Blair and Major battle over pensions

PM stakes his political career on guaranteeing state provision
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The Tories yesterday hit Labour with a tit-for-tat charge that it was planning a pounds 20-cut in the basic pension - after John Major condemned Tony Blair for dragging politics into the gutter, and staked his political career on guaranteeing the state pension.

The Institute for Fiscal Studies, a respected think tank, says in an analysis for The Independent that the Conservatives' proposal for a "basic pension plus" does, as Mr Blair claims, amount to the replacement of the guaranteed basic state pension by private provision.

"It is effectively a privatisation of the state pension," according to Paul Johnson, deputy director of the IFS.

The IFS also pointed out that Labour's retention of the link between pensions and prices, rather than earnings, will devalue the pension over time. "We are effectively seeing general agreement that the basic pension will be gradually phased out," Mr Johnson said.

Both parties downplayed the fact that anybody who is under 20 now cannot count on receiving a state pension that provides enough to live on, no matter who wins the election.

The pattern of pension provision is almost certain to involve two tiers, a basic state sum and a top-up private pension. The amount provided by the state, whether under a Labour or Conservative government, will be minimal.

But the political row between the parties overshadowed all else. While Mr Major and Mr Blair battled over the future of the state pension, Peter Lilley, Secretary of State for Social Security, alleged that Labour's plans for a flexible age of retirement "would cut the basic pension by pounds 20 a week".

Harriet Harman, Labour's spokeswoman, said: "The basic state pension will be paid in full to all who retire at 65."

The Labour leader said he was angered by Tory plans to split the country into a "two-tier" society. "Look at all their proposals," he said at Labour's press conference, "whether it's health, education, pensions; it's all dividing people up."

But Mr Blair was not as angry as Mr Major appeared at his press conference. Challenged by The Independent to say how he could guarantee the state pension with men like Michael Portillo or John Redwood about, he said: "If anybody in my Cabinet actually prevailed in an argument like that, I would not only leave Downing Street, I would leave politics, and I would call a general election. There's no question whatsoever that any Conservative Cabinet would countenance proposals like this.

"This is just the politics of crude fantasy, scurrilous, unscrupulous campaigning in order to win the votes of people who they wish to frighten ... it really does bring politics down into the gutter when people utter charges like this, that they know in their hearts to be false."

Mr Major added: "This wasn't a casual, tossed-off remark by Mr Brown or Mr Blair. This was a carefully calculated, carefully prepared campaign against the Conservative Party to frighten pensioners into believing that their security and the state retirement pension was at risk."

Certainly, the Labour attack was calculated. The Independent was told last night that Mr Blair had made his own assessment of Conservative pension plans when they were first announced in Downing Street in March - but held back his attack for delivery at the height of the election campaign.

Labour believes that it has scored a direct hit on the Tories, exploiting existing feelings of voter distrust generated by broken promises on tax made at the last election.

Gordon Brown, the shadow Chancellor, last night wrote to Mr Major asking him to confirm that the state pension was to be replaced by "privately purchased provision" and that the scheme might eventually be extended to include older people.

"Instead of the bluff and bluster we have heard from you today," he said, "it is time for answers."