Paying tax to fund decent pensions is a burden we should bear

It was John Major who described the Government's new proposals to privatise the basic state pension as "not an election-winner". Loath as I am to agree with the Prime Minister, I suspect he is right on this one.

When the current generation of taxpayers realise what they may be required to pay in return for a series of guesstimated savings in 45 years' time, they may find even less reason to vote Conservative than they might have.

There is no question that state pensions need reforming. For more than 15 years, the dream of an adequate state-funded retirement has been whittled away.

In 1980, it was possible to dream of a pension that might equal 45 per cent of average earnings. Today, state retirement payouts will barely make 25 per cent for a small minority, and this will tumble over the next 30 years.

So, we need to reform the system. But privatisation?

Peter Lilley, the Social Security Minister, paints a sunny picture 50 years hence, when today's teenagers can retire on pensions worth pounds 175 a week. Most of this will be paid for by minor but continuing improvements in economic growth over the same period.

What happens if that economic growth is not forthcoming and we face a repeat of the recessions in the 1970s and 1980s? Could any government guarantee it can pay pounds 9 a week into young people's personal pensions? And what if investment performance does not match expectations: who funds the guaranteed minimum pension? Actually, we will. In fact, we will be paying up to pounds 7bn a year extra until the hoped-for benefits kick in in 2040.

So, what is the answer? Ultimately, I believe there is no alternative but to accept that one of our society's obligations is to pay its elderly population enough for them not to live in penury. Such an obligation may mean higher taxes for some people. But it is better than relying on market vagaries.

Young people need a vision of a decent society they can contribute to. Knowing they will be cared for when they are old is part of that vision.