Labour’s proposal to cut winter fuel allowances for higher-rate taxpayers suggests we may be joining the Tories and Liberal Democrats in dismantling the inheritance of Clement Attlee, Nye Bevan and William Beveridge – at the top of a slippery slope towards a US-style system of public services only for the poor.
If winter fuel allowances are to be means-tested, then does it stop with pensioners taxed at higher rates, or will the pressure be downward and then onto free TV licences and bus passes for pensioners and senior rail cards?
For lower earners these benefits are comforts guaranteed in old age; for middle-to-higher earners they are one of the few rewards received for contributions to the welfare pot throughout their working lives. If middle Britain ceases to benefit from the welfare budget through the few universal benefits now remaining, how can we convince them to fund the great bulk of that budget through their taxes? There is plenty of talk about a ‘something for nothing’ society, but there is a danger now of a ‘nothing for something’ society. Indeed, it is argued that millionaire pensioners like Paul McCartney should not be entitled to free bus passes. I rather doubt he uses one but if he did he would have paid for it over and over again through his taxes. Beveridge’s 1942 report, which became the cornerstone of the welfare system built by Labour, advocated universal contributions for universal benefits in the hope of cementing social solidarity.
Labour’s new winter fuel policy only saves an estimated £100m – tiny compared with the total social security and pensions budget of over £200bn. Yet, as I have already found in my low-income constituency, many now think Labour is after their pension allowances, too: hardly clever politics.
The total cost of the winter fuel allowance is between £2bn and £3bn a year which is less than two per cent of the total budget. Means-testing is administratively costly, time-consuming and inefficient because of the many varied combinations of assets, capital and earnings among pensioners.
If means-testing went further than Labour’s proposal it would also create real unfairness at the cliff edge for pensioners on modest or low incomes. With the stigmatisation of benefit claimants already in overdrive, cutting back on universalism will marginalise and demonise.
The coalition’s erosion of universal child benefit has created real anomalies and unfairness. A family where one parent is earning more than £50,000 loses out while a family where each parent earns £45,000 (a total of £90,000) keeps it. The horrendous spending and economic predicament an incoming Labour government would face means restoring child benefit to top-rate taxpayers at a cost of £2.3bn cannot be a priority. But it would be nice to retain it as an aim.
Finally there is the troubling question as to whether the party is being dragooned into accepting Tory-Liberal Democrat spending plans after the next election. In which case why would voters choose a half-hearted Labour surrogate when the Tories promise the real thing?