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  1. Luxury
September 25, 2012

Should the wealthy accept benefits?

By Spear's

At the Liberal Democrat conference today, Nick Clegg has tackled a political issue largely unspeakable because of the risk of turning off those who vote most: ending universal benefits for the elderly. But what he should really be considering is ending benefits for the wealthy full stop, says Daniel Farr

At the Liberal Democrat conference today, Nick Clegg has tackled a political issue largely unspeakable because of the risk of turning off those who vote most: ending universal benefits for the elderly. But what he should really be considering is ending benefits for the wealthy full stop, says Daniel Farr
ACCORDING TO THE Daily Telegraph’s liveblog, ‘Clegg says that there will be no change to universal benefits for elderly in current parliament, but in future it will be impossible to defend people like Lord Sugar receiving the winter fuel allowance.’ And Work and Pensions secretary Iain Duncan Smith is also known to want to restrict these benefits to those who need them.

Currently, the wealthy can obtain any benefit that isn’t means-tested: the winter fuel allowance (£200 if you’re over 60, £300 over 80), a free bus pass, free eye tests and prescriptions, free TV licence. Some moves have been made to restrict previously universal benefits: after entirely removing child benefit from households with higher-rate taxpayers, George Osborne agreed that it could phased out in stages.

How do HNWs feel about this? Peter Stringfellow and Joan Bakewell, an unlikely pairing, have both accepted that the best-off do not need it, and Stringfellow has tried to repay it. The unnecessary cost to the taxpayer is not totally clear, but with the full cost of the fuel payment totalling £2.1 billion, estimates are that several tens of millions are going to waste rather than helping those pensioners in actual fuel poverty. 25,000 people actually died from lack of heat in 2011.

Plenty of HNWs are keen on benefits, however. One opened up to Spear’s about the true level of benefit greed among some high-earners. Though she knows some who may refuse benefits on principle (they don’t need them), there are many with ‘equally deep pockets’ who accept them on a different principle (they’ve paid for them).

But this is often ‘greed’, according to the HNW, to fund their kids’ extra-curricular activities or take the edge off expensive school fees – all a world away from the necessities of a home, food and water that the benefit is actually intended for. Many say that it is their ‘moral right’ as a taxpayer.
HOWEVER THE CHANCELLOR cuts benefits, he must do it in a sensible way. The original plan to tackle child benefit going to the wealthy was flawed. The Treasury wanted to introduce a threshold that stops any parent earning over £42,475 from making a claim for Child Benefit. This may have seemed sensible at first glance, but the plan meant that a family with two parents earning a pre-tax £42,000 each will still be able to claim the benefit, while a single parent earning £42,500 will be unable to access the funds they may need to support their child.

A real misjudgement of a ‘solution’ from the Treasury, the 2013 cap appeared to punish single parents and, according to a report from the Institute for Fiscal Studies, could well produce a ‘bizarre and economically damaging set of incentives’. The suggestion from the report is that as many as 170,000 families could be in the situation where they would have to balance the positives of a pay-rise against the price of losing child benefits. The government saw sense and created the taper.

Despite a few pensioners’ protests, there are still far too many who receive unneeded allowances, and there are rumblings in the government that say this should change. Tory MP Nick Boles came out as saying that ‘affluent pensioners’ should have their universal benefits removed. But having pledged that he would not touch the winter fuel allowance in the 2010 election, and making sure an agreement to that effect was written into the coalition, David Cameron seems unlikely to change his mind any time soon.

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One group that agrees with Boles that our benefits system is broken is the Taxpayers Alliance. A spokesman claimed that benefits such as the fuel allowance were used as little more than an ‘election bribe’ by political parties to win favour with the millions of British pension-age voters. Their suggested improvement to the status quo was to introduce means testing, though it was still said to be ‘far from ideal’.
MEANS TESTING IS a tough thing to implement, as time consuming as it is costly. There is also a fear that many pensioners wouldn’t be open to the intrusive process of means testing, fearing the idea of an unknown individual disturbing them. A situation such as this would make a means tested fuel payment incredibly counter-productive, and possibly even more damaging if those most in need refused to take part in the testing process. With most benefits already being means-tested, though, perhaps this is now a necessary move that must take place.

It seems that there is no certainty that the wealthy will lose their universal benefits any time soon. Vote-winning election pledges and a lack of foolproof alternative appear to be stifling any sort of positive development on that front. But with potentially billions of pounds at stake, it appears that we are going to have to rely on more than good will and charity if we want to give benefits to those who will actually benefit from them.

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