Brian Monteith: Davidson, be bold on devolution

The Chancellor’s approach is one for Scottish Tories to learn from, writes Brian Monteith

George Osbornes attitude towards fiscal matters is a template to be followed. Picture: Reuters

George Osborne’s best Budget yet may not have pleased everyone, but it should be warmly welcomed nonetheless.

Whatever one’s political colour or disposition towards the United Kingdom, the uprated figures on growth and the improving statistics that he announced on nearly every other front mean the standard of living of the vast majority of British people is improving and will continue to improve.

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There remains, however, a problem of incoherence in approach that stems from the lack of a real philosophical dedication to free markets and the freedom of the individual. On the one hand Osborne talked of the need for tight controls on public spending, while also announcing capital grants for theatres, cathedrals and other favoured projects. Is there an election next year, by any chance?

Then there was the welcome abolition of the alcohol duty escalator – but the continuation of the tobacco duty escalator, even though the arguments for ending (or indeed continuing) are the same for both.

Osborne was wrong: there are in fact public health benefits from not raising tobacco duties by more than inflation automatically if such a rise drives more sales into the counterfeit and contraband market. Public revenues also fall, funds available for the NHS are reduced and illicit sales to young people become more likely. It is no coincidence that every third cigarette bought in Ireland is illegal, when it has the European Union’s highest tobacco duties. But there no longer appear to be votes in the minority pursuit of smoking compared to the majority pastime of imbibing – so logic was left behind.

Again, as if contrast were needed, the Chancellor’s approach to pension reform showed a commitment to supply-side deregulation that will not only give people a long-overdue freedom to manage their private pensions in the manner that they believe suits them best, but will also improve the public finances, as reducing taxes on withdrawals down to marginal rates will result in revenues increasing to £1.2 billion by 2018.

If, however, the Chancellor had applied that same dictum to the two top rates of tax, reducing each by say, 3p, I have absolutely no doubt he would again increase revenues, be able to reduce the deficit sooner and begin paying off the national debt far earlier. Unfortunately, and despite the obvious benefit to everyone – not least in reducing the £56bn interest payments – such a move would have left him open to the attack of favouring the richest, even though he has increased the entry-level tax allowance by £500 to 10,500, benefiting the lowest-paid taxpayers the most.

Such thin-skinned sensibilities may be understandable with a general election coming but they betray the fact that politicians who claim they favour economic growth, rewarding hard-working families and tackling the so-called cost of living crisis are merely mouthing platitudes and would prefer class prejudice and dogma over policies that would rescue us all at a quicker pace.

Nevertheless, the Chancellor deserves credit where it is due: the pension and savings reforms are indeed a seminal moment in the life of this coalition government for their political and economic chutzpah.

Firstly, and this aspect could grow in importance, it is a policy where the Conservatives and Liberal Democrats are at one, and where Labour is distinctly ill at ease. It offers the prospect of binding the Lib Dems closer to the Conservatives in coalition after the 2015 election result – as the policy is also very much theirs.

Secondly, the pension reforms – both in ending the enforced purchase of annuities and reducing the tax level on withdrawals – are built on the principle of trusting people with their own money. This is in stark contrast to the “we know what’s good for you” micro-management of pensions and savings by Gordon Brown and his followers for well nigh 13 years.

John McTernan, a former political secretary to Tony Blair, revealed the inner soul of the Labour Party when he said, tellingly, on Newsnight that “you can’t trust people to spend their own money sensibly”. In that one phrase the patronising approach of the nannying, bullying state that relies on legislation to forcibly control what individuals do with their own money was laid bare.

The United States and Australia already have a liberal pension system similar to that being proposed by George Osborne. Interestingly, McTernan was also an adviser to the late Australian Labour government but I’m unaware that he was advocating that it abandon its more open approach and adopt the enforced purchase of annuities that is so detested in Britain.

Labour’s immediate reaction to the proposed reform was sclerotic, knowing that it could not easily offend those who have saved for their pensions while at the same time mourning the loss of another lever to control people’s lives.

Their idea that pensioners would squander their cash said everything. That these very savers who previously chose to defer the gratification of buying, say, an expensive car – and instead took prudent steps to arrange for an enhanced income in their later years – should then behave so impetuously did not make sense. But even if they did, it would be their choice – although as can be seen by looking at the facts, the average pension pot, so ravaged by the intervention of the last Labour government, stands at just £36,000.

Nor should the reforms result in the end of the annuity market: such a choice will continue to suit some people, while using the funds to buy property in warmer climes, invest in equities or simply enjoy a cruise are just some of the alternatives they can plan for. The possibility that it will create a domestic housing bubble as pensioners look to enter the buy-to-let market is also speculative scaremongering. More likely is that funds will be used to pay off a mortgage than lock up cash in another property with risky returns and attendant management demands.

With post-Budget polling showing Conservatives and Labour running neck-and-neck, Scottish Tory leader Ruth Davidson should learn from George Osborne and go for a simple yet bold policy on devolution, eclipsing Labour’s half-hearted offering and becoming the appealing, progressive force for change.