Why I should give back my widow's pension

Barbara Castle is wrong - we don't need to spend pounds 3bn on benefits for all
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The Independent Online
La Pensionaria is on the warpath again: Barbara Castle claims she was tricked with a bogus promise of a pensions review at the party conference. Breathing fire from her home, Hell Corner Farm, she calls the old comrades to arms in support of the National Insurance system. She is back. She is angry. And she is very wrong.

This is why. The National Insurance system is an empty relic of the sentimental old left. Most people are far richer than they were 50 years ago when Beveridge devised it so that it now pays considerable sums to people who are not needy, while failing to help the genuinely poor.

I know my situation is rare, but it does give an extreme example of what is wrong with the National Insurance system. I am entitled to pounds 123.00 a week widowed mothers allowance, as well as pounds 10.80 child benefit, and this week an added pounds 10 Christmas bonus. Although taxed on it, no one asks if I need it. My late husband's contributions entitle me to it - though, like most people, he probably regarded NI contributions as just another tax. There is no need for the well-off to draw universal benefits - sickness, unemployment, child benefit or pensions.

Privately, most sensible politicians agree to let these benefits wither on the vine: Barbara Castle's plan to restore the link between pensions and earnings would strengthen universal benefits. This is a last gasp of the old guard - because when NI was set up, most of the population was relatively poor, women did not work and had husbands who did. Life has changed beyond recognition. Seventy per cent of women work and many of the old are far richer through occupational pensions. The people who are truly poor gain nothing at all from NI: those on income support - single mothers, unemployed men, the old - gain nothing; universal benefits are deducted from their social security even if they contributed all their lives. It is now time to redistribute that money.

Barbara Castle wants to add pounds 3bn immediately to the pensions bill, paying out to all pensioners, rich and poor alike. There are many poor pensioners - but what they need is a redistribution in their favour. We could afford it if we took away NI pensions from the best off.

Think how much could be saved and used to stem the growth of the underclass. Start with child benefit (not an NI benefit, but a universal one) which costs pounds 6bn. Once it was the only money wives could call their own. Now most women work, while poor women on income support are the only ones not to receive child benefit. There are some non-working women whose husbands don't pay enough housekeeping, but this is an expensive way to target them. Instead we could have nursery schools, child care, after-school and holiday clubs, especially for the deprived.

What of other universal benefits? Incapacity Benefit pays out pounds 7bn, of which an estimated pounds 1.5bn may go to those who are sick but are not poor. Some pounds 200m could be saved from those who are unemployed but are not poor. Other sums could be saved by not giving contributory benefits to people like me.

But the big one is pensions - pounds 30bn a year. If you were to take it from the richest 20 per cent of pensioners, that would bring in a handsome pounds 6bn, some or all of which could be spent on the 30 per cent of pensioners on income support - robbing Margaret and Denis Thatcher to pay the rest. This is not an outrageous proposal - the National Association of Pension Funds wants just such a "rebalancing" of the growing inequality in pensioner incomes.

No politicians in their right mind would dare do this to many existing pensioners, so the money would not flow in immediately. While some benefits (mine) could be stopped at once, pension cuts would have to be phased in. Harriet Harman, Labour's shadow Social Security Secretary, plans to means test all new pensioners to trace the 1 million missing who are due at least pounds 14 a week unclaimed income support. So while bringing the missing ones in, it would be easy to knock the top ones out.

Any tampering with entitlements will cause a great outcry. Look at the rage when Gordon Brown suggested a slight cut in child benefit. It would take bravery - but only Labour, as founders of the current social security system, could do it. The Treasury would rightly insist on still collecting contributions from both employees and employers. It seems to me perfectly fair to go on calling NI "insurance" - the system will still insure us all against genuine need. It never was insurance in the real sense. It was always a con, done with smoke, mirrors and a lot of high-flown rhetoric. There is no fund, there is no connection between what you pay in over a lifetime and what you receive: you have no rights. All is left to the whim of the government of the day.

NI was once a fine communal ideal - all paying in, all earning pensions. But I doubt whether anyone under 40 has much ideological understanding of the NI deductions on their payslips. It used to be an efficient way to reach the poor, but in a less homogeneous society universal benefits are extravagant.

A Labour government intent on tackling the causes of crime will need money for intensive extra education, parenting programmes, youth clubs, training etc. Some say it would be fairer to raise income tax. I agree. But any large sums wasted by the state should be saved, because it is all desperately needed elsewhere.

Gordon Brown will need to harvest all he can. (Defence is another budget ripe for picking, since we spend twice the EU average.) He cannot send his front-bench troops naked into the general election with only the pathetic shreds of spending promises he has given them so far. So something drastic has to be done. He might enjoy boasting that Labour had cut the social security budget in ways that Peter Lilley never dared - while still giving more generously to the poor.

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