Means-testing winter fuel payments is fair on intergenerational fairness grounds. Liz Emerson, IF CEO, explains.
Why were winter fuel payments introduced?
A fair few years ago, a previous Chancellor of the Exchequer told me the story of Winter fuel payments. It goes like this. It was the night before a General Election and the political party was worried about losing the “grey vote”. Hey presto, a day later, winter fuel payments came into being. There was no targeting, no rationale to help poorer pensioners. It was merely a vote-winning “bung” to all older voters.
Fast forward a few decades and winter fuel payments are still with us. Anyone over the age of 66 received winter fuel payments irrespective of their wealth, until today. It is a poorly targeted out-of-date benefit.
The state pension triple lock
The state pension “triple lock”, which increases by the higher of earnings, inflation or 2.5%, has increased by at least or above inflation in all but two years going back to 2011. The triple lock ratchet means that as of 2017, the incomes of retirees had overtaken the earning of the working-age population, after housing costs. This is obviously economically unsustainable. In fact, in the last two years alone, the state pension has increased by close to 20%. It means that for more than a decade, older, wealthier cohorts were largely insulated from “austerity” measures. This year’s triple lock increase is likely to be around double the expected rate of inflation. That more than makes up for the removal of winter fuel payments.
The wealthiest generation
Nor are retirees the poorest group in society. Pensioner poverty has fallen from around 30% in the 1990s to around 16% today. Furthermore, 3 million over-65s (1 in 4) live in millionaire households and obviously have no need for winter fuel payments. Meanwhile, children are the new poor. Child poverty continues to run at about 30% (40% in London). One million children experienced destitution in 2022. Over 150,000 children are living in temporary accommodation and the two-child benefit has not been lifted to help families struggling from the post-Brexit, post-COVID cost-of-living crisis. Just this week, the Royal college of Paediatrics and Child Health called on the government to address stark declining health of our nation’s children:
“Children are waiting longer than adults to access healthcare, paediatric services are not recovering at the same rates as adult services, and there is a growing gap between demand and capacity. This has coincided with an unprecedented increased demand for children’s health services, which is forecast to grow further due to both preventable and non-preventable increases in childhood illness.”
Age is no long a fair proxy for need
That is why age alone can no longer be used as a fair proxy for need. That is why the new government has been brave to take on the grey vote and introduce the means-testing of winter fuel payments so that those older people on pensioner credit receive it but wealthier older people do not.
Drive up pensioner credit take-up
The Secretary of State’s announcement that the government intends to encourage 800,000 older people who are eligible for pensioner credit to apply for it, is welcome. So too are cold weather payments, the warm homes discount and even talk of a “social tariff” for energy as well as merging housing benefit and pensioner credit.
Means-testing is fair for all generations
At the end of the day, it cannot be fair on intra-generational as well as inter-generational grounds to give away taxpayer money to a section of society that simply do not need it, based solely on age. That is why we at IF have long called for government policy to catch up with changing wealth distribution and for policies to be assessed for their impact on all generations. The vote in the Commons today is a win for younger taxpayers and intergenerational fairness.
Next stop, reform of free public transport so that concessions align, at the very least, with State Pension Age.
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Photo by Keith Tanner on Unsplash