The soap opera's plot twist
What links Tony Blair's retirement with the retirement of us all? A man called Turner and a battle taking place in Whitehall over how far to implement his plans to reform pensions.
What makes Turner's recommendations politically explosive is his call for the basic state pension to be linked once again to rises in earnings rather than prices. Ever since Margaret Thatcher broke the link, many on the left have demanded its restoration. Ever since Gordon Brown became chancellor he resisted on the grounds that it could not be afforded. So too did Tony Blair - until, that is, Turner came along.
Turner came up with new reasons to restore the link to add to the old cry of "ending the indignity of means testing". His Pensions Commission argued that people would only have the incentive to save for themselves if means testing didn't punish them for doing so and if they had the certainty of knowing what level their state pension might be at in a decade or more.
Long term, Turner said we could pay for this by being forced to work longer before receiving our state pension. The problem comes in that phrase "long term". Before then, it's now clear, Turner is arguing that more of our taxes should be spent on pensions and, therefore, either less will have to be spent on other things or taxes will have to rise. That's what the Treasury is resisting.
Behind the scenes in Whitehall negotiations, Gordon Brown's men have proposed increasing the basic state pension by 3% a year - just a little more than the average 2.7% a year increase he's already been implementing. Restoring the link with earnings would have meant increasing it by 4.8% annually. So, they say, we're not against Turner per se. It's just that we want to downgrade his figures to make the whole thing more affordable.
Not so fast says Turner and his supporters at Number Ten and the Department for Work and Pensions. A little increase in the state pension won't halt the spread of means testing or provide much needed incentives to save. You can't ask people to work longer, ask employers to spend more on pensions and not also restore the link. If you knock one leg off the Turner stool it will, they argue, collapse.
Notice that, so far, I have not mentioned the Brown/Blair "soap opera". Now, though, there's no avoiding it.
The Blairites regard Brown as over-protective of his policy prescription - the pensioner credit targeted on the least well off (targeted is a nice word for means tested). Last week Blairite "outrider" Stephen Byers stood up in the Budget debate to say so.
The Brownites suspect that Blair wants to be seen to have delivered a once-in-a-generation reform of pensions to form part of his legacy - securing all our retirements before he himself retired. The bill, though, will be post-dated and paid when Gordon Brown is in Number Ten.
I reported this morning that one of those close to the negotiations had told me that "Blair's minded to overrule the Treasury. It's hard to see a meeting of minds". A Brownite responded "you cannot have a pension policy which the Chancellor doesn't agree to".
This would, in any event, be the sort of genuine policy dilemma which politics is all about. There are, in any government, tensions between spending departments and the Treasury. The "soap opera" makes it that much harder to resolve. In this particular episode we've all got a stake in how the plot develops.
I'm 
Comments
This could be the split to end all splits ... and who will the winner will be? Why, David Cameron of course. You can pretty much guarantee that he'll now come out all guns blazing for the beleaguered Blair. He can talk about the ‘reformist consensus’ that he and Blair are engaged in against the fusty old Brown. The rather hollow budget time cry that Brown was the past and an obstacle to reform will begin to take on real substance. How could Brown retaliate? Perhaps he could accuse Cameron of being a tax and spend Tory who is playing Russian roulette with nation's economic health. That would be a sweet irony indeed. He can't use the flip-flop argument as a key part of Turner's recommendations – restoring the link with earnings - was in the Conservative Party’s 2005 election manifesto. The trouble is any muck he throws at Cameron is likely to boomerang back and smack Blair firmly in the face. The Lib Dems are likely to back Turner too, so you’ll have the prospect of Brown taking on all three party leaders at once. Just how big a beast is he?
Please give it a break. I am sick and tired of hearing your commentary about the Prime Minister's departure. Please let him concentrate on doing the work which is necessary to improve the country
With the Blair/Brown "soap-opera" continuing, is there a good reason why there is no talk about Blair just getting rid of Brown to reassert authority - or would that just be suicide?
