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George Osborne’s grey-haired gamble

21 July 2014

George Osborne has been in retail mode this morning, selling his pension reforms and explaining how pensioners can unlock their life’s savings. The Chancellor has said that the Treasury will work with the Citizen’s Advice Bureau, Age UK and other organisations to provide pensioners with the best possible impartial guidance to transform their retirement. Interested parties can consult the Treasury for more details.

Osborne, in the course of this effort, gave a politically pointed interview to the Today programme. His watchword was freedom:

Osborne went on to add that this was what the pension reforms are ‘all about’.

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More cynical voices might, however, refer to Allister Heath’s article in this morning’s Telegraph, which says:

Despite the stonkingly good economic growth, and the near-miraculous performance of the jobs market, the budget deficit remains horrifyingly large. The government is set to borrow another £95.5bn this financial year, a mere £11.9bn less than in 2013-14. Matters are improving far too slowly: with the economy booming and GDP likely to expand by at least 3pc this year, the public finances ought to be in a much better state than they are.’

Heath notes that tax receipts remain depressed because real wages are falling and consumer spending is sluggish while households retrench. The deficit is running at 6.6% in 2013-2014. The hope is that it will fall to 5.6% next year. Some 65% of cuts are still to be implemented.

When seen through the dark prism of the public finances, the pension reforms have a different appearance – more fiscal necessity than political principle. The reform will release a vast amount of cash for pensioners to spend – and they will spend it because there’s not much point in being the richest man in the graveyard. The Treasury anticipates that the reforms will raise £320m next year, rising to £1.2bn in 2018-2019. As Fraser noted on Budget Day, ‘Osborne is, quite literally, banking on a pensioner spending splurge.’

Elsewhere in the interview, Osborne spoke about sanctions relating to the MH17 outrage – and there is a lot of chatter about ‘Iran-style sanctions’ in the press this morning, notwithstanding the damage that this would do to the British economy and (ho, ho) pension funds that have invested in oil and gas companies that run joint ventures with Russian state companies. Osborne was clear on sanctions and the integrity of national borders:

It is less clear what those sanctions will be. The EU is reportedly divided on the subject, with Germany apparently favouring a less severe approach than other western countries, many of which happen to be less reliant on Gazprom. The split is further evidence of a fissure at the heart of the Commission over how to deal with Russia; with bitter rows over the identity of Cathy Ashton’s replacement as EU High Representative. Federica Mogherini, the Italian foreign minister, is deemed to be unacceptable due to her allegedly pro-Russian credentials. But, alternative candidates such as the Swedish foreign minister Carl Bildt might veer too far in the other direction. Once again, the EU appears to dither while events turn apace.

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  • The Masked Marvel

    If Osborne doesn’t get interest rates raised, he’s not really serious about helping pensioners.

  • HookesLaw

    ‘if ‘real wages are falling and consumer spending is sluggish while households retrench’ then why do we have 3% growth?.

  • BarkingAtTreehuggers

    After last weeks pretty reshuffle I almost forgot this chap was still in government. Could we not just leave it that way, please?

    “The government is set to borrow another £95.5bn this financial year, a mere £11.9bn less than in 2013-14.”
    Tell another lie.

  • Patrick

    Osborne has not done enough to cut the deficit – for sure.
    But… Labour are ahead in the polls and the electoral system benefits them quite markedly. On today’s polling we’re going to have a Labour government in 2015.
    And then see what happens to the deficit!
    Buy gold.

    • BarkingAtTreehuggers

      When you run out of real gold all you need to do is print more paper gold.

  • Lady Magdalene

    Pensioners encouraged to go on a spending spree …. whilst the Government has STILL not produced a policy on the cap for elderly people paying for care in old age.
    Short-termism and stoking up problems …..

    • Holly

      I have about £6k in a private pension, that will give me next to diddly squat if the system stays as it is.
      I also have a public sector pension that I will continue to draw from.
      I fully intend to ‘go on a spending spree’ when I take full advantage of whatever Osborne allows me to.
      I will then put it towards, fixing my roof, gutters,replace the soffits, and re-paint the top half of the house walls.
      What a waste eh?

    • MichtyMe

      Encouragement is insufficient, compulsion to go on a spending spree is what’s needed. In old age you lose the appetites, desires, inclinations and cravings of youth. Me, I just can’t be bothered spending money anymore.

    • HookesLaw

      The main difference is not having to put your money into an annuity which pays a poor return (this alone is an encouragement NOT to save for a pension and spend). A pension pot will have to be put somewhere – and under the current system there is still also a lump sum – so the notion that there is a huge wave of extra spending to be unleashed is a bit dubious.
      The possibilty of a more flexible pension will probably encourage people to spend lass and save more. So once again Mr Nelson talks out of his backside.

  • anyfool

    That you or anyone seems to think that replacing Ashton is of any consequence is hilarious, it is a non job that carries no weight in the real world, and that is the reason that it is so dangerous, it has to make sounds in the EU world to mask its impotence, hence its contribution to escalating the original Ukraine crisis.
    It is a loose cannon that will be led by another out of depth idiot like Ashton.

    • Bert3000

      Ashton is a lot more impressive than the laughable William Hague as a foreign policy operator

      • Shazza

        So impressive – she together with her Leftie empire building comrades in the EU are the single most reason why Ukraine is in flames today.

        • HookesLaw

          No it isn’t

      • HookesLaw

        No she isn’t

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