Magazine article Public Finance

Leaving It All Behind

Magazine article Public Finance

Leaving It All Behind

Article excerpt

Tony Blair is not the only senior politician concerned about his legacy. Gordon Brown is too. His pre-emptive intervention in the debate about the Turner Commission's final report on pensions and his Pre-Budget Report on December 5 are all about defending his record - and establishing his credentials to become the next prime minister.

Brown and some of his acolytes in the Commons are understandably impatient to take over from Blair. They want time for Brown to establish himself in Number 10 before the next general election.

The chancellor believes that the key is the 'smooth and orderly transition' that Blair spoke about in the spring. There is little sign so far of this occurring. But Brown is against talk by his more excitable supporters of trying to force Blair out. He is said by close allies to believe that a coup would be self-defeating - creating the kind of bitterness and divisions that so damaged the Conservatives after Margaret Thatcher was ousted exactly 15 years ago.

Meanwhile, his main concern is to defend his reputation. He is infuriated by suggestions that he is anti-reform, as in the skirmishing over the Turner report. The Treasury is hostile to calls for the restoration of the earnings link in the annual uprating of basic pensions. These initially came from the Labour Left, but have come recently from the Conservatives and the Liberal Democrats. He has preferred to concentrate help on the poorest pensioners through pension credits. This is partly to avoid the costs of a big general uprating, not least because he does not want to make commitments now that would narrow his options as prime minister.

But Brown's opposition to these proposals has been attacked as 'anti-reform'. That is a gross oversimplification. The main point, stressed by the cogent analysis in the Turner report, and accepted in part at least by Brown, is that the status guo is no longer sustainable. We will all have to work for longer/pay more if we want to meet our expectations for incomes in retirement.

No great surprise here, and the only anti-reformers are the few populists who deny these choices. The real debate is over the balance of solutions: between raising the state retirement age for payment of the basic pension (very different from the actual age at which people stop working); trying to encourage savings; and what the state provides. Restoring the earnings link would certainly be expensive, but, equally, there are big drawbacks to an extension of means-tested pension credits.

More generally, Brown argues fairly that he has been responsible for some of the most far-reaching reforms introduced since 1997, notably: making the Bank of England independent; putting decisions on competition policy at arm's-length from ministers; an overhaul of benefits to encourage more people into work; changing the capital gains and company tax systems to encourage the creation and growth of new enterprises; and investment in research and development. …

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