NOSTALGIA FOR the 1970s is not without rewards. I find it touching that my nine-year-old son has an enthusiasm for Basil Brush (with virtually the same jokes as back then) and
Doctor Who (although the Cybermen were more scary in 1976) that I had 30 years ago. There are stranger aspects to this trend, however, namely the revival of Leo Sayer. And a darker streak, such as the widespread agreement to restore the link between pensions and earnings.
To express scepticism on this is to invite isolation. Everyone, it appears, is desperate to return to a link that was established by Barbara Castle in 1974 and cruelly scrapped by Margaret Thatcher in 1980. It is widely hailed as a “modernising” initiative; there is a vast “consensus” behind it, including the Prime Minister, the Conservatives, the Liberal Democrats, employers, employees and very likely the Tufty Club. The sole politician determined to protect Mrs Thatcher’s legacy was the Chancellor. So when on Friday it was revealed that Gordon Brown had (sort of) capitulated, one half expected church bells to ring out across the land. The one regret expressed was that it would be 2012, not 2010, before the link is with us.
The father of the reborn earnings link is, of course, Lord Turner of Ecchinswell. His official report into pensions has been hailed as the finest piece of work since Hamlet. His hostility to the means testing promoted by Mr Brown at the Treasury is about to be enshrined in statute.
Indeed, if events had taken a different course at about the time the earnings link was axed, Lord Turner might have ended up in a yet more exalted position. The young Adair Turner had been president of the Cambridge University Conservative Association and the Cambridge Union and his contemporaries thought that he was destined for the highest offices. But he joined the SDP in 1981 which, for him, was rather like aligning with the Moonies. What this episode demonstrates is that, first, his approach to pensions may be as much that of a frustrated politician as a neutral technocrat and, secondly, that there is at least one example where his judgment has not been perfect.
Nor are the Turner Commission recommendations perfect, either. These consist of an increase in the retirement age to 66 in or about 2020 and to 68 by 2050, a semi-compulsory second pension and the much cheered shift to linking pensions with earnings and not prices. I hope that Mr Brown has left himself some wriggle room to rewrite the forthcoming White Paper should he enter No 10. For the Turner formula is too cautious about the chosen age of retirement and cavalier about the implications of welding pensions back to pay packets.
In fairness to Lord Turner, it was assumed by many that the retirement age would be the most explosive question that he had to deal with. This never struck me as likely. The argument that if we live longer then we need to work longer seems elementary logic to most of the electorate. Further, lots of people enjoy their jobs and have no wish to be condemned to golf or the gardening. Personally, I hope to be still banging out words on these pages in 2040.
When David Lloyd George introduced the first pensions in 1909, life expectancy was barely 50, yet the money was not awarded until a person was 70. Life expectancy in 2050 is likely to be in excess of 80. Turner should thus have been bolder. It would have been wiser to make 67 the retirement age by 2025 and then three years later by the mid-century.
Some will insist that the future savings in public spending such a strategy would produce could make it easier to introduce the earnings link sooner. Even so, caution is needed.
As a matter of principle, it is not clear to me why any group that is not in the workforce should be treated as if it was. Everybody is affected by prices, but it is only the efforts of people who are working that determines the size of the pay packets. If it is to be earnings rather than prices for pensioners, why not the same for the single mother who relies on child benefit, the brilliant student from a poor background who depends on a state bursary to see himself/herself through higher education, or the chap made redundant in his early fifties who is thrown on to the jobseekers’ allowance? These groups will surely start to lobby for equal treatment.
Ah, some might retort, but society owes a special debt of honour to those who went through the Second World War as soldiers or civilians. I agree. I would be perfectly content to accept a compromise where pensions for those now aged 75 and over rose sharply. Yet a person who retires in 2012, who will be given a pension attached to earnings, would have been born in 1947. Too young for National Service, never mind the Normandy beaches or the Burmese jungles. The only thing he or she might have fought for is rock festival tickets in the late 1960s. People of my tender years cannot claim to have been part of any titanic struggle.
Finally, as Anatole Kaletsky has written on these pages (he is welcome to carry on to 2040 too), the Turner formula places pensions expenditure and health spending in competition. It leaves us with the ironic outcome for the 2012-2020 period that earnings-linked pensions will be affordable only if the reduced increase in resources for the NHS results in a slower rise in life expectancy. This does not strike me as an attractive situation.
The “consensus”, though, means that an earnings-liked pension may now unstoppable. Before the ink dries on a new law, nonetheless, we might recall what the woman who sunk the link said of consensus. It is: “Something in which no one believes, but to which no one objects.”
Dead accurate.
