At long last Adair Turner has come out with his proposals on pensions - and it's scary stuff. He is proposing that:
- The retirement age should be lifted to 66 by 2030, to 67 by 2040 and to 68 by 2050. Further increases in the age you leave work are under consideration if people's life expectancy continues to increase in the future. Turner's advice for you is work till you drop!
- The good news is that basic state pensions will be linked to earnings, not prices. Generally, earnings go up faster than prices as society gets richer. The bad news is that this won't happen till 2010.
- In the same year a National Pension Savings Scheme is to be set up. Unless you're in a separate scheme you'll be paying in 4% of your income, your employer will have to stump up 3% and the state will add 1% towards your pension. This is all a wee bit late for people who are currently coming up to retirement age.
Turner says, and the government agrees, that we can't afford a decent pension for all as of right. This is strange. In 1945, when Labour took over, the country was broke. Ask anyone who was around at the time. In that year Britain was importing £1 for every £6 we consumed. As a result we had built up huge foreign debts. The government had also accumulated astronomical debts in the war effort. Austerity was the watchword and basic food items such as butter were still on ration as late as 1953. Yet we could afford to pay everyone a basic state pension.
Since then, the trend rate of growth for the British economy has been around 2.2%. As a result we are all about three times richer in real terms than we were in 1945. Now, the government boasts, we are the fourth largest economy in the world. Recently national income edged over £1 trillion (a million millions). And yet we 'can't afford' decent pensions for all.
The reason we can't afford them any more is because of the 'demographic time bomb'. This phrase is supposed to mean that, as people live longer, a smaller and smaller proportion of the population works to support those who have retired. This ratio is called the support ratio, and alarmists are suggesting it could fall to 2.4 workers for every retired person by 2041.
Working people have always supported those too old or ill to work. We don't begrudge it at all and we hope and expect that others will do the same for us some day. This is called the 'implicit contract between the generations' on which pension provision is based. Yet as capitalist Britain gets richer, we hear more and more often that this implicit contract is under threat.
The number of pensioners has gone up since 1945. There are now 11 million of them. But pensioners are not the only 'economically inactive' section of the population. In 1951, for instance, there were about 13 million children, more than a quarter of the population. As the age profile of the population has shifted, we now have less children for the economically active to support.
This example shows how grotesque the whole argument of Turner and the economic establishment is. Children don't choose to be born and become a 'burden' on the economy. In strict economic terms they can be regarded as the most important investment any country makes. They are its future. They are also human beings and have an unconditional right to our support. So do pensioners, who in any case have 'put in' to the economy by working for forty or fifty years.
Also not all those of working age have actually got a job and 'are putting in' to the economic pot, and this is not their fault. There are eight million out there without work - unemployed, on invalidity benefit and so on. Unemployment in this wider sense is actually a structural feature of capitalism. The system relies on reserves of labour, which it can tap in good times and abandon when they are no longer needed. Capitalism wastes labour on a huge scale. Then its representatives lecture us about economic reality! If those eight million were found work by socialist planning to bring jobs to the people, nobody would be able to spout nonsense about how we can't afford to look after the elderly in modern Britain.
Pensions were actually linked to earnings until 1980. This meant that pensioners shared in increasing prosperity. Margaret Thatcher broke the link in 1980, and pensioners only got cost of living increases. That means a single pensioner is £30 a week worse off now, and it's going to get worse even if Turner gets the earnings link re-established for 2010. Gordon Brown is fighting Turner's proposal. In doing so, he is defending the legacy of Thatcherism. The Tories are now calling for the earnings link to be restored, outflanking New Labour from the left.
Most of the headlines about the Turner Report have been about Gordon Brown leaking and signalling his opposition to the plans. Mister Scrooge says we can't afford it and has briefed journalists with dodgy projections about the plan costing an extra 4p on the standard rate of income tax at some point decades into the future.
Against this, we underline our earlier point. If it is true that less people will be working to support the 'economically inactive' such as pensioners in the future, then that is in large part the fault of capitalism, because it can't mobilise the labour reserves that already exist to do a job of work. But, even if we accept for a minute that we are facing demographic reality rather than capitalist inefficiency, productivity is rising by more than 2% a year. That means a smaller working population can maintain more pensioners and others at a decent standard of living year on year. The rich get richer and tell us 'we' can't afford decent pension provision any more. We should tell them to go to hell.
