By Polly Toynbee, The Guardian.
Scrapping the so far universal benefit for millions of pensioners means money can be diverted to those who need it most
That sounded like a totemic cut, one that everyone could understand. She cut old folk’s winter fuel allowance! Is it like Margaret Thatcher, milk snatcher, abolishing free school milk? No, not at all. In the budget, the chancellor, Rachel Reeves, will need to make sure that poorer pensioners are better protected with improvements to pension credit, but the winter fuel payment was always a misbegotten benefit.
Here’s its history: in the early days of New Labour, the government stuck to its needless pledge to follow every jot and tittle of Tory spending policy. Ken Clarke, the former chancellor who had set those eye-watering plans, laughed out loud and said he had never intended to stick to them himself.
Pensions were miserably low, so Gordon Brown added the winter fuel payment in 1997 as a bung to soothe the problem without interfering with the benefit uprating system. The payment was an oddity, a universal tax-free bonus. You didn’t have to spend it on fuel and very rich pensioners got it, too. Good people often donated it to charity at Christmas. Less good folk did as the Spectator editor, Fraser Nelson, recently described: “A millionaire I know has a tradition every year: he buys a bottle of vintage wine with his winter fuel payment and invites friends to drink it. His point is that it’s ludicrous that people like him are given handouts by the government.”
Universal benefits, in theory binding everyone to support the social security system, often have the opposite effect, confirming (wrong) opinions that benefits are wildly extravagant. That’s why there was no pushback when the Tories cut child benefit for those earning more than £50,000. Reeves saving £1.5bn a year by removing the winter fuel allowance in England and Wales is a sensible cut, while still giving the payment to the poorest, those on pension credit.
Pension credit came in after pensions blew up. In 1999 inflation was exceptionally low, delivering the princely sum of 75p a week extra on the state pension. There was outrage all round: faux outrage from Tories who had left pensions so low, but genuine shock from many voters. Pensioner poverty was in the spotlight, when pensioners as a group were poorer than the rest of the population: throughout history, to be old meant you were more likely to be poor. So pension credit was announced in 2000, alongside tax credits that improved all benefits.
As ever, the last Labour government left pensioners considerably better off. A million pensioners were taken out of poverty by 2004, so that for the first time in history, pensioners as a group were better off than the working-age population. The current full state pension of £221.20 a week, though not much, does lift pensioners above the poverty line (60% of median income). Under the Tory triple lock, their benefits rise when children’s fall. The Tories were duly rewarded with the pensioner vote (43% of the over-65s voted Conservative in last month’s election, compared with 5% of those aged under 25).
However, averages stink in this grossly unequal country, and 2 million pensioners are still poor. An alarming one in three of those entitled to pension credit don’t claim it. Reeves promises a campaign to find them: credit is the vital gateway to housing benefit, council tax support and free TV licences. But claiming is difficult and take-up campaigns have failed in the past. It’s hard to understand why, when the state knows where every pensioner lives. In addition, Reeves needs to raise the threshold so that more people are entitled to pension credit, taking from richer pensioners to give to those who are poorer.
Reeves was also right to scrap the never-fulfilled social care promise the Tories have been making since 2011, when they commissioned Andrew Dilnot to answer the wrong question: how do we support those with property and assets so they don’t spend their children’s inheritance on their own old-age care?
It was going to cost near-bankrupt councils £4bn to ensure no asset owner spent more than £86,000 on care, except the Tories delayed and delayed, because they never put funds aside. The right question, which Labour will have to answer before too long, is: how do we create and pay for a national care service staffed by people on the same pay and career path as the NHS? It’s urgent, as Age UK reported that 28,655 old people died in 2022-23 waiting for care they never received.
Take a step back and consider the state of the nation. This is essentially a threadbare country with a small cadre of the very rich distorting all averages. The median salary for full-time employees, at which half the population earns less, is £34,963. That makes the poverty line low. Forget talk about the UK being “the sixth richest country in the world” when it only ranks 27th in terms of GDP per capita. Most people have little idea where they stand on the earnings scale, with the rich and poor tending to put themselves too near the middle. This IFS calculator will tell you your place, and every voter should check it, so the rich understand their wealth and the rest understand the injustice.
A third of British children are poor, so poor they often don’t have enough to eat. The two-child benefit cap is a scandal that Labour is bound to remove. Children’s services were the first to be stripped away after 2010. As Reeves prepares the country for tax rises in her first budget, all ministers should keep spelling out the basic reasons why our for-ever history of paying less tax than equivalent west European countries has left us behind them on every scale.
Labour is right to cut benefits that look wastefully untargeted, to tax and spend better on the benefits and public services for the neediest. And children must always come first.
