Small change for means-test pensioners

Budget 2003: Chancellor accused of making token gesture to the 'grey vote', and of misjudging the housing market

As the Government has learnt to its cost over the years, you treat pensioners badly at your peril. The "grey vote" is a significant and growing force and not one to get on the wrong side of. So, finally, the elderly merited a special mention in Gordon Brown's Budget.

But despite this, the Chancellor made largely token efforts to help Britain's pensioners, even though council tax hikes and falling annuity rates mean many will be feeling the pinch.

What would really improve things for pensioners would be for the state pension to rise in line with average earnings, but this would cost the Government too much money. Therefore, the most significant change in this Budget is the removal of the £28.30-a-week charge for bed and board for elderly patients who stay in hospital longer than six weeks.

Removal of these "hotel costs" is long overdue and has been widely welcomed by pressure groups. But Mervyn Kohler, head of public affairs at Help the Aged, says the Government had already decided to unwind the charge. "It's a logical move to get rid of it altogether and is hardly a major advance," he says. "The benefits the Government announced are obviously welcome but they are pretty small benefits."

The over-eighties received a special mention from the Chancellor, who has increased their winter fuel allowance by £100 a year, bringing it up to £300. This is an attempt to eradicate the embarrassing 25p-a-week extra payment for the over-eighties, introduced in 1971, which was little enough but should at least have risen in line with inflation. If it had, it would now be worth £2.80 a week.

"When you break the figures down, we are talking about adding something less than £2 a week with the extra fuel allowance to the income of many of the country's poorest pensioners," says Mr Kohler. "Any extra money is welcome but it falls well short of what is required."

Commentators also continue to be sceptical about the likely success of the pension credit, the means-tested benefit set to be introduced in October. This will apply to single pensioners living on incomes below £139 a week and pensioner couples with a total income of less than £203 a week.

Single pensioners will get up to £14.79 a week extra, while couples could benefit by up to £19.20. The average extra payment is expected to be £9 for couples and £7 for singles.

But before they get this cash, half of all pensioners will have to be means tested and fill in forms – which is likely to put many of them off. The Government itself has estimated that two million of those who are eligible for the pension credit will fail to claim what they are owed in the first year.

Rodney Bickerstaffe, president of the National Pensioners Convention, the UK's largest pensioner organisation, says: "The pension credit will result in half the pensioner population being means tested and having to parade their poverty in order to get extra money that should be theirs by right." He believes the Government "has simply not risen to the challenge".

"The Chancellor is keen to point out how well the economy is doing compared to Europe," adds Mr Bickerstaffe. "But the fact remains that we spend less of our gross domestic product on pensions than nearly any other European country. Britain has the fourth-richest economy in the world, yet millions of our elderly people still live below the poverty line."

'We'll look ungrateful if we ask for a bigger pension now'

Angela Senior is 82 and lives in Islington, north London. As secretary of the Islington Pensioners Forum, she spends a lot of time campaigning for a better deal for pensioners and welcomes the £100 increase in the winter fuel allowance for the over-eighties. But she reckons that Gordon Brown hasn't gone far enough.

"Everybody is grateful if they get £100 that they weren't expecting, but the Chancellor gives us little handouts like these because it's a lot cheaper than putting up the old-age pension," says Ms Senior. "He is hoping that a pension tied to average earnings, which is what we want, will be forgotten. After all, we'll look ungrateful if we ask for a bigger pension now. People will say: 'Haven't you just been given something?'"

She also despairs of the fact that the extra fuel allowance is available only to the over-eighties, when those in their sixties and seventies are also struggling.

"Costs are rising all the time," she says. "In order to save money I have a Calor gas heater, and the cylinders, which used to cost £18.50 a time, have just gone up to £19.50. I use one of these every two weeks, as even in the summer it can get chilly in the evenings. And with London Electricity raising its prices as well last week, I'll probably have to pay more for electricity too."

Ms Senior has recently seen council tax in her area rise by 21 per cent. Since she doesn't qualify for the pension credit, the extra fuel allowance will be more than cancelled out by her increased living costs.