State pension equality for women and men is justified – but more important is giving us all th

Gender equality wasn’t supposed to be financially painful for women. Yet that’s how it feels for many who have been experiencing a sharp rise in the female state pensionable age since 2010 which, as of yesterday, has finally been brought into line with the male age of 65.

Research by the Institute for Fiscal Studies last year found that the increase in the pension age has put upward pressure on the poverty rate of women in their early sixties. And a lobby group called Women Against State Pension Inequality (Waspi) has thrust the issue onto the agenda of journalists and MPs, not least the Labour leader Jeremy Corbyn.

The basic case for equalising the state pensionable age is not particularly controversial. The 1940 Old Age and Widow’s Pensions Act introduced the 60/65 disparity in favour of women in an era of entrenched gender discrimination, when women were generally expected to devote themselves to raising children at home and men were seen as the main earner of a family. The earlier pension age for females was conferred in an environment of extreme disadvantage for women in the workplace, when they tended to earn far less and accumulated far fewer years of social insurance contributions.

But the structure of the labour market has changed dramatically over the past 70 years, with many more women in jobs. As recently as the early 1970s, the female working age employment rate was just 55 per cent. Today it is at 71 per cent – a record high. The male employment rate, by comparison, is 80 per cent.

Of course, women continue to face disadvantages and discrimination in the workplace when it comes to pay rises and promotions, particularly for those who return after having children, but there are few who argue that a lower female state pension age should be used as a partial compensation for all of this.

The fairness question over pensionable age equalisation relates to the handling of the transition. Did successive governments do enough to inform women that the change was coming, to enable them to plan for it? Was the transition, which was accelerated by the coalition government in 2011, too rapid? Should all women who have been affected be compensated? Or only those who are worst off? These are questions on which reasonable people can disagree.

Yet it would be unfortunate if this debate were to crowd out discussion of other, deeper-set problems with UK pensions. One of the reasons the state pension gender equalisation debate gets attention is that it is relatively easy to understand. But bigger injustices now actually lurk in the sphere of private, rather than state, pensions.

The introduction of “auto-enrolment” of workers into “defined contribution” workplace schemes in 2012 was a good reform, using people’s natural inertia to nudge them into saving. The results have been impressive, with the proportion of employees covered shooting up from half to three-quarters. But, on its own, auto-enrolment was incomplete and might even potentially prove counterproductive.

This is because there is rampant ignorance and confusion among the public about how the kind of pensions onto which they are increasingly being enrolled actually function. A recent survey found that around a quarter of people aged 55 and over admit that they don’t know how such pensions work and never check their pots. In a speech in 2016, even the Bank of England’s own chief economist, Andy Haldane, confessed to being baffled by pensions. “Conversations with countless experts and independent financial advisors have confirmed for me only one thing – that they have no clue either,” he added.

So what is being done to rectify this terrifying knowledge gap? Not nearly enough is the answer.

The government has been hesitating on creating a promised “pension dashboard” so people can monitor all their pension pots, from various employers, in one place, and with consistent information on projected income streams in retirement, enabling them to plan for their retirement accordingly. The pensions industry has introduced a proposal for simpler and less confusing annual pension statements but is still, disgracefully, dragging its feet on the transparent disclosure of fees for fund managers.

We need a much broader government-sponsored financial literacy drive, to introduce people to the basics of compound interest, inflation, portfolio diversification, annuities and the fundamental importance of keeping costs down.

We do not just have gender equality in the state pension age. There is also broad gender equality in a paralysing sense that pensions are mysterious and out of our control. All of us – women and men alike – need urgent assistance to rectify that.

#pensions #statepension

Sometimes the real economic gamble is sometimes too little government borrowing – not too much

With his dad jokes and fetish for spreadsheets, Philip Hammond does not fit the stereotype of a “gambler”.

But the Institute for Fiscal Studies (IFS) nevertheless argues that the chancellor rolled the dice in last week’s Budget and took a rather risky wager.

Instead of using his lower borrowing projection “windfall” from the official independent forecaster to reduce the deficit more rapidly, Hammond essentially spent it all on the health service, while leaving the overall path of government borrowing more or less unchanged.

He could have had a projected budget surplus in five years’ time, but instead there’s still set to be around £20bn of borrowing in 2023-24.