A basic state pension for a single person is now around £82 a week. If Gordon Brown thinks that's enough, he should try living on it! The Treasury argues that the total can be pushed up to £109 with their Minimum Income Guarantee. That's little enough, but not everyone gets it. About 30% of pensioners who are entitled don't take up the means tested benefits provided to bump up their pension. This is always the way with means testing, and that is one reason why socialists have always opposed it.
The founders of the welfare state in the 1940s argued that people were entitled to an. income they could live on as of right. They should not be made to grovel. The Tories screeched that universal provision would mean well off pensioners would be getting money they didn't actually need. The socialist reply to that argument was not means testing but taxing the rich through a steeply progressive income tax.
Blair and Brown have pledged not to raise income tax on the rich. So they are left scratching around with means testing upon the poor. Means testing is not just demeaning. The pensioners' form is more than twenty pages long, and quite complicated to fill in without help. Means testing also means that if you save for your retirement, which the government says it favours, they clobber your savings pound for pound by removing benefits as the extra income pushes you towards their Minimum Income Guarantee line. So Brown is against a higher rate of tax on the rich. But he supports an effective tax rate of almost 100% on poor people who have committed the sin of squirreling money away for their retirement.
Turner recognises that you can't live on the basic state pension. He proposes a second flat rate state pension. What the Report spells out (in more diplomatic language) is that the reason we are in this pickle is that successive governments, Labour and Tory, looted the funds for the State Earnings Related Pensions system (SERPs) set up in the 1960s.
Turner says we need to work longer. But many workers don't even get to the age of 65 (or 60 for women) before they are out of a job. For a fortunate minority it's because they've been awarded generous redundancy pay or are enrolled in a good company pension scheme. But many workers made redundant in their fifties will never get another job. The reason is age discrimination, and employers can and are getting away with it.
A lot of us would like to give up work at the age of sixty as long as we had enough money to pay our bills. But instead, the establishment are 'equalising' the retirement age between men and women upwards, so in the future women will have to work till 65 as well. Turner says the increase in women's working life will mean his proposals will not cost so much. But Gordon Brown replies that he's already spent that windfall, despite the fact that women haven't started putting in the extra years yet!
Actually women workers have had a raw deal from the pensions system. Because of long career breaks for motherhood and other reasons, many women now retiring haven't made enough National Insurance contributions to be entitled to a proper pension. This is an injustice that should be sorted out. To be fair, Turner does propose some improvement in women's pension position. As part of his plan, he has unveiled a pension as of right to all women - as long as they're over 75 years of age. This is really a slap in the face for most women pensioners and all who believe a decent pension is a basic right.
Turner thinks that people in their sixties are bionic these days, but workers in manual jobs have often had enough by the time they are coming up for retirement. People in this age group have often developed nagging ailments that make it difficult for them to hold down full time jobs any longer.
They might want to go part time rather than no time - and no wages - but employers seldom hold that out as an option. With the lack of affordable state provision, many people of this age group play an indispensable role in caring for their grandchildren, allowing their children to hold down full time jobs. As the population ages, more people become disabled in some way, and have to be looked after. The state does very little for care of the disabled and dumps the problem on some seven million 'volunteer' carers, many of whom are themselves of pensionable age. Turner and New Labour agree to continue ignoring the problems of these people in their search for 'economic' solutions to human problems.
Current pensions have to be paid from current national income. In the same way this year's apples have to come from this year's apple trees. If this weren't true, they wouldn't be able to scare us with the 'demographic time bomb' myth. The myth of 'funded' private schemes is that your money will be punted at the stock exchange for you till you retire. The way finance capitalists stole people's futures with private pension swindles, while the government raided the SERPs piggy bank in the past, nails that lie.
It still might be wise to put aside resources to plant more apple trees for the future. Turner's plan for a National Pension Savings Scheme for the first time puts some onus on the employers to stump up for decent pensions. Turner puts state provision centre stage, brushing aside the fantasies of private pension provision that led to huge mis-selling scandals in the 1980s. The Report recognises that some people don't put enough aside to get a decent pension under capitalism. But these people are not daft. Most of them are just too poor, living from hand to mouth even while in a job. Decent pension provision for all inevitably involves a distribution of income from rich to poor. But capitalism imposes its own priorities on society. Chief among these are the accumulation of capital, inevitably at the expense of the working class. Turner's Report offers no alternative for workers because it accepts the capitalist system and its logic.