28 June 2012

Withering faster on the vine

After some years or decades of ‘withering on the vine’ it was announced first that state pensions would be means-tested, and then that the ‘basic’ state pension which remained would be increased each year in line with the CPI (Consumer Prices Index). This is less than if the increase were based on the RPI (Retail Prices Index) which includes the cost of housing, presumably because it is supposed that if you are poor enough you can apply for housing benefit, so your pension should not need to include your rent, mortgage, house repairs etc.

Not only that, but the CPI can be manipulated in various ways, one of them being to arrange for individual suppliers to operate means-testing. Electricity and water suppliers are to supply more cheaply to ‘poorer’ customers. Supermarkets are to keep down the cost of the cheapest and most basic foods so that price rises will be made only, and more steeply, on higher-quality or more nutritious foods.

Now the threatened increase in fuel tax is to be postponed from August to January. If it had started to apply in August, as was apparently planned, it would have affected the September CPI, on which the increases in next year’s pensions will be based.

In any case, it would have been a tax on motorists commuting to their jobs rather than on those who were excluded from academic careers and had to live as capitalists; or on pensioners, few of whom commute to jobs. Such a tax would be penalising the ‘working’ population more than the ‘independent’ population and that is presumably not what modern ideology favours. Independence is normally to be stamped out at any cost.

Those drawing pensions who will never apply for any means-tested benefit, such as myself, can derive little joy from observing the real value of their ‘pension’ shrinking year by year, ever further from a realistic cost of living, even leaving the cost of housing out of it.

Three or four decades ago I remember asking myself whether it was really good value to pay voluntary contributions towards the state pension when I had no salary. Might I not do better by putting aside an equivalent amount of money and investing it as favourably as possible? But, I thought, as probably many others did, there might be an unforeseeable Weimar-style inflation, and then the state would have to keep the pension at a realistic level, whereas one’s own investments might not keep pace with a very high level of inflation. So paying into the state pension was an insurance policy, protecting at least a small part of one’s money from erosion under all conceivable circumstances. So I thought, some decades ago.