Gordon Brown's Real Pensions Mistake
Just back from an excellent meeting last night in Mansfield. I thought that in the midst of the continuing media furore over Gordon Brown's pensions policies it is important to understand what Gordon Brown's real mistake over pensions has been over the last ten years.
The Chancellor of the Exchequer has come under attack for his early tax hit in his first budget on private pensions. Ed Balls then drops him in it by trying to defend Brown's position by explaining Gordon was only following orders, ie the CBI's orders.
The mistake Brown made was not the removal of an element of tax allowances on private pensions. The real issue is that in implementing a policy which was bound to contribute to the reduction in value of these pensions he failed to improve the basic state pension to compensate.
The pensions con of the last three decades is described very succinctly in an excellent booklet published last year by Professor Prem Sikka and Austin Mitchell, entited "Pensions Crisis:A Failure of Public Policymaking." Throughout this period large numbers of people were persuaded/cajoled into joining private pension schemes, taking out endowment policies and using various other financial instruments to protect them in retirement.
Fortunes were made in the city and employers then got even greedier and increased their profits and share dividends by taking "pensions holidays," ie just not keeping up with their side of the pensions contributions. Tax incentives were provided to drive more and more people into the hands of the pensions industry. As always the bulk of these tax benefits went to the better paid.
This was always going to be a risky business because the eventual pension payouts were at the mercy of the performance of the stock market. When the markets caught a heavy cold from the dot com boom and bust, plus various other market crises, the pension values started to collapse.
The reason for the anger of some pensioners and the media at Brown is that his tax hike made some contribution to the undermmining of the value of the pensions, no matter how insignificant this may have been in the context of the crashing market.
The real criticism we should have of the Chancellor's pensions policy is not that he removed a small element of the preferential tax treatment of private pensions but that whilst he was doing this he did virtually nothing to protect pensioners by increasing the value of the basic state pension and restoring the link with earnings.
The Government can reddress this failure by supporting my amendments to the Pensions Bill on 18th April, which restore the link between pensions and earnings immediately.
The state pension is the most secure and most efficient method of providing security in old age. It is not subject to the vagaries of the market and it pools the resources not just of the country overall but also across generations.
By the way being in Mansfield, in what was one of the biggest coal mining areas in the country, I was remind by retired miners that Gordon Brown is not averse himself to the policy of dipping into people's pension funds. Miners over generations through their contributions built up a significant pension fund in the belief that this money would be used to provide retiring miners with a decent pension. When I worked for the NUM part of my job was to assist in negotiating this pension scheme. Many miners are now very angry that they are not seeing the full benefits of their contributions because the Chancellor has allowed the Government to dilute the fund and in this way restrict the retirement benefits retired miners receive.
Billy Etherington, the Miners' MP, has worked hard with the NUM to raise this issue. He has my support and I will do all I can to obtain retirement justice for the miners.
The Chancellor of the Exchequer has come under attack for his early tax hit in his first budget on private pensions. Ed Balls then drops him in it by trying to defend Brown's position by explaining Gordon was only following orders, ie the CBI's orders.
The mistake Brown made was not the removal of an element of tax allowances on private pensions. The real issue is that in implementing a policy which was bound to contribute to the reduction in value of these pensions he failed to improve the basic state pension to compensate.
The pensions con of the last three decades is described very succinctly in an excellent booklet published last year by Professor Prem Sikka and Austin Mitchell, entited "Pensions Crisis:A Failure of Public Policymaking." Throughout this period large numbers of people were persuaded/cajoled into joining private pension schemes, taking out endowment policies and using various other financial instruments to protect them in retirement.
Fortunes were made in the city and employers then got even greedier and increased their profits and share dividends by taking "pensions holidays," ie just not keeping up with their side of the pensions contributions. Tax incentives were provided to drive more and more people into the hands of the pensions industry. As always the bulk of these tax benefits went to the better paid.
This was always going to be a risky business because the eventual pension payouts were at the mercy of the performance of the stock market. When the markets caught a heavy cold from the dot com boom and bust, plus various other market crises, the pension values started to collapse.
The reason for the anger of some pensioners and the media at Brown is that his tax hike made some contribution to the undermmining of the value of the pensions, no matter how insignificant this may have been in the context of the crashing market.
The real criticism we should have of the Chancellor's pensions policy is not that he removed a small element of the preferential tax treatment of private pensions but that whilst he was doing this he did virtually nothing to protect pensioners by increasing the value of the basic state pension and restoring the link with earnings.
The Government can reddress this failure by supporting my amendments to the Pensions Bill on 18th April, which restore the link between pensions and earnings immediately.
The state pension is the most secure and most efficient method of providing security in old age. It is not subject to the vagaries of the market and it pools the resources not just of the country overall but also across generations.
By the way being in Mansfield, in what was one of the biggest coal mining areas in the country, I was remind by retired miners that Gordon Brown is not averse himself to the policy of dipping into people's pension funds. Miners over generations through their contributions built up a significant pension fund in the belief that this money would be used to provide retiring miners with a decent pension. When I worked for the NUM part of my job was to assist in negotiating this pension scheme. Many miners are now very angry that they are not seeing the full benefits of their contributions because the Chancellor has allowed the Government to dilute the fund and in this way restrict the retirement benefits retired miners receive.
