Lord Macpherson of Earl’s Court (CB)

My Lords, I congratulate the committee on some first-rate analysis. An ageing population has been long foreseen and long debated. Very occasionally, Governments have taken action. I recall working on the reforms to SERPS introduced by my noble friend Lord Fowler in the 1980s. But for the most part, Governments have preferred to shelve decisions on the many reports they have commissioned. The result is that the cost of ageing is rising inexorably. The OBR estimates that age-related spending will rise from 26% of national income to some 35% in 2075. We can fantasise about financing these pressures through spending cuts elsewhere, but even if we abolished all expenditure on working-age and children’s benefits, that would relieve only half the pressure from age-related spending. Demographic pressures are already resulting in cuts. To pay for the ever-increasing proportion of spending accounted for by pensions and the NHS, successive Governments have had to cut “unprotected programmes” such as prisons, police and local government. The report describes the failure to solve “the social care crisis” as a scandal. But if those unlucky enough to require paid care are not going to pay for it, somebody else is—and that means the taxpayer. We need to face up to this fact. I have long argued the case for a health and social care levy. Everybody should pay it, young and old alike, and it should be payable on dividends and rents as well as earnings. For all of six months, thanks to Messrs Johnson and Sunak, I got my wish. Sadly, its abolition was the one tax cut which survived the Kwarteng-Truss Budget of 2022. At some point, it is going to have to be reinstituted, but raising taxes has its limits. The triple lock will have to go. At the very least, the state pension should rise no faster than the post-tax earnings of those in work, and we will have to take another look at the winter fuel payment and universal benefits such as free travel. Support for pensioners needs to be targeted at those who need it most. A rising proportion of the elderly is relatively affluent; more than 1 million pensioners pay the higher rate of income tax. Conceivably, higher growth may yet come to our rescue—though I rather doubt it. I was encouraged by the new Minister’s remarks on economic strategy on Tuesday. I wish him well in solving these problems, which have proven intractable for too long.