Anyone with even the faintest interest in current affairs could not have failed to notice the surprise resignation of Iain Duncan Smith on Friday evening. In his letter to the Prime Minister, IDS explained that he struggled to accept cuts to disability benefit at the same time that better-off pensioners had their benefit ring fenced.
In his recent budget, the Chancellor, who remarkably has given his fourth statement in less than a year, has just set out yet further dismal borrowing and deficit figures. Time and time again, we are told that the main aim of this government is getting spending under control. Yet large parts of the budget are off limits for Mr Osborne, due to ring-fencing, and so the axe ends up disproportionately falling in other areas – and is the real reason ministers end up having to contemplate cutting benefits for disabled people.
The social contract we sign with those in retirement is a great achievement of affluent democracies in the twentieth century. Retirement used to be the privilege of the few – even until the 1960s ‘retirement’ was a synonym for poverty. The current government’s policy of ring-fencing – on pensions, winter fuel allowance, TV Licences and the Christmas Bonus – is admirable in its intention. But you cannot argue that it is sensible economics.
Spending on benefits administered by the DWP is expected to be about £171 billion in 2015/16 (23% of public spending) of which about £90 billion is expected to be paid out in the State Pension. The triple lock – which means pensions will rise by the highest price of price inflation, earnings growth or 2.5% - is irresponsibly profligate and if taken to its inevitable conclusion, will eventually take up 100% of government spending (this is slightly factious but goes to show what a bad policy this is). When taken in context of the other benefits that are given out regardless of a pensioners wealth the TaxPayers' Alliance have called for this policy to be ditched in our Spending Plan. Given that pensioners have some of the easier incomes to work out, we believe that it is not unjustifiable for some of these benefits, for example Winter Fuel Payments, to be means tested. You could abolish the Christmas Bonus and target free bus passes for the elderly on those who genuinely need them.
Of course poorer pensioners should receive assistance if it is needed, and this is not a call for across the board withdrawal of pensioner benefits. But the existing system is unsustainable in the current climate and, with an ageing population and those in retirement now earning more than those still in work, it is time for the Chancellor to get serious. It is a good thing that people are living longer and the quality of life is going up but this needs to be paid by the individual and not by the state.
If we do not act now and face up to the financial reality, we will only escalate intergenerational unfairness. Ring fencing must be stopped from being used as a political message to buy votes - there is no substitute for substantial reform.
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