The Untouchables

Politicians have learnt the hard way not to mess with the grey vote. But could the two sides soon be at war over pensions, asks Sarah McInearny

On September 10 last year, a report by the International Monetary Fund (IMF) caused alarm at the offices of Ave Action Ireland. Eamon Timmins, head of advocacy at the lobby group, read with consternation a proposal from the IMF that the old age pension be cut.

The fund’s seventh review of Ireland’s bailout pointed out that while other welfare rates had been reduced by 8% in four years, the €230 a week state pension had been “exempted from the adjustment to date”. The report proposed a targeted reduction – the first time the IMF had openly suggested a cut in the pension.

Timmins sprung into action. Within 254 hours, Age Action had secured a meeting with Peter Breuer, the IMF’s representative in Ireland. The lobby group met Breuer twice before December’s budget, each meeting lasting an hour, during which Timmins explained the “lived experience” of Ireland’s elderly to the German. The IMF team is said to have been surprised to learn the free travel pass is not enjoyed by all old people, as some live in areas so rural there is no public transport.

Timmins was pleased with the meetings, but says he has no idea whether or not he influenced the IMF. As it transpired, budget 2013 contained no cut to the old age pension. Nor has the IMF mentioned cutting the state pension in its past here reviews.

The issue was laid to rest until this month, when a Sunday newspaper reported the government was considering a €10 cut to the pension. The response was immediate, and unequivocal. While Fine Gael and Labour TDs fell over each other to condemn the proposal, a spokesman for the Taoiseach said that there was a clear commitment in the Programme for Government not to cut the pension. “The matter isn’t even on the table,” he said.

Buy why not? What is it about the old age pension that makes it untouchable, when similar payments, such as child benefit, disability and unemployment allowances, have been cut?

“WHEN I hear any commentator saying older people haven’t been affected by austerity, I write them off as not knowing what they are talking about – and that’s putting it kindly,” says Timmins.

“There’s no point in having the core payment protected when everything else around it is being cut or new taxes are being introduced. We’ve had cuts to the respite care grant, the home helps, the fuel allowance, the household benefits package. We’ve had prescription charges which have a huge effect on older people. We have the property tax. What good is keeping your core payment when two or three weeks of it are gone on the property tax?”

Willie O’Dea, the Fianna Fail spokesman on social protection, also defended the payment. He noted a recent report from the central statistics office which found the average income of the over 65s grew by 41% between 2004 and 2011 – almost four times more than the increase of those between 18 and 64.

“That looks like a big figure, but you have to take into account that it was coming from a low base,” he said. “The position of elderly people before that was amongst the worst in the world”.

O’Dea argues that while there hasn’t been a cut in the core rate, its value in real terms has dropped as prices go up. “I know there hasn’t been any big inflation, but there are essential items of expenditure that have gone up,” he said. This includes health insurance and utility bills. There have been more than a dozen price increases by the main health insurance companies since September 2011, making this “luxury” unaffordable for many older people, according to Ave Action.

While consumers are encouraged to shop around for better value in gas and electricity, the National Consumer Agency found that only 20% of older people have switched supplier. Simon Moynihan, of bonkers.ie, a price comparison site, said that elderly people are often put off by the conditions utility companies place on discounts, such as online billing. “People of a certain age value tangibility,” he said. “The like to receive bills in the post and pay by cheque. It’s just how they manage their money.”

This reinforces a point made my Timmins: older people aren’t special – but they are different.

But surely those differences are recognised in the government supports provided for the elderly? In addition to the weekly pension, everyone over 65 is eligible for a free travel pass. All those over 70 get a household benefits package, which compromises a free television licence, €35 a month towards electricity and a telephone allowance. There is also a means-tested fuel allowance during the winter which, although it has been cut by six weeks, is generous by international standards.

In July, Joan Burton, the minister for social protection spelt out to an Oireachtas committee the increasing financial cost of pensioners to the state. Aside from the supplementary supports, Bruton said that €6.4bn would be spent on pensions this year, amounting to 32% of her €20bn budget. This figure is growing steadily. “In 2013, I have had to make provision for an additional €190m for the increasing number of pensioners,” Bruton said. “I have had to do this each year I have been minister.”

Constantin Gurdgiev, an adjunct lecturer in finance at Trinity Collete Dublin and Sunday Times columnist, feels Ireland cannot afford it’s level of state expenditure on state pensions. “The problem is it is a long-term issue so politicians are reluctant to tackle it because they will not be around when the benefits of action are seen,” he said. “We like to think of ourselves as a caring society and we are attached to symbols of being caring. As a result, we insist on giving everyone a little bit, instead of taking from the rich and giving to the poor who really need it. Is it really wrong to say that we should means test the state pension, so that a person with a big house and a big private pension doesn’t get it?”

Well, yes, apparently. When Brian Hays, the junior finance minister, made such a suggestion last year he was lambasted by lobby groups and many ministerial colleagues. Burton was one of the first to rebuff him, appearing on television to say that he was expressing a personal view. “Why he would simply focus on richer pensioners, I’m not quite clear,” she said.

A couple of days later a 300 strong delegation of Age Action delegates in Croke Park voted to demand an apology from the Fine Gael minister of state. Regina Doherty, Hayes’s Fine Gael colleague, happened to be on a panel of speakers at the conference and distanced herself from his comments. “He caused serious offence, he did not mean to do that,” she said. Doherty, a Meath East TD, stressed it is not government policy to alter the free travel schemes  and that economically it would make no sense whatsoever.

Figures for the free travel scheme provided by the Department of Social Protection appear to contradict this assertion though. Expenditure on the scheme has risen by 36% since 2005, while the number of recipients is up more than 100,000. The Department of Transport agreed to cap CIE’s payment for the scheme at €75m annually in 2011, but this is not sustainable.

This is a shortened version of an article that appeared in the Sunday Times on 25th August 2013

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