We don't do a party every year, only on the big years. (Like 1, 8, 10, 12) and maybe occasionally in between. The other years, we still have a birthday cake and family over, but not a big deal.
The thing with having a joint party for kids 6 years apart is that, until they are nearly adults, their interests and friends are going to be so different that it will be like you are throwing 2 parties at once, or the older will feel like it's too juvenile or the younger will feel lost in the "big girl" stuff.
Kids seem to be pretty understanding. Maybe this year, do a party for the 1 year old (especially if the family thinks that it's a big deal for first b-day) and a smaller family celebration for the 7 year old, and then next year you can make more of a fuss over the older one.