The soap opera's plot twist
- 4 Apr 06, 10:56 AM
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.
