NPC Comprehensive Spending Review Briefing October 2010
On 20 October 2010, the Chancellor George Osborne presented his long
awaited Comprehensive Spending Review. The main announcements
affecting older people were as follows:
From April 2011, the Basic State Pension (BSP) will rise in line with the
higher of either average earnings, prices (Retail Price Index RPI) or 2.5%.
As the highest figure is RPI at 4.6%, next year’s increase in the basic state
pension will therefore be £4.50 a week for an individual taking it to
£102.15, £7.20 a week for a couple taking it to £163.35, and £2.70 a week
for women whose pension is based on their husband’s contributions,
taking it to £61.20.
However, from 2012, the prices measure used for uprating the pension will
revert to the lower Consumer Price Index (CPI) rather than the RPI.
Furthermore, from April 2011 the State Second Pension, SERPS and/or
Graduated Pension will also rise in line with the lower CPI. This will mean
a 3.1% increase - 1.5% lower than the increase in the basic state pension.
Changes to public sector pension schemes will be introduced from April
2012, meaning that on average, employees will have to pay an additional
3% of salary into their schemes and future payments will be based on
average, rather than final salary.
Equitable Life savers who lost half their pensions when the insurer almost
collapsed a decade ago will receive £1.5bn in compensation, considerably
less than the £4.8bn total loss. The average payouts are likely to be less
than £600 each.
From April 2011, the means-tested Pension Credit Guarantee of £132.60
(single) and £202.40 (couple) will increase by the cash rise in the full basic
state pension rather than as a percentage linked to earnings or prices.
Therefore the Pension Credit will increase by £4.50 a week for a single
pensioner and £7.20 for a couple.
The maximum Savings Credit award will be frozen for 4 years from 2011-
12. At the moment, those individuals with incomes of up to £183.90 a
week, or couples with up to £270.12 a week are entitled to claim Savings
Credit on roughly the difference between their state pension and their total
income. The maximum award for the next 4 years will therefore be £20.52
for a single pensioner and £27.09 for a couple. Around 1.8m households
will be affected. The Treasury claims this cut will save £330m per year by
The State Pension Retirement Age will be equalised for men and women
by November 2018 – 2 years earlier than planned. The pension age for
both men and women will then increase to 66 by April 2020. This will affect
around 5.1m people, but the vast majority of losers will be women. For
example, a woman born on 5 April 1953 could claim her state pension a
month before her 63rd birthday, whereas a woman born a year later would
be forced to wait until she was 66. The Treasury claims from 2015 to 2025
this change will save around £30bn in reduced payments and raise around
£13bn through increased tax and national insurance contributions. Further
proposals on future increases in the state pension age will also be
The Winter Fuel Allowance is to be reduced in 2011 from £250 to £200 for
households under 80, and from £400 to £300 for the over 80s. The
government also intends to initiate an independent review of the fuel
poverty target before the end of the year.
Cold Weather Payments paid to those on Pension Credit when the
average temperature falls below freezing for 7 consecutive days will be set
at £25. This will cost £50m per year from 2011-12 and affects around 4.2m
Funding for the £280m Warm Front programme will be cut over the next 2
years to £110m in 2011-12 to £100m to 2012-13. From April 2011, energy
suppliers will provide additional help with energy bills to fuel poor
households through Social Price Support costing £250m in 2011-12 to
£310m in 2014-15.
An additional £2bn (£1bn from local government and £1bn from the NHS)
will be invested in adult social care. This represents a 3.3% annual
increase – but funding needs to rise by 4% above inflation just to keep
pace with increased demand. However, the real concern is that the money
will not be ring-fenced, and cash-strapped councils will use it for other
The mobility component of Disability Living Allowance to claimants in
residential care will end from 2012-13. Those who fully self-fund their care
will be unaffected. This change will affect an estimated 58,000 people who
receive on average £33.40 per week. The Treasury claim this cut will save
£135m per year by 2014-15.
