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Steve Webb on taking on vested interests and why ‘this was the moment’

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.

Steve-Webb-Pensive-in-2014-700.jpg
“If the Treasury was not up for this it would not have happened, there is no question about that”

“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

Steve-Webb-listens-in-2014-700.jpg

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

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. There are around 500,000 state pensioners who will totally disagree with your views on Webb. He has done nothing for the 4% to whom he pledged his support before he became pensions minister. Seeing as you Tom Selby have listed Webbs cv, here are a couple of quotes by the man himself.

    Steve Webb. 18 March 2004. Pension bill debate. Hansard,

    “The moral claim rests on the fact that we have a contributory pension system. We ask people to make contributions all their life to accrue an entitlement. Why should that accrued entitlement vary according to where they choose to live? That does not sit well with the idea of a contributory system.”

    “I strongly agree that there is an issue of injustice surrounding frozen
    pensions, given that pensioners living abroad have paid taxes and national
    insurance for their pensions. Treating pensioners differently from those
    living in other overseas locations that have their pensions automatically
    up-rated on a reciprocal basis is increasingly out-dated.
    We therefore believe that the Government must meet groups representing
    pensioners affected by frozen pensions to discuss how a just system of
    pension provision can be secured for those who move overseas. During the
    2006 Pensions Bill the Liberal Democrats proposed an amendment which would
    ensure that expatriate pensions would be re-linked to prices and then to
    earnings when this reform was brought in for the domestic state pensions.
    You may also be interested to know that the Lib Dems recently opposed
    regulations which would allow the situation to continue for another year.

    Please be assured that this is an issue that my Liberal Democrat colleagues
    and I will continue to campaign on.”

    He wrote this letter in 2008!
    Two years afterwards, Steve Webb was appointed Minister of State for
    Pensions.

    He has let down these vulnerable seniors whose only “crime” was to retire to a country that this government refuses to pay their rightful annual cost of living increases even though they have the same rights as those seniors who live in other countries. Paying into the NI scheme for decades dictates ones right to an annually uprated pension, where one lives is irrelevant. This is blatant discrimination and Webb knows this and still he does nothing. So Tom, the frozen 4% will not agree with your article about this man.

  2. I have to totally agree with Jane Davies and her comment.
    I can give you another instance of his meaningless words from Hansard source :
    (Citation: HC Deb, 8 April 2014, c48WH).
    Steve Webb (The Minister of State, Department for Work and Pensions; Thornbury and Yate, Liberal Democrat)
    We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the
    pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform—I am grateful to him for his positive comments on that—is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no
    differences if they have been in a company scheme. That is the world that we are moving to.
    >
    But the difference is that you could end up without indexing if circumstances place you in a country that the government see fit to deny the uprated pension by freezing it with no justification for doing so.

  3. Steve Webb said just a couple of days ago in the House of Commons :
    .” We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the
    pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people
    know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no differences if they have been in a company scheme.
    That is the world that we are moving to.”
    And you no doubt noticed the omission there about the denial of pension indexing that I see Jane Davies has highlighted. No change there then and this is the man who is supposed to be looking after the interests of the pensioner. I figure that it is only 4% or every 25th pensioner, so forget it !

  4. Jane Davis is correct in her statements.What I don’t understand is why a man like Webb,an economist, Cannot see the savings to the UK economy brought about by the 560,000 frozen pensioners . It has been calculated that the pensioners involved in this totally discriminatory policy,still in force after sixty years, saves the UK Government an estimated eighteen billion pounds per year.Which,if you take into account the total head count of pensioners living abroad,would be considerably more.Set against the latest estimate of uprating of 570,000,000 pounds,surely any economist would be able to to see the benefits of encouraging more pensioners to move abroad.Another factor which Webb is very keen on bringing to our attention is his concern how people spend their money. What we we need from Webb is more concern for the hundreds and thousands of expat pensioners,most of whom live the Commonwealth Countries,living on pensions which have been frozen since they went to join their families. A truly disgraceful situation for a so called caring British Government.

  5. Is the article serious or is it a pi55 take ? Webby is a clown in the coalition circus.

  6. Andy Robertson-Fox 11th April 2014 at 7:24 pm

    I must confess that when I read the first sentence of this article I went back to check the date of publication…surely 1st April?

    “….one of the most successful pensions ministers in British political history.” ? Well, yes, successful at forever moving the goal posts, successful at torpedoing the retiremnt plans of so many by abolishing pensions based on deceased spouse’s contributions and then, of course, as Jane Davies has so clearly detailed his unforgiveable about face on frozen pensions….and all this before his Pension Reform Bill has even hit the statute book and the proof of that unsavourary pudding is properly digested…or spat out..

    Anyone who witnessed Webb when diiscussing Clause 20 of that bill in the scrutiny committee stage will be more than well aware of his pathetic attempts in seeking to justify its inculsion on the basis of incorrect information and misleading assumptions…as well as seeking to divert members of the committee away from the nub of the issue by ensuring “colleagues” had been given adequate planted questions. It was a ministerially lead shambles.

    If dealing with the pensioners in the current state retirement pension scheme in this manner is a mirror of his proposed dealings under the pension bill and with the private pension schemes, too, then heaven help the potential pensioner.

    The writer suggests that after the next election unless there is another hung parliament Webb is unlikely to have a role in the next government; there are many pensioners who are being denied their annual index linking who would recommend to the electorate in Thornbury and Yate they consider very seriously whether he shoud have any role in the new parliament, let alone government.

    Webb admitted he was naive in the early days….a status he has maintained throughout his discrimination agaiist the frozen pensioner.

    More homework Mr Selby and less political gullability?

  7. It is difficult to add anything to what has previously been said with the comment by Jane Davies being topped up by Andy RobertsonFox and Paul Woolley.
    Even in the article Webb talks about 1 or 2 billion being needed which is no doubt an inflated figure like the inflated figures that he always gave out for the indexing cost to the NI FUND if they were to grant it.
    He says above : ““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.”
    The frozen pension fits that bill and he is now acting in the way that he accused others of doing.
    This is today Mr Webb and you have shot yourself in the foot again.

  8. If Mr Webb’s been arguing for years for relaxation on annuities, why has he said nothing about a radical new product such as Assured Income DrawDown?

    I heard today that, before it was announced, he was deliberately kept in the dark about the Chancellor’s major announcement in last month’s budget. If this is true, it doesn’t say anything very positive about the Treasury’s confidence in him and, let’s face it, he has made a few pretty stupid utterances that have suggested he doesn’t have much understanding of the problems with which the retirement income market has been grappling for the past decade.

  9. Surely it’s a bit early to deem Autoenrolment a success. When you combine the fact that the vast majority of prospective AE eligible employees have not yet been autoenrolled and the fact that the contributions are only at 1% and 2% points i think we’ll see opt out rates start to rise dramatically.

    I’d also argue that the relaxing of pension pot access rules had very little to do with Steve Webb and more to do with George Osborne wanting to score political points for the Tory party.

    He is certainly not the man of the moment that this article has made him out to be.

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