Why there'll be no U-turn from Clegg on green taxes

The Deputy PM vowed in his conference speech that the Lib Dems "will keep this government green" - and he meant it.

ConservativeHome thinks the Lib Dems are going to cave in to the Prime Minister after his rash policy-on-the-hoof announcement at PMQs yesterday – and start taking the green costs out of energy bills.

To quote the Tory blogger Mark Wallace, "they [the Lib Dems] know their position as the people preventing energy bills from being cut will not be tenable for long."

I think Mr Wallace is wrong.

Firstly, he forgets that this isn’t 2010 or even 2011. We’ve now crossed the rubicon and the differentiation strategy, so long promised, is in full swing. Hence the reversal on secret courts, clarification on Free Schools, the lists of Tory 'initiatives' we’ve stopped (the 'racist vans' campaign being the latest). That process is going to accelerate and the chance to expose the paucity of thinking from the Tories on energy is too good to miss. When David Cameron encouraged everyone to hug a husky, I had no idea he was actually outlining his whole energy policy.

Secondly, 75% of folk don’t blame green taxes for their energy bills. I suspect the 25% of people who do already vote Tory or have fled to UKIP. This doesn’t seem like much of a Lib Dem vote winner, so the politics don’t work. And thirdly, its a bad idea anyway. Around half the money raised in green energy taxes goes on schemes to help those in fuel poverty to minimise waste. I’d have said that making the poorest in society choose between heating or eating was a rather more "untenable policy position".

But that’s not really why the Lib Dems won’t be rolling over to get the Prime Minister out of a hole. It’s because just 36 days ago, Lib Dem conference was told:

"And if there’s one area where we’ve had to put our foot down more than any other, have a guess. Yep, the environment.

"It’s an endless battle; we’ve had to fight tooth and nail; it was the same just this week with the decision to introduce a small levy to help Britain radically cut down on plastic bags.

"They wanted to scrap Natural England, hold back green energy. They even wanted geography teachers to stop teaching children about how we can tackle climate change. No, no and no – the Liberal Democrats will keep this government green."

Nick Clegg’s words. No U-turning from there.

Mr Cameron, it might be time to pull on an extra hoodie. It’s the only energy policy you’ve got left.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

Nick Clegg speaks at the UN General Assembly on 27 September 2013. Photograph: Getty Images.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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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/