Winter Fuel Payments

There were two important “read my lips” moments in the election campaign. One was Clegg’s pledge to oppose a rise in tuition fees. The other was Cameron’s “contract” with the electorate on pensioner perks. Each pledge cost the Treasury a comparable amount (about £7bn and £4bn respectively). Only one politician had to eat his words.

This may be one of the most important trade-offs of the coalition. Tim Montgomerie has done a brilliant job of collating all the Con-Lib compromises so far. But a lot of them are obscure policy disputes, matters for the Westminster village. Most will hardly register with the electorate. Read more

This was always a problem George Osborne would be unable to solve. As a result of this spending review, pensioners next year will receive £600m less in winter fuel payments.

Does this break the Tory pledge in the election? Not quite. When David Cameron made his read my lips campaign promise, he vowed to “keep what we inherit” on winter fuel payments, free bus passes and other benefits to pensioners.

Most people would have expected that to mean that he matched the same payout as Gordon Brown.

But the Treasury accounts are a funny thing. As I disclosed in August, Brown only booked in a payment of £2.1bn in 2011. The additional £600m was his Christmas bung, a festive gift to show how munificent a leader he was. It was a one-off that he re-announced every year. Read more

Here is an idea for the new “nudge unit” in Downing Street.

David Cameron has pledged to protect the £2.7bn winter fuel payments to the over-60s — but he never promised to keep the name.

Surely it is time to stop people claiming these handouts by calling them something more appropriate that would deter the wealthy middle-classes? After all, the payment has nothing to do with fuel. Done properly, this cunning intervention could save hundreds of millions of pounds — while still permitting the needy to claim.

Neil O’Brien of Policy Exchange thought something absurdly bureaucratic would do the trick. Would you bother to claim the Voluntary Age-Related Season Specific Dependency Credit? And would you be able to ever find the forms on the internet?

My preference is for something much more unappetising. Perhaps the Old Age Support Ration? That would put off Ken Clarke and Vince Cable from sending in the application. Or maybe the Elderly and Infirm Support and Sustenance Payment? Read more

The axe is hovering over the £2.7bn winter fuel payments. But cutting this bung to the over-60s is harder than it seems. Even if Osborne decided, say, to pay out £600m less than Gordon Brown, it would make no contribution at all to cutting the deficit.

How so? The Labour wheeze was to top-off the winter fuel payment with a one-off bonus each year, which was presented as a Gordon’s munificent Christmas gift. Last year it amounted to £600m. The Budget books doesn’t expect this bonus to be repeated, so the future winter fuel payments are only scored as £2.1bn in 2010, not the £2.7bn actually spent in 2009.

The dilemma for Osborne is:

– Find an extra £600m from savings or increasing debt to pay out as much as Brown in 2009, or

– Take the political hit from withdrawing £50 off all pensioners (and £100 off all those over 80), without any upside in terms of deficit reduction.

 Read more