An Ed Balls up on benefits for rich pensioners

I am used to David Cameron shooting from the hip with knee jerk, ill thought out policies to respond to public opinion but I thought that Ed Balls would be cleverer than that.

David Hencke is a British investigative journalist and writer

I am used to David Cameron shooting from the hip with knee jerk, ill thought out policies to respond to public opinion but I thought that Ed Balls would be cleverer than that.

Evidently not. His latest pronouncement promises to save £100m by withdrawing winter fuel payments from pensioners who pay higher rates of tax. Labour expected this to show they are being tough on the rich and offering savings. Actually it will do neither.

As a punter and pensioner who pays higher rate tax because my freelance earnings top up my pension I expected to be one of the people targeted by Ed Balls. In fact it will have zilch effect, a load of old Balls if you like.

Let me explain why. The fuel allowance is currently paid to individual pensioners with a cap of £200 per household. So for a start I only receive £100 of fuel benefit. The other £100 goes to my wife, also a pensioner, who is a standard rate taxpayer. So his planned saving will be halved anyway in my case.

But it is actually worse than that. My wife became a pensioner before me and was entitled to the full household fuel allowance in her own right. So when I was on The Guardian, our household was receiving then a £250 fuel subsidy for a short time. What will happen under the Balls changes is that my wife will get back the full benefit of £200 – so we will still continue to receive exactly the same subsidy.

I suspect I am not alone. I know of many people around me in the shires, where in traditional families of that generation the main earner is the male who may well pay high rates of tax. His spouse who brought up the children, and did part-time work instead, would be a standard rate taxpayer. These wealthy households will continue to get the subsidy.

Now Ed Balls could get round this by imposing a household cap equivalent to the income level set by the higher rate of tax. But if he does this he will run into fresh problems.

The text of his speech reads:

“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?

“We believe 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.”

If he does this he will have misled people in this speech because this would mean that two pensioners with say a combined income of £44,000 will lose the allowance – extending the cuts  right into the middle-income group – the so-called “squeezed middle”. Millions more people will be hit than Labour claims. Or he could change the entire tax system going back to household not personal incomes, which would be enormously costly.

This proposal seems typical of a metropolitan political elite. Ed Balls and Yvette Cooper are both high rate taxpayers – just like David and Sam Cameron – and would expect to be hit when they reach retirement age – probably 75 by then. But the rest of the country is nothing like that.

So Ed you have a choice. Unless you have a genuine breakdown of where you will get this £100m – perhaps the Revenue gave you access to their tax returns – you have got this wrong. Either it will raise much less than you think or you will have to remove the fuel benefit from far more people than you have said.

Back to the drawing board I think.

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