Let's Do a Deal on Pensions

Article excerpt

Forget Frank Field: there's a workable plan - if ministers have the will

After a year's shadow-boxing with the new Labour leadership over pensions, I can see my way to striking a bargain with Harriet Harman and Gordon Brown. It has been a protracted argument, not least because the case Peter Townsend and I put forward for making the basic state pension and Serps the rock on which pensions policy should be built was fully costed, whereas the alternatives of the "modernisers" never were.

But as the modernisers have become ministers who must translate their words into legislation, so the reformers realise their bold bid to "think the unthinkable" may not prove as politically or financially feasible as they once thought.

Little birds tell me, for instance, that Frank Field has been floundering. His plan to compel everyone to contribute a large chunk of their income into savings that they must invest in private pensions policies has begun to appear an electoral liability. His Times interview of 9 May, in which he summarised his pensions credo in the words: "We are grateful for what the Tories did, but it is not the end of the story," was hardly likely to endear him to even the most loyal new Labour MP.

Hence, cynics say, the announcement of yet another. "far-reaching" review of pensions policy. Heaven knows, there have been reviews enough in the past year from all quarters of the pensions industry. Every pensions interest has set out its stall, including Townsend and me in our pamphlet We Can Afford The Welfare State. What is needed now is the political guts to choose between us.

So I believe this moment of truth might, with a few semantic surrenders on each side, enable the modernisers and the believers in the welfare state to strike a deal. This belief is strengthened by the interviews I held with various pensions interests for the Radio 4 programme Inside Money, to be broadcast this Saturday.

Time and again I found endorsement for my own belief that the decisions we have to make are political not economic ones. The Government Actuary, for example, argued that he could only do his calculations on assumptions laid down by government. His findings were not dictated by some immutable economic law.

Even Andrew Dilnot, director of the Institute of Fiscal Studies, who was one of the first to raise the alarm about the affordability of adequate state insurance for the elderly, has changed his tune. In an article in the Observer in March, he warned that silly statements abound during an election campaign. "One of the silliest is 'We can't afford the welfare state'."

He added: "Economics may constrain choice somewhat, but the question is primarily an ethical and political one. …