Tuesday, 30 April 2013

Andrew Harrop, Farage of the Fabians, on Pensioners

Andrew Harrop, Farage of the Fabians, on Pensioners

Andrew Harrop, General Secretary of The Fabians, has thrown 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 needs and things to offer which are not addressed by Harrop's simplistic arguments. Pensioners pay tax at the same rate as everyone else. They pay tax on their pensions and are only exempt if they are below the tax threshold like those who work. So as Harrop is writing about the "middle" he does not include the poorest in his conclusions. He doesn't seem to find it unfair that pensioners, having paid tax all their working lives, continue to contribute towards education, benefits for the young unemployed, etc.  But then Harrop's view of society is divisive; one group pitted against another, rather than a mutually supportive whole.

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 insuranc, 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 this will not even be 'flat rate'. Only those who have paid in for 32 years will receive the full amount. Others will get a proportion based on their contributions. So this will not be a simplified system as the government claims, but will still need to be assessed for each individual.

As well as hitting current pensioners with cuts, government savings are already in place for the future. By raising penisonable age incrementally 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 deeply offensive and think it should be regarded as a hate crime and legally challenged. It is an example of verbal abuse and incitement to hatred against a social group. It also indicates the 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.   

1 comment:

  1. the intergenerational foundation misses the point. If incomes are at a low since 1997, the over 50s that are being targeted are in the group of the "young" who have suffered as a result.

    The young are having their incomes topped up from the fund paid in to by working people to cover the state pension and health for all age groups including the young. While this is being used to top up their incomes, it is the older who are feeding the young plus they are borrowing from that for themselves, taking from their own future.

    If employers are publishing profits and high pay rises/shareholder payments, then the incomes should be fairly increased at the lower levels. I