The weekend debate: should benefits for pensioners be restricted?

Here’s your starter for ten in our weekend slot where we throw up an idea or thought for debate…

Nick Clegg and Iain Duncan Smith have both been arguing within the government for rich pensioners to have their benefits cut:

Nick Clegg is backing calls for cuts in pension benefits such as winter fuel payments and free bus passes. David Cameron is said to be adamant that the Tories should keep to a pledge made before the general election that the payments remain. But Clegg is understood to have told colleagues he wants the winter payments and free TV licences cut for all but the poorest pensioners in a bid to cut government spending. The deputy Prime Minister’s opinion follows calls for cuts yesterday from work and pensions secretary Iain Duncan Smith. He wants to reduce the £5bn bill for elderly benefits, which includes the likes of free TV licences and prescriptions, free bus and Tube travel and NHS eye tests.

Agree? Disagree? Post your comments below…

* Mark Pack is Party President and is the editor of Liberal Democrat Newswire.

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44 Comments

  • Steve Bolter 9th Jun '12 - 9:38am

    Nick Clegg is wrong about bus passes for pensioners, both practically and politically.

    Bus passes, even for those not in poverty, encourage car owners to leave the car at home and take the bus (even some of the really rich take the bus to get their money’s worth) which:-
    – reduces fossil fuel consumption and CO2 emissions;
    – reduces congestion;
    – promotes social cohesion (and gives politicians a chance to hear ordinary folks’ conversation);
    – saves car park space;
    – reduces accident s by taking some of the infirm and less alert off the road;
    – helps make bus services viable by proving extra off peak usage and thus
    – makes buses available for those too young to drive and those of all ages who cannot afford a car or are medically unfit to drive

    Without bus passes for all:-
    – government would have to provide for the extra car traffic and provide bigger direct public transport subsidies;
    – there would be a social stigma for those having a pass meaning that
    – some people who needed them would not apply.

    Without universal bus passes, winter fuel allowances and TV licences:
    – the testing would not only have to cover means, but also liabilities. Daily visits to a husband or wife in hospital 20 miles away, or heating a home for someone who is immobile can be very expensive, particularly in rural areas where heating fuel is twice as expensive as mains gas.
    – the cost of means testing to decide who should have the benefit could outweigh the amount saved, for, unless the threshold is set in serious poverty, the number to wealthy to need the concessions would be small;
    – maintaining universal benefits and getting them back from the rich by increasing their income would be a far more effective way of dealing with the cost.

    Politically: Nick Clegg risks raising the hostility of many, for the sake of placating a few right wingers who would never vote Lib Dem. I am sure neither our manifesto nor the coalition agreement promised cuts to pensioner benefits. The outcry would be almost as great as the outcry over tuition fees.

    Please! Please turn again Nick and abandon this silly stance!

  • Ruth Bright 9th Jun '12 - 9:45am

    What I find odd about this is the lack of political scrutiny of Attendance Allowance (a pensioners’ benefit) when all the heat for years has been on DLA or its’ successors (for people of working age). Clegg is surely right to say that there should be no “no go” areas in examining which benefits/concessions represent good value for money and whether they really deliver the goods for those in need.

  • These payments are just a recognition that the state pension on its own is not enough to support a reasonable life and/or that older people are incapable of budgeting for the year’s bigger expenses.

    Set aside the bus passes, which have to be applied for and probably have few rich takers. Means testing is complex, alienating and expensive. It also prevents some from applying for what they wrongly see as charity. If an extra £200 or £350 per year is considered necessary, why not just increase the pension by £4 or £7 a week? If you’re going to argue that the relatively well-off don’t “need” it, you could also press for the state pension itself to be denied to them. It’s the separateness (and, perhaps, arbitrariness) of these payments which singles them out for attack.

    Pensioners are liable to pay tax, so we always have to option of a general 21p/41p tax regime if we can’t afford such largesse.

  • Stuart Mitchell 9th Jun '12 - 10:12am

    “Nick Clegg and Iain Duncan Smith have both been arguing within the government for rich pensioners to have their benefits cut… Clegg is understood to have told colleagues he wants the winter payments and free TV licences cut for all but the poorest pensioners”

    Therein lies the problem! When the government threatens to remove benefits for “rich” pensioners, we know full well that what they’d really like to do is cut benefits for “all but the poorest”.

