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Who'd vote for the pension snatcher now? Andrew Alexander - Daily Mail, April 6, 2007 As I never tire of saying - forgive me if I bore on this theme - the great fascination of politics is its unpredictability. A week ago, the coronation of Gordon Brown seemed so certain. Everything was in order; the choir had sung Zadok The Priest; the anointing was prepared; the crown all but on his head. Then voices cried: 'Hang on a moment. Was the right heir about to be made sovereign?' What about this alarming Treasury document? How wise Environment Secretary David Miliband was when challenged on Any Questions last week about the Labour leadership to say that while his position was quite clear, it was not unequivocal in the sense that he had, or had not, undertaken not to promise that his (unequivocal) position might not, of itself, if not sufficiently obscure, in certain circumstances, be challenged. Or perhaps not. His exercise in mystification was wonderful to hear. I have never understood why anyone in a final salary pension fund, or even hoping to join one, and now facing an unexpectedly harsh old age, could bring themselves to vote Labour. They are unlikely to now, given the Treasury papers which Brown fought like a trapped ferret to prevent being published. And he then allowed publication only late on Friday when he was on his way to Afghanistan. Yes, I know that he and his friends can argue that his tax change was not the only reason for the collapse of so many funds. The stock market slumped in 2000 and lower interest rates make it harder to amass the amount which guarantees pensioners a lump sum sufficient to buy a decent annuity. And of course we are living longer than the actuaries had expected. But all this alters the main point less than he and his defenders claim. Alastair Ross Goobey, head of the Post Office pension fund and the industry's pension guru, warned of the consequence in a letter to the Financial Times when the change in tax was being rumoured. Combined with other accounting changes at the time, he wrote, the ending of the tax concession would mean that pension fund managers would need to find large lump sums to make up the prospective deficiency, instead of dealing with the problem as they normally would over 20 years of changed contributions. Most important, he pointed out that actuaries - the mathematicians who measure the profitability of pension funds - would lower the prospective annual rate of return on shares by one-fifth. Over a lifetime of contributions, this is a lot of money, which is why the apparently modest annual take from the tax change may look small but has a major effect. Actuaries have had to tell most firms that their pension funds are in long-term trouble. Not surprisingly, firms decided they could not afford to commit themselves to maintain final salary schemes. The argument about the stock market is valid only up to a point. The market slumped in 2000 - as some of us had grimly warned was bound to happen - after some lucrative years. But that did not mean they might not revive sharply at some point, and pension funds are very long-term investors. As for the longevity and interest rate issue, they have been under consideration for many years. They have never been a secret. Unless Brown was actually hostile to final salary pension funds, he could have addressed this problem with a modest rise in the tax concession as opposed to its abolition. But perhaps once the mistake of his change became apparent, he simply could not bring himself to admit to error - all too likely. He still argues that he made the change after hearing the view of the Government Actuary. But the sensible thing to do when making a change of such large potential would have been to seek advice from independent actuaries. Had he done so, he might have acted very differently. There is no way of avoiding the fact that the collapse of our once-admirable pensions system has occurred on this Government's watch It has observed it, no doubt with anxiety, but done nothing about it beyond trying to cover up the original error. And yet the sum raised for the Exchequer by this careful targeted tax treasury is tiny in relation to the tax total. It raises perhaps 1% of the Government's revenue despite its dire consequences. It is worth recalling by the way that Ross Goobey, who wrote that awkward letter before the 1997 Budget, was then also chairman of the official panel which advises the Government on private finance initiatives. He was subsequently fired. Mere coincidence, of course. It is difficult to see how the damage done to the pensions industry can be reversed. Few firms would want to re-open their schemes after the experience of the past decade. But the number of losers runs into many millions, more than enough to turn a General Election. There was a time during the Thatcher years when Labour recalled her role as Education Secretary with the slogan 'Margaret Thatcher, milk snatcher'. 'Gordon Brown, pension snatcher,' would not rhyme. But the slogan could harvest a killer number of votes. Miliband should keep his powder dry.
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