The Welfare Time Bomb

Last week I mentioned that we are sitting on a massive Pension issue here in the UK and that it isn't going to get any better as this year, for the first time in the last 10, our population grew because the rate of births exceeded that of deaths and overtook immigration as the primary cause of population expansion in Britain.

We now have 61.4m living here and 791,000 births took place in the UK last year, with a trend, for the first time in a while, that younger people are contributing more. As an increasing share of the population gets older and so drains the Welfare State on health grounds and burdens us with paying state pensions for longer, we have other issues at the new born end to contend with.

Not least, that many births puts its own strain on the NHS and other parts of the Welfare System. But an interesting fact is that a quarter of all those births were from parents who were not born in Britain so immigration was, in fact, again the largest contributor to population growth after all. William Hague famously fought and lost an election campaign on the immigration issue and tried to make it a political, not racial, debate. He failed and was laughed out by the Blair spin merchants who claimed he was barking up the wrong tree. But how wrong was he?

Studies show that the optimum population for Britain to get sensible well being is between 17m and 27m and this is based on studies, albeit mainly subjective, across the globe of countries who enjoy relatively low density pockets of population. The US came top rather oddly as you wouldn't think their inner cities showed a great deal of social well being or the murder rate wouldn't suggest such either. As with many pieces of Government funded, utopian work, the study is a bit previous unless we want to embark on a program of selective extermination as there are roughly 2-3 times the optimum number of people here already. And the population is rising - at around 0.7% per annum and this is three times the rate of the 1980's.

So as our tax take drops, in recent months by as much as 20%, as corporates currently make less and less people are working, and this figure is expected to fall further as unemployment homes in on 3m, we have a massive time bomb ticking at both ends of the spectrum. More babies are being born at a faster rate than before while we are living longer. The Welfare State as it stands and is funded today, simply will fall over in the very near future. Oh, and there is another, minor problem, that may disappear in 2032 - we have much increased borrowing as a nation as we have pledged so much into the failed banking system, which wasn't exactly planned for.

Put in those simple terms, we have a major problem facing Britain. It's all very well to moan about immigration being an issue but it's a done deal. In fact, if anything, more people are leaving than arriving now. Perhaps they can see the problem better than the rest of us. The Welfare System will implode - and we are not that far away.

We talk, this year, of a lost generation of youth as young people have been disproportionately been hit harder by the recession in terms on unemployment than older people. We are also talking of raising the retirement age, as we cannot afford the state pension payments for longer living people, to 68 and even 70, which only postpones the problem. But it creates a huge problem for young people arriving on the job market - what chances do they have of getting a good start to their career and what chance do they have of progression if older people stay in senior roles progressively longer?

The answer may actually see Britain suffer a 'brain drain' much as Ireland experienced some years ago. But it is different for Britain as we have a dense and ageing population and we don't have generous payouts by the EC to help incentivise companies to relocate here. In fact, we are becoming a less attractive proposition as our employment laws fall into line with Europe and greater strain will go on employers to retain, potentially, less flexible staff for longer who will require senior levels of pay and benefits. Meanwhile, at the bottom end, we will see a greater onus on employers to put greater provision aside for pensions for new staff as time goes on. What happens next may already be occurring as this week BT, one of the largest employers in Britain, announced that it had suspended its graduate entrant scheme - while many others have cut back the number of graduate entrants.

There is now the standing joke that the best prospects of a career start for many new graduates are call centres - what a training ground for Britain's best talent.

What the credit crunch and recession has done is to bring the underlying issues into stark focus for us all but we have yet to understand the implications. It comes to stupid things like this - as we fight two major wars in Afghanistan and Iraq, we have stopped our Army Reserves, the TAs, from training with live rounds while regulars also have seen their training with live ammunition be cut back in order to cut costs. We have systematically reduced the Armed Forces and its capability at a time when it has been most utilised since WWII. But such stupidity is now prevalent at all levels with retirement ages increasing while unemployment in the young is peaking.

