We have become familiar with a chorus of politicians and pundits insisting that ever-increasing public spending is “inevitable.” The only dispute is about whether this is to be welcomed or not. Socialists regard it as an advance of progress and equality. Conservatives lament it. “Believe me, I’m a small state, low tax Conservative but…” has been the refrain over the past decade from the latter cohort. They would appeal for deference. As Ministers of the Crown, they had great expertise, having gone through all the details with the most senior officials. Spending cuts were impossible. So we had to tax and borrow more. Anyone impertinent enough to persist with a specific proposal for a spending cut would be brushed aside. Either they could be told: “That would only save a billion pounds! That is merely a rounding error!” Or: “That would be fantasy! Imagine the outcry on the media, on the back benches, etc..”
The announcement this week by Rachel Reeves, the Chancellor of the Exchequer, that the Winter Fuel Allowance will cease being paid to all pensioners might appear to offer a case study to those sage commentators on just how tricky any spending cut is. Public spending is due to be £1,226 billion in this financial year. The Chancellor estimates that £1.4 billion will be saved by means testing the Winter Fuel Allowance. So not one per cent of public spending. Just over a tenth of one per cent of public spending. A rounding error! Yet it was also politically sensitive. Labour had no mandate for this cut – but had denounced such an idea.
The justification that only rich pensioners would miss out is also dubious. The old have their pride. Many regard the basic state pension as their due – but applying for extra benefits such as Pension Credit as demeaning. As putting themselves forward as charity cases. Aversion to bureaucracy and intrusive questioning is widespread – but form-filling can leave the elderly especially befuddled. Most of us have elderly friends or relatives we might find exasperating. But isn’t this cussedness rather admirable? At least from a Conservative perspective.
Guy Opperman, the former Conservative MP and Pensions Minister, says efforts were made to persuade them to apply. He tweets:
“I, DWP and other Ministers worked ceaselessly to drive up applications and take-up. We campaigned in a multitude of ways from advertising in post offices, media campaigns, letters to pensioners, letters to local papers and even enlisted Len Goodman.”
Age UK estimates that “800,000 who don’t receive the Pension Credit for which they are eligible.” Others would be just over the threshold but still struggle with heating bills.
The Chancellor would counter by blaming the Conservatives for leaving her an unforeseen “black hole.” She was whistling a different tune in her interview for the Financial Times on June 16th:
“Reeves admitted that — unlike previous incoming chancellors — she would be unable to arrive at the Treasury and claim she had looked inside the books and realised things were even worse than they looked from the outside, giving a flimsy excuse for immediate tax rises or spending cuts. “We’ve got the OBR now,” she noted, referring to the fiscal watchdog’s detailed and public scrutiny of the public finances. “We know things are in a pretty bad state,” she said. “You don’t need to win an election to find that out.”
To govern is to choose. The Government could have deported illegal immigrants to Rwanda – doing “whatever it takes” regarding our relationship with the ECHR, to ensure it took place. That deterrent has been ditched and so an asylum and immigration “pressure” of an extra £6.4 billion has been budgeted for. The Government has also agreed to an extra £9.4 billion in public sector pay – over and above inflation and without productivity improvements.
We also learn from The Times that the Government will be weak on welfare reform, ignoring the sensible advice of Alan Milburn, the former Labour Cabinet Minister. The stroke of a GP’s pen can declare someone has “limited capability for work” which means a much higher Universal Credit payment for them and any obligation to work is lifted. Mel Stride, the Work and Pensions Secretary under the Conservatives, had plans to toughen this up. Not just to save money but because keeping someone stuck at home on benefits is a strange prescription for better health. Labour has abandoned all that.
As David Miliband would have said in 2010:
“Your choice. Your cuts.”
Means-testing the Winter Fuel Allowance somehow manages to be feeble and brutal at the same time. I would prefer to get stuck into the Quangos – they spent £224 billion in 2020. Figures haven’t been released since then – which is a bit suspicious. Had it risen with inflation it would be £271 billion. Some spot checks I conducted suggest it is even more. Ever more subsidies being dished out and regulations imposed. Yet, Labour has announced new Quangos in the King’s Speech.
But let us stick to pensions. Lifting the shale ban would allow our energy bills to sharply fall. Fracking would not cost lives with earthquakes. It would save lives from being lost to hyperthermia. In the absence of this, I do not think that proud octogenarians, resistant to applying for “handouts”, should be forced to go cold this winter. Ending, or phasing out, the free travel perk would make more sense. If we want to make savings on the Winter Fuel Allowance it should be done on the basis of age to help those most vulnerable to the cold. For instance, only paying it those over 75.
A more significant change would be to raise the eligibility age for a state pension more generally. I’m due to start being paid it after my 67th birthday on January 11th 2033. Why? I think I should have to hold out until I’m 70. At present, we have 11 million pensioners, of whom nine million are over 70. I am not suggesting that those already aged between 66 and 70 should have their pensions cancelled. But we should phase out these pension for this cohort with a pretty rapid schedule – over the next five or ten years. We spend £141.6 billion a year on the state pension. If we didn’t pay it those under 70 that would save around 18 per cent of that bill so around £25 billion. In future years that would be a higher figure.
Of course, some 69-year-olds would be unable to work and so would be entitled to Employment and Support Allowance – just as 59-year-olds are or 49-year-olds. But it should not be a presumption that those over 66 are unable to work. Many pensioners do still work. Robert Jenrick told the Daily Telegraph that his father still goes to work every day in his eighties. That’s more the spirit one wants to encourage. But while being a recipient of the state pension is not a prohibition on work it sets a social pressure for retirement, a cultural assumption – often earlier than people would wish.
Choice and flexibility should be the pattern. Part-time working might suit some of us as we get older. But idleness is not the natural human fulfilment. Most of us yearn for the confidence and esteem that work provides. In the modern labour force that includes most of us in our sixties. A modern, sustainable welfare system should reflect that.
