Budget 2013: did the Chancellor deliver for older people?

Following statements from the Chancellor prior to the budget, it seemed that older people were due to benefit from significant changes to the future funding structures of social care and pensions. However, following the Chancellor’s statement there is little new to celebrate.

The main point of interest for pensioners was confirmation that the implementation of the cap on social care costs (the ‘Dilnot’ reforms) and the introduction of the single-tier state pension will both be brought forward to 2016-17. From April 2016, there will be a cap of £72,000 on the costs of care, and the upper threshold limit for the residential care means test will be increased to £118,000.

440x210_pound-coinsWhilst we welcome the earlier implementation of the care costs cap and the higher upper means test threshold from April 2016, this will do nothing to help the 800,000 older people who need help with everyday tasks but receive no formal state support. Since 2010/11, in real terms £700 million has been cut from local authority spending on social care. Although the Government has provided additional investment for social care over the course of this parliament, it has not been enough to halt the downwards spiral in care funding. As a result, 85 per cent of local authorities now provide care only to people with substantial or critical needs.
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Protecting the future: We all have to pay, but negative framing of the challenge in the context of ageing is unhelpful

In mid-July the Office for Budgetary Responsibility (OBR), the independent forecaster of the economy and public finances, published its annual Fiscal Sustainability report. The purpose is to identify whether and when changes in government policy may be necessary to move the public finances from an unsustainable to a sustainable path. The report paints a bleak picture for the UK’s economic recovery without further Government intervention and highlights spending related to population ageing as the key driver of this bleak economic future.

According to the OBR, in order to compensate for the demographic pressures and keep the national debt in 2060-61 at its pre-crisis level of 40% of GDP, another £17bn of savings will have to be found in 2017/18. This assumes that it is imperative to return to pre-crisis levels of debt to GDP. While this long-term aspiration is desirable there is much dispute within economic circles about whether this needs to happen quite so quickly.

It also suggests that maintaining benefits to which people are currently entitled will create a £65bn hole in the budget deficit between 2016/17 and 2061/62 and that health spending will need to increase from 6.8 per cent of GDP in 2016-17 to 9.1 per cent of GDP in 2061-62.

At first glance the figures look worrying and clearly difficult decisions lie ahead. Highlighting the need for these decisions is important – focusing the blame on ageing is unhelpful.

When you look at the detail in the report the impact of ageing is not as doomsday as the OBR make out.

Continue reading “Protecting the future: We all have to pay, but negative framing of the challenge in the context of ageing is unhelpful”

The Budget 2012

At the start of this week I told colleagues at Age UK that year’s Budget was unlikely to have much specifically for older people – either good or bad. But I was wrong! Headlines the next day included phrases such as ‘pensioners robbed’ and ‘anger as pensioners suffer’.

Disingenuously changes to allowances for people aged 65 and over were not described as a tax increases but ‘simplification’. So what is the effect? Well freezing the age allowances and abolishing them for those reaching 65 from April 2013 will result in 4.4 million people losing an average of £83 in real terms in 2013-14, of whom 360,000 will lose £285. 

These changes do not affect the poorest – over half of older people have incomes too low to pay income tax. But nor do they impact on the most wealthy older people who do not receive the higher allowances. Those affected will be older people who have built up private pensions and savings but still have only modest incomes. They will have a particular effect on people reaching 65 soon after April 2013 who may be planning their finances on the basis of a higher tax allowance and have little time to make changes.  Despite all you may hear about those reaching retirement now being the lucky generation with great final salary pensions, the median (typical) income of a newly retired pensioner is in the region of £11,000. 

As George Osborne points out, older people will gain from a £5.30 increase in the basic state pension and Age UK supports changes to the uprating of the basic state pension.  But many older people on modest incomes have other concerns – for example high energy bills, low rates of savings interest and reduced access to services.

Following the waves of protests about these changes to age allowances some commentators have argued that this balances things up a bit as in general pensioners have been protected from cuts, but at Age UK we worry about pitting one generation against another. In many respects there is more inequality within age groups than between them. Each generation faces different challenges and we need systems that are fair within and across age groups. And reductions in support or increase in taxes need to be debated – not announced without full consultation and described as simplification.  

Read Age UK’s full Budget briefing

Find out what the Budget means for you

 

Age UK Budget reaction

Some weeks ago Age UK submitted evidence to the Treasury ahead of the Budget, outlining our key Budget priorities for later life. While we’ve had some good news today, the Chancellor’s response – or silence – in other areas left our ‘wish list’ largely unfulfilled.

The highlight today for Age UK was the hint that the Government will introduce a simple flat-rate state pension of around £140 a week. This will be great news for those who receive it – we’ve been calling for a simpler, better single State Pension for many years. But as always, the devil is in the detail. We didn’t hear today when this pension is going to be implemented, and we know from the Chancellor’s statement that it won’t apply to those currently in receipt of State Pension. With 1.8 million older people living in poverty in the UK today, we believe that more needs to be done to tackle pensioner poverty now.

Future increases to the State Pension Age past 66 will now to be determined by an automatic process, according to today’s Budget statement. While we accept that the State Pension Age will have to increase periodically to take account of welcome increases in life expectancy, simplistic indexation is not the answer. In particular, it’s essential that any increase isn’t based solely on average life expectancy, as health inequalities mean that life expectancy varies wildly across the UK. Any new uprating must also take into account the impact changes will have on the poorest, those out of work and those with health problems or disabilities.

After spending years campaigning for an end to age discrimination, it was disheartening today to see the postponement of new age equality provisions for small businesses. We’ve been promised that this will not include the ending of the Default Retirement Age, which will begin to be phased out from April, but it will water down the banning of age discrimination in the provision of goods and services. Age equality makes economic sense, and older consumers’ spending will be key in reducing the deficit, so we would have liked to see more Government support to help small businesses adapt to the changes, rather than abandoning them.

Finally, there were areas where the Budget said nothing, where action was urgently needed. We already know that adult social care is going to be badly hit from April, as we hear news of local government cuts. We asked the Chancellor to channel any extra money he could find to top up support for care users who are among the most dependent in society. Yet while there was a little extra for other favoured projects – money for councils to fill potholes among them – there was nothing to see off the looming crisis in care.

Read more coverage of the Budget on the main Age UK site