Intergenerational Fairness in Government Policy

Lord Balfe Excerpts

Thursday 26th October 2017 Lords Chamber

[Lord Balfe (Con)]

My Lords, I also begin by thanking Lady Smith for a wide-ranging and useful debate. I am a member of silent generation; however, I am not a member of the silent party. One of the most astonishing things about the debate is the total absence of Labour speakers, apart from the noble Lord, Lord Hunt. It is not as though Labour has nothing to say on the subject. I would be interested if the noble Lord could tell us whether this was an instruction from the Whips—or is the Labour Party genuinely mute? I will try to make up for them by making one or two mildly radical suggestions.

First, we are told that pensioner poverty has halved between 1997 and today. That means there are still a lot of pensioners living in poverty. We should not forget that. Secondly, this intergenerational argument should not be regarded as an opportunity to bash the old. The basic problem is that the wage economy has collapsed in the last 15 years but the pensioner economy has been maintained thanks to the input of largely public money.

The great problem that exists between the generations, including this third generation, is that some of us are much better off than others, often because we bought our houses many years ago and were in defined benefit pension schemes if, as in my case, you spent your entire life in the public sector. I left school at 16. I did not have a single day’s unemployment until I retired at the age of 60. I did not have to sign on. I was in a number of jobs but they linked, one to the other. That is a quite different experience from today.

I shall make a few suggestions on having a slightly fairer taxation system for the elderly. The first concerns TV licences. In a couple of years mine will be free. Why should it not be a taxable benefit? I am not saying it should not be free for poor pensioners, but why not make it a taxable benefit so you declare on your tax return that you have a television licence, just as you declare you have a pension? The winter fuel payment is another. It is astonishing that, seven years into our Government, we are still defending what Labour did in creating a benefit that goes to millionaires, tax free. At the time I remember saying this was impossible. Gordon Brown had a very wishy-washy explanation as to why it was needed, but I still do not see why I, as a 40% tax payer, should get a benefit that is substantially more for me than it is for an old-age pensioner. You do not have to save the money; you could redistribute the winter fuel payment so the poor pensioner has more and the richer pensioner pays for it.

It is high time to look at the administrative costs, as well. There are nonsenses such as the £10 Christmas bonus, introduced by Barbara Castle, of blessed memory, 30 years or more ago. Some of these benefits hang around for ever, such as the 25p a week extra that I will get in my pension when I reach 80. All this has an administrative cost. We could look at that.

Reference has been made to the exemption from national insurance. If I am lucky enough to earn extra money on which I will pay tax, why should I not pay national insurance, when the noble Baroness who moved this Motion—who is also not in receipt of a bus pass—would pay? Yet, I could be lecturing, as I have, in the very same building she works in. We could be in the same classroom giving a talk to the same people—even that has happened—and we could receive cheques on which I would not pay national insurance and she would. Frankly, this does not make sense.

The old are healthier and they also live longer. They can cost more in end-of-life care, but there is a tendency for us to think that because they get old, they cost a lot more. In fact, most health expenditure is in the last 24 months of life. The two basic problems we have are, first, the rise in the cost of the NHS, which has always moved ahead of inflation—most of the savings the Government have made have been swallowed up in this. Secondly, we have to look at the fact that the elderly are not smoking or drinking as much, so they are not putting as much back into the Exchequer in excise duties. I am not suggesting they should, but the pattern of excise duties is moving.

I will say a quick word about the young. Earnings have fallen and housing is difficult, but, to echo the sentiments of some noble Lords, more needs to be done. Messing around at the margin with tax relief and other reliefs will only generate price increases, as, of course, has quantitative easing. The fact that mortgages are so cheap makes them much more affordable, which means house prices go up.

At some point we need to recognise that for the older generation, class continues to divide the income groups more than anything else. For every poor pensioner there is a rich pensioner, but for both there is a strong class factor. If you live in the north on a council estate and start work at 18, you are more likely to be poor. It is as simple as that.

My final suggestion is: when we look at pension ages, why do we not base them on years of national insurance contributions? Why do we not say that if you start work at 18, work for 45 years and pay into the NI fund, you should be able to retire at the age of 63? If you go to university and pay for 45 years into the NI fund, you would retire at 68. We know that there is a mortality differential associated with income and occupation. These are one or two of the things we should look at when we consider intergenerational fairness. It is a far more complex issue than many outside this House imagine.

[Baroness Goldie]

My Lords, I apologise for further interruption. We have a quite serious slippage of time. When the Clock shows seven, will noble Lords please terminate their remarks and sit down?