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Will reshuffle bring new deal on pensions?

After seven years of pension policies masterminded by the Treasury, this month&#39s Cabinet reshuffle has seen the appointment of a Blairite Work and Pensions Secretary, Alan Johnson, who is already adopting a very distinct tone.

Johnson, who got the Government off the hook on university top-up fees earlier in the year by appealing to the instincts of Labour backbenchers, has got his reward with a seat at the Cabinet table.

The balance on pension policy is starting to shift.

There is already speculation that the Prime Minister plans a distinctly different shape to his Government after the next general election – assuming Labour is on track to win.

But part of this change has already been achieved. The appointment of Johnson and Alan Milburn – the “other” Chancellor in the Cabinet – has altered much of the debate. Far from being a client department of the Treasury, a DWP led by Johnson will attempt to drive forward some distinctly New Labour thinking.

In his first major speech as Work and Pensions Secretary at the recent TUC Congress, Johnson echoed the comments of the Prime Minister who had addressed delegates the day before. While both men admitted there is no easy solution to the pension problem, it appears the tempo on policy change has been quickened since the reshuffle.

But the TUC was merely a dry run. As we anticipate next week&#39s Labour Party conference – pensions will again be near the top of the agenda – so the Prime Minister and No 10 are absolutely right to be raising the issue at this time.

Just before the reshuffle, Trevor Kavanagh, political editor of The Sun, declared that he and his paper are planning to make the pension debate a key part of the general election campaign. This commitment means that all three main parties will have to get their plans in shape.

We already know the Tories&#39 policies – launched at their conference last year – to bolster the state pension and uprate it in line with earnings. This is to be done by scrapping the New Deal employment programmes.

The Liberal Democrats have created a similar policy but have also launched their own pre-manifesto commitment to provide all over-75s with a pension which lifts them above means-testing – effectively the current level for the hotly disputed pension credit.

So we wait and see what the Labour Government&#39s response will be at this year&#39s Brighton conference.

What chance of Labour adopting or indeed aping some of these policies? We have seen the Government take ideas away from the Tories and Liberal Democrats before so we should not be surprised to see this again in the run up to the general election.

Back at the TUC Congress, delegates proposed a number of significant ideas which we are likely to see reiterated by the unions at the Labour conference. Compulsion is key. There were vociferous calls from all sides for employers&#39 compulsory contributions to occupational schemes.

One delegate went so far as to suggest that the Pension Commission, which is set to report next month, should have its terms of reference amended to look at when and not if compulsion should be implemented.

Wider calls came for lay pension representatives, with no financial axe to grind, to inform and educate employees – a clear reference to the recent conclusions of the Treasury select committee and a direct threat to the IFA community. Watch out for this one.

My firm prediction is t that we will see little detail of the development of Labour&#39s pension policies at this stage. The landscape is just not right yet. Johnson is barely in the role and any debate between the DWP, No 10 and, importantly, the Treasury has yet to begin.

So what might be the nature of that debate inside the Government? Undoubtedly, there is a growing political consensus towards uprating the basic state pension in line with earnings. This is increasingly regarded by most policy commentators as the bedrock of any new pension settlement. From the TUC to the CBI, the National Pensioners&#39 Convention to the Conservatives, this is quite some consensus.

I think the best guide is to watch out for the report of the Pension Commission led by Adair Turner, due in mid-October. However, do not be surprised if the report is somewhat delayed for it will have some crucial things to say. We can expect much of its script to form its way into the thinking for the Labour manifesto in May.

For the coming seven months – until the likely firing gun is fired for the general election in April 2005 – we can expect to hear very little new about policy in this area. So we watch and wait but I am extremely hopeful. For the first time in a long time, the debate on this issue is really taking place. Let us hope it gathers momentum this time.

I recently saw research from the House of Commons Library which suggests that in 2005, for the first time, pensioners will be the majority of voters who turn out in a general election. This time I have no doubt about that momentum.

Iain Anderson is director and chief corporate counsel at Cicero Consulting

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