IFS announces: peak pensioner and falling inequality

An article by Paul Johnson at the Institute for Fiscal Studies, and also published in the Times, begins

It can take a while before policy responds to new realities, in part because it can take time before those new realities are recognised. Policy has nothing like adapted to the collapse in home ownership among the young. We continue to treat pensioners as though they need free travel, winter fuel allowances and the like, despite the fact they are on average now the best-off demographic group in the country. The squeeze on middle earners that started in the early 2000s was barely noticed at the time.

This is so obviously and painfully true to any Liberal Democrat who may have dared to point out that income inequality fell during the coalition and is now (as Johnson points out) no higher than it was 30 years ago. The left wing grievance industry decided in 2010 that inequality was going to rise and has stuck to that line ever since, indifferent to the truth.

There’s a sense of weariness, isn’t there, about that first sentence? The IFS do the maths, publish the reports – the latest is the one Johnson is referring to – and politics carries on regardless, in a sanctimonious post-truth bubble.

Indeed previous attempts here at Liberal Democrat Voice to bring IFS evidence into the debate have met with furious indignation that it couldn’t possibly be true because etc. Claims that the evidence was a temporary aberration have obviously not stood the test of time.

And so Johnson is right that politics hasn’t woken up to the collapse in home ownership among the young or the fact that pensioners are on average better off than working age people, once housing costs are taken into account. And he offers three more insights:

That the racing away of the top 1% seems to have stopped in 2008 and not restarted. It is not clear why this happened, though there is a caveat about the quality of data in the full report.

That the advance of pensioners relative to working age people seems to have halted in 2012 (despite the triple lock on pensions).

And, perhaps most demanding of a policy response, the correlation between long term unemployment and poor health.

I’ll end on an issue which gets far too little attention — the plight of those in poor health. Among those without a longstanding illness, long term unemployment is rare. Only about 2 per cent of healthy men aged 25 to 54 have been out of work for three years or more. Those with a longstanding illness are eight times as likely to be long-term workless. The increasing numbers with mental health problems are even more likely to be out of work. Half the mentally ill report material deprivation compared with fewer than one in six of the healthy population.

The 1980s saw hugely increasing inequality, rising rates of poverty and mass unemployment. We are still living with the consequences, but we should not ignore much more recent trends. Of these the increasing numbers of, and poverty among, the mentally ill is perhaps the most urgent to address.

* Joe Otten was the candidate for Sheffield Heeley in June 2017, is a councillor in Sheffield and is Tuesday editor of Liberal Democrat Voice.

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39 Comments

  • Thanks Joe

    Your article really highlights not only the reality about the trends in inequality, but also the spuriousness of relying on measures of inequality at all.

    If inequality is reducing, some people think this is wonderful, the correct thing is happening. However this blurs something that is much complicated that simply measuring the gap.

    If pensioners are getting richer and working age people are getting poorer (as the IFS has suggested), this reduces inequality, but it isn’t a good outcome. In genetal, working age people have more expenses than pensioners, from transport costs to get to work, to costs of rearing dependent children (true there are children in their 30s who are dependent on their pensioner parents buy that’s not the norm). Impoverishing this working age demographic has much more negative impacts on society than that of the pensioner demographic. More children (the next generation) in poverty, more emigration of productive working age people, lower tax receipts on income. But for those who dogmatically stick to the mantra of ‘eliminating inequality’, can actually be supporting changes which are on balance detrimental. Just as inequality can be reducing if everybody in society are becoming poorer, as long as the richer section are loosing more income than others. Hardly a desirable situation

  • William Fowler 26th Jun '18 - 10:10am

    Averages hide wide disparity in pensioners’ quality of life. Pensioners who own their property and have no borrowings to service likely to have a much nicer life than someone who has ended up on pension tax credit and housing benefit but that is down mostly to forty years of hard work in the former case so there is no case for any additional taxes. In fact, the govn should move to removing all fixed costs by phasing out council tax and banning energy related standing charges, the whole populace thus benefiting whilst making it much easier to survive on a limited income.