Billy Etherington, the Miners' MP, has worked hard with the NUM to raise this issue. He has my support and I will do all I can to obtain retirement justice for the miners.
posted by John at 5:22 PM
6 Comments:
Good to hear of another successful meeting - and work continuing to get justice for retired miners.
Just watching Channel 4 News. The big big story is of course the release of the Iranian hostages but 30 seconds of news time was devoted to the fact that the private company which now runs bedside phone services for patients in NHS hospitals is to up its charges by 126 per cent - to 26 pence a minute. So a five-minute phone call to loved ones costs £1.30. Who needs these facilities .The sick and vulnerable. Who pays for them.The sick and vulnerable. A small, but telling, example of what creeping privatisation has done to ordinary people under New Labour.
Good point John and one more or less confirmed by GB in an interview the other day when he was at the local elections launch with TB.
If it wasn't his fault and the problem being experienced by our pensioners is as a result of the market reductions over the last few years then it must be a failure of the long term policy.
Don't we have the right to expect better of our leaders? We entrust them with the stewardship of protecting and creating the best possible investments returns on our money and all they can think of is looking for ways to reward the fat cats in the City.
To be fair New Labour inherited these policies from the tories in 1997. They simply decided to 'keep the ship on course' rather than do the proper job of Government which is to protect its most vulnerable citizens amongst which are our pensioners.
BTW John many thanks for your support in the Casino debate last week. On this occasion the upper house performed its proper role as a revising chamber sending the policy back for proper review.
Your work in the house on the true issues such as your TU freedom bill and the Pensions amendment you mention above and the way you still find plenty of time for constituency issues despite spending many hours on your campaign certainly restores my faith in politics.
I had a bad experience with patientline while in hospital having a baby last year. It costs £5 to use and was broken most of the time I was there (although the Pateintline reps came round every day and I called their customer services several times and neither of the could get the thing fixed). After having the baby I wanted to call my Mum but it was midnight and I didn't have Patientline set up (we had already paid £5 in the ante-natal ward to watch telly etc (it has internet telly and phone all in one as I'd had complications and ahd to wait all day to be induced). There are no ward payphones any more but i didn't kno wthis for certain at this point and I didn't want to bother the midwives to use the reception phone at this hour so I was up much of the night not so much with the baby but more looking for some change (as I thought they might have payphones like Hillingdon had had where I had my first baby at Wexham Park which last thing I heard is applying to become a foundation hospital..) and I didn't have snother fiver or quite frankly the time and inclination to fiddle abut setting up Patientline in this new post-natal ward in the middle of the night after being in Labour three hours earlier and also having a bad chest infection.....and having to feed the bay at three am; six am etc...
I eventually phoned from the midwives desk at 8.30
I know they are up in the night and of course I talked to them when they cae round at three a.m but I was supposed to be trying to rest as between midnight and six I was the only oen in the ward the furthest from the midwives desk (until next lady gave birth and came in which is good as i like the company) but I just really felt the need to debrief with my Mum as she had been there with us outside the door while I had my first one and had been able to see the baby and help me etc half an hour after teh birth wheras this time she had to look after my other child but I just would have liked to have called her at this most vulnerable of times as anyone who has had a baby will understand and also see when they would eb coming to visit me etc as it's diffcult to plan as you don't know when you will give birth and you might not have any money on yo uwhen you get to hospital which reminds me that they should abolish hopital car parking charges as well. Don't get em started on that one..10 who profits from this - does the moeny really go back into patient care and 2) when I temped at Hillingdon I was always helping desparate people trying to park in maternity who's money had got stuck in the machine so I had to go and knock up the car park man in the next car park for the so they could get through the barrier.....we don't need this stress when we are in hospital....!
Sorry badly written up again but due to lack of time!
Quite right John - the only guaranteed pension is a public pension as the scrapping of final salary pension funds shows.
on means tested benefits I had a shock when I found I was ten pounds a week short on my child tax credit now that the new tax year has started. I rang the tax credits office thinking it was a mistake but they reminded me it was because I no longer have a child under one (as you get a higher rate for the first year). Fair enough but they could send you a reminder letter before they suddenly dock money!!
It would be a lot easier to budget.
Also my phoning up will have added to the admin cost of administering the benefit- another reason we should have universal rather than means tested benefits and chase up any fradulent claims through the fraud departments which all benefits offices have.
Just on hearsay I'd say Gordon Brown is really in trouble because of his pensions mistake; as people keep mentioning it to me in casual conversation as you would talk about the weather or anything that's been in the news. (Not just political anoraks I mean!!)
Lets hope we don't lose any real Labour councillors etc in the forthcoming elections.
The continuing theft of Miners Pensions is simply down to the greed of the Labour Government and their outright refusal to honour the promises made in 1996, when they said that they would renegotiate the 1994 agreement. Instead, they have carried on robbing the pension funds,and have so far taken over £5 billion of miners money,with more to come in 2019, when they will "inherit" another £8 billion.
All this whist the ex - miners, the people who made the contributions, have 24,444 pensioners who receive a pension of LESS than £10 a week. It stinks, it really does.
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