150312 Pensioner benefits
  • For the nerds and nitpickers. One problem with writing about welfare spending is that no-one can quite agree what welfare spending is. I’ve used the DWP’s figures, which incorporate practically every benefit and tax credit you can think of, as well state pensions. Whereas the Treasury leaves out state pensions but includes public sector pensions and things called “personal social services”. If you want more detail, the Institute for Fiscal Studies tells the story as engagingly as it can be told here. But whichever numbers you use, the trends are basically the same.
  • Welfare rising… So, what are those trends? You can see for yourself from the graph above. Over the past thirty years, welfare spending has been on the up and up. It has gone from £93 billion in 1984-85 to 208 billion today, even after inflation is accounted for. Or from 22 per cent of total spending to 30 per cent.
  • …thanks mostly to pensioners. The graph also shows how much of this welfare spending goes towards children and those of working age, and how much goes towards pensioners. You’ll notice that pensioners receive the greater share, and increasingly so under the Coalition. Since 2009-10, the amount spent on pensioners has risen by £10 billion to £114 billion. The amount spent on non-pensioners has actually fallen by just over £2 billion to £94 billion.
  • Refrain from intergenerational warfare… It’s easy to get annoyed about thisdemographic dissymmetry. I’ve done it myself. But rather than reheating those same old furies, it’s worth noting that the bias towards pensioners isn’t entirely unfair. Yes, the Coalition has been particularly generous with its triple-lock on the state pension. But an ageing population will always put upwards pressure on pensions and on benefits associated with ill health and disability. And a growing economy will put downwards pressure on the pay-outs going to those who can work. After all, old age is part of the human condition; unemployment needn’t be.
  • …but prepare for the future… Much as with health spending, there is a question of how long politicians can tolerate these upwards trends. The Coalition’s policy to link the state pension age to life expectancy will have a slowing effect, but the Office for Budget Responsibility still reckons that pensions spending will climb to 7.9 per cent of GDP in 50 years’ time. That’s two percentage points higher than it is today.
  • …against public opinion. What can prevent this rise? Sadly, little else but a total change in attitudes. As Demos have pointed out, spending on pensioners is almost as popular among the young as among the old. To some extent, we’re getting the system we want.