Civitas Blog

Britain’s children are the unhappiest in the developed world says UNICEF in its recent report, An Overview of Child Well-being in Rich Countries. Britain came bottom not only in Subjective Well-being but also in Family and Peer Relationships and in Behaviours and Risks. United Nations research findings should generally be treated with some scepticism. Nevertheless I think we all know that there is at least a kernel of truth in this report, writes Graham Cunningham.

Few uncomatosed citizens of this country are going to make it through to the end of the coming weekend without being made aware that this Sunday marks the two hundredth anniversary of the abolition of the transatlantic slave trade. On 25 March 1807, royal assent was given to a parliamentary bill prohibiting transportation of slaves from Africa to the British West Indies.

Nor should anyone of good will and liberal sentiment want to let the anniversary go unmarked and uncelebrated. Nor, therefore, would or should they want to take umbrage if those with the power to engineer such things use the occasion to encourage British citizens to dwell on its significance. For, rightly understood, what the occasion commemorates has the potential to promote, among the diverse citizens of this deeply fractured and divided society that Britain has now become, is a true sense of community and of their common humanity, and pride in their British citizenship.

Sadly, however, and perhaps all too predictably, in our politically correct climate, a true opportunity to promote social cohesion has been missed by the government. Indeed, more than that, it has chosen to mark the occasion in a woefully tendentious way that distorts the event and its significance, and makes of the occasion something divisive, indeed, positively racist.

In last Thursday’s desperate re-shuffle of his fellow passengers on the deck of the rapidly sinking Titanic that is his administration, Prime Minister Tony Blair exchanged the ministerial portfolio of Ruth Kelly from education to that of local government and equality.

Her suitability for both new ministerial offices has since been called into question on grounds of alleged hypocrisy.

I think these charges against her misplaced, but shall argue below that, for other reasons, she does face insuperable difficulties in being able to remain in ministerial office in good conscience.

What with the education White Paper threatening to sink the Blair regime and the ID cards being blocked again yesterday in the House of Lords, these are fun times in Westminster, and now we have the embattled PM offering yet another ‘radical reform’, this time of incapacity benefits (IB). IB is intended for people with a disability that prevents them from working, but the Government admits it is now enjoyed by about a million people who are perfectly capable of work. It is one of the deepest dependency traps. IB abuse is hardly a new problem: it has merely become more acute. There has been a significant growth in government spending on IB over the last 20 years. Currently, 2.7 million people of working age claim IB and, since 1997, the social security budget has risen from £130 billion to £160 billion in real terms. The government estimates that its new measures could save anything up to £7 billion a year.

The Turner Commission is out tomorrow, here are our proposals for pension reform.

• Raise the retirement age to 70 in steps of 6 months per year over 10 years.


• Require contributions sufficient to meet the state minimum but no more.


• Scrap all up-front tax reliefs, but make pension benefits tax free.

Click Here for the Full Report (PDF)

The Child Support Agency (CSA) has become synonymous with failure. The agency has a case backlog of 350,000, they succeed in collecting even nominal money from only 70% of those owing maintenance, and the number of public complaints has risen by 30% in the last year to 63,678. Indeed, the CSA failed five of its seven performance targets.

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.

The High Price of Public Sector Pensions

Public sector pensions currently differ from private occupational schemes in two significant respects. Private pensions cannot be drawn on before contributors to them reach a retirement age of 65. Public sector workers can draw their pensions in full as from the age of 60. Second, private pensions are fully funded in that they met entirely from funds created by contributions to them. Public sector pensions are heavily subsidised from general taxation, contributions to them increasingly falling short of their costs.

So concerned has the present government become about the tax liability that public sector pensions impose as they currently stand that it has announced its intention to reduce their costs by increasing the age at which public sector workers may draw a full pension to same age as that at which private sector workers can.

Public sector unions are up in arms at this suggestion and threaten what would amount to a general strike in defence of the current age at which their members may retire on full pension. These unions insist the costs of these pensions will have to met elsewhere.

There are just two ways in which the government can meet the ever mounting costs of public sector pensions without increasing the age at which public sector workers may draw them in full. It can raise taxes or … reduce the size of public services.

