Cameron vetoes EU treaty: what does this decision mean?

The Prime Minister has taken a hard line in Europe in a political gamble that could leave Britain is

The Prime Minister has taken a hard line in Europe in a political gamble that could leave Britain isolated.

"Where we can't be given safeguards, it is better to be on the outside," said David Cameron at 6.20am today, as he announced that he has vetoed a revision of the Lisbon Treaty.

This is a huge development. It is the first time that a major treaty, striking at the heart of the EU, will go ahead without a British signature since Britain joined in 1973. It will redefine the nature of Britain's relationship with Europe, essentially creating a two-speed EU.

As I blogged on Wednesday, Cameron was in a very tight spot politically: on the one hand, his Eurosceptic backbenchers were clamouring for a referendum, while on the other his Liberal Democrat coalition partners warned against the risks of isolating Britain.

Isolation is certainly the main worry in the papers this morning. Of the 27 member states, all but four signed up to the treaty, with just Britain, Hungary, Sweden and the Czech Republic remaining on the outside. Sweden and the Czech Republic may yet join after their leaders have consulted their parliaments.

The risk here is that Britain will not only lose influence in the UK, but that its position in the single market will be jeopardised. Defending his decision at that early morning press conference (which was held after more than 10 hours of negotiations that ran through the night), Cameron said:

Of course we want the eurozone countries to come together and to solve their problems. But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. Without those safeguards it is better not to have a treaty within a treaty but to have those countries make their arrangements separately.

He insisted that he would work to ensure that any agreement works for all 27 member states, not just the 23 signed up to it.

So, Cameron will not be forced to go to Parliament with a contentious treaty, nearly 20 years after John Major's trials with Maastricht. But does this decision ease his political headache?

In short, not really. The decision has won grudging support ("Credit where it's due -- Cameron has shown backbone," said Roger Helmer MEP), but it is by no means certain that calls for a referendum will end. Eurosceptics could feasibly still argue that the new treaty marks a major change in the power structures of EU and that the British public should be consulted.

It is unclear how much Nick Clegg knew about Cameron's hardline stance on this, but the Prime Minister's calculation will be that the Lib Dems will not walk out of coalition over this issue.

The other risk here is that "Britain's interests" will not necessarily be safeguarded. Cameron made defence of the City of London his price, demanding that any transfer of power from a national regulator to an EU regulator on financial services be subject to a veto. The cost was too high, as French President Nicolas Sarkozy (who has been pushing for a two-speed Europe) explained:

David Cameron requested something which we all considered was unacceptable. We couldn't have a waiver for the UK and in my view it would have undermined a lot of what we have done to regulate the financial sector.

Financial services regulation will press ahead without Britain, then. However, the Guardian points out that these regulations are decided by qualified majority voting, in which Britain does not have a veto. It can currently form a "blocking minority" to prevent legislation from going through, but if more countries join the euro this will shrink.

Cameron has taken a huge political gamble, hoping to channel Margaret Thatcher and her intransigence in Europe, rather than John Major and his struggles over the Maastricht Treaty. It has yet to be seen whether it will pay off. The first priority must be the resolution of the eurozone crisis, which Cameron himself said is "our biggest national interest". The next stage of talks will focus on saving the euro -- without Britain's input.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for 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/