Just out of interest who is more likely to be correct on the matter? What qualifies the Chancellor to overide the recommendations of a specific study of the matter? There seems to be an echo with the LSE and their report on ID cards (a specific study) which Charles Clarke then refuted. Is this more of a battle of ego's rather than actual predictive modelling for the future? Personally being at the early years of my working career I like the sound of Lord Turners more logical argument than what Brown may suggest. But that is my opinion and may be founded in the folly of youth.
Would it not be a vote winner for the recommenation to go through? I can't see why, politically, Gordon has a problem with this. He will be linked to the policy as Chancellor and, possibly, the next P.M.
Personally I think that the Conservatives were wrong to break the link in the firt place. I also hope that they carry on fighting about it as it can only damage both men and, being a Tory supporter, can see the benefit in this.
With all Gordon's other broken promises on the finances, with PFI, reworked economic cycles etc, he shouldn't have a problem making these figures disappear as well.
Two pressing questions in respect of private & corporate pensions: Q.1 why do companies ultimately keep the pension (annuity) when all recipients die?; Q.2 why can't families inherit the pension/annuity lump sum (& monthly income) after all recipients die?. I would argue families/dependents are entitled to receive such monies, thus forming an inheritance trust, to provide benefits in the future (pensions, housing deposit etc). In short what are we being encouraged is to put aside 2-20% of monthly income for up to 40 years, only to benefit for it for a short while, then handing over what is effectively ‘family’ money to companies who have a dubious claim over it. Under present impasse, yes we should establish savings for the future, bu no we should not loose control of it in a pension pot.
Needless to say, not that i think your politically bias or anything, but you haven't written a blog today saying the Lord Chancellor has given up his central role in the judiciary. Making such fundamental constitutional change.. hey not worth blogging about!
Lord Turner has advocated a National Pensions Savings Scheme which should be run at a cost of 0.3%pa. Since no Insurance company could make stakeholder pay at 1%, which Whitehall "experts" would be investing our money for the future? If the scheme were to be a money purchase arrangement as has been suggested (i.e. not final salary), no guarantees could be made about the pension you would get without creating a political timebomb.
I am amazed by how passive pensioners themselves are being on this issue of pensions rights. Given the enormous voting power they have, and how that power will rise with an ageing population, it is perhaps time for pensioners to get organised, or even establish an independent Grey Party! Politicians like Blair and Brown would be literally scampering to offer better deals than any of the meagre efforts offered so far. It is pensioners' lethargy that is the real problem here.
Gordon Brown has been the architect of much of New Labour's domestic policy. This has been a policy of means testing and direction from the centre.
What Turner seems to be calling for is for the government to let people go about their own merry way, knowing there is a very basic level they cannot fall below.
This is alien to Brown, he believes that it is simply too expensive. However, I think he misses something... If he can encourage us to save, then this is saving to invest (via the stock market etc.). This can generate new wealth that will fund his basic state pension.
Blair is a realist, he sees that Turner did not slave away for nothing and has good idea. Brown is caught in his own bubble in the belief that you can means test your way to any solution.
At least that is how it looks to a 22 year old!
A pensioner myself, I am in agreement with the Thatcher and Brown approach. State pensions should be linked to prices, not earnings. Why? Because earnings are – or should be, in a competitive marketplace – a reflection of the degree or scarcity of an individual’s talents or skills. Qualifications may also be a factor, although in my experience an individual’s qualifications have rarely been a yardstick - much less a guarantee - of his or her competence or ability to perform.
Those who have made provision to retire on a private pension deserve to reap the rewards for their foresight and investment during their working lives. Those who have not done so should receive a pension that enables them to live comfortably, and receive increases in line with prices and cost-of-living increases. But linking pensions to earnings is a nonsense. One might just as reasonably argue that, in the marketplace at large, the cost of a product or service should vary according to whether a customer was a high or low earner.
