The old age of Prudence

 

Surely one key motivation to work and save your whole life is to remain independent? Why then do Conservatives habitually bemoan the fact that those with assets are required to use them (if their cash is insufficient) to take care of themselves when elderly? Why are they so envious of the imprudent who are cared for free of charge? Envy is the defining Socialist vice and ill befits free men and women.

A more conservative approach would be to ask the practical questions as to whether our system is adequately funded (no, it isn't) and whether it creates perverse incentives to be imprudent (yes, it does). Isn't the middle-class phenomenon of SKIing (Spending the Kids' Inheritance) as much a direct result of welfarism as the idling of the underclass? Not that I am suggesting well-off people plan to throw themselves on the mercy of state care homes and/or the NHS, you understand. It's more complicated than that.

The delightful uncertainty about the precise date of one's death makes it impossible for even the most financially-astute to provide "just enough" for lifetime expenses. Absent a welfare state, people are forced to over-provide for fear of dying in poverty. The existence of the welfare state tips the balance of that fearful calculation in favour of imprudence. As witness my late grandfather's death bed advice to his driven grandson not to "overdo the work and saving up". It could only have been given by someone acclimatised to welfarism.

The present crisis over pensions and elder care has a political and an economic dimension. Politically, there are 10 million votes in it, few of them wielded by anyone who cares much about economics. Economically, the problem is that "National Insurance" is a fraud.

Welfarism was sold to our prudent ancestors as much as an antidote to irresponsibility as a scheme to take care of the indigent. If you had the money to pay the premiums you were to be forced to do so. No-one with money could irresponsibly spend the minimum amount that should be saved for old age. The State would take money from the potentially reckless and invest it for them. Hurrah! If you didn't have money even to provide for that minimum, then the surplus in the insurance scheme would be applied to you. Hurrah! Then successive governments spent the "premiums" on bribes vote-winning schemes, just as if they were general taxation. Not only was there no surplus to provide for the poor, there was no basic pot to pay out the contributors. Boo!

Thus was the most successful Ponzi scheme in history born. Success, for a Ponzi scheme, being defined by the originators escaping with the benefits without getting caught. Beveridge never went the way of Madoff.

That's how we got here. Where do we go now? 10 million elderly voters are no more ready than 6 million state employees to be told (as they would be if they same thing had happened to their private pension) that the fund managers stole the money and there's little or no pension to be had. That's where the politics comes in.

Politics is really just legitimised gangsterism. Gangsters dispense largesse to their "families" and communities and buy themselves political and judicial influence with money stolen or extorted violently from others. Nuttin personal, you understand, they just has to do what they gotta do. The cries for a cap on payments for care in old age (like the strike last Thursday) are really just demands from the Godfather's influential friends for more extortion from others. I was reminded of this analogy by Polly Toynbee (fading moll of the Lefty Mob) when she asserted on this week's BBC Question Time that private sector pensions are "subsidised" by Government (because of tax relief). Gangsters who "go easy" on a victim of the protection racket are likewise inclined to see it as generosity. Polly and her gangster friends simply don't care where the money comes from, only about is how it's divided up, under the (as they see it) benign influence of their guns.

If, as "Conservatives" claim, the elderly want to pass on their wealth to their families and not to be "punished" for being prudent all their lives, then fine. Let the families take care of them and there will be no need for any of their assets to be "wasted" on looking after themselves. The real question now is how to create a scheme that incentivises prudence and disincentivises irresponsibility, rather than the reverse.

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