We need to talk about how the UK supports its growing number of older people, and in particular about the end of life. One of the many weaknesses of British politics is that its structure does not make it easy to link related issues, But the age of retirement, pensions for the elderly, the rising proportion of the NHS budget spent on those over 70, the cost of drugs, social care, palliative care, and the debate over assisted dying, are all interlinked – above all by the pressures they all put (now and potentially) on the UK budget.
The problem of providing and funding long-term care for the elderly was grasped by (Liberal Democrat minister) Stephen Williams during the coalition government, but weakly supported by Conservatives and opposed by the Labour opposition.
Theresa May as Prime Minister tried again to address the balance between private and public funding of long-term care, only for Labour to attack it as a ‘Death Tax.’ Since then care provision has drifted and costs have risen. The dominance of the private sector has grown as many cash-strapped local authorities have sold off their care homes, as charities have retreated from the sector and private equity has bought into it – driving up what Councils have to pay and holding down carers’ wages. Enterprising private providers have built retirement villages and apartment blocks for the well-to-do, but there is little new provision for poorer retirees. Local Council budgets are now weighed down by social care costs to the exclusion of other needs.
Right-wing attacks on the size of Britain’s welfare budget have omitted to mention that nearly 60% of welfare spending now goes on pensions: 8% of GDP, up from 2% after World War 2 as life expectancy has risen. When Lloyd George introduced old-age pensions, less than half the population lived long enough to benefit. Many of us now draw our pensions for 25 years or more, and medical advances will continue to lengthen life expectancy (and increase what the NHS spends on elderly people).
Liberal Democrats in the coalition government were proud of our commitment to the ‘triple lock’ on pensions. 15 years of pensions rising faster than inflation have shrunk pensioner poverty and enriched those also benefitting from post-employment pensions (like me). The case for ending the triple lock is strong – although the temptation for opposition parties to oppose the government doing so may still be stronger. The case for increasing taxes on better-off pensioners is even stronger; we benefit from a range of financial concessions but pay a lower rate of taxation than those in employment – because we no longer pay national insurance. But there’s little chance that Reform and the Conservatives, the parties of older people, would accept the logic of any increase, faced with the wrath that the Mail and the Telegraph would unleash.
As the Terminally Ill Adults (End of Life) bill moves slowly through the Lords, Sir Dávid Davis MP has just sent us a letter proposing that we should include ‘a clause that explicitly states the high-quality palliative care must be available to all in their final years of life, obviously including those who seek an assisted death.’ He does not mention the current funding crisis that hospices are facing, nor estimate what the impact on the NHS budget would be if hospices were to be fully funded by the state. The additional costs of the legalization of assisted dying, in terms of safeguards and regulation as well as accommodation, could be considerable.
When the Lords returned from the Covid lockdown, I took to greeting colleagues by asking them ‘How many pills do you take?’ and was shocked to discover how many were tsking a dozen a day or more – in addition to the regular injections all elderly people receive – without payment. The NHS budget for drugs has been held down by hard-bargaining with drug companies – but is about to increase significantly as Trump attempts to squeeze the excess profits drug companies make in the USA and those companies threaten to move research and production outside the UK.
Policy Exchange, a leading right-wing think tank, has just published a paper – Beyond Our Means – on how to shrink public spending by 3% of GDP. Its proposals include freezing state pensions for three years, raising the retirement age to 70 for those 55 or younger, and cutting other pensioner benefits (winter fuel, free prescriptions, bus passes, etc.) for all except the poorest – as well as cuts in payments and benefits for younger adults and children. This is refreshingly honest, in contrast to politicians and papers that call for tax cuts without suggesting parallel cuts in spending. But neither Nigel Farage nor Kemi Badenoch would dare to propose such cuts to their voters as they respond to the budget.
Liberal Democrats are in principle in favour of limiting the size and reach of the state. We believe in providing opportunity for every citizen to develop their potential and their skills – which means directing public spending at the younger generation rather than the elderly. We live in a country which has funded increasing state spending on health and pensions over three decades by cutting the defence budget, and has now discovered that we desperately need to repair our defence capabilities. Do we accept the need for higher spending, or want to argue for policy changes that will be painful for many older voters?