Question:
What type of pension would Blair be entitled to when he retires? Surely he could not be eligible for a earnings-linked pension that he himself would be using his position and influence to push through!
Question:
Sureley it is presumptuous for Blair/Brown to decide who the next PM will be? I understood that, constitutionally, it is the Monarch who chooses his/her First Minister.
Yet again our future (and that is what government is here to protect) is a playground for these two megalomaniacs. V for Vendetta couldn't have come at a better time.
While Gordon Brown has done a good job keeping the economy ticking over, with regard to pensions he and the government have done nothing to encourage us to save for our retirement. The various changes he's introduced have destroyed final salary schemes in the private sector and surely the public sector will follow.
We all know we've got to save more and work longer, but people won't do that unless they see some real benefits and encouragement. The debate has gone on long enough and it's time to get our heads out of the sand.
Who's going to make the brave decisions here and sort this out for once? Who's going to show real leadership here? Blair or Brown?
If it means higher taxes then that's fine - as long as the tax increases are visible - no more stealth taxes.
Frankly I don't care who makes the decision - just someone do it and stop dilly dallying around.
PS.
I think Blair should step down at the next general election so the public can decide if they want Brown + Labour to run the country, rather than passing over the batton without us getting a say in the matter.
People will not save adequately for their retirement unless they can either see the benefit of saving or an element of compulsion is introduced. The danger for the Chancellor is that if the public if encouraged/forced into significant savings then there will be less cash circulating within the economy, cash which at present is doing much to maintain the economic buoyancy on which the Chancellor's forecasts of growth and tax are based. Reduce consumer spending and the house of cards might fall down
I recently watched a number of "The Last Word" on more4 where the panel seemed to reach the surprising conclusion that striking council workers should be grateful to get any pension at all, because if natural justice took its course they'd be dead at sixty anyway.
The second half of the show was a discussion of caring for elderly relatives. The contradiction remained merely implicit.
I think "Logan's Run" was mentioned but I forget which of the two contexts it was applied to.
Nick, why is it necessary, on your part, to trivialise this important debate by characterising it as a soap opera?
The Brown policy (pensions credits system) doesn't work now.
It is actively penalising older people who are receiving small (under 100 pounds per month) pensions. My mum is one such. She receives a small widows pension from a private occupational scheme and because of that - she has to pay rent and council tax (which add up to the same or slightly more than she's receiving as additional pension) and she's not eligible for any of the much vaunted pension credit benefits. She's received around thirty letters so far from the Council / Benefits Agency who still have to work out what she is actually entitled to. This is six months on from the death of her husband. The latest delay is because her widows pension has gone up a few pence due to inflation so they have to recalculate everything again.
Brown and Blair are just posturing for political reasons - just like the fake 'free bus pass' scam they played at the last election. How is that being paid for? Bus routes being taken off and / or fares going up.
When are any real solutions going to be proposed by this Government?
I've been pondering on what it will mean for our next Prime Minister to have been Chancellor of the Exchequer for a decade. In particular, how will Brown as PM relate to his own Chancellor? Would we see a PM with an unhealthy amount of power over a Treasury in the care of a puppet Chancellor? After ten years in the Treasury, I can't see Brown just handing over to someone else and leaving well alone.
All we want is for the politicians to give us certainty and stability. Not the sort offered by Brown & Blair either. What I mean is don't change the rules, I have been saving for my retirement for 15 years, only to have Gordo change the rules
I really hope Blair has the guts to stand up to GB. It's not that often the government takes on sensible recommendations without watering them down.
My pension and future is exactly the sort of thing I want them to take a lead on. I don't mind paying more tax. Does everyone think tax is bad?
The problems that cannot for all intent and purpose be overcome are these`s...
Facts
What happens to pensions if/WHEN there is a BIG stock market crash?people could/would lose all there savings.We are in a boat that is being tossed about in a very uncertain world.
