A reform the Tories should shout about

As of today, you can’t fire someone just for turning 65. The government has delivered its promise to scrap the Default Retirement Age (DRA), introduced by Labour in 2006 as a caveat to otherwise laudable equality legislation. This ends the practice of forced retirement regardless of someone’s ability to work. Killing it is one of the best things the coalition has done and the Tories should be making more of as they gather in Manchester.

Of course, there will be some transition difficulties from scrapping (DRA), but they’re likely to be minor. Claims that older workers sticking around in their jobs will squeeze out the young are too simplistic – our jobs market isn’t ‘one in, one out’. Instead, higher employment rates mean higher tax revenues, more disposable income, and a healthier economy. Ironically, the biggest short-term losers might not be younger workers, but those in their later careers sitting directly under 65 year old colleagues, waiting in line for promotion. (I hear that some of those most afraid of the change are academics in their 40s and 50s, worried their careers will be held up.)

Yet any short-term costs will be easily offset by the upsides. The move raises as much as £100 million in tax revenue in its first year alone: a vital contribution from older workers to the rising costs of pensions and care. Longer term, it will help to dull the effect of the demographic time-bomb and it gives people a choice. According to Saga, nearly half of all workers over 50 want to stay in work past 65 and seven percent say they want to work past 70. With the pension age rising anyway, restricting their freedom to do so has become all but untenable.

The days of default retirement may have been numbered, but this reform is still politically useful for the government. The grey lobby will be happy, of course. And so will those who argue that David Cameron’s government should stand up to big business when it’s merited. The CBI has strongly opposed the abolition of the DRA, with Director-General John Cridland calling it his number one legislative concern this year. In rejecting his arguments, the Tories have backed more thoughtful employers, like B&Q and Sainsbury’s, who appreciate the value of older workers. This reform should join the coalition’s list of big achievements.

James Plunkett is Secretary to Commission on Living Standards at the Resolution Foundation