We're all going to get poorer under a Tory Brexit government, but at least older people will now pay their share

The biggest fiscal challenge faced by the country is its ageing population. It’s arguably the biggest policy challenge full stop, bigger even than Brexit

James Moore@JimMooreJourno
Thursday 18 May 2017 13:33
Theresa May delivered her manifesto speech, which turns its back on traditional older voters
Theresa May delivered her manifesto speech, which turns its back on traditional older voters

With prices rising and incomes once again failing to keep up, most of us are getting poorer.

If the next government wants to balance the public finances, some of us are going to have to get poorer still.

There are no more easy cuts to be found, and as a result even previously “protected” departments – health, education – are under strain, as can be seen in the reduction in per pupil funding in the latter.

That, by the way, is a cut, and another kick in the teeth to the young. It doesn’t matter how you dress it up.

However, squeezing the above two any further is politically unacceptable even if you end up with a thumping majority.

So someone is going to have to pay more.

The question is, who? The Labour Party has made it clear that it wants to tax the rich. That’s actually the fairest way to do it, because they can afford it.

The trouble is it’s also risky. Squeeze too hard and you might generate less revenue because the rich can afford, and tend to have the means, to move themselves or their money, or both.

The Liberal Democrats want to put 1p on income tax, among other things, and to legalise and tax cannabis, which has got everyone sniggering. Now that’s a real party!

When it comes to the former, making everyone pay a bit more is a reliable way to generate revenue, but it inevitably hits people who are already struggling. As for the latter, why not actually regulate and tax something a substantial proportion of the population uses regardless of its legality? Better for the NHS to get revenues that currently end up with criminals.

Unfortunately, it’s all a pipe dream (sorry, couldn’t resist) because it is the Conservatives who will likely form the next government. And that’s where it gets interesting.

The biggest fiscal challenge faced by the country is its ageing population. It’s arguably the biggest policy challenge full stop, bigger even than Brexit, and all the more so given that it has been ignored by successive administrations. Unfortunately it is reaching a tipping point, so that is no longer an option.

Now, pensioners were protected from austerity and coddled under David Cameron, whose governments oversaw a huge transfer of wealth from the young to their grandparents even as they battled to cut the country’s current account deficit.

Theresa May and the Conservatives: All you need to know

They got the triple lock on pensions, which has meant that while most Britons are currently getting poorer, they have not. Non-means tested benefits were protected, leading to the absurdity of winter fuel payments being handed to multi-millionaires like Alan Sugar (who pointed it out).

It looks like the Conservatives are set to change that. One of their prescriptions for Britain’s fiscal challenge is to make the old pay a bit more.

So the triple lock on pensions is to become a double lock. Currently it sees them rising in line with earnings, or inflation (whichever is highest) or 2.5 per cent if both are lower. It is the 2.5 per cent that is for the chop after 2020.

If inflation is high then, or if Britons aren’t getting a much-needed pay rise, that might not make for much of a saving. But some economists think inflation will be on the way down again after a few months and there doesn’t appear to be much chance of getting that rise, so maybe it will help a little.

The more radical (and sensible) option would be to abandon the earnings link too, while still protecting pensioners from rising prices. Given the costs imposed by pensions, it might eventually come to that, but not yet.

Even bigger news has been made by planned changes to care funding, which will be dressed up as generous when they’re actually not.

Pensioners will in future have the first £100,000 of their assets protected if, when, they need to start calling upon care in their homes (which is how most people receive it). But any costs above that will be taken from their estates when they die. So, a death tax? Those in residential care (property values are taken into account when it comes to their means test but again payment is delayed until after they die) are already in something like this position.

If you want to look at it cynically, the young will actually still end up paying the price: their grandparents won’t be able to leave as much for them in their estates.

But £100,000 is still a nice tax-free bung, even if it does get end up getting divvied up a bit. And isn’t the ultimate purpose of assets to pay for things?

May’s plans, then, make some kind of sense. They’re also surprising because she’s proposing to squeeze a group that reliably votes Tory in large numbers.

However, if she doesn’t want to tax the rich like Labour, or legalise pot while hiking income tax like the Lib Dems, she doesn’t have much in the way of options if she wants to confront the biggest challenge facing the country.

It’s a problem, of course, that the second biggest challenge (Brexit) makes it even more pressing. As a result of that, the measures that have been proposed might still not be enough.

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