I’ll drink to a longer life, but I’m not sure how I’ll pay for it
If you are anything like me, you can’t help salivating when you walk past the glistening vitrines of the estate agents. Ooh yes, there it is, some hutch or hovel of exactly the kind you bought 10 years ago – and look at it now.
Listen to the breathless adjectives with which the realtors announce this “rare opportunity to purchase” some hopeless, sunless, gardenless dump. Hark at them raving about the outlook of the kitchen, when you know in your heart it has all the charm and amenity of Fred West’s cellar. Then look at the price, my dears. Look at those zeroes spooling across the page like a child blowing bubbles.
I know it is rude to discuss property prices, but this column has never been bashful, and I propose to give you the eye-popping history of the Johnson investments. In 1995 we bought a house worth x. About four years later we sold it for 2x, and bought a bigger house worth y. Unless the prices in the estate agents’ are wrong, it now appears to be worth 2y, or possibly even 2.1y, where y is already a pretty chunky sum.
It is quite mad. It is not as if the people of the neighbourhood have all struck oil in the basement. It’s everywhere, this deep, dark love of inflation, not just in Henley-on-Thames, the hottest house-price hotspot in Britain, but across the country. An astonishing 70 per cent of British adults are owner-occupiers, and the result is that huge numbers of us have become hopelessly addicted to property porn. We drool over the leaflets shoved through our doors. We marvel that anyone can seriously ask that much for that shack down the road with the ulcerated stucco and the buddleia growing out of the architrave. Then we secretly pat ourselves on the back for being so smart as to invest in property; and we forget the wider consequences, not just for Britain, but also for ourselves.
The national obsession with house prices means that if there is the slightest tremor in the market, the press becomes almost unhinged with alarm; and it means the economy as a whole is steadily skewed out of shape. The total wealth of the British people is about £5,000 billion, of which £1,300 billion is in our funded pensions, and a stunning £2,500 billion – half the national wealth – is in the value of our houses net of mortgages; and over the past 20 years, that proportion has been growing, as the proportion of our wealth held in pensions has been shrinking.
Houses cost more and more; and for those who are not owner-occupiers, of course, the position becomes worse and worse. All MPs meet young people who are desperate to get on the property ladder, but who cannot afford it, and this is having a serious demographic impact. Every year from 1997 to 2003, the average age of first-time buyers increased. The longer couples have to wait to find a house, the longer they delay having children. The longer they delay having children, the fewer they have; and it is the general shortage of children that is at the heart of the pensions crisis.
An ever higher percentage of the population is now over 65, and an ever smaller percentage of the population is below 16, and that means, bluntly, that the dependency ratio is getting more and more alarming. As the century goes on, there will be a huge wedge of ageing baby-boomers depending on the graft, effort and taxes of a relatively diminishing number of young people. We baby-boomers fully intend to live longer and longer (I am told it is likely that thousands of us, in the 1964 baby boom, will live to see 2064, and I will certainly give it a shot with the help of my patent red-wine diet), and we will need more and more pension, and the decrepitude of our old age will be attended by ever more expensive NHS interventions.
There is only one way to change that dependency ratio, and that is for the women of Britain to punch out more babies. As is well known, the fertility of the average British woman hovers around 1.7, which is well below the rate of replenishment, and insofar as the British population is set to grow, it is entirely thanks to immigration.
All sorts of explanations are offered for the national baby famine. Traditionalists say it is to do with women’s lib, and girls thinking of their careers, and leaving it too late. At which point in the argument, the girls get very testy, and say it is all the fault of the young men these days, who are useless and reluctant to commit. I do not propose to enter that particular dispute. I merely wish to point out not just that the housing problem is also a deterrent to reproduction, but that the pensions crisis is related to the housing crisis.
What impression, all in all, do we take away from all these stories about pensions? That the pensions industry, public and private, is in a bit of a shambles; that schemes we hoped to rely on are worth a pitcher of warm spit. We know that Gordon Brown has inflicted disaster on private occupational pensions, robbing their funds of upwards of £5 billion a year to pay for his ballooning numbers of state sector pensions. We can see that the Government can’t even afford to fund these public sector pensions, and will shortly be forced to push up the age of retirement, even if it means a war with the unions.
Above all, we know that for a huge number of people, it hardly seems worth saving for their retirement, because if they do, they will find themselves penalised by the withdrawal of the means-tested benefits that are spreading ever upwards in the income groups. Young people realise that if they start saving now for their pension fund, they could end up with less than those who put nothing by; and that is among the reasons why the savings ratio in this country has fallen so fast. People look at all this pensions malarkey, they suck their teeth, and they decide that one way or another it is likely to be a rip-off.
Which is precisely why, as a nation, we pump ever more of our resources into houses. We have a touching belief that bricks and mortar cannot evaporate. That is among the reasons why house prices have tended to rise ever higher, with fewer and fewer people in them. Labour has made such a hash of things that an Englishman’s home is not only his castle, but his pension, too.