What it all boils down to is that the Master Plan set out by this Government, underpinned by a Fiscal Policy that relied out a banking system that had to continue to grow way beyond the actual growth of the nation, was fundamentally and catastrophically flawed. I don't know if any other Political Party could have done or will do any better - in fact, I severely doubt it given their absurd utterances - but I do know that the whole New Labour Project was built on bright ideas by 'champagne charlies' who thought if they talked a good story rather than execute the plans sensibly, the whole world would just go along with them.

Well, they have got us into a hopeless situation that isn't going to get any better until they get their priorities right and they address the real issues of this nation rather than pandering to the whims of a small number of incredibly wealthy people because they only want the world set up to serve them.

It could not be further from the make up of the Labour Party. It could not be further from what this country needs.

New Report - State Pension To Be Paid Hours Before Death

The situation on State Pensions is getting so farcical that it may well be that we may only be eligible to draw one hours before our death rather than at a specific age.

We laugh? No. On the one hand we will be more aggressively screened via our DNA by insurance firms to find more reasons why we cannot have life insurance or critical illness cover as they will see from our genes whether we are potentially likely to have diseases of some kind at some point in our lives, and the other the State has strategically accrued for our retirements so badly that the pot will not cover a pension for us until we are a few hours before expiration.

Lord Adair Turner (oh no not him again - the serial report writer and FSA failure? Yes it is he!), wrote a report a while back which has been avidly grabbed by a clueless Government to get into law that the retirement age will be raised to 68 shortly. Now, the UK pension's regulator, David Norgrove, reckons that could be raised to 70.

I mean, come on. We pay astronomic amounts of tax and National Insurance - the employer pays a whack of National Insurance for each employee too and still we have no money? And let's be realistic, in an era of non-ageist political correctness, is it wise to believe that people should stay in employment that long, particularly as young people have been hardest hit in the current sharp rise in unemployment? What prospects for the future for our young?

The writing is on the wall. The bank of ideas are empty. We are going to have to work like domestic animals to our dying days because the state isn't going to provide for us despite the vast money we pay into the tax pot. Makes you wonder what on earth all that money has been spent on.

Bureaucracy springs to mind - about 1 in 4 UK jobs are in the Public sector thanks to the rise in layers of administration by this Government. Two major wars would be another. Massive, unchecked spending in Government departments like the MoD and NHS where we see little return for our tax pounds while we already know how much just keeping Politicians in the life they so richly deserve costs.

If you are in any Public Sector job then you excluded from the above shock figures, of course. Such employees are the chosen ones where the Government has granted them superannuated, index linked pensions - based on final salaries - the sort that the private sector can't afford. As the Government has not accounted or accrued for such lavish pensions, of course, it will be our fresh tax money that goes to pay for it. And it is rising as bureaucracy rises, the layers of Government rise and the cost of paying for them rises too.

But hang on. We have also 'agreed' to bail out the banks. Because of the extra burden on the State for doing so, underwritten by our tax money, the available money to be spent on Public Services is going to have to decrease - massively - in the next 20 years in order to pay for the failed gambles of the boys in the financial world who are now gearing up to pay themselves £billions in bonuses for conning us all that they should be allowed to do it all over again.

So the available money for pensions is actually decreasing and the current estimates of idiots like Lord Turner, who has so many jobs he won't have to worry about his retirement as he will be on boards and quangos probably long after his death and he probably already has difficulty remembering which one he should be turning up to each day, are already defunct even before they have cleverly press released them.

We did a really good thing in bailing out banks. All that money has gone down the financial drain and has done us not a jot of good, but has made us all far worse off. Clever.

Some 20+% of our remuneration between us and our employers goes into National Insurance every single year of our working life, I am not even thinking about PAYE tax here. Surely, there is more than enough to provide more than a pittance of a pension for a person in retirement here and chip in for the vast dole queues out of that?

But I can't add up like Lord Turner or Darling or Brown. They are the masters when it comes to the economy. Leave it to them and we will all be ok. Just hang onto your job as long as you can turn up to work or are alive, whichever comes first. I am even looking into legally bequeathing my job to a relative or keeping it after my death as there may be no money in the pot in the hereafter due to bail outs in the afterlife - I will let you know how I get on.