Tuesday, 8 March 2011

Iain Duncan Smith, smoke and mirrors, and pensioners

A long campaign of the UK pensioner movement has been to restore the link with earnings.

One of the first acts of the coalition government was to do that with a new 'triple lock' - meaning pensions would rise by the greater of earnings, inflation or 2.5%. However, inflation was redefined as CPI rather than RPI. In a parliamentary debate last month, LEAP chair John McDonnell asked the Minister 'Did the Minister ever consider a quadruple lock so that, earnings or inflation, CPI or RPI, whichever was the higher, would be used?

The fact is that because of stagnating wages and rising inflation (on the more comprehensive RPI measure) the 'triple lock' may in the short term provide pensioners with a real terms cut, as even the Pensions Minister was eventually forced to admit.

Pensioners and pension campaigners were inevitably cautious when Iain Duncan Smith, author of what the LRC describes as the "pernicious and dogmatic" Welfare Reform Bill, allowed it to be leaked to the press that he might uprate the basic state pension to £140 per week, and scrap means-testing.

With the basic state pension currently languishing at £97 plus change per week (increasing to £102 in April) that might seem some considerable largesse. However, Pension Credit - Labour's means-tested minimum guarantee - will be worth £137.35 per week from April.

If IDS introduced his rumoured £140 per week basic state pension from April 2012, then that would be a real terms cut for those in receipt of Pension Credit (137.35 plus inflation of say 4.5% would mean £143.53 per week from April 2012. However, mitigating circumstances in IDS's favour would be the fact that means-tested Pension Credit only reaches about 66% of those entitled to it - so one-third of the poorest pensioners are missing out.

As an aside £16 billion in benefits goes unclaimed every year. Far more than the £1.5 billion lost in fraud or the £3.5 billion lost due to errors (by officials and claimants combined)

But the real issue is being missed. Why is that £140 is the rate under discussion, when the pensioner poverty line is £170 per week?

The problem is that the UK pays an appallingly low level of pensions, which leaves over 2 million pensioners in poverty and 3.5 million in fuel poverty. Pension expenditure accounts for just 6% of our GDP, compared with 12% in France and 10% in Germany.

Until this is addressed, Iain Duncan Smith cannot expect, and certainly won't receive many cheers from pensioners (present and future), especially when his government is cutting local services on which pensioners rely: libraries, day centres, social care, etc.

Today's Morning Star also demolishes IDS's bluster under the title 'Duncan Smith fails to convince on pensions'

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