Disaster for Cameron as Lib Dems win Eastleigh and UKIP beat the Tories

The PM faces a backlash after the Lib Dems win the by-election and the Tories finish behind UKIP in third place.

Let the Tory crisis begin. The result has just been declared in Eastleigh, where the Lib Dems have won with a reduced majority of 1,771 (4.26%) and where, disastrously for David Cameron, UKIP has finished second. A by-election that Cameron needed to win to convince his backbenchers that their party can achieve outright victory in 2015 has ended with the Tories finishing more than a thousand votes behind Nigel Farage's outfit. Coming second in a constituency where the Lib Dems hold all 36 council seats would have been allowable but to finish third, after a well-resourced campaign, is a terrible outcome.

For Clegg, the result will come as a considerable relief. Had the party lost the seat after earlier leading in the polls, it is his handling of the Rennard scandal that would have been blamed. That the outcome was a comfortable Lib Dem win is proof of the adage that "all politics is local". Voters were more concerned with the proposed gravel pit than they were with the disgrace of Chris Huhne or the allegations against Lord Rennard. Ironically, the result owed much to the "pavement politics" pioneered by the party's former chief executive.

The result is one of the biggest boosts to Clegg's leadership since the formation of the coalition. For once, he goes into his party's spring conference with something to celebrate. By holding Eastleigh in the most unpropitious circumstances, the Lib Dems have upset the assumption that they face wipeout in 2015. The Conservatives' hopes of a majority rest on the belief that they can take as many as 20 seats off Clegg's party (half of the Tories' 40 target seats are Lib Dem-held) but tonight's result significantly undermines that strategy. It is becoming ever harder to see how the Tories will improve on their 2010 performance.

For Labour, which finished a poor fourth, the result is a major disappointment. Having chosen to fight to win, rather than concede the seat to the Lib Dems, it saw its share of the vote increase by a mere 0.22 per cent. The hope was that Eastleigh would demonstrate the progress the party has made in the south, where, outside of London, it holds just 10 seats out of a possible 197. Instead, it has shown how much further it has to go before it can truly claim to be a "one nation" force. The only consolation for Ed Miliband is that the Tories' humiliation means all the attention will be on Cameron.

The big winner of the evening was UKIP, which saw its share of the vote dramatically increase from 3.6 per cent to 27.8 per cent, and finished just 1,771 votes behind the Lib Dems. The party still hasn't won a seat but it is getting closer and many will reasonably ask whether, had he stood, Nigel Farage would now be Westminster's newest MP.

Here's the result in full.

Mike Thornton (Liberal Democrat) 13,342 (32.06%, -14.48%)

Diane James (UKIP) 11,571 (27.80%, +24.20%)

Maria Hutchings (Conservative) 10,559 (25.37%, -13.96%)

John O'Farrell (Labour) 4,088 (9.82%, +0.22%)

Danny Stupple (Independent) 768 (1.85%, +1.56%)

Dr Iain Maclennan (National Health Action Party) 392 (0.94%)

Ray Hall (Beer, Baccy and Crumpet Party) 235 (0.56%)

Kevin Milburn (Christian Party) 163 (0.39%)

Howling Laud Hope (Monster Raving Loony Party) 136 (0.33%)

Jim Duggan (Peace Party) 128 (0.31%)

David Bishop (Elvis Loves Pets) 72 (0.17%)

Michael Walters (English Democrats) 70 (0.17%, -0.30%)

Daz Procter (Trade Unionists and Socialists Against Cuts) 62 (0.15%)

Colin Bex (Wessex Regionalist) 30 (0.07%)

Liberal Democrat majority 1,771 (4.26%, -2.94%)

Turnout: 41,616 52.8% (-12,034, -16.5%)

Swing: 19.34% Liberal Democrat to UKIP

UKIP candidate Diane James is joined by party leader Nigel Farage as they celebrate beating the Conservatives to second place in the Eastleigh by-election. Photograph: Getty Images.

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/