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Iain Anderson: The Budget that caught everyone off guard

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With Labour having campaigned vigorously for reform to the pensions and savings industry – was HM Opposition caught off guard by the Budget?

Too right. Everyone was. The Budget box – which has been so leaky in recent times – remained tightly shut until the Chancellor spoke.

Former Department for Work and Pensions minister James Plaskitt at Cicero’s Budget analysis event today saw little chance of a policy reversal if Labour win power in 2015.

This is not necessarily because the party agrees with the reforms but more because further changes would cause even greater uncertainty, do additional damage to the insurance market and have negative consequences for savers.

However, it hasn’t taken long for other Labour voices to emerge. Former political adviser to Tony Blair, John McTernan, told BBC Newsnight that “you can’t trust people to spend their money sensibly”.

Tom Watson MP has blogged that as far as pension savings are concerned: “People will tell you that ‘it’s your money, you should decide how to spend it’.  The whole point it just isn’t that simple. Yes, you paid in. But so did the taxpayer. And the Government has every right, therefore, to ask that you spend it in the manner it was intended when we were stumping up the cash.”

So a big debate is now going to take place in Labour on pensions.

For the Tories – No10 policy board Nadhim Zahawi MP has claimed the changes would assure the Chancellor a place in history.

So the Conservatives now claim a place in political history. They also believe they now have a domestic policy weapon to beat Ukip with.

It appeals very much to the smaller state instincts of many on the backbenches and the Government has been very open about the risks to individuals if they squander their pots by cashing them in and spending the lot, well before the reaper calls.

What next? A day after Budget 2014 no one in Westminster, Whitehall or the City, is able to answer that question. Will Labour be proven correct in predicting an increase in pensioner poverty and an increased reliance on the state pension as people recklessly use their pension savings?

Or will the Conservatives benefit politically from the move? The weekend opinion polls are well worth watching.

Iain Anderson is chief corporate counsel at Cicero Group

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  1. Totally disagree with Tom Watson, that’s a typical nanny state response. Why do we believe that everyone is suddenly going to immediately blow all their money just because they can? How stupid do you think pensioners are? I’m almost certain that when pensioners get their monthly annuity paid into their bank account they don’t immediately run out and spend it all, they budget for their bills and their future outgo like, you know, normal people.

    And the statement “Yes, you paid in. But so did the taxpayer” is incorrect. The taxman didn’t contribute anything at all to your pension, he just let you keep more of it. Giving tax relief and allowing you to keep more of what you’ve worked hard to earn is not the same as “paying in for you”.

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