Magpie politics will be the death of Labour

Why the party can't win the argument over inheritance tax

In recent weeks Labour ministers have stepped up attacks on the Conservatives over their grossly regressive pledge to raise the inheritance-tax threshold to £1m. This policy-based critique was, I thought, an improvement on the claim that David Cameron was a "vacuous" politician. But new figures out today, showing that under Labour the number of families paying inheritance tax has fallen to the lowest since records began, remind us why this approach so often flounders.

Alistair Darling's "magpie" pre-Budget report, which increased the threshold to £600,000 (and to £700,000 by 2010) after George Osborne stole the headlines with his promise to raise the threshold to £1m, remains one of the most shameful moments of Gordon Brown's tenure.

Labour has failed to win the political argument over inheritance tax because its disagreements with the Conservatives are differences of degree rather than kind. Ministers have focused on the negative point that the Tories' plan would benefit the 3,000 richest estates in the country and have refused to make either the egalitarian or the meritocratic case for inheritance tax.

I used to be one of those who believed that Cameron's embrace of social liberalism proved that Labour had unambiguously shifted the political consensus to the left. In truth, much Conservative policy reflects Labour's failures, not its successes. It is because Labour has been insufficiently radical that the Tories have been able to masquerade as progressive even while pledging to cut taxes for millionaires.

Labour cannot successfully rebut Cameron's claim that the Tories are the party of the poor after presiding over the highest level of inequality in 40 years. It cannot credibly challenge the punitive Conservative public-sector pay freeze after rushing out news of its own freeze the night before Osborne's speech. It cannot ridicule the Tories' obsessive anti-statism after fetishising the market for years in the pre-crash world.

Brown must learn that pandering to the right does not neutralise the Conservatives -- it puts them in power.

George Eaton is political editor of the New Statesman.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/