Why Cameron is brave to propose road tolls

At a time of record petrol prices, the PM has revived a deeply unpopular policy.

The first point to make about David Cameron's plan to "sell off" the roads is that there isn't one. No one is proposing the full-scale privatisation of Britain's motorway system. Rather, the government is examining the possibility of allowing private sector firms to manage parts of the network through a leasing scheme. But while one shouldn't overstate the radicalism, one shouldn't understate it either. The routes up for grabs represent just three per cent of the length of the country's roads, but a third of the traffic and two thirds of the heavy goods vehicle traffic. Cameron seems determined to prove that the imminent departure of Steve Hilton won't limit his capacity for blue sky thinking.

Equally eye-catching is the suggestion that private companies could introduce toll charges on the new routes they manage [existing routes will remain toll-free]. As Cameron will say in his speech on infrastructure this morning, the government, indebted to the tune of nearly £1 trillion, is determined to explore new sources of funding for our national roads. Here's the key section:

Road tolling is one option, but we are only considering this for new, not existing, capacity. For example, we're looking at how improvements to the A14 could be part-funded through tolling.

But we now need to be more ambitious. Why is it that other infrastructure - for example water - is funded by private-sector capital through privately owned, independently regulated utilities, but roads in Britain call on the public finances for funding?

We need to look urgently at the options for getting large-scale private investment into the national roads network - from sovereign wealth funds, pension funds, and other investors. That's why I have asked the Department for Transport and the Treasury to carry out a feasibility study of new ownership and financing models for the national roads system and to report progress to me in the autumn.

That last sentence is worth noting. Many proposals never make it past the Whitehall "feasibility study". But at a time of record petrol prices, the suggestion that more cash could be squeezed out of motorists is striking enough. It was only last week that Cameron told an audience at New York University that our fuel prices would "probably make you faint".

Unsurprisingly, then, Labour is playing its favourite "squeezed middle" riff this morning. Shadow transport secretary Maria Eagle has commented: "Motorists already suffering from record fuel prices now face a road charging free for all, adding to the cost of living crisis facing households up and down the country. Instead of easing the burden on drivers and boosting our stalled economy through a temporary cut in VAT, ministers look set to let private companies take over the strategic road network and charge drivers for access."

Cameron may emphasise that the tolls would not apply to existing routes but to most voters' ears it will sound like yet another tax. All the polling evidence we have suggests that the public are strongly opposed to any form of road pricing. When Tony Blair explored the policy in pre-crash 2007 an ICM poll found that 74 per cent were against road tolls and 1.8m signed a petition against them.

In these straitened times, Cameron's decision to revise this option is both surprising and brave.

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: www.oldmutualwealth.co.uk/ products-and-investments/ pensions/pensions2015/