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BeeHive  >  BeeLines  >  2008  >  Sep  >  Funny Money

Funny Money

Once numbers get above everyday levels we seem to struggle to understand them. Thatís my opinion anyway. I mean, most people know that £1,000 is not that much for a car, but also know that £50 would be a bit steep for a bacon sandwich. Weíve all got a general idea of the relative value of money at the level that it affects us. We need to have really or weíd be all over the place with our personal finances.

But the bigger numbers get, the harder it is for us to get our heads round whatís what with them. Hereís an example; on the BBC website today1 I discovered that the increase in the level at which stamp duty is charged (apparently thatís being changed today from £125,000 to £175,000 for a year) will come at an estimated cost of £600 million. From the Times this morning2 I also noted that the total cost of the bail-out package being aimed at the ailing housing market today will be around £1 billion. A Google search3 reveals that £675 million of Lottery money will be Ďdivertedí to the 2012 Olympic Games in London. Theyíre all big numbers thatíre hard to get your head around. Numbers like that just leave my head swimming to be honest. But then I just read something else thatís helped me to put these big numbers in perspective.

The thing I read was a press release thatís just been put out by the Department for Work and Pensions4 aimed at getting more elderly people to claim the means-tested benefits theyíre entitled to. The Pension Credit is one of those entitlements and there are loads of others. In that DWP release there is a quote by Help the Aged who say that around £5 billion a year is left unclaimed by the elderly. Thatís £5 billion sloshing around in the Governmentís coffers that people either donít bother to claim, or maybe donít know theyíre entitled to, or even if they do know may not know how to go about claiming it. £5 billion a year is roughly £100 million a week (according to my calculator) that elderly citizens in the UK are entitled to, but donít claim for whatever reason. £100 million pounds every week!

Six weeks of that and youíve got enough to pay for the Stamp Duty changes announced today, or almost match the Lottery funding of the Olympics. Ten weeks and youíd cover the cost of the total package being put together to kick-start the housing market. Thatís the best way, I think, of understanding what big numbers mean; put them side-by-side with other things so comparisons can be made; itís what we do in everyday life with motor cars and bacon sandwiches. The £2.7 billion5 thatís been made available for putting right the tax losses due to increasing the 10 pence tax band to 20 pence (remember all that fuss earlier in the year?) equates to just 27 weeksí unclaimed benefits by the elderly.

Why did the DWP issue its press release about unclaimed entitlements? Well, they think itís vital that people claim money thatís rightfully theirs, thatís why. The release says so. Also, as regular BeeLine readers will know, thereís a drop-dead date coming up on 6th October this year when the backdating rules are being changed for those who wake up and claim their rightful entitlements. At the moment people making a claim are entitled to twelve months worth of back-payments, but thatís changing from 6th October to just three months. So, if everyone claimed whatís rightfully theirs today theyíd be in for a collective windfall of £5 billion, or enough to fund the putting right of the 10 pence tax debacle nearly twice over. But if they leave it until after 6th October before they wake up and smell the coffee theyíll only be in for £1.25 billion. Sure, thatís enough to almost match the Lottery Olympics funding and pay for the change to Stamp Duty at the same time and not an amount to be sniffed at, but itís not as good as paying for the 10 pence tax thing almost twice is it? Thatís the way to look at it.

Something else I noticed in the DWP release that I hadnít previously twigged is that thereís an online Pension Credit Calculator† that people can go to and see if theyíre entitled to claim and thereís a free phone number (0800 99 1234) that can now be used for people to claim Pension Credit if they like. Thereíre also numbers for claiming Council Tax Benefit and Housing Benefit and a load of the other means-tested stuff that you can get hold of by clicking on the following link to the DWP press release and looking through the notes that accompany it; that linkís here: Over 60s Ė Don't miss out on extra cash.

If you know anyone whoís maybe not claiming their rightful entitlements maybe you could point them in the direction of the calculator and the free phone services. To my mind it seems just so weird that our media stories today are full of stuff about the 10 pence tax payouts, the change to Stamp Duty and the whole thing about rekindling the embers of the housing market and funding the coming Olympics, but thereís no word at all about the fact that pensioners are losing out on £100,000,000 each and every week. Plain crazy, isnít it?

Steve Bee

2 September 2008

Sources:

1. BBC "Stamp duty axed below £175,000" 2 September 2008
2. Times Online "Brown announces stamp duty holiday in housing package" 2 September 2008
3. Department for Culture and Sport "Olympic Lottery Funding Order Laid Before Parliament" 25 October 2007
4. DWP "Over 60s - don't miss out on extra cash" 26 August 2008
5. Times Online "Gordon Brown pays £2.7 billion to end 10p tax crisis" 14 May 2008.

Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.