Tax the rich... wait, no, not like that! (Winter Fuel Allowance)

[Tristan]

It's remarkeable how many "tax the rich" types online are up in arms about removing the Winter Fuel Allowance from... the rich.

I don't see how WFA can be justified for those who just don't need it.

Ultimately I suspect many more people will need to pay more tax, including the median earner. Pensioners can't be protected from that.

[dyqik]

Means testing benefits nearly always costs more than it saves, and removing a benefit will leave some people in trouble, due to lack of planning.

It's easier and cheaper to just tax benefits as well as other income to recover the money from the rich.

[TopBadger]

Yeah - I've seen a few "FB friends" get all pissed off about it being stopped. When I pointed out to one of them that it hasn't actually been stopped because it will still be available as a means tested benefit so their mum can apply for it, they countered with "yes, but admittedly my mum isn't exactly poor"

I mean, duh - that's kind of the point.

But WFA isn't being stopped, it just isn't being automatically fired out of a confetti cannon at every pensioner.

[discovolante]

Means testing benefits nearly always costs more than it saves, and removing a benefit will leave some people in trouble, due to lack of planning.

It's easier and cheaper to just tax benefits as well as other income to recover the money from the rich.

I'm not sure that will necessarily be the case here. Not because I've done any calculations, but because eligibility for the WFP is linked to receipt of Pension Credit and other means tested benefits - I.e. the means test has already been done and the only check that is needed is whether or not the individual is receiving the right benefits. Of course if the government is going to be encouraging uptake of pension credit that will lead to more applications and more means testing, but can't really complain if people are claiming what they're already entitled to.

Part of the question then becomes whether or not means tested benefits are nearly generous enough. Pension Credit is more 'generous' than Universal Credit. Very broadly speaking a single pensioner would be entitled to £218.15 per week / about £945 a month of Pension Credit. A single non pensioner adult over the age of 24 would get £393.45 per month UC. For both they would get additional benefits to pay rent although it's more complicated for mortgages.

[IvanV]

Means testing benefits nearly always costs more than it saves, and removing a benefit will leave some people in trouble, due to lack of planning.

It's easier and cheaper to just tax benefits as well as other income to recover the money from the rich.

I think in this case I think they are proposing to use a means test that is already in place, so it just involves changing some lines of computer code to work out what to pay? And I suspect that in the case of removing a benefit from 86% of 10.5 million pensioners, the operating costs cannot possibly exceed the savings.

As you imply, by suitable adjustment of tax thresholds, you can give it to rich people and then tax it all away. I guess something much like that has largely, or more than, happened anyway through the non-indexing of tax thresholds through the recent period of high inflation.

But actually the government needs to recover even more tax from rich people. And there are many more rich people among the pension population than there used to be. So explicitly taking the benefit away, assuming the removal saving is indeed a lot less in cost than the operating cost of the means test, is a way of increasing tax on the better off.

Maybe they will retreat a little from taking it away from as much as 86% of pensioners, as I suspect the extent of financial difficulty in that sector is a bit more than 14%. But hopefully not at the cost of introducing a new means test that would be costly to operate.

My well off 86-yr-old father has been donating his winter fuel payment to the Trussell Trust. He has asked his other well-off aged friends and relatives where they donate theirs, obtaining the unsurprising mumble in reply.

[Tristan]

I refuse to believe Delaney doesn’t know who Meaden is or how rich she is.

IMG_1468.jpeg (43.57 KiB) Viewed 9906 times

[discovolante]

I refuse to believe Delaney doesn’t know who Meaden is or how rich she is.

IMG_1468.jpeg

I don't think there's any suggestion that he doesn't know. I assume his position is that it's better to distribute a benefit to everyone, including people who don't need it, rather than to introduce conditions that might lead to people in need missing out. I'm generally of the same view to be honest. There are probably better ways that the winter fuel allowance could be administered though - there are some suggestions in this thread already.

[dyqik]

I refuse to believe Delaney doesn’t know who Meaden is or how rich she is.

IMG_1468.jpeg

I don't think there's any suggestion that he doesn't know. I assume his position is that it's better to distribute a benefit to everyone, including people who don't need it, rather than to introduce conditions that might lead to people in need missing out. I'm generally of the same view to be honest. There are probably better ways that the winter fuel allowance could be administered though - there are some suggestions in this thread already.

The other factor is that it's much easier to take away a means tested benefit, by not adjusting thresholds with inflation, or adjusting them down, than it is to take away a universal benefit.

This is also why creeping privatization of the NHS has to be fought.

Demanding benefits be means tested is a right wing Tory position for this reason.

[bjn]

I refuse to believe Delaney doesn’t know who Meaden is or how rich she is.

