NPC Comprehensive Spending Review Briefing October 2010 

On 20 October 2010, the Chancellor George Osborne presented his long awaited Comprehensive Spending Review. The main announcements affecting older people were as follows:

 

Pensions

·         From April 2011, the Basic State Pension (BSP) will rise in line with the higher of either average earnings, prices (Retail Price Index RPI) or 2.5%. As the highest figure is RPI at 4.6%, next year’s increase in the basic state pension will therefore be £4.50 a week for an individual taking it to £102.15, £7.20 a week for a couple taking it to £163.35, and £2.70 a week for women whose pension is based on their husband’s contributions, taking it to £61.20.

·         However, from 2012, the prices measure used for uprating the pension will revert to the lower Consumer Price Index (CPI) rather than the RPI. Furthermore, from April 2011 the State Second Pension, SERPS and/or Graduated Pension will also rise in line with the lower CPI. This will mean a 3.1% increase - 1.5% lower than the increase in the basic state pension.

·         Changes to public sector pension schemes will be introduced from April 2012, meaning that on average, employees will have to pay an additional 3% of salary into their schemes and future payments will be based on average, rather than final salary.

·         Equitable Life savers who lost half their pensions when the insurer almost collapsed a decade ago will receive £1.5bn in compensation, considerably less than the £4.8bn total loss. The average payouts are likely to be less than £600 each.

 

Pension Credit

·         From April 2011, the means-tested Pension Credit Guarantee of £132.60 (single) and £202.40 (couple) will increase by the cash rise in the full basic state pension rather than as a percentage linked to earnings or prices. Therefore the Pension Credit will increase by £4.50 a week for a single pensioner and £7.20 for a couple.

·         The maximum Savings Credit award will be frozen for 4 years from 2011-12. At the moment, those individuals with incomes of up to £183.90 a week, or couples with up to £270.12 a week are entitled to claim Savings Credit on roughly the difference between their state pension and their total income. The maximum award for the next 4 years will therefore be £20.52 for a single pensioner and £27.09 for a couple. Around 1.8m households will be affected. The Treasury claims this cut will save £330m per year by 2014-15.

 

 

Retirement Age

·         The State Pension Retirement Age will be equalised for men and women by November 2018 – 2 years earlier than planned. The pension age for both men and women will then increase to 66 by April 2020. This will affect around 5.1m people, but the vast majority of losers will be women. For example, a woman born on 5 April 1953 could claim her state pension a month before her 63^rd birthday, whereas a woman born a year later would be forced to wait until she was 66. The Treasury claims from 2015 to 2025 this change will save around £30bn in reduced payments and raise around £13bn through increased tax and national insurance contributions. Further proposals on future increases in the state pension age will also be announced later.

 

Winter Payments

·         The Winter Fuel Allowance is to be reduced in 2011 from £250 to £200 for households under 80, and from £400 to £300 for the over 80s. The government also intends to initiate an independent review of the fuel poverty target before the end of the year.

·         Cold Weather Payments paid to those on Pension Credit when the average temperature falls below freezing for 7 consecutive days will be set at £25. This will cost £50m per year from 2011-12 and affects around 4.2m households.

·         Funding for the £280m Warm Front programme will be cut over the next 2 years to £110m in 2011-12 to £100m to 2012-13. From April 2011, energy suppliers will provide additional help with energy bills to fuel poor households through Social Price Support costing £250m in 2011-12 to £310m in 2014-15.

 

Social Care

·         An additional £2bn (£1bn from local government and £1bn from the NHS) will be invested in adult social care. This represents a 3.3% annual increase – but funding needs to rise by 4% above inflation just to keep pace with increased demand. However, the real concern is that the money will not be ring-fenced, and cash-strapped councils will use it for other services.

 

Disability Payments

·         The mobility component of Disability Living Allowance to claimants in residential care will end from 2012-13. Those who fully self-fund their care will be unaffected. This change will affect an estimated 58,000 people who receive on average £33.40 per week. The Treasury claim this cut will save £135m per year by 2014-15.

