Oliver Duff

i Editor's Letter: The Budget 2014

 

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An unashamed offer to the Conservative heartlands and to floating voters unconvinced by Labour’s lean to the left. Seventy-five per cent of over-55s voted in the last election. The corresponding figure for 18-to-24-year-olds was 44 per cent, dropping to just 39 per cent of women that age. Yet that gulf doesn’t tell the full story behind George Osborne’s fifth budget yesterday.

The Chancellor had long been planning to make the 2014 a budget for saving. Pensioners of hugely varying incomes have seen their savings painfully eroded because of the Government’s policy to keep interest rates at rock bottom. Mr Osborne’s shocking decision to tear up the pensions rules, which wiped £3 billion off the market value of the UK’s top pensions firms in one afternoon, offers huge incentives to save, for those with the means.

Crucially, the reforms mean that millions of people have just had their pensions pots turned into bank accounts - a life-transforming change for anyone living hand-to-mouth who couldn’t draw down their cash because it was locked into a pension.

Mr Osborne’s motivations were threefold. Ideological: liberalising the market, empowering people to choose how they spend their pension pots by dispensing with the need for annuities, and by ending the punitive 55 per cent tax for withdrawing funds too quickly. Economic: he’s betting on a pensioner spending boom with all this unlocked cash - and it’s their money, spending fast-forwarded from the future. And especially political: he hopes this will be a “silver bullet” fired at Ukip, who are benefiting from defections by Conservative supporters aged over-60.

Of course, if pensioners go out and blow their pots, to hell with the consequences, then the state is going to be left with a whopping tab. The Treasury wagers that won’t be the case - and in Downing Street, the drumbeat of next May’s general election drowns out such niggles. Mr Osborne scores 7 out of 10 for drama, 8 out of 10 for politics.

But as for those in their 20s, 30s and 40s: all bets are off. Who knows which pension rules the next Chancellor will decide to change?

Ed Miliband, in replying to the Budget, was weak on detail - but correct in his narrative that for millions, this Budget will do nothing, their living standards still falling in the face of brutal inflation of housing, heating and food. Let no one say they all stand for the same thing.

i@independent.co.uk

Twitter.com: @olyduff

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