Friday, September 05, 2008

Blunkett has a point, at last

I never thought I would find myself in agreement with David Blunkett, but he has made some good points in his latest speech to the Counsel and Care charity in London. I accept I haven't read the whole speech so I may be missing some of the nuances, but here goes anyway.

Older people should be prepared to work after they reach retirement age for as long as they are physically able to, former cabinet minister David Blunkett said today.

Blunkett said that as the number of older Britons continues to rise, it was wrong to assume that the government should have "prime responsibility" for elderly care.

As a socialist he confuses Government with tax payer, but we'll ignore that one.

For years Maggie banged on about this problem but it was ignored. When the welfare state started there was over 10 workers to every pensioner ** and it is fast approaching 2:1 and will be 3:2 by 2040 according to some estimates. This is clearly unsustainable and its a pity that Blunkett had his head in the sand when he was in office.

The main problem is that we have a pay as you go scheme which a large part of the population doesn't appear to understand and think their NI contributions are paid in to some kind of fund they can draw down. Furthermore we are living longer and starting our working lives later, and with the debt of funding university courses. This means that people aren't being given the opportunity, let alone the will, to save enough for a long retirement.

So something has to give, but he misses the point. Only those who haven't saved enough during their lifetime should be prepared to carry on working until they meet incapacity or the grave. Or turning that round you have a choice - don't save and keep enjoying yourself with expensive cars and holidays but be prepared to keep working until you die or save now, relax later; its your choice.

But this implies a grown up conversation between the Government and the Governed and we don't have any major politicians prepared to have that discussion, what with the Tories trying to outdo Labour in the socialism stakes. And as we know, socialists don't trust the proles anyway.
"In our endeavour to protect people's inheritance, have we not made enough of, and are we not clear enough about, the release of equity from the enormous home ownership that exists in Britain and the divide of those with and without assets which this trend has accelerated?" he said.
Harsh as it seems it is not the job of the tax payer to protect Middle England's inheritance. If you have capital in your old age then you should be obliged to use it for your own care or continue working. Yes I know its harsh, some people get to live a long time and use up all their savings (so their children miss out on free money), others die yong and leave their savings to their family, life isn't fair; but its a damn site fairer than a 3rd party protecting the inheritance of those whose parents have money but don't want to pay for their care.

Again, this needs another grown up conversation and a few truth's spelled out, but I suppose that won't win elections so again probably won't happen.

Finally we have the real clincher. It has finally dawned on him that the welfare state creates a moral hazard, and what's more the cost of that moral hazard is becoming unsustainable
"Why should someone who's not saved, who's not put money by, expect those who have to sustain them to do so not just in working life but in retirement as well."
A very good question and one some of us have been asking for years. Lets hope that this message sinks in and come the next GE we have politicians with the metaphorical balls to stand up and say what the real problem is - we pay ourselves too much, for doing too little for not long enough.

Ah, I here you say, but what about people can't even make ends meet, let alone save for retirement.

Yes, there a number of people for who have been dealt a bad hand and these are the ones we need to protect - maybe a partner has died and they have a young family, maybe they suffer a chronic illness or have disabilities or they have suffered the slings and arrows of outrageous fortune; these we should protect. But there are far too many people who think that they can go through life not caring about the decisions they make and expect the rest of us to pick up the pieces.

**I couldn't find the exact figure but in this paper the Minister of State for Pensions states "When the State Pension was introduced in 1948 the ratio of working age people to pensioners was 5–1." Given that women weren't generally working and that not every man of working age was employed - many were disabled from the war so I have just doubled the ratio. I reckon this is too low and seem to remember reading somewhere that the ration was nearer 12:1

7 comments:

Bill Quango MP said...

Yet pension funds are raided. ISA lets you save just enough to be worth bugger all when you retire.

Inheritance tax nicks the retirement pot of the children..Public sector vs private sector pensions..

But as you say. who wants to tackle the issue.

formertory said...

Harsh as it seems it is not the job of the tax payer to protect Middle England's inheritance. If you have capital in your old age then you should be obliged to use it for your own care or continue working

Agreed - and it is harsh, compared with what people have come to expect, but I can't see any reason why I should pay income tax now to provide benefits or services to someone, so their child(ren) can get "an inheritance".

It's a shame that many people were lied to by successive Governments about the "cradle to grave" Welfare State, but they aren't the first and won't be the last to be betrayed by the greedy, the corrupt and the completely clueless incumbents of the Palace of Westminster.

The first necessity seems to me to be to introduce the "New Zealand Pension" - everyone gets the same regardless of working years - about £115/week was the last figure I saw suggested as workable. After that, there's no top-up, no MIG - but anything you saved on your own account you get to keep, on top of the basic.

Think you can live on £115 a week? Great. Horse on. Want more? Start a pension, early, or cash in the house. (Oh, and scrap higher rate tax relief on pension contributions for higher rate taxpayers. Obscene that the lower paid should be subsidising the higher paids' pensions).

formertory said...

Incidentally, when I saw your thread header - "Blunkett has a point, at last" - I thought you must surely mean he'd volunteered for medical research, or something. As opposed to "Blunkett makes a point, at last" :-)

The Great Simpleton said...

Bil,

Yes I have opened a can of worms on this one. As you point out there are many pension planning issues and the gilded pension civil servants and MP's recieve doesn't help the debate as they don't understand the problem.

I've fumed about Gordon's pension steal a number of times on the beeb's boards before I started blogging and I suppose I'll have a go on here some time in the future.

FT,

This points to the Citizens Basic Income (CBI), which I hadn't really considered until I started reading blogs last year, but the more I think about it the more I like it.

The problem with all these proposals is the transition, those in their 40's and 50's will claim they weren't warned and won't have time to save. despite all the dire warnings I suppose their would have to be some transionary arrangements.

On the title - sadly English isn't my strong point, having failed O Level 3 times, but I promise to try harder :-(

FormerTory said...

Sorry, GS. I wasn't having a go at your English and I apologise if it looked that way. It was just the humour value of Blunkett having been discovered to have a point, as opposed to being pointless, which I always thought he was.

The Great Simpleton said...

No offence taken, my response was in the same spiri as your comment

Mark Wadsworth said...

1. What FT says re citizen's income/citizen's pension.

2. Re workers-to-pensioners ratio, this is fairly irrelevant - what IS important is productive workers-to-everybody else ratio, whether that's children, unproductive public sector workers, students, unemployed or pensioners. So what if number of pensioners rises - if we can match that with a cut in quangista, that's fine by me.

3. The original OAP age was 70, not gradually increasing this by maybe 1 month a year (i.e. a century later, it would be 78 years 4 months) was the biggest mistake of all.

4. If you index up original OAP for GDP growth, it would be about £130 a week, i.e. current Pensions Credit plus free TV licence plus Winter Fuel Allowance.

5. Just sayin', is all.