Good news for elderly: major pension and care reforms brought forward by George Osborne ahead of Budget

Better than expected news for the families of the elderly who need to go into care

Move will be a major boost to the UK’s elderly population (Getty Images)

George Osborne will use this week’s Budget to make a direct bid for the vote of Britain’s pensioners, while resisting pressure to ease his broader austerity programme.

The Chancellor today announced better-than-expected news for the families of elderly people who need to go into care, while also promising to speed up pension reforms.

Mr Osborne dropped the hints as the Ernst & Young ITEM Club, a leading economic forecaster, warned that he would be forced to admit borrowing £8bn more than previously estimated due to falling tax receipts – giving him little room to manoeuvre in terms of spending to boost growth.

Speaking on the BBC’s Andrew Marr Show, Mr Osborne promised that, starting in 2016, there would be a £72,000 limit to the amount anyone would have to contribute to their care costs, after which they could receive free care for life. This is a year earlier than the Government had previously indicated and a small improvement on the £75,000 cap that the Health Secretary, Jeremy Hunt, announced in Parliament – although still substantially less generous than the £35,000 limit proposed by the Dilnot Report into long-term care.

The introduction of a new, simple single-tier pension, which would be worth about £144 a week, was also being brought forward by a year, to 2016, Mr Osborne announced.

“That is another example of how this Government is helping people who want to save, people who want to leave something to their children like their home, people who want to get on in life, people who do the right thing. Those two decisions are going to be enormously helpful,” Mr Osborne said.

Michelle Mitchell, the director-general of the charity Age UK, described the announcements as “welcome but modest”, and Joanne Segars, the chief executive of the National Association of Pension Funds, sounded a note of warning. She said: “We are squarely in favour of these vital reforms but the Government must ensure that the implementation of these changes is workable for pension funds. This is a very tight timeframe and we have to wonder if it can be delivered.”

While he had good news for the elderly, who are consistently more likely to vote than other age groups, the rest of the Chancellor’s message was that the Government is sticking with its plans for budget reduction.

He warned that the problems in Cyprus – where savers have been hit by a one-off levy to pay for a bank bail-out – demonstrated “what happens if you don’t show the world you can pay your way”.

Yesterday the shadow Chancellor, Ed Balls, called for a cut in VAT and the reintroduction of the 10p tax band, which he said should be paid for by a “mansion tax” on properties worth more than £2m. “If George Osborne would like to cut the basic rate, we would support him,” he said. “Anything which helps middle- and lower-income families is good.”

The Tory MP Adam Afriyie, who is being talked about as a future contender for the party leadership, called for a temporary cut in capital gains tax and relief on employers’ National Insurance contributions for companies which hire long-term unemployed. He also told the BBC’s Sunday Politics programme that universal benefits such the winter fuel allowance needed to be “looked at”.

The Taxpayers’ Alliance is pressing the Chancellor to finance tax cuts by cutting spending. To push their case, they released poll results showing that more people – 19 per cent – believe that alien life forms have visited Earth than the 12 per cent who think the Government should tax and spend more.

Targets: new ideas

Government spending

There will be new limits on what government departments can spend, but the NHS and overseas aid are exempt, as before.

House building

Mr Osborne is reportedly going to announce a £10bn new investment in housing, but he would neither confirm nor deny that today.

Pensioners

Pension reform and a cap on what anyone elderly has to spend on long-term care are coming a year earlier than expected.

Fuel duty

Plans for an increase are likely to be scrapped in this budget to avoid antagonising already under-pressure motorists.

Childcare

Mr Osborne was expected to announce £1,000 allowances towards childcare costs, but that seems to have fallen down now because of an argument about how to pay.

Tax avoidance

A crackdown is expected on those companies who locate their payroll departments in foreign tax havens to avoid paying employment tax.