Pensioners are being short-changed by the Tory-led government

Rachel Reeves

PensionersBy Rachel Reeves MP / @_rachelreeves_

As with the pupil premium which just moves money for schools from one pot to another while reducing overall funding, it is now clear that pensioners are being short-changed by the Tory-led government too. New analysis by the independent Institute of Fiscal Studies shows the true impact of this government’s measures on pensioners. Far from increasing incomes as they would have us believe, VAT increases and other changes to the small print of pensions mean that the average pensioner household will be worse off by around £240 next year. The largest chunk of this will be a result of the increase in VAT, which will hit pensioners by around £212 a year. And the picture is set to get worse. Indeed, the IFS find that by 2014 the average pensioner household will be out of pocket to the tune of £367. For older and more vulnerable pensioners who rely on extra support, the impact is likely to be much greater.

The IFS analysis comes just after Age UK revealed that inflation is leaving those over the age of 55 worse off by an average of £600 a year, with the gap between pensions and inflation likely to leave over-75s facing a loss of £700 a year. With CPI at 3.7% and RPI at 4.8% it’s not hard to see how those on fixed incomes lose out most. The upshot is that far from those with the broadest shoulders helping to reduce the deficit, this government are imposing upon pensioners, as with children, the lion’s share of deficit reduction. Given that pensioners rely so heavily on the NHS and local government funded social care, they are hit hard by cuts to frontline services too.

Labour made huge inroads in tackling unacceptable pensioner poverty. Between 1997 and 2010, over one million pensioners were lifted out of poverty and no pensioner now has to live on less than £132.60 per week. Free off-peak travel on local buses, free TV licences for the over 75s, the winter fuel allowance and cold weather payments all played their part. And it was Labour that made the commitment to restore the earnings link for the Basic State Pension despite the government claiming the credit.

So while I welcome the government’s commitment to increase pensions in line with the highest of earnings, inflation or 2.5% through the triple-lock guarantee, this one policy is now being used as a smokescreen for the real impact of the government’s actions on pensioners. The increase in VAT and the permanent switch from RPI to CPI means that pensioners will be worse off – this is what we have long-suspected, and this independent analysis IFS has now confirmed pensioners’ worst fears.

Rachel Reeves is the shadow pensions minister

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