There’s been a growing discussion nationally about how fairly spending cuts have been shared between age groups. Policies such as the state pension triple lock, or the protection of winter fuel allowance and other perks for pensioners, are often attacked as unfair at a time when other spending is being significantly reduced.
But in London there is a far more obviously unjust policy that benefits one well off age group at everyone else’s expense. The possibility of scrapping it should be near the top of the new mayor’s in-tray.
A bung worth thousands
I’m referring to the “60+ pass” – or “60+ London Oyster photocard scheme”, to give it its full name – which allows a lucky minority to travel for free. The name, however, is a bit misleading. For those above the female state pension age (roughly 63 at present, rising to 65 by 2018 and 66 by 2020), there is the separate old age Freedom Pass. This – like the free bus pass elsewhere in the UK, and rightly or wrongly – lets pensioners travel for free. In other words, this is really a “60-63” pass, rising to a “60-66” pass by 2020.
The 60+ pass was introduced in 2012-13 after the female State Pension Age, and therefore the Freedom Pass eligibility age, started rising. And while the Freedom Pass is part of a national policy (funded in London by borough councils), the 60+ pass was created by Boris Johnson and is funded from TfL’s budget. (Scotland and Wales have similar schemes for those between 60 and the female State Pension Age.)
Applicants do need to pay a £20 fee to cover administrative costs – but that is a tiny price to pay to be able to “travel free on bus, Tube, tram, DLR, London Overground, TfL Rail and most National Rail services in London”. An annual travelcard for just zones 1-2 would cost most people £1,296; free travel throughout London would cost £4,012 (more, if you couldn’t afford a whole year upfront). And couples may benefit twice over, of course.
The cost to TfL is soaring
A Freedom of Information request I put in to TfL reveals just how much this policy costs them. This year the cost is expected to be £56m. Compared to national budgets that’s not a huge sum, but it is over 1 per cent of TfL’s fare income and compares to the London Fire Brigade’s budget of £425m a year.
And the cost is growing rapidly. In its first full year, 2013-14, it cost £22m; two years later that had doubled to £44m. By 2019-20 – ahead of the next London election – it will have risen to around £100m, as the female State Pension Age keeps going up.
It goes to commuters not retirees
High costs might be justified if they achieve a worthy goal such as redistributing to a vulnerable group. But a look at relevant data suggests that this is really not the case.
First up, I’ve looked at the employment rate of this group: are they mostly retirees we need to help out of the house to socialise and access public services? No: they’re commuters.
Some 85 per cent of men eligible for the 60+ pass are in work, as are 70 per cent of eligible women. Sure, that’s lower than the proportions of younger people in work, but the big drop off in employment rates in London clearly comes later than people’s early 60s.
It may actually increase inequality
To judge whether the recipients are really rich or poor, we need to look beyond employment to their earnings, housing and other wealth; their partner’s income; and what family they have to support.
The measure below is the best measure of living standards, and looks at the typical incomes after housing costs of four age groups. It shows that the 60+ pass age group is in fact typically richer than other age groups.
What’s more, although not shown here, even poorer households (the bottom 40 per cent) in that age range are richer than their younger equivalents. So, if the intention of the policy is to help people on low or middle incomes, it is hopelessly ill-targeted.
More analysis is needed, and it’s difficult with the survey data available to look at such a small (and shifting) age group in only one region of the country. But this quick analysis should dispel any myth that those eligible for the 60+ pass are a particularly needy group.
More likely than not, this is a scheme that increases inequality by having a poorer majority pay more to subsidise households richer than them.
Time to scrap the 60+ pass, one way or another
The 60+ pass is a genuinely awful policy. Sadiq Khan should scrap it and use the growing sum of money to help fund his fare freeze for everyone – a promise estimated by him to cost £450mn over four years (though others have suggested higher figures).
Or it could be used to help the many families who really are in poverty in the capital. The London Fairness Commission suggested this spending on rich, elderly Londoners be redirected to improving the skills of poor, young Londoners.
Not encouragingly, Sadiq’s manifesto committed him to “guarantee” the 60+ pass. But one option might be to start increasing the eligibility age beyond 60 – phasing out the pass while protecting those who are already receive it.
But, if not, we need more scrutiny and popular recognition of the inequity of this policy – particularly as working at 60 in London becomes ever more normal – to slowly turn the debate before the next election in four years’ time.
Adam Corlett is an economic analyst at a think tank.