There will not be enough people to earn the amount required to pay so many a decent pension.
There are too many problems facing such an important issue and long term planning to tackle pensions is pie in the sky.Future governments will pay what society can afford and that will be that.
A good example is this,back in the 1978 a labour goverment brought out State Earnings Related Pension Scheme (serps) upon the death of her husband a women would receive 100% of her husbands serps.This labour goverment has now changed this because they say they cannot afford it?.She will now only receive 50% of her husbands serps it will put many into poverty and to late for many to try and make up the loss.You are on your own when it comes to pension provision.
"Notice that, so far, I have not mentioned the Brown/Blair "soap opera". Now, though, there's no avoiding it."
Thanks for trying, anyway! I don't think anyone objects to hearing the real policy differences between the two camps, though (I certainly don't). That is probably the one area of the "soap opera" that interests people.
It's the incessant overanalysis of every intonation of every word, every gesture, every twitch, as an indication of how the handover is progressing that drives me (and, I suspect, most others) mad, not to mention the steady stream of anonymous briefings about what somebody said about how long somebody else thinks that Mr. Blair can continue.
Nick,
Do you feel this latest spat between TB and GB is based on political principles or is just political posturing. GB introduced "means testing", it's his baby and we all know that what he lacks in charisma he more than makes up for in arrogance. Surely he will never want to lose face (see pre-budget speech figures alteration).
TB is deperately looking for a legacy (apart from Iraq), and has so many initiatives on the go now, he must hit lucky sometime...just through the law of averages.
I know I shouldn't trivialise such an important requirement as our future pensions, but it does strike me that the longer this bickering is going on, the more decisions are taken for personal gain rather than for the benefit of the country.
If the government abolished pension credits, winter fuel allowance, free bus passes etc. and took account of the cost to run these schemes, labour and overheads, has anyone worked out how much the weekly pension would increase by. As part of the calculation the fact that many pensioners will pay tax on the increase would also have to be brought into the equation to make it financially neutral.
The system has become to complex and each budjet seems to add more layers. Keep It Simple Stupid was always the best advice.
Nick
all this bashing of the prime minister and the labour party, is this your goal in life? I am by no means a labour lover but I all too vividly remember the Thatcher government and the rate of inflation that followed her and what SHE did or did'nt do for the country and the old age pensioners. She would not bow down to anyone even although she dug her own grave as the leader of the party. I think the present government who undid what the conservatives screwed up over their reign need a round of applause. I would have the way the government is dealing with the rate of inflation, unemployment, and the way that the old age pensioners are treated just now rather than go back to Thatcherism
Nick
at the local election campaign launch will you ask whether TB thinks the local election campaign would have been easier for Labour if the Budget had carried on with the £200 council tax bribe for pensioners (substitue your own word for bribe)?
The problem with much of our tax and benefits system is Gordon Brown has complicated to the point where it's beyond most peoples comprehension.
He believes means testing is the solution to the poor (including pensioners), but how much do it cost to administer and how many people don't claim?
What he needs to do is reduce the tax burden on the least well off e.g. raise the tax free allowance, the lost revenue could easily be recovered higher up the earning range or if the economic effects are strong enough may not even need to be due to the extra economic activity generated.
Brown is an arrogant man, so I don't ever expect to see him admit he's wrong though - central control and statism that's his game.
Surely if Tony Blair wants to have the authority and strength to continue as PM for another 3 years and get through the reforms he wants to he will have to ditch Gordon Brown as the backseat driver that hes been for t he past 9 years.He would surely also be wise to carry out the cabinet reshuffle thats been delayed so long,and perhaps move Gordon Brown to the foreign office.If Gordon wants to respond by mounting a leadership bid then let him be responsible for the break up of the Labour party.Clearly this government cannot continue with Blair and Brown both in it.Its clear to me that either Blair or Brown has to go.
