Why Lord Hutton is Right

One of the problems that the Labour Party has had in responding to the recent strikes on pensions is because they were worked up by Lord Hutton who is a former DWP secretary. The fact is that all the pension reviews were started by the previous Labour Government because they knew that there were real affordability issues in public sector pensions. Labour know that most, if not all, of what the current Government has done they would have done as well.

Someone recently challenged on me on why I support a new 3% tax on workers. The answer is of course that I do not. Anyone with a basic grasp of arithmetic can work out that:

  1. People are living longer
  2. That this means that either the money collected for pensions will have to be spread more thinly, i.e. reducing pensions or other ways of making up the shortfall will need to be found.
  3. That not enough money is currently being collected to pay for the pensions

It is possible to see this best inside the local governments sector because local government is the only part of the public sector which actually puts money into a pot in the same way as the private sector pensions which most of us have. There are 70+ schemes and not one of them at present ahs enough assets in hand to meet their liabilities. The asset cover ranges from mid 50s to early 90s but all of them need more money or new solutions to deal with their deficit.

In practice there are three solutions:

  • Pay lower pensions
  • Work longer to reduce the number of years in retirement
  • Pay higher contributions to build up a bigger fund.

None of these is what any of us want to hear so in practice the government has agreed to do all 3.

The change to CPI will save a few bob although giving it at guaranteed CPI levels for the basic state pension as part of the triple lock guarantee will cost more money.

Working longer is what many people want to do. We will live longer and a large part of that will be healthy years. Many want to use their brain and body productively for at least part of that period. It does not have to be full time or as demanding as current jobs. Many can reduce hours or days and do less demanding work for a final couple of years to delay taking a pension. This is easier for some than others. Easy for many desk bound people to do but not so easy for a dustman or cleaner.

Paying higher contributions is what anyone with a private pension has had to do now for the past 15+ years as the effects of longevity became better understood by actuaries.

This is just one of the issues that we need to face as we look at longevity. Health, social care and housing providers all need to find very new and different ways of doing things if they are to cope with the increase in the elderly. We also need to examine more closely the relationship between what people do for themselves preparing for in old age, what their families do and what the state should do. People will need to think through the issues in a way that they have not needed to before either because they could expect to die or because they were part of a brief ‘golden’ age for pensioners.

I’ll close with one example. We recently had a report on moderate care in Liverpool. One of the examples that we were given of a cut would be that of an elderly lady with 7 children who visited her regularly who would no longer have her washing done by an outsider paid by the state. My Mum who died this summer would have been mortified if my sister and I had not done things like washing and gardening for her almost until the end. That isn’t a cut but a reasonable request to a family.

Whatever you think of my thoughts on longevity, and please do tell me, I hope I am least contributing to a debate that we all must have.

About richardkemp

Leader of the Liberal Democrats in Liverpool. Deputy Chair and Lib Dem Spokesperson on the LGA Community Wellbeing Board. Married to the lovely Cllr Erica Kemp CBE with three children and four grandchildren.
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