David Richardson: Let’s learn the pension lesson

The MP for our constituency of South Norfolk, until he was elevated to the Lords, was John MacGregor.

He held several cabinet posts under Margaret Thatcher including Minister of Agriculture and Chief Secretary to the Treasury.

As I hear of the scale of public debt, of cuts in public spending and deficits in almost every pension fund, I am reminded of a conversation I had with him many years ago.

“We are creating a pensions time bomb,” said John MacGregor. “People are living longer and their pensions will have to be paid for more years than anticipated. There won’t be enough cash in the pot to keep up those payments. And civil servants, whose pensions are inflation proofed, will create the biggest problem of all.”

At the time I thought he was exaggerating. Most companies were enjoying “pensions holidays” as the Stock Exchange increased the value of investments. It was unnecessary to contribute more. I was several years from needing to draw my own pension and failed to take his warnings seriously. But he was right and I was wrong. Later, Chancellor Brown stealthily removed tax credits on pension fund dividends and made the things much worse.

I could, of course, criticise John MacGregor for not correcting the problem while he had the chance. But there was no obvious solution and Gordon Brown could and probably would have reversed any action that might have been taken.

Now that I’m of an age when pensions are no longer an abstract arrangement for the future but very much of the moment, I wish I had given the matter more attention. I and others like me are looking at smaller incomes than we had saved for and expected during our senior years. And for some there will be hard times just as Britain faces its biggest financial crisis for years.

I believe agriculture has suffered similar treatment to pensions. Back when the Stock Exchange was enabling pensions holidays, farmers were perceived to be producing too much food and making too much money. It was widely accepted in virtually all political circles that this would continue indefinitely unless measures were taken to stop it.

Those measures were enacted and have been cumulative. They’ve taken a number of forms, from the removal of production-based aid to the active discouragement of production for environmental reasons to the encouragement of imports, nominally to help the developing world but also because many imports were cheaper than home-grown and helped keep down the cost of living.

The result has been to inhibit investment in agriculture and technology. Production has stopped increasing and in some cases declined. There has also been a serious knock-on effect to service industries. Crucially, too, spending on research that would enhance production has been cut and the “tools” we now need are missing.

It’s not just that the amount invested in research has gone down. It’s also that the money that has been allocated has often been spent in the wrong way – on topics that reflected public and political antipathy towards production. Instead of new concepts that would take us forward into the challenging future we are left contemplating a near-vacuum of ideas.

Further, we are even deprived of some of the most promising technologies by misguided elements in our population who are still fighting yesterday’s battles. By their unproven, unscientific but vociferous opinions they may cause great suffering to some who may be short of food as well as a decent pension.

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