Why Labour is right to abandon Winter Fuel Allowance for rich pensioners


8:10 am - June 3rd 2013

by Sunny Hundal    


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Shadow chancellor Ed Balls is to make a speech this morning, which is broadly an pre-emptive assault on the upcoming Spending Review by Osborne.

Extracts were sent to reporters last night. Part of his speech is about pointing out the difficult situation Labour will be in 2015 if elected:

At the time of the 2010 Spending Review, the Office for Budget Responsibility forecast that the deficit would fall to £18bn in 2015-16. It is now forecast to be £96bn – that’s £78bn higher, even with the further deep cuts in public spending which the Chancellor has programmed in for 2015-16.

And this means that, because this Government’s austerity economics has failed, we will have to govern in a very different way and in circumstances very different to what we have known for many years. We will inherit a substantial deficit. We will have to govern with much less money around. We will need to show an iron discipline.

But his team also highlighted this part which says Labour would means-test the Winter Fuel Allowance:

When our NHS and social care system is under such pressure, can it really remain a priority to pay the winter fuel allowance – a vital support for middle and low income pensioners – to the richest 5% of pensioners, those with incomes high enough to pay the higher or top rates of tax?

About bloody time. In fact I wrote just 5 weeks ago that Winter Fuel Allowance (plus other benefits) for rich pensioners should be cut.

The Labour leadership is right to do this and I’ll happily reiterate why.

1) There is no evidence that offering universal pensioner benefits preserves support for universal benefits more broadly. Basically, people support benefits they get, but not other types of benefits such as for the unemployed or low paid.

In other words, supporting universal pensioner benefits does not preserve support for the principle of universal benefits more broadly. So I don’t see what’s the point of defending the principle in every single case.

2) Not every form of social security needs to be universal. Conservatives and left-wing critics say cutting rich pensioner benefits will save little – but this is likely to explode over coming years as the population ages and immigration falls. It will soon be a substantial amount, and it will have to be paid for somehow.

3) As I’ve said before, the left should move away from cash benefits to other forms of universal support which enjoy broader support. A better funded social care system for example would be a much better alternative.

The evidence shows that even as universal benefits have increased recently, support for them continues to fall. The Left has to start think of alternatives.

Let me reiterate two points again

I like universal benefits. I would just prefer focus on other kinds of benefits rather than cash hand-outs to rich pensioners.

When people say that means-testing would reduce support for the principle of universalism in other areas, I say – you are wrong. There are no evidence to support that.

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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


At the time of the 2010 Spending Review, the Office for Budget Responsibility forecast that the deficit would fall to £18bn in 2015-16. It is now forecast to be £96bn – that’s £78bn higher, even with the further deep cuts in public spending which the Chancellor has programmed in for 2015-16.

So if you don’t pay those with incomes high enough to pay the higher or top rates of tax? – how much will you save once you’ve deducted the additional cost of administering and managing the new means test?

This is rather important.

So Osborne’s austerity has resulted in a flatlining economy according to Balls therefore `obviously’ what’s needed it turns out is more public spending cuts and ones that will cost more to implement than they will ever save. And these are not cuts to fund tax cuts to boost private spending but to pay bankers debts. At least the Tories pretend they have a plan. Does Balls think the public came down with the last shower? There can be only one reason for this move by New Labour and that is to introduce the principle of means testing across the board for all benefits with the ultimate prize being means testing for health services. New Labour will be no different from this Coalition and until the left puts an alternative programme instead of tail ending these anti-working class scum then sub-Tory New Labour governments is the best the poor, sick, young, old, disabled and working class can hope for.

It’s probably the right thing to do, but it’s a drop in the ocean isn’t it? If you’re still paying WFA to 95% of pensioners, while means-testing all of them, the maximum you can save is a bit over a billion, less what it costs to means-test everybody.

3 – as ever my maths is execrable. Apparently the proposal saves something in the region of £105m a year, which really is peanuts in the grand scheme of things.

@1 cannot be stressed too highly. Creating the mechanism for means testing could easily wipe out any savings unless the plan is to extend the means testing to other areas.

If it has to be done, recovering the money through the tax system is the way to do it.

What an utterly feeble speech from Balls. Still none of the determination to make the fundamental reforms that this country needs, just more Tory-lite tinkering. The whole opposition has been feeble. Despite a weak, insane, lying and incompetent government the Labour party makes no effort against open goals. It all stems from Ed Moribund, desperate for Balls to appear financially prudent and for Cameron to become so repellent to the electorate that he loses the election, rather than Labour winning it by actually working at convincing the electorate that it has the right policies. Can anyone but a politics junkie actually name five members of the Labour front bench?