  • Catherine Smart 26th Jun '18 - 10:16am

    I am interested in the link made between long-term unemployment and ill-health (especially mental ill-health). Which way round is it – people are not well, so become unemployed or people are unemployed so become ill – especially mentally ill? Or are the two so linked it is impossible to say?

  • Peter Martin 26th Jun '18 - 10:29am

    @ Catherine Smart,

    You probably need to include underemployment and low paid full time employment in insecure jobs. That can all be soul destroying! It can lead to drug abuse, anti social behaviour and criminality.

    There’s probably a bit of both of what you suggest. Once we properly fix the economy we’ll have the data to know if, and by how much, rates of mental illness fall!

  • Catherine Smart.
    It’s an interesting one. I suspect that ill health leads to unemployment rather than the other way round. Plus of course if government agencies decide to change the definition of ill health and force ill people into work programs in order to cut benefit payments then obviously this will look like health is improved by work. It’s sort of like if you stop investigating and recording crime then the crime rate will “falls” even though people are still victims of it. I strongly suspect that this kind massaging was much more responsible for things like Rotherham than political correctness. Redefine illness and then fewer people appear to be ill, redefine investigable incidents and there appears to be fewer crimes.

  • Sue Sutherland 26th Jun '18 - 12:02pm

    Unfortunately we are indeed in a post truth bubble Joe and I believe this is in part due to a practice that politicians have had all the time I’ve been active in politics, which is manipulate statistics for their own purposes. Unemployment figures are one example because it all depends how you define who is unemployed eg how many weeks they have been without a job. Sadly this has resulted in people being much more reliant on feelings and personal experience when choosing which party to vote for, or whether to leave the EU.
    When you see two politicians arguing that they have the truth but they both back up their arguments with contradicting evidence then no ordinary person, unless educated in that subject, can understand what is going on. This is why we as a party can’t just rely on evidence based policy, we have to put the emotional message across too. It’s a very sad state of affairs.

  • @David Raw
    “”””That sort of pejorative sentence would do credit to the Daily Mail and indicates your values and where you stand..””””

    But what Joe said was completely true, both in content and sentiment.

    In content, inequality has decreased. This is a fact as outlined by the IFS.

    In sentiment, there is an irrational and dogmatic section of the British left which cares nothing for facts and reason, and just wants to blindly attack any person or grouping which doesn’t conform to their rigid and tribal virtue-bubble gang. The Labour Party epitomises this nasty face of British politics, but it also has devotees in other parties, including the SNP, Greens, and sadly the Liberal Democrats.

    “”””The Liberal Democrats will never recover credibility if, Canutelike, you keep denying the reality of what has happened to inequality in the UK since 2010.””””

    But haven’t we just established that inequality decreased during the coalition?

    I’d argue that credibility problems with the Liberal Democrats are multiple. One being so-called Liberal Democrats whose number one priority seems to be to attack and discredit the party, and attempt to demoralise its members and supporters

  • Thanks Joe, for bringing a breath of reality into our policy discussion. Particularly enjoyed your reference to the “sanctimonious post truth bubble”. That resonated.
    Just a shame that some attempted to use the old Daily Mail slur to try and put you in your place. Perhaps you need to indulge in a bit of ritual coalition bashing in future, just to keep the troops happy

  • As a pensioner I no longer pay National Insurance. I understand the historical background to this and why it may be unfair for pensioners solely on the state pension to continue paying for the pension that they paid for during their working life but why do I not pay NI on the pension I receive from my employment pension scheme?

  • > but why do I not pay NI on the pension I receive from my employment pension scheme?
    Interesting point, following the double taxation aspect, it is an anomaly.

    With respect to income tax, all pension fund contributions can be offset against income tax. However, with respect to NI, things aren’t so clear cut. Only employer pension contributions are free of NI(*). Thus we now have a problem, the traditional scheme typically has an employer contribution and an employee contribution. So it would seem the simplest is make all pension scheme contributions free of NI and then apply NI to the pension, just as we do with income tax.

