Means-testing pensioner entitlements: good economics, bad politics

Taking away the entitlements of wealthy pensioners may be good economics, but it would be incredibly risky for the Tory party.

George Osborne

George Osborne will deliver a speech today in which he will stress the need for a further £25 billion in cuts. 2014 will be a year of “hard truths” he will say:

“The year when Britain faces a choice. Do we say: ‘the worst is over; back we go to our bad habits of borrowing and spending and living beyond our means – and let the next generation pay the bill’? Or do we say to ourselves: yes, because of our plan, things are getting better.”

The big question, then, is where Osborne will swing the axe to find the £25 billion in savings he is after.

Understandably, the government has been asked whether it plans to cut pensions or pensioner entitlements.

Almost half (47 per cent) of UK benefit spending currently goes on state pensions – more than the £48.2bn the UK spends on servicing its debt. That figure is likely to increase as the population turns increasingly grey, with half of those born after 2007 expected to live to over 100. Between 2010 and 2030 the number of people aged over 65 will increase by a staggering 51 per cent.

However the Tories have already promised to retain the so-called triple lock on state pensions until at least 2020 if they remain in power, meaning the state pension will continue to rise with inflation, wages or 2.5 per cent – whichever is highest.

As for the entitlements that every pensioner gets, these are:

£616 million for the free TV licence for over-75s; £2.2 billion for winter fuel payments; and £1.2 billion for the free bus pass.

There has been some speculation this morning as to whether the government is to scrap some of the benefits for wealthy pensioners in order to help find some of the £25 billion in cuts Osborne is after. This is in part due to David Cameron’s performance on the Today Programme yesterday, when he appeared unclear as to whether the government would commit to retaining the perks after 2015.

Downing Street has come out today, however, and said that it is ‘minded’ to protect free bus passes, TV licences and the winter fuel allowance  from means testing until at least 2020.

Despite the headline on the front of today’s Mail about ‘Turmoil over OAP benefits’, this should surprise no one. What is odd is that there were apparently senior figures in the cabinet who supported the idea of means testing. Both work and pensions secretary Iain Duncan Smith and the chancellor George Osborne are said to have wanted to look again at entitlements for wealthy pensioners.

The economic case for getting rid of some of these perks is a sound one: do millionaire pensioners really need free TV licences subsidised by those whose living standards are in stagnating or worse? There is certainly an argument to be had over the principle of means testing – i.e. does it undermine the welfare state? – but it would seem naive to think the Tory party was particularly worried about that.

No, the reason there will be no pledge to means test pensioner entitlements in the 2015 Tory manifesto is very simple: pensioners vote. Or at least they are more likely to vote than younger people.

More than seven in 10 of those aged over 65 voted in past two elections, according to today’s Times. This compares with just four in 10 of those aged 10 to 24. 40 per cent of over-60s will also vote Tory, according to YouGov.

Taking away the entitlements of wealthy pensioners may be good economics, but it would be incredibly risky for the Tory party; especially when it has been revealed by new polling that 37 per cent of 2010 Tories would not vote for the party if there was an election tomorrow. Of course David Cameron is ‘minded’ to retain perks for wealthier pensioners: he wants to win the 2015 General Election.

There is also a lesson for young people here: if more of us voted, perhaps we’d get as many ‘perks’ as pensioners. Hear that Russell Brand?

8 Responses to “Means-testing pensioner entitlements: good economics, bad politics”

  1. Kathryn

    “This compares with just four in 10 of those aged 10 to 24.”

    LAZY TEN YEAR OLDS…not bothering to vote in elections they aren’t eligible to vote in for another 8 years.

    Weird choice of age group.

  2. JustSayin

    How many wealthy pensioners get on a
    bus? Means testing only results in a new paper shuffling department. Bus passes
    get pensioners to shops where they can spend all that money they are said to
    have. Economy boost all round. #MakesSense

  3. BarryE

    As more and more people continue to work after reaching Pensionable Age, should we/they continue to not have to pay National Insurance?

  4. swatnan

    Why just Pensioners? Means Test everyone.

  5. treborc1

    OK lets look at that one again, means testing people is expensive you have to have people sitting in offices going through bank accounts and looking for cheats, and it actually saves nothing at all, that’s why the decision was taken to give benefits universally because means testing has always cost more then it was supposed to save..

  6. sarntcrip

    if you are on working age benefits yu are means tested it’s fine to means test disabled adults below retirement age but not pensioners it’s more divide and rule

  7. sarntcrip

    god forbid the government might employ somebody what a terrible thought!
    i’m 50and have been disabled 16 years couldn’t work if my life depended on it only wish i never had to stop if means testing is good enough for me its good enough for everyone
    tories don’t like it because they don’t want people to know what they have

  8. vic

    means testing is utter nonsense introduced by labor as a covert bribe to attract votes from immigrants and every dick and harry in the street who are professional DSS people sitting at home doing nothing and looting the British treasury in their tens of thousands every day. Pensioners do not need government election bribes and perks but minimum state pension of £12,000.00/annum to get along with their daily lives. After all pensioners made contribution to social security througout their working lives. clearly, the ruling elites are a total fraud defrauding the pensioners with cheap perks.

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