Rachel Reeves has shown just how spineless this government is by U-turning on her flagship policy of cutting winter fuel allowance. Instead of sensibly offering only the poorest pensioners help during the coldest months, nine million pensioners on total incomes less than £35,000 will receive it. When a government with a majority of 174 seats can’t cut government spending by £1.6 billion, or, less than 0.2 per cent of its budget, there is little hope for sorting out the nation’s finances with impending demographic disaster on the horizon.
In U-turning on her flagship policy, Reeves has shown just how spineless this government really is
No doubt on the doorstep many pensioners have told Labour politicians, including the chancellor, that they simply can’t do without the £200 winter fuel allowance; it’s a choice between heating and eating, according to them. Yet for many pensioners this is simply not true. If we take the bottom 20 per cent of pensioner households we find they spend 17 per cent of their income on recreation, hotels, restaurants, alcohol and tobacco, or, around £2,000 a year. To balance the books, these pensioners could have cut their leisure expenditure by 10 per cent; if they weren’t receiving the winter fuel allowance via pension credit anyway. It is beyond a joke that pensioner households between the 60th and 80th percentile of household expenditure who spend 21 per cent of it on leisure, or, about £6,600 a year, will receive state support to allegedly pay their heating.
At a time when the tax burden on working people is at a 70-year high, no conception of distributive justice warrants this huge amount of wealth transfer from the young to the old. Nor, indeed, can the welfare state realistically be expected to continue like this into the future with a British birth rate of 1.44 per woman. Should current tax and spending pattens continue, the Office for Budget Responsibility (OBR) estimates the national debt will explode to 235 per cent of GDP by 2066 with debt interest at 9 per cent of GDP. To solve this problem austerity in some form of higher taxes or lower spending will have to come to get the books to balance. I suspect some pensioners will say it needs to be young people who bear the brunt of such austerity, because, they have paid in all their lives and hence are entitled to a full state pension with all the trimmings.
But these pensioners are deluded: the average Boomer born between 1946 and 1966 has or will take £1.20 out of the welfare state for every £1 they have paid in. So, contrary to the nonsense you hear on radio phone ins, especially from poor pensioners, pensioner benefits should really be cut by a sixth to ensure pensioners actually get out what they have paid in. No claim of desert then protects pensioners from any form of austerity. Why though when the state is spending £1.2 trillion quibble about the £1.6 billion cut to winter fuel allowance, which following Reeve’s announcement is now only likely to save £50m?
It is worth quibbling about because in the future the country is going to be riddled with intergenerational conflict. At the moment the dependency ratio is 57 per cent, but it is expected to increase to 80 per cent by 2100 due to a shrinking workforce and a ballooning of expensive pensioners. Reeves’s cut to winter fuel allowance was an attempt to ensure young people are not continually ripped off by an older generation – a first crack which could have signalled the beginning of a rebalancing of the nation’s finances. And a proper rebalancing too, because it seems entirely without reason that older people should always be protected from the inversion of the population pyramid.
Of course, one of the ways in which this whole problem could be overcome is by expanding the economy so everyone can have more. The great problem with this solution though is the most obvious way of doing it, i.e., planning deregulation and building on the green belts of big cities, is overwhelmingly opposed. And who is it overwhelmingly opposed by? Boomers who own their own homes who couldn’t possibly see the value of their property go down or have their view spoiled the slightest bit. If Starmer can’t decisively confront pensioners and take away £200 from them, I very much doubt his plans to deregulate the housing market, knocking thousands of pounds off their own houses, will go down too well either.
In U-turning on her flagship policy, Reeves has shown just how spineless this government really is. While this would not be ideal at the best of times, cutting the winter fuel allowance was important in actually acknowledging the hard choices which we will have to make into the future given the declining demographics of the country. The fact the Labour party has failed at this first hurdle, despite the original cut hardly impoverishing any pensioners whatsoever, having an overwhelmingly young voting base, and, a huge majority of 174 seats, just shows how pathetic its politicians really are.
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