Sunday, 28 April 2013

Pensioners, benefits and morality

Iain Duncan Smith has today said in the Sunday Telegraph that wealthy elderly people who do not need benefits to help with fuel bills or free travel should be ‘encouraged’ voluntarily to hand the money back.  Many already do give their fuel allowance to charity or, in the case of free travel, never bother to apply for it.  The recent Fabian study on pensioners has also commented less than favourably on the position of pensioners.  These two contrasting statements suggest that after the next General Election pensioners, like everyone else, are going to be in the austerity firing line.  David Cameron has already said universal benefits for pensioners will be protected for almost a year after the 2015 general election but there is, as yet, no commitment beyond that date and it is certain that what pensioners should contribute to the national pot will figure in all parties’ manifestoes.  The problem for all the political parties is that the ‘grey vote’ is significant since people over 60 are more likely to vote than those below 40 and, if they worked together could have a dramatic impact on the outcome of the 2015 elections. 
It is true that pensioners have, relative to other sections of society, done quite well in terms of annual pay increases and the move to a higher pension from 2016 for those not already of pensionable age will help to iron out some of the inequalities in the system.  However, pensioners with savings or annuities, in other words those who took the decision to save for their retirement, have seen low interest rates on those saving and a similar loss of value on annuities.  And, of course, many are sitting on housing assets on which they have made a substantial profit that they can use to fund of escalating cost of social care should they need it.  On the other hand, there are many pensioners who survive on very low incomes for whom additional benefits are essential so they can have a reasonable standard of life.  Thankfully there is now a political debate on how the elderly should be treated in a humane society though it has as yet failed to reach any firm and politically acceptable conclusions.  What is clear, however, is that the argument that ‘we paid our dues and should now get the benefits’ is increasingly threadbare as a coherent case for the future. But then neither is the moral argument that wealthier people should pay the money back: many probably won’t and it failed to address the issue of the fiscal contribution they should make to the state.
The problem for any government is balancing the needs of pensioners with the needs of society as a whole.  If rises in benefits for those below 60 are fixed at 1%, then why should this not apply to those of pensionable age?  This would be a perfectly acceptable proposition if the UK defined the ‘minimum wage’ as a ‘living wage’ but it doesn’t.  So, unless as a society we are prepared to accept more pensioners living in abject poverty, it’s a non-starter unless politicians are prepared to accept the political fall-out of doing it and most are not.  What about reintroducing national insurance contributions for pensioners to cover health costs, a more reasonable proposition as they are most likely to need medical services but again is it politically acceptable and anyway pensioners will continue to cover the costs of their social care needs, arguably a fiscal contribution to the state.  Which brings us to the other benefits pensioners get: free prescriptions over 60, free bus passes, free television licences to those over 75 and the winter fuel allowance.  Of these arguably the more important are free prescriptions and the winter fuel allowance.  So link free prescriptions to the common pensionable age, 65 not 60 and increasing in line with the increasing pension age…there is no longer any logic with leaving it at 60.  As far as winter fuel allowance is concerned, it should be taxed something that now has increased logic given the increase in personal allowances and limited to those whose joint or single incomes is below say £40,000 (though there may be a case for a figure as low as £30,000).  Those on the lowest income would receive the full amount with those above that level paying tax on it and those who clearly don’t need it would no longer be eligible.  In addition, when people receive the allowance should operate in the same way as free prescriptions.  The importance of free bus passes depends, to some extent, on where people live: there is greater logic in rural areas where facilities may be at some distance than urban areas where they are generally closer. So, again link the allowance to the common pensionable age and introduce a fee of say £50 for urban dwellers and £20 (or none at all) for rural dwellers or abolish it altogether and accept the political flak.    Finally, free television licences should be restricted to those over 80.  Implementing proposals such as these would help restore what the Fabian Society identified as inter-generational inequalities. 
The problem for government is that any action that penalises pensioners can be characterised as an expression of an uncaring and unfeeling society and there is no doubt that implementing proposals such as these would garner such criticisms.  But, whether we were in a period of austerity or not, these are issues that politicians and society as a whole can no longer duck. 

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