Andrew Harrop, Farage of the
Fabians, on Pensioners
This week Andrew Harrop, General Secretary
of The Fabians, threw his hat into the ring with his report: Ageing in the
Middle and a related article in The Times: "Pensioners too must take a
share of the pain" in which he offers solutions to ensure that the
"retired equivalent" of the working "squeezed middle" are
suffering enough in this time of recession. As far as Harrop is concerned
pensioners are getting off far too lightly in a bad case of what he calls
"intergenerational unfairness". His ideas make me wonder if he has been
sitting in the When-Harry-met-Sally diner ordering whatever Ian Duncan Smith
had and his language is straight out of the scaremongering, divisive mouth of
Nigel Farage. It's not only what he says but it's the way he says it.
Harrop thinks pensioners' properties should be taxed
"more heavily" because of the unfairness of them owning homes when
working people under 45 can't afford them. " Little wonder", he
rants "when the average first home now costs four times the typical
salary." "Replace council tax
with an annual property tax", he urges. Isn't that going back to the old
rates system? But he fails to mention that the culture was different when
today's pensioners were buying houses. It was possible to borrow three or four
times your salary, often unsecured without a deposit, and to top up with second
and third mortgages. Many pensioners have retired in debt because of it. It is difficult to secure any sort of
mortgage today and a hefty deposit is usually required. According to Rosie
Murray-West in The Telegraph of 26 January 2013, one in five pensioners retire
in debt from credit cards,
bank loans, overdrafts and mortgages that they will never be able to repay. Many
owe hundreds of thousands of pounds on interest-only mortgages, caught between
endowments that failed to deliver and lenders demanding repayment.
Intergenerational
parity is not easy to assess. Every generation has its own problems which are
not addressed by Harrop's simplistic arguments.
He also thinks pensioners should pay
National Insurance after retirement, lose the winter fuel allowance and bus
pass, and have the "triple lock" removed from the state pension that
guarantees an annual rise linked to the lower rate of inflation. And he thinks that certain services
and benefits should start not at state pension age, but at, "say,
80". Last year, Age UK gave the average male lifespan as 78, so this
could be a couple of years too late for some pensioners, but yes, definitely a
saving.
Harrop compares the difference in standard
of living between the retired and the working population past and present.
"Thirty years ago old age too often meant a mean life of scraping by,
shivering in a house warmed by a one-bar electric fire. The majority of retired
households lived on or near the official poverty measure. Not any
more". That seems to annoy him, but it's hard to see anything wrong
with a majority of older people no longer living in abject poverty. He
goes on to say that around thirty years ago in 1979, "the incomes of
households of working age" in the "middle-income bracket" was
93% higher than those of "middling retired households" (a
newly-introduced group who are not the majority of pensioners sitting by their
one-bar fires). But what seems to bother Harrop is that today "that
advantage has shrunk" and today, the middle-income working households have
only 37% more to spend than their retired equivalents.
The way his mind works is revealed in how
he expresses himself Farage-style. He could have equally said that thirty years
later middle range pensioners are still poorer than workers by 37%. And
he Farages that "since the financial crisis this effect has become starker
still" with a further worsening of 5%. Does he mean 37% now or 32%
now? I expect he means that things have changed since the data on which he
bases his report stopped in June 2011. A lot has happened since then. But if
"middle-income" pensioners are, by his reckoning still about a third
worse off than those on working income why does he think it a good idea to tax
pensioners more and make them even poorer? How will this help the
economy?
Harrop isn't without some understanding of
the plight of the elderly. He understands that "no one likes to be taxed
or have their pensions taken away". And his observation that "many
older people are parents or grandparents" shows that he has some grip on
reality. But what does having "less
to spend" mean? What is his typical "middle-income working
household" and its interchangeable "middle-earning working-age
family"? How many earners are there in such a household? If working
people of 45 and under cannot afford their own home, then they may well be part
of that household as may be unemployed young people on benefits, as may be
granny, a pensioner living in a working household. And what does Harrop mean by
"their retired equivalents? Does he mean a household of one
pensioner, a couple? Comparing undefined "households" is far
too vague. Without defined statistics and parameters no useful comparisons can
be made.
Another "glaring example of
intergenerational inequality" is, according to Harrop, that
pensioners don't pay National Insurance. He thinks they should. Here his
statistics are deliberately misleading rather than the usual muddle. He claims
"middle-income
older people pay 27% of their total income in tax, while working-age families
on the same income pay 33 per cent." He finds it "hard to think of a
reasonable justification for this". But what is rarely pointed out
is that pensioners pay tax at the same rate as everyone else and the 6%
difference of which Harrop writes is not tax but national insurance, paid by
those who work, but he doesn't say so. Pensioners have paid into the NI all
their working lives in the understanding that this tax is earmarked for their
state pension. But Harrop makes it appear that pensioners have an unfair
tax concession.
