Pay more! Work longer! Get less! This is the stark and
uncompromising message on pensions that the Tory- dominated government is
sending to millions of working class people. In the public sector, six million
state employees will find that the expected reward of a half-decent pension in
exchange for low wages during their working life is now being taken away.
Pay more! Work longer! Get less! This is the stark and
uncompromising message on pensions that the Tory- dominated government is
sending to millions of working class people. In the public sector, six million
state employees will find that the expected reward of a half-decent pension in
exchange for low wages during their working life is now being taken away. In
the private sector of the economy 87% of final salary schemes have been
abolished as being “unaffordable”, the latest one being Unilever in April. Not
content with attacking directly the living standards of the working class with
job losses, wage freezes or even wage cuts, the government is also reducing
living standards indirectly by cutting the social wage that includes public
services and pensions.
The message is also reinforced by the capitalist-owned media
that would have us believe that the “country” can no longer afford the “luxury”
of decent pensions for all. For them the issue is one of finance, of
affordability. The reality, however, is that pensions are not about finance but
about class and therefore the pensions issue is a political one.
Pensions and the Rich
The rich don’t have a problem with pensions. When Sir Fred
“The Shred” Goodwin, he of super injunction fame, retired from RBS at the age
of 50, he left with a pension pot of £8m, £2.7m of which he cashed in tax
free. His annual pension was £557k but due to a public outcry he only took
£342k. But that wasn’t enough for him so he got another job with a top
architect’s firm in Edinburgh. RBS is 83% owned by the taxpayer after having to
be bailed out with public money to the tune of £45bn. In March it was also
revealed that 9 top executives in RBS were given share options worth £28bn.
When Alex Hornby, ex chief of HBOS, recently quit as
Alliance Boots CEO, he was given a bonus of £450k not to join a rival group. At
the age of 44 his annual salary was £2.4m including a £337k pension supplement.
Last September it was revealed that the departing head of Lloyd’s Bank, Eric
Daniels was to retire this year with a £14m payoff and an annual pension of
£190k. Lloyds was bailed out by the Labour government to the tune of £20bn.
In June the M&S new internet guru, Laura Wade-Gery, was
given a “golden hello” worth more than £4m as well as an annual salary of £525k
and a pension supplement of £131k. On the way out of M&S was Sir Stuart
Rose with a “golden goodbye” of £8.1m.
The list is endless. The TUC has published figures that show
that in 2007 the average value of the total pension of the FTSE top 100
directors was £3m with an annual average pension payout of £147k. By 2009 the
total pension had risen to £3.4m and the annual average payout was £180k. Such
figures are common place. In addition, when you make provision for your
pension, you can get tax relief from the public purse. 25% of all pension tax
relief, amounting to £10bn in 2010, went to the top 1% of the population.
Rich Ricci, aptly named, of Barclays Bank secured a pay deal
in March of £44m, £10.6m of which was his salary. In May we learnt that the
average pay, not pension, of the FTSE top 100 CEOs was £4.2m annually, some 145
times larger than the median wage of just under £26k. On present trends it was
calculated that by 2020 average pay will be £8m or 214 times the average median
wage. The rich therefore don’t have a pension problem. Even the Business
Secretary Vince Cable has been moved to say that, “It is actually outrageous
that last year median earnings for FTSE 100 chief executives rose 32%, whereas
the share index rose only 7% – and average employee pay rose by less than 2%,
barely half the rate of inflation.” (Guardian, June 23rd). He bleats
well does Vince but nothing will be done except to appeal for restraint!
Pensions and the Working Class
When it comes to us working people whose labour produces the
wealth of this country, we have a problem with pensions in both sectors of the
economy. We already have the lowest state pension in Europe. As a proportion of
average working pay it is 31% while the European average is double that at 60%.
In Denmark it is 80%, in the Netherlands 82% and Sweden 62%.
At the same time the National Pensioners Convention (NPC)
has shown that 2.5 m pensioners are living below the official poverty line,
that 61% of pensioner couples have an annual income of £15k or less, 45% of all
single pensioners get £10k or less annually and 66% of all pensioner households
get the majority of their income from state pensions or benefits. It is little
wonder that pensioner poverty for working class people is on the increase, that
3m pensioner households are deemed to be living in fuel poverty or that each
winter about 25,000 more pensioners die in England and Wales than at any other
time of the year. Average annual energy bills are more than £1,000. When the
Winter Fuel Payment was first introduced it covered about a third of the
average energy bill, now it covers barely a fifth and is being cut by this
government.
Despite all of these facts we are told that changes have to
be made as we are living longer and we can no longer afford the “gold- plated”
pensions that exist in the public sector. The renegade Labour MP Lord Hutton,
whose recommendations have formed the basis for the government’s changes to
pension provision, produced the following facts about how “gold-plated”
pensions are. Average local government pensions are £4,000 for men and £2,800
for women. Some 900,000 retired local authority workers get this amount, an
average according to Hutton of £3.048 or £55pw. Some 670,000 retired NHS
workers get an average of £4,087 or £78pw. In Further Education the average
pension is £10k for men and £6k for women. If you serve the capitalist system well, however, your
pension will be better. After 20 years as an MP you can get a £37k per year
pension. If you are a judge, the majority of whom have been to Oxbridge, you
get nearly £53k per year.
Longevity and the Working Class
As for us living longer, what a joke! They claim that
average life expectancy for men is now 77.7 year and for women 81.8. Averages
hide many sins! We have huge geographical and social differences. In Chelsea
and Kensington for women it is 87.5 years and for men 83.7. For women in
Hartlepool it is 78.1 and for men in Blackpool 73.2. But within cities the
difference is even greater. In Coventry an article in the local paper last
October had the headline, “Inner City Men Die Before Retirement”. In two of the
most deprived wards, the average age of dying for men in Foleshill is 64 and in
Hillfields 65. In the leafy suburbs of Styvechale it is 78 for men. And every
city in the UK could produce similar figures!
