did not offer employers major gains over the long term. Without reform, the public pension
program’s contribution burden, shared equally by workers and employers, was expected to
multiply over the next few decades as the program matured and the population aged, rising from
3 percent more now, British firms could escape much larger rises over the next 50 years.
British employers, however, faced a political and institutional environment highly
favorable to a more advantageous alternative: delayed distributive moves away from future
pensioners. Better than a costly investment in a transition to private pensions, the government
could drastically reduce the state program’s future outlays simply by slashing its benefit levels
over the long term. Employers not only favored this alternative but new that it was politically and
institutionally feasible. A neo-liberal government had already signaled its deep commitment to
reducing social expenditures. Moreover, with political authority almost completely centralized in
their own hands, ministers had little need to accommodate the concerns of labor and welfare
clientele groups who would surely oppose such cutbacks. British employers thus knew that they
could likely achieve substantial reductions in their future tax burden without paying higher costs
in the short term.
If Thatcher’s government could safely ignore the pleas of the labor and poverty lobbies,
Conservative leaders could less afford to dismiss the objections of the business community.
Moreover, their attacks had a crucial effect on an internal Cabinet struggle over the reform,
bolstering the position of another short-term loser from the plan: the Treasury. While the
Chancellor of the Exchequer was willing to countenance some short-term cost in exchange for
long-term savings, the proposal would have squeezed too much from government coffers too
42
The figures come from the Institute for Fiscal Studies, cited in Michael Prowse, "Why 11m Pensions Are
in the Balance," Financial Times, May 2, 1985.
32
Convention