  • I can understand the superficial argument, But restricting benefits requires means-testing, which means very high rates of marginal tax+benefit-reduction rates, and if done badly eg with a cut-off people can end up losing more than their extra income which is barmy.

    High marginal rates in turn removes incentives to work and/or save for a pension, which is why until a few years ago we were in favour of universal benefits based on need, with taxation based on ability to pay. And I still am.

    Means-testing is also illiberal because it is intrusive and requires benefits recipients to report any change in their circumstances with criminalisation of those who fail to report and many people failing to claim because they are afraid of getting caught out.

    I’m open to the idea of including some benefits in the universal credit regime, so that marginal rates can be kept under control, but benefits should be valued at marginal cost, and the reduction in universal credit must be sensible and properly aligned with the tax regime, so that the overall cost to recipients is proportionate and people are not caught out or subject to intrusive reporting regimes.

    There is no point in raising tax thresholds to take people out of tax if you simply find another way of penalising people instead.

  • Could Clegg define ‘poorest’ and ‘rich’. What amount of income makes you rich?

  • Mike Clements 9th Jun '12 - 10:36am

    Pensions are supposed to be paid out of funds acquired through accumulated National Insurance contributions rather than general taxation. If we have a car accident or the house is burgled, the insurance company does not say “you’re wealthy enough to stand the loss so there’s no pay out under the policy” Likewise if pensioners have paid their premiums through NI contributions how can the government as The Insurer justify discrimination between their policy holders on the grounds that some are rich and others are poor when the time comes for a pay-out

  • Liberal Neil 9th Jun '12 - 11:04am

    Some of these benefits should be phased out when the new, bigger basic pension comes in and the level of it should be a little higher as a result.

    It would also be taxable, so those pensioners on higher incomes would not get the full benefit, and those on the highest incomes would get the least benefit.

  • I think it shocking that a Professorial colleague gets to commute to central London from the suburbs for free, even with a household income well above £100k. How can that be a good use of public money?

    Remember too that bus passes use is very asymmetric – there are some people who use them a lot, whereas from memory most pensioners never use them. From memory 4% of users account for a third of the cost.

    And as for giving me a heating allowance, a free television license, etc when I am old: please no. Politics should not be about giving to those who are already very well off.

    More generally, you can find my thoughts here: http://www.ft.com/cms/s/0/d49cd624-7414-11e1-bcec-00144feab49a.html (you have to register, but you don’t have to pay) and CentreForum will be publishing a more in-depth study on pensioner taxation shortly.

  • Stuart Mitchell 9th Jun '12 - 11:43am

    @Tim
    If bus pass use is asymmetric that is all the more reason to keep things as they are. Why bother with the expense of administrating a means-tested system if well-off pensioners don’t use them anyway? Of course it’s easy to find individual cases of well-off individuals who benefit, but it’s sneaky to use this as an argument to defend the removal of passes for what Clegg calls “all but the poorest”.

  • Bill le Breton 9th Jun '12 - 11:53am

    As Tony Dawson wrote recently in another post, “Piecemeal means tests are inefficient, costly to implement and forever create new ‘poverty traps’ or ‘steps of unfairness’. A small (often miniscule) rise in general taxation ALWAYS gets you the same financial gain more cheaply, more fairly and with less political pain.”

    I find it more worrying that this seems to be part of some generational scapegoating.

    For every high earner who is probably winding Tim up at the water cooler with tales of commuting in for free, there will be a thousand more genuinely poor who would miss out under a means testing regime.

    Never mind the truly dim political positioning that this utterance produces.

  • Even if this was a sensible policy it is an act of supreme political idiocy.

    You can’t do unpopular things when you’re already unpopular.

    This tends to highlight the main (and major) failing Nick has as leader. He’s not actually a very good politicial.

  • Keith Browning 9th Jun '12 - 12:55pm

    @Anne
    Definition of rich and poor seems quite simple to me.

    Rich – you can buy almost anything in life without having to ask the price and in many cases the things you purchase don’t have a price tag attached. You ALWAYS buy what you like.

    Poor – you dont enter into any transaction without knowing, down to the last penny, exactly how much you are committed to spend. Your purchases would often have a large ‘discount’ price attached. You can NEVER buy what you like only what you can afford – which isn’t much.

