It is easy to see why George Osborne seemed so confident ahead of the Budget. His radical reform of the pension system, allowing people far easier access to their pension pots, will not only help the retired (in the short term) but will raise money for the government, as it taxes what they spend.
The Chancellor boasted that this was the biggest single reform to the pension system since the 1920s, and he has a point. Until now, the system had operated on the premise that people should save, and that banks normally offer reasonable rates of interest. In debt-addicted post-crash Britain, those rules have ceased to apply. The government has kept interest rates nailed to the floor.
Osborne’s reforms will go a long way towards helping pensioners. With them — and with the government itself offering interest rates of up to 4 per cent — the Chancellor seems to have given up on the idea that the system will return to normal. Pensioners are, of course, more likely to vote than any other section of the electorate. If he could not offer a cash bribe, such as Labour’s winter fuel payment, then it is far cheaper to lift the rules on people accessing their own cash. The rationale for limiting the amount that can be withdrawn from a pension tax-free was that people could end up in trouble if they drew it down too quickly. So people will be able to spend more of their pension now — but what will be left in ten years’ time? Osborne seems happy to trust pensioners to make this judgment for themselves. After the pain they have suffered, and will continue to suffer if low rates continue, that will be welcome.
Osborne has been radical in the money markets, but cautious in government spending. His cuts have worked out at less than 1 per cent a year. Where he has been radical, he’s been rewarded. He has cut corporation tax from 28 per cent to 24 per cent — and the Treasury has seen a surge in revenue from it. He has cut 785,000 jobs in the public sector — but the private sector has created 1.8 million more. The top rate of income tax has been cut from 52p to 47p — and, as Osborne said in his Budget speech, the richest are now shouldering a greater share of the burden than ever.
This Budget showed that the Chancellor is still burdening us with debt, even though he has made it cheaper. He’ll have cut less in five years than Labour did in one (1976–77). Why so cautious? It is as if Osborne believes Labour’s spin. Where he did cut, we have not seen disaster. The Home Office budget has fallen sharply, and so has crime. As things stand, the glacial progress means Britain will not be back into the black until the end of this decade. Radicalism is needed in what a Chancellor should control — tax and spending. It is not needed in the manipulation of lending and borrowing markets.
The economy is moving quickly, but the recovery remains the slowest in British history. It will take us until 2019 to balance the books, three years later than Osborne promised. This means, of course, more debt. He has proved a point — that cuts did not mean a fiscal Armageddon, and that bold reform is usually rewarded. And in shaking the pensions system to its foundations, with so little consultation, the Chancellor is taking perhaps the largest gamble of his career.
Who could disagree with the luminaries listed in Hacked Off’s advertisements? Of course a free and independent press is a cornerstone of democracy. Of course it should be fearless in holding the powerful to account. And this is precisely why the politicians’ attempted power grab, in the form of the ‘Royal Charter’, posed such a danger to our democracy.
Happily, this proposal — passed with near unanimity in the House of Commons — has been ignored. The system was voluntary, and no self-respecting newspaper would volunteer to be regulated by the very people they hold to account. The investigations, arrests and convictions in the past few years have demonstrated that existing laws were strong enough to tackle criminality. The politicians have found the press is not theirs to rule over.
This appals the group Hacked Off, whose campaign was led by a very different group of priapic celebrities and moguls — whose names it has wisely chosen not to include in this list. It could hardly print the names Max Mosley, John Prescott and Hugh Grant and then ask ‘What do these people have in common?’
The signatories to these adverts, including in The Spectator’s printed edition this week, should take heart. Britain is about to introduce the toughest self-regulatory system in the western world, implementing almost all of Lord Leveson’s proposals. The new regulator starts in May. And politicians have stayed where they have been for more than 300 years: as annoyed observers, rather than architects, of a free press.