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Brown sugar

Gordon Brown last week gave what many observers believe to be his last major public performance as Chancellor as he delivered what will probably be his final pre-Budget statement.

As the removal men prepare to shift Mr Brown’s sticks of furniture into the house next door, probably some time next year, now is an opportune time to look at the legacy of his decade-long tenure as Chancellor. His speech also provides an interesting set of pointers as to how he might behave when he is finally installed as Prime Minister. The omens are not good at all.

The debacle over pension term assurance is a classic cock-up and not the first one, either. Here we have a situation where it was patently obvious to anyone that A-Day could potentially lead to a massive uptake in PTA from consumers.

Once the restrictions on contributions that previously applied to pension-linked life cover were removed, sales of this product were bound to soar. Not only did the industry realise this but so did the Treasury.

My understanding is that in the months before A-Day, there were extensive consultations as to whether or not Treasury officials understood what the implications were in terms of future PTA sales. The word came back that everything was hunky dory.

Many life companies and brokers geared up to create new products and sell them to consumers, only for Brown to sound the retreat barely eight months after giving the go-ahead to PTA sales under a new, more liberal regime.

Similarly with alternatively secured pensions, I remember a Treasury minister telling me a few years ago that concerns over the inability of people to pass on the unused element of a personal pension after their death would be addressed by Asps, then on the drawing board.

We now know just how liberal the regime will be for Asps – an 82 per cent tax. Luckily for most providers, the Treasury’s evident confusion on this issue meant very little work was done to develop products and bring them to market.

This brings to mind the other massive cock-up last year over self-invested personal pensions. Again, it was obvious that adding residential property to the Sipp mix could lead to a huge increase in sales of this product, as well as a minor avalanche of residential property sales.

As with PTA products, providers went to extreme lengths to consult Treasury officials over this, only to find Brown stomping on the idea barely four months before it was due to be introduced.

What it implies is that all this idea of a Chancellor and a Government department engaging in continuous micro- management so as to keep continuous control over what is happening is poppycock. Either that or the people around Brown really do not have any idea about what is happening until it smacks them in the face like a wet fish.

The second thing it suggests is that Brown is probably an even bigger political opportunist than Tony Blair. The evidence goes as far back as the farmers’ and lorry drivers’ blockade in 2000 when he scrapped the fuel duty escalator.

It can also be seen in 2005 when, just before the general election, he lobbed 200 in cash at pensioners to buy off their protests against higher council tax charges. Today, despite the fact that council taxes are even higher, there is no such largesse emanating from the Treasury.

A similar picture emerges in his so-called green taxes announced last week. Raising petrol prices by 1.25p a litre will add 23 a year to the costs of a driver travelling 10,000 miles a year in a standard car so it will not force anyone off the road. Nor will a further 5 tax on short-haul flights. What it will do is raise an extra 1bn for the Exchequer.

As for zero-carbon emission homes not being lumbered with stamp duty for the next three years, there is not a single home anywhere in the UK, nor is there likely to be one for at least another year, with zero carbon emissions.

Meanwhile, the very real problem of stamp duty faced by hundreds of thousands of cash-strapped first-time buyers is ignored. Not surprising, given that the Treasury is raking in billions from stamp duty every year.

The third thing this pre-Budget report tells us is that Brown is pig-headed. Take stamp duty. The Council of Mortgage Lenders and others have come up with proposals to lift the 1 per cent ceiling to a higher house value while simultaneously imposing a new 5 per cent tax for 1m properties. Despite this being a tax-neutral proposal, it too has been ignored.

What this tells us is that, despite the slavering support from his own backbenches, this is a Chancellor who, if and when he becomes Prime Minister, will be as unwilling to listen to the opinions of those around him as Blair has been. Not a good omen.

nic@inspiredmoney.co.uk

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