  • Marilyn Wallace 9th Jun '12 - 2:21pm

    Free bus passes: these have to be applied for, so pensioners able to drive don’t usually bother getting a bus pass. Older pensioners who can no longer drive a vehicle themselves (and therefore give up their independence) NEED to use public transport to get shopping, to doctors and everywhere else. Many older women never learned to drive and also rely on public transport. Using bus passes should be encouraged because otherwise we will have more elderly, no longer safe drivers on our roads.

    Winter fuel Allowance and other benefits for pensioners: How many pensioners actually have a higher than average income? (More than £25,000). I am guessing not many. I do not think it is worth employing people to analyse all the means tested applications that pensioners would be required to fill in to allow or deny WFA to pensioners. Oleder people feel the cold more than young people and therefore need warm surroundings.

  • Richard Dean 9th Jun '12 - 3:59pm

    How about free bus travel for everyone, paid for out of general taxation? Might have a dramatic effect on car use. Bus routes and timetables driven by need. And/or un-timetabled licenced mini-buses? On call? Are busses good or bad for the environment compared to the cars they might replace?

    British society seems to be built on the belief that Thou Shalt Live Alone. Are there alternatives that provide both increased well-being and reduced cost to the taxpayer?

  • Stuart Mitchell 9th Jun '12 - 4:36pm

    Richard: “How about free bus travel for everyone, paid for out of general taxation? Might have a dramatic effect on car use. Bus routes and timetables driven by need.”

    We used to have something very similar. Not free, but at least dirt cheap. Then the Tories decided that the way forward (outside London) was to have deregulated buses, providing an inferior service at vastly higher prices. The people who run most of these services are, I believe, billionaires.

  • More ‘tinkering’!
    “If it ain’t broke don’t fix it”; the coalition has managed to ‘cock-up’ Family Allowance and is determined to do the same with pensioners.
    A gradual reduction (based on income) will make a simple system so complex that even those (especially those) who need it most will be confused. A straight cut-off point, judging from Clegg’s ill-chosen words, will leave many in-need without sufficient support.

    Is there any ‘band-wagon’ (usually going in the wrong direction) that Nick can’t jump on?

  • Richard Dean 9th Jun '12 - 4:52pm

    I happen to be working in Trinidad this week. Here, in this country that is not yet First World, petrol is subsidized, and the cost of a 12-mile bus journey is the equivalent of 20p. They have licensed 12-passenger maxi-taxis that go from one terminus to another, waiting until they are full before starting their journey, stopping anywhere a passenger asks for along the route, and picking up anywhere too, once someone has got off. They have a Priority Bus Route – an entire road reserved for buses and maxi-taxis and a few special case vehicles. Makes you wonder what “First World” really means.

  • In London free bus passes are not something used by the poor, but something used by every one – and London has a good number of very well off pensioners who get a £2000 benefit a year, tax free, no matter how rich they are – and even if they are working. Pensioner bus passes cost £1bn a year. Are we sure that pensioners typically prefer this, even though £250m goes to a handful of pensioners who use buses for long journeys, frequently, rather than raising the pension that would give the same amount to everyone?

  • @Mary Reid
    “I would always argue the case for universal benefits, with claw-backs from the wealthy through taxation. ”

    I would agree but the coalition cannot take this stance as they have already decided to remove child benefit from wealthy parents. Wealthy pensioners should not be treated differently to wealthy parents, to do so is hypocrisy. The real problem is that pensioners are more likely to vote and therefore are a riskier target. Look at the outcry when the government looked at equalising tax rates, an argument which although unpopular did make some sense.

  • Richard Church 10th Jun '12 - 9:23am

    The pensioners bus pass should remain universal. There are not just good environmental arguments, the marginal cost to public transport of a few wealthy pensioners getting on a bus are very low. Withdrawing the bus pass for those people will save very little, either the level of subsidy and fares for everybody else will have to be increased to recover the loss of subsidy income to the bus companies, or services will have to be cut for everybody.

    For other benefits, particularly TV licences and winter fuel payments, I see no case for pensioners who have sufficient income to be taxed at the basic rate to receive them. Benefits, regardless of age, should be targetted where they are needed, while always considering the cost of means testing which might outweigh (as with bus passes) any benefit.

    If further savings are to be made to reduce public debt after 2015 as Danny Alexander tells us is neccessary, what other ideas do those who oppose means testing suggest?

  • @Hywel :

    “You can’t do unpopular things when you’re already unpopular.”

