Sunset for pensions

No politician dares suggest that depriving a chunk of the country of its retirement prospects is a f

The biggest debate in British politics in 2010 will be how to cut the size of government. With annual borrowing heading for £178bn in this fiscal year, whoever is in charge will have to wield the axe. One obvious target for the government and opposition is proving to be retirement. The consequences of removing pensions benefits, though painful, are felt later rather than sooner. But as we saw with Gordon Brown's dividend-tax raid on private pension funds in 1997, such measures can have hugely damaging effects.

Alistair Darling's December 2009 pre-Budget report was filled with pension cluster bombs. By far the most important was the decision to postpone implementation of New Labour's landmark "personal account" pensions reform, with a saving to the state of £2.3bn by 2014-2015, making it one of the largest identified cuts. Darling insisted on the delay despite a spirited fight by the Work and Pensions Secretary, Yvette Cooper.

The impending political battle over the costs of retirement was signalled by the Conservative shadow chancellor, George Osborne, in his October 2009 "austerity" speech to the Tory party conference in Manchester. Osborne was accused of betraying the elderly and failing to think through the consequences of raising the retirement age to 66 from 2016.

But the Tories were also recognising that, for much of Labour's 13 years in office, pensions have been an issue that dare not speak its name (though it has been at the core of Labour's value system since the Attlee government steered the National Insurance Act through the Commons in 1946). Over the first decade of New Labour, differences over pensions came to symbolise divisions between Tony Blair and Brown. Blair was a long-time advocate of pensions reform. But Brown saw any efforts to fiddle with state, public- or private-sector pensions as an intrusion on his territory at the Treasury.

The result was years of stalemate, bungled decision-making and the impression that no one really cared. It was only after heated meetings at N0 10 between Brown, the then pensions secretary, John Hutton, and Blair in 2006-2007, that agreement was reached on sweeping changes to retirement provision, based on the recommendations of the Blair-appointed Pensions Commission, led by Lord (Adair) Turner.

In an effort to phase out the need for widespread means testing, state pensions would be linked again to rises in average earnings from 2012 onwards. This would be paid for by raising the state pension age to 66 from 2026 (ten years later than the Tories), 67 in 2036 and 68 in 2046. All private-sector workers would be automatically enrolled in a new, government-organised scheme of "personal accounts" (just renamed the National Employment Savings Trust), similar to others in Australia and Sweden. This should have been operational in 2012.

It was the delayed implementation, if not destruction, of these plans that Darling sneaked through in December.

Deep in debt

The need to do something about the Budget deficit is clear: for every £4 the government will spend in the next financial year it will raise just £3 in taxes. As a result, borrowing in the current financial year will surge to 65 per cent of national output, the highest figure in peacetime (with the possible exception of a short period in the 1970s).

Without sharp rises in taxation and spending cuts, borrowing could rise to 78 per cent of GDP by 2014-2015. But these numbers tell only part of the story. Britain has enormous hidden liabilities that are not included in the Budget. Among the biggest of these burdens on future generations is the nation's unfunded pensions promises to employees in the public sector.

The number of state workers has surged under Labour as more than a million people have been added to the payroll.

The last published figures show that civil ser­vice pensions liabilities climbed 40 per cent - from £84.1bn to £119.4bn - in the three years to March 2008. However, if you count the total liability across government, including the NHS and education, the figure rockets to £750bn. Local government funds alone will have a deficit of £60bn next year, according to new data collected by the Liberal Democrats. Despite this, reform of public-sector pensions is one of the great unmentionables of the political debate. So far, no politician has dared suggest that depriving a large chunk of the country of retirement prospects is a fiscal necessity.

This, however, is precisely what has been happening in business. Britain's defined-salary pension scheme, not so long ago the best funded of all those in the western democracies, has been in decline ever since Labour came to office. The retreat is a product of several factors.

In 1997, Gordon Brown, in his first Budget, abolished the tax break for dividends invested in pension funds, removing an estimated £125bn of income. Extra regulations have also hugely increased the cost of running such schemes. Pile on the additional burdens of changing mortality as people live longer, and more than a decade of turbulent stock markets - culmin­ating in 2008's crash - and the gold-standard final-salary pension becomes an unbearable weight for many companies.

Generous package

It used to be said that the baby-boomer generation - with its inflation-proofed final-salary retirement plans - was the "pensions aristocracy". That may have been the case, but the most fortunate are now in the public sector, where many are in non-contributory plans that pay out inflation-proofed pensions at the age of 60.

