Some of you will remember only too well their ill-earned reputation for integrity and quality, and their collapse some three years later. Thanks to ineffective Government policing, Equitable continued to sell policies for far too long and the retirement plans of hundreds of thousands of people went up in smoke.
Now we know that within weeks of my April 1997 warning – which sadly went largely unheeded – other Treasury and Government so-called experts were gathering around Gordon Brown. Fair enough some warned him that digging his big tax shovel in pension schemes could end in disaster for millions but obviously the warnings were not strong enough.
We also now know Brown’s external advisers at the time were Arthur Andersen, another so-called pillar of the Establishment who were also advisers to Enron, another highly regarded business that collapsed, shattering the retirement dreams of thousands here and in the US.
I suppose there must be some captains of industry or wealthy private individuals in this country, who have suffered as a result of the Equitable Life collapse and this Government’s ill-conceived tax and restrictive legislation imposed on our pensions but the truth is that millions of average investors are the ones who have really suffered.
I have known Douglas virtually all my life. I bump into him from time to time usually on a Saturday morning when I’m at the local shops. Since he left school, he has spent his entire adult life working for a local employer and he is now close to retirement. Unfortunately, his employer had a pension scheme with Equitable Life so his future pension has fallen substantially. What he and thousands like him did not need was the tax kicking they have received from Brown.
But isn’t everybody in the same boat? Oh, no. You see, all civil service schemes are protected from Brown’s tax attacks. They cannot collapse because we, the daft tax and ratepayers, just dig deeper into our pockets for them. And did you know a further Brown attack on pensions which was nasty and retrospective exempted MPs and judges? So no wonder the other political parties are not making a fuss.
I am often asked how I spotted Equitable’s problems before hugely expensive Government regulatory departments who are supposed to protect savers. It is simple. I applied common sense. If numbers don’t add up, they just don’t add up.
I tell you what else doesn’t add up. Taxing pension schemes, restricting protective surpluses and applying ill-conceived, retrospective legislation are not in the best long-term economic interests of the country, as Brown now claims. He cannot be allowed to get away with such a ridiculous statement. History tells us the best economic formula lies with reducing tax, not increasing it. Positive demographics and entre-preneurs build wealth of countries, not politicians. Ten years from now, I bet Gordon Brown will not enjoy the status he does today. It is a pity we cannot swap him for Rudy Giuliani, former Mayor of New York.
You may recall he was the man who introduced zero tolerance to the streets of New York City and cleaned up crime. He achieved that by increasing the spend on policing the streets. So did he increase taxes? Not a bit. When he became mayor, he found the city dreadfully in deficit. It had 23 taxes. He lowered every one of them. He also tried to remove capital gains tax completely. He believed when you drop taxes you increase freedom and revenue. He changed a $2.3bn deficit into a substantial surplus. Now that’s what I call clever economics.
Alan Steel is chairman of Alan Steel Asset Management.