Raising the pension age will just turn 69-year-olds into the "undeserving poor"

The Institute of Directors is wrong to call for raising the pension age; it's not a magic money tree

Increasing the state pension age to pay for better pensions is a popular policy on the right. The Institute of Directors (pdf) are the latest to call for a rapid increase beyond 70.

It is easy to see the attraction. If you reduce the number of pensioners, then you can increase what each one gets from the state without putting up the pensions bill. Both employers and employees can contribute less to a pension if it is supporting fewer retirement years.

Increasing the pension age has become a magic money tree for pensions wonks as by definition they have no interest in the income needs of those yet to retire.

But while we cannot ignore the challenge of increased longevity, every increase in the pension age redistributes money from poor pensioners with shorter life expectancies to those from professional backgrounds who live longer.

And while longevity has increased for all social groups, the gap between rich and poor is growing. As the ONS say in just four years:

The gap between the health areas with the highest and lowest life expectancies at birth increased over the period from 9.8 to 11.3 years for males and from 8.2 to 10.1 years for females. At age 65, the gap increased from 6.7 to 8.5 years for men and from 6.3 to 8.3 years for women.

If you are only going to live to 75, you lose a much bigger proportion of your pension with an increase in the state pension to 70 than a centenarian will do. MPs who get on the Jubilee line at Westminster can see life expectancy drop by one year for each stop to Canning Town.

The other big problem with this policy is that it assumes that the pension losers in their late 60s can continue to work. Of course, many would welcome the opportunity to extend their working lives – and the coalition was right to abolish the statutory retirement age – but what looks attractive to knowledge workers with interesting jobs may simply not be an option, let alone a choice, for the less skilled and manual workers with dull or heavy jobs.

The differential state pension ages for men and women means that the poorest men who cannot work in their early 60s at the moment can at least claim means tested pensioner benefits before the state pension age as EU law does not allow age discrimination in benefits.

But with womens’ state pension age rapidly catching up with mens’ this loophole is closing. Soon we will have a situation where someone who is 66 will be a member of the deserving poor because they will be seen as pensioners, while 65 year olds  will still be among the work-shy scrounger unemployed category of the undeserving poor. They may be tired, worn-out and not very fit, but that will not be enough to satisfy ATOS that they cannot work.

Yet when the TUC did a detailed breakdown of the labour market position of 64 year olds before the recession we found that more than half of 64 year old men were economically inactive – some through choice, but doubtless many would prefer to be working.

Longevity increases inevitably bring change, but rapid increases in the state pension age are extremely unprogressive. Even a more gradual increase requires action to reduce health inequalities and to provide more flexible routes to retirement that end the cliff-edge between full-time work and full-time retirement. Yet employer groups were mostly opposed to scrapping the mandatory retirement age, and with continuing high unemployment, there is little pressure for creative thinking from employers about keeping older people in work.

An elderly man hoes a field in Havana: is Cuba the Institute of Directors' dream for Britain?

Nigel Stanley is the head of communications at the TUC. He blogs at ToUChstone.

Photo: Getty Images
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The future of policing is still at risk even after George Osborne's U-Turn

The police have avoided the worst, but crime is changing and they cannot stand still. 

We will have to wait for the unofficial briefings and the ministerial memoirs to understand what role the tragic events in Paris had on the Chancellor’s decision to sustain the police budget in cash terms and increase it overall by the end of the parliament.  Higher projected tax revenues gave the Chancellor a surprising degree of fiscal flexibility, but the atrocities in Paris certainly pushed questions of policing and security to the top of the political agenda. For a police service expecting anything from a 20 to a 30 per cent cut in funding, fears reinforced by the apparent hard line the Chancellor took over the weekend, this reprieve is an almighty relief.  

So, what was announced?  The overall police budget will be protected in real terms (£900 million more in cash terms) up to 2019/20 with the following important caveats.  First, central government grant to forces will be reduced in cash terms by 2019/20, but forces will be able to bid into a new transformation fund designed to finance moves such as greater collaboration between forces.  In other words there is a cash frozen budget (given important assumptions about council tax) eaten away by inflation and therefore requiring further efficiencies and service redesign.

Second, the flat cash budget for forces assumes increases in the police element of the council tax. Here, there is an interesting new flexibility for Police and Crime Commissioners.  One interpretation is that instead of precept increases being capped at 2%, they will be capped at £12 million, although we need further detail to be certain.  This may mean that forces which currently raise relatively small cash amounts from their precept will be able to raise considerably more if Police and Crime Commissioners have the courage to put up taxes.  

With those caveats, however, this is clearly a much better deal for policing than most commentators (myself included) predicted.  There will be less pressure to reduce officer numbers. Neighbourhood policing, previously under real threat, is likely to remain an important component of the policing model in England and Wales.  This is good news.

However, the police service should not use this financial reprieve as an excuse to duck important reforms.  The reforms that the police have already planned should continue, with any savings reinvested in an improved and more effective service.

It would be a retrograde step for candidates in the 2016 PCC elections to start pledging (as I am certain many will) to ‘protect officer numbers’.  We still need to rebalance the police workforce.   We need more staff with the kind of digital skills required to tackle cybercrime.  We need more crime analysts to help deploy police resources more effectively.  Blanket commitments to maintain officer numbers will get in the way of important reforms.

The argument for inter-force collaboration and, indeed, force mergers does not go away. The new top sliced transformation fund is designed in part to facilitate collaboration, but the fact remains that a 43 force structure no longer makes sense in operational or financial terms.

The police still have to adapt to a changing world. Falling levels of traditional crime and the explosion in online crime, particularly fraud and hacking, means we need an entirely different kind of police service.  Many of the pressures the police experience from non-crime demand will not go away. Big cuts to local government funding and the wider criminal justice system mean we need to reorganise the public service frontline to deal with problems such as high reoffending rates, child safeguarding and rising levels of mental illness.

Before yesterday I thought policing faced an existential moment and I stand by that. While the service has now secured significant financial breathing space, it still needs to adapt to an increasingly complex world. 

Rick Muir is director of the Police Foundation