PRIME Initiative

Click to download PRIME briefing paper as PDF 295K

ABSTRACT This paper summarises the ways in which the recession has impacted on the older (50+) workforce, comparing ONS data for different age cohorts since August 2008 – the point where the UK was entering recession and marked differences in the impact on these age cohorts started to appear. The data is drawn from ONS Labour Market Statistical Bulletins from October 2008 to February 2010, which provides figures from August 2008 to January 2010.

Plans to deal with pension shortfalls by encouraging people to work for longer received a dash of cold water today. Three-quarters of us could be too ill to work, Professor Sir Michael Marmot of University College London warns in a new report.

All but the richest Britons suffer years of ill health. People in the richest neighbourhoods in England live seven years longer than in the poorest, and enjoy an extra 17 years of good health.

Even if you exclude the poorest five per cent and the richest five per cent the gap in life expectancy between those in low and high income places is still six years, and in disability-free life expectancy 13 years.

Much more needs to be done to address health inequalities if raising the retirement age to 68 is really to mean people remaining active and working for longer, the report warns.

The report is not the work of some maverick outfit, but the final paper from the Marmot Commission - set up in 2008 at the request of the Secretary of State for Health. The Commission, chaired by Sir Michael Marmot, was tasked with finding the most effective strategies to reducing health inequalities in the country.

Fair Society, Healthy Lives (The Marmot Review)

Coverage at Times Online

In all the events and reports on worklessness that have come out over the last couple of weeks youth unemployment is always the central theme. But the evidence on youth unemployment is a bit like jelly - bright and brash on the surface, but 95 per cent water. You can’t use it to support anything. Only Polly Toynbee writing in the Guardian seems to have noticed that there was considerably more youth unemployment in the 80s than there is now.

Don’t get me wrong. I am not saying we should take all the public and private money that is spent on youth schemes away. The two groups that suffer the most when unemployment rises are the young trying to get a start on the employment ladder and older workers trying to stay on it – or get back on. Both groups require help - it’s not an either or thing.

The belief that all our problems will be solved if we throw everything into helping youth is irrational. It doesn’t even help youth long term. If older workers can’t get a job who will be paying to support them in their impoverished retirement? Today’s youth, one way or another.

In fact the interests of young and old are closer than you might think in other ways too. For example, schemes to help them often have the same flaws. So understanding what actually works when it comes to practically assisting one group can often lead to better initiatives to help the other.

Take the Future Jobs Fund. It is a Department for Work and Pensions initiative designed to create 170,000 additional jobs, mainly for 18-24 year olds who have been out of work for nearly a year. It does seem to be providing some new opportunities, particularly in work experience and training places. But it’s too early to say how many of real long-term jobs will remain when the money runs out in March 2011.

Here’s the problem. The Future Jobs Fund depends on there being employers ready to take government money to create sustainable jobs for youth. But will there be enough employers wanting to hire in the midst of a recession? Even with the incentive currently being offered of up to £6,500 for each unemployed young ­person taken on?

We really need to increase the number of expanding employers. One way to do that would be to put more effort into enterprise support for people creating new businesses. For example the over 50s – people who have seen recessions before. People with the experience, skills and knowledge to build businesses with a good survival rate, even in tough times.

So let’s put aside the false distinctions and the factional fighting. It’s often older people who can help younger people. And the other way round too.

Having said that, I’d not say no to a Future Enterprise Fund for the over 50s, should some wise government set one up. The point is the jobs the new enterprises create would help not just their older owners, but all of society.

Influential voices are calling for the current “default retirement age” of 65 to be scrapped. The latest call comes from the Equality and Human Rights Commission (EHRC), which has said that workers should be able to stay in their jobs beyond the age of 65. The EHRC polled 1,500 workers, and found that a relaxation of the current rule would be welcomed by most. The House of Lords is likely to debate the issue today, as part of the debate on the Equality Bill, which is currently threading its way through parliament.

Currently employers have the legal right to force employees to retire at 65 - irrespective of whether or not the employee in question is still able to do the job. This was confirmed in a legal ruling in September of last year - but there were strings attached.

