27 March 2023

Brits should be as angry as the French about pensions – but for different reasons


Depending on your political stripes, events across the channel can either be a source of inspiration or trepidation. The same was true of our forebears, of course. The French Revolution inspired Burke and Paine to come to radically different conclusions in Reflections on the Revolution in France and The Rights of Man

And so it is with the slightly more prosaic matter of pensions. For some the rioting engulfing France is a sad illustration of how difficult pension reform will be in the UK – for others it’s a noble, righteous fury against the erosion of vital social protections. In The Telegraph, Personal Finance editor Sam Brodbeck called for Brits to show similar resistance should British politicians ape Macron’s attempts at pension reform:

Make no mistake. Whoever wins the 2024 or 2025 election will eventually either try to raise the pension age again, or unpick the vital ‘triple lock’ protection. When that moment comes, we should all be ready to be a little more French, and take to the barricades.

I must admit there’s some perverse part of me that thinks this scenario would be incredibly funny, a last gasp for the banter-era of politics. A nationwide movement, even more aged than Nimby or Extinction Rebellion protests, against a pro-gerontocracy government. The Boomer colossus, at last astir, crashing and bellowing like a stag herd through Whitehall screaming ‘Sous les pavés, la pension!‘ You’re scared? I’m growing a beak and feathers.

But the fact is that Brodbeck is right, at least in one sense. The triple lock is going to be challenged by incoming governments, because it has to be – and Conservatives looking towards the future should welcome that. 

The primary driver behind this political acceptance is the increasing cost of the triple lock and the intergenerational disparity it is worsening. First, there’s the cost. The state pension is the largest single item of welfare spending, forecast to make up 42% of the total in 2022-23, and the Department for Work and Pensions puts the total cost for the state pension in 2021-22 at £104.86bn – an increase from £69.83bn in 2010 (the year it was introduced). The guarantee alone now costs more than many government departments.

As part of David Cameron’s austerity programme, cutting the bloated amount of welfare spending that had developed under New Labour was vital. As Cameron put it in his autobiography, On The Record: 

Without the DWP – which was responsible for a quarter of all government spending – making its fair share of cuts, other departments would face 33% reductions in their budgets, compared to the eventual 19%.

Tackling government spending on welfare is as important now as it was under Cameron: earlier this year, the Government Actuary Department warned that outgoings on benefits were expected to exceed income generated by National Insurance for four years in a row. Because state pensions – and other benefits – are funded on a pay-as-you-go basis by taxes collected from the current workforce, the increasing cost of the guarantee is a burden that weighs heaviest on young workers and families, who already face a whole host of problems; real incomes are dropping, buying a home is increasingly unachievable, inflation is high and taxes are even higher. Faced with all this, the cost of the triple lock is expected to cost each taxpayer an extra £1,000 over the next four years. 

It’s important, of course, to take care of the vulnerable. But the triple lock hasn’t just insulated pensioners from the economic realities of austerity and Covid. It has actually made them them measurably richer. Far beyond simply entrenching intergenerational inequality, the triple lock is now more comparable to a direct transfer of wealth from the poor to the rich. One in four pensioners is a millionaire, whilst the median pensioner, as John Oxley writes, ‘already has more disposable income than the median worker, and is likely to have greater wealth’.

Covering the cost of the triple lock isn’t a responsibility borne solely by taxpayers, however. The sheer scale of the generosity offered to pensioners means miserliness to others.

Describing the build up to the decisions of his first Budget in 2010, Cameron writes with pride of his plans to protect pensioners; benefits; not just the triple lock but free bus passes, TV licences and winter fuel payments. On the next page he talks about the emergency Budget, which cut £11bn from welfare by capping housing benefit, freezing child benefits for three years, freezing public sector pay for two years, and raising benefits ‘in line with the less generous consumer price index rate of inflation, rather than the retail price index’. Cameron, according to his biography, had to regularly fight both the DWP and Nick Clegg in order to maintain pension levels and to end means testing of pensioner benefits.

Whilst pensioners have been offered oats, others have been shown the whip. Claimants of other benefits haven’t received such generosity and cuts mean ‘our social safety net has got significantly weaker in terms of level of support provided’ over the last decade. Without the triple lock, would the Government have had more fiscal headroom to increase public sector pay, which is now significantly below where it was in 2010?

The sheer weight of benefits directed to today’s pensioners is scarcely creditable. Older generations have more of less mortgaged the welfare state to the hilt. As Duncan Robinson notes in The Economist:

On average someone born in 1956 will pay about £940,000 in tax throughout their life. But they are forecast to receive state benefits amounting to about £1.2m, or £291,000 net. Someone born in 1996 will enjoy less than half of that figure: a fresh-faced 27-year-old today will receive barely more than someone born in 1931, about a decade before the term ‘welfare state’ was first popularised. 

Politically, the ticking time bomb of demographic disparity is about ready to blow, with a whole generation on the losing side refusing to move rightwards as they age. In order to be electable amongst those below retirement age, future Conservatives will need to redress that intergenerational disparity, giving young people something to gain, in material terms, by voting Conservative. That can start with a reduction of their outsize tax burden – at the expense, if necessary, of older generations. 

The sheer asymmetry of our current pensions system means change has to come. Those of us who recognise the dangers of the disproportionate benefits and burdens of the triple lock will have to be ready to pit hard facts against easy myths. We will need to recognise the transformation in the median lifespan and fitness of the over-60s to work, the increasingly unbearable cost of universal welfare for an increasingly well off generation – and we cannot shy away from this discussion, however politically painful it may be. The debate, in the long term, cannot be avoided. It can only be put off to the advantage of others.

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Tom Jones is writer and a Conservative councillor for Scotton & Lower Wensleydale

Columns are the author's own opinion and do not necessarily reflect the views of CapX.