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Last Updated: Sunday, 4 December 2005, 11:31 GMT
Pension poser
On Sunday 04 December 2005 Andrew Marr interviewed Lord Turner

Please note "BBC Sunday AM" must be credited if any part of this transcript is used.

Lord Turner
Lord Turner

ANDREW MARR: I suppose almost everybody watching this programme is a member of one of the lucky generations, most of us have never had to go to war, we've been able to travel around the world, we've been wealthier, we've been healthier.

Often able to stop work relatively early and enjoy a pretty comfortable retirement as well.

But now it seems the luck is running out. We're living longer, we're spending too much, we're saving too little. Yes, it is the pensions crisis that has dominated the news all of this week.

Lord Turner spent three long years coming up with the answer.

Great debate over the last few days, there's been leaks, accusations, an entire Scandavian pine forest has been pulped for these reports, and all the press comment. Question is, will anything actually happen?

It needs ministers, it needs Gordon Brown to frame new laws and push them through parliament. But before the report was even officially published, the Chancellor's allies were pouring a pint or two of iced water on it.

(Ed Balls: "Pension reforms, they've got to be fair, they've got to be sustainable and deliver decent pensions for all people, but they've also got to be affordable, the sums have got to add up".)

Doesn't sound as if he's entirely keen then. After all this ballyhoo has the extremely clever Adair Turner just completely wasted three years of his life? He joins me now. Adair, if I may, rather than Lord Turner.

ADRIAN TURNER: Sure.

ANDREW MARR: If what really has to happen as I was saying, is there has to be legislation if any of this is going to be anything else, more than a happy contribution to the debate which presumably you don't want?

ADRIAN TURNER: That's true, we want to see action. But I think some things have changed already. Let me give you one example, a year ago you would not have found a single British politician who was willing to say publicly that in the long term the state pension age will go up. This week representatives of the Labour Party, the Liberal Democrats and the Conservatives have all said publicly that in the long term the state pension age will have to go up.

And that isn't just bad news, it's also good news in this sense that once we know that the state pension age has to go up it's possible to recycle some of the savings from that increase in the state pension age back into a more generous state pension when you get to that later age. So the debate has shifted already and something will happen.

ANDREW MARR: In straightforward terms what will happen to the average person on a normal income if nothing does change?

ADRIAN TURNER: Well, just one point I would like to make. This is a very important issue but I don't actually think it's as important or as life-threatening as climate change may be, or Aids in Africa.

What will happen if nothing changes is people will still live, they'll find a way forward, the state will look after them. But many people on average earnings, if we don't change, will be disappointed.

They will get to retirement and they will feel that relative to their income in life they are not able to live as well as they saw their parents living. And when that happens to them they'll be very grumpy about it and they will then vote for ad hoc sort of random changes and increases in the generosity of the state pension.

ANDREW MARR: And they'll blame with politicians for not doing something earlier...

ADRIAN TURNER: They'll blame the politicians for not doing something 25 years earlier, of course they won't able to vote them out because they won't be there any longer. And that is the problem of pension policy - that the consequences actually occur 25 years after the policies are made. And that is a fundamental problem, it's out of sync with the electoral cycle.

ANDREW MARR: You were dumped on by the Treasury. How do you feel about that?

ADRIAN TURNER: I think it's the completely legitimate role of the Treasury to ask questions about timing and affordability. And in fact in our report we continually said these proposals will have to be judged in the context of other priorities for public spending. But I think the most important thing in this debate is to understand the figures.

Relative to what we're spending at the moment, the proposals up to 2020 have a very small impact on public expenditure. They only become bigger figures relative to public expenditure if you assume that we would otherwise cut public expenditure. And it's very important that people understand that debate. There is no debate here about the mathematics. The mathematics was agreed between us and Treasury.

ANDREW MARR: You say, you say that. But before your report was published they were saying your figures were plain wrong.

ADRIAN TURNER: I don't think they were. I mean, I did receive the letter and I responded to the letter, so I know what's in the letter. What they were saying was, you are assuming that the base case is the present level of expenditure.

But we could if we wanted, even though we've never published a forecast that said this before, we could if we wanted make poorer pensioners quite a lot poorer by linking what is called the guaranteed credit - the 109.45 a week - to prices. If you assume that then relative to that falling expenditure our proposals are quite expensive. But I don't know any pension expert, at all, and certainly no poverty groups who believes that that is at all a realistic scenario.

ANDREW MARR: So why did they do this?

ADRIAN TURNER: Well I think, well first of all, I don't know who exactly is saying what. I come to programmes like this and they tell me they've had briefing from various people. But the briefing I actually hear, for instance, the voice of Ed Balls there, is a perfectly reasonable thing to say, it's a completely generic set of statements, exactly as I would say. These things have to be considered in the light of affordability and timing.

