EU State pension liabilities at three times gdp. UK’s are only 94% of gdp.
Very few people stop to think in life about why they’re working. However, a study conducted at Freiburg University in Germany can tell you why most of us seem to have struggled to build up even the most modest nest-egg: insane State largesse, and a complete inability to extrapolate forward what State pensions would one day cost unless proper provision were to be made.
I first spotted this study (although it was actually conducted in 2009) last week as a referenced source in some tedious EU document about ‘demographic imperatives facing the Union’. I would’ve skimmed it and moved on, had I not by chance stopped at a page while scrolling down looking for the idiots’ summary-version. This was a section devoted to France, and one figure leapt out at me: the pension liabilities of the French State are 6.7 trillion euros.
The Slog had a bit of an epi back in Spring 2010 (just before the election where we jumped off the Titanic onto the Hindenburg) about the Sir Humphreys awarding themselves massive increases in Civil Service pension emoluments after 2006. The technical term for these in government circles is ‘unfunded’. What that means is, senior Whitehall and Town Hall reptiles awarded themselves the increases with nothing in the budget for them, thinking as they did so that a future taxpayer could pick up the bill…..but then, that really wasn’t their concern: they deserved a fat retirement, so why on earth not steal it?
When I first ran this story, I had some quite heavy-hitting mates ring me to say I’d got something badly wrong, and ask was I, as it were, entirely of this world. However, last November, the public accounts committee duly confirmed the original Slog story, noting that ‘Unfunded public-sector U.K. pension obligations across 1,500 public bodies amount to slightly in excess £1.2 trillion’. What the PAC won’t give us is the analysis of how many pinstripes make up the vast bulk of that number. But I was given sight of the key document in April 2010, and it’s around 16,ooo people. The benefits accruing to these troughers doubled between 2006 and 2009. Parliament never voted on any of it. Technically – in my view – it is very close to being embezzlement; and on a moral basis at the very least, it represents fraud.
However, these are the public-sector pensions where there is a written, legal agreement. Our own measly £90 a week as OAPs we have to take on trust, and it is paid out of current account monies. It costs around £58bn pa, or just over 1,000 for every person in the country – not a bad result, actually: and unless future governments are astoundingly stupid, one that should remain relatively affordable. Despite the spin we get from Coalition handouts, this is amounts to only slightly over half what it costs the UK per annum to be an EU Member State.
To quote directly from the body of the Freiburg Report.
‘This share of GDP is the lowest of all the EU countries studied in this report’
And here’s an extract from the overall summary. Those with high blood pressure should look away now:
‘By contrast, State-funded pension obligations in France and Germany are three times the gdp of those two countries. Together they total 13.9 trillion euros, VERY NEARLY HALF of the pension bills of the 19 nation States studied by Freiburg’s authors, Christoph Mueller, Bernd Raffelhueschen and Olaf Weddige.’
Now, to compare like with like on the us-and-them sum, you simply add Britain’s OAP bill to the
fat lying useless incompetent porker public sector bill, and according to the report that comes to about 94% of our gdp.
Thus, just two EU nations – oh, surprise surprise and bless me, it’s France and Germany – account for half the entire Union’s pension trough – and in both cases, they’ve shown three times the barmy largesse of our lot.
Yet George Osborne more or less accepted today that we will be asked to cough up more IMF monies to the European Funny Farm. Yet Greeks are being asked to starve in order to save five French banks, and a motley collection of German building societies funding Spanish villas. Yet Spain has been forced to completely empty its social welfare and pension budgets in order to survive. Yet all the ClubMeds have been made to feel guilty as part of Brunhilde Merkel’s Wagnerian morality Opera.
I think that maybe here we have, revealed in its full, awful, decaying obscenity, the truth about why the EU cannot be allowed to end, and why its founders would rather eat glass shards than give up on it: for in its current existence, the European Union is a cash-cow based on honouring debt so that Franco-German pensions can continue to be meaningful. Welch on the debts, and the entire construct of a whole continent’s retirement plan ceases to be….but nearly half of that plan involves the inflated retirement expectations of just two countries.
If you thought it was madness to be an EU member State, then the broader demographics underpinning that conclusion bear some examination. According to a UN report quoted by Bloomberg this week, Europe has the highest proportion of people aged over 60 of any region in the world, and that is forecast to rise to almost 35% by 2050, from 22% in 2009.
Now tell me: would you hitch your trading wagon to a bloc where over a third of all its inhabitants will be retired by the time our grandchildren reach middle age…..and the hopeless indebtedness of that bloc means that they will not be consumers, they will be impoverished?
There is not much to commend the contemporary bonkers system of globalised neocon capitalism. But there is nothing whatsoever in these data to support the ridiculous idea that our key trading partner going forward should be the EU.
However, the numbers I quote also raise other even more pressing queries:
1. If the cost of UK State pensions is only 50% per year of the cost of being part of a trading Union with which we have a massive £55bn trading gap, why are the ordinary people of Britain being asked to put off their retirement dates to help support the bloated State pension grandeur illusions of France and Germany?
2. When is the UK political class going to tweek the grubby, grabbing snouts of the Sir Humphreys – just 16,000 of the buggers – and tell them, “Sorry, we don’t remember the PAC voting for anything for you lot after 2006″? Because were they to do so – and there is a diamond-hard commercial point to be made here – I’d say our AAA status would be more or less guaranteed in perpetuity.
I’ll tell you what I think needs to happen. I think the UK, in its dealings with the IMF, Paris, Berlin and Brussels, should start behaving as if we were the Troika in Athens. I think we should say – in a suitably patronising manner: “OK spendthrift grasshoppers – you have had your day in the sun, and now you need help. But if you want our help, then do what we’ve done: get your pension liabilities down to, say, 120% of gdp, and just possibly we can see our way to giving you some some further funds…tranche by tranche, on a monthly basis only, of course.”
There is very little less edifying than Lady Bountifuls shown to have no money, they having previously insisted that the flesh of their ethical being is as the driven snow. The British Government needs to stop apologising, and start flexing its muscles. In their current demise, the EU nations need us. With courage and determination, there is no need why we should depend on them. If Cameron’s Zen veto in Brussels eight weeks ago was a start, then fine. We’ve had the overture: can we now see the rest of the play please?