Public Policy Conjectures

Strategies 6 and 7 of the 10 Strategies

This fourth essay considers how to raise wages, and by that means and other action, to reduce the welfare bill

Our starting point is the 10 strategies repeated again here:

1    Economic modelling of this proposed programme

2    A 20 year programme of redeploying wasted resources

3    Responding to climate change and tackling plastics

4    Establish a North/South divide and Southern restraint policy

5    Private sector investment

6    A 20 year programme of raising wages and incomes

7    A 20 year programme of reducing benefits

8    A 20 year programme to create a society where food and housing are paid from the income of each person and family, and pensions and social care in old age are paid from their savings

9    Public sector investment and day to day spending

10  Continuing to promote high tech etc

Strategy 6  A 20 year programme of raising wages and incomes

Wages

Whilst even the idea of deliberately raising wages is regarded by some people as quite ridiculous, my proposal to actually do it, will be regarded as totally mad.  And if I support my idea by quoting Boris Johnson, whose aim was a high wage, high productivity workforce and economy, then I have utterly damned myself.  And if I obstinately persist in this argument and point out that the whole purpose of economic growth is to put up real wages, whilst the rest of the nation believes in cost-cutting and economy, then I put myself utterly beyond the pale and in company only with Liz Truss.

But economic growth, an increasing standard of living, being better off than the previous generation, all means real wages rise, and richer workers buy more goodies.  In this world of high wages, waiters can eat in the restaurants in which they are employed.  Milkmen like Raymond Brigg’s parents buy their own house.  Deliveroo riders, likewise.

I discuss later how the average family in 1900 Britain was 100 times better off than in 1800.  That means their real wages were 100 times higher.  Because of low long-term inflation rates, their money wages were vastly closer—only roughly doubling from 50p to 70p per week to around £1.50p.  But twice the wages bought 100 times more goodies.  Wages in 1939 were still only £2.30p to £2.60p.

These figures will sound astonishing.  I found them astonishing. But they are the best estimates around of how the average family has become richer as a result of the Industrial Revolution. Modern high inflation rates are a feature of the 1970’s onwards.

So if we wish to see poor people able to buy their own homes and provide a pension for themselves, then they must have higher wages than today.  They will then no longer be entitled to benefits.

And such a long-term programme will and can only be accomplished hand in hand with a reduction in the welfare budget.

Raising the minimum wage will be one means of doing this. But restoring unions that can negotiate fairly with employers will be another.  The whole idea that one employee can negotiate a fair wage for himself with Shell or Mike Ashley is clearly nonsense.  Some increase in real wages will come from better employment and working conditions.  A major driver will be investment, public and private to drive up productivity.  Of private investment, I have already written.  Public investment comes later.  Good wages contribute to managing climate change and redressing regional imbalances. These all contribute to economic growth, which drives up real wages.

But like all these strategies, raising wages depends on a shared vision of what is attainable, together with agreement that none of these 10 strategies works on its own.  Neither are they a “package” that must be taken in its entirety or not at all: they are open to change, improvement even replacement, by wiser heads.  

Pensions

After decades of disruption and pussy-footing about, pensions need to be taken by the scruff of the neck by government.

Public concern from politicians and the nation so far about pensions  seems to be about the social problems: will I ever be able to retire?  Will I have a big enough pension?

This concern is hugely under-stated.  We have failed to save for pensions; we are still not saving for pensions; we have no intention in the future of saving enough for pensions.

What also concerns me is, “Who will eat in restaurants when we—my generation—die?”

Restaurants and eating out generally, much of leisure and heritage related activity, all depend on pensioners with lots of money to spend—like us. A lot less people will frequent them in 20 years’ time, because the then retired will have smaller pensions. We know that to be a fact as we know who will then be retired and we know their pensions will be poor because we know they have not been saving anywhere nearly enough.  This will happen anyway: it is now inevitable.

We can stop it getting any worse.  But at the moment the nation is only pussy-footing around the problem.  The government’s efforts still only produce less than adequate future pensions.

The answer is quite simple.  Workers must work for more years (because of the demographic change), and save more. Moreover, we must return to the “final salary based pension”.  This is because everyone wishes to continue their current lifestyle when they retire. That is founded on their final salary. We did, and so did our contemporaries, if they had that type of pension. Workers are richer now: so it can be done today as well.  Besides, why have a crisis on retirement of not being able to live as you are and have been, maybe not in the same house with the same friends?  Such a crisis is avoidable —by working longer and saving more.

