Whichever way one looks at it, current government policies cannot solve the pensions crisis. So millions more will be condemned to face retirement poverty and insecurity. The only way to tackle this is through progressive taxation and redistribution of wealth.
The state pension should be raised immediately to £114 a week for single pensioners and £175 a week for couples. It should also be immediately linked to rises in earnings. And it should rise to 60 percent of median earnings.
Decent state pensions should be funded by a crackdown on organised tax dodging by companies and the rich, which is costing the treasury between £97 billion and £150 billion each year. Britain boasts some 54 billionaires who pay just £14.7 million tax on their vast wealth of £126 billion – equivalent to a measly 0.14 percent.
British companies are some of the most profitable in the world. The average profitability of non-financial sector British companies is at a record high of 14.7 percent, with the services sector achieving 20.1 percent and the oil and gas sector at 38.7 percent.
Corporate taxes have been reduced. The actual corporate tax take now accounts for only around 3 percent of Britain’s GDP. Some of the benefits of these extra profits should be used to finance good pensions. The employers’ national insurance contributions should be increased to bring it in line with the average for the EU.
Raising the upper limit for the national insurance contributions should provide extra revenues. Currently, employees on a £20,000 annual wage can expect to pay 8.25 percent in national insurance contributions, compared to 9.1 percent for those on a £30,000 wage.
Yet due to an artificial ceiling, someone on a £100,000 a year wage only pays an average of 3.1 percent, and someone on £300,000 pays around 1 percent.
This should be ended. Those earning more than £100,000 a year should also pay tax at a new higher rate of 50 percent. The revenues for decent pensions could also be boosted by levying a small “Tobin tax” on all stock market activity.
The above proposals provide a durable basis for financing a decent state pension for all. Progressive taxation and redistribution is the key to providing retirement security.