Monday, 19 January 2015

Osborne's pensioner giveaway, paid for by the children of the UK

Over the weekend George Osborne celebrated the initial success of his Pensioner Bond giveaway. Over 10% of the £10bn allocation for the bond, which returns 4% p.a. over three years, has already been taken up. But while this may be clever electoral politics, it is a bad policy by any other measure.

This is a redistributive policy that gives money to wealthy pensioners, paid for by the rest of us in the form of above-market debt interest payments. That cost is estimated at £300m a year more interest than if we had borrowed £10bn from the gilt market. The hypocrisy of this from a Chancellor committed to cutting the deficit is clear for all to see - even the Taxpayers Alliance have lined up to criticise the policy.

For a comparison, one of the coalition’s first acts was to scrap Labour’s Child Trust Funds. These funds were given to a parent on behalf of every child at birth, maturing on the child’s 18th birthday. They were modest, but intended to encourage saving by the family for the child’s future.

Scrapping these funds saved £320m a year in 2010 and 2011.

In effect the coalition took money away from every child in this country, including the most deprived, and redistributed it to wealthy pensioners in a pre-Election giveaway.

Another insight into the Conservative’s priorities for this country.

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