 

Council Tax

·         Council Tax benefit spending will be reduced by 10% from 2013-14, and localised to local authorities to target the benefit at local priorities. There are currently around 3.5m pensioners who receive some level of Council Tax benefit. The precise arrangements are yet to be determined, but the Treasury claim this cut will save £490m per year from 2014-15. However, there will be a council tax freeze for 2011-12 costing £650m.

 

Housing

·         From April 2011, Housing Benefit will be capped at £400 a week for a four bedroom house, £340 for a three bedroom, £290 for a two bedroom and £250 for a one bedroom property.

·         Funding for the Supporting People programme will be set at £6bn.

 

Transport

·         The eligibility for concessionary bus travel will be linked to changes in pension ages. Reimbursement arrangements will also be reformed whilst maintaining the statutory entitlement to concessionary bus travel. However, bus subsidies to operators will be reduced by 20%, which may have an impact on the availability of services.

 

Local government

·         Local councils will have their funding cut by 27% over the next 4 years. This is likely to affect all non-statutory services, some of which, such as day care centres and meals on wheels are vital to many older people.

·         Government Offices for the Regions are being closed as part of the abolition of regional government. Given that many of these offices were providing the secretarial support for the Regional Forums on Ageing, it has yet to be seen how these will continue to function. Cuts in local government funding are also likely to have an effect on support for local pensioner groups.

·         Local Area Agreements, which were supposed to help local councils prioritise the concerns of older people have been abolished.

 

After the announcement, the NPC gave a reaction to the proposals. This is reproduced below for information. Media coverage of our comments included statements in the Daily Express, Daily Mirror, Daily Telegraph, BBC News website and various radio stations.

 

Spending review signals more unfairness in retirement

 

Britain’s biggest pensioner organisation, the National Pensioners Convention (NPC) has described today’s Comprehensive Spending Review as a recipe for unfairness in retirement.

 

Dot Gibson, NPC general secretary said: “All the evidence shows that the richer you are, the longer you live - so making people work longer is a direct attack on the poorest in our society. Plans to reduce the increases in the state pension by using the lower Consumer Price Index rather than the Retail Price Index will, over time, increase the number of pensioners living in poverty, whilst the money committed to care funding won’t be anywhere near enough to meet the growing demand. It’s a recipe for unfairness in retirement and the burden will fall on those who are least able to bear it.”

 

“The contribution older people already make to the economy every year in unpaid caring, voluntary work and child minding is well over £30bn, yet none of this is recognised by today’s statement. If pensioners have to work longer they will simply be unable to help others. So much for the Big Society.”

 

“The older generation was around at the beginning of the welfare state and they know that it is not meant for poor people; it should be for everyone to prevent them from becoming poor. But the government is seeking to privatize responsibility and blame individuals for the structural failures of our economy. It’s time we stopped pointing the finger at the so-called undeserving poor and started taxing the undeserving rich.”

 

 Winter Fuel Allowance still to be cut – despite Coalition promise

 

Britain's biggest pensioner organisation, the National Pensioners Convention (NPC) has today criticised the Chancellor, George Osborne, for planning to cut the winter fuel allowance in 2011, despite a pledge in the Coalition government's programme to protect it.

 

In yesterday's Spending Review, the Chancellor said: "Winter Fuel Payments will remain exactly as budgeted for by the previous Government" - but the NPC points out that this means the £250 currently paid to households under 80 will drop to £200 and the £400 currently paid to the over 80s will fall to £300.

 

Already over 70 MPs have signed Early Day Motion 481 criticising the move.

 

Dot Gibson, NPC general secretary said: "The winter death rate amongst older people is a national scandal and getting worse. Last winter over 36,700 pensioners died of cold related illnesses – a staggering 13 pensioners every hour. Yet the government has now confirmed it is going to cut the winter fuel allowance next year, which will only make matters worse.”

 

“Up to 3m pensioner households are already spending more than 10% of their income on fuel bills, and are living in fuel poverty. What older people need now is more money – not less. They need to be reassured that when the cold weather comes they will not be financially punished for keeping warm in winter. The government must give them confidence that they will be able to pay their bills by immediately ruling out any changes to the winter fuel allowance.”