Saving, inflation, constructing a pension scheme, investing the funds: none of these have changed in the last 100 years.  Nothing has changed to make a final salary scheme unachievable. It is a myth that we cannot afford them. What has changed is that we live longer.  But as we are also much richer, we can afford more easily to save the greater amounts required.  So pension schemes have to be significantly re-thought. But what’s the sense in having a pension that is not inflation-proof and, as a result, the pensioner has no idea what on earth it will be worth. And what’s the sense in each person saving for their own pension when they don’t know how long they are going to live?  We do know how long 10,000 future pensioners in a fund are going to live.

But we do need to start saving when we start working.  This will only happen with government and employer intervention; with paternalism, community action and not leaving it to the individual, particularly the young individual, to take the initiative.

Indeed, it is quite unreasonable to expect any 20 year-old entering into the fun and challenges of life, doing a world tour, clubbing, buying a car, seeking a career, choosing a partner, getting married, finding somewhere to live —and excite them at the same time to sort out their life in 50 years’ time.  What young person should be doing that?  You can’t imagine that’s being Bill Gates’ first thought at that age, or John Lennon’s, or even mine.

So we need an interfering, busybody, employer pension scheme and lacking that, a government intervention. Nannying is the order of the day when it comes to saving for pensions.

We also need a re-appraisal of what % of final salary is needed to maintain a family in retirement. Why was it normally 50% or more?  I have no idea what is required now.  I don’t for one minute think anybody else has.

Pensions for those renting their house

All those renting a house need higher pensions than those who own a house and can reasonably be treated as having paid off their mortgage before retirement.

This extra pension should presumably only have to cover rent. And with the changes proposed later to drastically reduce rents, this amount should be significantly smaller than mortgage repayments, maintenance etc plus owner’s profit.

But as tenants are poorer workers anyway, and their ability to afford pensions is limited, then establishing, for the first time, proper adequate pensions for such families is a new and big task. Poorer people have to save more than the rich for their old age.

Tackling pensioners’ rent burden is discussed further in a review of the state pension, which follows social care.

Social Care

For home owners then the obvious route to the provision of social care, when living in the family home is no longer possible, is to sell the property and use the proceeds to fund social care.  That is our personal family plan, and our responsibility.

However, the bulk of homeowners wish to pass their property, without paying any inheritance tax, to their offspring.  By this, the wealth they have enjoyed, (and may have worked hard to achieve), is passed to the next generation, who have a good start to life.  A large number of these homeowners then seek someone else to pay, or help pay for their social care: taxpayers—which in effect means themselves!  After that they want tax cuts!  The mega-rich don’t mind, as they can afford social care out of their savings anyway.

Home owners represent 62% of families.  Given the state of opinion in the country they have clearly been very effective in arguing their case and defending their corner.

I find the whole argument quite illogical and totally inequitable — but no doubt I have missed a trick or two.  But this is a nettle that must be grasped.

Tenants and other folk who struggle to save for a pension and struggle even more to save for the higher pension needed by tenants, never reach the point of struggling to save for social care.  They don’t save for that and they can’t.

Social care for them must fall on the state until such time as they have adequate pensions for normal retirement living.  Then the situation can be reviewed again.

State pension

I was going to suggest the state pension remains until such time as all families have adequate pensions, as I have no alternative suggestion.

Moreover, the present government is now tackling its uncontrolled cost. However, Burnham’s attack on the triple-lock has upset Unite, who point out the UK state pension is extremely low by international standards.  Reducing its rise is unjust.

But on the face of it, Tim Harford’s adviser on “More or Less” this morning, more or less destroyed her calculations, (Wednesday 7 October 2026).  But a thoughtful review of the “correct” figures seems to me to reveal that her argument is still absolutely correct.  The Unite comparison could still be valid, especially compared with the French state pension which could be twice that of ours. It depends rather on whose pensions are being compared.

We get excited about the state pension because poor people only have that.  They don’t have an extra pension like richer people, still less a “gold-plated pension” like mine. (Don’t forget I said above we should all have, and can all have gold-plated pensions.)

Tim Hartford’s advisor quite correctly standardised the international comparisons —by including all pensions state and private.  This gives a statistically defensible international comparison. But it compares pensions for the entire population of retirees.

If we only compare pensions for poorer people, for those with no private pensions to supplement the state pension, then the corrected comparison is totally misleading.

France has a much higher state pension than the UK.  So poorer people there have a much higher pension.  And as private or employer pension schemes play much less part in France than they do here, then everyone, rich and poor in France, receive a much more similar sized total pension than in the UK.

