NEW PENSIONS FOR OLD
This week the Government has published, in its White Paper on pension reform, the outline of what may come to be judged the most important strategic move in its domestic policy. The objects of the legislation which the White Paper proposals envisage are three : first, to break the vicious cycle of costly and inadequate pension systems of the last half-century and more; second, to show that there is a radical, imaginative and socially effective side to the New Toryism of Edward Heath; and, third, by enacting it just before the planned end of the life of the present parliament and hopefully gaining the support of the socially conscious centre of the electorate, to secure the return of the Government with an increased majority. Many dreams and hopes, therefore, now ride on the shoulders of Sir Keith Joseph and his junior minister in charge of pensions, Mr Paul Dean. The present system compounds deceit, injustice, and inflation. There is deceit in pretending that a tax is an insurance contribution — and sad puzzlement on the part of old people who feel entitled to cost of living related pension increases, when they are told they have not earned them. There is injustice in that a generation of workers (and employers) who provide for a generation of pensioners do not receive a commensurate return when they are old. There is inflation in that, in spite of all this, the taxpayer must still foot a substantial proportion of the pensions bill; in that, at 1970-71 prices National Insurance retirement pensions will rise in cost from £1,610 million in 1969-70 to £1,961 million in 1974-5; and in that the social security system as a whole increased in cost between 1959 and 1969 by 78 per cent, while the Gross National Product rose in the same period by only 33 per cent. And still the old do not get a decent pension.
The Tories draw attention to the fact that these animadversions apply only to the state pension scheme and that the better private, or occupational, pension schemes pay their way : income is invested and, in turn, produces income sufficient to meet the obligations of the schemes in any given generation, which, in mixed degrees, is thereby inflation proofed. The Government therefore proposes to switch the main burden of pension provision away from the public to the private sector, preserving a state scheme (run by an extra-governmental agency) for those who, for whatever reason, are unable to join occupational schemes good enough to gain the required government seal of approval. Contributions in this reserve scheme, thankfully, will be paid as tax, so hypocrisy will be eliminated.
If the plan works, the main body of pension provision will be taken out of the field of state action altogether; and everyone will receive a decent pension related to his earnings throughout his working life, and related also to the cost of living. Further, pension rights will be protected in the private schemes in spite of job changes. The reserve state pension will also be earnings-related, and it will be increased every two years; workers in private pension schemes will be able to contract out of payments to the reserve scheme; but there will remain an earnings-related tax on all workers to pay for the National Health Service and other benefits, and for a small—called 'Basic '—state pension. But there are certain problems.
Under the Government's plan, the principle of private provision is unequivocally and dogmatically opposed to the principle of public provision. Will the various private pension organizations respond by providing schemes that meet the Government's dreams? Will workers and employers respond willingly to what will often be the expensive challenge of self-help? Will pensions become a basic and vital element in wage negotiation — as they must if the plan is to succeed? Will people be able to perceive, and over the years to act upon, a true realization of their self-interest? And will there be avoided a social and financial fissure between the better-off worker in the private, and the worse-off worker in the public scheme, so that the latter, though labouring honestly throughout his'ivorking life to the best of his ability, will increasingly become the stigmatized and inadequately provisioned recipient of the benefits of a state scheme, not merely reserve, but residual?
On this last point Labour guns will concentrate. The Opposition will not be defending the existing system, but a variant of their own plan, lost in Parliament because of the timing of the last election. Based on a belief in the virtual impossibility of doing justice to all concerned, Mr Crossman's scheme proposed to make almost everyone pay large contributions related to earnings, in order to provide a generous pension in a generation's time. It was immensely complicated : and, in order to make it work, current pensioners would have to resign themselves to relatively small increases. Inequities would abound for a generation; but, at the end of that time, it was argued, a period would begin in which successive waves of pensioners would be decently provided for in old age. It was a bold, visionary, and ruthless scheme; but, at some future cost to the economy, it reflected an honest belief in the indispensability of state provision on a universal and fundamental basis. It was as true an expression of one ideology as Sir Keith Joseph's neW Tory plan is of another.
We have become accustomed to the growth of provision through the state since the war, and so it is the Conservative scheme that looks and is the more radical. It depends almost entirelY for its success on a sufficiently adequate and intelligent response on the part of workers, employers and pension organizations alike. For it to succeed, the Government must command cooperation in the field of social welfare, the field in which, perhaps unfairly, if has hitherto looked to many most unimaginative and most ungenerous. It is a bold stroke, and, for Its boldnesS, worthy of reward. The scheme will Undoubtedly be refined in the course of negotiation with the pension fund organizations; but it can hardly be doubted that it will pass into legislation. We will then see whether the Prime Minister's faith in the desire and will of people to stand for, and provide for, themselves is justified. If it is we will have entered, not before time, into 8 new era in politics.
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