Then Harrop goes for the jugular. He advises that the
'triple lock' protection of the annual pension rise in line with inflation
should be scrapped. The 'triple lock' commitment was made by this government in
2010 as compensation for switching annual state pension rises from the retail
prices index (RPI) to the consumer prices index (CPI) which has historically
risen at a slower pace. It guarantees that there will be an annual rise for
existing pensioners. This year state pensions rose by 2.5 per cent - or
£2.70 per week on the basic pension. Harrop wants the guarantee of an
annual inflation rise to be removed to avoid "intergenerational
unfairness", insisting pensioners' "special treatment must end".
Special treatment? We're talking £2.70 per week and a rise of 2.5% on any
occupational pension. I, too think this annual rise is unfair, but not for the
same reasons. But then I'm a socialist, and in fact, a Fabian.
As people get older, it
becomes increasingly likely they will need care and less likely that they will
have the ability or opportunity to earn extra money. That part of the aging
population which might be cash poor but asset rich because of their
homes, the "middle" to whom Harrop is referring, fear that even
if they sell their major asset, their home, they may be unable to cover their
long-term care costs. The government's new care-capping scheme will hit these
people most because they will be caught by the assets means test. If they don't
have a stash of £75,000 lying around they will need to sell their homes to
raise it. Private care would eat up the price of a house in a frighteningly
short time. So Harrop's recommendation in his report that retired people
should be encouraged to spend more of their money, while they watch their
savings dwindling away, rather than rely on their pension, and that they should
realize the value of their homes, ignores the particular needs and
circumstances of the elderly.
Harrop ploughs on in the same
autocratic vein that begins to sound like a Dalek: "The older generation
has been protected from the worst of the austerity measures. That special
treatment must end." But pensioners
have been and will continue to be affected by the recession. Any savings
they may have are dwindling away with negligible interest. Energy,
utilities, fuel, VAT, food are all going up by leaps and bounds to unaffordable
for all ages. Every pensioner whatever their financial situation was targeted
in the 2011 Budget, when George Osborne decided to cut the winter fuel
allowance without notice from £250 to £200 for those aged 60-79, and from £400
to £300 for those 80 and over, cuts of a fifth and a third. The cuts did not
appear in the 100+ page Budget document and came as a shock to pensioners,
especially as it happened weeks after the big six power firms hiked the price
of gas and electricity and have continued to do so. The so called "granny
tax" this year has ended the small amount of tax relief at 65.
The proposed introduction in
2016 of a flat rate pension of around £140 for all new pensioners will
disadvantage all existing pensioners whose basic pension of £110.15 will fall
substantially short even with the expected annual increments. But there is no
indication that the £140 will increase each year in line with inflation.
As well as hitting current
pensioners with cuts, government savings are already in place for the future.
By raising penisonable age aincrementally from 60 and 65 for women and men
respectively, to 67 for everyone (and it has been suggested that this could
rise further), the government's future commitment to pensioners has been
massively reduced.
And there is the wider
picture. It shouldn't be overlooked that younger pensioners support the economy
by giving free care to grandchildren to enable their children to work and pay
tax and free care for very elderly parents whose community care has been
withdrawn or become unaffordable. And many have the true "big
society" ethic giving their time to charities and communal projects.
As society grows older and
incomes in retirement rise..." continues Harrop. A snap shot today might reveal that middle
range pensioners are getting poorer as he writes. Harrop's future means
older people will continue paying tax just like the younger working population
but won't get their pensions until later, and if he has his way pensioners will
be taxed on their homes, have to pay NI for ever, be subject to the granny tax,
have to pay tax on the lump sums in their pension payout, receive no fuel
allowance, no bus passes, not even have the guarantee of a £2.75 annual
rise on their pension and receive no interest on their savings. And being 37%
worse off is just not enough. My gosh, how those pensioners are spoilt. How
the working population must envy them.
Everyone is seeking a
sustainable solution to tackling the needs of a growing aging population but
this isn't it. Harrop is condemning "middle" range pensioners to the kind of poverty he describes in the 1930s. The one-bar electric fire
market may benefit because after a lifetime of paying their dues pensioners are going
to be shivering all over again in Harrop's fair new world.
Harrops is promoting suspicion and resentment
between generations where there is already an awkwardness in communication.
Yesterday this damaging style of rhetoric reached a new, unacceptable level when
Angus Hanton of the Intergenerational Foundation said on the news that
"the old are feeding off the young". I find this so offensive
that I think it should be legally challenged and regarded as a hate crime;
verbal abuse and incitement to hatred against a social group. It also indicates
a disturbing attitude present in the field of intergenerational studies that is
echoed by Harrop.
Surely the Fabians isn't the
right home for Mr Harrop. His ideas could never become Labour Party policy. The
Labour Party is pushing for growth in the economy. Build affordable homes
to boost the house market and provide employment; get the young into work and
get tax flowing back into the Treasury's coffers instead of paying out
benefits; get the banks to lend money to small businesses. Stop the stagnation
and the slide into triple recession. Squeezing money out of pensioners is
not Labour ideology. I see Harrop fitting in more with our coalition
government supporting IDS's workhouse culture while he talks the inflammatory
talk of UKIP.
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