An old age question

In his budget this week the Chancellor announced that us younger folk will have to wait a bit longer for our bus pass - he’s raising the entitlement age for concessionary travel to age 65 and hopes to save £60 million in the process. This makes a lot of sense – there isn’t any reason why benefits designed for older people should kick in before the age of retirement.

However the move raises a much thornier question. To what extent should benefits for older people be universal for all or targeted according to need?

A number of the benefits that older people receive – such as the winter fuel payment and free TV licence – are handed out on a universal basis. There are some big advantages to this: the take-up level is high so people don’t miss out; there is no stigma attached to getting support; the process is easy to administer; everyone has a stake in what is available; and it’s popular.

The trouble with universal benefits is that they are costly and do not distinguish between the different circumstances of the people who receive them. The bus pass may help someone who can’t drive or afford transport, but it also allows the well-off to travel from one end of the country to the other at no cost.

With spending cuts looming, the challenge for policy makers will be to find a better balance between universal and targeted support for older people. There are three options:

1. Introduce some form of means testing for these benefits. The trouble is that many people who would be eligible for the support would not claim it – we already see this problem with the Pension Credit Guarantee where take-up is about a third lower than it should be. That’s a lot of people missing out.
2. Keep the benefits as universal, but make them taxable. This would ensure that those who can afford to contribute towards the cost of their support do so, but they would do it through the tax system rather than up-front means testing.
3. Raise the age people are eligible to receive these benefits – perhaps to around 75. This is a very blunt way to save money, but we know that the risks of poverty, illness and low levels of well-being all increase rapidly after this age and that broadly speaking it’s that age group that need most support.

For what it's worth I think the second option is the best way to tread the line between ‘universal’ and ‘targeted’ support. But I wouldn’t expect any of these decisions to get much of an airing before the election – as yesterday’s budget demonstrated, tricky decisions about spending cuts will be saved for after May 6th.

Jonathan Clifton, researcher, ippr