Daniel Godfrey's report on pension provision for the lower-paid warrants great scrutiny. He is suggesting that the Government increases borrowings now to fund the future pension for today's workers.
As interest rates are currently low, making it cheaper to fund the national debt, thanks largely to a red-uction in the net Government borrowing requirement assisted by increased compulsory purchase of annuities which enforce increased investment in gilts, his suggestions have logic.
We do have a low national debt in Britain compared with the rest of the EU. However, we also have the most rundown infrastructure of roads, railways, London Transport, hospitals, education and low-cost housing. The inefficiencies and losses are massive.
Maybe if a few bright sparks in the Treasury could endeavour to apply their brains to evaluating the economic cost to the nation of such a rundown infrastructure, it could be established, I venture to suggest, that increasing the national debt right now at low interest rate cost and investing that money in improved infra-structure could improve the financial health of the nation.
In, say, 20 or more years, when we enjoyed the benefits of that investment, the greater wealth so created by those improvements would fund the cost of improved state pensions for present-day younger work-ers who will retire in 20 years. May be such a plan could be the answer to the problem of London Underground.
There is clear evidence now that the private/public owner-ship plan desired by the Treasury is looking pretty discredited. Why not invest public money in the Under-ground system just like every other country in the world and then enjoy the financial rewards which accrue from that invest-ment (by helping to retain, not lose, the international status of London as the financial centre of Europe). These benefits will then fund the extra state bene-fits for retirees 20 years hence.
I suggest that the cost of getting through university and then trying to put a roof over one's head is such a problem that most young people are preoccupied with that rather than a pension in 40 years.
Let us suppose that compulsory pension funding arrives. If it is a traditionally funded investment-linked pension, are there the invest-ments opportunities available in the UK, now that there are so few capital-intensive industries in Britain to offer a home for that “wall” of money?
Mr Godfrey offers an alter-native, which is worthy of disc-ussion. Equally, if it is right to fund future pensions out of equity investments now, it could be equally right to fund future pensions at least in part out of investments by the state now in the infrastructure which is so rundown from years of underinvestment by both parties.
There is room for many methods of funding pensions. All solutions need to take account of the same premise, however. People are living longer and cost more in old age. These issues need addressing. Mr Godfrey has part of the solutions just as much as occupational and personal pension savings.
Troy French & Partners,