A Battle For Britain

John McTernan writes:

So you don't trust people with their own money? That's the question the Tories gleefully throw at anyone who dares question their pension reform.

And so far it seems to be working; the coalition has successfully defined the reforms as a liberation, and all opposition as "paternalistic".

The chancellor has certainly spooked the opposition.

That is understandable, up to a point: no party wants to be on the wrong side of public opinion, and early polls show a large degree of support for the pension reforms.

But Osborne is a man with form – initially popular policies, such as the bedroom tax, have lost support as the reality of what they mean becomes clear.

The signs are that pensions reform will go the same way. Experts are already warning of catastrophic unintended consequences. 

So how should Labour react?

First, it needs a direct response to this issue of trusting people with their own money. That's simple. People are being asked the wrong question.

When asked, "Should you have control over your own money?", people will say yes. Ask them, "Do you understand your own finances?", and many will admit they don't.

Go further and ask, "What kind of financial instrument will you purchase when you are in your 60s that will ensure you an income into your late 80s and early 90s?", and they will look nervous and ask for help.

This is the point. The Osborne reforms are the privatisation and personalisation of massive risk with huge unknowns. People do not know how long they will live, and tend to underestimate it by up to 10 years.

Second, Labour needs to emphasise again and again that this is the wrong way to make pensions policy.

Changes in pensions have a long-term impact lasting 40, 50, even 60 years. They should be made consensually and on the basis of wide consultation.

Osborne has tried to bounce a major change affecting all current workers through parliament with no scrutiny.

Why? Is there is something nasty lurking in the detail?

Third, it is time to remind the public that the Tories do not come to this issue with clean hands.

Their last major pension reform was the creation of personal pensions. Remember them? Pension mis-selling was the biggest financial services scandal until the global financial crisis. 

You can bet that the sharks are rubbing their fins in anticipation of selling you an "innovative" product that will have high charges and low returns.

Next, Labour needs to make this a real consultation.

That started with shadow secretary of state for pensions Rachel Reeves's three tests – on advice, fairness and costs. Tests which, on an honest and frank appraisal, the current reforms will fail.

Now Reeves and her team need to do the heavy lifting, modelling the true impact of the changes and explaining them to voters.

The place to start is behavioural change.

The Treasury has scored a big increase in tax take over the next three years because it anticipates a big draw-down on pensions.

So what does that mean for income when these pensioners become 80 or 90? And what does it mean for annuities?

In Australia, a similar arrangement has killed the annuity industry. Freedom of choice can end up actually meaning less choice.

Finally, never forget the politics.

This is an attempt to brigade the anger of older people about annuities with the anger of young people who have large debts, no pension and little chance of a property, and to harness both to destroy a flawed but essential pension system.

Labour needs to make clear that the answer is not destruction.

In the end, this is a battle about the fundamental principle of collective provision. If the Tories win this, what's next?

The same "it's my money" argument applies to income tax. It is, after all, my money, so why should I be made to spend it on the NHS?

This is no mere technical change – it is a battle for Britain.