Millions of poor excluded from aid for VAT on fuel

UP TO 5.3 million pensioners and 2.6 million disabled people will not qualify for extra government compensation paid to cover the cost of the imposition of Value Added Tax on domestic fuel, an analysis by The Independent on Sunday has concluded.

Thousands of low-income families with children and earnings just above the level to qualify for income support, and other means-tested benefits, will also miss out on the extra payments.

VAT will be charged at 8 per cent from 1994 and the standard rate, 17 1/2 per cent, from April 1995.

The findings of our analysis will reinforce fears among a growing number of Conservative MPs that the tax, announced by Norman Lamont when he was Chancellor in April, may prove to be as unpopular as the poll tax because it is perceived to be so unfair.

Pensioners groups are gearing up for a mass 'no pay' campaign similar to the poll tax rebellion. Leaflets will be sent out in the autumn by the organisers, the Pensioners Rights Campaign, which has about 50,000 members.

Pressure groups, including the National Association of Citizens' Advice Bureaux, the Child Poverty Action Group, Help the Aged and the Disability Alliance, are lobbying for the charge to be scrapped or for a compensation scheme which will reimburse the full cost of the VAT.

Some Tory MPs have already blamed the VAT policy for their party's defeats in the Newbury and Christchurch by- elections. Sir Rhodes Boyson, a member of the executive of the Tory backbench 1922 Committee, said: 'The Government will have to provide full compensation eventually. Pensioners are a very important voting group. Failing to compensate them fully will be morally wrong and politically suicidal.'

Sir Geoffrey Johnson Smith, vice chairman of the 1922 Committee, admitted the policy was perceived to be unfair and indicated the Government might drop plans for the second increase to 17 1/2 per cent.

He also indicated that ministers realised the proposed compensation scheme was flawed and said the Government could help compensate those pensioners and disabled people who pay tax by increasing the threshold at which they begin to pay tax.

The reasons why so many people will miss out on the compensation payments are complex. Ministers have promised that people on low incomes will be recompensed for the cost of VAT on fuel bills.

The Treasury estimates that the VAT imposition will push up inflation by nearly 0.4 per cent next year and just over 0.8 per cent in 1995. The Government has promised that people on all types of benefits, including pensions, will have benefits increased in line with inflation.

However, the inflation increase will not appear in benefits until 1995 and analyses have shown that the Retail Price Index increase will not fully compensate people on lower incomes, or those with extra needs for heat and light - such as disabled people and families and single parents with children.

In recognition of this the Government has promised to pay extra compensation to people on income support and other means-tested benefits - including housing benefit, family credit, council tax benefit and disability working allowance - from April 1994. The precise amount of compensation will be announced in the budget in November.

Figures supplied by Help the Aged show that of the 10 million people receiving the state retirement pension, just 1.4 million receive income support. Excluding these, and an estimated 3.3 million receiving community charge benefit in 1991 (now council tax benefit), means that 5.3 million pensioners will not qualify for extra help.

Since 25 per cent of pensioners receive enough income to pay tax, a more conservative figure for poorer pensioners who would not qualify for extra compensation would be 3.8 million - a total made up of 3.1 million pensioners whose income is above the income support level, but below the tax threshold, and 700,000 who are entitled to claim income support but do not.

The Disability Alliance estimates there are 6.5 million disabled people in the UK. A recent report by the Policy Studies Institute showed that 40 per cent of disabled people were not on means-tested benefits. On this assumption another 2.6 million will not qualify for the compensation.

An analysis of the impact of VAT on fuel by academics at Cambridge University shows it would bear seven times as hard on the poorest 10 per cent as on the top 10 per cent and three times as hard on the bottom 40 per cent as the top 40 per cent.

In a special analysis for the Independent on Sunday, Gerry Redmond, a research officer at the Microsimulation Unit, at Cambridge University, found even greater differences in fuel consumption for pensioners living alone and lone-parent families.

Using data from the 1988 Family Expenditure Survey his analysis showed that, on average, pensioners living alone spend about 14 per cent of their total expenditure on domestic fuel compared with about 10 per cent for pensioners who live with other people. People other than pensioners spend about six per cent.

The analysis showed that lone-parent families spend about double the amount other families with children spend on domestic fuel as a proportion of total expenditure - 11.54 per cent compared with 5.56 per cent. This is probably because, in general, lone parents have less income. Lone parents spend about pounds 8.61 per adult and pounds 3.44 per child per week while two-parent families spend about pounds 6.84 for the first adult, pounds 4.10 for the second and pounds 2.74 per child per week.

Phyllis Keen, 78, from Ferndown, Dorset, who suffers from severe rheumatoid arthritis and osteoporosis, and is virtually confined to a wheelchair, is one of the 2.6 million disabled people who will not qualify for compensation because her benefit is not means tested.

Miss Keen, who has been ill since 1974, receives pounds 44.90 disability living allowance care component and pounds 31.40 mobility component. People on the disability working allowance will be entitled to compensation, because that is means tested. 'It's crazy that disabled people who can work will qualify but the more seriously disabled people, who cannot, will not qualify,' she said.

(Photograph omitted)

Sport
The Pipes and Drums of The Scottish Regiments perform during the Opening Ceremony for the Glasgow 2014 Commonwealth Games at Celtic Park on July 23, 2014 in Glasgow, Scotland.
Commonwealth gamesThe actor encouraged the one billion viewers of the event to donate to the children's charity
Sport
Members of the Scotland deleagtion walk past during the opening ceremony of the 2014 Commonwealth Games at Celtic Park in Glasgow on July 23, 2014.
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
Life and Style
fashion Designs are part of feminist art project by a British student
News
Very tasty: Vladimir Putin dining alone, perhaps sensibly
news
Life and Style
Listen here: Apple EarPods offer an alternative
techAre custom, 3D printed earbuds the solution?
Arts and Entertainment
Top guns: Cole advised the makers of Second World War film Fury, starring Brad Pitt
filmLt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a uniform
News
The University of California study monitored the reaction of 36 dogs
sciencePets' range of emotions revealed
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
Arts and Entertainment
A scene from Shakespeare in Love at the Noel Coward Theatre
theatreReview: Shakespeare in Love has moments of sheer stage poetry mixed with effervescent fun
News
Joining forces: young British men feature in an Isis video in which they urge Islamists in the West to join them in Iraq and Syria
newsWill the young Britons fighting in Syria be allowed to return home and resume their lives?
Arts and Entertainment
The nomination of 'The Wake' by Paul Kingsnorth has caused a stir
books
News
i100
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

BI Manager - £50,000

£49000 - £55000 per annum + competitive: Progressive Recruitment: My client is...

BI Project Manager - £48,000 - £54,000 - Midlands

£48000 - £54000 per annum + Benefits package: Progressive Recruitment: My clie...

VB.Net Developer

£35000 - £45000 per annum + competitive: Progressive Recruitment: If you're pa...

SAP Business Consultant (SD, MM and FICO), £55,000, Wakefield

£45000 - £55000 per annum + competitive: Progressive Recruitment: SAP Business...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game