The deadline for written submissions to the parliamentary inquiry conducted by the Work and Pensions Select Committee (chaired by Frank Field MP) into intergenerational fairness was February 19th. It’s worth having a look at what they are doing and who is submitting evidence. The key to the content is in the name of the committee. The inquiry has nothing to do with problems of environmental sustainability and the generational incidence of the costs of dealing with them. It has a narrower focus.
The Committee’s terms of reference distinguish between what we might think of as a question of fact and a question of explanation or responsibility. The question of fact is this: is there a disparity between the wealth and public benefits accumulated by the current generation of people in or approaching retirement and those likely to be enjoyed or accumulated by more recent generations? What the Committee has in mind here includes housing wealth and financial assets as well as welfare and pension entitlements and what they ‘public sector usage’.
The question of explanation or responsibility concerns the role of government policy - whether inadvertent or not – in bringing about this state of affairs. As an example of a policy which at least has the appearance of unfairness, the Committee points to the so-called ‘triple lock’ on pensions. In fact, two of the specific questions on which the Committee has invited written submissions deal explicitly with the rights and wrongs of the triple lock: is it necessary to prevent future increases in pensioner poverty? What would be effects of reforming it and how could the worst of these be mitigated?
The triple lock, you will remember, is an indexation rule for the UK state pension: it should rise in line with average earnings or inflation (whichever is the higher); but if neither of these reaches 2.5%, it should rise by 2.5%. It is an expensive guarantee, estimated by the Government Actuary’s Department to be costing an extra £6bn per year. The Institute of Fiscal Studies has already called for it to be scrapped at least partly on grounds of intergenerational fairness. The present government is committed to maintaining the triple lock for this Parliament, but after that, who knows? It is merely an administrative rule for the payment of current pensions, not a promise for the long-term future. Since the OBR reckons that it will add the equivalent of 1% of GDP to government spending on the state pensions, the IFS is not really going out on a limb when it says that the policy is unsustainable.
As the focus on the triple lock might suggest, what really interests the Committee is recent government policy in areas of public spending which fall squarely within their remit. They ask about “the collective impact on different generations of policies in recent years, including welfare reform and deficit reduction with areas of protected spending”. They do, however, ask a couple of big, more general, questions that try to take the issue beyond their own remit. “To what extent is intergenerational fairness a welfare issue?” “How does the welfare system interact with other areas of public expenditure and income and wealth in the wider economy, including issues of health, education and housing?” I find the first of these questions rather puzzling, as I would be inclined to put the matter the other way round: to what extent is welfare policy an issue of intergenerational justice? And if we decide that welfare policy inevitably raises issues of intergenerational justice, we might even go on to ask how we should assess intergenerational fairness in welfare policy – and how this way of assessing policy should be integrated with other criteria for determining whether a policy is good or bad.
About the Author
Kenneth Howse is a Senior Research Fellow at the Oxford Institute of Population Ageing. He is also a key member of The Collen Programme on Fertility, Education and the Environment.
Opinions of the blogger is their own and not endorsed by the Institute
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