Britain’s Osborne to Freeze Benefits, Cut Pension Tax

A next Conservative government will freeze benefits for working age Britons and overhaul pensions.

Chancellor of the Exchequer George Osborne addresses the Conservative Party Conference in Birmingham, England, October 8, 2012
Chancellor of the Exchequer George Osborne addresses the Conservative Party Conference in Birmingham, England, October 8, 2012 (Andrew Parsons)

Britain’s chancellor George Osborne on Monday promised a next Conservative Party government would freeze welfare benefits for people of working age and abolish taxes on pensions. In a conference speech, he positioned his as the “party of progress” and dismissed the opposition Labour Party as living in the past.

Speaking in Birmingham, Osborne said the freeze would not include disability benefits, maternity pay and pensions but save £3 billion — money he would put toward financing three million apprenticeships for young Britons, “three million more chances for a better life so we help our citizens get jobs instead of more immigration from abroad.”

The freeze would nevertheless be “a serious contribution to reduce the deficit,” said Osborne, who argued it was also fair. “Families out of work should not get more than the average family in work.”

According to the Treasury, some ten million households would be affected by the freeze, roughly half of which are working.

Osborne also announced changes in pensions.

“There are still rules that say you can’t pass on to the next generation any of your pension pot when you die without paying a punitive 55 percent tax on it,” he lamented. “Now I could chose to cut this tax rate. Instead, I chose to abolish it altogether.” The philosophy behind the cut being, “People know better how to spend their own money than governments do.”

Some twelve million Britons who have defined contribution pensions would be affected by such an overhaul. Starting next year, anyone who inherits a pension from them will have to pay no tax over it.

The Conservatives’ Liberal Democrat coalition partners were not enthusiastic about the proposed benefit freeze. The BBC’s Nick Robinson quoted one party source saying the liberals had “consistently blocked” Conservative plans to freeze working age benefits and describing the proposal as a “crowdpleasing punchline for a conference speech.”

Left-wing media were also critical. The Daily Mirror tabloid predicted the freeze will “push more people below the poverty line.” The Guardian warned, “Large poor families will be hit far harder, as a fresh tightening of the benefit cap chops a fifth off some household budgets.”

The newspaper also criticized the proposed pension changes, arguing they “err on the side of generosity for the minority with substantial savings to bequeath.” Although there will still be a £1.25 million limit on the amount Britons can put into their pension funds.