Blair backs off pensions revamp

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Tony Blair has bowed to pressure from businesses and is ready to shelve the threat to impose compulsory pensions contributions on employers until a fourth Labour term of office.

Tony Blair has bowed to pressure from businesses and is ready to shelve the threat to impose compulsory pensions contributions on employers until a fourth Labour term of office.

The decision is likely to infuriate union leaders who demanded the change at a meeting with Labour leaders to fill the pensions black hole that has left workers facing the threat of retirement without an occupational pension.

Mr Blair defused a row by persuading union leaders, including Tony Woodley, the general secretary of the Transport and General Workers Union, to wait until after the election for a review of pensions by Adair Turner, the chairman of the low pay commission, due in the autumn.

However, Gordon Brown's former chief economic adviser at the Treasury, Ed Balls, ruled out compulsory contributions for many years.

He said: "We will wait to see what Turner proposes and there will be a debate after that and future elections will occur before any of those changes get implemented in pensions policy. Any changes in pensions policy will be fully debated and won't come in for many, many years because we need to make sure people's legitimate expectations can be fulfilled."

Mr Balls told a Labour press conference: "I'm sure it will be the case there will be a long and detailed debate about any Turner recommendations before any decisions are made."

Alan Johnson, the Secretary of State for Work and Pensions, was still insisting last night that compulsion on employers had not been ruled out. But his aides made it clear that Mr Balls was correct in saying that it could not be brought in before the end of the next parliament. Mr Johnson is backing changes to the current voluntary system, which could be implemented more quickly. He favours a system of automatic enrolment so workers would have to opt out of a company pension scheme. At the moment, they have to opt into a company scheme and that has left millions of workers without any occupational pension at all.

Mr Balls, in effect, quashed remarks by Peter Hain, the Leader of the Commons, who told the Financial Times that "major legislation" on pensions would be introduced "sooner rather than later" by the next Labour Government.

The Tory spokesman on pensions, David Willetts, claimed that Labour's pensions policy "has descended into chaos".

Mr Willetts said: "Gordon Brown's closest ally says a Labour government would wait at least four years before doing anything about the pensions crisis.

"But just 10 days ago, Peter Hain said there would be a big change in policy 'sooner rather than later', and that this was going to 'surprise people'.

"Pensions policy requires stability and a long-term strategy. Instead, Labour are changing their story from one day to the next."

The Confederation of British Industry has been lobbying ministers to reject the case for compulsory contributions, warning it would add unacceptable costs to business.

John Cridland, deputy director general of the CBI, said a move towards compulsory pensions savings would "restrict the freedom of individuals" to make investments for their retirement". He said employees might want to seek compensation for making compulsory pensions contributions in funds that fell in value on the stock market.

However, Sir Peter Davis, the former head of Sainsbury's, warned in a government-commissioned report, that the voluntary system was in the "last chance saloon". The report shied away from compulsion, but urged employers to set a pensions contributions target for employees at between 10 per cent and 15 per cent of their earnings. The report said companies should contribute between 7 per cent and 10 per cent.

Labour also promised yesterday to open more state boarding schools to give poorer children a taste of the education they would get in private schools. The party's education manifesto said: "We would encourage more small schools and boarding schools as a way of helping the most disadvantaged children.''

There are only 30 state boarding schools in the country. However, Sir Cyril Taylor, chairman of the Specialist Schools Trust, believes some of the new privately sponsored acad-emies being set up to replace struggling inner city schools could include boarding provision.

Ministers are planning to advertise for new sponsors who would be prepared to offer boarding accommodation.

Senior advisers believe such a scheme would benefit children from broken homes - allowing them to concentrate on their education away from any turmoil in their private lives.