The Conservatives last week launched their latest set of election posters. One sarcastically depicts Gordon Brown announcing ‘I took billions from pensions. Vote for Me.’ After years of relatively harmonious consensus on pensions policy, the gloves may be off. We should not be surprised: there are huge questions regarding both state and private pension provision that have yet to be answered by policy-makers.
But we should be worried. Pensioner poverty is a scar on the conscience of a modern society, and although the numbers have improved under Labour, the well-being of older generations must not be allowed to ebb and flow in line with the daily rituals of party politics. Furthermore, we are facing a huge longevity challenge. Over-65s already outnumber under-16s for the first time in the UK, and the proportion of people aged over 65 will increase by 7 percentage points (to 23%) over the next 25 years. The implications for public spending on health, social care and pensions are mind-boggling.
For what it’s worth, the Conservatives have a point. While the rot in the UK pensions system set in under the last Conservative government – after endemic mis-selling of company pensions and a failure of regulation on employer obligations[1] – Brown’s 1997 decision to end tax relief on dividends paid to pension funds has probably helped to make pensions saving less attractive. And the restriction of tax relief on pension contributions for the highest earners will inevitably lead some people to seek alternative forms of saving. Should we care about the highest earners? Well, the industry does, and in a system which strongly favours private over state provision, the industry matters.
Nevertheless, the repoliticisation of this issue amid the circus of a general election could be very damaging. In Monday night’s Ask the Chancellors debate, Alistair Darling and George Osborne traded blows on public sector pensions, competing over who could sound the toughest. In an attempt to ‘show willing’ on the fiscal deficit, Osborne has already intimated that the Conservatives will raise the state pension age faster than currently planned. These are both highly complex policy areas, and must not be reduced to points-scoring on the public finances.
Somewhat paradoxically, David Cameron has pledged to ‘protect’ pensioner benefits such as Pension Credit, Winter Fuel Payments and free bus passes[2] – some of the areas that his own supporters have earmarked as wasteful public expenditure[3]. The fact that his pledge is deliberately ambiguous is further indication of a descent into electioneering in place of evidence-based policy-making.
In short, the big question that needs to be answered by our politicians is not whether pensioners keep their bus passes, but whether the state pension is a form of welfare or a form of insurance. If providing a basic level of welfare for people in retirement is the state’s responsibility, which is what Cameron’s pledge implies, then the contributions-based insurance model is a relic. Indeed, there are some on the left now arguing that only a more generous residency-based state pension can provide the incentive, indirectly, to save for a pension that Labour’s flagship NEST scheme is seeking to engender by direct means.
While not wishing to deprive the electorate of their say, it is unthinkable that these issues could be debated publicly during an election campaign in contemporary Britain. Our air-brushed, headline-chasing political culture will not allow it. So instead we have short-termist pandering to ‘the grey vote’, amongst others[5].
This is not to say that consensus is necessarily a good thing. While consensus will be vital to see through the Turner reforms, it is right that the bigger issues are subject to debate. Yet it must be a debate premised on the understanding that the policy decisions we make now will affect people for many generations to come, just as outcomes for today’s pensioners are the product of decisions taken decades previously. Crucially, it requires a similar timescale to determine the impact of policies – such is the nature of pensions policy.
The contestants of the next general election will be long gone by the time we can fully evaluate their choices, meaning they have a responsibility as public servants to resist their partisan motives. Issues like the state pension age, the balance between the state and private sector, and how to help people plan for retirement several decades before it really matters to them, are too important for politicking.
Craig Berry
References
1. Parliamentary Ombudsman (2006) Trusting the Pensions Promise, available at http://www.ombudsman.org.uk/improving_services/special_reports/pca/pensions%20report/index.html
3. Reform (2009) The End of Entitlement, available at http://www.reform.co.uk/LinkClick.aspx?fileticket=ECSzk1Mtle8%3d&tabid=118
4. P Hollis & A Kemp (ed.) (2010) A New State Pension, available at http://www.soapboxcommunications.co.uk/anewstatepension.pdf
5. A Harrop (2010) So, you want to be elected, ILC-UK Thinkpiece, available at http://www.ilcuk.org.uk/view.jsp?view=browse&type=publication&order=date&by=desc&skip=0&pageID=55