A tussle in cabinet over universal benefits for old people is destined to end badly for David Cameron, whatever the outcome
In British politics there are not many words capable of killing a rational argument stone dead, almost regardless of its merits. But “granny” is usually one of them. Just ask George Osborne, whose budget centrepiece was an unintelligible bit of tinkering with retirement tax thresholds until some bright spark coined the phrase “granny tax”. Within hours it was a full-blown PR disaster, any hope of arguing that an ageing nation might need to rebalance its tax base swept away in an emotional tsunami. The chancellor might as well have been caught personally mugging an old lady. So what to make of the granny-baiting manoeuvres of his cabinet colleague, Iain Duncan Smith?
The welfare secretary has been privately arguing in cabinet that the universal winter heating allowance (an annual £200 currently sent to all households containing someone over 60, rich or poor, rising to £300 for the over-80s) is now an unaffordable luxury. This week his case for restricting it to the poorest half of the retired population spilled into the open: yet far from being accused of heartless granny-bashing, Duncan Smith was cheered on by the Sun, which launched its own campaign in support of him. When the Fleet Street champion of both grannies and wealth-creators adopts the slogan “ditch handouts to the rich”, something odd is afoot.
It helps that Duncan Smith is arguably quite right. As the broadcaster and older people’s tsar Joan Bakewell points out, it seems absurd that she and her millionaire rock star neighbour get taxpayer subsidy for heating their prime Primrose Hill real estate. The fact that so many pensioners, unlike Bakewell, need every penny of help they can get only makes it seem stranger that 100,000 households on incomes of over £100,000 a year should still be merrily banking their “winter warmer” even as the welfare state is cut to the bone. It is hardly rapaciously rightwing to suggest this money could be better spent on those in real fuel poverty.
After all, senior politicians from all parties have been privately questioning for at least three years whether a whole raft of universal pensioner freebies – the heating allowance, free TV licences and bus passes – could really survive an age of austerity. What they didn’t dare do was say so in public, ahead of an election where a startling four in 10 voters were expected to be over the age of 55.
It’s not hard to understand why he did it, but in hindsight it was a fatal mistake for David Cameron to let himself be cornered into a pre-election pledge never to mess with these universal perks. By all accounts, he remains determined not to renege on what he sees as a personal promise. The last thing any Tory leader needs, especially one sliding in the polls, is such a totemic breach of faith with the one demographic still most likely to support him. But the fresh round of spending cuts on which his coalition has now embarked means this argument can’t be ducked forever.
The idea that the recession has pitted young against old – with a generation pushed off the career and property ladder turning resentfully on the baby boomers – is sometimes overdone. A third of pensioners, one recent survey suggested, are actually borrowing money from their children rather than the other way round. But a new wave of austerity risks flushing intergenerational tensions out into the open by forcing ministers to choose between the demands of angry youth and needy old age. And nowhere is that choice more stark than within the welfare budget.
Duncan Smith has been asked to find another £10bn in savings as his contribution to getting the Treasury’s battered deficit-reduction plan back on track: this after an already savage pruning, which saw families uprooted from their homes (in the name of capping housing benefit) and the profoundly sick declared suddenly “fit for work”. His resistance looks uncannily like a recognition that, for all the rhetoric about welfare scroungers, there’s precious little fat left to trim. A crude choice now looms between the virtually untouched budget for pensioners, or redoubling the punishment for those of working age. Neither choice is politically painless any more and for the Sun to come down on the side of youth is a critical straw in the wind.
Yet for a government that once bragged about its readiness to take the tough decisions, there is little sign of enthusiasm for a battle with pensioners. It is a striking reflection on how far Cameron’s authority has faded that a senior cabinet minister and the Sun – backed by Nick Clegg – should be prepared to make common cause on such a sensitive issue for him. But it’s precisely this weakness that may encourage the PM to dig in his heels.
A strong leader can get away with going back on his word occasionally, when changing times justify changing minds: one who has already U-turned once too often, however, will eventually find this bank of goodwill exhausted. This coalition may be running out of road just as it most needs it.
Of course there are legitimate worries about means-testing, which may make it harder for the genuinely needy to claim, as well as pushing up administration costs. But we’re not dealing here with some precious relic of the Beveridge settlement: it’s a relatively recent budget wheeze of Gordon Brown’s, still less than 15 years old. And even if Cameron’s promise rules out a change before the 2015 election, there is clearly a little wriggle room left given that the spending review effectively extends to 2017 – particularly if the change were made as part of a broader, balanced package.
It should not be impossible to draw up a new covenant between young and old, based on a promise to ease older people’s genuine fears over long-term care – not just capping the cost to individuals, but rooting out shoddy and degrading treatment in care homes – and protecting the basic state pension. But a confident government could insist in return that wealthy retirees pay more tax and fork out for their own bus passes, in solidarity with their grandchildren. To coin a phrase, it’s time the generations were all in this together.
The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage.
NEW YORK (Trefis) — Concerns about the Apple’s iPad heating up to alarming levels seem to have little impact on the tablet’s consumer satisfaction ratings, implying that the heating issues are probably a rare occurrence.
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