The High Court ruled that the default retirement age was not unlawful - but that there was now a compelling case for it to be scrapped. In practice this means that employers can still lawfully retire people against their will at the age of 65, for the time being. But the court wanted an urgent review of this provision.

The current Equality Bill does provide an opportunity to decide whether the default retirement age stays in place. The government has said it intends to get the bill passed before the general election this year. So there’s a chance here for the political parties to do more than make promises, but to actually vote on the issue.

Many organisations have already scrapped automatic retirement based on age, without waiting for a change in the law making them. They include Tesco, Marks & Spencer, HBOS, the Co-op Group and the Civil Service (for all but senior civil servants). An umbrella group called The Employers Forum on Age has been campaigning against forced retirement at 65 for several years.

However, Personnel Today magazine, which itself backs the campaign to scrap forced retirement, reports that some employers are still against changing the law, particularly now, in the middle of a recession. This is because it provides a useful mechanism for them to reduce staff numbers legally. Personnel Today quotes one HR director, who is against changing the lw, as saying “It’s useful to us now”.

Long term though forced retirement at 65 is likely to go. But this in itself won’t be enough to keep more people in work and earning. The jobs need to be there in the first place, for anyone of any age to do.

External links
Equality and Human Rights Commission summary of proposals

EHRC report (PDF) Working Better: The over 50s, the new work generation

Personnel Today on attitudes of HR chiefs pro and con

The Guardian Harman wants end to compulsory retirement age

Note:
The default retirement age and the state pension age are currently out of step. The default retirement age was set at 65 for both men and women in legislation that came into effect four years ago. Meanwhile women continue to be receive their state pension earlier than men, currently at age 60 while men have to wait till 65. But the plan is to harmonise the age for both sexes, increasing it in stages to 68 over time.

When will you get a state pension? Official State Pension Age calculator

Here we go again. George Osborne has announced plans at the Conservative Party conference to make us all keep working longer before we can draw our State Pensions. While this might a seem logical way to save public money it misses the same key point as most similar proposals to raise pension age. It assumes there are going to be jobs there for these older workers to do. In reality it is probable that almost half will be out of work.

So for many people it will simply mean moving from drawing their pension to drawing an out-of-work benefit. Where’s the saving in that?

Let’s be clear. I have no problem with the idea of working for a bit longer. In fact there’s a lot of positive things to be said for it. It would probably lead to a generally better standard of health, and many people would a welcome a chance to stay ‘connected’ and contribute to society for longer. And of course, there’s the financial benefits.

But the tricky bit is finding the jobs. So, at the moment, George Osborne has only half a policy. The difficult bit is missing.

The fundamental point that George Osborne seems to have missed is that alongside the proposed changes to State Pension Age, interventions are required to help older workers to stay in, or get back into, work – and these interventions come at a cost.

According to the last census, economic activity rates for workers during the five years immediately before retirement were only 58% for women, and 52% for men – and these figures are likely to have been worsened by the recession.

So what we really need from the Conservatives are some really innovative proposals that give older workers real support in finding sustainable work opportunities. Given the poor track record most companies have in hiring older workers, these proposals will have to include self-employment. This is how currently how over a third (35%) of 65 year-olds choose to work (source: ONS 2001 Census).

Full text of George Osborne’s speech

Over 300 delegates from older people’s organisations poured into the Scottish Parliament at the bottom of The Royal Mile in Edinburgh on Friday 2nd October. This was the first Older People’s Assembly in Scotland of this size, and is certainly more than England, Wales and Northern Ireland have produced. There are a range of forums, panels, committees and local assemblies across the UK, but nothing on this scale or with this potential.

A few years ago the obsession was with younger people’s parliaments. Thank goodness the reality of an ageing society has at last sunk home.

For me it was a great pleasure both to be able to speak about the work PRIME could deliver to help the Scottish Government create a wealthier and fairer Scotland, and to actually enjoy being in the ten-year-old Scottish Parliament building.

