Becoming Mexico

Neil Clark writes:

Well, at least we beat Mexico. The new OECD report on pensions reveals that for people on average earnings, Britain's state pension is the least generous of all the 34 OECD members bar one.

The average Briton's state pension replaces 32.6% of their income when they retire. Our state pension isn't just stingy compared with other prosperous western European countries. The governments of Hungary, Slovakia, Slovenia all give their pensioners more, as does Turkey.

What an indictment of neoliberal Britain. We have the lowest state pension of any major country in Europe and also the highest rail fares. The country that comes top, or near the top, in tables where it's better to come bottom, we also come bottom, or near the bottom, in tables where it's better to come top. Inequality? We're right there at the top.

Another report by the OECD, published in December 2011, said that income inequality among working age people had risen faster in the UK than in any other OECD country since 1975. Social mobility? We're right at the bottom: OECD figures in 2012 showed earnings in the UK were more likely to reflect our parents' earnings than any other country.

It doesn't have to be like this and wouldn't be if it weren't for the radical changes made to our economy from May 1979 onwards.

The decline of the state pension began in 1980 when Margaret Thatcher's government severed the link between the state pension and average earnings, introduced by Labour's Barbara Castle in 1974. Thatcher's dream was to wean people off the state and onto private provision in the same way she wanted to wean people off council houses.

Although an earnings link has been restored by the coalition, the damage has already been done by successive governments since Thatcher. The new flat-rate pension of £144 a week planned for 2016 will still be below what it would have been in 2008 had the earnings-link been maintained.

Our high rail fares, like our low pensions, are also the direct consequence of neoliberalism. A recent TUC-commissioned report found that prices on Britain's privatised railways for long distance, day return and season tickets, were around twice as much as the average fares in France, Germany, Italy and Spain.

"In France, a near fully publicly owned rail system manages to give its passengers fares, which are far lower than the UK, for almost exactly the same amount of public rail subsidy between 1996 and 2010", the report declared.

With its pitiful state pension, Britain is not only no country for old men or women, but it's certainly no country for old men and women who like to travel by train.

It's revealing to compare the situation now with 1978, the last year before our economic model was changed. In 1975 the "old" Labour government introduced Serps (state earnings related scheme), a generous scheme to top up the basic state pension.

On returning to power in 1974 Labour also raised widows' and retirement pensions by a record real increase of 13%. This move meant that pensions as a proportion of average earnings matched their previous record, set in 1965 – also under a Labour government.

In 1978, pensioners were not only getting an excellent deal from the government, with the value of the state pension rising to 20.4% of average earnings, it was also the year that the gap between the rich and poor reached its lowest level in our history. Never before had the share of income of the bottom 90% been so great and the share of the top 10% been so low.

Public ownership of transport and utilities meant lower prices for customers: in the days when the publicly owned British Rail ran the trains, you didn't need to book months in advance to get an affordable fare.

I don't know about you, but I'd rather live in a country with the highest state pensions and the lowest rail fares. To achieve that mere tinkering of the present system won't do: the left in Britain needs its own Margaret Thatcher, as determined to rebuild the progressive postwar mixed economy model as Thatcher was to destroy it.

Half measures won't get us anywhere: neoliberalism is deliberately designed to increase inequalities, destroy state provision and allow corporations to charge us much more for things than when they were in public ownership, like our utilities and our railways.

Coincidentally, BBC2 has been showing repeats of the 1978 series of the classic sitcom Are You Being Served?. The staff of Grace Brothers department store sometimes grumble at the wages that young Mr Grace pays them, but if they knew what was going to happen in the UK in the years ahead – the abolition of wages councils, the decline of the state pension, the growth of zero-hours contracts and McJobs – they'd probably have been much happier with their conditions.

The sad fact is that for the vast majority of Britons things have never been quite so good as they were in the year before neoliberalism hit. We could have been another Norway. Instead, we're becoming Mexico.