Andy Maciver: There is a way to pay for our old age – without increasing tax. Here it is...

But this compliance – enthusiasm, no less – for throwing tax at the conundrum of how to pay for old age is the result of a decades long exercise in deception by governments of all colours, in both parliaments.

The argument is built on the emotional presumption that we want to thank our parents and grandparents for ‘what they’re done for us’. We do. And it wins the argument. It allows our politicians to sleep easily in their beds after creating policies such as the state pension triple lock, free TV licences for older people, and now the National Care Service. And more importantly it helps governments win elections.

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But, reader, we are being taken for fools, and fools we are to believe that every problem can be solved by passing the hat to the taxpayer. We are indulging the politicians in their perpetuation of this myth. We are asking to be lied to.

The problem of today’s taxpayers paying for today’s non-taxpayers’ healthcare, social care and pensions is not all that difficult to understand, once the emotion has been stripped away. Group A pays for Group B. Group A gets continually proportionally smaller, and group B gets continually proportionally larger.

I could ask my primary school-age children if this is sustainable and they would say no. Group A won’t have any money left, they’d say. Group A is beginning to understand this, it seems. The same YouGov poll showed only around one-quarter of under 25s supported the workers’ tax increase, and only one-third of under 50s (ironically, the supposedly fiscally sensible Tory voters appear to be most economically illiterate, with nearly two-thirds in support compared to one-third amongst Labour supporters).

This is the heart of an incoming inter-generational rift the likes of which we have never seen. My generation (I’d be described by demographic researchers as a late generator X-er) is the first that will be poorer than our parents. For the Millenials and the Generation Z which come thereafter, the outlook only worsens.

Researchers have estimated European life expectancy by 2065 to be well over 90, for men, and nearly 93 for women. So by then, a university graduate starting work at 21 and retiring at 68 will be non-working for almost exactly half of her life.

Her children and grand-children will pay for her to receive the state pension (and taxpayer-funded occupational pensions, should she work in the public sector), for a quarter of a century.

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In 1965, when life expectancy was 70, that same woman’s grandparents would have been funding their parents’ state pension for less than a decade.

John Maynard Keynes said: “When the facts change, I change my mind. What do you do, sir?”.

Were they being honest, our politicians would answer this by saying: “I pretend the facts haven’t changed, and if people show me that they have, I pretend that doesn’t matter.”

But the facts do matter, and the key fact here is that continually increasing state funding of non-working older people is plainly unsustainable. This diagnosis is easy, but the cure is exceptionally tricky.

And it is, of course, a fair question to ask: “Well, what would you do about it?”.

The answer to that question is that we have to transition to a system where workers pay for their own old age, when they are working. We think we do this now, because governments tell us we do. They tell us that we pay National Insurance to ‘pay in’ to our pension.

This is, of course, total codswallop. National Insurance is a Potemkin tax; a construct maintained by governments to pretend that we are paying for our future. We are not. National Insurance is income tax by another name; it is not hypothecated to any particular service, and instead is used by the government for any means it chooses. For all we know, the National Insurance we pay could end up paying for local authorities to repair streetlights.

National Insurance should, instead, be gradually abolished as we transition to paying for our own future. This is happening, painfully slowly, with the government’s Workplace Pension programme, although typically they have failed to make clear that its purpose is to, eventually, replace the state pension.

The same must now happen with healthcare and with social care. Because this has to be a long, long process, it must start now. There are two critical mistakes to avoid: the cliff-edge, and the vulnerable. A long transition is important both for eliminating a cliff-edge where an entire demographic cohort is left with no service, and for establishing a safety-net for those who have not been able to pay enough into their own pot during their working years.

Nonetheless, the end goal should be clear – a European-style social insurance system in which we pay for our own retirement; for our income, health and social care. Older readers need not be cross with me – they would be largely unaffected even if such a system was commenced now.

Instead, it will be Generation X which would likely shoulder the burden. I, for one, would be happy to do so, simply because if the burden doesn’t fall on us, it will fall on our children.

They are going to have to clean up enough of our mess as it is – climate damage, government debt, and so on. Let’s not make it worse by making them pay for us, too.

Andy Maciver is Director of Message Matters