IMG_1468.jpeg

I don't think there's any suggestion that he doesn't know. I assume his position is that it's better to distribute a benefit to everyone, including people who don't need it, rather than to introduce conditions that might lead to people in need missing out. I'm generally of the same view to be honest. There are probably better ways that the winter fuel allowance could be administered though - there are some suggestions in this thread already.

The other factor is that it's much easier to take away a means tested benefit, by not adjusting thresholds with inflation, or adjusting them down, than it is to take away a universal benefit.

This is also why creeping privatization of the NHS has to be fought.

Demanding benefits be means tested is a right wing Tory position for this reason.

This. In spades. Means testing and removal of benefits also has perverse incentives near the thresholds. You can effectively have 100% tax rates on marginal increments in income. If I were god emperor I’d get rid of all means testing and tweak the tax system to make sure its target efficiently.

[bjn]

There is also the fact that the winter fuel allowance fills in for profoundly crappy UK housing stock.

[Tristan]

There is also the fact that the winter fuel allowance fills in for profoundly crappy UK housing stock.

Do only old people live in crappy UK housing stock or should everyone get winter fuel allowance? I live in a house with crappy insulation but I earn a very good salary. Should I get a winter fuel allowance?

[discovolante]

There is also the fact that the winter fuel allowance fills in for profoundly crappy UK housing stock.

Heh. I linked to the Cleaning Up episode with Greg Jackson of Octopus in another thread. One thing he talked about on there was that during the cost of living crisis, Octopus started sending out free electric blankets to people who called for help, because it's much much cheaper to keep yourself warm with an electric blanket than to heat a house. They didn't publicise it at first (or rather the publicity was organic) because he knew there was a risk it could lead to bad publicity. Possibly he also just didn't want everyone phoning up asking for an electric blanket.

Obviously I'm not suggesting that an electric blanket is the solution to everyone's heating problems (for one thing you are sort of trapped under them, and it won't help if, for example, your house is susceptible to damp and mould if you don't keep it heated), but maybe we'll see a rise in 'winter warmth' banks or something. They probably already exist.

[discovolante]

I don't think there's any suggestion that he doesn't know. I assume his position is that it's better to distribute a benefit to everyone, including people who don't need it, rather than to introduce conditions that might lead to people in need missing out. I'm generally of the same view to be honest. There are probably better ways that the winter fuel allowance could be administered though - there are some suggestions in this thread already.

The other factor is that it's much easier to take away a means tested benefit, by not adjusting thresholds with inflation, or adjusting them down, than it is to take away a universal benefit.

This is also why creeping privatization of the NHS has to be fought.

Demanding benefits be means tested is a right wing Tory position for this reason.

This. In spades. Means testing and removal of benefits also has perverse incentives near the thresholds. You can effectively have 100% tax rates on marginal increments in income. If I were god emperor I’d get rid of all means testing and tweak the tax system to make sure its target efficiently.

Do you mean something like UBI? We're probably now at a point where it's seriously worth experimenting with. Or maybe that should be phrased as, it should be trialled.

[JQH]

Not sure how "universal" WFA actually is. I'm a pensioner and I don't get it.

[bjn]

The other factor is that it's much easier to take away a means tested benefit, by not adjusting thresholds with inflation, or adjusting them down, than it is to take away a universal benefit.

This is also why creeping privatization of the NHS has to be fought.

Demanding benefits be means tested is a right wing Tory position for this reason.

This. In spades. Means testing and removal of benefits also has perverse incentives near the thresholds. You can effectively have 100% tax rates on marginal increments in income. If I were god emperor I’d get rid of all means testing and tweak the tax system to make sure its target efficiently.

Do you mean something like UBI? We're probably now at a point where it's seriously worth experimenting with. Or maybe that should be phrased as, it should be trialled.

Mostly yes. UBI might need to be tweaked so that it increases with age to some degree, to counter the inability to earn as you crumble, same for the young ‘uns.

[bjn]

There is also the fact that the winter fuel allowance fills in for profoundly crappy UK housing stock.

Do only old people live in crappy UK housing stock or should everyone get winter fuel allowance? I live in a house with crappy insulation but I earn a very good salary. Should I get a winter fuel allowance?

Ideally you, and everyone else, would get an incentive to insulate your home properly so there was no need for ongoing winter fuel allowances. Investment to reduce the need for ongoing expenditure.

That was going to happen until Cameron junked it as “green crap”. It’s cost the UK economy multiple billions of pounds and left us more vulnerable to the likes of Putin and various other fossil fuel dictatorships. I remember the figure as at least £20 billion (source, The Cleaning Up Podcast).

[IvanV]

Means testing and removal of benefits also has perverse incentives near the thresholds. You can effectively have 100% tax rates on marginal increments in income. If I were god emperor I’d get rid of all means testing and tweak the tax system to make sure its target efficiently.

