Abolishing the universal state pension – the new Westminster consensus?

Over the weekend, Ian Duncan Smith made widely reported comments that wealthy pensioners should be prepared to return some of their benefits – notably winter fuel payments and free bus passes.  This morning on the BBC Today programme, Labour DWP spokesman Liam Byrne (unsurprisingly) refused to defend the principle of universality. Nick Clegg and his party have for some time been advocating removing some benefits from wealthier pensioners.  It’s increasingly obvious that there is a Westminster consensus emerging.

It’s not difficult to see the attraction to policy-makers of a neoliberal bent.  It gives the impression of fairness, but also provides the opportunity to get to grip with the fact that spending on pensions and associated benefits represents a far greater proportion of DWP spending than the benefits for the poor (in or out of work) and the disabled that the Coalition has hitherto targeted.

But, as so often when our Westminster parties begin to coalesce around an idea, start picking at it and it falls apart. I’ve blogged before about the advantages of universal benefits – the way in which they are both more efficient and promote social cohesion – and Owen Jones has tackled the social cohesion arguments in a a characteristically powerful piece in the Independent.

But Duncan Smith’s comments raise some fundamental questions – just who are these wealthy pensioners? And how many of them are there?  The problem is that of conflating wealth and income.  There are many older people who have extremely low incomes – especially widows who have not worked or only worked intermittently, and whose tiny basic pension is topped up with pension credit – but who are sitting in houses that, thanks to long-term house price inflation, give the appearance of wealth. Are these people – likely to be hit hardest by rising fuel costs – to hand back their winter heating allowance?  And how on earth do you measure this wealth (as an aside, it’s quite amusing to see how many of the policy initiatives from the right involve the comprehensive post-Council Tax revaluation of property from which successive governments have shrunk in fear)? Everbody knows that the truly wealthy are expert at hiding their wealth, while the processes of deciding who is eligibility will almost inevitability  hit those whose apparent wealth is wholly unrelated to their income.

And there is a longer-term question.  One of the undoubted legacies of the Thatcher era was the belief that private pensions were the way to provide sustainably for old age; but as those who have started to draw pensions after the 2008 crash know to their huge cost, the vagaries of the market can decimate that provision.  The effect of relying on private provision is that old age is inherently less secure, less predictable, less stable.  Universal benefits have a hugely stabilising effect, especially when the market fails to provide.

One of the most dishonest pieces of Labour rhetoric is the claim that its approach to benefits aims to “restore the contributory principle”.  Of course the contributory principle is alive and well – all of us who earn pay National Insurance – and nowhere more so than for provision in old age; to claim otherwise is either dishonesty or gross intellectual confusion (and Liam Byrne’s daily pronouncements show that the two are by no means mutually exclusive).

All in all then, this looks like the Westminster parties lining up to end universal benefits in old age.  It’s not something they could ever propose openly – for a start everybody knows that older people are more likely to vote.  But then nobody proposed the privatisation of the NHS at the 2010 election.  It’s that insidious process of undermining something, dressing that undermining up as fairness and calling for a “debate” about long-term sustainability while making reassuring noises about things being off the agenda until after the next election.  And it’s worth recalling that many of the (in my view) most obnoxious elements of Coalition policy – workfare, outsourcing of health care, the promotion of academies, the privatisation of higher education, the use of ATOS to apply bogus science in the name of getting people off benefits – are really no more than New Labour policies taken to their logical conclusion.

Watch this space.  I predict that whatever the outcome of the 2015 election, the next Government will be looking to abolish the universal pension.  The time to start organising – and to start defending the universal principle is now; and there is no policy more dangerous than assuming that Labour in office will do the decent thing.

One thought on “Abolishing the universal state pension – the new Westminster consensus?

  1. It will be interesting to see if the public support for the private pension system survives until 2015. There is very little awareness of how it all works, but in a nutshell, if your private pension is dependent on the (falsely inflated) property market, or the (falsely inflated) stock market, or variations thereof, and these bubbles pop, it will leave a lot of people just retiring facing a much bleaker picture. Then, factor in the levels of fees and commissions, which typically take much of the fund growth in a growing market – things won’t look so pretty in a crash.
    The foundations of a state pension are sound, since we have our own currency. Abandoning that for the roller-coaster of private finance is the classic short-termist neo-liberal approach.

    It “sounds right” to the average Express reader, but so did austerity. Liam Byrne is either 1) in the wrong party; 2) insufficiently aware of the risks; 3) solely focussed on next weeks polls – either way, this change would significantly increase inequality and destitution in the medium/long term.

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