6 Oct 2009

Why Tory pension plan contains a ‘debatable’ £13bn

Robert Chote was arguably the most dangerous man here at the Conservative Party conference. He was working through George Osborne’s speech at a fringe meeting alongside some journalists when his mobile rang. It was one of Mr Osborne’s lieutenants.

When a shadow chancellor is trying to prove his credibility and judgement to the nation, it’s no surprise that the chief of the fiscal watchdog the IFS, is directly lobbied by Tory hierarchy.

The £13bn number for the move to raise in the state pension age to 66 is in Mr Chote’s view ‘debatable’.

Originally that number was attributed to the National Institute of Economic and Social Research.

On Conservative plans, it won’t reach that level of saving until 2020. In the short term, it’s fair to take all women out of the equation, and they are more than half the age group at 65, so the savings are more like £6bn.

Then there’s the impact on pension benefits, particularly the Minimum Income Guarantee, which kicks in at 60.

Niesr itself now says that “until the Minimum Income Guarantee is changed the effect of the policy may well not be very great”.

So the mystery of the £13bn is becoming a little clearer. The savings only get to that level if pensions benefits are also adjusted sharply.

There is little mention of this in the Conservative costings. It was a difficult distraction for a shadow chancellor already trying to take the public on a long journey of painful cuts.

6 reader comments

  1. the-Richard-of-Nottingham says:

    And that “long journey of painful cuts” only begins to scratch the surface of the budget deficit over the next 4 years.

    I’d really like to know how Alistair Darling thinks he can halve the deficit within the same time frame (play the National Lottery I expect). That would be a trick worthy of Derren Brown. Hey !! here’s thought. how about getting him (Derren) on the 7 O’Clock news broadcast and ask him how he’d make it suddenly disappear. Painlessly.

  2. Andrew Dundas says:

    Most of the deficit is caused by short-term drops of £100bn in Corporation Tax receipts. Especially from Financial Companies. Those tax payments will return to normal during the next 2 years.
    We shall also be able to make a profit on our forced investments in British Banks.
    Meantime it’s important not to make the same panic cuts the Tories made in the 1980s. Those cuts and tax hikes caused mass unemployment, hundreds of thousands of bankruptcies and spiralling government debts & inflation. That sort of panic should be avoided.
    Yes, we need to re-arrange where our money is spent to optimise public services. But overall big cuts would be a silly response to short-term wobbles from banks.

  3. evie murray says:

    Well there is certainly a hussle on to get the nation in a panic. Growth is discussed by Alistair Darling. Perhaps because he is more honest? I wonder why this new and caring tory party talk of honesty so gallently, Questionable. Democracy is failing us all!!! Society has peaked, we are ready to move on to new ways…

  4. the-Richard-of-Nottingham says:

    Andrew Dundas :

    Oh I see !! So Alistair Darlings secret strategy is more of the same !!

    i.e. Let the banks flood the economy with cheap money (tax payers money) for gullible mugs to borrow more than is good for them in order to inflate another housing bubble (or consumer led bubble) so that the banks can then post more record (vapour) profits which in turn will be passed on to the Exchequer (what with them being the biggest share holder and all) and everything will be hunky-dory again. Simples !!

    That’s one almighty finger-crossing hail-mary hope-and-pray gamble. If that is the strategy then heaven help us all. A little more prudence is required I think.

    I get the feeling that the real strategy is do nothing and hope something happens. i.e. The normal management approach to difficult situations.

  5. Defined Benefit Plan says:

    very good information. keep it up.

  6. Defined Benefit Plan says:

    thanks you for a great article

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