by Rab Bruce’s Spider
The Westminster Government’s announcement that the State Pension Age would be increasing to 68 several years earlier than originally intended has caused quite a stir, not least because there was no mention at all of this plan in the Tory manifesto for the General Election.
As always, there are arguments on both sides as to whether this announcement is a sensible move to protect the UK’s finances or simply another example of Tory heartlessness and ideological thinking.
First, some points about the aging population. Nobody can deny that people are now living longer than they used to. Many tory policies introduced since 2010 appear to be reversing this trend, but the fact remains that people alive now are living longer than they did when the State Pension was first introduced. For example, when the State Pension Age was set at 65 in 1925, average life expectancy for males was only 58. The comparable figure is now around 80, so the argument goes that the Pension Age should be increased because of the significant additional drain on the State finances caused by the need to pay pensions for longer than first anticipated.
In purely monetary terms, this is a strong argument. Taxpayers are being asked not only to provide income for the elderly, they also need to fund the health costs of the aging population who take up a large portion of NHS resources which help to prolong their lives, thus exacerbating the problem.
The big issue with this argument is that it views things from a purely monetary aspect. The aim of any Government must surely be to improve the lives of the citizens it is elected to govern. Attempting to revert to a situation from 90 years ago is hardly progressive, especially when the original provisions, for all their good intentions, meant that most people still had to work for most of their lives. We should be aiming to provide longer retirement to our older generation, not forcing them to work longer and longer.
There is also the point that the average life expectancy figure conceals wide discrepancies across the UK. Average life expectancy in Glasgow is infamously at the lower end of the scale, with the rise in state Pension Age meaning that many people will have very short retirements indeed. Socially, this is a disgrace.
But what about the money? There is no Magic Money Tree, after all. But consider the UK’s Pension. It is one of the poorest in the OECD as a percentage of average income. UK Pensioners receive far less than their counterparts in most Western countries. It is true that many European nations are gradually increasing their State Pension ages, but part of the reason for this is that EU nations do not control their own money supply and are constrained by the Neo-Liberal Austerity economics imposed by the ECB. The UK controls its own money supply, so it is only Neo-Liberal economics which drives this move to increasing Pension Age.
Wait! What? You can’t just print money to pay for Pensions, can you?
Yes, actually, you can. Of course, pumping money into the economy can cause inflation, so it needs to be done carefully. But don’t forget that Pensioners who rely on the State Pension tend not to hoard their money. They contribute to the economy by spending. This creates work which in turn, generates taxes.
But that is a small part of the argument. The main problem is the Neo-Liberal economic theory which dominates our culture. Politicians and journalists are obsessed with knowing how Government expenditure will be funded, thus demonstrating that they have little idea of how Governments actually spend and tax. If you don’t believe me, check this post from Richard Murphy on how we can afford to pay for all Public Sector expenditure.
So there is a Magic Money Tree, after all. It is called the Bank of England. You will note that those who claim there is no money to fund the UK’s meagre State Pension never make the same point when it comes to vanity projects like Trident, new Aircraft Carriers or HS2. The UK always has enough money for militaristic projects, the cost of which greatly exceeds the possible savings which will arise from the Pension Age increase. It is not really a question of money, it is a question of priorities. The Pension Age increase is only one example of how the Tories are cutting public expenditure. They claim this is because they need to balance the books, although economists who do not ascribe to the Neo-Liberal consensus have repeatedly pointed out that Governments who control their own money supply do not need to balance the books. What they need to do is inject money into the economy in order to boost economic activity. The current Austerity model simply isn’t working, as evidenced by the fact that UK debt has now risen to £1.75 trillion. The whole point of Austerity and making cuts was to reduce the debt, yet seven years of Austerity have failed to make any impact. The entire concept is flawed.
The other trick employed by the Neo-Liberal thinkers is to cite the burden on taxpayers. This is because people tend to equate that to the burden of tax they pay themselves. The argument carries force because of the conditioning of attitudes where tax is viewed as a burden. In many countries, paying tax is viewed as a social obligation because it helps to fund social care like Health, Education and Pensions. Notably, those countries where such attitudes are prevalent tend to be far less warlike than the UK.
Additionally, we should not forget that it is not only individuals who pay tax, although you would be forgiven for thinking so in view of the major tax avoidance by large corporations in the UK. A fairer tax system, where corporations paid tax instead of dodging it would significantly improve the UK’s cash flow.
So, if we were to abandon the Neo-Liberal Austerity model, we would be able to pay for all the public services and the pensions of our older people. Sadly, this is not likely to happen in the UK.
The greatest irony of this is that the Better Together campaign warned Pensioners that their State Pensions would only be safe if they voted No in the 2014 IndieRef. As with so many other claims, this one hasn’t stood the test of time.
It cannot be denied that an aging population presents problems for any nation. Some people are arguing that all State Benefits should be replaced by a State Universal Income. This may well be a solution, although details of exactly how it would operate need to be closely looked at.
Another possible solution for a small, independent country with a vibrant and diverse economy would be to gradually transform into a high pay, high tax, high social care society, where the emphasis is on caring for people rather than squeezing wealth upwards towards the pockets of a wealthy minority while engaging in constant military ventures. Will that ever happen? Perhaps it is a fanciful dream, but surely it is better to aim for a more equal, caring society than to simply sit back and accept that the way things are is the way they should be.