A former pensions minister has said the government should admit that tax will have to rise to make up the pensions shortfall identified in this week’s Turner report.
John Denham, chairman of the Commons home affairs committee, told Channel 4 News: “My fear is although we know it’s a big problem we are not actually going to tackle it.”
Denham warned that the Treasury dominated pensions but did not really understand them. “Muddling through” was one of the options set out in Adair Turner’s Pensions Commission report, he said. “And I fear that is what will happen.”
He added: “Turner said if you don’t want pensioner poverty there are three other things you can do. More savings, work longer, or put up taxes. He said ‘please don’t rule out any of these until the report has been debated’.
“Well the report hadn’t even left the presses, and tax rises were ruled out by the Chancellor. The Tories are saying also you don’t need tax rises, we can do it all through government savings.
“So one of Turner’s key proposals and the one that actually makes most sense to most people has already died in the political quick sands. That makes me pessimistic we will not rise to the challenge.”
Denham argued that for most people an extra element of tax or national insurance would be “the most cost-effective way of looking after their own parents, themselves and their children.”
Asked whether the government should admit, before the election, that taxes and national insurance needed to rise, Denham said: “Yes, and so should the opposition. This is a critical point. All political parties have got to say that part of the answer is increased tax and national insurance. Everyone should admit that.
“Yes, we will have to work longer. Yes, we will have to save more. But part of the answer is tax, and all political parties have to admit it now.”
Denham, described by the Telegraph as a Blairite, said means testing had to be reduced over the coming decades. The paper suggested his comments were designed to put pressure on Gordon Brown to replace means testing for pensioners with a higher state pension.
The Telegraph reported that Treasury officials, stressing the high cost of a more generous state system, insisted that no decision would be made before the election.