17.07.2002

Security, dignity, comfort

Work hard all your life - until you are at least 70 years old. Scrimp and save every penny that you can - ideally at least 20-25% of your income. Then, if you have not died in the meantime, you might just be able to get a pension sufficient to fund a modest retirement. Providing, of course, that you have not been robbed by your bosses, conned and ripped off by financial advisers and insurance companies, or your pension contributions have not disappeared down the black hole of a stock market crash. This, in essence, is the prospect facing millions of working class people in Britain today. Long before the market carnage of recent days, which has seen the destruction of billions of pounds worth of capital invested in private pensions and insurance policies, Britain's pensions system, both public and private, was already beset by severe difficulties, if not an outright crisis. The reasons for this phenomenon are complex - the drive to cap government spending, the squeeze on profit rates, demographics, a popular unwillingness to put off consumption, the peculiar irrationalities of the UK housing market and a fiscal system geared to the demands of the middle and upper classes, that serves only to exacerbate the polarities between wealth and poverty, are just some of the readily identifiable causes. Last week saw the publication of two government-sponsored reports aimed at tackling the problem: the Sandler report on savings and the Pickering report on pensions. Sandler tells us that there is a gap of some £27 billion between what the population is currently saving and what it needs to put by in order to secure a financially viable retirement. Whereas the savings ration has sunk to an all-time low, the burden of personal indebtedness has reached unprecedented proportions. Low inflation, historically low interest rates and the perception of wealth that comes from a grossly inflated bubble in the property market combine to fuel spending above immediate income. There is a need for secure, transparent and simple to understand savings products, backed up by fiscal incentives, Sandler reports. Pickering's message, predicated on the need to make decent pension provision more financially acceptable to the bosses, while ignoring the fundamental needs and just demands of workers, should be sounding loud alarm bells for our class. He recommends that the index-linking of pensions to the retail prices index (in itself a paltry measure, since there is frequently a ceiling of five percent) should be abolished. In addition, the payment of company pensions to surviving spouses should cease, while membership of company pension schemes should be made a compulsory condition of employment. And the gains for workers? They will be allowed to draw their pensions even if they go on working after the official age of retirement. Raising the age of retirement for women to 65 and abolishing the compulsory retirement age across the board are two nostrums that have already been adopted by government as potential interim measures designed to defuse the so-called pensions 'time bomb'. Increaseing the size of the exploitable population is the aim. According to official statistics, nearly half the UK workforce does not belong to any company or private pension scheme. When their days of wage slavery finally come to an end, they will have to subsist on the state pension, topped up to reach the levels of chancellor Brown's much vaunted minimum income guarantee, set to reach a miserly £100 a week by the spring of next year. One side effect of the treasury's move from a universal flat rate to so-called targeted payments will be vastly to increase the number of people subjected to means-testing. The fact that millions of workers do not choose to participate in company or private pension schemes is eagerly attributed by the Tory press to their inherent profligacy and financial imprudence. Living the life of Riley on beer, fags and foreign holidays, these spendthrifts expect the state to provide for them when they get old. The Guardian too remarks sniffily: "Left to themselves, many people either cannot or will not save voluntarily" (July 13). No mention of the fact that every week of their working lives our people pay national insurance contributions, supposedly intended to provide them with a civilised standard of healthcare, social provision and pensions when they need them. Why is it that so many workers do not contribute to pension schemes? Could it, for example, have something to do with the likes of 'Captain' Bob Maxwell, who for a time kept his leaking ship afloat by stealing his workers' money; or the mis-selling of pensions by financial institutions in the 1980s and early 1990s in the wake of the Thatcherite drive to shift the pensions burden on to the private sector; or the failure of Equitable Life? Certainly these are big factors in terms of the prevailingly negative attitude that so many people have. There is also, more importantly, the simple fact that after securing a roof over their heads, feeding and clothing their families and affording themselves a modicum of enjoyment and relaxation, millions of workers simply do not have enough money to put by for their old age. In a culture dominated at every level by consumerism, where you are defined not by who you are but by what you possess, it is hardly surprising that so many, far from having cash to spare for investment, find themselves locked into a vicious spiral of debt. Despite his sermons about prudence, Brown has every reason to be thankful that the high street has been so crowded with consumers for so long. Without their demand, it is certain that the boom of recent years would have ended long ago. So far as the state pension is concerned, the key point to remember is that even the derisory sum upon which people are currently supposed to eke out an existence (one can hardly call it a life) is not some kind of gift graciously bestowed upon them from above, but the result of long and hard fought political battles. It was in the period of industrial unrest that preceded World War I that the state pension was achieved by struggle. The age of eligibility was set at 70, by which time, in those days, most workers had died off anyway. The Labour government of 1945 made the system somewhat more tolerable and the introduction of the state earnings-related pension scheme (Serps) by the Callaghan government in 1978 - itself part of a political trade-off with the TUC designed to keep down wage demands during the era of the so-called social contract - heralded, at least notionally, the idea of providing retirees with a survivable