It is difficult to see any case for substantial tax increases to enable public sector workers continue to be able to retire on full pension five years sooner than private sector workers can. When the terms of their pensions were originally agreed, no one could remotely have anticipated by how much average longevity would have increased by now and with it the size of the blank cheque the government was signing on behalf of the nation. The public might conceivably agree to higher taxes to enable public sector workers continue to retire before private sector workers, but it is difficult to think they will take kindly to the idea.

Far more likely than any tax increases to meet the costs of public sector pensions will be the only other option government has in face of them. It will have to find the money by making cuts elsewhere in its budget: so public services will be obliged to be cut.

Current public sector workers might not be afraid of the prospect of such cuts, calculating it unlikely they will be adversely affected by any, especially when negotiated voluntary redundancy packages are taken into account. However, if they believe the propaganda of their unions as to how vital to the nation’s health and well-being public services are, especially in the case of those on low incomes, they might well want to think twice about forcing the government to implement such cuts.
Today’s public sector worker is tomorrow’s NHS patient and recipient of other public services.

Sadly, public sector unions will have to wake up to the fact that, just as in the case of lunch, there is no such thing as a free supper before bed-time.

The fourth voter briefing, covering the Government's welfare and work policies, is now available.

Overall welfare dependency has increased since 1997, despite a large fall in unemployment.

Andrew Neil has an excellent discussion in The Business of the Government’s misguided approach to poverty and equality. The Government is not waging a war against poverty, as it claims. It is attempting to equalise people because its prime concern is not the interests of the poor as such, but the size of the gap between the better off and the less well off.

Pensions are a real problem nowadays. The state pension is in trouble as a result of the falling birthrate coupled with increasing longevity, which means there are fewer and fewer young, working people to support more and more elderly people. PAYE pensions mean that anything you pay in now goes straight out to whoever is of pensionable age. When you retire, your pension will depend not on what you have paid in – which will be totally irrelevant – but on what the generation of workers at that time are paying in. ‘National Insurance’ is not based on any recognisable principles of insurance.

Occupational pensions are in trouble, as final-salary arrangements are becoming unsustainable, even in the public sector. The government has announced that, for 1.3 million workers in the NHS, pension age will rise from 60 to 65, and some workers will be offered average-salary pensions rather than final-salary.

Private pensions are in trouble, partly because of Gordon Brown’s raid on pension funds to pay for his own projects, which left them less robust than they would have been to withstand a falling investment market.

And as for saving if you are on a low income – forget it. The government’s pension credit makes it a complete waste of time and assets. You will be much better off if you just spend everything and then claim the Chancellor’s new benefit for the elderly, aimed specifically at those who have never given in to a thrifty instinct.

Which makes it all the more strange that the government launches today its child trust fund, which will open a savings account for every baby born, and put £250 into it, with a top-up at age seven. According to Stephen Timms, financial secretary to the treasury, the aim is to ‘boost the culture of saving… We want to make sure that every single young person has a worthwhile financial asset available to them at the age of 18’.

The only way in which these young people will have a ‘worthwhile financial asset’ at 18 will be if they get into the habit of saving themselves – but why would they do that, when all the signals sent out by the tax and benefits system encourage you to spend rather than save? If they leave the £250 gathering interest for 18 years, it will just about cover their eighteenth birthday celebrations, perhaps enabling them to take advantage of the government’s 24-hour drinking laws and big new casinos.

The Welfare State We're In by James Bartholomew has just been published. It looks afresh at all aspects of the welfare state, from schools and hospitals to pensions and child benefit, and asks whether we made a mistake in placing so much confidence in government-provided welfare.

It deserves the strongest recommendation. The book presents the evidence on complex issues while remaining highly readable and avoiding over-simplification. It is available from Amazon at 30% off.

The independent commission, chaired by Adair Turner, has warned of the need for pension reform. Some groups are demanding an increase in the basic pension at the taxpayer’s expense, others an end to means testing, and a few are calling for raising the pension age.

A basic safety net is a necessity, but if we want to remain a free people and to enjoy independence in old age, the best safeguard is to rely on self-help: save as much as you can during your working life and ‘work until you drop’. Further discussion.