The chances of an EU referendum in the next parliament are wildly overstated

A Conservative majority remains unlikely and EU treaty change could take many years to come to fruition.

If promising referendums were a good way of winning votes then you can be sure there would be more politicians promising them. There have been two (nationwide) held in the past 40 years: one on the UK’s membership of the European Economic Community in 1975; the other on the voting system in 2011. Polls suggest they are always popular in theory, (after all, who could be against ‘giving the people a say’?) but in practice, voters generally seem happy to be left alone outside of election time (which probably explains 2011’s somewhat deflating 42% turnout).

Why do I mention this? Chiefly to challenge the notion that a growing public appetite is making an in/out EU referendum inevitable. The surging popularity of the UK Independence Party and the Conservative Party’s loud commitment to a referendum in 2017 have lent credence to the idea that an unstoppable momentum is building in favour of a referendum in the next parliament (and possibly before). It's a case that has been wildly overstated.

Polls show two-thirds of voters in favour of a referendum on EU membership, but there is little evidence the issue would induce many of them to change their votes at an election. In fact quite the reverse: just 7% of voters mention Europe when asked to list “important issues facing Britain today” with only 2% identifying it as “the most important”. It speaks volumes that UKIP, a party whose raison d’être is to pull the country out of the EU, spends most of its time these days talking about immigration rather than Brussels. The two are related of course (Nigel Farage warns of an impending tide of Romanian criminals once immigration restrictions lapse in 2014), but the 7% of voters listing Europe among their top issues is dwarfed by the 35% mentioning immigration, the 50% mentioning the economy and the 26% mentioning the NHS. Put simply, the EU question is unlikely to play a significant part in the 2015 general election. Labour and the Lib Dems have little to fear from failing to match the Conservative pledge.

As to that pledge itself, it is only certain to be fulfilled in the event the Conservatives win an outright majority. But the chances of this appear to be diminishing. Current polling projects a Labour majority of around 100 seats. This is almost certainly too generous to Labour if one assumes a modest revival in the economy and the return of some UKIP voters to the Conservatives ahead of polling day (both of which seem likely). However, for the Tories to improve on their 2010 performance they would need to buck the trend of the last eight elections, which have seen the governing party's vote share fall on each occasion. There are no immutable laws of politics, but the last election’s circumstances were very conducive to a Conservative win (13-year old government, faltering economy, deeply unpopular PM); their removal and the added threat from UKIP suggest the trend is unlikely to be broken in 2015.

If one expects a Conservative defeat at the next election then a referendum is no more likely now than it was in January 2011 when the coalition government first legislated for a  ‘referendum lock’. This is a law mandating a referendum in the event of treaty change which transfers more powers from the UK to Brussels. Both Labour and the Lib Dems have pledged to retain the lock. This is significant. Nick Clegg has stated that it is a question of “when, not if” the UK holds a referendum. In the long run, this is probably true.

Yet EU treaty change could take many years to come to fruition. French President François Hollande, who will be in power until at least 2016, is desperate to avoid it, not least because the last one, Lisbon, split his party. The Netherlands has also expressed a distinct lack of enthusiasm. Balancing the competing demands of debtor countries and creditors, once it starts, will also likely be a long, laborious process. And that process isn’t even close to beginning. Meanwhile, while the Lisbon Treaty took just six months to negotiate, it was almost entirely based on the failed EU Constitution which took three and a half years from proposal to the start of the doomed ratification process.

Beyond the significant question marks over when a referendum would actually take place, there is also the small matter of the likely result. Readers of ASR’s Politics Monthly will be familiar with our position on the current polling data, which shows a plurality of voters in favour of exit. This, in our view, simply reflects the one-sided nature of the debate that has dominated discourse over Europe in Britain for the past two decades. There has been little incentive for politicians in favour of Britain’s EU membership to argue its case from day to day – passionate arguments for maintaining the status quo aren’t the stuff great political oratory is made of – but a widely-publicised referendum would likely prompt many who have up to now kept quiet to speak up.

On one side of the debate would be UKIP, the eurosceptic press and a cabal of backbench, mostly Conservative, MPs; on the other would likely be the leaders of all three main parties, the non-eurosceptic press and, potentially the trump card, a majority of the business community. Faced with arguments from non-partisan business people that leaving the EU would cost thousands of British jobs, we believe the British public would, reluctantly perhaps, vote to stay.

David Cameron delivers his speech on the UK's relationship with the EU at Bloomberg's headquarters in London on 23 January. Photograph: Getty Images.

Richard Mylles is a political analyst at Absolute Strategy Research, an independent consultancy based in London.

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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/