Constructing the Public-private Divide

In contrast to many European countries, UK pension policy has long sought to preserve private pension provision, initially through the promotion of occupational pension schemes and more recently with the development of state-sponsored personal pensions. This paper examines the record theoretically, historically and comparatively. It argues first, that arguments favouring public choice as the basis for old age income security are inherently flawed because they fail to recognise the role played by convention and law in sustaining and developing common knowledge and confidence – the essential bases for economic action on which individual choice relies. As conventions of market activity vary by place, by product and over time, there is a constant need to define and refine their public legitimacy, without which the collective confidence necessary for economic action disappears. Second, the paper offers an historical account of how public-private pension ‘partnerships’ were first established in the UK in the 1960s. Contrary to what we might expect, Old Labour was more conscious of the importance of preserving established conventions governing occupational and private provision than their New Labour successors have been. Recent extensions in regulatory surveillance expose the contradictions that result when governments attempt to extend market solutions as a substitute for public services. Finally, contrasting UK experience of earnings-related schemes with their European counterparts, the paper shows how different conventions have shaped different roles for the state in earnings-related pension provision, resulting in varied typologies of public-private mix. Under recent demographic and fiscal pressure, previous divisions between public and private have become increasingly complex as governments move to regulate personal pension savings as a necessary supplement to statutory schemes. However, in contrast to careful collective negotiation found elsewhere, changing conventions imposed by recent British governments have shattered public confidence and provoked inaction. Future pensioner poverty appears very likely unless politicians first accept that private provision will never replace public pensions and (secondly) are prepared to negotiate a settlement that promotes collective confidence among all agencies and the whole population.