Skip to Content

Coffee House

Sharing the burden will enable tax cuts in the future

24 February 2011

5:48 PM

24 February 2011

5:48 PM

The elderly have been sheltered from cuts, so far at least. New research from the IEA suggests that the government could save an additional £16bn a year simply by cutting the various non-means-tested benefits older people
receive and by making some minor changes to the pensions system.
 
Such a cull would include: the abolition of free bus travel (which would save £1.3bn per year), free TV licences (£0.7bn) and the winter fuel allowance (£2.1bn). In addition to
those cuts, the state pension age should be raised to 66, which would save an extra £5bn. Abandoning the “triple lock” policy for pension increases from 2011 would save another
£5.6bn, and increasing the minimum income guarantee for pensioners in line with prices rather than wages would save a further £0.8bn.
 
Electorally, the government may fear that it has much to lose by implementing these policies. But with public spending due to return only to the levels of 2008, the coalition needs to make further
savings if it is ever to reduce taxes, which is surely a vote winner?

Many of these pensioners’ perks are gimmicks, ripe for cutting. The winter fuel allowance is a universal cash payment made regardless of how much is spent on fuel, how well off a pensioner is
and how cold the winter is. These proposals won’t leave pensioners broke and shivering. Means-tested benefits would still be available for those genuinely in need. It’s also worth
pointing out that all people – rich, poor, young and old – would be much better off if they could keep more of their own money in the first place. Currently, money goes round in circles
with people paying taxes to one government department only to reclaim it from another after having completed voluminous forms. Our proposals – and other suggestions that the IEA will be
making in the coming months – will allow room for substantial tax decreases.

Ruth Porter is the IEA’s Communications Manager.


Show comments
Close