    (*) In all the debate about pensions and complaints about funding eg. the university lecturers pension scheme, I found it surprising that no one was demanding a salary sacrifice arrangement ie. employer pays employee contribution free of NI, in return the employee accepts a reduced salary – done correctly, it allows for a potential 20% increase in pension contribution with no change to the gross package…

  • @David Raw
    “”””No, afraid we haven’t, Mr Cory. What we’ve established is that Joe picked out a particular IFS report to support his position – whereas I picked out a more substantive IFS Report which establishes the opposite. Have you read it ?””””

    Yep, and as you have quoted, it is projecting inequality to increase in the future. Joe is talking about and referring to evidence about inequality trends in the past (during the coalition). You referring to projections of inequality in the future is rather odd, given the Lib Dems are not in government and have not been for the past 3 years. I’d hazard a guess that Brexit is likely to be the biggest determinant of future economic state (and inequality) and that’s the Conservatives’ baby. But some people just want to bash and enjoy charging off on the attack with their blinkers firmly in place.

    “”””Lib Dems must stop being in self denial if they are to recover and progress – and I write as someone who first joined the Liberal Party in 1961, have devoted active political life to it, and also have experience in the last few years of the actualtie in the CAB and a Foodbank.””””

    How about individuals intoxicated by the “left wing grievance industry” stop being in self denial? We can already see some of those in denial about inequality decreasing during the coalition. Am sure there are lots of other facets of denial that they could stop which would aide the party’s recovery

  • I think it is important to base policy on facts as Joe’s article points out. There has been a reduction in inequality of incomes as a consequence of higher taxes on incomes enacted during the coalition years. There has also been a much greater increase in wealth inequality primarily driven by housing and pension wealth accumulated by the older generation and the shutting out of younger people from home ownership.
    Pensioners as a demographic may have benefitted from rising house prices, but poorer pensioners, particularly the large numbers reliant exclusively on the state pension and pension credit are certainly in need of free travel and winter fuel allowances. These are generally made available on a Universal basis as the administrative expense of means testing such benefits is not cost-effective.
    David Raw rightly focuses attention on the explosion in the numbers of people accessing food banks in recent years. The University of York and Equality Trust have published some startling statistics http://taxpayersagainstpoverty.org.uk/news/food-bank-britain-amid noting that the rise from the 61,468 food parcels which were given out by the Trussell Trust in 2010/11 to 1.1 million people in 2015-2016 does not reflect the number of people living with insufficient food in the UK today.

    The US Farm Bill is proposing to cut food stamps for those who cannot work to meet the requirement to work 20 hours per week to be qualify. We don’t want to go down that route in the UK on the basis of demographic statistical trends.

  • The report that Joe Otton lauds actually says, “Latest income inequality figures show we may have reached peak pensioner” ….’We may have’ could equally mean ‘We may not have’…What jury would convict on such a summary?

    As for, “previous attempts here at Liberal Democrat Voice to bring IFS evidence into the debate have met with furious indignation that it couldn’t possibly be true because etc.”…Well the anyone reading the comments will realise that the ‘etc.’ had quotes disputing the miracle claims way back then…

    Churchill’s remarks about statistics and lamposts have been proven right on many occasions. David Raw is involved in foodbanks; I am involved with the homeless and rough sleepers.

    I don’t see much evidence that those at the bottom are any better off; quite the reverse. Those ‘sitting indoors’ explaining how it isn’t raining might try actually ‘going outside’; trust me, it’s still p…ing down.

    Instead of focussing on terms like ‘income equality’ perhaps we should be looking at what the ‘income’ at the bottom actually buys; let me assure joe and his acolytes that things are getting worse not better.

  • Daniel Carr 26th Jun '18 - 5:11pm

    Thanks for bringing this to our attention Jo. Far too many people seem to have a poor grasp of the facts in the inequality debate.

  • David Evershed 26th Jun '18 - 5:36pm

    Is post-truth a thing?

