Tory rise in state pension age - do the sums add up?

[fedsron2us]

Now as many on here may know I am not a huge fan of the Liberal Democrats but Steve Webb has done a pretty good analysis of the dodgy maths that appears to underlie George Osbornes supposed £13 billion pound savings from raising the retirement age for men to 66 from 2016

http://webbsteve.blogspot.com/2009/10/tory-rise-in-state-pension-age-do-sums.html

He estimates the savings would only be in the region of £2 billion a year. I suspect that they would be even less as in many cases the deferred state pension of about £100 a week is likely to be replaced with dole payments since most older workers are squeezed out of the Labour force well before the age of 65. If they do stay in work they will be blocking up the mobility in the workforce that is usually created by retirements that ultimately creates vacancies for younger workers so unemployment payments will simply just be shifted elsewhere.

The figures suggest that we have a shadow Chancellor who simply can not add up.

To my mind the Tories in their rush to be seen as the party imposing stern cuts are going to wind up doing their electoral prospects no good at all. If they had been smart they would have matched this policy with proposals for enhancing the rights of older workers to choose to stay employment beyond retirement age (something which many already want to do). By emphasizing compulsion rather than choice they are confirming most people suspicions that they are simply a nastier version of the current government. I do not think that is likely to be a huge selling point. Even Thatcher would have made a better presentation of the proposals than this shower.

Of course in the current frenzy for donning the hair shirt of austerity what none of the parties are doing is setting out where they think future jobs are going to come from or how economic prosperity is going to be restored. Their silence tells all. They have not got a clue what to do now that the neo liberal world economic order has imploded under a mountain of debt.

[muriel_volestrangler]

1. Looking at their web page on it, I think I've seen how they try to justify the £13 nillion figure

it's for men and women, it's in 2020 (so you allow for 11 years of GDP growth), and it's using a claim from the National Institute of Economic and Social Research:

The Government should announce an updated review of the state pension age, as recommended by Adair Turner’s Pension Commission. Given the state of the public finances and rapidly changing demographic projections, the review should consider whether the increase in the pension age from 65 to 66 should be brought forward from 2026, but starting no earlier than 2016 for men and 2020 for women.

· This should be combined with a renewed commitment to re-link the state pension to earnings growth in the next Parliament in order to ensure a decent standard of living for all in retirement, halt the spread of means-testing and restore incentives to save.

· According to the National Institute of Economic and Social Research, every year by which the pension age is increased reduces government borrowing by about two thirds of a per cent of GDP. Once the pension age for both men and women increases by a year there will be a saving of around £13 billion a year.

http://www.conservatives.com/News/News_stories/2009/10/Specific_measures_to_start_tackling_Labours_debt_crisis.aspx

GDP is currently about £1400 billion; if you (optimistically, IMO) allow for 3% GDP growth per year, then it's

(1.03^11) * 1400 billion * 0.67 /100 = £12.9 billion

I bet they did a fair amount of searching before they managed to come up with a figure as large as that.

[Anarcho-Socialist]

2. 3% GDP growth sounds very optimistic

The Tory government would have to convert many government services into private commodities, more so than any previous New Labour or Tory government has done. I'm sure the Tories would love to do so, but the scale of inflating the private sector with sold-off public assets (on the cheap) that this would require would be politically-difficult.

On the other hand, Brown often used the most optimistic accounting predictions for his budgets and spending predictions so it is more likely that it's a continuation of this.

[muriel_volestrangler]

3. Yeah, but that was what I had to plug in to get the figure

and it seems round enough for them to have picked.

[fedsron2us]

4. The Pension sums are pretty easy to work out

as the average number of recipients can be calculated with some modicum of accuracy and the rough level of payouts is known. There is absolutely no excuse for coming up with projections that are so far from reality. Just deriving them from some macro economic model is pathetic. It hardly suggest that Tories are going to be able to claim to be the party of economic competence. The figures only come anywhere near the projection if women's pension ages are increased in line with men which is something Cameron now says he is not going to do. In addition there seems to be an assumption that those who are retiring at 66 will be working and paying PAYE/NIC etc. This is highly unlikely to be the case.

