Budget & Pensions - throwing out the baby with the bath water?

"Answered prayers cause more tears than those that remain unanswered".

Don't get me wrong I have blogged recently here and here about how poor value pension annuities are for many people.

Yet instead of reforming annuities and making them better the government will now allow people to just cash in all their pension pots when they retire and spend it as they like.

Now this may be clever politics but it will be potentially disastrous for many working people and for all taxpayers.

For generations there has been a trade off where a pension saver gets in return for life long generous tax relief (and for higher rate taxpayers - very generous relief)  an obligation to spend 75% of this money to buy a guaranteed life long income called an annuity.  The "deal" is that tax relief is justified because the money will stop people being dependent on the taxpayer when they retire. As Nigel Stanley from the TUC argues here this break in the trade off will also mean that the principle of pension tax relief itself will be under threat.

The very wealthy will use this huge concession to rip off the tax payer which will also bring tax relief for pensions into even further disrepute. 

I actually agree that most people will not "squander" their pensions savings when they retire but to be clear this will happen. In a small minority of cases people will indeed fritter the money away but in other cases they will be robbed and deceived by the ever present financial services sharks and charlatans, who will no doubt be now rubbing their hands in glee at the prospect.

The government claims that it doesn't matter if people squander their private pension since they will have the new State Pension of £150 per week to fall back on? As I have pointed out in the past it costs £150 per week just to rent a one bedroom flat above a Chicken shop in Newham. If you privately rent (which is a growing sector ) then you will have indeed an incentive to blow your pension money on "holidays of a lifetime" and then expect the taxpayer to pay your rent. You would in fact be a fool not to do this.

But the very worse thing about this budget proposal is that instead of reforming the broken annuity market it will mean that annuities remain discredited.  People will also be so fearful of running out of money when they grow old that they will keep the money in the building society on deposit and live miserable lives dependent on tiny amounts of interest while inflation cuts the value of their lump sum, year in and year out.

By coincidence I was at the "Rethinking Pensions" conference the day after last weeks budget. This was of course a live issue and I will post further on the 1st day of the conference.

Hat tip picture Nigel Stanley clever response to the stupid and condescending Tory Party Chairman Grant Shapps.

Tory Whitehall crib sheet for attacks on poor and vulnerable

Great post stolen from Redbrick blog.
"From an anonymous correspondent

As welfare ‘reform’ and housing cuts bite ever harder, when do we reach the point where the government concedes that the hardship caused is an inevitable consequence of rebalancing the public finances and reducing the deficit? So far, they seem to be in deep denial.

This contrasts with the Thatcher era, because when she increased unemployment as a tool of economic policy, she at least admitted that the growth in joblessness was a price which was (on her reasoning) worth paying.

The Cameron government seems either to deny that there is any hardship or to blame anyone other than the ministers who have instituted the cuts. Whenever some new example of the horrendous effects of their policies (here’s a good example - Ed) is presented to them they have a range of stock responses.

We’ve been wondering if there is a standard Whitehall crib sheet for ministers. Well by sheer chance, we’ve been sent what looks like the housing and welfare crib sheet in a plain brown envelope.

In the interests of open government, here it is…

Say the cuts are avoidable. This is Eric’s favourite. The trick is to give the impression that all the cuts can be made painlessly by eliminating luxuries and sacking backroom staff. You can use his little list. Even the Prime Minister makes this excuse: at PMQs last week he accused councils of making high-profile cuts ‘to try to make a point’, not because they need to. Some people will believe him.

Blame the victims. This works well too. Extravagant housing benefit claims may only happen in a few isolated cases, but even so the press will lap them up, especially if they are large families, unemployed, migrants or – even better – all three. Give the impression that such claims make up most of the welfare budget. Whatever you do, don’t admit that over half of welfare spending goes to older people as they are seen as deserving of it. If talking about housing benefit, try to give the impression that it’s spent by the tenants themselves to fund their indolent lifestyles – whatever you do, don’t admit that the money goes to landlords who are pushing up rents because there are insufficient houses.