A recent report
from the Office for National Statistics (Guardian, June 9th) showed
“variations in income, socio-economic status and health behaviour continued to take
their toll: average life expectancy for both sexes in greater Glasgow is lower
than in Albania and nearer to that of the Palestinian territories than to the
wealthier London boroughs.” Dr Simon Szreter, professor of public policy and
history at Cambridge University, said: “Life expectancy has a long-standing
correlation with social class and income.” And the situation is getting worse
as “during the last two decades, class has become more closely tied to income.
Income inequality has gone up significantly.” In other words working class
people sell their labour power in exchange for a wage. As we expend our labour,
we create wealth but as each year passes we get back a smaller and smaller part
of the wealth we have created. Income inequality grows and we as workers die
young, and many of us will die before we even get to pensionable age.
One fact above all brings home the reality of the situation.
The raising of the state pension age from 65 to 66 will save each year £1.8bn.
According to the National Audit Office the amount of money given to the banks
to bail them out was £950bn and they still have £512bn. We therefore have spare
cash to bail out the rich who are still getting their pay rises and bonuses,
but we don’t have money for pensions for working class people. The Guardian of
April 26th reported that although bonuses for City of London workers
have shrunk by 8% over the past 12 months, the same workers have seen a
permanent rise of 7% in their basic salaries. Average wage settlements in the
same period were 2% while the measure of inflation usually used as a benchmark
for wage negotiations stood at 5.3% in March. One law for the rich and one for
the poor!
Whose money is it?
So at the end of the day, whose money is it that goes to pay
for the pensions that we are now told we cannot afford? This is a question that
is rarely asked in our movement, yet the answer is crucial to understanding the
pension crisis for working class people under capitalism.
According to the NPC, in 2009 there were around 12m pensioners
living in the UK, 7.5m women and 4.4m men of state pension age. This is 19% of
the total population. By 2050, the number will rise to 16m or 21% of the
population. State pensions are paid out of the National Insurance Fund that was
set up in July 1948 to provide unemployment and sickness benefit, as well as
retirement pensions and other benefits. This Fund works on a pay-as-you-go
basis with the contributions for each year being used to pay the benefits and
pensions in each year. The NPC states that at the moment employees pay 11% of
income between £111 and £844 per week and employers pay 12.8% on all incomes
above £94pw. Workers therefore pay out of their wages and employers pay out of
the profits or surplus value that the workers have created but not received in
wages. We who create wealth pay for our pensions and at present the Fund has a
surplus balance of between £41bn and £43bn.
This fund could be topped up in a number of ways. An extra
£10bn could come from abolishing the upper earnings limit on NI contributions
as the limit means that the higher paid actually pay a lower proportion of
earnings than the lower paid. Employers’ contributions could be raised from
12.8% to 15% as in many EU countries. There could be reforms of the tax relief
on private pensions where the top 1% gets 25% of the tax relief of about £40bn.
In addition some £120bn of tax goes missing from avoidance and evasion schemes
by the rich. All of these measures are to be welcomed and have been advocated
by trade unions such as Unison and PCS.
Pensions and Capitalism
There is however a fundamental flaw. Under capitalism the
function of the state machine is to protect the power, wealth and privileges of
the rich, of the ruling class. As a backup measure too the rich employ an army
of tax specialists and accountants to ensure that they do not pay what they
should. Sir Philip Green of BHS is an example. He pays virtually no tax on his
super profits yet is in government advising on how to make cuts to the social
wage! Our NI contributions however are taken from us at source before we get
our wages. The rich can negotiate with the tax authorities on how much they pay
and often arrive at backroom deals where they end up paying far less than they
should have. We cannot escape the fact that until we own and control the
production of wealth, we will never have any equality in contributions for
pensions nor in pension levels.
In the private sector the picture is even starker. We again
contribute to our private or works pension by having deductions from our wages.
Our employers also contribute from the profits that they make. The profits are
part of the wealth that we create when we work so we in fact make contributions
from our wages and from the profits. Pensions are therefore deferred wages. A
recent example really hammers home the message. It was announced that BT
investors were hoping for a payout on the back of pension cuts (Guardian, May
13th). It stated: “Investors could benefit from a £100bn windfall
over the next 15 years following a government switch to a lower measure of
pensions inflation that has given BT a £4bn plus boost to its finances….a
ruling that allows it to link pension payouts to the lower CPI measure of
inflation.” Lower pensions therefore mean higher profits and vice versa.
This attack on pensions is part and parcel of the general
attack on working class living standards. Over the past 30 years the share of
national wealth as measured by the GDP that goes to wages has fallen from 65%
to 53%. The share that goes to profits has risen over the same period from 13%
to 21%. More and more of the wealth that we create is stolen from us under the
system of the private ownership of the means of production. But even this is
not enough. The rich and their government want more. The more they can cut
public spending, the less they have to pay in taxes and the more will the spivs
and speculators in the bond markets be reassured that any money they lend to
the government will be repaid.
Pensions are therefore a political issue. It is about how
the wealth that we create is taken from us and used for the benefit of the rich
and powerful in society. Under capitalism it cannot be any other way.
We
will therefore fight to stop these attacks on our social wage, on our pensions,
but we must also realise that until we control the wealth that we create, we
will never have a system of pension and benefit levels that give the majority
of the population anything like a guaranteed decent standard of living. For
that to happen we need to change society. That is why we are socialists and why
we link the struggles of the present to protect our gains from the past to the
need to change society.
