In any event, looking ahead, the public pension system will face additional pressures on the spending side, stemming from a significant expected increase in the population of retirement age, relative to the population of working age, owing to demographic factors.10 Reforms made in recent years have addressed these pressures; among other measures, a gradual raising of the retirement age, a sustainability factor linking initial pensions to future life expectancy developments, and a new pension adjustment mechanism that takes into account the system’s balance have been introduced. These reforms represent a considerable improvement to the system’s financial sustainability. However, in the absence of further changes to the system’s revenues, strict application of the new adjustment mechanism will give rise to systematic decreases in pensioners’ real income. Also, according to the various estimates available, eliminating the new adjustment index and returning to inflation indexed pensions, as recommended by the Toledo Pact Commission, would generate an increase in pension spending of around 3 pp of GDP over the period to 2050.11 Moreover, the date on which the sustainability factor (which adjusts the initial pension amount in accordance with life expectancy developments) will begin to be applied has been put back from 2018 to 2023 at the earliest. According to AIReF calculations, the introduction  10  My address at the meeting of the Toledo Pact Commission last September was devoted to analysing this issue.
Perhaps even more importantly, there has been a revolution in central bank attitudes towards public engagement. This revolution has, with luck, increased the public’s understanding of the economy and economic policy. But there is no question in my mind that it has also enhanced very significantly central banks’ own understanding of the economy. Having ascended some rungs of the engagement ladder, our panorama on the economy has been much enhanced. Looking back over the past five years, and looking forward to the next five, the Bank is taking further steps towards securing a foothold on the next rungs of the engagement ladder. This will increase the extent to which we “involve” and “collaborate” with a wider set of citizens, as well as “informing” and “consulting” them. From a potentially long list, let me highlight four examples of how we are going about that. 6 7  Arnstein (1969). Haldane (2017b). A number of excellent historical examples are given in Kynaston (2017). 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  (a) Layered Communications  There is a natural temptation among technocrats to communicate in a language that is only understood by fellow technocrats. This tendency has deep sociological roots, most probably dating back to our hunter-gatherer past. At that time, language was a means of bonding and binding people; it was social glue. It still is. Language can also, however, be a barrier to understanding and, as in our hunter-gather past, a source of tribal conflict.