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Lloyds

Nick Faith is Director of Communications at Policy Exchange.

An ill-conceived beer and bingo ad has given the Labour attack dogs a slight sniff of blood, but, overall, Conservative HQ should be an extremely happy place today. Miliband was clearly caught completely off guard by the “Silver Saver” budget and the papers are rightly singing the Chancellor’s praises.

Osborne and his team pulled off quite a remarkable feat. They managed to stick to the austerity script while handing out presents to “the savers, the makers and the doers”.

Remember interest rates have been at record lows since March 2009, when the Bank of England cut them to 0.5 per cent. Savers have had very limited options until now. Ending compulsory annuities and making it cheaper for pensioners to draw down their pots brings much needed flexibility to the system. Likewise, expect to see a huge rush for the new “pensioner bond” with an interest rate of up to 4 per cent which will give be available for over-65s from next January. The only argument I’ve heard to date is that pensioners might blow all their money on a year-long cruise around the Caribbean. I personally think people are more responsible than that. In the long run more will need to be done to encourage a culture of savings at all ages; for example, automatically linking a rise in peoples’ wages to a rise in their private pension contributions. But yesterday was a very good start.

Osborne also played an extremely canny game by keeping his powder dry on the savings announcement. If I were a conspiracy theorist I could make the argument that a number of backbench MPs played up the arguments over the 40p tax rate to distract Labour from the real focus. I’m sure a number of people paying the higher rate of tax would have been delighted to see an increase and simplification of the ISA system and the liberalisation of the pensions market. Lest we forget, middle earners will also benefit from a rise to the personal allowance. Focusing efforts to help the low paid was rightly economically – the people hit hardest during the recession were those earning £18,000, not £40,000, a year. It also prevented Labour from arguing that the Conservatives were only helping their “core voters”.

Reading the papers, the Chancellor will be a happy man but he will not be complacent. There is much more that needs to be done if the Conservatives are to stand any chance of governing alone come May 2015. The party is likely to finish behind Ukip and Labour in the European elections and the electoral map favours Miliband’s party. Yesterday’s Budget is a giant step in the right direction, but I still believe the party needs an iconic policy that links economic growth to a rise in peoples’ living standards.

One idea that would certainly cut through to the public would be a mass distribution of the remaining shares in Lloyds. Osborne has made it clear he wants to return the nationalised bank to the private sector before the next election. Instead of an institutional sale or a traditional Royal Mail-esque sell-off, he could simply give the shares away to every taxpayer in the country. The shares would be risk free and the government would get its money back when people decide to cash in their stake.

Or the government could launch a “Help Sid” campaign – people with a spare £1,000 could apply for their shares in the traditional fashion, while people without that sort of disposable income lying around could apply for their interest-free shares from their high street bank. The government would guarantee the shares, but the advantage of this scheme is that the Treasury receives its £20 billion from privatising Lloyds immediately.

Either method would create a new generation of shareholders six months before a general election. Now there’s a thought.

9 comments for: Nick Faith: From pensions to living standards – what the Chancellor should do next

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