Tory budget changes to pensions have left Labour in a quandary about whether to back greater individual freedom or defend a policy that creates a more stable society.

This kind of dilemma is nothing new and reading Robert Skidelsky’s biography of John Maynard Keynes I am struck by how little the political tension between individual freedom and the collective good has changed.

As the second world war intensified, Keynes pressed politicians and the unions to support compulsory savings as a fairer way than inflation, tax hikes or rationing, to reduce consumer demand, which was sapping the war effort. The Tory instinct to allow total economic freedom and let ‘nature’s cure’ inflation take its course left the poor worse off and diverted resources from making war materials. The left of the Labour movement saw the war as an opportunity to institute a permanent command economy while Keynes said his approach marked the ‘line of division between the totalitarian and free economy’.

In very different circumstances we on the centre-left of British politics still grapple with similar dilemmas as to where we stand in relation to the balance between individual choice and the need to regulate for the good of society. Of course ‘freedom’ sounds much better but individual choice must be balanced against the wider needs of the community if it is to be meaningful for the most vulnerable.

In the case of George Osborne’s pension reforms the ‘freedom’ to spend your whole pension pot in one go rather than have a guaranteed income for life through a mandatory annuity goes too far against the collective good. The Institute for Fiscal Studies says the changes are a serious risk and based on ‘highly uncertain assumptions’, while annuity provider Partnership points out that 35 per cent of Americans run out of money before they die thanks to the kind of system the Tories are introducing. If a third of UK pensioners were to have their income drop in this way it will inevitably have dire consequences for our social care system which is already on the brink of collapse.

Age UK says that despite rising demand, the amount spent on social care services for older people has dropped by £1.2bn (15.4 per cent) since 2010, as care budgets fall victim to local authority funding cuts that are falling most heavily on the councils serving the poorest people. We in local government can see first-hand the impact austerity is having on our ability to care for our most vulnerable residents while the NHS is forced to inappropriately use hospital beds to fill the gaps.

The projections are clear that within a few years falling income and rising demand for social care will bankrupt local government. Anything that adds to the demand – and this pension change surely will – is to be resisted.

This resistance must be part of an alternative, wider package of measures to transform how we plan for an increasingly elderly population. Our health and social care system needs to change to one all-encompassing system that really prioritises prevention, treats the whole person rather than isolated symptoms and enables people to live independent but social and happy lives for as long as possible.

It is a harder sell on the doorstep but a sensibly planned pension, health and social care system for all would also create more freedom and quality of life than the ability to blow your whole pension on a sports car, bingo or beer.

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Edward Davie is a councillor in Lambeth and chair of the Lambeth council health and adult services scrutiny committee

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Photo: Catherine Smith