A targeted tax system is precisely a means-tested system. It depends upon your income, and that is a very precise assessment of your means to apply the measure to.

But what you are rightly complaining about is those measures that are not smooth, but rather you lose some lump sum when you go over a particular income level.

Tax systems can provide for income support through negative rates of taxation. It tends to be income support measures that are particularly prone to not being smooth. But they can likewise be designed to be smooth, just like the taxing for those who don't get income support, by constructing them as negative taxes.

Unfortunately Chancellors make promises not to increase (certain) taxes, but need to get more income. So they play games, and we ended up with this topsy-like lumpy silly tax and benefit system. And of course any change creates howls from those who will lose out. As this precise argument illustrates only too clearly. Keith Joseph did largely smooth out our tax system - at least the tax part of it - in the early part of the Thatcher period. But he had the benefit of doing so as he made giveaways from a high tax system. Much easier to fix tax systems when you are mostly giving away. And I suppose that explains why he didn't sort out the income support side. Then subsequent chancellors only buggered it up. The term "stealth tax" was first heard under Lamont's chancellorship. And much brought out again for Mr Brown's activities. It has only got worse since.

The Mirrlees Review, which was initiated late in Mr Brown's term, and continued and completed under Cameron, recognised that our tax (and benefit) system was a mess and proposed how it should be fixed. A large and thoughtful project. But every subsequent government has ignored it.

[TimW]

Not sure how "universal" WFA actually is. I'm a pensioner and I don't get it.

Are you a prisoner? They are excluded.

[Trinucleus]

I'm surprised as a measure that it passed the money vs political hassle test. There are surely other ways of bringing in 1 billion that don't annoy so many people.

Just don't take away our Christmas bonus* as well.



*£10. Yes, seriously

[dyqik]

Tax systems can provide for income support through negative rates of taxation. It tends to be income support measures that are particularly prone to not being smooth. But they can likewise be designed to be smooth, just like the taxing for those who don't get income support, by constructing them as negative taxes.

The US does this fairly extensively, via fully refundable tax credits, like those for having children in the family. These are lump sums that are subtracted from your tax return bottom line (tax owed/refund owed). As such, they are available to everyone who otherwise qualify, and offset higher taxes on higher income individuals, or pay out to lower income individuals.

[Gfamily]

The problem as I see it, is that the WFA is now tied to savings as well as income, with any savings above £10k being counted as additional weekly income.
We're often told that we should aim to have 6 months reserves 'for emergencies' (difficult enough for many people), but any reserves that most pensioners have are likely to have to last for 15/20 years. So penalising people (by withholding Pension Credits as well as the WFA) for having a 'reasonable but not excessive' level of reserve is deplorable.

People of working age can change jobs or look for additional shifts if they 'have emergencies' but most older pensioners don't have that option.

[snoozeofreason]

...
Part of the question then becomes whether or not means tested benefits are nearly generous enough. Pension Credit is more 'generous' than Universal Credit. Very broadly speaking a single pensioner would be entitled to £218.15 per week / about £945 a month of Pension Credit. A single non pensioner adult over the age of 24 would get £393.45 per month UC. For both they would get additional benefits to pay rent although it's more complicated for mortgages.

To be more precise, a single pensioner on pension credit would get their income topped up to £218.15 per week. In other words the amount they receive as pension credit would be £218.15 minus any other income. According to eligibility rules on gov.uk, the "other income" would include, State Pension, other pensions, earnings from employment and self-employment, and most social security benefits (although some benefits, such as housing benefit, are not counted).

For context, someone who gets the full new state pension, but has no other income, would be receiving £221.20 a week.

[TopBadger]

So pension credit only adds £7 a week?

[Grumble]

So pension credit only adds £7 a week?

It doesn’t take you up to full state pension

[discovolante]

...
Part of the question then becomes whether or not means tested benefits are nearly generous enough. Pension Credit is more 'generous' than Universal Credit. Very broadly speaking a single pensioner would be entitled to £218.15 per week / about £945 a month of Pension Credit. A single non pensioner adult over the age of 24 would get £393.45 per month UC. For both they would get additional benefits to pay rent although it's more complicated for mortgages.

To be more precise, a single pensioner on pension credit would get their income topped up to £218.15 per week. In other words the amount they receive as pension credit would be £218.15 minus any other income. According to eligibility rules on gov.uk, the "other income" would include, State Pension, other pensions, earnings from employment and self-employment, and most social security benefits (although some benefits, such as housing benefit, are not counted).

For context, someone who gets the full new state pension, but has no other income, would be receiving £221.20 a week.

Yes sorry, I was writing a bit hastily and was just using the baseline assumption of a person with no other income, but didn't make that clear.