Friday, March 14, 2008
Burning Our Money
If you've never visited the Burning Our Money blog, do yourself a favour and bookmark it. It's written by Mike Denham, whose insights into the world of government expenditure and waste are beyond comparison. His latest post is a brilliant expose of the pensions timebomb that is about to hit us. Be afraid. Very afraid.
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5 comments:
"a brilliant expose of the pensions time bomb about to hit us...". I don't imagine that many of your readers are not already aware of the pensions time bomb Iain.
And, whilst it's troubling, I would struggle to blame anyone for it.
As far as I can see, there is very little we can do about an ageing population. That being the case, there is very little we can do regards the general long-term trend of public finances.
All we can hope for is that production efficiencies are such, that even with a significantly smaller working age population (relative to non workers), living standards will not have to fall correspondingly.
But that's an unknown; I would suggest increased and more efficient spending in education and science/research (by all developed countries) and the lowering of trade barriers across the world might be two suitable responses.
But there won't be any easy answers.
Big Andy
"And, whilst it's troubling, I would struggle to blame anyone for it." Big Andy 8.55pm
Really? What about Gordon Brown's plundering of pension funds in the late 90s? I seem to remember that this robbed them of some £5 billion a year which, after over ten years of his hegemony, could account for a very big chunk of the gap.
Given the rapid expansion of public sector employment in the last ten years, too, and the fact that these people's pensions are future unfunded liabilities for the tax payer, can't a case be made that this Labour government has to take a share of the blame?
Also, given the extent that Gordon Brown encouraged the expansion of personal debt based on house price inflation to ensure that the retail sector was a driver (the only driver?) for economic growth over the last decade, shouldn't he take some of the responsibility for the pensions time bomb?
The fact we have an ageing population has been understood for decades and various attempts by governments of all hues have been made to encourage people to save more for their old age. But still the savings ratio has fallen. Perhaps we should also blame ourselves for the time bomb too?
I fear we may be too optimistic about future benefits of "production efficiencies" of a smaller workforce. They may not come soon enough for some of us.
Have a good weekend and "Enjoy life while you can!"
http://devilinthedetail.blogspot.com/2008/03/enjoy-life-while-you-can.html
Diablo:
I knew someone would bring up the £5bn a year "plundering".
I would say that this is a complete irrelevance to the topic; as is the "unfunded" future liabilities of state employees.
Over the next fifty years, as a society, all of us: pensioners workers; children; will produce and consume goods and services.
Some of these will be provided by the market and some by the state.
The sum total of these will be determined by the productive capacity of our, and the world's, economy.
I fully agree that pensioners with private pension schemes might be worse off vis a vis state employees over that period directly as a result of this labour government.
Similarly, the refinancing of home equity and the recent consumer boom might transfer wealth to the young from the elderly (i.e. providing retail employment for the young at the expense of higher interest payments for the pre-retired).
Both of these - significant - issues are about the relative wealth of segments of our community.
However, a high savings rate might not necessarilly lead to a reduction in the % of our economy devoted to the elderly (which is the topic of the discussion). Indeed, it could be argued that high household savings would lead to a Japanese style deflationary spiral.
Or, it could be argued that increased household savings would increase the amount of monies available for investment in the productive efficiencies needed to maintain (if not improve) living standards over the next fifty years.
I don't profess to have the answer. I would though suggest that the UK's "timebomb" is significantly smaller than other developed countries (for example Italy).
But I do not think we can blame this government, the last government, or ourselves, for the fact that our population will age; and the consequence that the economy will be correspondingly geared towards elderly consumption.
Big Andy
What was the average life expectancy when the state pension was initiated? If we reset the retirement age to the current life expectancy, would this remove the pensions crisis?
As women live longer, should they retire later?
I'm certainly no Professor of Pensions but the decision to equalise the NI qualifying contributions to only 30 years seems at odds with the increased age thresholds.
However, this may, in part, answer the point Bert Rustle has raised since many women leave paid employment to raise a family, thus are not making the current necessary NICs to qualify for a full state pension.
Also at odds with the ageing population 'problem' is the issue of extending life expectancy by increasing NHS spending, increased nannyist propaganda of don't drink, don't smoke, don't eat McDs, [insert don't whatever gets you through the day].
I'm confused. Does this gvt want us to live to an old age or not?
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