Thank you.
Yes, the tax system is in a ridiculous state and - unlike many economic issues - entirely within the control of the Government to change instantaneously and research shows that doing so would have an effect within a matter of months, so this should absolutely be the first priority in the budget.
There is very clear evidence from robust independent economic studies (one of which was commissioned by Hunt regarding why UK productivity is so low!) supporting the changes that need to be made (in points 9 and 10 in my earlier post) so there’s absolutely no excuse for the Chancellor not enacting these changes immediately. Not doing so is making everyone in the UK poorer year on year.
Unfortunately a large proportion of the pensioner cohort are extremely entitled. You even see people repeatedly trying to claim that they have “paid for their pension” when they know that this is not how it works, claim it is “not welfare” when it has always been a welfare payment as set out clearly in the NI Act in 1948! And like all welfare payments the qualifying criteria and amount is subject to change and will, of course, always be dependent on what the country can actually afford.
There are some very clear graphs that demonstrate visually why it’s completely unsustainable and will bankrupt the country (not an exaggeration, but a mathematical certainty) if it continues as is. There are also clear ways to represent visually the magnitude of housing costs and childcare costs on working families which dwarf all other household costs, and the net income they have remaining after those costs (which the wealthy pensioners who’d be affected by means testing do not have to pay), and then show this in comparison to the net income of a pensioner with a paid off mortgage and sufficient separate income that they’d be subject to the means testing. I think such graphics would demonstrate unequivocally that they don’t have a leg to stand on.
Politicians are scared of this cohort because there are a lot of them and they shout loudly and try to play the “Four Yorkshireman” game whenever their privilege is pointed out to them, which is why abandoning the triple lock is difficult because then of course you get endless stories about the pensioners who are not wealthy and genuinely are poor. But means testing wouldn’t affect poor pensioners, only the wealthiest ones, so I really don’t see that they’d have a leg to stand on if a politician actually had the courage to stand up and tell them that we’re very sorry but we simply can’t afford to pay out £70-90bn of unnecessary welfare each year, at the expense of the future living standards of your children and grandchildren.
These wealthy pensioners tend to be the same people also who constantly disparage the young calling them lazy (when employment participation is higher now than it’s been since the 1970s) and are all in favour of impoverishing some of the poorest working aged people and disabled through further benefit cuts to save a measly £5bn per year, so I’d be interested to see their reaction if the scale of the £70-90bn spent on unnecessary pensioner welfare was actually called out very publicly and they were asked to justify why this should continue.
Their only argument seems to be “well I paid tax!”. Firstly, many of them did not. Secondly, those that did, paid nowhere near enough to fund this. And thirdly, everyone now is paying far more tax as a proportion of wages yet mysteriously they’re always in favour of changing entitlements for future generations (e.g. raising pension age further in future) but never any reform that would affect their own cohort, of course. They seem quite content with working-aged people paying taxes now despite knowing that the system can’t continue as it is and we won’t get a state pension like they are receiving so their argument that “we paid tax” entitles them to large welfare payments they don’t require for 20+ years falls flat.
Fundamentally, I think they need calling out and people have pandered to them for far too long. And when the scale of the savings that would be achieved by means-testing pensions without creating any pensioner poverty whatsoever were made clear in visual graphics - and what could be achieved instead with this money - I think the rest of the population would absolutely get behind the policy. It has to be changed and we need a political leader who will stand up for what needs to be done and has a backbone. Australia originally had a system much like ours but had the foresight to change it decades ago. Our pensioners knew for decades about the demographic time bomb that their large cohort would cause for their children and grandchildren to fund and chose to do nothing about this to make the system sustainable, instead voting for lower taxes for themselves. Now the piper has to be paid and they need to be told this.
I do think, however, that the pension credit system needs amending and that the means-tested state pension for those who do require it should be substantially higher than the pension credit amount. Again, by means-testing it this could easily be funded while also funded the other spending priorities I mentioned. In addition, making auto-enrolment mandatory and raising contribution levels (with offsetting tax cuts) plus implementing a similar scheme for the self-employed will significantly reduce the numbers on pension credit in the future.