By Richard Johnstone | 8 June 2011
The Institute for Fiscal Studies has found that the government’s Winter Fuel Payment to pensioners is almost 14 times more likely to be spent on heating than on anything else – even though there is no obligation to do so.
In a study funded by the Nuffield Foundation, the IFS found that households receiving the payment spent 41% of it on fuel. However, when the same households received additional income that was not labelled in any way, they spent just 3% of it on fuel.
IFS senior research economist Laura Blow said this suggested that, contrary to expectations, the name of a benefit has a significant influence how it is spent, potentially allowing government to influence spending decisions through such labels.
She added: ‘The Winter Fuel Payment was introduced to encourage older households to spend more on heating in the winter.
‘Remarkably it appears to have had just that effect. The fact that it is labelled a winter fuel payment appears to mean that much more of it is spent on fuel than would have been the case had no such label been attached.
‘This suggests that simply calling a benefit by a particular name can have a real effect on how it is spent. The potential implications for government policy are significant.’
However, the report found that the payment does not protect the poorest older householders from facing a choice between heating their home or paying for food.
The annual benefit is provided to all households with one member over the age of 60. Households receive £200 where the oldest person is under 80 and £300 where the oldest person is 80 or over.
However a ‘heat or eat trade-off’ leads to the poorest quarter of households cutting back on food spending in harsher winters. Poorer households increase fuel spending by a similar proportion to other older people at these times, spending around 7% more, but also reduce food expenditure by a similar percentage.
The Institute for Fiscal Studies has found that the government’s Winter Fuel Payment to pensioners is almost 14 times more likely to be spent on heating than on anything else – even though there is no obligation to do so.
In a study funded by the Nuffield Foundation, the IFS found that households receiving the payment spent 41% of it on fuel. However, when the same households received additional income that was not labelled in any way, they spent just 3% of it on fuel.
IFS senior research economist Laura Blow said this suggested that, contrary to expectations, the name of a benefit has a significant influence how it is spent, potentially allowing government to influence spending decisions through such labels.
She added: ‘The Winter Fuel Payment was introduced to encourage older households to spend more on heating in the winter.
‘Remarkably it appears to have had just that effect. The fact that it is labelled a winter fuel payment appears to mean that much more of it is spent on fuel than would have been the case had no such label been attached.
‘This suggests that simply calling a benefit by a particular name can have a real effect on how it is spent. The potential implications for government policy are significant.’
However, the report found that the payment does not protect the poorest older householders from facing a choice between heating their home or paying for food.
The annual benefit is provided to all households with one member over the age of 60. Households receive £200 where the oldest person is under 80 and £300 where the oldest person is 80 or over.
However a ‘heat or eat trade-off’ leads to the poorest quarter of households cutting back on food spending in harsher winters. Poorer households increase fuel spending by a similar proportion to other older people at these times, spending around 7% more, but also reduce food expenditure by a similar percentage.
