By any reasonable measure Steve Webb will go down as one of the most successful pensions ministers in British political history.
Since his opening salvo of introducing the state pension triple-lock in 2010 – a policy that all three political parties are likely to stick with after the next general election – Webb’s ability to drive through radical reform in a coalition Government during a period of austerity has been nothing short of remarkable.
“Having now discovered how difficult it is to do stuff I think I will have achieved more than I could have dreamed of when I first took this job,” he says.
“The reality is we have got a shocking fiscal backdrop that means there is not just no money to spend but substantial negative amounts.
“I occasionally look back wistfully at previous governments who have had budget surpluses and think of all the things I could have done in that situation.”
Webb cites the introduction of a single-tier state pension worth around £144 a week in 2016 as a particularly difficult reform due to the lack of money available to him.
“If you think about the single-tier state pension, that cost no money,” he says.
“It would have been so much easier to reform the state pension if we could have slipped £1bn or £2bn in to smooth things over.
“To deliver triple-lock, single-tier, successful roll-out of auto-enrolment, great liberalisation of pensions and value for money through the charge cap is a
pretty full agenda. If you had offered me that at the start I would have taken it.”
The “great liberalisation” referred to by Webb was, of course, announced by Chancellor George Osborne during last month’s Budget.
The changes mean that from April next year anyone aged 55 or over will be able to take their entire pension pot as cash.
While the policy did not appear in either the Liberal Democrat or Conservative manifestos, Webb has previously indicated a preference for boosting the flexibility of pensions by allowing people to access their fund early.
He says: “It dawned on me some years ago that the drawdown rules were framed in terms of what was then the basic state pension. Simple arithmetic suggests the drawdown rules can be relaxed with a
different state pension system.
“Personally, I have been arguing for relaxation on annuities for years. I think I had a debate in 1999 with Frank Field in the House of Commons on annuities and I have long stood up at conferences and said we are too picky about how people spend their money.”
So was Webb behind the Treasury’s apparent change of heart? After all, this is the same Treasury that reduced the maximum amount a person in capped drawdown can take each year from 120 per cent of GAD to 100 per cent.
“I’ll let you use the phrase ‘change of heart’ rather than me,” Webb says.
“I had certainly been prodding and probing and trying to get action on that but it was a coalition thing. If the Treasury was not up for this it would not have happened, there is no question about that.
“There was a sense that now is the moment. With the opportunity presented by the single-tier and maybe the fact we are in the
final year of a Parliament, if we were going to do anything it had to be now.”
As well as overcoming the differing agendas of Government departments and his coalition partners, Webb has also had to contend with the powerful pensions lobby.
Few would now suggest he has caved in to the vested interests of providers – the Budget reforms and the auto-enrolment charge cap are clear attempts to hack away at insurers’ profit margins – but I’m keen to know whether the minister has encountered any problems with industry lobbying.
Webb admits he was “shocked” at the level of industry opposition to his plans to introduce automatic transfers for small pension pots.
“The biggest occasion I hit the vested interests was on small pots and transfers,” he says.
“I still remember a meeting with leading industry figures where you could just see them round the room thinking ‘hang on – we are going to have a net outflow of funds here, I don’t like the look of this’ or ‘I am quite enjoying all this money just sitting quietly on my books – don’t prod it whatever you do’.
“I think I was a bit naïve in the early days and that one shocked me. I suddenly thought ‘oh crikey’ because people in the industry were thinking up all sorts of reasons to oppose something which to me seemed clearly right.”
Despite this, Webb says there are industry figures that have supported his reform agenda.
He says: “There are people who see the need for reform and recognise the problems with the industry and its reputation. I include [ABI director general] Otto Thoreson in that category of people who are trying to drag the industry kicking and screaming into the modern world.”
Having overseen a dramatic programme of reform, Webb’s attention is beginning to turn to the priorities for the next Parliament.
He suggests proposals to increase auto-enrolment minimum contributions above 8 per cent will form part of the LibDem manifesto ahead of next year’s election.
Webb says: “At some point a future Government will have to deal with the great ‘8 per cent is not enough’ question. Arithmetically 8 per cent is not enough for lots of people but how do you fix that?
“There are lots of different ways you can deal with that. I have some thoughts but that will be a big challenge for the next Government.”
Without another hung Parliament, Webb is unlikely to have a role in the next Government, but his legacy as one of the great reforming pensions ministers may have been sealed.
STEVE WEBB CV
2010-present: Minister of State for Pensions
2010-present: Member of Parliament for Thornbury and Yate
2009-2010: Liberal Democrat shadow for work and pensions
2007-2009: Liberal Democrat shadow for the environment, energy, food and rural affairs
2005-2006: Liberal Democrat spokesman on health
1999-2005: Liberal Democrat spokesman on work and pensions
1997-2010: Member of Parliament, Northavon
1995-1997: Professor of social policy, University of Bath
1986-1995: Economist, Institute of Fiscal Studies