Abandoning the winter fuel allowance for a mere £100 million: why bother?

Ed Balls is currently making a speech in which he will effectively renege on previous Labour Party statements that universality remained a "part of the bedrock" of the welfare state.

Ed Balls made a speech today in which he effectively reneged on previous Labour Party statements that universality remained a “part of the bedrock” of the welfare state.

In the speech at Thomson Reuters, Balls asked:

“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 per cent of pensioners, those with incomes high enough to pay the higher or top rates of tax?

He continued:

“Labour believes the winter fuel allowance provides vital support for pensioners on middle and low incomes to combat fuel poverty. That’s why we introduced it in the first place. But in tough economic times we have to make difficult choices about priorities for public spending and what the right balance is between universal and targeted support. So at a time when the public services that pensioners and others rely on are under strain, it can no longer be a priority to continue paying the winter fuel allowance to the wealthiest pensioners.”

Removing the winter fuel allowance from wealthy pensioners does three things. It will save a prospective Labour government £100 million; it will further erode the principle of universality; and it will take money from a section of the population that is far more likely to vote than any other at the 2015 election.

Understandably the Labour Party is trying to persuade the public that it is capable of making tough and unpopular choices should it win the 2015 election. Voters still don’t trust the party on the economy and no doubt part of the intention here is to combat the idea that Labour will be profligate with public money should it win office.

Yet there are a number of reasons why the move is potentially problematic. The first, as Mark Ferguson asks over at Labour List, is whether the principle of universality is worth abandoning for a measly £100 million. This is a relatively tiny sum in the grand scheme of things, and with it already being a struggle to win over young people to the principles of the welfare state (see this week’s leader in the Economist), is it really wise to embark on the potentially slippery slope of undermining universality among older people too?

It’s also hard to see how this is clever politically. There are of course people who think anything ostensibly “tough” is good politics; but hitting the demographic that is most likely to turn up to the polls in 2015 with a measure that takes money out of their pockets is comparable to confronting the school bully on your first day: it may be “tough” but it’s also very silly. This is one of the reasons David Cameron rejected the move to limit winter fuel payments to poorer pensioners – he believes it would lose him votes at the 2015 election.

People do like firm politicians who “don’t shy away from the difficult decisions”, but this generally requires that politicians are tough with other people and that they make decisions that don’t make them poorer (or in this case less rich). I’m not entirely sure how much people like “iron discipline” when it isn’t reserved solely for someone else.

9 Responses to “Abandoning the winter fuel allowance for a mere £100 million: why bother?”

  1. LB

    The problem is that you are going to have to make 2,000 such cuts just to get the short term cash flow right.

    Given the borrowing has to be repaid on top, with interest, you need to multiply that by 4 or 5 times.

    That ignores the pension debts.

    You won’t make those decisions. Neither will the Tories or the Lib dems.

    So the decisions will be made for you. You will end up defaulting on the pensions

  2. Colin Melville

    “Demographic” is an adjective, not a noun.

  3. David Moss

    It’s interesting and telling that this particular aspect of the benefits system is thought of as a locus of “universality.” Compare a young person who can’t afford to pay for their heating (or to eat)- their hardship payments are not considered something that properly ought to be universal or automatic. A winter fuel allowance seems obviously the sort of thing that one ought to receive only if one could not otherwise pay for fuel. Otherwise it doesn’t even seem to be a fuel allowance, so much as a perk for old people.

    As to “universality”: the valuable thing about the concept is ensuring that all people are entitled to benefits (should they need them) regardless of whether they’ve contributed in the past, thus ensuring that the poorest get what they need even if they’ve not been able to contribute anything themselves. The project of “universality” conceived of as giving benefits to the most affluent voters in order that they’ll support the benefits system is dead: voters are prodigiously able to both decry the cost of the benefits given to ‘scroungers,’ while insisting that their own bus pass/pension/child benefit etc. are entirely deserved.

  4. Bill C

    Interesting that the word socialism does not appear in any argument against Ball’s attack on universality. Labour really has lost its roots.

  5. Sparky

    Ed Balls also claims that Labour would have an “iron discipline” on spending! Laughable.

  6. don gately

    what principle of universality – the main principle behind the welfare state as it was concieved was the contributory principle, not universality.

  7. Terence Godfrey

    Until (at least) Ed Balls goes, no thinking person will take Labour seriously – he is too tainted by financial mismanagement during Labour’s term in office.

  8. George Hallam

    “As to “universality”: the valuable thing about the concept is ensuring that
    all people are entitled to benefits (should they need them) regardless of
    whether they’ve contributed in the past, thus ensuring that the poorest get
    what they need even if they’ve not been able to contribute anything themselves.”

    The problem with many of the people that need benefits is that they are less likely than the average person to claim are the benefits to which they are entitled. (Why is this? Perhaps those who need benefits tend to be disadvantaged in some way or other?)

    Consequently, “targeting”, through allowances, means tests etc., is that it is either ineffective (it will discourage those in need from claiming while continuing to help the relatively well-off), or inefficient (it will require considerable additional resources to reliably reach the needy and exclude others).

    The reasoning behind “universality” is not that it is ‘fair’ (whatever that is) but that it is the most administratively efficient way of ensuring that all the people need that need a benefit gets it. Take-up by the target group is extremely high, administrative costs are low. Of course, there is an extra cost but this if it is recouped through progressive taxation then it happens automatically. Unlike means testing, this is just a book-keeping exercise of changing the tax rate, since the tax system exists anyway.

  9. David Moss

    I agree that *if* people had to make an onerous novel application for WFB that might put off the most vulnerable from applying for it (which would be bad). I’m not sure that’s required though. What’s proposed here is just giving it to everyone apart from the very richest: it’s not clear that everyone would need to make a new application for WFB to administer this. Similarly *if* the cost of targeting the benefit were to be greater than just giving it to everyone, then I’m all for giving it to everyone. I would not defend doing so on the basis of any value attached to “universality” though (which is what *this* article was about).

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