Reform re-formed: pensions and banking
John O’Farrell compares the speed of reform in public sector pensions to the slower pace in banking.
Walt Whitman once advised his readers about how to deal with a fanatic. “If someone runs at you, eyes ablaze, with some wonderful idea – Run!” Right now, we are in at the start of a slew of reforms in just about every sphere of government involvement, all in the name of ‘efficiency’ and ‘living within our means’. Reformers are running amok among all of our services: hospitals, the military, policing, prisons, universities, welfare, schools (in England, so far) and pensions. All amounts to the slicing and dicing of the state, and this becomes clearer when one examines the other side of ‘reform’, namely that pertaining to the private sector.
The ‘bonfire of the quangos’ is not really about saving taxpayers’ money. It is about ‘freeing up’ business from ‘red tape’. The turmoil in the Eurozone is encouraging Tory EU-phobes to demand the ‘repatriation’ of certain sovereign powers (human rights, working time), invariably those which protect those at the bottom of the heap. It explains the Prime Minister’s bizarre inclusion of ‘health and safety’ as being among the demons which lay at the root causes of the summer riots.
While taxes on consumers and workers are increasing, corporate taxation is being lowered, while further corporate welfare is flowing via stealthy privatisation and the Big Society.
These reforms are urgent, we are told, and must be imposed quickly. Pensions are a particular source of angst, and the ‘solution’ is to raise the pension age and reduce the income for public sector pensioners. The main ‘justification’ for this panic is Lord Hutton’s report from last June. Or is it?
Francis Maude was the Minister wheeled out for BBC Radio 4’s Today programme*, where his mantra-like answers were interrupted at one stage by an exasperated Evan Davis:
ED: Can you tell us why does [the report] show the cost falling over the decades in terms of the proportion of GDP going to public sector pension recipients? Just explain why it’s going down, because if you’ve read the report you will know the answer.
FM: The answer is that the expenditure on pensions by the taxpayer has increased by a third.
ED: Why is it going down? In his report, the big picture is it’s going down. Why is that? Just explain to the public why the cost is going down.
FM: Well, the cost to the taxpayer is going up. That’s the point.
Except it isn’t. That’s the point. Evan Davis got to the point when he asked Maude: “I’m going to read you a line and ask you whether you think the account you’ve given is the same as the one he gives. ‘There have been significant reforms to public sector pension schemes over the last decade. Some of these changes have reduced projected benefit payments … Projected benefit payments fall gradually to around 1.4% of GDP after peaking in 2010-11 at 1.9%.’ That’s just saying it’s not unaffordable, we don’t want to afford it. It’s cheaper. It’s going to be 25 per cent cheaper in the next few decades in terms of the burden on GDP than it is at the moment.”
FM: What he’s saying is that long-term reform is needed.
ED: Absolutely. For different reasons.
FM: The point is, there’s been widespread pension reform across the economy. People in the private sector have seen old, defined benefit schemes disappear. What John Hutton has said – and we’ve totally agreedwith–iswedonotwanttoseea race to the bottom.
But a race to the bottom is exactly what is on offer. One of the greatest scandals of modern Britain is the fleecing and abandonment of private sector pensions, says Civitas, a Tory think-tank in a savage report called ‘You’re on Your Own’, which concludes with the recommendation that free markets are “great for vegetables, less so for pensions.”
The Government is making choices about just about everything it does which makes lives better, or at least more bearable, and choosing one way: “We don’t want to afford it.” There is, of course, one area of governmental responsibility for which ‘reform’ can be placed on the long finger, until well into next Parliament, or the one after that. The banks are to have another eight years of unregulated gambling with unlimited stakes, underwritten by all taxpayers.
And some people still wonder why public servants are lining up to take industrial action this autumn.