6. Baton Rouge

New Labour’s opposition to the Coalition’s spending cuts was always based on pure populist demagoguery but now they have abandoned that in favour of joining Osborne’s attack on universal benefits (means testing hurts only the poor) – an attack that had all but stalled due to opposition from … Tory voters who may have been thinking of coming over to Labour rather than loose their fuel allowances or bus passes or free health services. The correct position would have been to demand that the austerity that is needed due to the loss of taxation from the bankers’ failed Ponzi Scheme and the multi-trillion cost of the subsequent bail out falls on the shoulders of those who are able to sustain it and on those who are morally culpable in the bankruptcy of the UK state: the millionaires, billionaires, bankers and corporations. Balls, in rejecting his own previously ridiculous Keynesian demagoguery, may well have just cost Labour the next election.

7. gastro george

Let’s face it, this is just short-term tactics and news management, isn’t it?

The Labour leadership, under pressure from the endless stream of media stories about the need for Labour to “re-think welfare”, have caved in and decided that they needed to have something on the table. So this is what they have come up with – purely to try to defuse the media/Westminster bubble hype.

The administrative cost of means-testing any support (be that financial, health care, etc.) is always sizeable. It was one of the reasons that National Assistance (later Supplementary Benefit, later Income Support, later Universal Credit) has to be continually repackaged and rebranded with less and less discretion available to ensure resources genuinely go where they’re supposed to.

Beveridge saw this coming. But we don’t live in the 1940s any more, and we need to adapt our thinking. I want to know how much the administration of this would cost, and how “clawback” (i.e. taxing richer people so that they in effect pay the money back) might work better.

While “public support” has to be a factor in developing policy, just because the public support it doesn’t mean it’s a good idea. If the Labour Party were truly brave, they would shamelessly raise taxes on rich pensioners to preserve the fuel allowance, and explain exactly how and why this is a good thing.

Instead, we only provide aid to the poorest, enhancing the stigma on being poor, and making people think that benefits are something only “other people” get – eroding support for the welfare state still further.

Instead, we only provide aid to the poorest, enhancing the stigma on being poor, and making people think that benefits are something only “other people” get – eroding support for the welfare state still further.

Yes, except we DO offer a lot of universal benefits… and as I’ve repeatedly pointed out, trying to encourage support for other universal benefits by paying pensioners WFA is a futile exercise.

It just doesn’t work. I wish people would actually read the piece properly. :'(

This is the type of thing that makes me weep for the moribund Left. Christ how did we get this low and bereft of any common sense? Have we come to hate pensioners so much that we are unable to see the blinding obvious banana skins here? Sometimes we step on landmines that the Right have planted, but, the funniest prat falls are the one we actually set up for ourselves. We have made ritual public suicide a spectator sport, but this one takes the biscuit.

There are a couple of glaring problems with means testing previously universal benefits. First is the cost of the actual means test, in this case to catch out the small numbers of ‘rich’ pensioners, and secondly the inevitable and hugely embarrassing anomalies it throws up.

So, we want to install a fully fledged bureaucratic nightmare to administer a system that amounts to about four quid a year, per pensioner? Seriously, why has that managed to get passed the first hurdle?

Sunny, the complete failure to spot the second of these issues could be overlooked if it were not for the fact we saw the Tories getting into a complete mess with child benefit. We saw what happens when you write your policy on the back of a fag packet and then throw the fag packet in the bucket, just to make sure. For weeks we saw the Tories batting away googlies from all comers because no-one in the Tory Party could foresee a two earner family getting benefit while a one earner family struggled. The Tories rode that one out thanks to a rather lackluster opposition, however, the Left would get no such respite. The one thing the Right are good at is exploiting weakness in a policy.

Would the Left really be able to withstand an onslaught of pensioners who lose out for the sake of a couple of quid here and there? Are we really going to see a low paid works pension excluding people from a free bus pass or a winter fuel payment of two hundred quid? The sister losing out because she shares a house with a brother or whatever? Are we really that fucking mind blowingly stupid to think we are capable drawing up a system that would be fair? Nothing I have seen in the last five years has shown me that the Left are anything other mind numbingly incompetent. Christ, this is shower that ‘designed’ the ATOS debacle and now they are attempting to take away winter fuel payments from undeserving pensioners, without harming those in real need. Yeah, good luck with that, hopefully we Scots will be independent before you guys can do any real damage.

These winter fuel payments were designed to be universal for good reasons, perhaps you get the notes out to find the reasons why that was.

These winter fuel payments were designed to be universal for good reasons, perhaps you get the notes out to find the reasons why that was.