Council Tax benefit spending will be reduced by 10% from 2013-14, and
localised to local authorities to target the benefit at local priorities. There
are currently around 3.5m pensioners who receive some level of Council
Tax benefit. The precise arrangements are yet to be determined, but the
Treasury claim this cut will save £490m per year from 2014-15. However,
there will be a council tax freeze for 2011-12 costing £650m.
From April 2011, Housing Benefit will be capped at £400 a week for a four
bedroom house, £340 for a three bedroom, £290 for a two bedroom and
£250 for a one bedroom property.
Funding for the Supporting People programme will be set at £6bn.
The eligibility for concessionary bus travel will be linked to changes in
pension ages. Reimbursement arrangements will also be reformed whilst
maintaining the statutory entitlement to concessionary bus travel.
However, bus subsidies to operators will be reduced by 20%, which may
have an impact on the availability of services.
Local councils will have their funding cut by 27% over the next 4 years.
This is likely to affect all non-statutory services, some of which, such as
day care centres and meals on wheels are vital to many older people.
Government Offices for the Regions are being closed as part of the
abolition of regional government. Given that many of these offices were
providing the secretarial support for the Regional Forums on Ageing, it has
yet to be seen how these will continue to function. Cuts in local
government funding are also likely to have an effect on support for local
Local Area Agreements, which were supposed to help local councils
prioritise the concerns of older people have been abolished.
After the announcement, the NPC gave a reaction to the proposals. This is
reproduced below for information. Media coverage of our comments included
statements in the Daily Express, Daily Mirror, Daily Telegraph, BBC News
website and various radio stations.
Spending review signals more unfairness in retirement
Britain’s biggest pensioner organisation, the National Pensioners Convention
(NPC) has described today’s Comprehensive Spending Review as a recipe
for unfairness in retirement.
Dot Gibson, NPC general secretary said: “All the evidence shows that the
richer you are, the longer you live - so making people work longer is a direct
attack on the poorest in our society. Plans to reduce the increases in the state
pension by using the lower Consumer Price Index rather than the Retail Price
Index will, over time, increase the number of pensioners living in poverty,
whilst the money committed to care funding won’t be anywhere near enough
to meet the growing demand. It’s a recipe for unfairness in retirement and the
burden will fall on those who are least able to bear it.”
“The contribution older people already make to the economy every year in
unpaid caring, voluntary work and child minding is well over £30bn, yet none
of this is recognised by today’s statement. If pensioners have to work longer
they will simply be unable to help others. So much for the Big Society.”
“The older generation was around at the beginning of the welfare state and
they know that it is not meant for poor people; it should be for everyone to
prevent them from becoming poor. But the government is seeking to privatize
responsibility and blame individuals for the structural failures of our economy.
It’s time we stopped pointing the finger at the so-called undeserving poor and
started taxing the undeserving rich.”
Winter Fuel Allowance still to be cut – despite Coalition promise
Britain's biggest pensioner organisation, the National Pensioners Convention
(NPC) has today criticised the Chancellor, George Osborne, for planning to
cut the winter fuel allowance in 2011, despite a pledge in the Coalition
government's programme to protect it.
In yesterday's Spending Review, the Chancellor said: "Winter Fuel Payments
will remain exactly as budgeted for by the previous Government" - but the
NPC points out that this means the £250 currently paid to households under
80 will drop to £200 and the £400 currently paid to the over 80s will fall to
Already over 70 MPs have signed Early Day Motion 481 criticising the move.
Dot Gibson, NPC general secretary said: "The winter death rate amongst
older people is a national scandal and getting worse. Last winter over 36,700
pensioners died of cold related illnesses – a staggering 13 pensioners every
hour. Yet the government has now confirmed it is going to cut the winter fuel
allowance next year, which will only make matters worse.”
“Up to 3m pensioner households are already spending more than 10% of their
income on fuel bills, and are living in fuel poverty. What older people need
now is more money – not less. They need to be reassured that when the cold
weather comes they will not be financially punished for keeping warm in
winter. The government must give them confidence that they will be able to
pay their bills by immediately ruling out any changes to the winter fuel