Labour warns of 'second granny tax'

Labour has claimed the Government is planning a "second granny tax" as the party pledged to force votes against specific budget measures in the Commons.

It said scrapping savings credit would cost 105,000 new pensioners up to £897 per year. The credit is due to be abolished as part of Government reforms to create single tier, flat state pension.

The Department for Work and Pensions said no one would lose money because savings credit is means tested and the single tier pension moves all pensioners above the means test level. But the Opposition said figures from the House of Commons library backed its analysis.

Labour is expected to force Commons votes on several budget measures when Parliament returns from the Easter recess this week.

Shadow work and pensions secretary Liam Byrne said: "George Osborne has been caught bang to rights plotting another secret raid on hard-pressed pensioners. First, we had the Granny Tax.

"Now we've uncovered Granny Tax Mark 2: a £900 cut for pensioners who did the right thing and saved some money for retirement. Pensioners will be disgusted at this secret attempt to pick their pockets to pay for tax-breaks for millionaires.

"How low can you go? This Government is hell-bent on attacking the right-thinking values of hard-working people."

Mr Byrne said losses would be maximised on pensioners who are eligible for savings credit only - which he said was 3% of people aged 65-69, or 104,770 of the current group. He said the House of Commons library had confirmed this means a cash loss of £17.25 a week per pensioner - adding up to £897 per year.

But a Department for Work and Pensions spokeswoman said: "No-one currently getting savings credit will lose it under a single tier system. Over a million pensioners are currently missing out on means tested Pension Credit despite the efforts of successive Governments to get people to claim.

"A single tier pension set above the level of the basic means test will give a fairer deal for women and will lift pensioners out of means testing - ensuring a decent and secure income in retirement."