Socialist Worker

This is how we can defend our pensions

The government is peddling a series of myths about pensions which are accepted by the vast bulk of the media, says Charlie Kimber

Issue No. 1932

French workers have beaten off  two major attacks on their pension rights over the last few years

French workers have beaten off two major attacks on their pension rights over the last few years

‘Lots more pensioners mean we have to work for longer to pay for pensions.’

It’s true that the number of pensioners is set to rise from 11 million now to 17 million by 2050.

Yet the government’s own forecasts say that this will only take the cost of state pension benefits from 5 percent of Gross Domestic Product (GDP) today to 5.7 percent in half a century.

That rise, less than 1 percentage point, should be set against how much the government hands out in subsidies to private pensions.

Private pensions tax relief and rebates for contracting out of the state second pension are now the equivalent of 2.5 percent of GDP.

Much of this goes to the rich. Half the money goes to the richest 10 percent of taxpayers and the top 2.5 percent grabs quarter.

So, if the richest 2.5 percent were denied their subsidised pension top-ups, this would more than offset the increase in the state pension bill due to the extra number of old people.

If immediate funding is needed, the national insurance fund now has a huge surplus of around £25 billion because the level of the state pension has dropped so much relative to earnings.

‘There will be lots of pensioners and far fewer workers to pay for them.’

At present there are about 3.5 people of working age for every pensioner. In 50 years time this will drop to 2.5 or thereabouts.

This statistic (often further hyped up as “from four people to two”) seems like the basis for a crisis.

But it’s an illusion. What matters for this calculation is the number of workers, not the number of people of working age.

Groups like the unemployed, students and the long-term sick are of working age but don’t work.

So the number of workers (27 million) presently supports (in a very narrow sense) around 32 million others in Britain—a ratio of around 1:1.

In 50 years time the population may be slightly higher, but not much, and employment rates will be no lower. So we will still have 27 million supporting, say, 33 million—hardly any change in the ratio.

Forty years ago the male employment rate in Britain was about 95 per cent.

Now it has fallen to 78 percent as men over 50 who lose their jobs are often regarded as unemployable.

The ratio would be exactly the same as now in 2050 if there were jobs for the 2 million people who want to work but can’t get one.

In any case, what has always insulated societies from problems with ageing is that technology improves and productivity rises. In 50 years time, on present trends, the average worker will be producing twice as much as they do at the moment.

That means there will be 100 percent more wealth to share out, and only 50 percent more pensioners.

‘Public sector workers get a much better deal than the rest.’

Low pay for many people in the public sector has often been excused by the government on the basis of greater job security and better pensions.

Nobody is suggesting wages are going to get better.

It is true that pensions has been a disaster area for many private sector workers recently. Employers have closed half of “final salary” schemes which offer a reasonable pension, to new workers in the last ten years. Firms have cut benefits and demanded increased contributions.

Either the union movement can allow public and private sector to be savaged together, or it can draw a line and demand defence of everyone’s pensions.

In Europe the unions have held general strikes in Italy, Spain, Greece, France and Germany over pensions—and defeated most attacks. British workers can do the same.

‘Don’t you want improved pensions and care for the old?’

We don’t want the present miserly level of pensions and care, we want better.

So say we did want to increase the share of GDP spent on the old by 5 percent of GDP or more. This only means increasing the tax rate by 0.1 percent of GDP a year for 50 years, a tiny amount.

It might mean returning top tax rates to closer to the ones which Margaret Thatcher’s governments used for most of their time in office.

Or it might mean taxing private pensions of the rich, or returning corporation tax rates on big business to a decent level.

We could even try not having any more wars like the one in Iraq.

Pressure from rank and file needed

THE TIMETABLE for the government’s assault on public sector pensions is clear. Plans to raise the retirement age to 65 for 500,000 civil service workers have been announced.

New Labour has finished its “consultation” with over 500,000 teachers over the same rise in the retirement age, to be brought in from September 2006.

One million health workers will formally hear next month whether the government plans to force them to work to 65 as well. It is rushing through changes for a million local government workers.

But the response from the TUC to this blizzard of attacks is less definite.

There are commitments to jointly approach government ministers and to co-ordinate a campaign.

Some union leaders are pushing for industrial action. Unison union general secretary Dave Prentis said before a meeting of public sector union leaders on Monday, “Make no mistake—we will not sit back and allow them to tear our members’ pensions to shreds.”

But there are as yet no firm plans for action.

This is a result of the deadening argument that nothing must be done to confront the government over the next few months for fear of damaging Labour’s electoral chances.

The attitude at the TUC is in marked contrast to the feeling in workplaces.

Huge numbers of people say they are prepared to strike over this issue. There have been successful strikes over pensions in many parts of Europe.

Yet the response of the TUC so far has been wholly inadequate. It managed to call a demonstration this year, but then failed to mobilise effectively for it.

It will take enormous pressure from the base of every union for action that can halt this attack.

That means developing networks in every workplace to push for that action and to take unofficial initiatives as well.

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Sat 18 Dec 2004, 00:00 GMT
Issue No. 1932
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