Dream on: As in a vast Ponzi scheme only current contributions from workers finance current contributions to pensioners
Traditionally Christmas is a time for ghost stories. But this year we don't need invented tales to make us shiver. There are quite enough genuine reasons in the news—enough, in fact, to obscure the really frightening developments which you cannot discern through the fog because they are a little farther off. So wrap your cloak about you and draw nearer to the fire. I want to make your flesh creep.
The largest financial hole facing the UK is not the deficit (£126 billion and sticky)—about which the Coalition is doing quite a lot, though it's often contradictory. Nor is it the national debt (£1,039 billion and rising)—about which the Coalition proposes to do nothing at all, except increase it. No, the grimmest spectre haunting us is the liability attached to the state pension system. Depending on whom you ask, this is equivalent to possibly £2,000 billion, a figure nowhere incorporated in the public accounts.
We are living longer and we are having fewer babies before we die. Also, we have stopped saving, either because means-tested welfare has made saving irrational, or because low real interest rates have undermined its value, or because we've all become short-sighted. It's probably a mixture of the three.
The state pension is unfunded. No pot of money supports the promises made. Like a vast Ponzi scheme, current contributions from workers finance current payments to pensioners. Thus, as a matter of inescapable arithmetic, if the number of recipients goes up, they receive for longer, and more of them are dependent upon the state because they have no savings of their own, while the number of contributors falls in relative terms, then the burden on the contributors will escalate. And a heavier tax burden on future contributors will leave them with less disposable income, which reduces their ability to save, making more of them dependent upon the state when they retire, which will cause the problem to snowball even faster. Furthermore, this system of dole-pensions carries a high administration cost: to track people, to record their notional accrued entitlements, and then to make small, regular payments to them in their old age.
The system, then, is a recipe for escalating tax burdens which are simply unsustainable. And everyone knows it. The Ghost of Christmas Present is hardly a bundle of laughs, but the Ghost of Christmas Yet To Come offers nothing but Dickensian squalor. Perhaps the natives of Borrioboola-Gha will send us food parcels.
- Our EU Deal Gives Us The Best Of Both Worlds
- Brexit Would Save Us And Set Europe An Example
- Are Both Sides Playing By The Referendum Rules?
- Should We Stay Or Should We Go?
- Ignore Project Fear: Brexit Won't Ruin Us
- Uncontrolled Immigration Means Finis Britanniae
- The Next US President Must Carry A Big Stick
- Can Clinton Or Trump Crack The US Tax Code?
- How to Survive the Fourth Industrial Revolution
- The Spectre Of Mayor Khan's Islamist London
- Students Are Leading The Free Speech Fightback
- Fortress Europe Faces An African Migrant Tsunami
- Trump May Be Bad, But What Comes Next Will Be Worse
- Myth Of Stressed-Out Soldiers On The Street
- The Russian Love Affair With Palmyra Resumes
- How Russia Is Ruled By The Putin Doctrine
- The Doors Of Holocaust Memory Are Closing
- Rediscovering The Point Of Language
- The Novelist For Whom Small Was Beautiful
- A Recipe For Disaster