PMQs review: Cameron still lacks answers on living standards

If the PM wants to dismiss Miliband's energy price freeze as "a con", he needs to come up with a superior policy.

Ed Miliband arrived well armed at today's PMQs: food-bank use has tripled, pay growth is at its lowest level on record and the number of people working part-time because they can't find a full-time job has reached a new high. But after last week's floundering performance, David Cameron put up a better defence. He was able to boast that unemployment had fallen in every category and that there were now a million more people in work than in 2010 (a statistic you can expect to hear every day from now on). The PM also finally settled on a line of attack against Miliband's proposed energy price freeze, branding it a "price con". It is doubtful whether those forced to choose between heating and eating will agree, but this appeal to cynicism is an improvement on last week's red-baiting.

In response to Miliband's questions, all of which were on living standards, Cameron strikingly argued that the best way to improve voters' incomes is to "cut taxes". As was reported earlier this week, the Tories are set to mimic the Lib Dems and pledge to raise the income tax threshold to £12,500. But for voters who are seeing their wages fall by an average of 2% in real-terms, a promise from the government to take a smaller chunk away is unlikely to prove sufficient. The Tories need a plan to increase the minimum wage and to spread use of the living wage, a subject on which they remain oddly silent.

If he wants to dismiss Miliband's energy policy as "a con", Cameron also needs to devise an attractive policy of his own. He currently boasts that the government is ensuring consumers are put on the lowest tariff but figures show that only 10% will benefit from this. Others in his party pin their hopes on a bonfire of green taxes and regulations but these account for just a fraction of the average bill. Polling shows that 75% of the public don't believe that rising bills are due to green levies. Miliband also delivered an effective riposte to the charge that his environmentalism was to blame for excessive prices: "They’ve been floundering all over the place and they blame the last government and green levies. Who was it who said: ‘I think green taxes as a whole need to go up’? It was him as leader of the opposition ... I look back at the record on the energy bill of 2010. Did he oppose the energy bill of 2010? No. He supported the energy bill of 2001. You could say, Mr Speaker, two parties working together in the national interest."

Until Cameron devises a policy with as much appeal as Miliband's price freeze, it is still Labour that will look like the party with answers on living standards.

David Cameron leaves Downing Street earlier today. 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: products-and-investments/ pensions/pensions2015/