A debate on pensioner poverty in the House of Commons yesterday revealed that Britain spends 5 per cent of its gross domestic product on state pensions - about half the average of 15 other European Union countries. In Britain the state pension as a proportion of the average working pay is about 30 per cent. A number of countries including Greece, Luxembourg, the Netherlands and Spain top 80 per cent. At least 15 per cent of pensioners - approximately 1.5 million older people - are living in persistent poverty. And two-thirds of pensioner households receive the majority of their income from state pensions or other benefits.
In other words, many do not have access to either occupational or private pension schemes. As if the headline figures were not bad enough, the situation for women pensioners is even worse, with only 30 per cent of women reaching the state pension age being entitled to the full basic pension, compared with 85 per cent of men.
For ethnic minority pensioners, their poverty in old age means that half are eligible for pension credits. Poverty in retirement often mirrors working opportunities and life chances when younger. The background to the current situation is lengthy. From its foundation in 1909 the state pension was never adequate to keep older people out of poverty. Because of this, most trade unions campaigned vigorously for occupational pension schemes in order to protect their members from poverty in retirement. While this was effective for those involved in big industrial pension schemes, it was not of much benefit to part-time workers, women or others who broke their working careers for child care or those working for small employers or workers who frequently changed employment. The late Barbara Castle, secretary of state for social security during the 1974-79 Labour government, managed to break the mould with the passage of her pensions legislation. Her Act recognised that there had to be universal secondary pension provision in order to end discrimination and that the state pension had to be something that could help to eliminate poverty in retirement.
Thus the central provisions of her Act were the creation of the state earnings-related pensions scheme (Serps) and the linking of the annual pension uprating to either the retail price index or the earnings index, whichever rose the greater. Between 1975 and the early '80s this meant that the pension consistently rose at a higher level than prices and meant that pensioners were looking forward to an increasing share of national wealth. In 1980 the incoming Conservative government broke the link with earnings and linked it solely to prices - disregarding the fact that, as smaller consumers, pensioners often suffered greater real-terms price rises than the RPI would indicate. Compounding this crime, in 1986 the Conservative government passed a mammoth piece of social security legislation. This erroneously claimed that Serps was unaffordable and abolished it, creating a market for private pensions and setting Britain on a divergent course from most European countries.
While others were maintaining the value of their pensions, Britain was reducing it while pushing pensioners and people of working age into the vagaries of private pensions and the stock market to guarantee their retirement. The National Pensioners Convention has always campaigned for a state pension that is sustainable to live on and not based on means-tested benefits. Sadly new Labour adopted the concept of means-tested pensioner credits after 1997, rather than increasing the state pension and restoring the link. The situation we've now reached is that in this year alone there are over £5bn worth of unclaimed pension credits. And the government has embarked on an expensive public information campaign to persuade those eligible to apply for pension credits. While it's obvious that everyone eligible should apply and receive everything they are entitled to, the reality is that means-tested benefits often discriminate against the very poorest and most needy.
The question is, how do we move on from this? In Britain today pensioners do get other areas of support, as in other counties, such as free or subsidised travel in most areas. They receive some support for nursing care at home in Scotland and Wales and the more vulnerable elderly get varying degrees of home-care support, though this often depends on their own local authority priorities. The experience of the last 12 years has been that some of the very poorest pensioners have been helped out of poverty and those who have been able to claim the fullest amount have benefited. The tragedy is that the thrust of government policy has been to encourage people into individual savings and private pension provision, rather than accepting the great tradition of our welfare state which should provide free health care, free education and support for people while unemployed, plus a guarantee that nobody past retirement age lives in poverty.
The 2007 pensions Act will reinstate the link between pensions and average earnings at some point between 2012 and 2015 and does reduce the number of years (from 39 to 30) of National Insurance contributions to qualify for a full basic state pension. Linking the pension to average earnings is obviously a good step forward, but it doesn't do anything for three million of today's pensioners who may not live long enough to see its restoration. It would also be much better to retrospectively apply a reduction in qualifying years of National Insurance contributions, particularly for older women. As we approach a general election, the Liberal Democrats and Conservatives are both committed to massive public spending cuts. But it's unclear what Labour's manifesto will actually say on this central economic question. Now is the time to assert basic Labour values of justice for older people.
I fully support the National Pensioners Convention's approach, which is to increase the state pension to at least the official poverty level - currently £165 per week - and to bring forward the date of linking the state pension to earnings. This could be funded using the surplus in the National Insurance fund, by abolishing the upper earnings limit at £43,000 on NI contributions and increasing employers' contributions to the European average. It is calculated that the very wealthiest - ie the top 1 per cent of taxpayers - receive £30bn a year in tax relief on their pensions. Social justice requires economic justice to fund it.
A blog for the socially and politically conscious, written by a young, gay activist who strongly believes in equality and justice.