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LAB’s just reignited pensions as a battleground

February 28th, 2015

David Herdson says the tuition fees funding proposals could be skating on thin ice

Elections are won on perceptions as much as realities: competence, trustworthiness, whether a person or party is ‘on my side’, and so on. It’s therefore brave of Labour to propose funding a cut in university tuition fees from taxes raised on pensions. In doing so, the unintended consequence of opening up a policy front on what ought to be a relatively strong policy subject for them may be to divert it instead to a much weaker one.

Labour’s record in government on pensions was not a happy one. Part of this was accident – longer life expectancy and lower yield rates were largely generational or global events – but part was not: Gordon Brown’s raid on pension funds in his first two Budgets. That act did not of itself kill off final salary pensions but it did accelerate the trend. As a result of the declining returns, many middle-class voters have lost out. For Labour to revisit pensions as a tax source invites comparisons with 1997/8, particularly given Ed Balls’ positions then and now, and also given the propensity of the Middle class and middle aged to vote.

Where the Tories and Lib Dems can attack – beyond basic economic trustworthiness – is on the reduction in the size of an individual’s maximum overall tax-free fund to £1m. Obviously it would be a mistake to go on that specific: £1m sounds like a lot to ordinary people and the technicalities of having to explain why it’s not will turn most voters off. In fact, it would affect many workers on comfortable but not massive incomes such as many public sector workers paying higher rate tax. “Does Labour plan to raid your pension again?” could be a potent slogan.

For the time being, it doesn’t matter; there’s enough mileage for the government in the fees story itself what with richer former students benefitting most from Miliband’s message. Labour may dispute that and will in any case be keen to remind voters of the Lib Dems’ perfidy on the subject, though it may be optimistic of Labour to expect an exemption from the voters in respect of politicians’ pledges when so many voters see the main parties as ‘all the same’.

What’s also worth asking is whether the fees policy will actually change votes. We know a huge number of voters switched from Lib Dem to Lab in 2010 and we also know that virtually none have gone back, so who is the policy aimed at? Not those who’ve gone on to UKIP presumably given the small numbers there in the 18-25 age group. likewise, not those who’ve gone SNP given the different arrangements in Scotland. Lab-Green switchers is possible but trying to outflank the Greens on tax and spend is like the Tories trying to outflank UKIP on immigration (though perhaps not the best time to mention that topic).

Which is why the unintended consequences of the policy could be far more significant than the effects of the proposal itself.

David Herdson