This piece first appeared in Saga Magazine in December 2000
The text here may not be identical to the published text

What Price Your Vote?


more money for people over 60

More money for people over 60, £10,000 for ex-prisoners of the Japanese in the last war, and radical new plans for pensions and tax were announced just as Saga Magazine went to press. Paul Lewis gives his first analysis of these promises.

The Chancellor of the Exchequer has finally understood one important piece of arithmetic – people over 60 account for 12 million votes with another 7 million aged 50-59. His Pre-Budget statement in November tried to win them for Labour at the General Election expected in May. Seldom has there been such a sustained package of measures to give older people more money – and let them keep more of the money they have earned and saved themselves. Over two years he will give more than £4 billion extra to people over 60.

· The basic state retirement pension will rise by £5 a week from April 2001 for a person claiming on their own contributions and £3 for a married woman claiming on her husband’s contributions.

The Chancellor’s promise would take the basic state pension to £72.50 a week and the married woman’s pension to £43.40. Those rises are more than double the increase if pensions went up simply in line with inflation. The are also higher than the rise many people have been demanding in line with average earnings – that would have been around £3.50 on a basic pension.

· In April 2002 the basic state pension will rise by £3 – and by £1.80 for married women claiming on their husband’s contributions.

This rise in 2002 will take the basic pension to £75.50 and £45.20 for a married woman. It is equivalent to an extra 4% on the pension, well above the rate of inflation expected by the Treasury at that time which is 2.5%. The increase may be almost as much as the percentage rise in average earnings.

· The winter fuel payment will be fixed at £150 a year in the future. But this winter it will be raised to £200.

The winter fuel payment now goes to around 8.5 million pensioner households where someone is aged 60 or more. For this winter only it will be raised from £150 to £200 as part of what the Chancellor calls "transitional arrangements to our new pension reform". Anyone who was born on or before 24 September 1940 should get the payment. A person who lives alone or who is the only person in the household aged 60 or more, will get £200. If there is more than one 60-year-old in the household, then they will get £100 each. The winter fuel payment is tax-free and does not affect any means-tested benefits. If you have not had a payment before and have not already claimed, then ring 08459 15 15 15 to register your claim now.

· The minimum income guarantee will rise to £92.15 a week from April 2001

This promise is not as generous as it appears. At the moment the minimum income guarantee (the Government’s new name for income support) is a means-tested benefit which raises the income of people aged 60 or more to a guaranteed level. At the moment that level depends on age and is £78.45 up to age 74, £80.85 for people 75-79 and £86.05 for those over 80. On November 8 Gordon Brown promised

"I can tell the House that the minimum income guarantee which…is £78.45 today…will be raised in April by £14 to £92.15."

But that is not quite true. Leaving aside that fact that the difference between £78.45 and £92.15 is actually £13.70 not £14, the Government will also abolish the extra amounts for people at age 75 and 80. So for someone aged 80 the new rate of £92.15 will be a rise of just £6.10 – less than half the "£14" promised by Gordon Brown. Of course, even £6.10 is a significant increase of 7%, twice the rate of inflation. But the uncomfortable fact for the Government remains that the smallest rise will be given to the oldest, and often the most needy, pensioners. For couples the new minimum income guarantee from April 2001 will be £140.55 a week regardless of age. At the moment the figures are £121.95 at 60 rising to £131.05 at 80.

The Government also committed itself to raise the level of the minimum income guarantee in line with earnings in future.

Finally, anyone on minimum income guarantee who is responsible for a funeral from April 2001 will be able to get a payment of £600 or more even if they have savings. At the moment, anyone over 60 with savings of more than £1000 is expected to spend the excess on the funeral.

· Capital limits for savings will be raised from April

The minimum income guarantee is only given in full to people with savings under £3000. For those with savings up to £8000 it is reduced and people with more than £8000 cannot get it at all. From April 2001 the Government has already announced that those limits are to be raised to £6000 and £12,000. And from April 2003 the capital limits will be abolished altogether. That will be done as part of the new Pensioner Credit which will start at the same time.

