What a “strong mandate” means for pensions.


Since the range of outcomes considered by the bookies ranges from “strong” to “weak” conservative majority, I’m putting my money on the Liberals getting an overall majority (only 25-1 with William Hill). That seems the likeliest alternative outcome and I’ve suggested to @stevewebb1 that he gives uncle Phil six weeks notice (is he still on probation?) and get on the stump in Thornbury and Yate.

I have a side bet with Alex Cunningham, the shadow pension minister and can do a reasonable impersonation of the Vicar of Bray if the country decides Jeremy Corbyn is the man to negotiate us through Brexit.

And this is law, I will maintainvicar of bray
Unto my Dying Day, Sir.
That whatsoever King may reign,
I will be the Vicar of Bray, Sir!

Opportunism or agility?

There is nothing that so enrages those with political conviction as fragrant opportunism. The “u-turn” from our prime minister enrages everyone, especially the Guardian (see Rafael Behr’s article on “game-playing” – link at the bottom).

There must have been a political barometer (maybe an app) that May could consult which determined the point at which the opposition were so weak that they wouldn’t even oppose this fragrant violation of 5 year parliaments (a policy May herself voted in).

The barometer seems to have swung into “fair times ahead” as she sat in Snowdonia admiring those just getting by, going by. By happenstance I was in Maidenhead over Easter – her constituency. You don’t get many slate mines in Maidenhead and you don’t get many three star restaurants in Festiniog!

beeching 2

George Osborne

To the point

You don’t get much credit for raising taxes if you are a Tory. Osborne couldn’t raise taxes on pensions because his own back-benchers wouldn’t let him. He thought that his back-benchers would deliver a Remain vote and forgot that a referendum includes people outside “the village”.

The fact remains that our economy owes money and all the rules laid down by Osborne have been cast aside (ostensibly to help those getting by – but in reality to get the Government by). There is nothing wrong with that – the chaos of last summer needed someone to get on with things. Now that things have calmed down, Hammond can be given some head-room to tax the self-employed, pension the self-employed and include Matthew Taylor’s missing millions into the “real economy” – e.g. tax UBER/Deliveroo etc as major employers.

All this was going through my mind, and I imagine the Pension Minister’s mind, as we drank tea in Caxton House yesterday.

Those with extreme memories will remember that in 2015, the Treasury embarked on a major review of the taxation of pensions which resulted in the implementation of the Lifetime ISA – hardly a good return on human capital employed. The plans for a restructuring of pension taxation still sit on the Treasury’s X drive; (fake news-hackers) and the fundamentals remain exactly the same as this time last year, when they were put there.

The idea would have been to ditch the current Heath-Robinson system of LTAs and AAs and PIPs and tapers for a simple system where you paid tax on the way in and paid less tax on the way out. This could all have been achieved with the help of devices within the taxation system that allowed the Treasury to clip your pension , shave your pot and recover what he liked by means of Real Time Information and payroll.

The Treasury managed a similar exercise when they switched RPI pensions to CPI pensions a couple of years ago. The lessons of “pension deficit de-risking” can be applied to “budget deficit de-risking”, you don’t miss what you never had.  Gordon Brown managed it, why not Philip Hammond!

Will reform of pension taxation happen?

One of the benefits of Brexit to a weak Government is it takes eyes off the ball. The ball had been bobbling around in the fiscal penalty area for some time and is now in the safe hands of goalkeeper Phil.  He is however close to having it for more than ten seconds and I predict that by the Autumn Statement, Phil is going to have to put the ball back in play.

Whether the pension taxation system is still at the front of the reform queue is an interesting question. Theresa’s constituents in Maidenhead looked prime targets for a higher rate haircut if not a reversal of taxation fortune. But this is silly talk. May and Hammond will do exactly what is best for Brexit – which is what they’ll be judged by.

Those just getting by will continue to feel the longer term impact of the austerity reforms brought in by evil (and now very rich) uncle George and perhaps this will be enough to right things. The OECD revised Britain’s GDP growth up to 2% for the year and Hammond may be able to argue that there is enough momentum in the economy for pension tax-perks to be spared.

The triple-lock seems doomed.

The manifesto pledge to keep the triple-lock till 2020 can now be restructured and I fear it will. I would be very sad to see it go as it is by far and away the fairest way of redistributing economic capital to the retiring poor.

It has survived longer than some thought but it is a benefit that costs more than it earns in political capital. By comparison, auto-enrolment and the pension dashboard are cheap to run and earn Government fame and favour at home and abroad.

A strong mandate means a swing to the right

Mrs Crankie, whingeing in Jock-land is right, given their heads, May and Hammond would pursue the agenda that best suited the short-term success of BREXIT over everything else. Managing that little baby will define her time in Government.

I am far from certain that annoying higher-rate tax-payers, by simplifying the taxation system serves her cause (she and her colleagues are major beneficiaries of the pension taxation system). If she was a politician who was driven by conviction , she would see through pension taxation reform and keep the triple lock, that is what you do if you want to help those just getting by.

But yesterday’s move shows her at best agile and at worst shamelessly opportunistic. Which suggests that the rich will continue to get their tax-privileges’ from pensions and the poor will get no further benefits from the triple-lock.

I would be happy to be proved wrong!



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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