Pensioner families to suffer social security cuts worth over £6bn a year

TUC

Pensioner families across the UK will suffer social security cuts worth £6.38bn a year by the time the government’s welfare reforms have taken full affect, the TUC warns today (Sunday) ahead of a new report on the impact of social security cuts published later this week.

In the run-up to the last general election, David Cameron pledged to protect pensioner benefits. However, the TUC-commissioned analysis of welfare cuts, undertaken by Howard Reed of Landman Economics, shows that this pledge has been broken as a result of changes announced by the government over the course of this parliament.

The analysis looks at annual cash losses to a number of benefits. It shows that a quarter of all social security cuts implemented between 2010 and 2016/17 will fall on pensioner families – single or couple families where at least one adult is above state pension age and where no adults below the state pension age are in paid work (but where one adult in a couple may be below state pension age and workless).

A large proportion of the losses are due to the Chancellor’s stealth cut to the uprating of benefits, announced in June 2010, which changed the measure used to increase benefits every year from RPI inflation to the lower CPI measure.

The biggest single social security loss to pensioner households is the reduction in Pension Credit, which will cost pensioner families £3.85bn a year by 2016/17. This is due to the value of the Pension Credit Guarantee falling as a result of the Chancellor’s benefits stealth cut, as well as reductions to the Savings Credit element of Pensions Credit.

Other significant cuts to pensioner families introduced by this government include a £138m annual reduction in the value of the Attendance Allowance and a £340m annual cut in disability benefits for pensioners, both as a result of changes to the uprating of benefits.

The social security cuts faced by pensioner families are set to get worse after the election, warns the TUC. Pensioner families will fare particularly badly under Universal Credit, due to be rolled out nationally from 2015, as almost half of the projected £5bn a year of cuts that its introduction will bring will fall on pensioner families. This will bring total losses to pensioner families up to £8.75bn a year, says a TUC.

Universal Credit will make unemployed men and women in their mid-60s the new so-called workshy scroungers, warns the TUC, with many people no longer able to claim Pension Credit. Instead they will only be eligible for less generous working age support and will also be subject to the government’s benefit sanctions regime.

Under the system the current government inherited, families where one person was at or above state pension age and another was out of work and approaching this point were entitled to Pension Credit.  But under the new system a family in this position making a new claim will have to rely on the working age benefits system, and will receive less generous support under Universal Credit.

Pension Credit has been a vital benefit for couples who are close to retirement and unable to work but who have different state pension ages. Although limited transitional protection will be available for existing claimants, families finding themselves in this position from 2016/17 onwards are set to lose out significantly.

Pensioner families are also losing out as a result of changes to the way the state pension is increased every year, despite government assurances that its ‘triple lock guarantee’ will maintain its value.

The state pension should normally rise in line with earnings, the highest measure in the government’s triple lock guarantee. However, because the UK is still experiencing an unprecedented real wage squeeze, the state pension has been increased in line with inflation in recent years. As a result of this the state pension has become another victim of the Chancellor’s benefits stealth cut, says the TUC. This is likely to cost pensioner families around £1bn a year by 2016/17.

The TUC wants the government to come clean on the full impact of the social security cuts it is making. Whilst minsters have been very vocal about how welfare reforms are targeting out of work households, they have been largely silent on the significant cuts faced by working families and pensioners.

The TUC also wants the government to reverse its stealth cut to the uprating of benefits as this change is reducing the value of the state pension, as well as many workplace pensions across the public and private sectors.

TUC General Secretary Frances O’Grady said: “The government want people to think that their welfare reforms have targeted so-called scroungers, while pensioners have been spared the pain. After all, the Prime Minister pledged to protect pensioner benefits during the last general election campaign. The reality, however, is very different.

“Pensioner families have had been hit hard by the Chancellor’s social security axe with their incomes set to be slashed by over £6bn a year.

“For many pensioners the worst is yet to come. Universal Credit will make unemployed men and women in their mid-60s the new workshy scroungers – unable to claim Pension Credit and suddenly subject to the government’s sanctions regime.

“Poor pensioners with no private income will also lose out as a result of the Chancellor’s stealth cut in the uprating of vital benefits such as the state pension.

“The government’s welfare reforms are undermining the extra support we need when we have children or retire, and the safety net we rely upon if we lose our job or become ill. It is time to stand up for the social security system that we all pay into and will all need at some point in our lives.”

NOTES TO EDITORS:
Annual cuts in benefit spending on pensioner households, 2010 – 2016/17 (Feb 2014 prices)
Disability benefits £340m
Out of work benefits £20m
Pension Credit £3.85bn
Retirement pension £1bn
Tax credits £940m
Child benefit £20m
Housing benefit  £230m
Total £6.38bn
Universal Credit £2.37
Total (including Universal Credit) £8.75bn

– Note: totals may vary slightly due to rounding
About the TUC-commissioned analysis
– The analysis has been undertaken for the TUC by Landman Economics whose tax/benefit model uses the Family Resources Survey (FRS) to consider how families across the UK will be affected by social security changes.  It considers all of the tax and social security changes using data from the FRS to model impacts for different types of families.  Where the FRS does not contain adequate information to model the impacts of the cuts (for example in relation to some disability benefits and housing benefit) estimates of the cumulative costs of the cuts have been taken from Treasury Budget documentation and allocated among families in proportion to receipt of those benefits in the 2010/11 FRS data. 
– The analysis does not include transitional protection as this will not be available for new claimants and will not be uprated in line with inflation.
– The full analysis will be published on Thursday 21 August 2014. Embargoed copies are available from the TUC press office from Monday 18 August.
– All TUC press releases can be found at www.tuc.org.uk
– Follow the TUC on Twitter: @tucnews
– Congress 2014 will be held in the BT Convention Centre, Liverpool, from Sunday 7 September to Wednesday 10 September. Free media passes can be obtained by visiting www.tuc.org.uk/media-credentials and completing an online form. Applications must be in by noon on Wednesday 27 August. Any received later than that will be processed in Liverpool and will cost £75.

Contacts:
Media enquiries:
Rob Holdsworth    T: 020 7467 1372    M: 07717 531150     E: rholdsworth@tuc.org.uk
Tim Nichols   T: 020 7467 1337   M: 07876 452902   E: tnichols@tuc.org.uk

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