Julian Knight: IDS is happy now but our pensions could wipe the smile off his face

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The Independent Online

The broadest smile in Downing Street wasn't Clegg or Cameron last week but Iain Duncan Smith as he walked to his first cabinet meeting.

The self-styled quiet man of British politics nearly punched the air with triumph as he started his dream job of Work and Pensions Secretary. It is tempting to think of IDS as the Tory version of Frank Field charged with "thinking the unthinkable" over benefits and, to a lesser degree, pension reform. Through his leadership of the Centre for Social Justice, IDS has become expert in many of the root causes of poverty in the UK. He is compassionate and understanding, particularly about the often forgotten white, male, unskilled working class – members of which group actually underachieves all other groups in society.

Although IDS comes from the right of the party, when it comes to social justice he is a much more centrist in his language and perception, although not in his proposed remedies. Fundamental reform of the benefits system was largely dodged by Labour, and they allowed the compounding of the Thatcherite calumny of leaving millions in effect out of the economy hooked on benefits and anti-depressants. It's a horrifying fact that 40 per cent of all benefits in this country go to working-age adults totalling more than £75bn a year.

In its reports, the Centre for Social Justice makes the correct point that due to the way in which benefits are withdrawn as soon as someone gets a job, it puts claimants off getting back into the workforce. In addition, the complexity of government agencies and the myriad benefits are condemned as absurd. What's the proposal? For starters, it's not the rather crude caricature painted of it that it's simply same old Tories slashing benefits and moralising to single parents. Instead, the centre proposes that the amount of money that can be earned before benefits start to taper away – taper is important rather than a cliff-edge cut-off – is much higher than at present. This is called an earnings disregard. Family units are given a nod through the fact the disregard will be higher for multiple-occupancy households. These people are on benefits anyway so why not allow them to earn a little cash as well and enter the workplace again? This idea would dovetail well with the Lib Dem policy of raising personal allowances to £10,000. The cost of benefits reform was put at £3.6bn in its first year, but up to 800,000 households could enter the workforce. This in the long run will save a fortune in terms of administration and breaking the cycle of generations living off benefits.

So far a bit of a no-brainer, yes? But where are these jobs coming from in a recession – remember, unemployment rose above 2.5 million last week. Are employers to be compelled to take on extra staff when, frankly, they can get better more motivated staff from other parts of the EU? What's more, how do you get people to take up work if they face issues of mental health, lack of confidence or drug and alcohol dependency? The only way would be to threaten to cut benefits, which will cause huge resentment – akin to that in the 1980s. How robust will Lib Dem support in government be when their activists start militating against the Tories' same old tactics? Also, IDS's new Pensions minister, Steve Webb, is bright, but on the left of the Lib Dems. In addition, £3.6bn doesn't sound much but at this time every penny counts. It could be all too easy to kick the whole idea into the long grass.

At first glance, there seem to be easier wins on the other side of IDS's brief: pensions. Compulsory annuitisation is to end as is the default retirement age – both good ideas – and the state pension age is to rise sooner than under Labour. To sweeten the pill, the state pension earning link will be restored faster, while gold-plated and unsustainable public sector pensions, ignored by Labour, will be urgently reviewed. All as a prelude, no doubt, to a battle royal with the public sector unions.

But nothing new is in the offing from either the Tories or Lib Dems on workplace pensions, apart from going on with Labour's Nests which increasingly is looking a bad solution. What's more, if the Lib Dems get their way and higher-rate tax relief on pensions is abolished, then you may well find that some boards of directors lose their enthusiasm for keeping open their workplace pension schemes in a thrice, particularly as Nests offer a low-cost alternative option. The danger of a "levelling down" in workplace pension provision on the introduction of Nests must be taken seriously. Like the flight away from final-salary schemes around the turn of the century, once the pension sands start shifting it's too late to stop. Some new thinking is needed on workplace pensions fast. If I were IDS, I wouldn't be smiling quite so broadly.

Child trust funds could be an early casualty in this new government

Another acronym in danger now that Labour is out of power is CTFs, which stands for child trust funds. The Lib Dems promised to get rid of the payments, which are meant to give kids' savings a kick start. The joint Lib-Con policy statement is a little unclear as to what fate awaits CTFs; it states simply that they will be "reduced". This may mean no top-up payments at ages seven, 11, etc.

I wouldn't be surprised when the final figures are totted up that the Tories see they can kill CTFs and blame the Lib Dems. It will represent the start of the erasing from history of much of Brown's chancellorship. Tax credits could go the same way, if the Lib Dems get their wish to see personal allowances rise to £10,000.

In theory, CTFs looked good; the idea was that a small gift from the Government, invested wisely and topped up by parents, could offer a path for paying for tuition fees etc. What's more, the approach of using the market to grow what is in effect a social benefit could have been applied elsewhere. But the evidence is that the middle classes have adopted the scheme and taken an interest in where the money should go, and many poorer families have not done so. In effect, CTFs are widening rather than narrowing inequality.

Few people are likely to mourn the imminent demise of the home information pack – especially time-wasting sellers

The estate agency industry is already dancing on the grave of home information packs (HIPs), with the coalition government promising their early abolition. It brings to an end one of the more pointless bureaucratic exercises of modern times. They were busted from the outset due to the fact that they didn't include a full structural survey. The whole sorry enterprise was pushed through as an act of political machismo by the then housing minister, Yvette Cooper. Having recently sold my flat and forked out for a HIP, I can confirm that the information within is of no use to anyone. The people I feel sorry for are those who spent thousands retraining to put these packs together. It will be interesting to see over the next few weeks whether house sellers decide to hold off putting their properties on the market until after HIPs are gone.

But in the triumphalism from many property professionals it shouldn't be forgotten that HIPs were originally designed to solve a real problem, the high number of property transactions that fall through. Strangely enough, the very awkwardness and expense of HIPs has led to a drop in the number of collapsed sales. HIPs have deterred the non serious seller from putting their homes up for sale just to see what they can get – time-wasters, to put it bluntly.

I would like to see a beefed-up HIP including the structural survey tied into reform of the law in England and Wales to bring it into line with the Scottish system where accepted bids are legally binding. However, my suspicion is that the appetite among Lib-Con will only be for killing off HIPs and we will just go back to where we were before. Pity.

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