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Sunday, June 22, 2008

One Hundred Years of Old Age Pensions

Here's my article to mark the centenary of old age pensions, from the Daily Express. And if, like me, you think it's about time that Britain's political elite gave our OAPs the fair deal they deserve, then please lend your support, in whatever way you can to the National Pensioners Convention. The key hallmark of a civilied society is how it treats its old folk-and by that measure Britain, with the lowest state pension in the EU, is failing badly.

It has been described as the most momentous date in British social history, the day on which the modern welfare state was born. One hundred years ago (on 7th May 1908), Prime Minister Herbert Asquith announced his government’s intention to introduce an Old Age Pensions bill. For the first time in British history, the elderly would receive a pension from the state.

The idea of a universal old-age pension, payable to all elderly people as of right, was first raised in the French Revolution of 1789–99. It was however, to be another hundred years before Germany became the first country in the world to introduce pensions.

A further nine countries followed Germany‘s lead, before the British government finally decided it was time to act.

With improvements in medical knowledge, people were living longer than ever before. Yet there was no state provision for old age. In 1906, almost 20% of the population over 65 were officially classed as paupers. Women fared particularly badly; around three-quarters of the recipients of ‘outdoor relief’ were elderly women. Old people who could not rely on the kindness of relatives to look after them often ended their days in the dreaded workhouse (pictured above). By the end of the Victorian period the largest group of workhouse inmates were the elderly.

Workhouse life was made as harsh and humiliating as possible, so that the able-bodied poor would apply for relief only as a last resort. But while the system was designed to discourage the work-shy, it also meant that the elderly, through no fault of their own, were also penalised. Aged pauper couples were not allowed to share a bedroom. Workhouse inmates had their clothes confiscated and were forced to wear uniform akin to prisoners. Many suffered from malnutrition: hardly surprising considering that the standard dinner was 6oz of bread and 2oz of cheese.

The scandalous treatment of the elderly in what was then the richest country on earth led to growing calls for state intervention. In 1891, the philanthropist Charles Booth published his first old-age pensions proposals. In 1899, a Parliamentary select committee investigated and advocated non-contributory old age pensions. In 1902, a campaign group called the National Committee of Organised Labour on Old Age Pensions was formed; its founder George Barnes, defeated the Conservative Cabinet minister Andrew Bonar Law in the 1906 general election.

The fiery Welsh Liberal Party politician Lloyd George, who became Chancellor of the Exchequer in 1908, had long advocated old age pensions and was determined to take action that, in his own words, would "lift the shadow of the workhouse from the homes of the poor". But though his Old Age Pensions Act was groundbreaking, its provisions could not be described as over-generous. A pension of up to 5s (25p) per week would be paid to single men and women only when they reached the age of 70; married couples were to receive about 7s6d (35p). The pensions, although non-contributory were means tested: anyone over 70 who had some form of income had this deducted from their pension. Only British subjects resident in the country for twenty years were eligible, anyone who had been in receipt of poor relief in the last twelve months or in prison within the previous ten years was barred. In addition, pensions were not available to those who were deemed to have habitually failed to work according to their “ability, opportunity and need”.

As limited as the provisions were, Lloyd George’s proposals were for some, the thin end of the wedge. Old age pensions would prove “profoundly demoralising” and would “weaken the moral fibre of the nation”, critics like the Tory peer Lord Robert Cecil claimed.

But the government’s scheme proved hugely popular. The cry “God bless that Lord George” was heard across the country when the first pensions were paid on 1st January 1909. A huge bonfire was lit on the White Horse Hills. In Bromsgrove the streets were hung with bunting and bands paraded the streets. In Kettering all the pensioners of the town were entertained at tea and two of them moved a vote of thanks to the government. The National Society of Amalgamated Brassworkers sent a telegram to the Prime Minister which read: “Brassworkers wish you and the Chancellor of the Exchequer happiness and prosperity for the New Year. Express gratitude for State recognition of veterans of industry generally on this Glorious Pensions day”.

Over 400,000 pensions were soon being paid to nearly 45% of the population over 70. In order to remove any stigma in receiving the benefit, the scheme was administered by the Post Office rather than the parish or Poor Law. It wasn’t all plain sailing: old people who were unable to write and who failed to bring in a relative or friend to sign for their pension in the presence of officials, were told they could have no money.

Over the years, state pension provision gradually became more generous.

In 1925 a contributory State scheme for manual workers and others earning up to £250 a year and available from the age of 65 was established. The measure nearly doubled the income of pensioners. Bigger changes followed after World War Two. The 1946 National Insurance Act extended contributory State pensions to all and lowered the retirement age to 65 for men and 60 for women. In 1975, the State Earnings Related Pension Scheme (Serps) was introduced, providing a second tier pension paid by the State financed by National Insurance contributions.

Yet in more recent years, the value of the state pension has declined markedly.

In 1980, the link between state pension increases and average earnings was broken by Margaret Thatcher's Conservative government. Pension rises would thereafter be linked to prices: but because average earnings generally rise much faster than retail prices, the real value of pensions soon began to fall. It’s been calculated that if the link with earnings had not been broken, a basic state pension for a single pensioner would now be worth £145.15 a week.

One hundred years after their introduction, British pensions are now the lowest in European Union. A recent survey found that the basic state pension of £90.70 a week is equivalent to just 17% of the average earnings, compared to the EU average of 57%. The 25p a week top-up for over 80s has not been raised since its introduction in 1971: then it bought a bag of coal, now it doesn’t even cover the cost of a second-class stamp. One in five British pensioners lives below the official poverty line, the vast majority of them women.

Moreover, the UK also has one of the highest retirement ages in Europe at an average of 62.6 years, with 57% of people aged between 55 and 65 still working. The government has pledged to restore the link between pensions and average earnings in 2012, but only if it can afford to. If not, the change will have to wait at least another three years. And even then the government’s reforms are part of a package that will also raise the retirement age to 68 from 2044.

It’s often said that a civilised country is judged by the way it treats its old people. As we mark the centenary of the introduction of old age pensions wouldn’t it be nice if our politicians gave Britain’s pensioners the fair deal they deserve?


Ken said...

You are showing your youth. Five shillings was written 5/- and 35p in real money was rendered as 7/6d.

If you had pounds to write in then it would go:

£1-10/- or £5-5/6d

DAVIDD said...

"the past is another country...", I imagine that the British governments reason for introducing pensions were not purely altruistic. Not that that is a uniquely British phenomenon, after all when Bismarck introduced a welfare system in Germany one of his reasons for doing so was to cut the ground from the socialist parties feet. Was there a similiar fear of socialism in Britain at the time of the introduction of the pension? Another thing that strikes me as curious is that at the time of its introduction, as you referred to in the article, a significant minority saw this as a step towards chaos and the overthrow of society. While this view might seem risible now, I am sure that a lot of good, well meaning people had this fear. It seems to be fashionable to sneer at Victorian and Edwardian morality as merely a form of social control but I don't know that we're yet in a position to pass judgement. I think that I'll stop now as my self righteousness is beginning to irritate even me...

Roland Hulme said...

Very well written article, Neil.