    I can see them lining up to prove Hywel wrong! 🙂

    But two and a half cheers for Paul Burstow today with his announcement on Carers and respite.

  • patricia roche 10th Jun '12 - 11:13am

    The thing that has not been mentioned here is the end of free prescriptions in England for pensioners. This could be a real vote winner, What do LDV readers think? I am at a union conference and we have an emergency motion in front of us to debate today regarding this proposal. I will let you know the result of the vote. There are 600 delegates here so significant.

  • Mr AC Trussell 10th Jun '12 - 11:36am

    A great many pensioners are very well off. Why do people go all starry-eyed when they talk about the “dear old age pensioners” They are not all one person! Giving them £200 ,to have a week-end in Europe- when many of them already have houses there, is ridiculous. Giving them a free bus pass while some have two cars, and some students can hardly afford the fare to get to college ,is madness! Although I would have thought that most “well off” do not apply for the bus pass.
    Reading other comments; I didn’t realise that the bus companies are getting the money- even if the bus passes are not used! Who set that one up?!
    People say that “means tested” benefits are expensive and can perhaps be demeaning. Why not simply send a letter to everyone when they reach the age of sixty(or whatever) stating that they now qualify and asking if they need to receive the different benefits? Also informing them of the way to receive the different benefits should they need any of them in the future. It may not be perfect but I think that most people that did not need the benefits would not bother.Let’s trust people a bit- it won’t cost anything (much) It’s common sense to give benefits to the people that need it- it doesn’t matter about their age. That’s ageist!
    Nick Clegg is right, but will the childish and reactionary Media and public grow up enough to see it? I doubt it!

  • ………………………………If further savings are to be made to reduce public debt after 2015 as Danny Alexander tells us is neccessary, what other ideas do those who oppose means testing suggest?……………………

    The problem with ‘means testing’ is that it creates anomalies and any savings are lost by the increased administration costs.
    Perhaps someone might explain the logic of “a household, where one parent chooses to remain at home, with a single income of ‘x’ losing child benefit” and a household, of two incomes of ‘x-1p’, receiving child benefit”?

  • If it is true, that Nick Clegg really thought that the state pension was £30, per week, then the man is dangerously out of touch with ordinary people.

  • Fiona White 10th Jun '12 - 1:33pm

    I have not seen a financial breakdown which would convince me that the savings to be made would offset the cost of means-testing to enable those who need winter fuel payments and bus passes to keep them. There is also the diifficulty of calculating the cut-off point. There are simple terms such as “rich” and “poor” but very few people actually fall into either of those categories. There are a great many people in the middle-income bracket for whom these benefits make a lot of difference. Running a car can be very expensive once income drops: not having one is very limiting if you have to pay full bus fares. The cost of heating bills is rising and many pensioners – not just the poorest – are having to ration their use of central heating for fear of the costs: losing the winter fuel allowance would make that problem worse. Evidence shows that many pensioners already fail to apply for benefits to which they would be entitled and that entitlement does not kick in until they are on a fairly low income. I can see the argument about not paying these benefits to very rich people and I agree with them. I am not sure about the practicalities of changing the system without penalising those to whom the extra money makes a lot of difference to their lifestyles.

  • Stuart Mitchell 10th Jun '12 - 5:23pm

    Just to put this into some kind of financial perspective:

    Pensioner bus passes cost the taxpayer £1bn pa according to Tim.

    Vodafone made £9.5bn profit last year, on which they paid zero (yes, zero) tax.

    Once again, it’s the soft targets (pensioners, benefit claimiants, ordinary workers) who are expected to stump up for the deficit. This is why proposals such as this rile people.

  • Martin Pierce 10th Jun '12 - 7:00pm

    As the Coalition has pushed through ending child benefit for people on the 40% tax rate (sort of), it doesn’t seem unreasonable that if you’re a pensioner earning enough to hit the 40% threshold, that you should have the various ‘freebies’ removed. I suspect there aren’t that many of them (pensioners on 40% tax that is – there are plenty of freebies – fuel payments, free TV licences, free bus passes, higher tax threshold), but given the endless withdrawals of support for poorer people who are not pensioners, it would at least be a symbolic ‘we’re all in it together’ thing. The ‘granny tax’ was at least a starting point in the right direction – there’s absolutely no reason I can see why older people should have a higher tax threshold – especially when you consider that if you are a pensioner you don’t have to pay NI (which is in practice just another form of income tax for the rest of us).

