Review in the Sunday Times by one-time Brtish Labour Party minister, Barbara Castle, of an interesting new book "The imaginery time bomb" by Phil Mullan.
It is appropriate that the new century has opened with the demolition of an old myth. This book is like one of the firework displays that illuminated millennium eve up and down the country. Although it is written by an economist, often lapses into the economist's jargon and is peppered with graphs, it has running through it the gold thread of a simple answer to one of the dominant questions of today: are we old 'uns living too long and putting an intolerable burden on the country's economy?
Phil Mullan, who has specialised in the study of population changes, scoffs at the idea. What, for example, do we mean by ageing? We are all ageing from the day we are born, and the fact that we grow old is nothing new. So why the sudden obsession with it and the kind of "demographic determinism" that leads the experts to put such emphasis on it today? "Never," he writes, "has society held such a specific concern about the dire implications of ageing populations."
The reason, he argues, is part of a rightward trend to reduce the role of the state in our affairs and to undermine the welfare state that is its symbol. This explains the recent moves by the previous and present governments to eulogise the virtues of self-reliance, as expressed in the growth of private provision for one's old age. This is not justified by the facts.
For one thing, it is sloppy thinking to identify personal ageing with an "ageing population". Ageing, the author argues, is not an illness. Nor can all the elderly be lumped together in one homogeneous whole on the assumption that they will all be infirm and dependent on the working population. What matters to the budget is the "dependency ratio", and this can be fed as much by the young as by the old. We ought not to be surprised by his discovery that the under-16s can cost society more to sustain than the over-65s.
Not all the elderly are dependent. Some obvious examples spring to mind. There is Lord Denning, for instance, who died recently after many years of service to British justice, and who was 83 years old when he retired as master of the rolls. He has been acclaimed as the greatest judge of the last century. The author's graphs provide less anecdotal evidence. The number of dependants can be built up from below as well as from above. Fertility rates are as important as longevity, and these cannot be forecast as they depend on social factors such as people's confidence about what is happening to the economy.
The trouble with the statistics on which the doom-laden predictions are based is that they are projections of what happened in the past, not forecasts. Nobody can foretell what will happen in the middle of this century, as the government's own Office for Population Censuses and Surveys admits. All the indications are, however, that the elderly ratio will peak at 2038, then stabilise before falling. The ratio is growing more slowly than in the past.
Ageing, therefore, need not be a burden that automatically lops off people's economic usefulness at an arbitrary age. It "was brought into the debate to give the anti-welfare state arguments a spurious air of necessity". Ironically, this misconception was first introduced with the welfare state when the old-age pension became a retirement one. This has fed the assumption that the economic usefulness of the elderly expires at the same time, but it was some years before the concept of the "growing burden" of the elderly turned into doom-laden prophecies of economic disaster fed by such international agencies as the OECD and the World Bank. Our population has been ageing steadily over the past half century without the economy suffering any great harm.
So what is new? We have all grown up with the belief that medical progress has transformed the situation by keeping people alive who would otherwise be dead. However, the author points out that the most dramatic medical advances came early in this century when the attack on infectious diseases and improved social conditions drastically reduced the rate of infant mortality. Economic and social factors, Mullan argues, have played a much bigger role than longevity.
This is particularly true of the "dependency ratio". This has always been calculated in terms of the number of people dependent on the working population (roughly those between 16 and 64). But here we come up against another fallacy. By no means all those of working age are at work. Some people, such as women bringing up children, do not wish to enter the labour market. Others are unemployed against their will. The ratio, therefore, is affected by economic and social policy even more than by medical advance.
What then are the implications for the welfare state? This transfer of blame has encouraged the doom merchants to claim that the only way out is for people to be conditioned to save more and invest their savings in private pension schemes. The author challenges the belief that savings, however invested, can work the economic miracle. He also points out that at any given time the switch to private pension schemes in no way reduces the cost to future generations of sustaining those who cannot work. "The particular type of pension system employed - private or public, funded or pay-as-you-go - makes no difference," he argues, "to the amount of wealth required at any point in time to fund elderly, unproductive people to a particular standard of living." They are merely technical means of distributing it.
This argument was advanced by the Commission of Social Justice under Lord Borrie, which Labour set up before the election and which it has since conveniently ignored.
There is one omission in this book. Mullan is an economist, not a sociologist, so he does not even mention the decisive effect of underpinning the private-pension provision with a means-tested safety net for those who cannot afford the costly premiums of private schemes. Means-testing actively discourages people from saving for an additional pension since it reduces their entitlement to means-tested help.
None the less, this book is highly opportune. It brushes away the unscientific assumptions that are dictating pension policy today. It is to be hoped that Alistair Darling, the secretary of state for social security, will read it carefully.
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