January 4, 2013 by Nash Riggins
Prime Minister David Cameron has today rejected the proposal by Lib Dem MP Paul Burstow that Winter Fuel Payments should be means-tested in the future; however, Mr Cameron would do well to reconsider.
Mr Burstow, the former Care Services Minister, asserted in a report yesterday that the Winter Fuel Payment (WFP) scheme “is an anomaly in our welfare system”, as it is widely available to a vast number of individuals who are not in financial need.
At present, anyone of pension age is able to receive the benefit – which ranges from £200-300 every winter. Yet according to Mr Burstow’s report, over 10% of pensioners currently claiming WFPs have an annual household income in excess of £100,000. By means-testing the WFP scheme, the report claims that the Treasury could save up to £1.5bn per year.
In addition, the Centre Forum’s report asserted that the WFP scheme has whole-heartedly failed to prevent households from slipping into fuel poverty – an unfortunate relative truth. Relevant research suggests that 88% of those who receive WFPs don’t spend said funds on their energy bills, which has effectively led many individuals to be classified as living in fuel poverty – meaning that the household in question is spending in excess of 10% of their annual income on energy costs.
For example, if a household spends £120 every month on fuel – out of an income of £1,000 – they have effectively spent 12% of their income on energy. If the state then raises the household income by £25 – in the same way that WFP increases income – the household in question still spends 11.7% of its total income on energy, meaning said individuals will remain classified as living in fuel poverty. However, if the £25 is spent on cutting their energy bill, the same household spends 9.5% on energy, taking them out of fuel poverty.
Accordingly, Mr Burstow’s report has made the claim that the WFP is ineffective and works merely as a universal income boost for all over sixties – as opposed to operating as a means of targeting help to those who need it most. At present, the eligibility and rate of payments for the WFP scheme is very high – in fact, the cost of the WFP scheme reached £2.1 billion last year. This was paid out to over 12.7 million people – the majority of which having admitted to not using said payment as stipulated.
In response, the report is effectively calling for an abolishment to the WFP scheme, and instead continuing fuel payments via the government’s less-popular and means-tested Pension Credit scheme.
At present, only two-thirds of eligible individuals are claiming benefit from the UK’s Pension Credit scheme, at just over 2 million people. Upon this basis, if the WFP scheme was limited solely to those claiming Pension Credit only, over 10 million people would lose this benefit, leading to savings to the Treasury that would exceed £1.5bn annually. This savings would immediately be used to fund the bulk of costs for the government’s proposed £1.7bn reforms of elderly care in England.
Moreover, this plan has been crafted in the hopes that, by adding the value of WFP to Pension Credit and distributing it into people’s bank accounts at wintertime only, it would effectively encourage a group of people on low incomes to claim Pension Credit. In turn, more individuals who vitally need subsidised fuel payments will receive them, while those who are able to pay for their own energy will be left to do so.
Unfortunately, David Cameron has already rejected calls to means-test WFPs, insisting that he would stand by an election pledge not to cut state help for pensioners. Some in Westminster have even gone so far as to claim that the report is ‘out of touch’; however, those same politicians would do well do allow Mr Burstow’s report the due attention with which it deserves.
The UK government throws away millions of pounds every year in order to heat the homes of very well-off individuals – as well as British ex-pats who have retired to sunny locales that don’t even require heating. This is an appalling waste of funds, given that subsidies such as the WFP scheme do indeed mean the difference between heating and eating for some of the UK’s less-fortunate individuals. With any luck, Mr Burstow’s report will materialise in the form of a viable piece of legislature in the near future – because fuel costs are mercilessly rising, and there are people out there who truly are in need of a helping hand.