Virtually the entire UK news media took up this “gambler” theme in their headline coverage of the aftermath of the Budget.

Yet we should be extremely wary of this framing. Because it obscures the crucial truth that, in economics, the gamble is sometimes borrowing too little, not too much.

The IFS, to be fair, was using the phrase in a narrow sense of the chancellor jeopardising his chances of meeting his own self-imposed fiscal rules.

Those Office for Budget Responsibility (OBR) borrowing downgrades – whose origins remain mysterious given the official forecaster hasn’t upgraded its nominal GDP or growth forecasts which would be the most obvious explanations for higher than expected tax receipts lately – could very well be reversed in future budgets.

Since 2010, most underlying borrowing revisions have been negative (implying more borrowing than previously expected) rather than positive for the public finances.

What the lord of forecasting (in this case OBR director Robert Chote) giveth, he can also taketh away. He even warned as much last week

And what would happen then? Would Mr Hammond really try to hike taxes while the government is walking the tightrope of a hung parliament? Would he cut public spending when the prime minister has told the country that austerity has ended? Isn’t it more likely that the result would be more borrowing? And what would happen to his fiscal rules then?

All this raises the question of whether or not the chancellor’s fiscal rules are sensible. If a man had resolved to jump off a building, we wouldn’t describe a decision to place obstacles between himself and the ledge as a “gamble” because it might mean him not achieving his suicidal goal.

Hammond’s rules, including a deficit below 2 per cent of GDP in 2020-21, are not suicidal. They are far less economically destructive than those of his predecessor George Osborne, who was insisting on running an absolute budget surplus in 2019-20, ignoring the advice of just about every independent public finance expert.

Yet there are other fiscal rules available. There is no reason to believe Hammond’s represents perfection. Indeed, it’s quite possible for a country to borrow indefinitely and still see the debt stock as a share of GDP decline provided (roughly) that the growth rate is higher than the deficit as a share of output.

Labour’s own fiscal rule targets a day-to-day budget surplus in five years’ time with a suspension if interest rates are still stuck close to zero, meaning monetary policy and the Bank of England cannot reliably help to boost growth if we go into recession.

That’s a perfectly reasonable rule, consistent with stable public finances, and one which requires less consolidation – and allows more near term borrowing – than the Chancellor’s.

And then there’s the state of the overall economy to consider.

The OBR judges that there is now no slack in the UK economy, suggesting any additional borrowing would be inflationary. But the OBR may well be wrong about that. Several other credible forecasters think there remains an output gap. Oxford Economics puts it at more than one per cent.

And even if we were to accept that the economy is running roughly at capacity, an output gap could easily open up again if we have a chaotic Brexit. At that stage additional public spending will be an economically stabilising influence, just as it was during the last recession.But the media’s wholesale adoption of the “gamble” framing from the IFS briefing, and the failure to put it in the specific context of the chancellor’s own chosen fiscal rules and the neglect of all questions of macroeconomic management, is evidence of what the Oxford professor and magisterial economics blogger Simon Wren-Lewis has rightly called “mediamacro”

A key element of mediamacro is the naive assumption that higher government borrowing is inherently dangerous and that lower borrowing is always praiseworthy.

This is a rule of thumb used by far too many political journalists, commentators, presenters, editors and producers. Some of them do it for ideological reasons, out of their desire for a smaller state and tax cuts. Some lazily accept the framing of politicians. But most ubiquitous and dangerous are those who consider themselves to be neutral and non-partisan yet still drift into looking at fiscal policy through this distorting prism.

It’s depressing and really rather shameful that after a decade of well-documented macroeconomic mistakes across the western world, it’s apparently still necessary to restate the truth that a national economy cannot be usefully compared to a household, and that the only kind of economic “gamble” some seem able to recognise is the one where the risk is more borrowing.

#GeorgeOsborne #PhilipHammond #Budget #SimonWrenLewis #deficit #mediamacro

Sometimes the real economic gamble is sometimes too little government borrowing – not too much

With his dad jokes and fetish for spreadsheets, Philip Hammond does not fit the stereotype of a “gambler”.

But the Institute for Fiscal Studies (IFS) nevertheless argues that the chancellor rolled the dice in last week’s Budget and took a rather risky wager.

