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January 17, 2012 - Bill Esterson's Westminster Diary

Bill Esterson


The elderly are being hit hardest by price rises, with a ‘silver inflation’ rate which far outstrips that faced by the rest of the population.

For many pensioners, the cost of living has risen by nearly 20 per cent since 2008.

This means they are having to find an extra £1,000 per year to maintain the same living standards.

It compares with average UK inflation of 13 per cent over the same period.

The fact that older people spend a greater proportion of their income on heat, electricity and food means they have been hit hardest by surges in the price of essentials.

Gas tariffs have leapt by 25.3 per cent in just the past year, while electricity is up by 15.5 per cent.

The research, by Age UK, shows a silver inflation rate ranging from 16.97 per cent to 19.07 per cent since 2008.

For those aged 65 to 69 the figure is put at 18.67 per cent, which equates to needing an extra £1,111.26 a year to maintain the same lifestyle. In the same period, the state pension for a couple has increased by just 12.6 per cent, equating to an annual increase of around £950.

The over 80s have seen a cut in the Winter Fuel Payment from £400 to £300 this year, while other pensioners faced a £50 reduction to £200.

Those retiring now are also suffering from a collapse in annuity rates, which means the value of the annual pensions they can buy with the money set aside for them is down significantly compared with previous generations.

The amount pensioners earn on their savings has also been savaged by low interest rates.

Age UK Enterprises, described the surge in living costs for the elderly as ‘extremely worrying’.

They said: "Since 2008, an average over 55-year-old has experienced additional costs of £978 per year, which rises to £1,111 yearly for the average 65 to 69-year-old.

"In addition, costs remain high for essentials such as energy and food which, as our silver inflation shows, are items that those in later life spend proportionally more on.

"At a time when the value of annuities is in free fall and savings generate little or no income, it is extremely worrying."

Saga, said the hikes in living costs were a life or death issue.

"Older people remain worst hit by rising costs of living," she said. "We are deeply concerned about how these abnormally high levels of inflation are impacting on pensioners in particular.

"Last year, nine pensioners died every hour, due to the cold. With reduced Winter Fuel Payments this year and record high fuel costs, these 'excess winter deaths' could rise.

"Policy makers have not fully factored in the dangers of inflation for our nation. Low interest rates on savings and high inflation are robbing older generations of their spending and are hugely damaging to older people’s lives."

Saga is supporting the Surviving Winter campaign, which is encouraging wealthy pensioners to donate their Winter Fuel Payment in order to help those elderly who cannot afford to heat their homes.

Labour has suggested that energy companies should have to put pensioners over the age of 75 on the lowest tariff. Sadly, the Prime Minister failed to say whether he would do this when asked about it at Prime Ministers questions. 


The Government could take this step to help pensioners and it could reinstate the higher levels of Winter Fuel payment. Many pensioners are among the poorest and most vulnerable people in our society and government should be doing all it can to help. The deficit needs to be cut but the government could and should charge the bankers and others at the very top more (especially as they caused the crisis in the first place). 


By charging more with a tax on bankers bonuses, the government could then help poorer pensioners and it certainly could force energy companies to help.


The welfare bill is forecast to rise by an incredible £29 billion - over £1,000 for every household in the country. The reason for the massive increase in the cost of benefits is that the economy has flatlined and unemployment has gone through the roof and will continue to rise especially for young people. The cuts in spending, which are far higher across Merseyside than in other parts of the country have meant more people out of work and less money in the economy for businesses. As a result, it is that much harder for business to grow and to create jobs than it would have been had the cuts been phased over a longer period of time. Quite simply, welfare costs are going up as a result of economic failure.


The Government is pushing through changes to welfare, some of which like a single universal benefit make sense and will save money in the longer term. But there are other changes which will be counter productive. The government wants to make big cuts to tax credits. Tax credits help families by creating an incentive to take low paid jobs. They make it worthwhile to take a job rather than stay on benefits. By removing tax credits, the government is making it more likely that people will stay on benefits, which will increase the cost to the tax payer, rather than reduce it and make it harder for businesses trying to grow. 


Welfare benefits and the system of benefits should be there to help those who need help and it should encourage people into work. The changes to tax credit may well make people better off on benefits than in work. The government is also cutting help for young people with disabilities, and for patients still recovering from cancer. 


These two measures were defeated by the House of Lords so will have to be reconsidered by the government. Cutting support to young disabled people and people receiving treatment for cancer looks like an attempt to cut the deficit on some of the most vulnerable people in our society. The government should think again on welfare reform and on support for pensioners.

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