Use the keywords. We know it sounds boring, but you have to repeatedly refer to ‘scroungers’, ‘strivers not skivers’ and talk about ‘subsidised housing’ not council homes. This helps confirm the impression that most welfare spending is a waste of money. Suggestions for new and even more derogative terms are always welcome. IDS has made a good attempt to link welfare recipients in the public mind with drug addicts and alcoholics. Follow his lead.

Blame the previous government. It’s their fault we have too few homes. Focus on the fact that housebuilding in Labour’s last year was the worst they achieved, even though we know that was because of the credit crunch. Don’t admit either that (a) housebuilding under the coalition is on average 45,000 homes less per year than the output under Labour, or (b) that 2010/11 and 2011/12 were the two worst years since the war for English housebuilding.

Blame local government. So Westminster’s putting homeless families up in expensive hotels and Camden’s sending them to Coventry (or Leicester, or somewhere else absurdly far from London). Brilliant: we can say how stupid this is and tell them to stop, even though we know they can’t.

Don’t admit that policies to cut the welfare budget affect anything else. For example, some academics argue that cuts in benefits for private tenants mean that more of them will become homeless, or that more people will need accommodation with lower rents in the social sector. Deny that this will happen. If any evidence emerges that shows you’re wrong, under no circumstances must you agree with it. Better still, don’t read the evidence then no one can accuse you of knowing the facts but ignoring them. Alternatively, officials may be able to find an obscure or outdated source that on the surface appears to contradict the evidence: use it!

Deny that cuts are taking place. For example, is there any part of your budget that you have decided to protect, however small? Grossly exaggerate its importance. Take a lesson from Grant Shapps: every time someone said funding for homelessness was being cut and decimating services he would point to his department’s small fund for homelessness prevention, and claim that because it hadn’t been reduced then either services had been unaffected or – yes! – any cuts were local councils’ fault.

Apply a sticking plaster. It’s obvious to a fool that the scale of the welfare cuts must – in reality – mean massive hardship. Furthermore, Labour will find deserving cases (people dying of cancer, homeless ex-servicemen, that sort of thing). First, always offer to investigate the particular case, implying you might do something (even if you won’t). Second, point to the money that’s been set aside for special cases (e.g. discretionary housing payments). Never fail to give the impression that this is sufficient to deal with any genuine hardship. Mention the amount e.g. DHPs total £60 million in 2012/13. This will seem a large sum to the public even though it’s only a tiny fraction of the cuts taking place.

We’re dealing with it. Unfortunately some problems are so big and so obvious that you’ll have to pretend you’re doing something about them. For example, every fool knows builders have virtually stopped building. Given that the housing budget had one of the biggest cuts of all in the Spending Review there’s precious little we can do, but you must pretend otherwise. First, argue that output is going up even when it’s going down (NB. Don’t appear on Sunday Politics, choose programmes where they don’t do their research). Second, have some useful initiative available that sounds like it might solve the problem even if it’s far too small to make any difference.

Grant gave us NewBuy and FirstBuy, which both sound sufficiently impressive, but we might need to invent one or two more when people realise how inconsequential they are. Say we are selling more homes under right to buy as if this helps solve the problems, even if we aren’t and it doesn’t.

Joking aside, Richard Vize made the excellent point in the Guardian last week that Cameron and Co. are undermining local government and failing to prepare people for the depth of the cuts that are now hitting them – with much worse still in the pipeline. He says that ministers are ‘giving the impression that public services can indeed manage cuts without pain or profound change. They can’t.’ How can the coalition expect to be taken seriously as a government, if they make cuts on an unprecedented scale over a dangerously tight timescale, but refuse even to admit there might be consequences for public services?"

Britain's Broken Housing Policy

Floundering Tory Housing Minister, Grant Shapps, was given a good going over this morning on the Radio 4 "Today" programme.  The National Housing Federation (FED) had first drawn blood with a report published today that under present policies home ownership will decline by nearly 10% while prices will increase by over 20%.

The interview started with a recording of a speech by Thatcher to her Party conference in 1986 saying that the great Tory political reform of the 20th century was encouraging more people to own property.  Yet ironically this government's housing policy will reverse home ownership back to 1986 levels.