Like many first assemblies in the past, the sub-texts of this very successful meeting were about the legitimate areas of discussion, the format that any future meetings of this kind should take to be most effective, and what the extent and limits of the Assembly’s power might be.

At this stage the proceedings of the Assembly will form a report which will go to, amongst others, the Members of the Scottish Parliament. But there then has to be a deliberation about the next steps.

Younger people’s assemblies are a chance for the young to learn political skills, but older people’s assemblies may well offer a chance for older people to apply the political skills they have learnt over a lifetime. I was certainly urging the Assembly to demand a proper programme of enterprise support activities for older people in Scotland.

If society continues to be so youth obsessed, will older people take their political revenge through older people’s assemblies? It will be interesting to watch, but even better to participate.
Further reading:
Report on event from Age Concern and Help the Aged in Scotland

This week has seen a rash of media stories saying that youth unemployment is running out of control, in reaction to the official labour market statistics released in August.

But the real story contained in the Office for National Statistics latest figures was rather different.

Though both groups have a hard time in a recession, oldsters who drop off the employment ladder are having a harder time even than the youngsters taking their first steps onto it.  It is this story - about the difficulty that older have finding work, that is rarely told.

Just how could they get it all so wrong? Well, read PRIME’s Occasional Paper on the subject.

Too many commentators appear to have rushed in and grabbed the first figure they could find, so anxious were they to “expose” a huge rise in youth unemployment. They all made the elementary error of assuming that those who were economically inactive were all unemployed and completely forgot that nearly one million people aged 18 - 24 are in full-time education.

The real story in these statistics is the same one that PRIME published in 2004 when PRIME wrote “Towards a 50+ enterprise culture” based on the 2003 labour market statistics.

It’s the over 50s stupid.

Why are the media writing wrong headlines and getting the interpretation of the data so wrong? The statistics do tell a fairly clear story that we have a huge worklessness issue among the over 50s. It’s not that hard to discover what is really going on.

When the data is adjusted for full-time education amongst the 16/17 year olds and the 18 - 24 year olds, it is quite apparent that these cohorts are faring betting than others. That is not to say that everything is rosy - one person in ten aged 18 - 24 economically inactive is not good news. But compare it with worklessness in the 50 to State Pension Age cohort. One in four is economically inactive in this age group according to these data.

How about a call for programmes for the 50+ workless? How about a call for more help for 50+ self-employment and enterprise?

Some voices are now calling for such action.  The TUC has just warned that long-term unemployed people aged over 50 are at risk of never working again - unless they get proper tailored support to get back into the job market.

The TUC quotes research that shows that people aged over 50 who are unemployed are 10 times more likely to still be out of work after two years than they are to have found a new job.

For a man in this age group, says the TUC, for every additional year spent unemployed the chances of never working again increase by almost 25 per cent. Almost half of unemployed people over 50 had been out of work for more than a year.

It’s not an optimistic story. But it is the truth. We won’t get far doing much about tackling unemployment if the majority of the media get the facts wrong. It takes the pressure off the authorities to get help to the people suffering the worst.

PRIME Occasional Paper August 2009 on Older Workers And Recession

PRIME OccPapAug09 Appendix 1 Labour Market Data Unadjusted

PRIME OccPapAug09 Appendix 2 Labour Market Data Adjusted By Education

Two big changes affecting the way government deals with small business have emerged out of the current spate of resignations and today’s cabinet reshuffle.

Firstly Alan Sugar, the business star from TV’s The Apprentice has accepted a new role promoting enterprise from within government. The role is unpaid, but Sir Alan is expected to accept a peerage, which will enable him to speak on business topics from within the House of Lords.

Text of official announcement below.
Press comment: Sugar

Secondly the government department with overall responsibility for business in the UK, BERR, is disappearing in a merger with DIUS, the department in charge of higer education. The new merged department, called BIS or “Business, Innovation and Skills”, will be taking over both roles - under the control of the current Business Secretary Peter Mandelson.
Press comment: BIS

From BERR site

Sir Alan Sugar has been appointed as the Government’s Enterprise Champion.

