The new government has defined its task as needing to take the ‘difficult’ and ‘unpopular’ decisions needed in order to address the £22bn fiscal ‘black hole’. Under the watchword of fiscal responsibility, decisions have been taken that have promoted a backlash and which early polls suggest the voting public feel let down over.
Chief among these is the decision to revoke pensioners’ winter fuel payments. The first thing Gordon Brown mentions in his oft-shared lift of achievements under the last Labour government, the winter fuel allowance was introduced in 1997 to tackle pensioner poverty – with Brown announcing that he was ‘simply not prepared to allow another winter to go by when pensioners are fearful of turning up their heating, even on the coldest winter days, because they do not know whether they will have the help they need for their fuel bills.’
A similar, emerging, issue is the rumour that Rachel Reeves might scrap the £2 bus fare cap.
Introduced by the last government to encourage people to return to public transport in the aftermath of the pandemic, the cap has provided a lifeline for poorly-connected communities and helped to maintain vital connections.
Backlash over cuts
Any cut is a bad cut, and cuts that directly impact people and communities are antithetical to any mission of equitable growth. Dan Tomlinson is right to highlight that our ‘fundamentals’ – housing, energy, transport, and infrastructure – need investment if we are to grow the economy. With housing, energy and transport put forward as economists’ key priorities in a recent ‘UK Growth Survey’, cuts to winter fuel payments (assuring warm homes) and the fare cap (assuring accessible transport) undermines this mission.
The backlash the government continues to face over winter fuel payments, which included a lost vote at party conference, was in some sense inevitable. But the response to both sets of floated cuts has missed addressing the fact that neither policy was good, or perfectly formed. The problem with both cuts more is that their removal is that they are essentially a case of cart-before-horse.
The winter fuel allowance is in essence a handout from the state to private energy companies to subsidise increased energy costs: people will spend more money on energy in the winter and the government makes more funds available to enable this.
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While some have supported the cut on the basis that there are some people wealthy enough not to need it to survive, this doesn’t negate the fact that people still need to use more energy in winter months.
The winter fuel allowance itself is, however, clearly not the most efficient way to keep pensioners warm during winter, and if – in an ideal world, were money not a factor – we were designing policy from scratch this is not where we would start. The winter fuel allowance has undoubtedly helped people stay warmer in winter, and played its part in cutting levels of pensioner poverty, but it neglects the fundamental issue: that our houses are incredibly energy inefficient.
If done right, Ed Miliband’s plans to invest £6.6bn to improve the energy efficiency of British homes and regulate to drive up standards for private and social landlords, should prevent the need for any winter fuel payments by making homes warmer and lowering fuel bills at source.
Sticking plaster policies
Similarly, the bus fare cap in most places simply means the state subsidising private bus companies in an unregulated market. This again is no one’s ideal policy solution.
Louise Haigh’s plans to extend bus franchising powers and end the ideological ban on municipal bus ownership could pave the way for the level and price of service needed to negate the need for the fare cap.
Both the bus fare cap and the winter fuel allowance are sticking plaster policies, used as temporary fixes to mitigate broader issues. They are absolutely vital for communities, but because they are being used to partially address broader issues that previous governments failed to solve.
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The problem with both cuts is as much Whitehall’s failure to consider how they would be felt on the ground, and the need to sequence decisions. Delaying both by a relatively short period – less than one parliamentary cycle – until longer-term policy solutions were brought in to address the underlying issues could spare many from a world of pain.
Whether rightly or wrongly, this speaks to is politicians and civil servants making policy in a vacuum without considering the full impacts of those decisions. That the intended savings from cutting winter fuel payments are thought to be negated by the increase in Pension Credit expenditure again speaks to this failure to devise policy from the perspective of those affected – not considering how people will be affected or how they will respond.
There is still time to walk back both decisions, to ensure that no one’s quality of life is diminished in the in-between period between now and houses being retrofitted or buses being brought into public ownership. The government absolutely should do this.
Going forwards from this, there’s clearly great need to end the Treasury’s dominance in policy-making, and to bring to the fore the impact on and involvement of communities in decisions.
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