I dislike the term ‘Granny Tax’ for two reasons. First: it’s sexist. I’m sure there are still old people who are indeed, grandfathers, or perhaps, just old. Second: it’s not a tax.

From April the first this year pensioners will get an extra £5.30 a week in additional state pension. That’s £275.60 extra over the year.

In April 2013 two things will happen. Thanks to the ‘triple lock’, pensions will go up by inflation, average wages or the Bank of England base interest rate – whichever is highest - and for the first time since, erm, Labour froze it in the March 2010 budget (page 122 here), pensioners personal tax allowance will be frozen. Not cut, not abolished, not taxed extra. Frozen.

Let me put it another way. The ‘Granny Tax’ will cost those affected about £1.60 a week from next year. The state pension will go up £5.60 a week from next month (and by a similar amount next year) You do the maths.

When pensioner groups say pensioners will lose on average £80, they're wrong. They won’t. They will not receive the extra money had the allowance gone up as they expected, but in cash terms, pensioners will be better off in 2013 and 2014 than they are now.

So do I feel sorry for pensioners? No, not particularly. Public sector workers have faced pay freezes for the last three Budgets. Unlike people of working age, pensioners get free bus travel, are exempt from the TV license, get free prescriptions, eye tests, discounted rail travel and a dozen other voter incentives or as they are also known, 'concessions'.

When the current crop of senior citizens was growing up they didn’t have to worry about university fees. When they were working they enjoyed private final salary pension schemes simply inaccessible to most people currently in work. Unlike today buying a family house didn’t involve waiting until you were middle-aged and getting a pension didn’t mean waiting until you were in your mid-seventies, if ever.

The press might say that today’s pensioners have been prudent savers. My generation would love to save as prudently, I’m sure, but most of us can’t find a job, let alone one with enough income to actually allow us to save anything, so it is with some quantity of grim mirth I see the grey lobby arguing that they should get a higher personal allowance on account of being older, as well as be exempt from the squeeze the rest of us are having to face.

As the Institute of Fiscal Studies, which backs the plan, has pointed out, pensioners are “well sheltered” from the ravages of the storm those of working age have had to face, and while pensioners in the 1920s, when this concession was conceived, were worse off than today is it really fair to discriminate the level of tax allowance based solely on age?

By restoring the link to pensions and earnings and ensuring that pensioners never again suffer the humiliation of a 75p increase, the government has done well for our older citizens and ensured their standing of living keeps pace. By raising the tax threshold for the many, not just the few, and asking baby boomers to give up their special tax break, taxation has become an issue of generational equity and the government has done well for us all. 

Tags: Budget 2012, Generational fairness, Granny tax, Pensions