* William Wallace is LibDem peer, a former vice-chair of the Federal Policy Committee and convenor of the party's 1997 manifesto team.
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13 Comments
Was ensuring that people lived longer ever a matter of public policy in post-war Britain? I can’t really remember any politician spelling it out. For many decades it seems to have been something we slipped into as a consequence of improving health standards so the issue for the most part it was never raised. Ideally how to tax better off pensioners more beyond the point when they cease to pay National Insurance contributions should be a matter of cross-party consensus if it it is to last beyond a five year parliament. National Insurance has always been a tax substitute because there never was a “National Insurance fund”. Adjusting the taxable income of people like me requires sober conversations about thresholds and perhaps a phasing in period. Alas the chances of getting cross-party agreement about anything in the present climate do not appear great. Meanwhile I’d be very i’d be very happy if Lib Dems willing to face hard questions and difficult choices like William Wallace were able to have conversations with politicians in other parties on the issue.
Lord Wallace challenges us with a difficult equation. I would start from the old 1970 Liberal Party slogan that People Matter. I hope Lord Wallace can avoid any suggestion of linking cost with the current debate on end of life legislation. The two matters are and should be separate.
I would suggest that the elders amongst us have contributed more in total than the younger generation both in taxes (direct and indirect) and in national insurance throughout our working lives.
In addition the state obtains considerable proceeds from inheritance tax when life is finally over. Given the current Royal controversy, I suggest William takes a sharp look at the intestacy proceeds going to the Royal purse in the Duchies of Cornwall and Lancaster. We need more transparency there.
On a point of accuracy, yes, Lloyd George’s famous 1908 budget did create (a minimal) state pension of five shillings (25 pence) a week from age 70 (at a time when life expectancy was much lower than now), but it was H.H. Asquith who actually drafted that budget and who introduced and spoke to the debate in the Commons. William will know that Lady Violet Asquith would have given him a sharp response if he had suggested anything else back in the 1960’s.
The obvious change that is necessary to address the issue of pensioners no longer paying National Insurance is to scrap employee National Insurance completely and raise the equivalent through increasing the basic rate of income tax. Those pensioners whose income crosses the thresholds to pay Income Tax, should be paying.
There is also the issue of giving free bus passes to pensioners prior to their state retirement age. Why should some workers below the state retirement age get free bus travel and other workers just a few years younger have to pay their fares in full? I see that this has to change.
However, if we need to cut state support from some people, I do not believe that those who have worked and paid taxes throughout their lives should be the first target. How about those of working age who do not work, and don’t pay taxes, and yet are sometimes better off than if they took a job and worked for a living? (I say this as I overheard a conversation in an office this week where it was being discussed about a family taking home more than £2000 per month in benefits, which was more than the take home of each of those who worked in the office!)
It all depends how you define ‘better off’ pensioners. I doubt increasing taxes on them, or making them pay national insurance, will rake in much revenue. Well it might now, but that is going to decrease as there will be far fewer (new) ‘better off ‘pensioners in future. Including people who are in their 50s and early 60s now.
The days of defined benefit pensions are over for those not already enjoying them. Certainly for people working in the private sector. And fixed incomes from annuities lose value every year with inflation.
‘..for all except the poorest’. Labour tried that by axing the winter fuel payment for anyone not entitled to pension credits. Thus causing all those just above that threshold to shiver.
And if ‘all except the poorest’ had to pay for their flu jabs, how many vulnerable folk would skip them to save money? With the NHS then having to deal with the consequences when they fell ill.
‘We believe in providing opportunity for every citizen to develop their potential and their skills – which means directing public spending at the younger generation rather than the elderly.’
Sounds like robbing Peter to pay Paul. When Paul COULD go out and get a job, or improve their skills to get a better one. When Peter is either already on the employment scrap heap or soon to be so for the rest of his days.