  • I am a pensioner. When I left school I chose my job from a wide number of options, I enjoyed a job for life which included free higher education up until the age of 27,. In buying my house I recieved income tax relief on my mortgage and I now have an occupational pension. I don’t need benefits which are genuinely needed by a younger generation who will probably never enjoy my good fortune. There are thousands in my position. I am sickened by the affluent “I worked hard all my life” brigade and yes I did give my heating allowance to charity because I am lucky enough not to need it.

  • Stuart Mitchell 10th Jun '12 - 7:54pm

    Stephen W: Look at Google News, it’s been in the papers today. Vodafone paid no corporation tax at all last year. They are somewhat laughably claiming that they “are responsible” for £700m in “other taxes”, those other taxes apparently being income taxes paid by their employees, and sales taxes paid by their customers.

  • Tony Dawson 10th Jun '12 - 8:25pm
  • Tony Dawson 10th Jun '12 - 8:40pm

    @Martin Pierce:

    “.. it doesn’t seem unreasonable that if you’re a pensioner earning enough to hit the 40% threshold, that you should have the various ‘freebies’ removed. ”

    I agree that free TV licences (especially when so many pensioners have TVs) are stupid – just give them the money. ‘Heating Allowances’ (winter or otherwise) were likewise more for the benefit of the politicians who introduced them than the recipients. As was the original introduction of the higher rate tax allowance for pensioners. Just give them the money. But off-peak travel is a very sensible thing to give away to pensioners. and daft not to give to all pensioners. With a few exceptions, the better-off pensioners hardly use the buses and the charge levied by bus operators can be by a ‘click’ for each journey rather than a flat rate. If you do not subsidise the bus routes in the afternoons, you have to charge the few non-pensioner users at those times horribly and you are wasting masses of capital equipment (and have horrendous problems with staffing) if you do not run most buses all day.

    Please do not draw parallels with the Child Benefit removal. One stupid inefficient complex move like that is surely enough for a whole government’s lifetime, isn’t it?

  • Ronald Koorm 11th Jun '12 - 11:02am

    I think it extremely short sighted of Mr Clegg to want to restrict travel passes. As a user of a travel pass I use my car less so reducing pollution, I spend more money in shops and cafes in London which I would not otherwise do, boosting the economy, I am a lot fitter physically as walk a lot when I use the pass, and so does my wife. The benefits on health for the elderly is substantial and if the pass is taken away from me, I will not travel by public transport but revert to using my car, or not go into London hardly at all (from Harrow). Additionally, elderly people who have worked all their lives and paid taxes should be entitled to being respected by society and not continuously means tested, a degrading process. the money that Clegg would save in removing travel passes would be relatively small but substantial votes would be lost as a result in elections, s this would indicate a “non-caring” approach by liberal democrats. In countries like Germany, they respect their senior citizens and they are entitled to benefits such as travel concessions, I believe. Time to consider senior citizens irrespective of their income, Mr Clegg, unless you wish for your political future to be shorter than it needs to be ! As an access consultant, semi-retired, I can see an awful lot of disabled people and others being disadvantaged by this proposal. Be prepared for a significant backlash against your party !

  • I wouldn’t cut the bus passes. The network is the thing. The bus network is bad enough as it is in many places.

  • A free public transport pass and free TV licence should be a reward for lifetime of hard work and should not be seen as a charity only for the needy. We should as a party be encouraging all to use buses and trains rather than the car for environmental reasons. Not only is it cleaner and greeener but will also free our roads from congestion for commerce.
    Means testing is an expensive system to maintain and nearly always returns to disadvantage ordinary people that have worked and saved all their lives. You can see this with the council tax system whereby typical people have to pay the same rate as a millionaires on an annual income of only £5000/year because of the £16000 capital rule which under today’s interest rate doesn’t bring much from bank deposits.
    Liberal Democrats should not go down this means testing road: it is intrusive and leads to discrimination between peoples. The Income Tax system is a better system of fairness both local and federal (national) as everyone goes through the same rules.

  • If benefits are to be taxed, it would only be fair to allow us to refuse unwanted ones. Tax on a television licence is about £40 which I wouldn’t choose to pay and I hate to think how much you could grab from us on bus passes!

    In villages where there is one bus a day it would often be cheaper not to have.a bus pass. I don’t pay very little income tax, but all pensioners not on income support are called “wealthy pensioners”.

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