Archive for the ‘Welfare & Pensions’ Category
Posted by admin | Filed under Welfare & Pensions
On Tuesday, Richard held a Westminster Hall debate urging the government to invest in the future of our public sector pensions. Currently, there is no money put aside to fund payments to our public sector pensioners. Instead, the money comes out of general taxation.
A future fund is a way to remove the burden of paying for public sector pensions from current taxpayers so that it comes from the proceeds from an investment fund instead.
Given that our public sector pension liability has risen to £1.1 trillion, Richard argued that it would be best for the government to start putting aside money now so that in future there is a specific fund for public sector pensions.
During the debate, Richard outlined three main reasons why the Government should consider creating a future fund: “The first is that it promotes intergenerational fairness, and reinforces the Government’s view about long-term thinking for the security of our economy. Secondly, it offers an opportunity to rebalance the structure of earnings, to restore emphasis on pension provision—deferred income—rather than on immediate income and, thirdly, it enables the creation of a UK sovereign wealth fund, to stimulate investment in long-term projects.”
“Let us remind ourselves that the current level of public sector debt—the debt that we all talk about and are so worried about—is £1 trillion. The public sector pensions liability, which we do not often talk about, is £1.1 trillion. All those obligations have to be paid by future generations and, as we have so significantly ramped up this first amount of debt, should we not look for ways to reduce the unfunded part of public sector pensions for future taxpayers? A future fund would, over time, eliminate that burden from taxpayers and transfer it to the returns that would be generated from a funded pension scheme.”
To see all of Richard’s speech and to read the Minister’s response, please visit the Official Record of the House of Commons (Hansard) here
The Opposition front bench believe the Coalition Government has exaggerated the problem in the public finances. “Too far, too fast” is their easy, guiltless mantra.
In a culture – media and political – that has become used to “solving problems” with public money and leaving future generations to pick up the bill, every step the Chancellor is taking to reduce the deficit is met with varying degrees of hyperbole, with predictions of disaster ahead or fairness undone.
In truth, the concern should be that by focusing on deficit reduction rather than debt reduction, the Coalition government has not yet gone far enough in creating the conditions for stable, long term growth. The greater imbalance in the economy is not between sectors, it is between what we demand and our ability to pay – an imbalance between generations.
During the Budget Debate on the 23rd March, Richard praised a number of the Chancellor’s announcements and put forward a few ideas of his own.
His contribution to the Debate can be found here.
Posted by Richard | Filed under Welfare & Pensions
The provision of care for the elderly in Britain is a bit of a shambles. There is confusion about what care should be provided, who should provide that care and who should foot the bill. Reform is needed and I am professionally involved with two businesses in elder care, so I was eager to get a copy of the Government’s Green Paper, “Shaping the Future of Care Together” that was published today. You can get a copy here.
The Green Paper is well written and well argued, but it is disappointing in its lack of radicalism and the options that it presents. The recommendations are mostly a mix of half-measures that would tinker at the edges of the problems but not really effect the fundamental change that is required plus one “big” idea. It is the sort of list of options you get when you know that they want you to pick the “big” idea; a choice but not really a choice. Of course, and as usual, there was no detail on costings from the Government and this was a serious omission.
I was hoping this would be what it should it: the launch of a compulsory scheme of individual savings accounts to cover anticipated care needs in old age. Crucially, these would be savings accounts held individually, with any surplus, above contributions to a common pool, at the end of life added to the individual’s estate and available for their children and heirs. This approach, if given the right tax treatment, would encourage thrift and ensure people think about their long term needs.
Alas, the Government’s big idea appears to be another government insurance scheme where you will be liable to a new tax to cover care via a new socialised pool . Their model, obvious from the self-styled title of a “National Care Service” is to replicate the NHS. However, there are serious reasons to doubt this model makes sense in this case.
The NHS makes sense for lots of sound reasons both on social justice and economic grounds. Two important economic justifications are that the costs to insure against a random incidence of illnesses and accidents over a lifespan are much more cost effective on a pooled rather than an individual basis; and that the power of drug companies and other vendors means that a monopoly purchaser such as the NHS ought to be able to obtain treatments at a much lower cost.
These factors are not as apparent for a care service primarily targeted at the elderly. Getting old is a less random process (at current levels of genetic medicine!) though the particular levels of care required at the latter stages of life can vary. The balance, in my view, should be about encouraging individuals to make their own choices about how much – above a minimum threshold – they want to save. This is best done via a tax-deductible savings route rather than a social insurance route. As to the need for monopoly purchasing power, this is much less evident a need in care, where the individual qualities of caring, consideration, friendship etc are much.
Instead we have another government commitment that talks up entitlements but not responsibility, that focuses on bureaucratic state solutions rather than personalization and individual choice, and that favours short term over long term thinking.
I hope the next Conservative government will use the valuable analysis here, but change the direction of policy so that we can build a truly coherent future for care.