The Pensioner Credit is new concept. Details were still coming in as Saga Magazine went to press. But as we understand it, any pensioners with a modest income from savings, earnings or a pension of their own will be given a credit by the Government to boost it. That is exactly the opposite of what happens now. Under the present system any savings or any income from a pension or earnings REDUCES the amount of minimum income guarantee which is paid. For example, someone who just has the basic state retirement pension of £67.50 and less than £3000 savings can get an extra £10.95 income support to bring his weekly income up to the minimum income guarantee level of £78.45.

But suppose he had saved for his retirement by paying money into a small pension scheme at work and that those modest savings now produced a pension of £10.95 a week. His total income from his own resources would then be £78.45 a week. Because his income was at the level of the minimum income guarantee he would get nothing extra. In other words, he is exactly as well – or badly – off as if he had not saved at all.

But the pensioner credit will reverse that. Instead of penalising people with small pensions or savings, it will give them extra money for each pound of their own pension or earnings or income from savings. These credits will be paid to anyone with an income of up to £135 a week – and up to £200 a week for couples. This amount will rise each year in line with earnings. The pension credit could boost some incomes by more than £13 a week.

The Government has also promised that the intrusive and difficult means-test which is required for claiming minimum income guarantee – the famous 40 page form featured in Saga Magazine in May (?) – will be made simpler and easier.

· Tax reliefs raised with inflation next year - but more in the future

The amount of income that an individual can have before paying any tax will rise next April by the rate of inflation. That will mean a rise of £150 to £4535 for people under 65; a limit of £5990 (up £200) for those aged 65-74 and £6260 (up £210) for people aged 75 or more. From 2003 the Chancellor has promised that the higher amounts for people over 65 will rise by the same percentage as average earnings rather than in line with prices.

The Chancellor has not responded to the many calls for the restoration of the married couple's allowance for people born after April 5 1935. But for those who are still eligible, the tax allowance will rise in line with inflation and will be worth £543.50 off the annual tax bill where the older partner was born before 6 April 1927 and £536.50 in other cases.

· £10,000 each to Far East Prisoners of War and their widows

The Government has agreed to make a one off payment of £10,000 each to the survivors of Japanese prison camps in World War II. An estimated 16,700 survivors and widows will get the payment. Four groups of prisoners and internees will benefit.

· Members of the British armed forces

· Merchant seamen

· Civilians

· Some members of the Burmese and Indian Army and those serving in the Colonial forces.

Surviving widows and widowers of people in any of those four categories will also get the payment. It will be tax-free and will not affect any other benefits.

In the early 1950s small payments of around £75 each (£48 to civilians) were made after Japanese assets were sold under the 1951 Peace Treaty with Japan. People who got that payment and those who have subsequently joined one of the many clubs or associations for prisoners of the Japanese should be able to claim the £10,000 without much difficulty. Those who did not claim a payment in the 1950s and who have never declared themselves as ex-prisoners of the Japanese may have their claims examined more carefully. Members of the Burmese, Indian and colonial forces will ONLY be eligible if they got the payment in the 1950s.

The payments bring to an end a long campaign for recompense for these men and women who suffered torture, forced labour, starvation, disease and beatings for up to four years. Governments of both parties have previously refused their demands for compensation. About five out of six of those who survived the war have now died. Many campaigners still hope for an apology from the Japanese government and legal proceedings for damages are still with an appeal court in Tokyo.

More information

War Pensions Agency 0800 169 22 77 or +44 1253 866043 from overseas

Royal British Legion 0345 725 725

· A rebate of up to £55 to drivers of some small cars

If your car has an engine between 1100cc and 1500cc your Road Fund Licence (tax disc) will be cut from £155 to £100 from 1 November. This change will not be formally introduced until the Budget in March 2001 but it will be backdated to November. Arrangements will be made to pay the refund next year.

December 2000


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