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November 18, 2005

Time Gentlemen Please for Some Joined -Up Government

The Government wants and will soon announce new ways to force low-income workers to save more for their retirement. It has already announced it intends to extend by 2 years until 67 the age before which the full state pension can be drawn.

Given the relative inelasticity in demand for alcohol, plus the demonstrable highly damaging effect on health of more than moderate levels of consumption, would not the best way to induce such saving be for the government to impose a steep increase on the duty on alcohol, ear-marking the revenue for pensions?

At a stroke, the government would achieve the increased ‘savings’, improve the heath of the nation, and, as an added bonus, reduce social disorder associated with binge-drinking and the costs of policing it.

The price of alcohol has fallen in real terms very severely over the last couple of decades, thereby stoking demand and its associated costs.

The alternative is to raise taxes or find some other way in which to force people to save more. In the end, whatever it decides will amount to the same thing, as they will have less disposable income and therefore have to reduce their consumption of non-necessities such as alcohol.

Of course, it would have been much better had the country never had to start from such a situation as it finds itself in, but that is besides the point. The country faces a real pension crisis and something has to give.

At least, on the suggestion mooted above, private sector workers, shortly to be made to slog on to age 67 before being able to draw their full state pension, will be able to take some comfort from the thought that their public sector counterparts, who remain able to retire on full occupational pension at 60, will no longer be able to down quite as many pints down the local as their private sector counterparts toil to pay for public sector pensioners.

Posted by David Conway at November 18, 2005 11:53 AM

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