The Winter Energy Payment (WEP) provides older people extra income to keep warm during the winter. It sounds kind, but is it a glaring example of wasteful expenditure and poor allocation of scarce resources?
While an automatic increase in benefits is a good way to pay the WEP to beneficiaries it should have been designed as an opt in not an opt out for superannuitants.
The WEP is a payment of $450 a year for single people, and $700 for couples. Two singles sharing get $450 each because the MSD can’t work out how to pay them each half the married rate. It is not taxable so that there is no clawback from higher taxes on the better off.
Many superannuitants would not even notice that their pension had increased. They didn’t ask for it and don’t need it. The MSD figures show that last year only 2000 opted out. That’s right, not 20,000, not 200,000 but 2000, a tiny proportion of 770,000 superannuitants.
Overall the annual cost of the WEP for superannuitants is around $308m.
Yet superannuitants overall have low rates of fuel poverty suggesting that it would be better to pay the WEP only to those on additional hardship payments such as the accommodation supplement or temporary additional support, and allow others to opt in (no questions asked) if they felt they needed it. It would still be universal and it would still be kind.
Under an opt in policy around 40,000 superannuitants receiving the accommodation supplement would get the WEP automatically. Allowing for others on hardship support and some others to opt in, about 70,000 may benefit from this policy.
That would mean a saving of $280m for the 700,000 out of 770,000 superannuitants who currently get it but don’t need it.
$280m could do a huge amount of good in the hospitals where superannuitants are denied, or face unacceptable wait times for life enhancing operations like cataract removal and joint replacements.