Generous retirement arrangements for state employees were seen as compensation for lower wages. However, during the recession, average pay in the state sector has caught up with pay by private companies. In fact, this clash of reward structures, if not addressed, could damage social cohesion and the de facto contract between taxpayer and state.

The Confederation of British Industry has been among those leading the calls for reform. The employers' group proposes that the retirement age be raised to 65 for younger state workers. More realistic employer contributions should be deployed and mortality assumptions altered in line with practice in the private sector.

The Chancellor unveiled changes, aimed at capping public-sector pensions, in December. But with estimated cost savings of just £1bn, these barely scrape the surface. At the very least, public-sector retirement ages should move in step with those for state pensions, thereby cutting back the burden for future generations of taxpayers. However, a bolder solution would be to bring future public-sector employees under the umbrella of the "personal account" system, if it gets off the ground.

There is no reason why the government, setting an example to the private sector, should not contribute more than the minimum. Unfortunately, that is not going to happen. All too often, when it comes to pensions, obfuscation and complexity are preferred to bold thinking.

Alex Brummer is City editor of the Daily Mail

This article first appeared in the 25 January 2010 issue of the New Statesman, Afghanistan: Why we cannot win this war

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The fish-eaters and the fasters

With a population split between whites and Asian Muslims, in some ways Nelson in Lancashire feels like similar-sized towns in Ulster: two communities separated by a gulf of non-communication.

In the late afternoon of local election day this month, the chairman of Nelson Town Council was working the terraces of old cotton weavers’ houses on his patch. Sajid Ali was wearing a red rosette and a navy blue cardigan over his capacious white shalwar kameez, and what looked like his dancing shoes.

This was not the forlorn ritual of unanswered doors, blank looks and curt responses habitually experienced by Labour canvassers even in more promising political times. Along these streets Sajid is a figure of some consequence: a jolly fellow and, as one opponent put it, an “interesting character”.

Almost everyone was in; Sajid knew almost all of them; and they in turn understood what was required. Sometimes a quick burst of Lancy Punjabi did the job: “Salaam alaykum, yoong maan, how yer doing? What time yer coomin’ to vote?” To older voters his spiel would be entirely in Punjabi and the response would often be a head-wobble, that characteristic south Asian gesture, which, when given to Westerners, can be baffling, but in these cases clearly signified solid intention.

The Labour candidate in the Brierfield and Nelson West division of Lancashire County Council, Mohammed Iqbal, held his seat comfortably on the day his party lost control of the county. And he did so on a poll of 58 per cent: a far higher turnout than in any of the other, whiter areas of Pendle; the highest in Lancashire; and higher than wards with these demographics would usually expect even at a general election. The average across Lancashire on 4 May was 37 per cent. It seems reasonable to conclude that the votes from those of ­Pakistani heritage, marshalled by Sajid, were wholly responsible.

Nelson is a strange, sad, divided, forgotten old cotton town, not without beauty. The weavers’ houses are stone not brick, which, elsewhere, might make them rather chic. A few minutes from town is wonderful Pennine countryside, and to the north the view is dominated by Pendle Hill itself, brooding like some sleeping sea monster.

Pendle is both the borough council and the constituency, where the mix of urban and rural has delivered it to the winning side in seven of the eight general elections since its creation 34 years ago. (Labour took it, five years prematurely, in 1992.) No one seriously believes the 5,400 Tory majority is in play. Nonetheless, Nelson can explain a lot about British politics in 2017.

“This was a cracking town,” said John Bramwell (“John the Fish”), who has been purveying cod, haddock and non-stop banter to Nelson for 41 years, first on the market, now from one of the last white-run, independent shops in the town centre. Nelson had a football team that played fleetingly (1923-24) in the old Second Division, what is now called the Championship. And in 1929 the Lancashire League cricket team, flashing cash in a manner that baffled the national press, signed Learie Constantine, the most gifted and thrilling West Indian all-rounder of his generation.

“When he arrived, no one in Nelson had ever seen a black man close-to,” said Derek Metcalfe, the club’s historian. “People would cross the road when he passed by. But he grew into their affections. He was a highly intelligent man as well as a great player.” Constantine, after a post-cricket career in the law, Trinidadian politics and diplomacy, finished life in the House of Lords as Baron Constantine of Maraval and Nelson, Britain’s first black peer. In July 1943 the Imperial Hotel in Bloomsbury accepted his booking but not his presence, and he promptly sued. His victory at the high court the following year was an early landmark in the fight against racial discrimination.

