Cutting pensions!!!

Shadow chancellor Ed Balls has just announced that he would cut the winter fuel payments for the UK’s richer old people if Labour wins the next general election.  It would affect about 600,000 people over 61 who pay higher and top income tax rates—saving about £100m. He also suggested curbs on new free schools and police commissioners to save money.  The response on the BBC website has been predictable with nearly three hundred comments within two hours of his speech and most of them negative: we paid in for our pensions and now are getting pay-back, some higher tax payers are not wealthy pensioners, typical labour, the politics of envy…and so on.  Now it’s not like me to jump to Ed Balls’ defence…he generally brings out the worst in me largely because he comes across as arrogant and self-obsessed (yes and I’m positive he’s a very nice man really, kind to animals!!), but he has made what is a good point but has not taken it further enough.  Why should pensioners be exempt from the austerity programme that is being foisted on the rest of society? 

Now I’m a pensioner.  I took early retirement from teaching to care for my wife disabled by a stroke (for which we have a disability living and carer’s allowance) and will receive my state pension later this year.  We had already paid off the mortgage on our house and had the sense to save for our retirement so we’re not badly off…not wealthy by any means but with enough to get by with some ease (even without the benefits).  We had planned for our retirement, though circumstances meant that there had to be some rapid changes in those plans, and had the incomes to do so.  Many pensioners could not do this even if they wanted to.  You might think that I would find Ed Balls’ proposal completely unacceptable but I don’t and think he’s missed a trick in not carrying out a thorough review of pensions and allowances, something that you can afford to do when in opposition rather that come up with a headline-grabbing and inevitably unpopular idea.  The problem is that pensioners have a firm grasp over the political system…they are the ones who are most likely to vote in elections and the power of the ‘grey vote’ is growing.  Politicians who challenge pensioners are in for a good mauling: it’s unfair to target the old, it’s an attack on the elderly poor and suggests that society is becoming increasingly uncaring.  Well, yes but that doesn’t mean that pensioners should be treated as politically untouchable and until politicians are prepared to address the issue, despite its political risks, that perception will remain.

I have examined how I think matters could be reformed in a previous blog http://richardjohnbr.blogspot.co.uk/2013/04/pensioners-benefits-and-morality.html  and I want to reiterate the points I made there.  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 allowances 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 and costly 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 (for which you have to apply—you do not receive them automatically) 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.

The current situation for pensioners is becoming increasingly unaffordable and as the number of those on pensions increases, this will become even more the case.  There would be a case for reforming the state pensions system further even if we were not in the depths of recession.  Pensioners should not be immune from tough and unpopular political decisions.