DON'T TAKE AWAY UNIVERSAL BENEFITS FROM THE OLD

Let me declare an interest. I am old enough to get the £200 tax free Winter Fuel Payment and free local bus travel anywhere in England. As I live in London my travel Freedom Pass extends to local bus and tube travel throughout London 24/7 and local trains from 0930. I guess the whole package is worth £700 a year to me, tax-free. Though in truth if I paid for London travel I would claim back much of it from clients and customers.

So. That’s that out of the way. Well almost. I do not in the slightest need that money. If it disappeared tomorrow I would shrug and say ‘so be it’. It would not leave me freezing in the winter and cut off from family, friends or the local library. Or, come to that, work.

So I get it; I do not need it; and the amount is small enough in my personal financial affairs that whether I get it or not is neither here nor there. So that leaves me uniquely able to say unequivocally that it would be complicated, counterproductive, and wrong to stop Winter Fuel Payment and free bus travel in England for those over women’s state pension age (see footnotes). Here’s why.

First, complicated. Who would you take it away from? Everyone who admitted they didn’t need it? Everyone called Paul? Everyone who paid higher rate tax? That would be possible but it would create a cliff edge at an income of £42,475 – earn an extra £1 and lose £200. And it would not save much. The Government estimates that ending it for households with an income above £35,000 would save just £270 million out of the total cost of more than £2 billion. The administrative cost could be £25 million a year or more – the amount estimated for administering the child benefit tax charge which begins on 7 January.

You would save more by following what one tweeter suggested to me recently. Go down the income scale and only give these benefits to those poor enough to pay no income tax. Then the cliff edge would move down to £10,500 for over 65s (slightly more for over 75s and rather less for 61 to 74s. I know it’s complicated but I didn’t invent the system). That would save more but would certainly take it away from many who needed it.

Another problem is that these are individual entitlements so the non-taxpaying husband, wife, or civil partner of a higher rate taxpayer would continue to get it. The only way round that is to impose a joint means-test such as that about to be imposed on child benefit recipients - and which the theoretical savings above are based on.

Now, I know your next argument. It is one I have made myself. Surely, you are thinking, surely all that Oxbridge brain power in the civil service can come up with SOME scheme to rid me of these turbulent pensioners? Well, just look at the problems of the Child Benefit Tax Charge – yet to be realised.

So that is the ‘complicated’ bit.

Now ‘counterproductive’. The thing about these universal benefits – ones that you get on grounds of age or condition – is that they go to everyone. Those who need them do not have to declare their poverty to get them. If they do have to take that step then many simply do not claim. More than two million older people fail to claim up to £5 billion in means-tested benefits they could get if they applied. Paying them to me is the price we pay as a society so that my neighbour Marjorie, too proud to claim means-tested benefits though she needed them, at least got her winter fuel payment and free bus travel – though she could use that very little in her last years. If you means-test free bus travel and winter fuel payment then poverty among pensioners would grow as many failed to claim what they could get.

And finally ‘wrong’. In a way this is an extension of counterproductive. Many countries call the government departments that run social security or health the Ministry of Solidarity. Because state benefits represent solidarity. Between the sick and the well. Between the jobless and those in work. And, of course, between young and old. There are times and circumstances in life when the state should step in and transfer money from one group to another. Just as the childless pay for schools. The law abiding pay for the police force and the courts. And those without solar panels on their roof pay for those who do.

In summary, taking winter fuel payment and free bus travel away from richer older people would save relatively little, cost a lot in administration, increase poverty among the old, and undermine solidarity between the generations. 

NOTES

Women’s state pension age
Winter fuel payment is paid to people if they reach the state pension age for women in the September before the winter. Qualifying birthdates are listed here www.paullewis.co.uk/statepensionage/WinterFuel_AS.pdfthough of course it may not last for as many years as this theoretical table suggests! In England free bus travel begins at women’s state pension age – currently just over 61. London Mayor Boris Johnson has promised to bring the age down to 60 in London and it is 60 in Scotland, Wales, and Northern Ireland. The age for free prescriptions is 60 in England. In the rest of the UK they are free for everyone.

Payment abroad
The rules about paying winter fuel payment abroad have been changed following a European Court of Justice decision. The following paragraph was correct when written in June. New rules are blogged here http://goo.gl/lyl9I 

Anyone who has claimed the Winter Fuel Payment in the UK can continue to have it paid for life even if they move abroad to live in any EEA country – that’s the EU plus Iceland, Liechtenstein, and Norway – plus Switzerland. Some of these places – like the Canary Isles and Martinique – are very hot. In 2010/11 72,840 received it outside UK at cost of £15.6m, less than 1% of the estimated £2bn cost this winter. It is paid outside the UK because of European law and agreements. The only way to stop paying the WFP outside the UK is to change its nature – means-testing it for example.