PS its obvious that Blair wants desperately to outlast Maggie Thatchers 11 and a half years so he wont go till december 2008 at the earliest,if he can hold on that long..Is noone at Westminster aware of this?
Funny thing, pensions. I live and work in The Netherlands, which has a reciprocal arrangement with the UK for the state pension. (I cannot afford to live in the UK as the house prices are madness, pure madness.) I have several small pensions that I have accumilated whilst being employed, but I wish to take care of my future by putting more money into a tax efficient pot. However, what tax I save now I pay later, so I save money in a bank. I could still take a pension, but its a gamble, as the value of my investment could go up or down. I've known the bitterness of losing heavily on an investment when buying a house in 1989 and having to sell it some 6 years later. Successive governments have failed to grasp the situation, so they cannot blame people if they prefer to spend the cash now and see the world and deal with the problem later. The government has let down many pensioners by failing to underwrite the pension funds gambled away on the stock market not so long ago. What people want is a central fund with tax efficency, money safe from the dodgy hands of the financial institutions that gives normal people a decent retirement. Not exactly rocket science, but clearly beyond some of those in a position to do something about it. It's no good suggesting the next generation has to support those nearing retirement in the future - what happened to the money I've paid into the system since I was 18 years old? Who's spent it if it's not still there for me, in its entirity? We pay in, we follow the rules, and we expect to receive what we saved for. Do you think I should do the next pensions review?
Are MP's satisfied with their pension rights? No complaints there so why are they so reluctant to sort out the pensions for the ordinary working person?
Many people will not make it to 68 years of age in the rat-race called work these days. Why not just increase the contributions and keep the retirement age at 65. I paid 11% all my life plus state contributions too but I will retire at 54 years. Thats old enough for me, I was not born to work forever. We all become institutionalised with work until we don't know when to stop. Remember, for most people work is due to economic necessity not out of choice or pleasure.
Planning for a pension is like nailing jelly to the ceiling. No-one can give you a real prediction of what it will buy you when the time comes, there are too many variables. The value of the pot will not only move with the stockmarket and the ravages of inflation, it is vunerable to attack from politicians eager to fund their short term goals at the expense of our futures.
We were encouraged to put money into private schemes only then to have them raided by Flash Gordon to the tune of about £5bn per year. To add insult to injury, as our pensions nose-dive, the House of Commons votes to plug the gap in MP's pensions from general taxation! And they wonder why we don't trust them anymore!
What we need is a guaranteed basic (non-means tested) pension that moves with average earnings. After that it should be down to the individual to build their own top-up fund. It should also be free of requirements to hand-over a large part to an insurance company. I would like the freedom to be able to create a family pension fund that stays within the estate and outside inheritance tax (within limits). I want more control given to the individual and less possibility of interference from Westminster.
The biggest problem with the pensions debate is that those who resent the notion of being forced to save for their old age are the least likely to save if left to their own devices and most likely to look to the state for financial assistance when they leave work.
Although in theory it should be each individual to decide for themselves what - and if - they put away for their retirement the reality is that those of us who will be asked to support other people's old age are also entitled to a say.
Of course the politicians can always fall back on making people sell there houses to fund a pension for themselves when they retire just as they have with the elderly when they need care.You will then be forced to rent and use the rest to live on.There should be enough there to last you your last few years.Then the government won`t have to pay out at all.What is the betting that is the long term plan?.
Gordon Brown exhorts those in work to save more for their pensions , giving the impression that he thinks workers should take greater responsibility for their own future and thereby reduce the tax on others.
He needs to be asked why it is that the Treasury milks billions each year from the savings that people already make towards their pension.
It is not motivational to save for your pension and then find that the chancellor has created a legalised way to filtch your savings.
john maxwell
Nick,
You mention the increased cost to taxpayers of the Turner proposals, and it's a fact that won't go away.
