Osborne's Budget 'has betrayed the elderly'

Cuts to fuel allowance will create worry for millions of pensioners, say campaigners

Personal Finance Editor,Simon Read
Saturday 26 March 2011 01:00 GMT

One in four of us thinks we'll be worse off as a result of the measures in Wednesday's Budget, according to Opinium Research.Pensioners certainly will be after it emerged that hidden in the small print was news that the winter fuel allowance will be cut by up to £100 this year.

The move may seem small beer, but it's not to those older people to whom such an amount can make a real difference. For many pensioners, cash is so tight that it can come down to a straight choice between heating and eating. For those forced to live in fuel poverty – when a tenth of their income is taken up in heating costs – £100 can make a real difference.

To be fair to the Chancellor many pensioners will only be £50 worse off when the cold weather hits in winter 2011. Currently the 60s get £250 from the winter fuel allowance while those aged over 80 get £400. But next winter the payments will fall to £200 and £300 respectively. The move will save the Treasury some £600m but a spokesman told The Independent that the Government is not cutting anything, but simply allowing a top-up introduced by the last Labour government to expire.

That doesn't impress the National Pensioners Convention which has accused the Chancellor of betraying pensioners by cutting the allowance, despite rising energy costs and higher winter deaths among the over 75s. The NPC was also angered by the way the cut was buried in the Budget papers and didn't form part of the Chancellor's statement.

"It's absolutely outrageous that George Osborne didn't have the guts or common decency to make this announcement public in his speech yesterday, but instead chose to bury it in all the paperwork," says Dot Gibson, NPC general secretary. "It's a shabby way to treat Britain's older generation.

"If we really are all in this together, why is he going to take £100 off the winter fuel allowance for the oldest members of society at a time when fuel bills are rising and winter deaths among older people are a national scandal? He should be ashamed of his behaviour."

Up to 3 million pensioner households are already spending more than 10 per cent of their income on fuel bills, and are consequently living in fuel poverty. "What older people need now is more money – not less," says Ms Gibson. "They need to be reassured that when the cold weather comes they will not be financially punished for keeping warm in winter. We will be fighting this change all the way."

A leading cancer charity also warned of the problems cutting the allowance will cause. "It is plainly wrong for the Government to withdraw much needed money from vulnerable cancer patients who are already struggling to meet the cost of ever-rising energy bills," says Mike Hobday, head of policy at Macmillan Cancer Support.

"Feeling too petrified to put the heating on because of money worries is an unacceptable reality for far too many cancer patients who feel the cold more because of their condition and are at home for longer during treatment and recovery. Finding out that the financial support they receive will be cut will create further unnecessary worry and concern."

Since the start of 2008, the cost of domestic fuel bills has risen by 38 per cent, according to price comparison site uSwitch.com. The average dual fuel bill, which includes gas and electricity, is £1,132. With prices soaring, the temptation for struggling vulnerable people is to cut costs by cutting back on heating.

Last December was the coldest in 100 years but 55 per cent of people went without heating at some point during the winter to keep their energy costs down while one in five regularly went without, according to uSwitch research. "This year, without extra help, many pensioners will be condemned to another cold miserable winter and may suffer ill health as a result," warns Ann Robinson, director of consumer policy at uSwitch.

"The Government needs to understand that pensioners are already concerned about next winter. The withdrawal of the extra payments of £50 for those under 80 and £100 for those over 80 will hit pensioners hard, especially the large number that are living in fuel poverty. This group in particular needs as much help and support as possible from the Government."

One solution is to target the allowance at those who really need it, rather than making it a universal payment for all. Hard-up pensioners who qualify for Pensions Credit, for instance, are likely to be those who will be hit hardest by the Coalition's cutback in winter fuel payments. Making the allowance means-tested could actually mean increasing the allowance to cover most of the cost of heating for needy pensioners, without having to dig any further into Treasury coffers.

Hard-up pensioners can also help themselves cut the cost of energy bills, says Robinson. "Now the payment has been reduced it's more important than ever that households manage their energy bills by paying the lowest possible price for their energy and cutting down on the amount they use through sensible energy efficiency steps and measures," she advises.

There's also the question of whether older people are getting all the financial help they are eligible for. Charity Elizabeth Finn Care says that only 5.4 million of the 13.5 million people living in poverty in the UK are claiming the state support they are entitled to. In fact, the latest annual figures show that around £16.8bn of welfare benefits go unclaimed each year. There are also more than 3,500 charitable funds available which distribute grants worth £366m a year.

Key points of the budget

* State-pension schemes are to be replaced with a flat-rate payment worth, at today's prices, £140 a week. The changes will affect future rather than current pensioners.

Full details will be set out in a forthcoming Green Paper, but it will take many years to implement and will continue to be based on contributions.

* The tax-free personal allowance for under-65s will increase by £630 to £8,105 in April 2012. That's in addition to the already-announced £1,000 increase in the allowance to £7,475 from 6 April this year.

* A consultation is being set up to consider scrapping the 50 per cent tax rate on incomes of £150,000. Mr Osborne intimated the rate would be scrapped within the lifetime of this Parliament.

* The Gift Aid scheme that allows charities to reclaim basic-rate tax on donations will be simplified so that charities do not have to file declarations on donations up to £5,000 – in other words, cash raised through local fund-raising events, collecting tins and similar.

* Meanwhile, the rate of inheritance tax on estates where 10 per cent or more is left to charity will be cut by 10 per cent from next April.

* The Government is looking into merging tax and national insurance to create a simplified tax system. But Mr Osborne admitted that the move will need extensive consultation and will take several years to complete.

A helping hand

Turn2us, part of the national charity Elizabeth Finn Care, is launching a campaign next Friday to make people aware of their benefits and help them get access to crucial cash they're entitled to. Benefits Awareness Month will last throughout April and will hopefully help some of the estimated 8m people who don't currently ciaim benefits. Log onto the website www.turn2us.org.uk to access a benefits checker.

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