  • It seems that Paul Johnson is saying we haven’t fixed the huge increase in inequality and rising rates of poverty that came about in the 1980s. And that the most pressing issue is that those with longstanding illness including mental health issues are most likely not to be in employment. Therefore they are amongst the most poorest in society.

    We could increase benefits so these people are not living in relative poverty.

    We could encourage large companies to employ these people.

  • I’m afraid the electorate passed their verdict on the Lib Dems in coalition in 2015; the verdict was fail. You can rehash as many reports saying look we did so much right but you can’t get away from the fact the party was gutted and the Tories took control of the country. What ever good you think you did can’t undo the harm that has done. Hard as it for some to accept the coalition was a mistake, I’d urge them to learn from the mistake and don’t make it again.

  • Mick Taylor 26th Jun '18 - 6:33pm

    James Pugh hits the nail on the head. There is a group of so-called Lib Dems, who enjoy nothing better than attacking the party they purport to be members of, primarily on the coalition to make sure we suffer maximum damage from it. They also attack every attempt to move away from it because ‘we haven’t grovelled enough about it’. However they also attack every new policy and every attempt by the leader to set out possible new directions that could help us recover. Oh, and the same people also accuse the party of being obsessed with Brexit and of becoming the single issue party.
    We just can’t win, can we?

  • Innocent Bystander 26th Jun '18 - 7:39pm

    Mick,
    I think much of the advice is well meant (perhaps not all) and with opinion polls stuck at 8% it does suggest that advice might be needed. My own view is that the nation yearns for a viable third alternative but it would have to be clear, strong, distinctive and purposeful. Apart from the zealots, I don’t detect the populace wants to go backwards on Brexit. They just want to end up somewhere new and make the best of it and they are tired of all the bickering and the endless re-fighting of the referendum. Agree something and make it work is what I think they want rather than let’s go back in time.
    I think the coalition is history and only rears its head because the party appears to be occupying the same space as Labour with the very slight difference that for “renationalisation” read “cooperatives”. A meaningless distinction for everybody.

  • Steve Trevethan 26th Jun '18 - 8:09pm

    Data, such as that presented by and commented upon by Mr Paul Johnson is important information which is a simulation of reality. The experience of Mr David Raw and his colleagues is a no less important input which is an actuality of reality. Perhaps we might value both in any effort to improve matters for those who currently suffer in our current socio-economic systems.
    Might it be helpful to look at the systems and attitudes which seem to have enabled many pensioners to be in a pretty good socio-economic state but which have been replaced by those which seem to offer pretty grim prospects to many future pensioners?

  • nvelope2003 26th Jun '18 - 8:35pm

    Innocent Bystander: I would have thought that the failures of Network Rail and the Transport Secretary should have killed off any wish to renationalise the rest of the railways. I have just seen a list of ten problems causing delays on the South Western and every one of them was the fault of Network Rail. I suppose the die hard nationalisers will keep their murky flame alight until hell freezes over.

  • You can argue your own views about the coalition but you can’t change the public’s verdict. They didn’t like the Liberal Democrats involvement in it and they voted that way. Claiming the public got it wrong may make you feel better but it doesn’t alter the fact they elected 8 lib Dem MP’s. It nearly killed the Lib Dems as a party so no amount of we are right the electorate are wrong will change that. Learn from your mistake, the coalition was a disaster for the party and by letting the Tories take sole power a disaster for the country. Pointing this our isn’t being nasty it’s merely pointing out the facts uncomfortable as they may be to those that don’t want to accept the coalition was a disaster.

  • Innocent Bystander 26th Jun '18 - 8:55pm

    “A pleasure to be able to agree with Innocent Bystander this time.”

    David,
    I am torn as to whether I should post again as it could never get better than this!

  • Innocent Bystander 26th Jun '18 - 9:12pm

    frankie,
    My view is that when the media and public talk to the LibDems they mention the coalition only because the LibDems haven’t given them anything new to talk about.
    Well, apart from Brexit, and, if my own little social circle are anything to go by, the average citizen is completely fed up of arguing over Brexit and only wants it over with.

