Tuesday, August 02, 2011

Pensions, Poverty and Priorities

Yesterday's report that those of us of modest means face a bleak old age sadly comes as no surprise to me.

I've been thinking for some time that we're in a bit of a Catch 22 situation, whatever we do with pensions.

The State is currently putting an unsustainable amount of money into public sector pensions. Labour, and previous Conservative Governments, should have dealt with this years ago, before it became critical to manage the deficit. Instead, they stuck their heads in the sand.

The Coalition Government is trying to deal with the financial gap by asking public sector employees to pay a little more. In this climate. That's a tough ask, but we have to remember that this could have been done before, during those years of pretty benign economic circumstances at the end of the '90s.

I don't think the Coalition's proposals are unreasonable, and reflect Liberal Democrat influence by ensuring that those on the lowest incomes have no, or small increases, while those earning whacking salaries contribute most.

The worry is, of course, that people in their twenties and thirties, struggling maybe with the costs of raising a family, or with other housing and living costs, will leave their pension schemes.

Added to that, you have final salary pension schemes becoming rarer in the private sector, meaning that over the next few decades, people, whether public or private sector employed, face not being able to save enough to even afford the most basic of lifestyles in retirement.

In 40 years' time, that means a lot of poor older people. We could see life expectancy plummet at that time as we all know the links between poverty and poor health.

So, what to do?

This Government is at least trying to provide a sustainable model, not just for public sector pensions, but for other public services, too.

I'm not convinced it's going to be enough.

The idea of raising Income Tax has become so taboo in the last couple of decades. I think we need to look at what we're going to need in the future to build the sort of society we want to see. For me, that's a society where everyone has decent quality housing, enough to eat, free education and healthcare and where those who can take their fair share in supporting the vulnerable.

It is not beyond the wit of a society to do all these things. The Scandinavians aren't perfect, but their priorities as societies are not a million miles away from mine. They also tend not to spend massive amounts of money on nuclear weapons or wars, concentrating instead on contributing to bringing more peace and tolerance in the World.

My already healthy admiration for Norway has, since the right wing terrorist attacks of 11 days ago, increased immeasurably. On Channel 4 News the other night I heard someone from their security service say that they could put half of Norway on a database and watch them, but "that isn't the way we do things".

Any politician who suggests higher levels of taxation in this country risks vilification in the media and by business, both areas with more than their fair share of people with high personal incomes.

They don't want to pay more Income Tax - and the argument is that if they pay more in tax, they won't have enough to invest in their businesses. But their personal income surely goes mostly to fund their own personal lifestyle,not their business which is likely to be a separate entity.

The Tea Party element in the US wants to deliver lower taxes for the rich and leave the poor to fend for themselves. And there are plenty of similar views expressed here, usually by the rich protecting their own interests.

We need to have an honest debate about what we need to do in terms of personal taxation in order to avoid a lot of people falling off a very steep cliff in their retirements in decades to come.

Part of the reason we don't want to pay more tax is because of the appallingly inefficient public monoliths of the past. If higher taxes were accompanied by more people centred public services which did their jobs and people were proud of, then we would all benefit. This is a theme I want to come back to over the next wee while.

I'm not suggesting that we all hand over huge amounts of extra tax, or that we return to the 83% supertax. We do, however, have to set our priorities as a society and we should do so in an open and honest environment, have a grown up conversation in which all options are considered in mature fashion.

Politicians of all parties need to show leadership and govern for their grandchildren as well as their current electorate.

- Posted using BlogPress from my iPad

Location:On the train going to London


KelvinKid said...

Well, let's have an honest debate by all means. That would involve acknowledging that the assertion that "The State is currently putting an unsustainable amount of money into public sector pensions" is a flat lie.

Public sector pensions changes in 2007 and 2008 have brought projected expenditure into line with historic percentages of GDP. See http://blogs.telegraph.co.uk/finance/jeremywarner/100009757/theres-nothing-unaffordable-about-public-sector-pensions/ and


Public sector pensions are now perfectly affordable. The increased contributions public servants are now being asked to pay amount to a tax which will be used to defray the deficit. This is victimisation, not justice.

The real problem, as you correctly state is private pensions. Here the Tories, having messed up pensions 'reform' in the Eighties (remember the pensions misselling, the Equitable Life scam?), are now offering a wholly inadequate response. You are correct that the Scandinavian solution works but then the Scandinavians have not been not cursed with forty years of self-interested propaganda against state solutions. Propaganda which Clegg and Alexander, and you for that matter, are happy to perpetuate.

Anonymous said...

Abolish cap on national insurance payments problem solved.I suggest you go to website tax research uk to find ways to collect more tax


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