Thank you for a common sense article. The data on the growth of the Pension age population is salutory and certainly points toward raising the age of state pension further. I agree with Jenny Smith that removing National Insurance is a good step to level the field and a small step to simplifying taxation, recovering the revenue by a straightforward rise in income tax, though I’ d prefer to bias it more toward Higher rate and beyond.
Very interesting article. I think part of the problem is that British society has a very romantic view of pensioners – the common assumption is that pensioners are poor. That probably was the case when David Lloyd George introduced the Old Age Pension, but it really is not the case today. Yes, some pensioners are in poverty – but not many.
@David. ‘but not many.’ As an FYI: Age UK report that 1.9 million, or 16% of pensioners in the UK are living in relative poverty. (source: 2024 Pensions and Lifetime Savings Association report to the Work and Pensions Committee).
The report is well worth reading in full. Not least because it predicts that percentage is only going to increase in future.
Eg. ‘Recent modelling commissioned by the PLSA has shown that after the 2024 Triple Lock increase, just 68% of the total population are on track to hit the Minimum level of the Retirement Living Standards in retirement – with 32% falling below. This is equivalent to approximately 5 million households.’
Any committed Liberal should prioritise providing the means for every child to develop to their full potential – through early years socialization, good education and opportunities to acquire technical, social and wider skills – over spending on those of us who are watching our grandchildren grow up. Yes, we older citizens deserve dignity in our final years; and Britain is a society in which fewer families see this as their responsibility that in other countries, so it falls upon the state. If the state is to shoulder both the upbringing of young citizens and the support of the elderly, that means either that other sectors of public spending – research and development, investment in infrastructure, defence and security – will have to be cut back or that taxes will have to rise further.
Thank you, William, for raising such a major issue.
Those of us in our mid 80s face friends and family, too often in end-of-life crisis. Few had thought about it until too late. Education policy should have included how we could have planned for it through fitness; health policy should have warned us about smoking, excess alcohol and obesity; and our community policies should have made companionship the highest priority as loneliness in end-of-life is a killer.
As a committed Liberal, I always look for all sides of a debate! And their possible flaws/unintended consequences. Nothing in life is simple, few if any issue black/white.
In this case, we still don’t have a definition in this discussion for ‘better off’.
However, there are 12m pensioners at moment, of whom 2m are officially in poverty, and likely a further 3m ‘just about managing’.
Even if the remaining 7m are all ‘better off’, how much would cutting their bus passes/charging them for flu jabs/making them pay NI raise to help the young?
With 750,000 54-64-year-olds job hunting/willing to work but economically inactive, and; 2m over-50s claiming benefits, and; pensioners renting, not owning their homes set to rise, and; the days of ‘good’ private pensions over, and; today’s ‘better off’ sooner or later having to pay £2,000 a week care home fees or £300+ a week for home care visits…
…and, from 2027, everyone on the state pension alone will be paying income tax (those with a private pension on top already do)…
…how many ‘better off’ pensioners will there be to foot the bill in five years? Ten years?
Older people are being asked to bear the burden for systemic policy failure: to relocate, deplete their independence, and sacrifice mental and emotional stability – all so that younger generations might find a foothold in property.
Ahead of Reeves’s Budget, the Government should remember that homes are not just financial assets. Taking homes from older people without delivering alternatives is a kind of social erasure. If this crisis is to be solved, we need guts, not guilt: we need to build at scale – urgently and sustainably – for every generation.
https://inews.co.uk/opinion/forgotten-victims-housing-crisis-pensioners-forced-downsize-4016514?ico=most_read_by_subscribers
We need to start making difficult choices given the shifting demographics outlined here. As unpopular as it may be ending the triple lock pension I believe is one of them.
We should all contribute to our pensions whatever our situation. To make this fairer, those who can afford to should save more. A decent living pension should be available to all regardless of circumstances. Pensions education should be part of the schools curriculum. Moving to a fairer system of pensions that rewards saving and effort while recognising that we all play different roles in making society work will take time and is a worthwhile if not essential endeavour.