Actually I think it is a "good thing" that home ownership density is lower but there needs to be far more good quality, affordable and secure rented properties to take its place (and address existing shortages and overcrowding). 

Shapps argument was that he will increase supply by changes in planning and anyway these problems will disappear due to Britain's low interest rates which means mortgages are cheap.  He ignores the NHF prediction that prices will increase by 20% and of course very few people expect 0.5% interest base rates to continue for much longer.  House prices are already too high and even if supply was increased substantially, they will still remain unaffordable.  

What we really need is a housing policy something more like this.

Caroline Flint MP “a tough love sort of girl”

Caroline Flint, the Shadow Secretary of State for Communities and Local Government was the guest speaker at the Tower Hamlets Labour Party Housing Policy forum at The Centre in Merchant Street, E3 last month. I was invited as a member of Tower Hamlets TULO. She gave us a presentation followed by a Q&A.

Now, some of the things she said that I thought interesting. “Housing is not just about having a roof over your head. It is linked to your journey through life and what are your aspirations. People still want to buy their own home.  Home ownership may be “the english disease” but this is what people want if they win the lottery. They want a stake in life.  Not only for their children but for help with social care when they are older. How to increase the supply? Look at finance and supply. There are uncompetitive banks and building societies. It is easier to get a mortgage on a £200k new build than get £50k to do up and refurbish a home. There are over a million empty homes in UK. New build is VAT free, with a refurbishment you pay VAT. A very narrow range of builders.  A few big ones and lots of very,very small ones.  

Caroline was brought up in the private rental sector then the family had a council flat.  But with secure tenancies with fair rents. This is nonexistent nowadays.  While the private sector needs to be part of the solution.  This governments unfettered faith in the private sector is wrong. Labour is now engaged in a completely open policy debate. Willing to look at piloting housing policies in Labour Councils. Turn a talking shop into reality. 

In the Q&A I made a comment about despairing about housing in London due to the very high land prices.  Each Social housing unit in London had cost an average £100k in subsidy.  My question was related to her comments about pension funds and housing investment.  The Local Government Pension scheme has £160 billion investments and wants to invest long term secure low risk asset based investments.  What joined up thinking can her Shadow CLG team bring on this matter?  She said they will be looking into such ideas.

Question about Paris having a more successful housing policy since most people rent. Caroline said they may rent in Paris but many own homes elsewhere. Then one on the sub-letting of social

Housing it not only immoral - but should it be made illegal? (No real answer to that one)  

Social housing should not be a refuse of last resort. We need mixed neighbourhoods. So if someone gets a pay rise and they then risk losing their home, what is the incentive to work? Cameron and Shapps have a lack of understanding about what is and what isn’t possible. We need to help people make the journey they want to make.

Caroline says she is a tough love sort of girl. You should respect your environment, your neighbours and pay your rent. There are not only entitlements but responsibilities.

Caroline has three messages to Labour Councils. Show that Labour can get good value for money for services, they can get more people involved and have a say and have a sense of what you want to do.

Finally “aspiration”. Not everyone can own their own home at the end of the day. It is sad that so many people from all walks of life think their children will not do better than them. We should be on the right side of these people. Most people don’t want too much from government. The 1945 victory was broad based coalition who believed that Labour was about offering them a better future”.

Great action picture taken by Dan McCurry (with my camera!). Many thanks to TH Labour Party for the invite (and well done for arranging such good events.  Next one is on Health in July with John Healey MP). 

This post was from the last time I attended a "meeting" with Caroline, also in Tower Hamlets.

"Unison publishes list of 62 councils ‘robbed’ by Housing Minister"

SHAPPS MUST KEEP PROMISE ON FUNDS FOR HOMELESS, ELDERLY AND VICTIMS OF DOMESTIC VIOLENCE

- Unison publishes list of 62 councils ‘robbed’ by Housing Minister
 UNISON, the UK’s largest union, today challenged Housing and Local Government Minister Grant Shapps (pictured left), to honour his pledge made in the House of Commons, not to cut the Supporting People grant by more than 1%. The grant helps support more than 1 million people, funding women’s refuges that provide a haven for victims of domestic abuse, helping rough sleepers, and people with mental health problems. It also funds sheltered wardens and community alarms.

