Pensioners facing means test as €6bn in cuts loom
THE Government is now aiming to cut €6bn in December's Budget.
The package of spending cuts and tax hikes for next year is now twice the previously announced figure of €3bn.
It is one of the biggest cutbacks in a single budget in the history of the State.
The revelation came as pensioners over 70 face the prospect of being means tested for free household benefits.
The removal of the automatic entitlement for free household benefits for 260,000 over-70s is on the table for the Budget, the Irish Independent has learned.
The Government is also weighing up incurring the wrath of pensioners by slicing €9 off the state pension, as it attempts to make cuts of up to €6bn in Budget 2011.
At present, everybody over 70, regardless of income, is entitled to a household benefits package, known as free schemes, covering electricity, gas, telephone and a free TV licence. Pensioners aged between 65 and 70 are already means tested for these benefits.
But the Coalition will be fearful of a repeat of the backlash from the elderly caused by the removal of the automatic entitlement to a medical card two years ago.
The means testing of free schemes has been put forward by the Department of Finance to save €25m, along with the cut in pensions to save €160m. Coalition sources confirmed the pension cuts were "still on the table", but there is a reluctance to repeat the errors made in the medical card fiasco a year ago.
Given the size of the saving on the free schemes, the Government may decide it is just not worth the hassle, even if it would wish to extend the principle of benefits only going to those most in need.
"It's a small amount of money, just like the medical cards for the over-70s. At that time, it was said: never was so much political capital squandered on so little," a source said.
The Household Benefits Package comprises the electricity or gas allowance, telephone allowance and free TV licence.
The allowances are paid as a direct credit on customers' bills where possible. Where this is not possible, monthly cash payments are made directly to the pensioners' post office or bank account. The cost of the package in 2010 is €406m.
At the end of October 2010, there were 396,651 pensioners getting the package, of which 259,613 were over 70 years of age. The number of pensioners over 70 getting the package includes those who got the benefits before they reached 70.
But those who get the package for the first time at the age of 70 do not have to satisfy a means test.
The Department of Social Welfare calculates the weekly means test by adding together the maximum rate of state contributory pension of €230.30, plus €100 and any further allowances paid for a qualified adult, dependent child or Living Alone increase.
The electricity allowance covers normal standing charges and up to 2,400 units of electricity each year.
The gas allowance covers the normal standing or supply charges and a certain amount of gas kilowatt hours each year, while the telephone allowance provides a payment towards the telephone bill. A free TV licence package is also included.
The Department of Finance also put forward a 4pc reduction in pension payments.
The Government argues a drop in the cost of living has increased the value of the payments in real terms. A 4pc reduction would result in a cut of about €9 from the state pension.