ANDREW MARR: Did you have a difficult meeting face to face with the Chancellor before you published the report?

ADRIAN TURNER: We've had a series of meetings with the Chancellor in which we have discussed the emerging ideas, as we've had with the Prime Minister and with various Secretaries of State as it happens, on the pensions side.

ANDREW MARR: But he wanted a range of options to be presented to ministers, not the final conclusions that you personally were determined on.

ADRIAN TURNER: Well, let's be clear. If you actually read the report and you read the key recommendation pages in the executive summary, we actually describe the way forward for the national pension savings scheme as a recommendation.

And when you turn to the right-hand side of the page which is the state, it does say these are the objectives and principles, these are options which will have to be considered. It then says there's one preferred way forward, but it makes it quite plain that there are a range of issues that have to be debated about when we actually start that reform.

ANDREW MARR: OK. Gordon Brown, most people say, is likely to become the next Prime Minister. Do you believe, given your conversations with Gordon Brown, that he is going to act on your proposals?

ADRIAN TURNER: I think that over time we will see something like these proposals enacted. I believe that because there is such a strong consensus among anybody who knows about pensions, that the broad direction has to occur. Let me talk about two sides. I think if you talk about the proposal for a new form of pension saving scheme, so that people of modest income are able to save at low cost, actually there's a lot of support for that within the Treasury as well as in No. 10, as across the spectrum.

And we may well see that. On the state side I think the real issue is about timing. There's actually lots of people in the Treasury who if you say "can you imagine that in 45 years' time 70% of people will be subject to means testing in retirement?" they say "of course not". That's not going to happen and we'll find a way out of that at some stage, we just don't need to make the decision now...

ANDREW MARR: So do you agree it will be something that's put off perhaps for three or four years until the next parliament, another General Election?

ADRIAN TURNER: That is a possibility that people will debate that option. In the report we say, look we've suggested a set of figures that start in 2010. You could delay it one or two years without seriously undermining the overall approach that we've suggested. But we've said that leaving it as late as 2015 is a problem. And that I think is the spectrum we've got to debate.

ANDREW MARR: Right. Now, you think that the whole political spectrum is accepting 67 or whatever it might be as the new retirement age. And it was broad support for the citizens' pension.

This does mean higher taxes doesn't it? Maybe not nearly as dramatically higher taxes as the Treasury has suggested. But it will mean most of us paying higher taxes.

ADRIAN TURNER: Up to 2020 it need not mean anything other than a trivial increase in taxes. Beyond 2020 it does. And we're absolutely quite explicit about that, that between 2020 and about 2040-2050, because of the retirement of the baby boom, and actually we sometimes talk about the key problem here being extra life expectancy.

In terms of the figures an even bigger effect is the fact that birth rate fell in the late 20th century and when they retire we have a lot of pensioners, as the baby boom retires we have a lot of pensioners and smaller number of workers. In that period when the baby boom retires it's very difficult to see a way forward for pensions which doesn't involve some increase in taxes.

ANDREW MARR: Tony Blair calls these proposals exciting. Do you think he is more keen on what you have suggested than the Chancellor?

ADRIAN TURNER: We have been told very clearly by the Secretary of State for Work and Pensions, and indeed by the Prime Minister who made a statement in an interview on Friday, that he believes there's a broad consensus, including the Treasury, that over time if there are more people aged over 65, we're going to have to spend more money on pensions. And also that we really can't see a way forward which has a relentless spread of means testing. And I think that that consensus now exists.

ANDREW MARR: All right, well Lord Turner, I have to say in a nasty way, slightly relieved to read that you don't have a pension yourself though you probably don't need one.

ADRIAN TURNER: No, no, that's not quite true. I mean there are various things that enter the files, like the fact that I have a large antique collection, which to any thief out there who is intending to burgle my house, I'd like to reassure you is not true, and the fact that I don't have a pension, I don't have a salary-related pension.

ANDREW MARR: And your advice to MPs with their good pensions, now looking for an extra 22%. Not the best thing to do when they're telling the rest of the country it's got to be tougher?

ADRIAN TURNER: Well the issue of their pay rate is not for me to comment on. What I have said is that as life expectancy goes up, any salary-related scheme has to be adjusted because otherwise we're handing people a more and more generous pension at a bigger and bigger cost to the taxpayer. And everybody who enjoys a salary-related scheme needs to be aware of the need of that.

ANDREW MARR: Including MPs?

ADRIAN TURNER: Including MPs, yes.

ANDREW MARR: Thank you very much indeed.

INTERVIEW ENDS


NB: this transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy


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