This week, Iain Duncan Smith was reported to be considering a “temperature test” for pensioners who want to claim their £200 winter fuel payment. Put simply, pensioners would have to show that where they live is cold enough to merit the payment.
This bureaucratic wheeze tells us a lot about our politics. First, there’s the tendency for one absurdity to lead to another. Mr Duncan Smith has been hit with an EU diktat that would force him to send an extra £100 million to pensioners who live abroad. Previously, pensioners couldn’t claim the benefit abroad if they had lived overseas for a long time. The Work and Pensions Secretary reasons that such cheques were not supposed to be a bung for people living in famously chilly places such as the Costa del Sol or Tuscany.
But the nature of EU law means that he must find some “objective” reason for denying such payments. (Otherwise it would be viewed as discrimination by Euro judges.) The temperature test is peculiar, but then the winter fuel payment is a peculiar policy. In the Nineties there was a rash of sensational media reports about pensioners freezing to death, so Gordon Brown quickly promised to drive down the numbers of people living in what he called “fuel poverty” – those who spent more than 10 per cent of their income on energy bills.
But the winter fuel payment is a remarkably bad way of addressing this problem. It goes to all pensioners, regardless of income. And it doesn’t go to other people who struggle to heat their homes. As a result, four fifths of the money goes to people who aren’t in fuel poverty, while half the people who really are in fuel poverty don’t get it. It is about as well targeted as Chris Waddle’s famous ballooning penalty kick in the 1990 World Cup (which is currently orbiting the moon somewhere).
It would be better, surely, to focus the money on the poorest pensioners, rather than sending benefit cheques even to millionaires. But it can’t be touched, because the Prime Minister promised during the election that it wouldn’t be. He did this because politicians are increasingly in awe of older voters. And that’s the other big thing we can learn from this.
The winter fuel payment is just one example of the way that older people are gradually getting a bigger share of the spending cake. In recent years, pensioners, whether rich or poor, have also been given free TV licences (costing three quarters of a billion a year) and free bus passes (worth over a billion). The Government has introduced a “triple lock”, which will see pensions rise by more than average earnings.
Meanwhile, younger people face higher tuition fees, and the end of benefits such as the Education Maintenance Allowance. Benefits for working-age people are linked to inflation, which generally grows more slowly than earnings.
Despite explosive growth in tax credit spending, the share of welfare benefits going to pensioners rose from 45 per cent in 1997 to 52 per cent a decade later. Current reforms are likely to see that share increase further.
No wonder there has been a flood of books on “the clash of generations”. A frequent theme of such books is the way that soaring house prices have helped the old and clobbered the young. Yet the underlying reason for spiralling prices is Britain’s tight restrictions on new building. Countries such as Germany, which allow more building, have seen housing become cheaper, while in Britain the past decade saw house prices rising three times faster than earnings.
Why do older people now seem to have more political clout than youngsters? Well, there are two main reasons. Older people have been more likely to vote for a long time. But the “age gap” in turnout is growing fast. In the 1992 election, 83 per cent of the over-65s voted, compared with 63 per cent of 18- to 24-year-olds. By the 2010 general election the gap had widened: 76 per cent of those over 65 voted, but only 44 per cent of those aged 18-24.
To put it another way, in 1992 an older person was “worth” a third more than a young person in the eyes of the politicians. These days they are worth three quarters more. In fact, two old couples are “worth” seven young people.
Grey power is about to get a lot stronger, because we’re an ageing society, too. In 2010 there were two over-60s for every 18- to 25-year-old. By 2025 there will be three. Politicians used to be famous for kissing babies. Soon they will be sidling up to grannies.
The politics of this are interesting. On the one hand, older people are generally more conservative. In fact, if it was up to older people alone, Labour would have won only one general election since 1970. But no politician is going to mess with welfare spending for older people, the NHS services they use, or their social care.
The politics of ageing are already playing out in America. The former Bush adviser David Frum has accused the Republican candidate for Vice President, Paul Ryan, of wanting to “entirely exempt Republican-voting age cohorts” from the pain of dealing with America’s deficit.
Japan has an older population than any other industrialised country, and has seen genteel stagnation for nearly a quarter of a century. It has endured a long period of falling prices, with the Bank of Japan slamming the brakes on recovery at the slightest sign of inflation. Why do the Japanese put up with this? Partly because so many of them are pensioners, living on fixed incomes.
There is no shortage of pessimistic analysis out there about the effects of an ageing society, or the rise of grey power. We will certainly have to make some big changes if we are to cope with the costs, and should start by linking the retirement age to rising life expectancy.
But the fact that we are living longer is fundamentally a good thing, and there will be good things about an older, wiser society. If politicians want to benefit from it, they need to respond imaginatively to the challenges it throws up.
For example, Japan has a system of care credits, run by charities, which allows someone to help an older person in their neighbourhood and earn “credits” for care of their own parents, who live elsewhere. In London, “Southwark Circle” helps members look after one another, and mixes together younger and older neighbours.
Nor is it obvious that there must be a conflict between generations. In recent polling for Policy Exchange, we found that older people were the group most convinced that Britain must build more houses: they worry that their children and grandchildren won’t be able to get on in life. And so far the increased welfare spending on older people has only really brought pensioner poverty down from sky-high rates to average levels.
When you think about the zillions of hours of child care provided by pensioners, it is far from obvious that an older society will be a more selfish one. In fact, the opposite may be true. In his poem “The Mower”, written towards the end of his life, Philip Larkin reflected that “we should be careful of each other, we should be kind. While there is still time.”
As well as new challenges, an older society will have great resources of time, experience and goodwill. We must learn to use them.