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What do Theresa May and Andy Burnham have in common with Michel Barnier, François Bayrou and Emmanuel Macron? All five were admirably honest with the public about the trade-offs inherent in financing an ageing society, and all five were duly punished for their candour by the public, the press, opposition politicians or all three.
The past two decades of French and British politics are a graveyard of proposals to slow the upward ratchet of spending on growing elderly populations. The same two decades of French and British fiscal balances show the results. Public disbursements to older citizens have climbed higher and faster than in peer countries, and debt-to-GDP ratios have followed suit.
Ageing populations are hardly unique to the shores of the English Channel. In fact, France and the UK have some of Europe’s more favourable demographics. The problem is how they have been handled, and in the primacy of the pensioner in both societies.
In the UK, the problems are twofold. First is the trashing of both major parties’ attempts to move some of the eye-watering costs of elderly care on to those most able to afford it. Britain’s health and care bill for over-65s has doubled since the turn of the millennium, and absent commensurate increases in revenue is both squeezing out spending on infrastructure and increasing borrowing.
Second is the “triple lock’” on the state pension, which guarantees that payments rise each year by whatever is the highest out of inflation, wage growth or 2.5 per cent — an extraordinary deal which guarantees that pension spending growth outpaces pensioner population growth, and ensures elderly living standards increase at a faster rate than everyone else’s. In addition to slowly suffocating Britain’s public finances, this has created a society where children are now more likely to live in poverty than their great-grandparents.
The picture across the channel is even more extreme. Not only do French pensioners receive larger cheques from the government than their counterparts anywhere else in the west, they start getting them several years earlier. The result is a situation in which over-65s now have higher average incomes than the working age population — unique both internationally and in France’s own history.
Even the rumour of threats to this arrangement is met with mass public outrage and opposition from left and right. Macron’s proposal to nudge the retirement age up towards the lower end of western norms was met with nationwide protests. Barnier’s suggestion of a six-month delay to the latest scheduled increase in pension payments led to the first of two collapsed governments in the past 10 months. Bayrou’s refusal to scrap the same pledges brought about the second.
In a particularly stunning statistic highlighted by French political analyst François Valentin, pensions play such an outsized role in the country’s public finances that they accounted for one-sixth of the ministry of defence budget last year, and without them France would not meet Nato’s 2 per cent target for military spending.
It is a mark of how untouchable pensions and pensioners have become that French opposition parties have instead taken to proposing ever more creative and poorly-thought-through taxes on ever smaller slivers of the population, with the hoped-for receipts nonetheless falling short of what would be saved from barely-perceptible moderations to pensions. In the UK, meanwhile, even the most optimistic estimates for the proceeds of a wealth tax come in at less than the annual excess cost that the triple lock imposes over and above a pension indexed solely to earnings growth.
There is little sign that generational turnover will help, either. Hopes that baby boomers’ grip on Britain’s public finances would be weakened following Labour’s victory in last year’s general election — the first time boomers had been on the losing side in a UK vote since they were born — proved naive. The chancellor was quickly forced to reverse plans to make pensioners’ winter heating subsidies means-tested, and voters declared Labour’s poor treatment of pensioners the low point of their start to government.
Voters often accuse politicians of fiscal sleight of hand, but here they are complicit in presuming ever larger pension cheques can be conjured like rabbits from a hat. At some point, both groups must confront mathematical reality.
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