It was the 1950s before Nelson would get used to seeing non-white faces again, when the mill owners, battling labour shortages and overseas competition, turned to Pakistan to find biddable and affordable workers. They found them in Gujrat District, which is not one of the more worldly places, even in the rural Punjab.

“The first group were young men who in many ways integrated better than they do now. There were no mosques. They went to the pubs with their workmates and knocked around with local women. Then they had to go to the airport to collect the intended wives they hadn’t met yet,” recalled Tony Greaves, the Liberal Democrat peer who is deputy leader of Pendle Borough Council.

The mills disappeared, gradually but inexorably, but the Pakistani community kept growing and has now reached its fourth generation. The young men do not normally spend time in pubs; indeed, in a town of 30,000 people, there are only two left, plus a couple on the outskirts. It is hard to imagine anywhere that size in Britain with fewer. There are, however, at least a dozen mosques. The 2011 census recorded 40 per cent of the population as Asian, but on market day in the town centre the proportion seems much higher. The most prominent retail outlets are two bazaars: the Nelson (the
old Poundstretcher) and the Suraj opposite (the old Woolworths). Few white faces are seen in either: the saris and hijabs are beautiful but of little interest. They are all imported to this textile town from south Asia.

The white people have retreated, either out of the town altogether or to the semis of Marsden, on the hill. In the visible life of Nelson, they are clearly a minority. Population change on this scale can be accommodated, if not always easily, in large cities. It is a different proposition in a small town that was once tight-knit and, despite its closeness to larger places such as Blackburn, Accrington and Burnley, largely self-contained.

Even after 60 years, hardly anything has melted in the pot. The early migrants were villagers who placed little value on education. Recent history has led Muslims all over the world to turn inwards, to their own religion and culture. This is being exacerbated by white flight and by the advent of religious free schools, a disaster for anywhere in search of cohesion. The old Nelsonians have turned away. “Nelson is not multiracial or multicultural. It is biracial and bicultural,” says Greaves. “I would love to tell you that I go round to Abbas’s house to have chicken jalfrezi and he comes to mine for steak pudding and chips,” says John the Fish. “It’s just not like that.”

Unemployment is high at 18 per cent; there is no shortage of taxis. Educational attainment is patchy. Teachers at the two high schools fear their best pupils will be creamed off further by the promised grammar-school boom.

The vicar of Nelson, Guy Jamieson, and at least some of the local imams do their utmost to make connections between the communities. In certain respects Nelson feels like similar-sized towns in Ulster: two communities separated by a gulf of non-communication. In other ways, this description is unfair. When Burnley, just four miles away, suffered riots in 2001, Nelson stayed quiet. I could sense no threat, no active tension, merely resigned indifference on both sides. “There’s a poverty of confidence,” Jamieson said. “They don’t know how to sit down and engage.”

***

A modern English town council, subordinate to Brussels, Westminster, county and district, is an improbable power base, but Sajid Ali seems to be making Nelson’s work. Its precept is only £330,000 a year but this is not capped, so it suits both district and town if Pendle offloads smaller assets: parks, play areas, community centres. It is a minimalist form of devolution, but harks back to the days when Nelson was a borough in its own right, and looks forward to an improbable future when our towns might again be allowed to take their own decisions as they do in more grown-up countries.

But the council votes on party lines, Labour’s 16 councillors trumping the Tories’ eight. “They won’t work with us,” Sajid says flatly. “They don’t run it fairly for the town itself,” says the Conservative Neil McGowan. “If we put something forward for Marsden, we are always outvoted. One council official told me they’d never come across a town like it.” In Tony Greaves’s words, “The
politics in Nelson were always sour.” In the 1930s it was known as Little Moscow.

When I first met Sajid, however, he was outside a polling station doing a stint as a teller and laughing merrily along with his blue-rosetted counterpart, Arshad Mahmood. Yet things were not quite as they seemed. Mahmood was part of a mass defection of Pakistani Lib Dems to the Conservatives which appears to have nothing to do with Brexit, extra taxes for the NHS or Maymania. What it does have to do with remains elusive even to local politicians: “clan politics” and “personal ambition” were mentioned. It may be even more complicated than that. “So you’ll be voting for Theresa May next month?” I asked Mahmood. “Oh, no, I like Jeremy Corbyn. Very good policies.”

Perhaps this helped Sajid maintain some enthusiasm for the bigger campaign ahead, though he was daunted by one fact: the general election coincides with Ramadan, and dawn-to-dusk fasting comes hard in these latitudes when it falls in summertime. Still, he was impressed by all the new members Corbyn had brought to Labour: “The way I see it is that each new member has five, ten, 15, 20 people they can sell the message to.”

