Pensioners are furious at this 'sneaky' Budget move that will leave them much poorer

Andy Burnham and John Healey are standing on the edge of a fiscal precipice. On Wednesday, the Chancellor will step up to the despatch box in the House of Commons to deliver his maiden Autumn Budget. It is shaping up to be a high-wire political nightmare that could define - or dismantle - Mr Burnham’s premiership before it has even properly begun. The honeymoon is now over, reality is starting to bite. Faced with a toxic cocktail of rocketing government borrowing costs, persistent inflation, escalating Middle East conflicts, and a multi-billion-pound hole in the nation's finances, the Prime Minister and his moneyman are squeezed between a rock and a hard place.

Mr Burnham desperately wants to spend to fulfill early cost-of-living promises, but the Treasury cupboard is bare. For millions of Britain's hard-pressed pensioners, middle-income families, and business owners, the stakes could not be higher. And for the Labour leader, this Budget represents an acid test of trust: will he stand up for the vulnerable OAPs, or will he resort to a stealthy tax raid that leaves Britain's retirees out in the cold?

It’s a mixed bag for pensioners In good news they are set for a bumper pay rise from April under the triple lock. The state pension rises each April by whichever is highest out of September inflation, average wage growth from May to July or 2.5%. Wage growth came in at 3.9%, beating this week’s inflation figure. That means the full new state pension is on course to rise from £241.30 to around £250.70 a week from April 2027. That’s an extra £9.40 a week, or around £489 a year, taking the full new state pension to just over £13,000 annually.

For the first time ever, that will push the state pension above the £12,570 personal allowance, the amount you can earn before paying income tax. This uplift is expected to be confirmed in the Budget. But there is a growing revolt among Britain's older generation over the "sneaky and iniquitous" freezing of income tax thresholds. Since 2021, the personal allowance - the amount of income a person can earn before paying a single penny in income tax - has been frozen.

Under current plans this freeze is set to stay in place until at least 2031. As inflation drives up wages and the state pension increases, millions of low-income earners and pensioners are being dragged into the tax net for the very first time, or pushed into higher 40% tax brackets. Data unearthed by former pensions minister Sir Steve Webb shows that the number of pensioners paying income tax at higher rates (40% or 45%) has doubled in just five years, surging from 494,000 in 2021 to over one million in 2026.

Over the same period, an extra 2.2 million older citizens have been dragged into basic rate tax, bringing the total to 8.4 million pensioners. Next April, the full new state pension is projected to rise by around £488 to £500 a year under the Triple Lock, taking it tantalisingly close to, or directly above, the £12,570 tax threshold. Without urgent intervention, millions of retirees whose sole or primary income is the state pension will face the bizarre and punitive prospect of paying tax back to the state on their retirement benefits.

Campaign group Silver Voices, led by director Dennis Reed, took this message straight to the doorstep of No. 10 this week, handing in a mass petition signed by more than 275,000 people demanding an immediate end to the threshold freeze. "The freeze on tax thresholds has contributed significantly to the current cost of living crisis, and must be lifted in the Budget," Mr Reed told the Express outside Downing Street. "If the lower tax threshold had not been frozen for the past five years, the personal allowance would now stand at £16,070 - a huge £3,500 more than the current rate!

“If the Chancellor is serious about providing relief to low income households in the face of escalating prices, then he must end this iniquitous, regressive and sneaky tax grab." While campaigners demand tax relief, Chancellor John Healey is grappling with grim Treasury arithmetic. The Institute for Fiscal Studies (IFS) and independent financial analysts warn that war in the Middle East, soaring global energy prices, and persistent borrowing costs have battered the UK’s economic outlook.

The Chancellor's fiscal headroom, the emergency cushion of cash required to meet public debt targets, has shrunk rapidly from £22 billion down to £15 billion. On top of that, he must find an estimated £4.7 billion to fund defence spending commitments, while facing immense spending pressures across social care, local councils, and the NHS. Economists believe Mr Healey will need to unearth at least £10 billion in targeted tax increases or spending cuts to keep the public finances credible.

Because Labour's manifesto explicitly rules out raising headline rates of Income Tax, National Insurance for employees, or VAT, Mr Healey’s maneuverability is severely constrained. For Mr Burnham, this Budget is far more than an accounting exercise, it is a supreme political test that hits at the heart of his credibility. Conservative leader Kemi Badenoch has warned that the Prime Minister’s brand of "old-fashioned tax-and-spend socialism" threatens to drag Britain back to a 1970s-style era of misery.

The political threat is made even sharper by Reform UK. Shadow Chancellor Robert Jenrick threw down a gauntlet to Downing Street by unveiling a bold Reform plan to raise the tax-free personal allowance from £12,570 to £15,000 in their first 100 days.1 Mr Jenrick promised the move would ensure pensioners keep every penny of their state pension untaxed, saving 40 million taxpayers around £500 a year and lifting 2.9 million people out of income tax altogether.

Other measures expected in the Budget include more details on the changes being brought in to the Lifetime Isa, which is being replaced by a new First Time Buyer ISA with no withdrawal penalty and no upper age limit. Key details of how it will work including the bonus rate and the property price cap, could be announced. Mr Healey says he wants to use the statement to “back British businesses making a profit”. We already know that a tax cut for pubs, clubs and live music venues will come into force from April 2027, but the Chancellor hinted he is preparing to cut regulations in a boost to entrepreneurs.

Further changes we know coming down the line next year include a tourist tax that gives mayors the power to charge visitors to their area for overnight stays. There has also been help for households as energy bills have soared. From 1 October this year VAT has been taken off electricity bills, saving households around £45 a year. However the cut only lasts until March 31 next year despite costs for households expected to rise by at least £276 from January.

There is hope that more support will be announced at the Budget to help families tackle rising bills as in a further blow inflation rose to 3.5% in September, pushing up household costs. It has been reported that Healey may raise taxes on banks to pay for an energy support package for homes rather than borrowing to fund extra help. Similarly, there are rumours of measures coming to help drivers who have been battered by soaring petrol and diesel costs.

Currently there is a 5p tax cut on fuel duty but it is due to end 1 January next year. Mr Burnham made his political reputation by presenting himself as a compassionate champion of working people and local communities. But piling more painful taxes on people to pay for his ideological dream could end up in political failure.