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Ed Balls is right: it’s time to think again about pensioners

10 June 2013

10:02 AM

10 June 2013

10:02 AM

You can accuse Ed Balls of a great many things (and we do), but he doesn’t do gaffes. His interviews are always worth paying close attention to, because every soundbite is carefully-considered, weighed for its political potency and constantly reused. Anyone who missed his interview with Andrew Neil yesterday should catch it (here) because – like Ben Brogan – I suspect it marks a new direction in UK economic debate: that pensioners’ benefits should be subject to cuts, like everything else.

The curious way that George Osborne conducts his economic policy – as a constant game of chess against a political opponent – confers great power on Ed Balls. What the Shadow Chancellor says about economics matters more than what anyone else in the Cabinet says about economics. Osborne’s fateful decision to ringfence all pensioner benefits, from bus passes to TV licenses, was made in a panicked moment during election time to try to close down one of Balls’s attack lines. This was a massive error, because it’s so expensive. As Balls said yesterday, spending on the over-65s constitutes the majority of welfare spending. Protecting this sector means concentrating pain on working-age benefits and government departments. Morally, there isn’t much of an argument for increasing pensions much faster than the average salary. The ‘triple lock’ on pensions was not in the Tory manifesto, yet now stands as one of the most expensive pieces of government policy.

And we ought not to think of the over-65s as charity cases. Rather, their energy and industry is single-handedly giving Osborne his flattering employment numbers. The other day, I published overall employment numbers. Here it is again.

Screen Shot 2013-06-10 at 09.13.50

But let’s break this down by age group, and it emerges that there are fewer working-age people in employment. The incredible progress is being driven by the over-65s.

Screen Shot 2013-06-10 at 09.00.53

And this fits a trend. Let’s look at their employment rates:-

Screen Shot 2013-06-10 at 09.01.38

According to the Keynesians, the recession is caused by a lack of demand and ought to affect everyone equally. Yet British pensioners don’t seem to have received that memo. Nor do British women aged 50-64, whose workforce participation rate has surged from 60.7 per cent to 64.2 per cent over the last three recession-struck years.

It’s no puzzle, of course, to those of us who believe the dominant factor in recession and recovery is the supply of willing/able workers, rather than demand for their services.

For decades, government policy to pensioners has had – as its premise – the rather patronising idea of oldies staying at home and watching daytime TV and waiting for the next benefit cheque as they mull who to vote for. The reality is that the over-60s are Britain’s fastest-growing national economic resource. They could do with lower taxes, not higher benefits. Ed Balls may well have cracked open this argument. But I’m not sure that Balls has discussed the implications of this with the Shadow Cabinet. Given his cordial contempt for his colleagues, I suspect not.

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