This seemed a bit strange: it implied he thought politics in the rest of Britain worked as it did in these streets. He had boasted earlier that he knew everyone. “All over Nelson?” “Oh, no,” he had backtracked. “In the English community nobody knows their next-door neighbour.” Which was an exaggeration, but perhaps not much of one.

There were no posters along Sajid Ali’s streets – not one. The information about which house to choose was on the canvass return and, more significantly, in his head. Just once he got it wrong. A little white girl opened the door and then a tattooed, muscular figure in a singlet barrelled towards the door. He wasn’t aggressive, just brisk. “Naaw. I doan’t vote.” End of. It was a sudden reminder of the norms of modern British politics.

***

Another norm is that, at any local count, no one ever thinks much of the big picture. The rise and fall of prime ministers, earthquakes and landslides are no more than distant rumours, of surprisingly little interest to the principals; what matters is the here and now. Where did that ballot box come from? How big is the postal vote? Any chance of a recount? When the five seats for Pendle were counted the next day at the leisure centre in Colne, one stop further up the clanking branch line from Nelson, no one was talking about the Tory takeover at County Hall.

Here there was something for everyone: Mohammed Iqbal won, just as Sajid predicted. Azhar Ali took the other Nelson seat even more easily for Labour. Both results were greeted with more effusive male hugs than would be considered seemly in Berkshire. In Pendle Central the Tories knocked out the sitting Lib Dem, but – heroically, in their eyes – one of the Lib Dem candidates grabbed a seat in the rural division.

But the most interesting result came in the most trifling contest: a twinned by-election for two vacancies in Nelson Town Council’s lily-white ward of Marsden, so electors had two votes each. The seats were won by a Conservative married couple, the Pearson-Ashers, who got 426 and 401; the single BNP candidate had 359 votes, with one Labour candidate on 333 and the other on 190. The first of these was called Laura Blackburn; the second Ghulam Ullah. This suggests a good deal of vote-splitting that Labour might find rather unpalatable.

In fact, Marsden already has one far-right relic: Brian Parker, who sits on Pendle Borough Council, is the last survivor in the top two tiers of local government of the BNP mini-surge that took them to 55 council seats across the country by 2009. Of Parker, two opposing councillors told me: “He’s actually a very good ward councillor.”

Curiously, Ukip has made little impact in Nelson or in Pendle as a whole. So there is not much scope for the party to fulfil what appears to be its immediate destiny: as a way station for Labour’s historic core voters to catch their breath on the arduous journey into Theresa May’s arms. According to John the Fish, whose shop functions as a kind of confessional for white opinion, they may no longer need a stopover: “I’m getting plenty of people, staunch Labourites, telling me they can’t stand Corbyn.”

I asked him how many Pakistani regulars he had. He broke off from chopping hake and held up five fingers. On 8 June the fish-eaters of Marsden can be expected to rouse themselves more energetically than the Ramadan fasters across town.

***

Seedhill, the cricket ground graced by Constantine, is pretty Nelson rather than gritty Nelson, even though a chunk of it, including the old pavilion, was lopped off years ago to form an embankment carrying the M65. Upstairs in the pavilion is a wonderful picture of the great man, eyes ablaze, down on one knee for a full-blooded cover-drive. It would have made a better monument in the town centre than the 40-foot weaving shuttle that has dominated Market Street since 2011. I thought it was a torpedo; children think it’s a giant pencil.

The packed houses that watched Constantine lead Nelson to seven league titles in nine years have dwindled now: there were only a couple of dozen to watch his successors play Accrington recently. But it was a drab day with a chilly breeze and Burnley were at home to West Brom in the winter game down the road.

And generally the club thrives better than the town. Given the lack of hotels and pubs, the pavilion is much in demand for functions, and the team remains competitive. Nelson fielded four local Asians for the Accrington match, which suggests that, in one activity at least, integration is just about where it should be.

It seems unlikely that a similar situation would apply at the crown green bowls or the brass band, or any other of the long-standing recreations in Nelson (though small but growing numbers of Pakistanis are now taking allotments). The knee-jerk liberal reaction might be that this is somehow the fault of the white Nelsonians. I think this attitude is a grave oversimplification that has done much damage.

In one respect the incomers have re-created the old life of Nelson. In the hugger-mugger stone-built terraces, the neighbourliness, the power of extended families, the external patriarchy and the internal matriarchy, the vibrancy, the sense of communal struggle . . . that is exactly what this cotton town must have been like a century ago. 

This article first appeared in the 18 May 2017 issue of the New Statesman, Age of Lies

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