It was 45 years ago
that the Commercial Union insurance company used the slogan “we won’t make a
drama out of a crisis”. In fairness, given that she wasn’t born until 1979,
the Chancellor of the Exchequer has a plausible excuse for not remembering the
slogan. But not being old enough to remember the advert is not much of an
excuse for not understanding the meaning of the message. The handling of the
winter fuel allowance (WFA) for pensioners has now gone beyond simple drama,
and is rapidly becoming a long-running soap, with a cliff-hanger at the end of
every episode as viewers attempt to work out how on earth she will extract
herself from this week’s latest plot twist. Where’s Dick Barton’s “one bound”
when you need it?
Her reluctance to
give a handout to millionaires is understandable in principle, although her
initial attempt to prevent that by limiting the payment to only the very worst
off pensioners was something of a sledgehammer approach. Her latest approach –
setting the cut-off at £35,000 a year – isn’t a whole lot better. Given that the
average full time earnings before tax in the UK are a little over £37,000, the
new cut-off point is going to exclude a lot more people than those who are
really millionaires – unless the definition of ‘millionaire’ is now being
changed to include everyone on average earnings or above, a definition which
will come as something of a surprise to most working people, let alone
pensioners.
In order to implement this ‘new improved’ version (as the advertising companies would surely try and present it), she’s inventing a whole new tax rate of 100% which only applies to a tiny part of people’s incomes and which comes into effect at a completely new threshold, unused for anything else in the tax system. It’s hard to envisage any approach she could have taken which would be more complex to implement, and probably end up costing a significant chunk (in terms of staff and IT costs) of the claimed savings to implement – as well, potentially, as requiring a couple of million extra pensioners to file annual tax returns which someone will then need to process.
I’ve never been a
fan of the WFA anyway; it’s always struck me as a bit of a gimmick. Simply
adding £300 a year to the state pension (even if paid once annually rather than
as part of the weekly pension) would mean that those who most need it get it
tax-free, whilst pensioners with other income would effectively pay tax on it
at up to 45% anyway. It’s true that ‘millionaire pensioners’ would still end up
pocketing 55% of £300 (£165), but it would be a great deal easier and cheaper
to administer using existing systems. I don’t know how many ‘pensioner
millionaires’ there are, but given that a cut-off at £35,000 (well short of
millionaire status) will only exclude around 2 million people, we can
reasonably assume that it’s a lot less than 2 million. Even 2 million net
payments of £165 would only cost £330 million – a drop in the ocean for the
Treasury. And lower administration costs reduce that further.
Still, for fans of
long-running dramas, where the heroine of the piece finds herself tied in ever
more complex knots at the end of every episode, why cut the serial short when
the pain and agony can so easily be prolonged?
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3 comments:
Completely agree, yet another example of politicians with no practical experience coming up with a plan in isolation.
Unfortunately lack of some or any practical experience in endemic amongst politicians of all parties
On a separate note, I read with sadness the plan to demolish the Hoover factory in Merthyr. It was my first foray into the world of manufacturing and I am proud that the rest of my working life was with various factories
I can't understand the emotional attachment that many seem to gave to the, so-called, Winter Fuel Alowance. It has nothing to do with winter fuel use and is, or at least was, just a universal pension top up. The real question is simply whether the state pension is enough to cover a pensioner's basic living costs, including the cost of keeping their home at a suitable temperature at all times of the year. If the answer to that is no, the response should be to increase the state pension to a level where it does cover those costs, not introduce or retain (as you accurately described it) gimmicks.
Completely agree. The real reason (whatever they may say about helping pensioners to budget etc.) for the annual payment is that £300 once a year looks more generous than £6 a week. Smoke and mirrors, of course - but as bribes go, it's more likely to act as one than a small regular amount which gets easily swallowed up in daily living costs.
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