Ex-pensions minister Steve Webb has argued that the financial services sector will see no “benign stability” during the next parliament because the government’s focus will be on cutting costs.
Webb, a former Liberal Democrat MP who currently works as director of policy for Royal London, argued that outside the mammoth task of disentangling the UK from the European Union (EU) the government’s main objective will be to cut costs in light of a stalling economy.
He said: “Although Chancellor Osborne has admitted the government will not be able to balance the books as it had hoped to by 2019, it still faces an enormous current account deficit and must focus on deficit reduction, anything else will be way down on the list of priorities.”
He explained that officials and lawyers in all government departments will be consumed with the enormous task of separating EU from English law over the next few years and so will have little time to focus on much else.
Webb argued that as a result any changes to the financial services sector will be ad-hoc and made to save money. They are likely to include changes to pension tax relief.
“Expect to see a reduction in the lifetime or annual allowance,” he said.
Similarly, the government will have little time to solve problems that urgently need addressing, he argued.
Those most in urgent need of attention might include the fact that 8% is too low a threshold for auto-enrolment contributions, and that 4.5% of the population are self-employed and excluded from the scheme altogether.
Another big issue is the significant advice gap. “There simply won’t be the legislative space to address these problems,” he said.
However, Webb concluded on a high note. “One good thing is that legislation already in the pipeline will probably be passed. The government will probably continue with its work on the Finance Bill, the Pensions Bill and rules around the Lifetime ISA,” he said.
“The government needs to be seen to be doing something, they won’t want to appear to be completely dominated by Brexit and so will be unlikely to drop initiatives that have been worked on already.”
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