,000 – ie, still not actually on the top rate of tax – will pay nearly £54,000 in income tax this year plus, if they’re still eligible, another £5,000 of National Insurance. That’s 39 per cent of their income going to the state. If half of the £91,000 they have left is spent on goods bearing VAT, that is another £9,000 paid into the Treasury pot.

Do we really think someone paying well over £60,000 a year in tax should not receive a winter fuel allowance of £200 per household (£300 for under-80s)? Top-rate taxpayers are donating even more to the Exchequer – and are even less likely to use a free bus pass.

The campaign to prevent the rich from receiving perks proposes using tax returns to decide who to deprive of these universal benefits. But note that those figures quoted above are for taxable income: anyone using wheezes such as pension contributions, Venture Capital Trust investments or spurious business expenses to lower their taxable income could fall below the threshold for having their perks withdrawn.

Nevermind whether the cost of checking tax forms to decide who loses covers the £100-a-head saved, this campaign is based on spite or on trying to impress the majority of voters with an unfair attack on the minority. Just because there is a relatively small number of high-earners who qualify for fuel allowance is no reason for targeting them.

Prime minister David Cameron is rightly sticking to his promise not to withdraw these benefits before the 2015 general election. But if he’s still in office after that – and still desperately seeking to cut government spending – he should concede that it is petty to refuse £100 or so to people paying tens of thousands in tax.

These golden oldies are the government’s golden goose. And sooner or later, these rich pensioners will be handing over large sums in inheritance tax too.



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