Although I am a recipient of it, and have been ever since it was introduced, i think Rachel Reeves is quite right to scrap the pensioners' universal Winter Fuel Allowance. It has been a profligate waste of public money from the start.
I have no idea what the proportion is, but I suspect at least half of us, and possibly more, are very comfortably-off on a combination of our state pension, work pension and, in some cases, interest and investment income. We need this extra boost like a hole in the head. (At least one of my friends calls it his "wine wine allowance.")*
The people who do need the Allowance, and indeed much more, are those who are dependent on the state pension alone. However, M/s Reeves has decided to limit it to those receiving Pension Credit (for which a lot of those entitled to it don't apply) or other benefits. Critics, quite rightly, say this is not enough.
To me the simplest solution would be to continue to pay the Allowance to any pensioner whose total income is below the income tax threshold. In other words, not to pay it to pensions like me who do pay income tax. The Treasury already has the information: there is no need for the dreaded "means testing."
At the moment the "personal allowance" or amount of income we receive tax free, is £12 500 per year.
The "New" state pension is just below that threshold at £11 502 per year
The "Old" state pension is well below it at £8 814 per year.
So all would be covered.
If the saving gained by not paying the Allowance to the comfortable is considerable, then the amount for those who do need it could be increased.
In the long run the source of the problem is that state pension in the UK is woefully low by international standards. It France it is above the equivalent of £18 000 a year, in Spain a whopping £32 000. Like so much else we need a root and branch reform of the way we finance our pension provision so that all are assured of an adequate income in retirement. This would need something like a Royal Commission and could include consideration of a Universal Basic Income.
* Nor do we need the extra £10 at Christmas which dates from the days of Sir Alec Douglas-Home (he called it a "donation") and stilt less the extra 25p per week we get when we reach 80, but the Treasury still sends them. What does it cost to administer these bonuses?
In the long run the source of the problem is that state pension in the UK is woefully low by international standards. It France it is above the equivalent of £18 000 a year, in Spain a whopping £32 000.
ReplyDeleteIs that why France has a public-debt-to-GDP ratio of 111.79% (97.43% in 2019, so before lockdown effects) and Spain of 111.62% (98.22%), compared to the UK’s still-bad-but-not-quite-so-catastrophic 97.6% (80.3%)?
If the saving gained by not paying the Allowance to the comfortable is considerable, then the amount for those who do need it could be increased.
ReplyDeleteNo, it can’t, because Mrs Reeves needs every penny of those savings — and more — to pay for the massive raises just granted to teachers, doctors and train drivers, plus any other union who, having seen that all they have to do is threaten to strike and the Labour government will obligingly throw massive amounts of taxpayers’ money at them, decides that want a bite of the action.
So our public debt is in the same range as that of other major economies after dealing with the 2008 Crash and the COVID Pandemic and, at just under 100% of GDP, is perfectly manageable if dealt with prudently (as was the 250% or so after the Second World War.)
ReplyDeleteis perfectly manageable if dealt with prudently
DeleteOurs is, yes. But France’s and Spain’s certainly isn’t. So why are you calling for us to emulate their imprudent policies, instead of prudently cutting our public spending to match our cloth and bring the ratio down?
Because it isn't necessary.
ReplyDeleteBecause it isn't necessary.
DeleteLiving within our means isn’t necessary? Well, I suppose if you don’t mind destroying the prosperity of future generations by selfishly piling debt upon them to maintain your unrealistic standards of living it’s not, no.
Provided we are able to service the public debt, which is the case at the moment, then it would be foolish to neglect more urgent priorities (care of children, investment in clean energy) in order to reduce the debt.
ReplyDeleteProvided we are able to service the public debt, which is the case at the moment
DeleteWhere on Earth did you get the idea that we are able to service the public debt? We aren’t. Last year the debt increased by 4.4% of GDP. As our GDP is basically not growing at all (maximum of about 0.5% per annum) that means that every year our debt position is getting worse. If we were able to service our debt then the debt-to-GDP ratio would be shrinking, or at least staying stable, not growing.
We, as a country, are living beyond our means and have been for many years; we need to realise that we can’t continue to do so and cut back on public spending.
(And I mean actually cut back, not do what the lying Mr Cameron and Mr Osborne did and say they were cutting back while actually increasing real-terms public spending every year they were in power)
I read in the paper this week that Lloyds Bank are now offering mortgages at 5.5 times a person's income. That means that their debt to income ratio would be 550%. No problem provided they can continue with the payments. A Debt:GDP ratio is peanuts by comparison. Hence the post-war Attlee government were able to establish the NHS, introduce Family allowances etc. whilst successfully servicing a public debt of 250%
ReplyDeleteI do agree with you, however, that the country is "living beyond its means, internally by privatising our public assets and externally by allowing our assets (including the public ones but also firms like ARMS - read Will Hutton in last week's Observer - to foreigners. A sad legacy of Thatcherism which I hope the present government will reverse.
No problem provided they can continue with the payments
DeleteWhich, as I pointed out, we can’t, because if we could then our debt-to-GDP ratio would be staying stable or decreasing. Instead it is increasing, which means we cannot keep up with the repayments — in effect, we are continually borrowing more just to pay off the interest on the debt we already owe. That is not sustainable.
If Lloyds want to lend recklessly to people who can’t afford the loans, that is up to them — that is what caused the financial issues in 2007-8, so it’s not like it hasn’t been done before. Hopefully this time when their loans turn out to all be bad they will be allowed to go bust, instead of having taxpayers’ money wasted on bailing them out.