James Daley: A ruthless approach is needed to start closing the £27bn savings gap

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The Independent Online

Ruth Kelly, Gordon Brown's little helper, found herself with the date from hell on Monday - two hours inside the lion's den of the unpredictable Treasury Select Committee.

Ruth Kelly, Gordon Brown's little helper, found herself with the date from hell on Monday - two hours inside the lion's den of the unpredictable Treasury Select Committee.

As part of its epic inquiry into restoring confidence in the long-term savings industry, the committee called Ms Kelly - the financial secretary to the Treasury - to tell them exactly what she was doing to sort out the public's current complete disinterest in saving.

The true answer to this question is, of course, "almost nothing". In fact, it is far easier to make the case that since coming to power, the Government has created more incentives not to save than to encourage it.

Whilst some had feared that the Treasury Select Committee was softening up - after its relatively benign treatment of the UK's largest life insurers' chief execs last month - it was heartening to see that it was not willing to pass up its chance to give Ms Kelly a public thrashing.

David Heathcoat-Amory, a Tory MP, was lethal when criticising Ms Kelly for her "frightening complacency" in tackling the savings crisis.

While the Government's original attempts three years ago to deliver a stakeholder pension - which would be more accessible and cheaper for those on lower incomes - were admirable, the product was a failure in terms of achieving what it had set out to do.

While this should have taught the Treasury the important lesson that it needed to look beyond cost and accessibility to get the nation saving, it instead led it to take the advice of the financial services industry, raise the charging cap (from 1 to 1.5 per cent) and hope that with industry support, stakeholder would succeed. This is what it has spent the last year coming up with.

But stakeholder and its charges are a side-show . If Ms Kelly has any intention of getting people to save, she needs to address the issue of incentivisation - a topic she has so far avoided.

People will only save either if they are compelled to - a route which the Government deems to be political suicide - or if they are incentivised. Simply reversing the pension tax relief system to give more to lower rate taxpayers than those on the higher rate would be a step in the right direction.

However, Ms Kelly not only insists that savers are already sufficiently incentivised, but has the gall to argue that the problem is not nearly as bad as most people have suggested.

On Equitable Life too, Ms Kelly and her colleagues have displayed an incredible arrogance. Having only agreed to compensate those whose occupational pension schemes went bust after the prospect of a backbench revolt, the Treasury is now fighting harder still to ensure it makes no payment to those who lost out through Equitable. Ms Kelly refuses to publish her recent response to the Parliamentary Ombudsman as to whether the inquiry into Equitable should be reopened - surely because it argues against such a move, in case the Government is found culpable.

It has long been predicted that Ms Kelly is destined for higher things in Government, and after three years at the Treasury perhaps it is time to move on. A more Ruth-less approach is required if the Government is to make a start on closing the £27bn savings gap.

* The worst may well be behind Standard Life in terms of its strategic review and restructure, but the damage done to its brand by the questions raised over its solvency at the start of this year could prove to be irreparable.

At its interim results this week, the group's new chief executive Sandy Crombie admitted that its market share had decreased significantly in its core UK business, and that amongst financial advisers it had slipped behind Norwich Union as the most popular provider.

While Standard is still a formidable player, it has a mountain to climb. There is little to persuade new customers not to opt for another, more financially secure firm, whilst existing customers still need reassurances to persuade them to stay.

Although Mr Crombie insists the recent fall in sales and weakened capital position are one-offs, the prudent customer would do well to give Standard a wide berth until his promises are shown to be true.

Time to face failure of UK care homes market

Stephen Ladyman, the junior health minister, last week finally admitted that some £180m of compensation will be paid to the thousands of elderly who were wrongly denied free nursing care by the National Health Service.

Most of the victims of this scandal were forced to unnecessarily sell their homes or spend their remaining savings on private care.

While the arrival of compensation is good news, it remains a pity that there is still no acknowledgement of the endemic failure in the UK care homes market which is affecting far greater numbers.

Although the Government says more than 6,700 cases of people who were wrongly denied free care have now been investigated, and a further 5,000 cases are under way, there are many thousands more who remain unaware they were ever entitled to any state help, and so have never appealed.

At the heart of the problem is an opaque system, in which the NHS and local authorities are forced to disguise the benefits the elderly are entitled to because their budgets are not big enough to pay out to them all.

The Government must face up to the reality that it cannot afford to pay for the growing care home population, and must begin working on a solution which ensures it is clear what the state will provide and what it will not.

This, however, would include the implicit admission that the NHS cannot be there for us all from cradle to grave - an admission that the Government remains too frightened to make.

j.daley@independent.co.uk

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