In other words, poorer people here receive a much smaller proportion of total UK pensions than they do in France.  They also pay rent which which richer people do not.  So the demands on their smaller pensions are much higher than those on the pensions of richer people.

Unite, it appears, is justified in its concern, even anger at Andy Burnham.  Whilst average pensions are much the same in France and Britain, pensions for poorer families are much smaller  in the UK.

So I am now calling for a major review of the UK state pension scheme, with particular emphasis on its relevance to both rich and poor sections of the community.  And also with particular consideration for retirees still paying rent.  It seems there should be a higher state pension for those persons.

Strategy 7  A 20 year programme of reducing benefits

Previous attempts to reduce benefits tried to answer the question, “How the hell do we stop spending so much money on welfare?  Surely loads more people can look after themselves. Why do they need a Nanny State ?”  The Victorians divided the poor between the undeserving and the deserving poor.  The harsh regime of the workhouse was designed to make the poor prefer work to the workhouse.  And of course there were, and still are scroungers.  So we are right to worry about the total bill?  And what are the proportions of deserving to undeserving?

Jesus said, “The poor you have with you always”. And we find in the Acts of the Apostles and I guess in the letters, references to Christians and churches supporting the poor. That suggests something similar amongst the Jews of Palestine .  And I can’t imagine that was peculiar to Judaism, but was probably found around Roman and Greek temples and elsewhere.

In Christendom, relief of the poor was a key role of churches and the clergy.  When the monastic orders and monasteries were destroyed by Henry VIII, the whole system collapsed and was eventually replaced by the poor laws of Elizabeth in 1601, when parishes were give the task.  This lasted till the Poor Law Amendment Act of 1834 which ushered in the workhouse.  At the end of the 19th century piece-meal reforms began, including the state pension.  The system culminated as we know in the creation of the Welfare State under the Labour Government of 1945.

Unfortunately, poor people are still part of British society.  We wish to help them and to enable them to stand on their own feet.  To do this we try to understand their needs and the best ways to help them turn things round.  As a community we also take a view on what we, the grant givers and taxpayers, perceive to be their needs.  Need, and need as seen by the needy, and need as seen by the donor of help, are three similar but not identical things!  That makes the task more difficult!

And turning things round is also complex.  Those with no transport can’t easily move to new jobs.  Those on zero hours can’t regularly attend training courses, if they can get to them.  Those whose basic education has been inadequate have further problems. Some families simply can’t organise themselves. Those in their 50’s find job opportunities are fewer.  And there are those with gambling or debt or other problems  and those with mental illness, whether temporary or longer-term. Those without these disadvantages will get new jobs or overcome lengthy illness.

But grants and benefits have only been invented and survive because of some perception of need; and without addressing the need, there is little hope of significantly reducing the welfare bill. One way is to spend more money and staff time on giving help.

But this Vision is about doing much, much more.  In particular it is about increasing wages as an indirect but powerful way to reduce the bill.

Moreover, the proposals later, on housing, will reduce housing benefit and avoid some of the growing costs of social care.

Increasing job opportunities as proposed earlier, and training as proposed later, will reduce the NEETS bill.

But one of the key drivers of the rising welfare bill is sickness and disability.  This seems to be a function both of current social conditions and also of demographic change.  We are all getting older and more clapped out it seems.

My paper on mental health, already published on my blog, discusses changed social conditions.  It demonstrates that politically made changes, together with social and technological change have increased stress and anxiety in the population as a whole and in certain sections quite severely.  This may well affect mental health negatively.  It may be one of the causes of Wes Streeting’s excitement in late 2025 about increasing mental health diagnoses.  A national review has now reported on this.  But it remains to be seen if it has any impact, as it has been hijacked it seems, by national excitement about a small part of its recommendations: on ADHD.

So the politically engineered changes to social conditions identified in my paper on mental health can all be reversed by government.  There is a very practical solution to hand. On the face of it, this will somewhat reduce health and welfare bills.

On the other hand, a growing proportion of aged persons in the population is the result of better health care  and nourishment (thanks to the NHS and to supermarkets).  And there will always bee a minority with long-term health problems. This cannot be changed and must be accommodated.  It is part of the limits of economic growth per capita—it is part of the limits to increasing our standard of living.

Thus there is much that can be done with time and money and reversal of some decades of social and other change, to reduce the welfare bill long-term.  But there are some limits to this.  Consequently, without major effort over say 20 years to boost wages, the welfare bill will stay unacceptably high.

© Philip Morgan 2026 Public Policy Conjectures All rights reserved