Friday, November 25, 2005

BROWN WRECKS PENSIONS POLICY AGAIN

As this blog is meant to be suitable for a family readership I cannot use the form of words that would give full force to my disgust at the latest piece of sabotage from the Chancellor on pensions. Every time I think that even Gordon Brown could not possibly do more damage to the hopes of everyone except the super-rich for a comfortable retirement he proves me wrong with yet another damaging and irresponsible action.

Future historians will have some difficulty assessing the Brown economic legacy. Within weeks of his appointment as chancellor, he made both the best economic decision for eighteen years and the worst one for more than seventy. Devolving responsibility for interest rates to the Bank of England’s Monetary policy committee was the best decision since the abolition of exchange controls in 1979 and ensured that the four years of stable non-inflationary growth which we had enjoyed under Kenneth Clarke has been extended until now. However, Brown’s five-billion pounds a year raid on pension funds was the worst decision since Churchill took Britain back onto the Gold Standard in the mid 1920s.

The malign effects of this raid on pensions have been felt throughout the economy. Some, such as the fact that most final salary pension schemes have closed to new members, and reduced incentives for saving, have been obvious. Other negative impacts have been less obvious but just as real: the pensions raid has caused both higher prices in the shops as companies needed to raise more money to fill the pensions hole, and contributed to soaring council tax bills as councils had to do the same thing. Since pensioners have been particularly hard hit by council tax rises, this effectively means that pensioners have been hit twice.

Brown has compounded the damage he did on pensions with his five billion pounds a year raid by introducing the absurdly complicated pensions credit. This means-tested policy really is the worst of all worlds. It is supposed to direct most help to the poorest pensioners, but in fact hundreds of thousands of them – an estimated third of those in this group – do not get that benefit because they cannot manage to complete and return the forms. And by withdrawing support from those people who have bothered to save for their old age, the pensions credit further undermines the incentives to save.

These two measures have greatly exacerbated a pensions shortfall which every wise person has been able to see coming for decades: funding adequate pensions was always going to be difficult as people are living longer while birthrates have fallen. That is why the previous government had a coherent policy of giving people incentives to save, and had successfully built up more pensions savings than the whole of the rest of the E.U. put together. As Labour’s own Frank Field MP admitted, the present Labour government inherited one of the strongest pensions positions in Europe, but we now have one of the weakest.

Faced with some very difficult decisions on how to put this right, Tony Blair set up the Turner commission to investigate and come up with recommendations – conveniently timed for late this year, thus missing the general election. I thought at the time it was bad enough to leave it this long before taking action. But now, a week before the Commission is due to report, the Chancellor has already let it be known that he will refuse to accept certain recommendations. We have been waiting months for action on pensions, and Gordon Brown is sabotaging the government’s own review before it has even been published !

Both today’s pensioners and tomorrow’s deserve better treatment than they have received from Gordon Brown.

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