[T_i_B]

5. Where are the jobs going to come from?

That's the question you keep asking whenever the Tories float a policy idea at the moment. Now Gideon Osbourne may not have noticed this but the private sector has not exactly been doing much recruiting this year. The jobs for people to go to once their own position has been cut are simply not there so all they are going to do is just heap loads of people onto the dole.

And this leads us to another problem. At the moment people are so fed up with New Labour that the Tories are being given something of a free pass. We had the same thing back in 96/97 with Tony Blair the beneficiary and that ended in tears.

[Nihil]

6. I think you are on the right lines ...

> I suspect that they would be even less as in many cases the deferred state
> pension of about £100 a week is likely to be replaced with dole payments
> since most older workers are squeezed out of the Labour force well before
> the age of 65. If they do stay in work they will be blocking up the mobility
> in the workforce that is usually created by retirements that ultimately
> creates vacancies for younger workers so unemployment payments will simply
> just be shifted elsewhere.

The difference that you are not allowing for is the difficulty encountered
for any previously working person to actually *GET* any dole from the state.
From my experiences (albeit nearly four years ago) the only way to get state
payments was either to have come from school or to be speaking so little
English that you were unemployable. I can't see that situation improving
when governments are actively trying to save money by farting around with
pension & benefit rules.

:grr:

[T_i_B]

7. Provided you have savings of less then £5000...

...and you can put up with being asked lots of stupid questions it isn't that hard to get JSA.

But even then you'll find that when you go to sign on it's all a bit "wham bam thank you ma'am" when you really need help and advice, not just signing the form and buggering off.

[ikri]

8. A lot of their sums don't really add up

Their big, show-stopping, conference announcement on savings to help repay the £174 billion national debt shows that it will possibly save under £10 billion. Even then it is just the announcement of a review into existing plans for raising the retirement age.

Added to that, they've done their bit to win the Jeremy Clarkson vote by declaring that they'll do away with fixed speed cameras which will do little more than please a few dickheads like Clarkson and mean a drop in the revenue from the cameras. Meanwhile they've mentioned nothing about the inheritance tax changes that will cost the government money.

Then they've told civil servants who earn over £18k (of whom there are a LOT) that from 2011 their pay will be frozen. Just to make that clear, they've told the most unionised sector of the UK that they're not getting a pay rise from 2011. I can't see that causing any problems whatsoever. At the same time they're going to remove a number of tax credits and benefits from families who earn over £50k, many of those families don't desperately need the extra money, but many do use it for things like child care.

Asking voters to put up with a pay freeze, work longer and potentially lose the benefits is really asking a lot and they seem to be staking a lot on the public's dislike for Labour.

In essence, they just asked turkeys to vote for Christmas.

[T_i_B]

9. Revealed: £3bn mistake in George Osborne's budget plan

http://www.guardian.co.uk/politics/2009/oct/09/george-osborne-budget-deficit

George Osborne's reputation as a would-be Tory chancellor was unravelling tonight after his claim that he would save £13bn by raising the state pension age was challenged by the respected thinktank that provided the basis for his figures.

The National Institute of Economic and Social Research (NIESR) said the shadow chancellor's proposed saving, outlined at the Conservative party conference this week, would take five years longer than estimated and fall £3bn short.

NIESR said Osborne's team had made a mistake in their calculations, misreading a paper written by the thinktank earlier this year. Osborne's aides originally based their calculations on a NIESR document in the House of Commons library. After his speech the thinktank sought clarification of his assumptions. It has recalculated the figures and will present them at a conference on Monday.

[non sociopath skin]

10. It is nowt short of scary that, in spite of the fact that the Tories plans are clearly built on air

... the polls seem to suggest that it matters not to Joe Punter.

The Skin

[Anarcho-Socialist]

11. creative accounting

and they've admitted as much. The supposed £13bn figure has deliberately not been adjusted for inflation so the figure looks better. It's of course done because Joe Public doesn't understand that £13bn in 2020 is likely worth a lot less than £13bn in 2010.

[dipsydoodle]

12. I have no concept

of any government being a nastier version of the current government who I wouldn't piss on if they caught fire.