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Demonising
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elderly
Jill Stephenson
The furore over the ‘granny tax’ – which is not a tax but the withdrawal of part of a tax allowance – has generated much comment. Ros Altman of Saga has railed against this ‘outrageous assault’ on the elderly. Actually, though, it’s not entirely clear why elderly people should have a higher personal allowance than others, and the raising of the personal allowance for the others probably provides a good opportunity to equalise the personal allowance across the generations. It’s not as if the elderly won’t get a personal allowance at all.
Yet it goes further than that. There is an increasingly vocal lobby that argues that the elderly have lived a life of ease and are, wrongly, better off than the young. Whether those arguing this – members of, for example, the ‘Intergenerational Foundation’, the people who recently complained that older people have too many spare rooms in their houses – believe that the elderly should live modestly, huddled over a small gas fire in one room and with the occasional outing to bingo by way of entertainment, is not clear. But at least one economist thinks that the elderly have had it too good for too long.
Writing in the Financial Times, Tim Leunig, chief economist at the think tank CentreForum, expressed the view that pensioners should pay National Insurance and that the lump sums of over £45k stored up in pension funds should be taxable. Wasn’t it enough that Gordon Brown raided the pension funds to help to finance his public spending largesse? Tim Leunig failed to mention that. There would not be an issue with National Insurance if it had either remained a genuine insurance fund or else had been, in all honesty, amalgamated with income tax.
Tim Leunig is correct in saying that NI rates have increased as income tax rates have come down. This was because Gordon Brown wanted to boast about reducing the standard rate of income tax while at the same time (stealthily) increasing NI to pay for it. Don’t blame the pensioners for this. Tim Leunig (who appears to be about 40 years old) is strongly of the view that there should be a redistribution of wealth from the old to the young. I think that those of us who have made savings throughout our working lives and who have not racked up personal debt would feel robbed and pillaged if that were to be the case.
Belonging to the generation that had free university education and grew up in a time of full employment, I can appreciate that life is now much more uncertain for many young people. Yet the invoking of ‘free university education’ is rather selective. When my generation (the one that is under attack) was leaving school, a relatively small minority of us (10%?) attended university. Blaming the entire cohort for enjoying free university education is therefore unjust.
Further, as I have argued in these pages on a previous occasion, it is not as if my generation had a life of luxury when we were young. The postwar years were a time of austerity. The great inflation of the 1970s may have ultimately had the effect of reducing dramatically the real value of many people’s mortgages, but living through that inflationary period was not pleasant, and trying to buy a house when prices were rising steeply was an enervating business.
Further, it is not as if the over-60s have not paid their dues. Those who are retired spent their working life paying National Insurance. They also belong to the generations who can remember – as doubtless many of the younger commentators cannot – paying what would now be regarded as utterly punitive rates of income tax. In the 1970s, the standard rate rose to 33p in the £ (some people say 35p, but I’m not sure). The highest of various higher rates was 83p, and some people paid more. I recall a senior medical professor saying that he was going to refuse to examine any more PhD theses because out of a fee of £120 he received £3 and was, in addition, charged tax on any travelling or other expenses he received.
I find it hard to believe that this is the first time that – as we are told – people in their 60s have been better off than people in their 20s. I was certainly not well off in my 20s. When I started working, at age 25, my first annual salary was £1,050. Scaled up to today’s prices, I guess that that would seem rather little to members of my profession who are starting out on their careers. Nevertheless, my husband (as he then wasn’t) insisted that I start saving on a monthly basis. I am now extremely grateful that he did. If I am better off than people in their 20s, that has quite a lot to do with it.
Surely in these electronic days it should be possible for better-off
pensioners to pay – say, £100 a year – through a website for their bus
pass and to renew it each year in the same way, ie, without having to
attend an office somewhere in the town.
Jill Stephenson is former professor of modern German history at the University of Edinburgh
