The new government’s honeymoon period with the voters ended at 3.33pm on Monday 29 July. This was when the chancellor stood up to announce to MPs that all but the poorest pensioners would lose their winter fuel payments.
The politics of this announcement were pretty grim. It is one thing coming up with a package of cuts where everyone feels some of the pain but we are “all in this together”. It is quite another to make one group of voters feel singled out by the government. And the problem was made worse a few weeks later when Ofgem announced a 10% increase in energy bills for this winter.
Before a vote by MPs on the issue on Tuesday, the government has offered a three-pronged defence of its plans.
First, it will seek to drive up claims to pension credit, the low income benefit for pensioners, which in future will act as a “passport” to receipt of winter fuel payments. Second, it is continuing with support for local authorities via the “household support fund”, allowing councils to run local welfare schemes for those most in need. And third, it has pointed out that the state pension is set to rise by more than £400 a year from next April, based on the wage growth figures due to be published a few hours before the debate.
However, while many people might assent to the proposition that the “richest pensioners don’t need winter fuel payments”, far fewer would think that the right response is to take them away from everyone above pension credit levels, including those just a pound or two above.
Our analysis has looked at the 1.9 million pensioners shown in official figures as having household incomes below 60% of the national average – a widely used poverty line. Out of these, just 300,000 are in receipt of pension credit. This means that roughly 5 out of 6 pensioners in poverty are about to see a cut of £200 or £300 in their annual income.
Some of those below the poverty line who will lose out are people who would be entitled to pension credit if they claimed it but have not done so. So the proposed take-up campaign and plans for data sharing with local authorities are to be welcomed and I hope that anyone over pension age on a tight budget will put in a claim.
Unfortunately, while take-up campaigns come and go, non take-up remains stubbornly high. According to the Department for Work and Pensions itself, more than one in three of those who would be entitled to pension credit fail to take up that entitlement. This may be due to the complexity of the system, reluctance to share personal details with DWP or a perceived stigma associated by some with claiming state top-ups. For these reasons, none of the many publicity pushes over the last decade or more has really moved the dial.
There are other ways in which the bill for winter fuel payments could be cut without hitting so many pensioners living in poverty. Money expert Martin Lewis has suggested that the payments could be restricted to those living in lower value properties – council tax bands A to D – and this is a mechanism that the government has used before to target cost of living help. We find that this would protect all but 300,000 of the 1.9 million pensioners in poverty but would slash the amount of money which Rachel Reeves would raise to around £0.5bn.
The government’s huge majority means it is likely to get its way over this issue. But you would not want to be a newly elected Labour MP reading their email inbox over the next few days if it does.
Steve Webb is a partner at pension consultants LCP and was pensions minister 2010-15