Areas he may look at include access to finance, prompt payment, how to handle the downturn and how to start a new business. The post will be unpaid.

New Department for Business, Innovation and Skills (BIS)

Last updated 05 June 2009

Over the next 20 years the UK’s population will age faster than ever before in its history. There will be 5.4 million more people of pension age - an increase of 45 per cent. At the same time, our working-age ratio is declining. This combination has serious implications for the economy, with proportionally fewer workers supporting the growing number of older retired people.

One measure being implemented by Government from next year to tackle this issue is the introduction of later retirement ages. Through gradual changes in State Pension age (SPA), three million people who would otherwise be able to claim a state pension are being nudged rather hopefully back into the workforce.

This presentation given by PRIME recently (Powerpoint format) highlights the economic impact of these changes - and projects even higher levels of worklessness and poverty among older people if practical measures are not adopted now.

Of the three million workers eventually being removed from pension entitlement by the changes, most are women - in fact in the initial batch all are. We reckon that no more than 40 per cent of the total are likely to be economically active. This means that 60 per cent of the three million will be without a pension - and without a job. And that’s without taking into consideration the impact of the recession, since it’s impossible to say how long that will last.

But it does seem the consequences of changing the pension age haven’t really been thought through. In attempting to solve the problem of financing pension provision the state may only have succeeded in creating different problems elsewhere.

On the plus side, today around one fifth of the over-50 working population are self-employed, and many continuing to work beyond the current state pension age. So there is considerable benefit to the economy to be gained through assisting higher numbers of over 50s into self-employment.

But self-employment isn’t an option for everyone, so there would also need to be other measures to support older workers to remain in or re-enter conventional employment.

Without such action raising the state pension age won’t accomplish much - indeed it may do more harm than good. It’s not enough to put a whole lot of older women and men back into the workforce by administrative fiat. They also need some practical way of making a living.

See also What are the alternatives to a personal pension? on our other site.

Over half a million women could benefit from changes to the pension bill currently going through Parliament. They will be able to buy back up to 12 years of contributions to fill in gaps in their National Insurance record, enabling them to then qualify to receive the full state pension. Currently only around a third of women reaching state pension age qualify for the whole amount.

Though women only need to have 39 years of contributions at the moment, compared to 44 years for men, the breaks from work many women take to raise children or care for another family member means a pensions shortfall is much more common among women - 90 per cent of men get the full whack.

The proposed changes will affect both men and women who reach state pension age between 5 April 2008 and 5 April 2015, enabling them to plug much bigger gaps in their National Insurance record. The reason for doing this is that the cost of buying the extra entitlement is usually much less than you’d get back from the state over the full length of your retirement.

None of the changes apply to you if you reached pension age (60 for women, 65 for a man) before April 2008. And complicating the calculation of whether you would really be better off is Pension Credit, a separate system that kicks in for those on low incomes.

More on this story from the BBC

The Pensions Service - official information from the government

Pensions Advisory Service - independent non-profit source of information.

The next step in the drastic simplification of government-funded business support in the UK was today announced by Peter Mandelson, who is Secretary of State for Business. The aim is not to reduce total spending on government assistance to business, but to slash the number of different programmes so they are easier for people to find.

The intention now is to make Business Link the single point of contact for most government-funded support programmes for business. The process won’t be completed till March 2009 at the earliest, but Mandelson announced 30 programmes that should be available by then from Business Link - and five that should be available immediately.

“Publicly funded business support - advice, loans and grants, can help individuals realise their entrepreneurial potential, businesses start and succeed, and communities prosper and flourish”, Mandelson said. The problem has been people haven’t been able to find it. A plethora of over 3,000 different schemes around the country has meant that tracking down what is on offer is a major task.

There are more details of the simplified Business Link offering in this new “Solutions for business” leaflet.

However, if you look at the details, all is not what it seems. The promisingly named “Intensive start-up support”, available from December 2008, will only be available to you if you belong to one of the groups that the local Regional Development Agency has decided to assist. So it is not yet clear who will be eligible.