For Jesus Christ’s sakes. I have pointed out repeatedly in my piece that there is no evidence to show that the ”universal’ bit does not bring the benefits you think it does.

And yet no one has actually bothered to engage or discuss the point… instead I get pointless waffle about how the Left is fucked.

I’ll say this – the Left is more fucked if we rely on dodgy evidence and baseless emotional arguments than a clear understanding of how our money is being spent.

12. John Ruddy

Glad Tim J thinks £105m is peanuts and not worth doing.

Since thats roughly what the Bedroom Tax will save, how about we dont bother with that?

13. ex-Labour voter

When is Ed Balls going to announce that Labour will abandon Trident replacement and save about £25 billion in procurement costs and at least £2 billion a year on running costs?

Glad Tim J thinks £105m is peanuts and not worth doing.

You mean the bit where I said “it’s probably the right thing to do”? Remedial English for you; remedial maths for me.

“There is no evidence that offering universal pensioner benefits preserves support for universal benefits more broadly. Basically, people support benefits they get, but not other types of benefits such as for the unemployed or low paid. ”

It is not about popular support. It is about inconveniencing misguided, deluded and ambitious politicians as much as possible before they can succeed in something malevolent. What did the Equality Act do for popular support for equality? Since it became law, it has done nothing to affect public support of the disabled in the face of marginalisation and unofficial hate crime. It’s still a good law though, hence the desperation of the Coalition in trying to destroy it. It ties their hands, making much of their actions illegal unless it is first changed(something made easier by the fawning pathetic news media).

Means-testing is not targeted at the rich- it is targeted at everyone in the claimant group, even those who pass are targeted. This lesson should be obvious from the ESA/WCA debacle that everyone treats as a pantomime and not an atrocity. Where does it end? Let’s assume that the mechanism for recovering this money uses administrative data that is already in place and it’s simply a matter of ticking an extra box on a screen, minimum fuss and the recipient never even notices. The law is changed and it will be impossible to reverse: a tiny sum has been saved, but the statutory instrument is now there to ramp it up the next time someone thinks they need to make a real saving.

We could not have had the WCA without first having the PCA. We could not have had £9,000 tuition fees without first having tuition fees. We could not have had Iain Duncan Smith’s replacing of statutory entitlement with ‘whatever the secretary of state sees fit’ without JSA providing the instrument for the jobseekers agreement. Small tokenist gestures have served politicians for years in providing the initial mechanisms for much worse things later.

Deselect Balls

Whilst I support Ed Balls’ proposal for the winter fuel allowance restriction in isolation, it was perverse the the Labour Party’s finance guru, on Newsnight tonight, knew the saving was £100m but did not know what proportion of the deficit that was – an alarming piece of arithmetical incompetence (it’s about one thousandth). Or about one ten thousandth of the debt.

And no doubt it will cost to administer … so given that its effect is proposed to be congruent with the higher rate tax threshold, why doesn’t he simply propose to lower the 40% tax band for pensioners by £1,000 thus collecting an extra £200 tax. The system for doing that is already in place (so little admin cost) and, for those at the 40% margin, the effect will be phased in – which it won’t be via the winter fuel allowance removal.

Adding my voice to that of Chris’s:- Deselect Balls

Is this really all they can do? I bloody despair.

Suuny,

Sunny, the problem is that when you start to means test, you end up with anomalies. Not only that, but if you want to reduce those anomalies you need a more complicated system and collect more information and that discourages take up, thus defeating the purpose. The winter fuel allowance was supposed to address a simple issue and should be as simple as possible and really deals with small sums of money given to pensioners. Once you introduce means testing, you will eventually salami slice away until it is scrapped entirely.

It is the same with child benefit, once you unpick the universal element, you will eventually kill it off because the principle is broken, it only a matter of time the next salami slice is removed, and so on.

Think back to the introduction of prescription fees. I remember when it was all of twenty pence and by the time we scrapped them in Scotland they were £6.40 or something. However, there were huge anomalies. Some chronic conditions where covered and arguably worse conditions were not. No doubt at some point, Scotland will re-introduce prescription charges and with it they will re-introduce glaring anomalies. Oh, I dare say, that the first principle will mean that we will endeavour to confine those charges to the rich, but people will eventually find that they are paying for medicine that other people in similar circumstances do not.

I do understand that when dealing with complicated systems and conditions we will need a complex system of means tests and that is fair enough, but things like childbirth and reaching pensionable age are simple to understand. Even if some of that money goes to ‘rich’ people what is the harm? Far better that the odd rich pensioner gets two hundred quid to spend on a Mexican beach, than five OAP die of hypothermia?


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