    My own view is that the public want a non-ideological movement which will decrease inequality and increase fairness but without turning us into a collective farm but, above all, look like it offers the technical know how to manage a struggling and fragile economy in a fiercely competitive world that thinks it owes the British no special favours.
    What it doesn’t want is a patchwork quilt of ‘nice’ and ‘worthy’ but small scale and disconnected proposals.

  • Alas the Lib Dems can come up with the best policies in the world and they wouldn’t get any air time.
    We all want Brexit to end but it won’t, we can close our eyes and wish it away but it will still be there when we open them. Brexit and its aftermath with dominate the poltical realm for years if not decades to come no matter how much we want it to go away. That is an unfotunate fact, Brexit dominates all. Look at the news papers Brexit may be knocked of the front page by celebrity gossip or football but it is soon back.

    The only thing that will grab headlines are election wins, not I’m afraid policies, no matter how good they are (you could I suppose propose some outlandish policy, such as complusory wearing underware on your head on a Thursday, but while that would grab a headline I doubt it is one you’d want).

    Finally to those wishing to point out the pluses of the coalition ask yourself this

    “Knowing what I know now would I voted for the Lib Dems to go into coalition.”

    If the answer is NO, chalk it up to experience and move on. If the answer is YES I admire your fortitude even if I doubt your poltical judgement.

  • Innocent Bystander 26th Jun '18 - 10:10pm

    “wearing underwear on your head on a Thursday,”

    frankie,
    How did you know that? Are you stalking me?

  • Mick Taylor 26th Jun ’18 – 6:33pm………………………..James Pugh hits the nail on the head. There is a group of so-called Lib Dems, who enjoy nothing better than attacking the party they purport to be members of, primarily on the coalition to make sure we suffer maximum damage from it. They also attack every attempt to move away from it because ‘we haven’t grovelled enough about it’. However they also attack every new policy and every attempt by the leader to set out possible new directions that could help us recover. Oh, and the same people also accuse the party of being obsessed with Brexit and of becoming the single issue party.
    We just can’t win, can we?……………..

    I almost choked over my ‘Ovaltine’… A comment about moving away from the coalition whilst applauding a post explaining, yet again, how good the coalition was…

    Three years on from the coalition we are still in single figure national support; why? Perhaps it’s because voters remember what actually happened even if those ‘real’, as opposed to ‘so called’, LibDems are in denial?

  • Peter Martin 27th Jun '18 - 2:26pm

    “This is so obviously and painfully true to any Liberal Democrat who may have dared to point out that income inequality fell during the coalition and is now (as Johnson points out) no higher than it was 30 years ago. “

    I’m not sure it is so obvious. Although what you are saying could just about be possible if we study the graph on the link below and cherry pick the right years for our comparison.

    What is “painfully true” is that we aren’t as equal as we should be and we aren’t as equal as we used to be.

    https://www.equalitytrust.org.uk/how-has-inequality-changed

  • Peter Martin 27th Jun '18 - 3:16pm

    @ Innocent Bystander,

    ” ……..a struggling and fragile economy in a fiercely competitive world”

    Just a couple of points.

    1) We aren’t that fragile

    2) The world isn’t as ‘cut-throat’ as many would suggest. I know you didn’t use this term but it would be a mistake to think that we are like Toys R’ Us or Woolworths. We aren’t going to go out of out business and have to shut up shop. Give or take a few percent or so, we exist by swapping the goods and services that we make or supply, for another lot of goods and services that others supply.

    Possible we could move up in the ranking if we do well or down in the ranking if we do badly. But, barring any kind of global calamity we’ll still be here. Germany will never be able to send in the bailiffs because we owe them money. We don’t really. They’ve got lots of ££ based securities. They can either hang on to them or spend them on Scotch whisky or whatever else we might make that they might want.

    It’s their choice to save or spend.

  • Peter Hirst 28th Jun '18 - 1:52pm

    Work is perhaps more important for those who have long-term medical issues. What we need is a coordinated strategy to help those with these problems to find and keep suitable work. They are often well motivated and just need that extra assistance.

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