What has the Labour Government ever done for us? The last four years have seen some of the greatest upheavals in the financial services industry for at least a decade, if not longer. Where once it was teachers and doctors who were overwhelmed by rapid change from tinkering Governments, now it is product providers and IFAs.
One Chancellor, two Social Security Secretaries and three Treasury financial secretaries have all sought to make their mark on the industry. An honest appraisal of the Government's record would give it credit for tackling long-overdue reform and brickbats for unnecessary tinkering and missed opportunities.
First, the praise. Labour has done well in tackling the big issues. Independence for the Bank of England has given us hope for long-term economic stability. The new Competition Act will help to create a more competitive environment for UK business. The creation of the FSA is a huge achievement. Certainly, it is having its teething problems, as any enterprise this size would. But, unlike its neighbour, the Millennium Dome, this institution shows signs of working. Its new-found emphasis on protecting and educating the consumer is welcome. We will not, of course, know its real strengths until it is tested in a crisis.
On the radical side, the Government has committed itself to product regulation. Cat standards for Isas and stakeholder standards for pensions have at last started to tackle the obfuscation and downright robbery inherent in many financial services products. These reforms are genuinely innovative and have been carried out in the face of formidable opposition. Labour deserves credit for not backing down. In this respect, the Government should go further by extending Cat standards and making them more prominent. Cat standards for advice, bank accounts and credit cards would be welcome.
The award for the most pointless reform must be the abolition of Peps and Tessas in favour if Isas. The insurance Isa remains a poor relation and the cash and equity elements are simply pale imitations of their more robust forebears. Peps and Tessas were not broke but Labour was determined to fix them for no discernible benefit except huge remarketing spend.
Pensions, welfare reform, long-term care – all are the great missed opportunities for this Government. All stakeholder represents is reform of the personal pension. It is nowhere near being the radical solution for pensions that is so desperately needed, including an imaginative solution to the inflexibility of annuities. Similarly, welfare is now a complete muddle of incomprehensible tax credits, with no sign of a reduction in spiralling budgets. Finally, the reform of long-term care has been left on the shelf. It is almost impossible, I imagine, to advise anyone on what steps they should take to ensure they are cared for in old age.
I would give this Government about six out of 10 for effort and imagination. But as it moves inexorably towards a second term, the adage is still “must try harder”. Labour must tackle pensions and annuities. The proposed baby bond is a microcosm of what could be done with pensions and it will be interesting to see how that policy develops. Labour must also move forward with product regulation and consumer-friendly policies. Above all, it must sort out the muddle of polarisation reform and begin to tackle the issue of genuine independent financial advice. In this respect, it is well known that the Government is on the warpath. The Government has warmed up. Now it must work out.