income. Devised by Barbara Castle as a second tier on top of the basic pension, which was at that time linked to earnings, the idea was that, once the maximum earnings element had been achieved (after 20 years in work), Serps would make up a pension amounting to a calculated 45% of average wages - hardly a fortune, but a great deal better than what retirees can expect from the state today. Successive Thatcher governments did all they could to dismantle the state system, encouraging people to contract out of it and take up private pensions, many of them dependent on the performance of the equity market, with the results of which we are all familiar. New Labour has consistently followed a similar path since 1997. Its endless attempts to reform the state pensions system, culminating with the new 'state second pension', a replacement for Serps in the process of introduction from April this year, represent just cack-handed attempts to keep the pensions bill down while appearing to be caring and generous. The basis of the old state pension system was a simple, readily understandable form of 'pay as you go'. Your NI contributions fund today's pensioners. Tomorrow's workers pay for you. This, of course, is where the so-called thorny question of demographics comes into the equation. Back in 1948 there were five people of working age for every pensioner. By 1995, that figure had fallen to around 3.7; by 2030 it is estimated that it will fall to some 2.4, when there will be more than 13 million people over the current retirement age, as against some nine million at the turn of the last century. Fewer and fewer people to fund the state pensions of more and more old people -so the government, and the Tories before them, say. Conveniently forgetting, of course, that 'working age' does not equal 'working people'. The fact of the matter is that women have entered and stayed in the labour force en masse - something which has helped to more than double the 'economically active' population since 1948. Nevertheless the government tells us that the situation is impossible and that something must give. Workers must, if necessary, be forced to sort out their own arrangements, with the state pension becoming a mere safety net for those who, through sickness, disability or whatever, did not manage to work long enough, or were not paid enough, to provide themselves with a retirement nest egg. The reality, of course, is that the many billions of pounds raised over the years from the NI contributions of successive generations of workers (and employers) have just gone straight into the general tax pot, subsidising politically motivated tax cuts for capital and the rich and paying for everything from Trident submarines to the lord chancellor's wallpaper. In the private sector itself, the abandonment of final salary schemes, whereby the worker is guaranteed a certain percentage of final salary on retirement, has proceeded apace, allegedly because employers can no longer afford the long-term financial liabilities involved. To a great extent, this reflects the end of a relatively long honeymoon period in which booming market conditions and rampant share prices led to the technical overfunding of company schemes, to the extent that many enterprises took 'contribution holidays', siphoning off huge chunks of accrued surplus value into parasitic forms of accumulation, notably executive share options and the like. That climate, and the accounting practices associated with it, has now come to an end. Companies are obliged to show their pensions liabilities on their balance sheets and they do not make comfortable reading. British Telecom, for example, has a ballooning and surely unsustainable pensions deficit of some £5.7 billion, larger than any UK company by far. Yet just over a decade ago BT itself, to the protests of unions and members of its pensions scheme, took a 'contributions holiday'. Most companies have stopped offering final salary schemes to new employees. Some, including major constituents of the FTSE 100 index, have even dropped the schemes altogether, which raises interesting legal questions. In future, workers must take up alternative, 'money purchase', packages based ultimately on the performance of the stock market, and it is the employees themselves who must shoulder the associated risk highlighted by recent events. What is to be done about this mess? Relying on the paternal benevolence of the state, let alone, god help us, the market economy to provide a decent life for our old people is a nonsense. So long as they can reproduce themselves in order to provide the market with labour power fit for exploitation, the working class has an obviously essential role in the capitalist mode of production. Without them, there would be no value, no capitalism at all. But once their work is done, they are surplus to requirements, an unproductive drain on resources. As communists our view is fundamentally different. Under a system where production is planned and conducted not for profit but for need, where the all-round social development of every kind of human potential constitutes the very raison d'être of society, the contribution, the experience and wisdom of life's veterans demands a rich reward. This is not something for the distant future, but should be fought for in the here and now. Hence in the draft minimum programme of the CPGB - that section devoted to the socio-economic conditions of capitalism - we have this to say about how pensioners and the elderly should be treated: "People deserve a secure, dignified and comfortable old age. The needs of the elderly should be met fully by the state, and should be available by right. Our old people should not suffer the humiliation and anxiety of relying on means tests or charity." Among our immediate demands, focused on mobilising the working class as a whole to fight for pensioners' rights, we demand the right to voluntarily retire at 60 for all workers - at 55 in unpleasant and dangerous jobs. We oppose compulsory retirement. The state pension should be fixed at the level of the minimum wage, which itself must be based on what is needed for workers to reproduce themselves physically and culturally (£300 per week is what is currently required) and should be paid to everyone who has retired. You can hear the paid defenders of capital howling their objections: 'We can no longer afford even the current level of pensions. Workers must accept less, not get more.' We have a simple answer: if the system cannot afford the minimum we need, then the system must go. Workers, whether employed or retired, must not be made to pay for the failings of capitalism. Maurice Bernal