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Osborne refuses to bell the cat

Osborne refuses to bell the cat

The Chancellor’s Autumn Statement to the House of Commons today will contain the news that the pressures on the economy have caused him to order a delay in the implementation of pension auto-enrolment for smaller firms. The Department of Work and Pensions (DWP) have been out-manoeuvred by the Treasury and will announce a series of delays to the start dates for different sizes of firms, starting with firms of less than 50 employees, who will now not need to begin the auto-enrolment process until after 2015.

Of course, it will be dressed up as an attempt to give something to the business community in order to stimulate growth. However, this action represents a major victory for the Treasury, who have been appalled at the drift of the economy practically into stagnation and who fear the effect on growth of imposing even more costs on small businesses, the engine of any recovery.

However, this is nothing that hasn’t been foreseeable for many years. The effect of spreading pensions across the lower paid is extremely tightly coupled to the domestic economy as the low paid generally have to spend all their money so a penny saved is a penny lost to a local business and so the imposition of auto-enrolment was always going to have a deleterious effect on the UK’s growth prospects.

The penny has finally dropped for the Treasury, who have strong-armed the DWP into submission and got the first postponement of auto-enrolment. I say the first because it is hard to foresee any time in the near future when the government will be happy to impose the level of drag on the domestic economy that will automatically be the result of a mass increase in pension savings.

Problems regarding the bill for pensions in 2050 are all very well, but the Treasury and her political masters have to concern themselves with the much shorter economic and political cycles and they will need to be very strong to be able to take a strategic approach, which won’t pay off until after most of those currently in power have actually finished drawing down their own pensions.

Although it is in everyone’s interest that the long-term problem of state-pension provision is resolved, it is not in any single politician’s interest that they themselves do it. The pay-off is far too remote in an era of 24-hour news, where politicians are expected to deliver results at the press conference where the journalists raise the issue.

Until we can find a way of moving long-term strategic areas of government policy, such as pension provision in the middle of the 21st century, outside the political / news cycle, it will be impossible to persuade anyone that they should be the mouse who bells this particular cat… and the cat will continue to prowl unheard until it pounces.

Tom Murray

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