Northern Ireland builds a Potemkin village to look good for the G8

A teachable moment in austerity.

Northern Ireland is in a tricky situation. It's hosting the G8 summit in the luxury Lough Erne resort in three weeks time, in the midst of an economic slump which has rendered much of the nearby community of Fermanagh a ghost town. That's not the sort of thing which any nation wants to deal with; it's embarrassing enough when the neighbours pop over and you've forgotten to do the hoovering, let alone when you don't have a fully functioning economy in your rural outskirts. And while George Osborne isn't exactly hiding the fact that the UK is in dire economic straits, the chancellor still wants to put on a brave face in front of Vladimir Putin. So what do you do? Build a potemkin village, of course! The Irish Times reports:

Just a few weeks ago, Flanagan’s – a former butcher’s and vegetable shop in the neat village – was cleaned and repainted with bespoke images of a thriving business placed in the windows. Any G8 delegate passing on the way to discuss global capitalism would easily be fooled into thinking that all is well with the free-market system in Fermanagh. But, the facts are different…

The butcher’s business has been replaced by a picture of a butcher’s business. Across the road is a similar tale. A small business premises has been made to look like an office supplies store. It used to be a pharmacy, now relocated on the village main street.

Hopefully, the Chancellor does, in fact, know that the economy in rural Northern Ireland is suffering somewhat. It's his job, after all. So the Potemkin village is just for the sake of appearances in front of the neighbours. Still, while he's out there, he could learn a thing or two from the Northern Irish Departments for the Environment and Social Development, like how to justify economic stimulus:

All is paid for by so-called dereliction funding. About £300,000 was made available by the Department of the Environment and the Department for Social Development. A second round of funding is expected… The short-term beneficiaries were local builders and painters who were called in for the spruce-up.

But as Keynesianism goes, this is a pretty poor attempt at it. It suffers from the same false economies that most of the UK's policy does these days. If you're going to spend money with the aim of a) sprucing up a town in preparation for international visitors and b) providing work for local builders and painters, then a far better sort of stimulus would be to increase your initial outlay, to £3m or even £30m, and try to fill those properties with real businesses, rather than pretty pictures of businesses. In the short term, the cost will be more, but there's no substitute for having a thriving local economy, and you'll soon earn the outlay back.

But if Osborne understood that, we wouldn't be in this mess in the first place.

Enniskillen in Country Fermanagh. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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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/