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Reckless driving

The Government has developed such a nasty habit for U-turns that it is amazing anyone in financial services ever gets anywhere. Added to property in Sipps comes Hips and arguably Asps. There have been many other changes of stance but these are the big ones that have seen intermediaries and everyone else in financial services have to shift position time and again.

In the case of home information packs and self-invested personal pensions, it wasn’t so much the change itself which was wrong but the manner of the change. Many might argue that the principle of Hips was good although the practical effect would have been to cost people extra money when trying to move house.

As for Sipps, the move to stop people putting residential property in pensions was welcomed by many if not all advisers. Most felt that the benefits were outweighed by the possible risks of misselling as the sector attracted unregulated property entrepreneurs plus the perils of topsy-turvy asset allocation. But some mourned the loss of a chance to make pensions sexy, possibly for the first time in their existence.

In the case of alternatively secured pensions, it may be a little harsh to call warnings about their abuse a U-turn but there was definitely a change in the emphasis of the language used by the Government as it feared losing tax revenues.

One can also throw inheritance tax into the mix, where the original changes to trusts introduced in this year’s Budget had huge implications for the public and were then watered down.

In all these changes, the big losers are the businesses directly affected – tax advisers, firms with Hip divisions or the property companies and mortgage banks which allied with pension firms. The U-turns are hard to quantify but Government flip-flopping has cost business very many millions of pounds. One estimate on Hips was a quarter of a billion pounds.

Viewed in such stark terms, it shows how reckless this Government attitude to policy changes has been. If you consider that many of the financial services people affected are the sort of entrepreneurs and risk takers who spot chances and make things happen, then it is even more irresponsible as the Government is hurting the sort of people who make the economy work – the ones the Chancellor claims to have nurtured during the life of this Government.

Intermediaries have also been hurt. Companies had started to gear up for Hips and were beginning to warn clients. The pension and IHT changes left advisers looking powerless in the face of Government fickleness.

Once again, consumer confidence has been hit although probably more in retirement and savings than in the housing market, which at times can seem more than an unstoppable engine.

What should be done? Well, no one can rule out U-turns. Governments make policy mistakes and then correct them. Whether that happens in the early stages of the development of a policy or just as it is about to be implemented does not necessarily change the argument for or against something. If it is wrong, it is wrong. But the Government and the Treasury, in particular, should undertake to try and avoid U-turns.

If something is in draft legislation, then it is hardly surprising – when a Government has a majority – for an industry to begin planning and investing.

It would also make a refreshing change if ministers could admit: “We changed our mind.” The change in psychology required might not be possible for politicians but at least some of their officials might consider it.

Finally and perhaps most important, the Treasury should try and lose its traditional suspicions of financial services. For a department that so champions private sector involvement in all manner of public sector areas, it often works against the grain when it tries to work with financial services companies. This applies to all firms from huge providers through to advisers.

If ministers and officials change their attitude, then they might also open their ears a little earlier and not assume a vested interest lies behind everything the industry says. As another wholesale reform of pension savings is being plotted, it would be helpful if all concerned could know that U-turns will be avoided if at all possible. In that way, maybe everyone – ministers included – could finally get where they want to go.

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