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How the Treasury is hiding its true public spending on pensioners

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It’s a miracle! There is a surviving policy from Chancellor George Osborne’s omnishambles 2012 Budget characterised by a staggering number of U-turns.

Osborne’s decision to send all income tax and national insurance payers a statement every year on how their tax is spent is actually happening, more than two years after it was announced.

The tax summaries will show how much income tax and national insurance contributions have been paid over the financial year and how these have been calculated.

They will also break down each individual’s contribution to Government spending in areas such as welfare, health and defence.

But they are already proving controversial because of what is and is not included, and how it is being portrayed.

Labour has criticised the lack of VAT on the statements after the Government increased the rate from 17.5 per cent to 20 per cent in 2010.

More pertinent is how spending on pensioners is clearly being downplayed, while a welfare bogeyman is being ramped up significantly.

The statements will show nearly one quarter of all tax is spent on welfare, with a further 12 per cent spent on the state pension.

In a report on its website today, the Institute for Fiscal Studies says it is not a “helpful balance” and argues it would have been logical to include a breakdown of welfare spending for pensioners and those of working-age.

In an excellent analysis, the IFS shows £83bn was spent on the state pension and £168bn spent on other welfare in 2013/14. But within “other welfare” is plenty more spending on pensioners.

In fact, spending on pensioner benefits such as the winter fuel allowance, personal social services and public sector pensions accounts for almost a sizeable chunk of the welfare figure.

For example, £20bn is spent on public service pensions and £28.5bn on personal social services such as long-term care and child services.

A further £15bn is spent on specific pensioner benefits such as pension credit or winter fuel allowance, while £13bn is spent on other non-pensioner specific benefits such as disability living allowance and housing benefit.

The IFS states: “There are different ways of reporting how our taxes are spent, and there is a balance to be struck between the amount of detail presented and clarity of message.

“Lumping a quarter of total spending into one bucket labelled welfare may not strike the most helpful balance, especially when it includes such diverse items as spending on social care, public service pensions, disability benefits, child benefit and unemployment benefits.”

The IFS points out that the EU budget is included in the tax transparency statements despite making up just 0.1 per cent of total spending. But Osborne can’t find the space to break down a disparate group of “welfare” spending making up a quarter of all tax.

In the last 12 months Osborne has spent £150m on ending the 55 per cent “death tax” for pension funds as well as unleashing new freedoms next April. 

He has also imposed a triple lock on state pensions, meaning they will rise at 2.5 per cent at a time when inflation is just 1.2 per cent.

The Chancellor has refused to cut any pensioner benefits while taking an axe to housing benefit for young people with the promise of much more to come.

The IFS has picked up on a political trend to shower cash on pensioners while cutting back on younger people’s benefits. A cynic would say this is down to a far greater proportion of voters over 65 than under 30.

With Ukip attracting older Conservative voters it is more than likely Osborne will target the grey vote again through expensive policies. That is legitimate political choice but at least be honest about it instead of trying to hide the facts in “transparent” statements.

Samuel Dale is politics reporter at Money Marketing – you can follow him on Twitter here

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. He may be politics reporter but whatever the rights or wrongs of the proposed tax breakdown perhaps it would be better if Samuel Dale left his own personal political leanings to one side when reporting. Left being the operative word!

  2. Please stop knocking pensions. They are not ‘welfare’, they are a benefit paid for by many years of saving through National Insurance!

  3. @Barry Woolley – Whats woring with a journalist expressing an opinion in this way? I presume you wouldn’t have objected if the article had been slavishly supporting what the Chancelor has done? I can point to any number of articles that have appeared here folowing the Government/Conservative line – can’t you cope with balance?

  4. Rosie Dawn Chorus 10th November 2014 at 10:17 am

    Honest mistake? As we know he’s not very good with numbers our Chancellor.

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