David Cameron at No 10 with Herman van Rompuy, president of the European Council, 23 June. Photo: Getty
Show Hide image

Leader: Britain’s growing Europe problem

The aim of the Prime Minister’s European policy was never to protect Britain’s best interests within Europe but to appease restive backbenchers.

So which is David Cameron: reckless or incompetent? That was the question Poland’s anglophile foreign minister, Radosław Sikorski (an old Oxford and Bullingdon Club acquaintance of Boris Johnson), posed during a private meal. “He f***ed up the fiscal pact,” the magazine Wprost reported Mr Sikorski as saying. “Because he’s not interested, because he doesn’t know, because he believes in all that stupid propaganda and is trying stupidly to manipulate the system.”

This was not a tactical leak. What it revealed was that Mr Cameron has succeeded in alienating even Britain’s closest European partners, without winning a single concession to our national interest from them.

A further difficulty was looming for Mr Cameron as we went to press. At a meeting scheduled for Friday 27 June, the British government hoped to force a vote in an attempt to block Jean-Claude Juncker’s candidacy to become the new president of the European Commission. However, the UK lacks the goodwill to make this case. Mr Juncker, the former prime minister of Luxembourg, is a federalist. His selection as the candidate for the presidency to succeed Portugal’s José Manuel Barroso would highlight Mr Cameron’s poli­tical weakness, even irrelevance, and act as an obstacle to his aspiration to renegotiate the UK’s membership of the European Union.

For all the noise surrounding the debate about the EU, there is a remarkable degree of consensus about the best policies to promote Britain’s national interests in Europe. The leaderships of the three main parties favour reform of European institutions; all want to protect the single market; and all are determined to resist “ever closer union”. Both Labour and Conservative politicians have expressed an interest in restricting the free movement of labour within the EU.

The essential difference between the parties is not one of goals but of tactics. Labour politicians have generally clothed their desire to repatriate powers and resist further integration in the language of commitment and compromise. The Conservatives, by contrast, have attempted to coerce ostensible allies with threats of a British exit from the EU.

The aim of the Prime Minister’s European policy was never to protect Britain’s best interests within Europe but to appease restive backbenchers. Under his leadership, the Tories withdrew from the European People’s Party grouping, abandoning a coalition of the mainstream European centre right for the company of xenophobes and cranks. Tories have characterised eastern European immigrants as benefit tourists. And Mr Cameron has guaranteed that a referendum on Britain’s continued membership of the EU would be held in 2017, if not before then.

If all of this was intended to ensure the loyalty of Eurosceptic backbenchers, it has failed: Mr Cameron’s attempts to appease the right have merely emboldened it. As Alex Salmond said, in an interview with the NS last year: “You can never out-swivel-eye the swivel-eyed.”

In Brussels, meanwhile, this strategy has weakened both the government’s influence and its credibility. Mr Cameron possibly assumed that other European leaders could be cajoled into acceding to Britain’s demands.

The Prime Minister ignored the reality that they have anxious electorates and sceptical backbenchers, too. Having staked everything on being granted reforms that he seems ever more unlikely to achieve, there is a chance that Mr Cameron’s legacy will be Britain’s accidental abandonment of the European project.

This is a result that very few senior British politicians favour, certainly not William Hague. He was an ardently Eurosceptic leader of the Conservatives but has been an impressively pragmatic Foreign Secretary. Some of his colleagues have even complained of his having been “captured” by the pro-European mandarins at the Foreign Office.

If there is any consolation for the UK’s supine pro-European lobby, it comes, unexpectedly, from Nigel Farage. As Ukip’s poll ratings have risen, so has support for Britain’s continued EU membership. It is possible that, by associating Euroscepticism with fear and xenophobia, Mr Farage has made the case for Europe in a way his mainstream rivals never could. 

This article first appeared in the 25 June 2014 issue of the New Statesman, Who was Franz Ferdinand?

Show Hide image

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/