In his Sir Hugo Young lecture before Christmas, Peter Mandelson rejected orthodox arguments about the virtues of ‘big’ and ‘small’ government and defined a new political challenge: to develop an era of ‘smart’ government. While extolling markets as ‘extraordinary tools’, he also stressed their limitations and argued that it is the responsibility of a ‘strategic’ state to steer markets to achieve social justice. Moreover, the evidence from the developed world, he suggested, is that equality, fairness and opportunity can be delivered alongside economic growth.
Regulation is one of the most important tools of smart government. Until the credit crunch, the prevailing wisdom was that it should be rolled back in order to free up markets. However, policy-makers have since recognised that the absence of effective regulation was one of the primary causes of the economic crisis. This opens the way for smart regulation that strikes the balance advocated by Mandelson.
The Equality Bill promised in Labour’s 2005 manifesto and announced in December’s Queen’s Speech embodies just such an approach. The Bill will place ageism – the most common form of discrimination experienced by people in this country – on the same footing as other forms of discrimination.
By introducing light touch regulation to outlaw age discrimination in the provision of goods, facilities and services, it will deliver significant benefits to older people – for example by ending arbitrary age-based restrictions on access to insurance and other financial products – without placing an undue burden on individual firms or constraining economic growth. Indeed by opening up goods and services to our growing older population, it will create an opportunity for firms to access new markets and benefit from the potential of the ‘grey pound’. Over the coming months, it will be important for MPs to support this legislation – and ensure that ministers keep their nerve – in the face of inevitable calls from self-interested lobby groups calling for it to be watered down.
However, to achieve its full potential, the introduction of the smart regulation promised in the Equality Bill must be matched by the rolling back of clumsy regulation elsewhere. Despite the implementation of a European Directive in 2006 outlawing age discrimination in employment and training, which was supported by the UK government, ministers subsequently introduced regulations to allow employers to enforce mandatory retirement ages – allowing them to force people to retire when they reach the age of 65. These regulations are hideously complex to use – the antithesis of the smart approach advocated by Mandelson. And by forcing the retirement of large numbers of people who are willing and able to work, they undermine equality and reduce the economic contribution of a significant segment of the population.
People should be judged on their ability do their job, not their date of birth. When they are allowed to do so, over half a million people already choose to work beyond the age of 65. A number of major employers, including M&S, Sainsburys and the vast majority of the civil service, have chosen to reject forced retirement, with no ill effects. Indeed, companies such as B&Q and Nationwide attest to the positive impact older staff have on their profit margins due to reduced turnover and the high quality service they can be relied on to provide.
In difficult economic times, older workers also have an important role to play by contributing to the economy and fuelling recovery further down the line. The experience of previous recessions, however, is that they are often the first to be laid off. In the early 1990s, the employment rate among men over the age of 50 fell by seven points and did not recover for a decade. Labour supply in the subsequent upturn was suppressed by the premature exit of more than 300,000 older workers. With unemployment among the 50s currently increasing at almost twice the rate of 18-24 year olds and three times the rate of 24-49 year olds, it seems the lessons of the past may not have been learned.
Forced retirement fuels this by pushing capable, willing workers out of the job market, with little prospect of them ever returning. According to a survey by the Chartered Institute of Personnel and Development and KPMG, just under one in five employers are planning to introduce or more vigorously enforce mandatory retirement ages during the economic downturn. This will have significant long term costs – not only will it prevent large numbers of people from contributing to the recovery, it will also stop them accumulating valuable income to support themselves in retirement, undermining the pensions settlement and placing an additional burden on younger generations.
In a recent debate in the House of Lords, Lord Carter admitted that the default retirement age had been introduced on the basis of ‘a relatively limited evidence base’, that the economic landscape has changed significantly since then and that the government’s long term aim is ‘to achieve a culture in which compulsory retirement ages are no longer required.’ Yet, despite firm evidence to the contrary from UK employers and around the world, he repeated the mantra given at the time – that employers need the option of ‘a tool for workforce planning’ – and refused to budge from the government’s position that the situation will be reviewed in 2011.
Perhaps Lord Carter had not read his boss’s speech. Either way, a ‘smart’ government should not only keep its nerve by using the Equality Bill to outlaw age discrimination in the provision of goods, facilities and services, it should also take the opportunity to end forced retirement.