Austerity Until 2018 and an Old Story

The Chancellor of the Exchequer has said that the austerity "programme" will continue until 2018 at the earliest.

Five years is rather a long time and especially in politics.

The next General Election will be held in 2015. In the event that our current Chancellor loses his position at that election, all talk of bringing austerity to an end by 2018 will quickly be forgotten. Particularly by the new Chancellor, who is naturally going to be unable to achieve his predecessor’s target.

During austerity programmes, the masses (around 98% of the population) are usually requested to "tighten their belts". This has of course nothing to do with keeping their trousers in place. It is an invitation to become poorer.

So between now and 2018, all but 2% of the UK population are likely to see their standard of living fall. The 2% are millionaires, so are unlikely to struggle.

Many of the 98% are going to rely on their State Pension after they retire. Unfortunately, we are now basically being told that such pensions are unaffordable.

All the tax and national insurance revenue UK Governments have received over the years has been spent.

The average age UK adults are reaching is now 80. With the State Pension now generally being payable at age 66, this means that, on average, the Government must fund a pension for 14 years for every UK adult.

An individual State Pension amounts to about £5000 per year. There are around 10 Million pensioners in our country. State Pensions therefore currently cost the Government around £50 Billion every year.

Since tax revenue in the UK will be about £550 Billion in 2012, a cost of £50 Billion for State Pensions doesn't appear to be unaffordable, amounting as it does to less than 10% of tax revenue.

However, the total amount spent on pensions by the Government in 2012 will be in excess of £120 Billion. The difference is the cost of pensions being paid to former Government employees.

So the real issue of affordability is not the State Pension. It is the growing cost of funding pensions for ex Government employees.

With nearly 6 Million people working in the Public Sector in the UK - more than 20% of the total UK work force - the pension issue is one that will grow.

When will a British Government have the courage to address this issue? Answer: it will always be the next one.
 

Friday, 7th December 2012

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