Charles Amos: Badenoch was right the first time – state pensions should be means-tested | Conservative Home

Charles Amos studied Political Theory at the University of Oxford and writes The Musing Individualist Substack.

Kemi Badenoch is making a habit of saying something harsh but true and then rowing back on it when she realises its unpopularity.

First, it was saying maternity pay was “excessive” and “has gone too far” before U-turning and saying “Of course maternity pay isn’t excessive”. Now she’s strongly implied concerning the state pension “we’re going to look at means-testing” only, hours later, to say that is not the case.

In both instances, Badenoch should have stuck to her guns. A steely-eyed determination to do what is right but unpopular will be a very important part of correcting future generational injustice ensured by largesse on pensioners created by spendthrift governments and declining demographics. Older generations cannot carry on burdening children and the unborn forever.

Pension spending in this country is simply unsustainable. By 2066 the national debt is forecast to increase to 233 per cent of GDP with debt interest at 9 per cent, largely due to spending on the elderly. Those born between 1946 and 1966 have or will take £1.20 out of the welfare state for every £1 they have paid in. Worse still, Generation X and Millennials are due to take out approaching £1.25 for every £1 they have or will pay in.

Tax take would have to increase to 45 per cent of GDP to be self-financing, which equates to increasing the total tax take today by 10 per cent. In the short term, this doesn’t seem too bad. The main taxes would have to go up a couple of percentage points, but with the birth rate predicted to fall to 1.30 by 2100, taxes overall will have to increase yet further to finance the social democratic state most people demand. Politicians, I suspect, will opt for tax increases.

According to the Resolution Foundation, this will require that present working people and future working people pay higher taxes, not to finance their own state pension and old age care, but, rather, to finance the pensions and old age care of those who went before them on a net basis. I contend this is wrong: Future generations should not be burdened with political promises that they could never consent to due to being either children or unborn at the time of their making.

As a libertarian, I take the social contract to be “not worth the paper it’s not written on”, to use Robert Nozick’s memorable phrase, but social democrats do believe in it and often point to it as the foundation of political legitimacy. Yet even a very strained idea of hypothetical consent is not going to get the unborn agreeing to enter into life with a massive debt around their neck to no advantage of their own.

Following a prohibition on each present generation burdening future generations of children and the unborn will require state pensions and old age care to be cut. Badenoch was right to start the ball rolling with the politically easier idea of means testing the triple lock.

In opposition to this, I know older people will reply by saying they were promised things and that those promises should be kept because they have made plans around them. No. If an old mother’s income was being supported by her son who had promised to give her £5,000 a year, financed solely from running up credit card debt in the name of a child who would be forced to pay it back when they grow up, we’d all object, even though the son promised her mum the money.

Yet this is exactly what is happening at a national level. Current generations are running up the national debt and future liabilities and waiting to force children and the unborn to pay for them.

Each present generation should get out what they’ve paid in on a net analysis in real terms, or, at least, pay in and receive what they had the opportunity to vote on.

The trouble comes with a population pyramid shrinking at the base, because, it may be the only way to finance what people have paid in real terms for their state pension and old age care is to take on a net analysis from children and the unborn (via running up liabilities they will have to pay for when entering the workforce).

More net taking will be required as there is simply less production in real terms from a smaller population meaning the same real terms amount as paid in must come from a higher share of tax payments coming from these future generations.

However, an even smaller set of generations following that will not be able to compensate the mentioned future generations in real terms for their higher tax payments while not being net disadvantaged themselves because they will have a still smaller set of generations to claim on.

This is no fiction: According to Paul Morland’s excellent new book, No One Left, the old-age dependency ratio, i.e., the number of pensioners to working people, is due to go from 30 per cent today to 60 per cent by 2100. Not being a social democrat who believes in the social contract as the foundation of political legitimacy, I don’t know what their exact solution should be to the moral actuarial science problem of a shrinking population.

I remain firm though in believing it cannot be by burdening in advance children and the unborn with debt, which, all else equal, only leaves the alternative of higher taxes on existing pensioners or real reductions in pensioner benefits. One thing is clear: pensioners should be getting less from now on.

Kemi Badenoch was originally right to imply the triple lock on state pensions should be means tested, for as time goes by the legitimacy of the welfare state for social democrats will rest on shrinking the entitlements of the elderly. Children and the unborn cannot rightly be burdened with debts they have never consented to in even the loosest interpretation of the latter concept.

Cutting pensioner benefits will take a steely determination on the part of politicians, which, Kemi “I never have gaffes ” Badenoch doesn’t have. But at least she’s poked her head over the parapet on the issue, if only to pull it back down pretty quickly. We’ll need better politicians in the future.