However, this is an increased cost relative to Treasury projections of the existing system. And nobody believes that the existing system can be maintained in its current form without an increase in costs above what the Treasury currently publishes.
So while cost is an important issue in all of this, some of the additional cost of Turner being quoted is quite illusional. In part, this is not the Treasury trying to save money, this is the Treasury trying to save its projections.....
Tony Ryan (31) is spot on.
"What we need is a guaranteed basic/b> (non-means tested) pension that moves with average earnings. After that it should be down to the individual to build their own top-up fund."
This is affordable if all the tax breaks such as pension tax credits that subsidise the most wealthy are abolished. Who stands in the way? Gordon Brown - anti-pensioner and our next PM - unless pensioners make sure he isn't.
Doesn't this Blair/Brown row over pension, with each desparate to been seen to have "won", just show quite how childish they both are.
I don't understand why the link between pensions and earnings can't be (re)made. In my mind it goes: 1) pensions are funded from taxes. 2) Income tax is based on pay. 3) Income tax must go up in line with wage inflation.
I suppose income tax receipts must go up at a different rate to other tax receipts (like VAT or stamp duty) but I don't see any stories about falling tax receipts overall.
All Brown cares about is a little old lady on benefit in Kirkaldy. I think he is utterly dedicated to squeezing us 'rich people' in the south of England until we're bone dry. He, and his cohort don't care that its a magnet for immigrants (UK internal and external)and becoming overcrowded and unpleasant. How can they recommend all these extra houses when we don't have the climate to produce the water?
Why are the Scots allowed to look after their old folk better than us in the South? Why are they allowed the power to vote in our parliament on questions that affect us, and we have no influence over theirs.
Haven't you all got it yet - Brown is out to get us southerners. If you vote for him you are sleepwalking into doom.
It may have been my imagination Nick, but during your interview with Gordon Brown yesterday did his eye contact with you waver at the precise moment when he said he and Tony Blair are in agreement? Of course I only saw the piece once so I may be wrong......
Nick,
Why is it that when pensions reaches this level of high politics, no one ever bothers to interview pensions professionals on their views on what the Prime Minister and the Chancellor are supposedly arguing about? Instead, the nation's future pension prosperity over the next generation is being viewed through the prism of personality-led politics. This is, frankly, bizarre. Any chance of you stepping outside the Westminster bubble to see how far-reaching the impact of this spat could be?
I find it fascinating that there is a huge media debate this week about pensions for 'ordinary folk' and whether we can afford them.
Yet last week, when MPs decided to get the taxpayer to pay millions to shore up their own pensions blackhole - barely a mention from the media and certainly no suggestion it was an outrageous drain on the taxpayer.
Why the double standards, Nick?
While it's interesting to see the way this plays out, surely the issue has to be one of making a fundamental assessment of what people are prepared to pay for, given there is a long tail legacy of 'welfare state' ideology that's part of the British DNA.
There's a generation of people - of which I am one - who were imbued with the expectation that if 'we' contribute to our old age through our NICs there would be something at the end of value. The fact it is not enough would seem a reasonable argument for saving more. So where is the real resistance? Is it that we think money in = money out at an at par rate? I rather suspect it is.
This of course is only one dimension of what seems an intractable problem. Maybe what we really need our politicians to spell out is that if 'we' want a free economy that is based more on the American model than the social European one, then be prepared to take the consequences. And if that means additional savings or additonal working or both - then that's the price to be paid.
If not, then an alternative needs to be found. But one that is rooted in what people are preared to accept, not one that's politically expedient. Is that so very hard?
Sorry - I forgot - power corrupts and all that.
Hilary Adams and others comments regarding MP Pension Scheme is SO true but what about the SNEAKY way it was carried out -immediately before their WELL EARNED Easter Break! I hope Nick and others will not allow this to be forgotten!!!!Like others I think the GREY VOTE SHOULD start to make itself felt.