David Prosser: The charmed lives of Britain's pensioners inan age of austerity


Outlook It is not the done thing to say you are in favour of squeezing the pips out of pensioners, so we should at least give the Institute of Economic Affairs top marks for bravery. In a paper published today, the think-tank says we could be saving £16bn a year by 2015 "if older people shared the cuts burden".

It is a rather pejorative phrase – after all, many public spending cuts are already being felt by all users of public services, whatever their age, as is the increase in the VAT rate – but the IEA has a point nonetheless. On welfare spending, it is remarkable how pensioners have so far been spared during the cuts process.

Now, to get to the £16bn ofsavings that the IEA has identified, the Chancellor would have to abolish a string of benefits altogether and scale back the rises promised on the basic state pension and the minimum income guarantee. Many of these proposals – saving £800m by linking the latter to wage inflation rather than price inflation, for example – would be a step too far for many people.

Still, some of the IEA's ideas should be a no-brainer to all but those who would defend the indefensible. For example, how do we justify spending £2.1bn a year on a winter fuel allowance paid to all pensioners, no matter how wealthy they are – particularly since child benefit, at the other end of the spectrum of age-related benefits, is now to be means tested?

Similarly, why are income tax allowances higher for older people – again, regardless of their resources – than for those still of working age? And is spending £700m a year on free TV licences for all pensioners really a sensible use of taxpayers' money in this time of austerity?

In moving so quickly and aggressively on reducing the deficit, the Coalition Government is making a gamble that is political as well as economic. It hopes that people will put up with the austerity in the knowledge that the fiscal realities require it. Well, maybe so, but if one section of society is unfairly burdened with more than its fair share of the cuts – the flip side of pensioners not "sharing the cuts burden" – the necessary goodwill is likely to be in short supply.

In short, the IEA is right, and somebody had to say it: pensioners should not be spared their share of the austerity simply by virtue of their age.

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