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PATEL Priti headshot

Priti Patel is an elected Member of the Conservative Party Board, the 1922 Committee’s Executive and the Public Administration Select Committee. She is also a member of the Party’s Policy Board and MP for Witham.

The revolution in pensions and savings announced by the Chancellor of the Exchequer in his Budget last week is a fundamentally Conservative initiative. It empowers individuals to take control of the money they have saved and rolls back the frontiers of the State. It gives savers a more optimistic outlook for the future, and marks a sharp contrast to the policies pursued by the last Labour Government which lead to our pension system being decimated by Gordon Brown’s stealth taxes. Last week’s announcements are truly profound, far-reaching and will be as important to pensions and savings as Right to Buy has been for housing.

The significance of these reforms cannot be underestimated. They will encourage long term incentives to empower pensioners. They also give pensioners new choices to plan for their future and respond to the erosion in the value of pensions and savings caused by low interest rates. At a practical level, the benefits will help millions of families and respond to the financial difficulties and challenges they face.

Many of my constituents have been mystified by the controls that the State imposes on their pensions and savings, the restricted choice that they have and the punitive tax rates for withdrawing money from their pension pot. On the doorstop and in my mailbag, many report to me the difficulties they have planning for the future and finding their savings to be inadequate to support the lifestyle they had anticipated in retirement.

There is plenty of hard evidence to show how savings are being undermined. For example, last year the Bank of England reported that some £23 billion had been withdrawn from long term savings accounts, while the average amount that people save from their income is falling. But with the introduction of the pensioner bond, the abolition of the 55 per cent tax rate on withdrawals from pension pots and the raising of the annual limit on saving in ISAs to £15,000, there are now new and positive incentives in place for people to save. Just as Conservative policies are rebuilding the public finances, the changes announced by the Chancellor will help rebuild individuals’ savings.

In the 1990s, we had one of the strongest pension systems in the world. But the last Labour Government did nothing as our pension system became inadequate to fulfill future demand, growing life expectancy and the ending of final salary pension schemes. Prior to last week’s Budget, Conservatives had introduced auto-enrolment, planned the single tier pension, and enabled people to work for longer to give them the chance to have a better retirement. Alongside the new arrangements and flexibility that pensioners will now have to control their savings, Conservatives are restoring this country’s pension system to give those who have worked, saved and made sacrifices, a retirement they can enjoy. Hard work and responsible decision-making will be rewarded.

At an ideological level, these new changes, particularly the lower tax rates on savings and pensions, and the freedom being given to pensioners to consider alternatives to purchasing an annuity, show the clear difference between Conservatives and Labour. As Conservatives, we trust the public to make their own decisions about their finances. We are cutting their taxes so they can keep more of what they earn and more of what they save. On top of this, we are helping them to consider the choices they have when deciding what to do with their pension pots by investing in the introduction of a free and impartial advice service. We believe that people who decide how to save their money are more than capable of making decisions about how to spend their savings, and thtat the State should not intervene in these decisions.

Under considerable public pressure, the Labour Party has now indicated that they will broadly support these reforms, Labour’s response has been characterised by weak leadership, dithering and the weight of their statist, socialist beliefs. Instead of supporting the reforms immediately, Ed Miliband had nothing to say about them when he stood up in the House of Commons to reply to the Chancellor. In a 15 minute speech, all Miliband was interested in doing was stoking up the rhetoric of class warfare and making superficial, petulant and immature attacks on the Prime Minister. This was typical Miliband – weak, predictable and one-dimensional. If the Labour leader is utterly incapable of making a comment on the most important reforms to the pension system in living memory, than he is in no position to lead the country.

Following the lacklustre performance by Miliband, we then had the spectacle of Ed Balls and other members of the Labour frontbench doing the media rounds failing to give any form of solid backing to the reforms. They dithered, and it was only as the weekend approached that they finally adopted some form of position. But we know from Tom Watson’s comments (“…the Government has every right…to ask that you spend it in the manner it was intended…”) that Labour believe that they have some sort of god-given right to control, interfere and meddle in the decisions people make about their financial future. At a fundamentally ideological level, Labour does not trust you with your own money.

By contrast, with our actions in Government, belief in personal responsibility and freedom, and the reforms announced in the Budget, we can demonstrate the interests of pensioners and savers are best protected by Conservatives and that is a message we must be proud of delivering to voters.

36 comments for: Priti Patel MP: Osborne’s radical pension reforms will empower savers

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