Two and a quarter years late, this blog is an answer to Ruth Gilbert’s question. I’m not sure why it has re-emerged on my timeline, but now is a good time to get a layman’s assessment of what we can expect from Government by way of “open accounting for unfunded pension liabilities” .
Ignore the headline and para 1 neither of which I wrote but this piece sets out what happened https://t.co/qWd8MDtVM9 governments did take money from the NI Fund. It is based on Tony Lynes’s paper and I was led to that by David Hencke with whose analysis I broadly agree.
— Paul Lewis (@paullewismoney) September 16, 2019
Tony Lynes, who I met socially but never professionally, has been described as one of the architects of the welfare state . He was an ardent campaigner for the rights of children and pensioners and as an accountant, viewed the Government finances as a book that could and should be opened. You can read his many blogs on state pensions here.
I take Tony’s analysis of the funding of the state pension and ancillary benefits as correct, Tony was a scrupulous man and if he was wrong in his understanding I expect readers of this blog (as close to these issues as Tony) to correct me
Tony died in 2014 and did not live to see the change to the Single State Pension that finished off the decimation of SERPS. Tony was not arguing for women’s rights , he was arguing against a general cut in state benefits that happened under both Labour and Conservative Governments.
Tony knew and wrote of Government policy in his later years as a conspiracy against the work he advised on when working with Barbara Castle in the 1970s. He exposed the changes in funding of the state pension in an article he entitled “the Rape of the National Insurace Fund”
But Tony’s analysis is limited by the conception he had of what is right. Government does not allocate resources according to a fixed framework , but on a pragmatic assessment of priorities. The priorities change over time, we can be grateful that the state pension has been prioritised over the past ten years.
His analysis of the Treasury “purloining” national insurance contributions to pay bills that should fall to general taxation suggests that the Treasury is some kind of super-parliamentary vilain , unaccountable to the UK population and proceeding with an agenda of its own making. This is not the case; the Treasury officials are agents of parliament and even parliament is not fully in charge of its decisions. This is especially the case when it comes to gender equality as it touches pensions
During the period that Britain was in the European Union it was required by European Law to treat male and females in the same way with regards pension rights. So we brought in unisex annuities, against the principals of insurance underwrting and we equalised GMPs and we equalised occupational and state retirement ages.
We know that women and men do not have the same lifespans and we also know they do not have the same pay, either in retirement or before. Equalising rights in the law can lead to greater inequality in practice and WASPI have a good case to argue that the old state pension system where women retired at 60 and men at 65, was one of the few means the state had to rebalance retirement wealth between the sexes.
But EU law gave the Goverbment no choice but to equalise ages and the question was whether we chose to equalise to 60, 65 or some later date. We chose to rebalance to 65 and 66 and the process will soon be underway to rebalance to 67. This is not good news for women but it is explicable both in terms of what had to be done and what was best to be done.
My second (layman’s) view is that it is best to push back the state pension age than bring it forward, despite Steve Webb and LCP’s recent paper arguing that we should be reverting to an equalised state pension age of 65. The key reason is “dependency“, there are now too many people of or approaching state retirement age and not enough people in the workforce or approaching working age, to support them. This is a matter of fertility, of higher education and of early retirement.
People can choose to retire early and many do. The Fire movement has proven popular among people who yearn for the freedom to do what they want (without need to work) from when they want to. But the State has no need to help them do this and is right to tax wealth as well as income to ensure the perpetuation of the retirement system it has set up. My arguments for wealth taxes to pay for later life benefits are also based on the inequalities of a system that taxes working people to pay for the later life healthcare benefits.
As general principles, I suggest that the amounts allocated to the National Insurance Fund are based on an accounting model that is responsive not indicative. Government does not make policy on what is in the National Insurance Fund but based on its overall priorities and money is allocated according to policy not the other way round. Who pays for what is the business of Government, how it gets paid is the business of the Treasury.
Government is accountable to the electorate through the democratic process and Treasury is accountable to Government through Select Committees.
Moving on to the specific allegateions of skullduggery in the Treasury, I struggle to accept miscreance in Government accounting as Paul Lewis would have it
Lynes’s paper, The Rape of the National Insurance Fund, shows that potentially hundreds of billions of pounds have been taken from the fund by successive governments.
Having done that, they claimed there were insufficient resources in it to pay for an increase in the basic state pension.
We have to wonder what is meant by “Rape” here. It is an emotive word that suggests violence (mainly) towards women and is doubly emotive as a result. But Governments are made up of people who do not set out with ill-intent towards pensioners or females or female pensioners. The suggestion that the Treasury was behind a conspiracy against mature women’s interests needs some basis in fact. Simply pointing to changes in the notional accounting of the National Insurance Fund as evidence of prejudic is not enough.
The DWP have been rightly criticised for not making the changes in the state pension age for women impacted by the 1998 letislation more prominent, but you can hardly justigy a conspiracy theory on the scale that Lynes and Henke and Lewis have, on that.
It is difficult for anyone to write a piece defending the changes to the state pension age , especially the changes on the WASPI women, because of the inevitable backlash on social media, that such an article creates. It is doubly difficult as a man, because men are seen as having both the motive and the weapon to do the crime. And the language that Tony employed and which is continually repeated is the language of criminal violence against women.
But my answer to Ruth Gilbert is that I do not see Paul Lewis’ comment as fair.