Instead of using his lower borrowing projection “windfall” from the official independent forecaster to reduce the deficit more rapidly, Hammond essentially spent it all on the health service, while leaving the overall path of government borrowing more or less unchanged.

He could have had a projected budget surplus in five years’ time, but instead there’s still set to be around £20bn of borrowing in 2023-24.

Virtually the entire UK news media took up this “gambler” theme in their headline coverage of the aftermath of the Budget.

Yet we should be extremely wary of this framing. Because it obscures the crucial truth that, in economics, the gamble is sometimes borrowing too little, not too much.

The IFS, to be fair, was using the phrase in a narrow sense of the chancellor jeopardising his chances of meeting his own self-imposed fiscal rules.

Those Office for Budget Responsibility (OBR) borrowing downgrades – whose origins remain mysterious given the official forecaster hasn’t upgraded its nominal GDP or growth forecasts which would be the most obvious explanations for higher than expected tax receipts lately – could very well be reversed in future budgets.

Since 2010, most underlying borrowing revisions have been negative (implying more borrowing than previously expected) rather than positive for the public finances.

What the lord of forecasting (in this case OBR director Robert Chote) giveth, he can also taketh away. He even warned as much last week.

And what would happen then? Would Mr Hammond really try to hike taxes while the government is walking the tightrope of a hung parliament? Would he cut public spending when the prime minister has told the country that austerity has ended? Isn’t it more likely that the result would be more borrowing? And what would happen to his fiscal rules then?

All this raises the question of whether or not the chancellor’s fiscal rules are sensible. If a man had resolved to jump off a building, we wouldn’t describe a decision to place obstacles between himself and the ledge as a “gamble” because it might mean him not achieving his suicidal goal.

Hammond’s rules, including a deficit below 2 per cent of GDP in 2020-21, are not suicidal. They are far less economically destructive than those of his predecessor George Osborne, who was insisting on running an absolute budget surplus in 2019-20, ignoring the advice of just about every independent public finance expert.

Yet there are other fiscal rules available. There is no reason to believe Hammond’s represents perfection. Indeed, it’s quite possible for a country to borrow indefinitely and still see the debt stock as a share of GDP decline provided (roughly) that the growth rate is higher than the deficit as a share of output.

Labour’s own fiscal rule targets a day-to-day budget surplus in five years’ time with a suspension if interest rates are still stuck close to zero, meaning monetary policy and the Bank of England cannot reliably help to boost growth if we go into recession.

That’s a perfectly reasonable rule, consistent with stable public finances, and one which requires less consolidation – and allows more near term borrowing – than the Chancellor’s.

And then there’s the state of the overall economy to consider.

The OBR judges that there is now no slack in the UK economy, suggesting any additional borrowing would be inflationary. But the OBR may well be wrong about that. Several other credible forecasters think there remains an output gap. Oxford Economics puts it at more than one per cent.

And even if we were to accept that the economy is running roughly at capacity, an output gap could easily open up again if we have a chaotic Brexit. At that stage additional public spending will be an economically stabilising influence, just as it was during the last recession.But the media’s wholesale adoption of the “gamble” framing from the IFS briefing, and the failure to put it in the specific context of the chancellor’s own chosen fiscal rules and the neglect of all questions of macroeconomic management, is evidence of what the Oxford professor and magisterial economics blogger Simon Wren-Lewis has rightly called “mediamacro”

A key element of mediamacro is the naive assumption that higher government borrowing is inherently dangerous and that lower borrowing is always praiseworthy.

This is a rule of thumb used by far too many political journalists, commentators, presenters, editors and producers. Some of them do it for ideological reasons, out of their desire for a smaller state and tax cuts. Some lazily accept the framing of politicians. But most ubiquitous and dangerous are those who consider themselves to be neutral and non-partisan yet still drift into looking at fiscal policy through this distorting prism.

It’s depressing and really rather shameful that after a decade of well-documented macroeconomic mistakes across the western world, it’s apparently still necessary to restate the truth that a national economy cannot be usefully compared to a household, and that the only kind of economic “gamble” some seem able to recognise is the one where the risk is more borrowing.

#Budget, #deficit, #George #Osborne, #mediamacro, #Philip #Hammond, #Simon #Wren-Lewis