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Pensions: we must halt this race to the bottom

I’ve posted before on some of the excellent research coming out of the TUC recently, in particular its Touchstone series of pamphlets. Now it’s provided a defence of that ugly duckling of causes, public sector pensions.

The report, Decent pensions for all, makes two broad points:

1) The cost of public pensions has been vastly exaggerated by politically-motivated critics:

“Pension schemes are very long term. Expressing the cost of future pensions promises in unfunded schemes as if they all had to be paid today is a favourite device of public sector pension scheme critics as it produces frighteningly large numbers, but makes as much sense as expressing the cost of the next century of the NHS as a bill that has to be paid all at once.”

2) The real scandal is the cost of tax relief on the pensions of the very rich, which costs taxpayers more than twice as much as public sector pensions:

“The cost of providing tax relief on pension contributions each year is much greater than the net cost of public sector pensions. In 2007/8 tax relief cost £37.6 billion - almost ten times the net cost of unfunded public sector pensions. This tax relief is heavily skewed towards the well off. 60 per cent goes to higher rate tax payers and a quarter of tax relief - nearly £10 billion a year - goes to the one per cent of the population who earn more than £150,000.”

The report also notes the offensiveness of the term “pensions apartheid”, oft used by the Institute of Directors and TaxPayers’ Alliance. I’m probably less sensitive about language than the TUC, but it is a poor analogy. And if we are going to talk about apartheid, as Labour and Capital points out: “the end of apartheid involved granting proper rights to black South Africans, rather than taking away the rights of white South Africans”.

Indeed, the conclusion of the TUC’s report is that we must level up, not down. It quotes a recent Pensions Week editorial:

“The problem isn’t public sector pensions. The real problem is the devastation of private sector provision and the abject failure of the three main political parties and the industry to offer any meaningful solution.”

For some more radical solutions to the pensions crisis, see Robin Blackburn’s A plan for pensions, and Richard Murphy’s Solving the pension crisis and Time to take pensions seriously.

Posted by Other TPA at 10:46am on 9 September 2009
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