04 bank g w 300x158 Pensioner payments surge above record £100bnAn uncomfortable truth for Britain right now is exemplified by this story on the Daily Telegraph website.  

The story is right, welfare payments are heading for a record high of £208bn this year before surging to £224bn by 2017/18.

It is a lot of money, that many will feel could be better returned to taxpayers, or spent to boost job creation. Obviously it feeds into the current fevered debate about benefits.

Intriguingly, however, the record will be attained in the coming years because of payments not to work-shy “scroungers” but to pensioners.

The majority of what is termed the “welfare bill” goes on payments to pensioners. This House of Commons  note  shows that the number is 53 per cent of that £208bn, which works out at £110bn – £98bn is not spent on pensioners: jobless, disabled, families etc.

Even more interestingly, the proportion paid in pensioner payments will increase in the next half decade to 56 per cent of the total bill. Now a quick bit of maths -56 per cent of £224bn is £126bn.

Annual increase of £16bn

That’s a £16bn annual increase in cash payments to pensioners by 2017/18.

It accounts for ALL of the increase in the headline number to £224bn. Yes, the non-pensioner cash funding for benefits available in 2017/18 will again be £98bn. Clearly this amounts to a sharp real drop.

In the government’s austerity plans, it continues to make allocative decisions about winners and losers.

Now pensioners will argue that they should not be lumped in with benefit recipients. A pension is not a benefit. But pension credits, fuel allowances, and other freebies, do come out of this budget.

A far more interesting headline from the HoC report would be that last year “pensioner payments top record £100bn, responsible for surge in social security bill”. Many pensioners are poor.

Savings verboten?

Plenty that receive free bus passes, TV licenses, and winter fuel payments are far richer than many of the squeezed recipients in the £98bn pot. So why is even talking about savings from this pot of cash verboten? 

At the very least, if you strip out pensioner payments the headline number shows that welfare payments are declining in real terms. It should not be a surprise.

It is what happens in a recovery, when welfare is being squeezed. Indeed the other intriguing number in the House of Commons report is the welfare/GDP assessment.

Britain entered the financial crisis devoting 10.9 per cent of GDP to “welfare” broadly defined.

Tony Blair inherited a level of 11 per cent from John Major.

(Plausibly you might have expected that proportion to fall in the good times, or for the benefit bill not to rise in line with the economy).

 However, it is fair to say that Labour devoted to welfare, a share of the economy greater than it inherited, only after the 2008 crisis struck.

The prime minister promises freebies to older voters who have gained disproportionately from the asset price increases arising from QE (though this should be balanced by low annuity returns and saving rates).

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