Similarly it is not yet clear how “Small loans for business” - up to £50,000 scheduled to be available from January 2009, will be rationed. The announcement says they will be targeted at “entrepreneurs who might otherwise struggle to raise finance from mainstream lenders” - but this could be almost anyone in the current economic climate.

The intention behind this whole simplification effort may be admirable, but has not been achieved - and probably never can be. Even after March 2009 many other government agencies will still be in the business support game, so all taxpayer-funded programmes will not be centralised under Business Link’s new “Solutions for business - supported by government” brand.

For a start Jobcentre Plus is rolling out its “Flexible New Deal” at the moment, which will offer a variety of schemes for people currently claiming benefits seeking to enter employment and self-employment - in other words setting up their own businesses.

And many local authorities have their own business creation schemes, some of them funded by Local Enterise Growth Initiative money from central government. HMRC, Defra, and the Ministry of Justice are among central government departments that will continue to run their own schemes to achieve their own objectives. So Business Link is never going to have a monopoly on business support.

However, it is now a better place to start. You can find Business Link in your area here.

Quietly coming into effect at the end of May, the Consumer Protection from Unfair Trading Regulations 2008 summarises in one place most of the things you are not allowed to do when selling to consumers. The parallel Business Protection from Misleading Marketing Regulations 2008 does the same thing for businesses selling to other businesses (B2B).

The new regulations replace many existing laws, including most of the Trade Descriptions Act, so they are certainly worth a read. Among perennial bad practices predictably banned are “bait and switch” - offering one thing then actually providing another, claiming to belong to a trade association when you don’t, and pyramid selling. So most of it is common sense.

But there are some more surprising additions to the list of shame. Now banned are advertorial (paying for favourable press stories without making this clear to readers), fake blogging (pretending to be an ordinary consumer giving an independent opinion in an online web site or forum when you in fact stand to make a financial gain) and “astroturfing” - generating a fake grass-roots buzz around your product or service by paying people to pretend to be satisfied customers or supporters.

Since many of the latter practices have become fairly common in the media, on the Internet and among fans of so-called guerrilla marketing, it is likely that court cases may be necessary to define what exactly is permissible and what is not. For example it’s not yet clear whether the sort of affiliate marketing deal popular on the Internet will be caught under these regulations - for example recommending books in return for a commission on any sales that ensue

Since in many instances the offence lies in the deception or misleading of the customer, you can probably stay on the right side of the law by declaring what you are up to. If you have a financial interest in a transaction that isn’t obvious to the consumer, you can probably make everything clear and above board with some kind of declaration. Here’s a PRIME example - from our ONLY foray into affiliate marketing!

The regulations will mainly be enforced by local authority Trading Standards departments, with the Advertising Standard Authority playing a role where advertising is involved. Penalties can be up to two years in prison and substantial fines. But it is likely the authorities will go after big fish first in areas where there is any doubt to get maximum press coverage and establish the principles.

Read the rest of this entry »

From October 2008, a new benefit called the Employment and Support Allowance (ESA) will start replacing Incapacity Benefit and Income Support for those unable to work due to a disability or long-term illness. The new system will apply to new claims from 27 October 2008. Those with existing claims accepted before that date will continue to be paid on the existing system for another two years.

At the moment you can apply for Incapacity Benefit or Income Support, or sometimes both under a confused system that will eventually be completely scrapped.

At the heart of the new system is a new medical test, the Work Capability Assessment, designed “to look at what people can do rather than what they cannot” according to the government press release.

ESA claimants will be split into two groups based on the results of the test: those judged able to take part in some form of work and those who can’t. The amount of money you receive and the sort of training, if any, offered depend on which group you fall into. Meanwhile Jobseekers Allowance will continue to be available for those without health problems who quailify.

These changes are all part of the 2007 Welfare Reform Act, which is only now becoming law as the relevant provisions are enacted. You can read the detailed regulations passed at the end of March here.

There is a good discussion on BBC Moneybox on how these might affect real claimants.

