The policy agreement from the new British coalition government is a seven-page summary, put together under 11 headings, in private and under pressure. Inevitably, it’s a bit thin in places – often more a statement of shared principles than specific intentions. So what does it mean for older people? And what can we infer from what has been lifted – and left out – from the Conservatives’ and Liberal Democrats’ respective election manifestos about how the new government has resolved to address pensions, tax, retirement and care?
This coalition will be judged overwhelmingly on its success in reducing the deficit; it aims to do this primarily by reductions in spending. But one of the first points in the document is that those on low incomes will be protected from the effect of spending constraints. It’s not clear how. There’s also a headline pledge to increase NHS funding in real terms – although, given the demands on the NHS, it won’t necessarily feel like an increase. To contain costs there will almost certainly have to be more of a Big Society approach to healthcare – less reliance on hospitals, more on communities.
So, what else? On spending and welfare:
We will restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats.
Restoration of the earnings link was a policy of all three major parties before the election, but the Lib Dems’ offer was by some way the best. This will have significant benefits for pensioners. There is also a commitment to establish ‘an independent commission to review the long term affordability of public sector pensions, while protecting accrued rights’ which could save the exchequer very large sums; this obviously has implications for younger pubic sector workers primarily.
On tax, there will be a ‘substantial increase’ in the personal allowance to be introduced in the first budget, with a longer-term policy objective of getting this up to £10,000. The Lib Dems claimed before the election that their proposal for a £10,000 threshold would make ‘many, many pensioners,’ (Nick Clegg’s words) about £100 a year better off. But the personal allowance for someone over 65 is nudging towards £10,000 now and will be £10,000 for over-75s by next April, so this is clearly not a policy devised primarily to help pensioners. Meanwhile, there has been an abandonment of the Conservative pledge to raise inheritance tax thresholds to £1 million.
On pensions, the parties agree to phase out the default retirement age, though they give no date. David Cameron said he was conscious of the need to reassure some businesses, which were worried about increased redundancy bills for people they wanted to get rid of.
There will be a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.
This is uncontroversial – it was a policy of all three main parties, although the earliest dates here are sooner than Labour’s.
We agree to end the rules requiring compulsory annuitisation at 75.
This was a shared Conservative-Lib Dem policy.
We agree to implement the Parliamentary and Health Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.
Clearly, they shouldn’t expect to get the whole lot, but this is much more generous than Labour’s position, which may well have cost them votes.
What’s been left out? Comparing the agreement with Cameron and Clegg’s ambitions for older people as outlined in their pre-election webchats on Saga Zone, quite a lot. It may be that some policies will surface at a later stage – this brief statement is designed to get the coalition started. But no doubt, in both parties, there will be things quietly dropped, probably with some relief.
Before the election Cameron also said he wanted:
- A freeze on Council tax, which many older people find a burden, since it is often out of line with their income
- An insurance scheme to finance residential care for the elderly, involving an £8,000 contribution at the age of 65 which would guarantee free care later when needed
- Inheritance tax threshold raised to £1million (very unlikely this will happen now)
- A move away from means-testing for pensioners, which was brought in to help the poorest, but which many see as a disincentive to save – though Cameron admitted Britain can’t afford a flat-rate pension. Short of a complete overhaul of the pensions system, this looks unlikely and always did in this parliament
- A move towards individual budgets for carers, with an assumption that carers need respite, but they should be entitled to choose and buy it for themselves. (There is nothing about care in the agreement, but this fits very comfortably with the underlying principles of both parties)
- Digital inclusion Cameron has talked rather more about opening up BT’s pipes and ducts than about how to get the biggest group of the digitally excluded – old people – using technology
- Tax-free savings income for basic rate taxpayers, from which pensioners would be significant beneficiaries. (But he admitted this was an aspiration rather than a policy; it looks extremely unlikely in the present situation)
- Legislation to ensure that energy companies always give consumers information about the lowest tariffs available
- Users of Post Office card accounts to benefit from the discounts available to those who pay by standing order and direct debit
- A ‘Green Deal’ – allowing companies to subsidise energy saving home improvements such as lagging and insulation then share the reductions in fuel bills
Clegg also said he wanted:
- Dramatically reduced energy tariffs for people on low incomes and to ensure that the first units of energy used are cheaper
- A citizen’s pension, universal and generous (£132 a week) – He admitted the Lib Dems had no idea how to pay for this
- A removal of winter fuel payments from people aged between 60 and 64, now rather than with the raising of the pension age, in order to extend the payments to anyone who is disabled or terminally ill. Anyone under 65 receiving pensions credit still to get a winter fuel payment
- Tax relief for pensions contributions equalized at 20%
- A replacement of Council tax with one based on ability to pay
- Shared contributions to care between individuals and the state, based on the recommendations of the Wanless report. (He admitted this would be very expensive)
- An assumption that anyone doing 50 hours of caring or more a week should be entitled to a week’s respite
Some of these things are costly aspirations. Others are practical shifts in the way things are managed. It will be interesting to see how these various ambitions are pursued, or not, over the coming months.