Victor Ross worked for 30 years with Reader’s Digest from copywriter to Chairman of its UK edition and five continental editions.
Successive Chancellors have discovered through bitter experience that having once conferred a benefit such as Winter Fuel Payments (WFP), these become impossible to withdraw without causing uproar. The memory of yesterday’s gain is never as sweet as the pain of today’s loss.
Ed Conway, the economics editor of Sky News, summed the situation up in a recent article in the Times about pensioners’ benefits. “Pensioners have had it too good for too long” was the headline, and he went on to assert “that there are policies every economist has derided, yet no Chancellor has been bold enough to confront.” One such is WFP.
Yet there is a way of reducing its cost painlessly by using techniques not normally associated with welfare policy that have proved effective in other fields. These rely on removing three road blocks: first, inertia; second, the lack of an incentive; and, third, the absence of any human element, signalled by the arrival of a brown window envelope – usually the bringer of bad news.
There are enough public-spirited citizens who are willing to do without their WFP (and who may even be embarrassed by a superfluous handout) for the Department of Work and Pensions to take the initiative instead of waiting for individuals of goodwill to come forward when the only thing that stops them is inertia.
So a scheme that overcomes it promises rich dividends. In this case, it could be overcome both by relieving individuals of the irritation of not living up to their expectation of themselves, and also by reinforcing the incentive effect though offering to trade a dream of big money for giving up small, un-needed amounts.
This is how such a scheme would works. If you forego your entitlement to WFP, the amount foregone will be accumulated in your name as Premium Bonds Class B (PBB). They are not accessible and can never be cashed – but entitle the holder to participate in the monthly draw on the same terms as conventional Bond holders (PBA).
Thus, in the first month after having opted into the scheme, a £300 entitlement to WFP could be converted into 300 PBBs, affording 300 chances in the monthly draw (3600 in a year). And each month, a little blip of hope would keep the renunciation alive.
The entire transaction consists of the exchange of a single letter: from the minister responsible to the pensioner, setting out the terms of the deal; those pensioners who opt in sign at the bottom,and send the same letter back to the Minister. This being an opt-in Scheme, there is no need to say no. Ignoring the offer is enough. The addressee is in the driving seat: no pressure to say yes, no shame in a no. For once the roles would be reversed – and he Minister would sweat a little as he counts how many of his (deckle-edged?) letters have come back with good news for him.
How many? It is of course quite impossible to forecast the likely response, but a reasonable guess would lie somewhere between two and eight per cent. How much money this represents would depend on the mix of payments foregone. Would they come mainly from the £100, £200, or £300 subgroups? By way of illustration, let us assume that the invitations go out to 12.2 million pensioners, that five per cent sign on the dotted line, and that those 610,000 generous souls forego on average £195 per annum each.
This would mean that the Exchequer would save £119 million in the first year, and for all eternity thereafter – minus the pensioners who avail themselves of the right to opt out. The exercise would needless to say be repeated at regular intervals, albeit with diminishing returns. Testing would show up the cohorts that remain profitable after multiple approaches, and those whom it is a waste of money to mail more than once.
How much would this scheme really yield? Nobody knows, and there is no need to guess. The mass of pensioners provide an ideal test bed. It is not often the case that a perfect sample can be taken from the world around us. But the DWP holds every name in receipt of a pension – complete with address, age, entitlement, etc. Tests could be conducted on samples which would replicate precisely the bulk mailing thus selected.
This is a no-risk operation. The worst – unthinkable – outcome would be a nil response which would leave the WFP finances exactly where they are now. (A mere handful of responses will cover the cost of a test.) No bulk mailing would ever go out that had not proved its worth at a set confidence level.
Weaning pensioners off winter fuel payments can make only a tiny dent in the mishmash of benefits, many of them never intended to last. But a start has to be made somewhere in clearing up the chaos of quick fixes and the expectations that they arouse. They act as a brake on productivity by setting up benefits in competition with wages. Sit back and wait to see what pays best, it seems to say.
This scheme would do no more than blow away a small cloud, but this at least would show that something can be done to change the weather. It is unusual in that it is risk-free; creates goodwill rather than echoes of nasty officialdom, and has unforeseeable potential to save public money. When was the last time that the removal of a benefit made both main parties feel that they have gained? This is what a bonfire of winter fuel can achieve, and it therefore demands to be tried.