The new system has had little detailed coverage in the press, with most media outlets ignoring it or treating it as an opportunity to comment on benefit fraud. However, the whole welfare reform process has been dragging on for some time. Many of these changes were announced last year by then Work and Pensions secretary Peter Hain, prior to his resignation in a scandal over alleged failure to properly declare over £100,000 in political contributions.

Official DWP page

Get tough tests face the sick on benefit

Is Labour abolishing illness?

UPDATE: Since more than half of the respondents to a recent mini poll on PRIME’s client-support site www.primebusinessclub.com expect to sell their business this story directly affects many older entrepreneurs. See Can business sale realistically finance people’s retirement? on this site.

Controversial new rules on Capital Gains Tax that will affect anyone planning to sell a small business have finally been clarified.  Tax will be levied on asset sales up a value of £1 million at the rate of 10 per cent, rather than the 18 per cent originally mooted. The higher rate will apply to sales above the £1 million mark.

The new regime comes into effect from the 6th of April 2008.

What is Capital Gains Tax?

If you sell an asset for more than you paid for it, capital gains tax (CGT) may possibly apply. An asset is a resource such property, shares, a piece of equipment or your entire business. It is not the raw material or stock used in the normal day-to-day transactions of most businesses, which are not subject to this tax.

CGT is really aimed at gains made by investing, so if this is central to your business you will need to look into the subject thoroughly.

For most small businesses CGT is most likely to become an issue at the exit stage if you decide to sell your business as a going concern or close down and sell off (or give away) major assets.

The Chancellor’s original proposals made three months ago were highly controversial, and were greeted by frantic lobbying by business groups.

Among the various counter proposals were schemes to reduce the rate or exempt altogether those selling a business to retire.  But the government has decided against those, instead opting for a two-tier system where the lower rate is available to anyone selling assets up to the £1 million threshold.

Business owners will have a £1 million lifetime capital gains allowance that will be taxed at 10 per cent - this means you can claim relief for gains made on multiple occasions up to a cumulative total of £1 million.

The government may have decided against confining the lower rate only to those retiring because it wants to encourage people to sell or hand their businesses on to family members as going concerns. Having to wait until retirement to get the tax concession might have discouraged this.

Report in the Independent

The Chancellor’s statement to the House of Commons

Reaction from Federation of Small Businesses

PRIME and its sister charity PRIME-Cymru have jointly published a report into improving the employment prospects of the over 50s.

“It is worth putting real money behind a drive to re-employ economically inactive over-50s”, says the report’s lead author Christopher Smallwood.

“In order to reintroduce them to the workforce, two things are needed: (1) widespread changes in employers’ practices relating to training, retention and recruitment, and (2) a more proactive approach from Government agencies to help people back to work, particularly in the area of self-employment.”

Some 800,000 people between 50 and state pension age are currently inactive but want to work, according to Smallwood’s analysis of the available data. The UK has a total of nine million people in this age group. At the moment one in three is workless, and one in seven on Incapacity Benefit.

“There is a huge wealth of skill and experience amongst the over 50s that UK business could benefit from tapping into”, says PRIME’s Chief Executive Laurie South. “Not enough is being done to reduce worklessness among the over 50s. Despite an increase in the number in work, the number not working is actually growing - and will continue to grow as the UK’s population ages. So effective government action is sorely needed. ”

“Meanwhile, self-employment remains the best option option for many of the 800,000 individuals eager to work. It’s something you can do for yourself. You don’t have to wait for government.”

You can download the full report and the executive summary from the links below.

“Improving Employment Prospects For The Over 50s”, by Christopher Smallwood and Linda Obiamiwe, published by The PRIME Initiative, January 2008.

Christopher Smallwood is a leading UK economist, and has held a wide range of senior positions in government, industry, banking and media. He is a Member of the Competition Commission, a Trustee of the charity UnLtd (founded to support social entrepreneurs) and until April 2005 he was Chief Economic Adviser to Barclays plc. Previously he was Chief Economist and Strategic Development Director at TSB Group and before that Chief Economist at BP, Policy Director of the SDP and Economics Editor of The Sunday Times.