Something For Nothing?

Time to reform pensions, increase immigration, and build more houses

The new Civitas report made it onto the front page of the Daily Mail. This is generally a bad sign and has been retweeted with approval by Lee Anderson MP (another bad sign). The report and the headline both claim that there has been a surge in those dependent on the State for welfare. Although there are some issues with the report and I don’t agree with the conclusions drawn by the Mail and certain MPs (that it’s immoral or that people are scroungers), I do agree that it is problematic.

We are living in a country where working people are penalised through high taxes in order to pay for public services. Not only is this increasing the cost of living for people – many of whom are also struggling to make ends meet – it also hampers productivity which can lead to stagnant economic growth.

What is actually going on?

However, it is not fair to say that this is due to lazy scroungers refusing to work. In my first blog post I explained that after the Great Recession the UK experienced a bit of a jobs miracle. That is, we did not see the long term unemployment we might otherwise have expected. So, those who are economically inactive are either retired or sick. In short, in the UK if you can work, you do work.

We have seen an increase in people being too unwell to work since Covid. This, coupled with an ageing population, is why we have seen an increase in the number of people dependent on the State. As such, it should be clear that unless the Mail wants to claim that pensioners are to blame (which it probably doesn’t) or those with disabilities are lazy (which it might, it is the Mail), it is wrong to suggest we’re becoming a ‘something for nothing’ nation.

There is also much more going on. Again, in my first blog post I pointed out that the Great Recession had a scarring impact on the UK economy which is still being felt today in the form of low productivity. The Great Recession and a number of factors has kept productivity low in the UK. Given that productivity is the key driver of living standards and economic growth, wages have failed to keep up and so although many people are working hard, they are still struggling to support themselves and their families.

What should we do about it?

Pensioners

The first thing we need to do is recognise that pensioners are not an homogenous group of people. It is right that the country provides for people who cannot provide for themselves and this does include many pensioners. However, this no longer applies to many pensioners and a significant proportion of pensioners are actually incredibly wealthy. As such, it is not right that we treat them all the same.

We should scrap the triple lock. Under the current system, the State Pension is guaranteed to go up by either 2.5 per cent or in line with wages or inflation (CPI), whichever is highest. It is not right that young working people should have to pay for this, not least of all because they are often worse off themselves and receive no such guarantee regarding their own salary. Pensioners should be shielded from the increased cost of living so we should have a single lock where the State Pension increases in line with CPI inflation.

As I mentioned above, not all pensioners are the same. Some are wealthy and some are very poor. As such, we should means test the State Pension. Those who don’t need it should get nothing while the very poorest pensioners should arguably get much more than they do now. This is surely a much fairer way to approach things.

It is also completely bonkers that those of State Pension age stop paying National Insurance Contributions. Not only is this deeply unfair to younger people it is depriving the country of a source of funding for public services. It needs to stop.

Finally, we need to look at raising the State Pension age. We are living longer lives and so it is right that we reconsider this. Obviously this will not be appropriate for those working in manual labour, but those who can still work should not be incentivised to retire.

Immigration

I write about this a lot, but we really do need to increase immigration. There are numerous economic benefits such as boosting productivity and the downsides are practically non-existent. It will also help to end this dependency culture which the Daily Mail and Civitas are seemingly so concerned about.

Increasing immigration will increase the proportion of people who are in work. This will increase the tax base meaning that we can afford quality public services and to pay benefits such as the State Pension without levying crippling taxes on young, hard working people.

Housing

We need to liberalise the planning system to allow more homes to be built. This will help tackle the ‘dependency culture’ in a number of ways.

First, it will boost productivity. Our restrictive planning system is currently the biggest thing holding Britain back and is strangling our economy. Allowing more homes to be built in and around our major cities will enable better job matching by allowing our most productive people to live in our most productive regions. This in turn will lead to economic growth, higher wages, and better living standards.

Second, it will help to tackle the cost of living crisis. The main expense for most people is housing. The reason why housing is so expensive is because supply has failed to keep up with demand. Increasing supply by liberalising the planning system will make housing much more affordable, thereby allowing wages to go much further and reducing the number of people who rely on the State for support to simply make ends meet.

Finally, it will also dramatically reduce the welfare bill. Housing Benefit represents a significant proportion of welfare spending. If we make housing much more affordable by increasing supply it will reduce the burden on taxpayers.

We do have a significant proportion of the population who are reliant on the State. However, this is not because they are lazy scroungers.If we are serious about addressing the issue then we will reform the State Pension, increase immigration, and liberalise the planning system.