The Great Debate UK
A central pillar of George Osborne’s 2014 budget was the announcement that pensioners will no longer have to buy an annuity upon retirement and that they would have more control of their pensions pots, including the freedom to withdraw cash without incurring penalty tax changes.
This is a true blue move that has Conservative values right at its heart – giving retirees the right to do what they want with their money. While in most instances being freed from the shackles of government is something to be celebrated, in this instance a little government paternalism can be a good thing.
On paper it’s easy to see why the government has stopped forcing people to buy annuities – their dismal pay-outs in an era of record low interest rates were a major bugbear for today’s retirees (and next year’s voters in the general election). Indeed, some annuities come with so many punitive conditions and get-out clauses that you would have been better burning your money rather than buying one in recent years.
However, at heart an annuity in retirement is not a bad idea, especially in an era when firms can no longer afford to fund defined benefit pension schemes. Rather than cold shoulder the annuity the way that Osborne did, he should have worked with the pensions industry to make annuities a more reliable product for the UK’s large cohort of retirees. Osborne could be accused of dealing with this problem far too late into this government; after all if interest rates start to rise from next year, as expected, then annuities could become more attractive.
Confidence up. Inflation down. Exports up. Unemployment down. Growth forecasts up. With this backdrop it must have been difficult for George Osborne to draw up his fifth Budget. But what we have ended up with is a Budget for blue rinsers rather than businesses. He obviously thinks that everything is heading in the right direction with the economy and exports so there is no need to do much, despite all the supportive rhetoric around helping businesses.
George Osborne had good news to tell in his 2014 budget. The deficit continues to fall. Forecasts for 2014 growth, at 2.7% , are better than expected. Employment levels are now on a par with the US (he did not add that they lag behind Australia or Canada). The challenge he has set for this country is to increase exports to one trillion pounds by the end of the decade. That means the UK must increase its exports each year by 10.4 per cent.
–Cathy Corrie is a researcher at the independent think tank Reform. The opinions expressed are her own.– Today’s budget was a good news story. There is now no major advanced economy growing faster than the UK. Yet underneath the chancellor’s celebration, the end of austerity is nowhere in sight. With national debt heading inexorably up to over 75% of GDP, in the words of the chancellor: “The job is far from done.”The chancellor today made reference to two strategies to secure the public finances for the long term; the first, an Annual Managed Expenditure (AME) cap to limit welfare spending, and the second, a new Charter for Budget Responsibility, to be announced in full this autumn. Through these new measures Osborne has pledged to “fix the roof when the sun is shining to protect against future storms”, by returning to absolute surplus in the years of growth. The goal is to allow the UK to enter recessions from a position of financial strength, not on the back foot.Yet while the chancellor should be applauded for keeping fiscal discipline at the top of the agenda, history shows he faces a daunting challenge to deliver on his promise. For twenty years, governments have allowed debt to build by consistently spending more in recessions than they save in periods of growth. Debt has been left £124 billion higher as a result. It’s worth noting that 22 out of the last 26 forecasts have promised a return to surplus. No government since 2002 has thus far delivered.
–Dr Richard Wellings is Deputy Editorial Director at the Institute of Economic Affairs. The opinions expressed are his own.–
History is unlikely to be kind to George Osborne. Four years after he became chancellor, the national debt has exploded, the budget deficit remains at dangerously high levels, and an increasing share of tax revenues must be devoted to repaying creditors.
With the next general election just over a year away, it is likely Chancellor George Osborne will want to keep his powder dry and hold back any vote winning announcements for the Conservative Party manifesto or for the election campaign itself. That said, there are pressures from both the UK public (especially those experiencing the continued squeeze on household incomes) and businesses that are continuing to experience the effects of the recession. With this in mind, I have set out below what I think could happen on Wednesday, and some of the measures I’d like to see introduced.
The headlines generated by the forthcoming UK budget are likely to be political rather than economic; the general election is next year. Despite a faster than expected fall in unemployment and inflation, macroeconomic developments since the December autumn statement present limited scope for forecast revisions to government borrowing. But come the post-budget analysis, some of the seemingly esoteric revised economic assumptions may have important consequences for how the budget is perceived politically.
Those expecting a rivetingly exciting spectacle when the chancellor announces his budget next Wednesday will be in for disappointment, but that doesn’t mean that this won’t be an intensely political budget, given this really represents his last chance to make changes which will be fully appreciated by the electorate by the next general election. Having said this, his room for manoeuvre is limited, and the effect on the overall fiscal balance will be minimal.
–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–
Spring has sprung.
The grass has riz.
I wonder when the Budget is….
On 19th March actually or, more importantly in this age of nonstop campaigning, six weeks before the European elections and barely a year away from the general election. Since the 2015 Budget will be too late to affect our wallets before we go to the polls, this is George Osborne’s last chance to reassure us that the economic situation is under control. Will he be able to resist the temptation to give us a reward for our patience through four years of austerity and to reassure us that the misery is nearly over?
from The Great Debate:
Today, the International Monetary Fund announced yet another a reduction in its global growth projections for 2014, with its estimate of U.S. growth also reduced (citing reduced government spending, but not the present U.S. government shutdown -- or the heretofore unthinkable notion of the U.S. government defaulting on its obligations). Despite the seeming urgency of global economic slowdown, when world leaders attended their annual fall confabulation at the United Nations in New York last month, they focused on the diplomacy of physical security (Syria, Iran, etc.). Thus another year has passed in which global economic security issues were on no one’s reported agenda.
Policy makers continue to fail to appreciate that the most formidable economic challenge today lies in the area outside the borders of any one nation or region -- and that multilateral action to address this challenge is arguably more important than efforts at increasingly less-effective internal stimulus.