Last week in the House of Commons, Liverpool (Walton) MP Steve Rotheram, asked “If I can prove that it (the cut to the Liverpool Supporting People grant) is 30%, will the Minister give us back the other 29% so that we only suffer a 1% cut?” Grant Shapps replied “I take him up on his challenge.”

The union is today publishing evidence that Liverpool’s Supporting People grant has been cut by 30%, together with a list of more than 60 other councils also facing cuts of more than 1%. Camden council has lost more than 60%. The union is challenging Grant Shapps to give all these councils back the difference so they can keep these services to vulnerable people running.  
Dave Prentis, UNISON General Secretary, said:

“All over the country, Supporting People grants fund women’s refuges; providing a haven for victims of domestic abuse.  They help keep people who have fallen on hard times from sleeping rough, and give people with mental health problems a roof over their heads. More than 800,000 elderly people rely on services funded through Supporting People. Drastic cuts will mean shelters shut, and beds lost, pushing vulnerable people onto the streets or leaving them without the help they need.

“In the House of Commons, Grant Shapps said that this grant had been protected, so the average cut was just 1%. But our evidence taken from his own Department’s website, proves many councils have been hit much harder. Grant Shapps promised to give Liverpool back the difference if he saw evidence that it’s grant had been cut by more than 1%. Here is that proof in black and white.

“We challenge Grant Shapps to stand by his word, to give Liverpool back the money that has been taken from them, and to do the same for the 61 other councils hit hard. Either Grant Shapps didn’t know what was going on in his department, or he didn’t care about some of the most needy and vulnerable people in our society. This is his opportunity to put things right.”

UNISON evidence shows that:
One council (Camden) faces a cut of more than 60%
Seven councils (West Berkshire, York, Rochdale, Nottingham, Bournemouth, Oxfordshire and Gloucestershire face cuts of between 40% and 50%,
Eight councils (Newcastle upon Tyne, St Helens, Isle of Wight, Bristol, Manchester, Halton, Leeds and Liverpool) face a cut of between 30% and 40%,
Seven councils face a cut of between 20% and 30%
Twenty Two councils face a cut of between 10% and 20%
10 councils face cuts of more than £5m (Camden £18.470m; Manchester £12.613m; Liverpool £11.167m; Leeds £10.614m; Nottingham £9.942m; Bristol £9.275m; Gloucestershire £8.601m; Oxfordshire £6.627m; Rochdale £6.587m; Newcastle upon Tyne £6.527m)

Check out Unison press release.

A 2010 Christmas Carol

In an east London state nursery, staff noticed that a three year old new starter, a little girl, was still wearing nappies.  They were concerned and when the mother came to pick the toddler up, they spoke to the Mum.

Her mother was a single parent who was originally from East Europe.  She explained that the only accommodation she could afford was a small room in a large house full of strangers.  The one toilet in this house had no door on it.  The toddler refused to use this toilet since there was no privacy.  Therefore she still wore nappies.

Extreme poverty and deprivation still occurs in this country.  Not the same scale as in the times of Dickens but still here - and now.  Coalition cuts in building and refurbishing homes, housing benefit, protection against eviction, regulations of HMO's, massive increase in rents and the farming of homeless to the private sector will make things far, far worse.

There was redemption for this family as nursery staff rallied around to rescue Mother and daughter, from the slum and help find them a self contained flat to live.  Well done to them. No Tory "Big Society" saved them but rather experienced and trained public sector professionals - thinking out of the box.

It goes without saying that you could hope against hope that a Christmas spirit would mean that Cameron, Clegg, Shapps and Boris (four guilty men) will change their ways to prevent the "shadows of what may be."

Which always reminds me of the saying "you've got two hopes, Bob Hope and no hope" of this.

Update: Another Christmas Carol