Friday, 16 January 1998


New Times, 16 January 1998

The idea that Europe should have a common foreign policy was one of the great dreams of the founders of what has become the European Union - and in one sense their dream has been realised.

The EU simply has to have a common foreign policy as it processes applicants for membership and makes trade deals.

Who is in, who is out: there's real power here, as any Cypriot or Turk or Czech or Slovak or Windward Islander will tell you.

But beyond the crude mechanisms for deciding membership of the club, the record is scratchy. On the big question of security policy since 1945 – what should we do to stop the Russians invading? – western Europe has never found any answer but to beg the United States provide a "nuclear guarantee".

Since the end of the cold war the community of west European democracies has failed miserably to rise above the competing interests of its major member states when dealing with crises on its borders.

The west European response to the collapse of Soviet imperialism in 1989-92 was chaotic, determined partly by the perceived interests of the national governments of France, Britain and Germany and partly by the US. German unification almost split the west asunder.

Far worse, the "diplomacy" of the EU as Yugoslavia collapsed – orchestrated by Britain and France – merely encouraged Serbian territorial aggrandisement and genocide.

In such circumstances, it is difficult to be optimistic about the prospects for the EU initiative on Algeria, announced by British foreign secretary Robin Cook earlier this month.

It's not that Algeria should be left to its own devices. It is clear that its government is running a policy of terrorism against its own people to legitimise its suppression of democracy. The state massacres of recent weeks are the latest in a long line since the generals mounted a coup to annul an Islamist victory in local elections in 1992.

The problem, however, is that the Algerian regime has been allowed to get away with it for so long because it has been backed by France, the old colonial power and still a force in the land, with the acquiescence or support of the rest of the west.

The argument was – and is – that if Algeria were to fall to the Islamists, Morocco and Egypt would not be far behind. In a short time, the whole of north Africa would be in "enemy" hands. The idea that the people of Algeria should be allowed to make their own choices (and their own mistakes) has never been allowed to get a look-in. The same goes for the possibility that the Islamists might just sustain a polity that is more liberal than the current one.

Of course, this anti-democratic paternalism has an immaculate left pedigree. The totalitarian regimes of "actually existing socialism" before 1989 always claimed that "the masses" were too simple, too stupid, too prone to influence by propaganda to be allowed to vote. A similar position is taken by apologists for "socialist" police states in Cuba and North Korea today. It is no accident, as the communists used to say, that many of the leading figures in the regime were once acolytes of Moscow.

But there's no reason for the EU to adopt their line. Free elections will not stop the slaughter on their own - but nothing will stop the slaughter until there are free elections. If the delegation comes back with a ringing declaration in favour of democracy, and if the governments of the EU back it up with an offer to run the polls, the initiative will at least have made a mark. Anything less will be a very sick joke.

Thursday, 1 January 1998


Chartist, January-February 1998

Many commentators have rightly complained that social security secretary Alistair Darling’s plans for reforming the pensions system, announced at the end of last year, are insufficiently radical. The trouble with the present system is simple. People are living longer but aren’t saving for their old age. By 2020 we’d need to be paying a lot more tax to sustain state pensions. This is politically unthinkable, and in any case – as Charlie Leadbeater argued in the New Statesman the other week – the tax system is in grave danger of collapsing before then because of the growth of self-employment and Internet shopping. So it is imperative that we act now to make sure everyone starts saving.

Yet Darling has done the opposite. His plan to retain the basic state pension and pay a means-tested guaranteed minimum to those who have not made their own provision suffers from a fatal flaw. A substantial proportion of people who can well afford to save will choose not to because they recognise that their chances of getting the means-tested pension will be wrecked if they have money in a pension scheme.

The only solution to this “free rider” problem is to bring home to these irresponsible non-savers the risks that they are taking. To coin a phrase, we have to be tough on prodigality and tough on the causes of prodigality. And the most effective way to do this is to abolish all state provision for pensioners – the basic pension, means-tested income support and the state earnings-related pension scheme.

This is perfectly feasible politically: I am not suggesting abolishing any existing pensioners’ pensions, nor am I suggesting doing anything to alarm anyone who will soon retire. My suggestion is that the state should withdraw from pensions provision only for those whose 65th birthday is on or after 1 January 2025. No one born before 1960 will be affected in any way. And because everyone born in 1960 or after has 26 years or more still to save before reaching 65, no one should have any difficulty in building up sufficient funds: we are, after all, an affluent society. Provision would of course be made for modest voluntary deductions from unemployment and disability benefits to pay into individual pension accounts so that everyone is able to feel that they have a stake in their future.

The economic advantages of abolishing state pension provision are many. By 2065, the demands on the exchequer from pensions would have become nugatory, allowing substantial reductions in income tax – with all that means for encouraging enterprise. Equally important, taking the state out of pensions would stimulate an ethic of personal responsibility and thrift, which in turn would have substantial beneficial knock-on effects on the British economy.

The less people spend and the more they save, the better the government’s chances of maintaining unemployment at a level compatible with low inflation – a particular headache if we are to join the European single currency. If everyone saved 40 per cent of his or her post-tax income in a pension scheme, the risks of runaway consumer demand causing the economy to overheat would disappear forever.

Getting the state out of pensions would also allow many older people to remain economically active for much longer. Older people are one of the great under-used resources of this country, and many regret having been forced into retirement at 65 when they are at the height of their powers and believe they still have much to offer. The arrival of working over-65s on the labour market would put welcome downward pressure on wage inflation, making Britain even more competitive in the global market place.

There is no reason why working over-65s could not have the same rights at work as everyone else. And if they lost their jobs, they would of course enjoy the same rights to unemployment benefits – and the same responsibilities to look for work. Anything else would be patently unfair.

However, it would be wholly utopian not to recognise that older people have a greater propensity to fall ill despite the great advances in medicine in recent years. So rules governing sickness and disability benefits for working over-65s would have to be kept under constant review to ensure costs to the taxpayer remain reasonable. On the other hand, because working over-65s would enjoy enhanced mortality rates, the costs of long-term care for the elderly who are genuinely incapable of working would be reduced.

I have no interest in benefiting from this proposal myself. Indeed, as I was born in October 1959, I would narrowly miss out on being a beneficiary – except indirectly as younger people’s changed patterns of spending and saving have their macroeconomic impact. But the more I think it through, the more its attractions become irresistible. Let’s hope Alistair Darling still reads Chartist.