Murnaghan 23.03.14 Interview with Rachel Reeves, Shadow Work and Pensions Secretary

ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

COLIN BRAZIER: Now the Chancellor’s pension shake up took most people by surprise this week, not least of all the Labour party.  They hesitated at first before the Shadow Work and Pensions Secretary, cautiously backed the plans and Rachel Reeves is beside me.  The pensions pot that you used to have to convert into an annuity, now you can play with, do what you will with but the worry is that some people will be prudent whilst others will be profligate and there are those people, including some from within your own party, who say the discipline that an annuity provided is something that we still need. 

RACHEL REEVES: Well first of all Ed Miliband said in a speech in January 2012 that the pension market isn’t working for ordinary people.  The fees and charges are far too high and people aren’t getting a good deal when it comes to buying an annuity because they’re not getting the advice and the guidance that they need so I support, we support reforms to the pension market so people can get the better deal and have more flexibility, especially at the moment when people are just not getting a very good deal on their annuity but we’re talking about people here who are coming up to retirement, have saved all their life, put something aside, I think we can trust those people to make sensible decisions about how they want to use their money in retirement to support them. 

CB: Ed Miliband diagnosed the problem,  in common with many other people who knew there was a problem with the annuity markets and the interest rates being so low, gilts and all the rest of it but it’s quite another thing then to come up with the reforms that the Chancellor has come up with and clearly it took you a while to think them through and it did catch you off guard didn’t it?

RACHEL REEVES: Well we didn’t know they were going to make the announcement on Wednesday but I’d argue though that they haven’t gone far enough in what they announced on Wednesday because we’ve called for a cap on the fees and charges that pension providers are allowed to charge and the government promised that a few months ago, they said it would be introduced by April 2014.  It hasn’t been and all the evidence shows, in fact the government’s own numbers suggest that people risk losing up to £200,000 during the course of their lives to pay for those fees and charges. 

CB: But we’d have to pay for a cap wouldn’t we because the problem is if you want more financial advisors …

RACHEL REEVES: No, no, the cap would be that pension funds wouldn’t be able to charge more than say 1% a year on what you’re putting in, at the moment they can charge 1.2, 1.5, 2% and that means when people come to retirement and they come to annuitize or take their money out, they’ve got less money than they were entitled to.  Now the government said there was going to be a full frontal assault on fees and charges but there’s been nothing of the sort, there won’t be a cap on fees and charges next month.  I don't think there’ll be one by the end of this parliament.  The government need to do that, that was one of the reforms that was missing and we’ll continue to call on them to do that.

CB: You need to have some incentives in place don’t you because you can have an army of advisors, all this extra money sloshing around now that needs to be invested wherever and you’re going to need people, some shrewd operators, who are going to invest that wisely lest you have a situation where conmen, hucksters, tricksters, scammers all get a slice of the action and we don’t want that to happen.

RACHEL REEVES:  Well we’ve set three tests for the government which we’ll be pressing them on over the next few weeks and months.  The first is around advice to make sure that people get the support and guidance to be able to make the right decisions for themselves when they are coming up for retirement, whether that’s to buy an annuity, whether that’s to take a lump sum, whether that’s to draw down smaller amounts of money, so advice.  The second test is around fairness, so will be people on modest or low incomes be able to get a good deal or is it just going to be the wealthy that get a better deal out of this and the third is around cost because what we don’t want to see is further pressure on the social security budget and on the social care budget if people run out of money during their retirement so the government have got to answer questions about those three things.  I support, the Labour party supports, greater flexibility for people who have done the right thing all their lives and saved for their retirement. 

CB: Not everybody in the Labour party supports this, people like Tom Watson, he said it is a one sided charter for tax avoidance, there are other people on your back benches who feel a slightly more paternalistic approach is the right one.

RACHEL REEVES: Of course there is always going to be debate and disagreement but Tom is right to ask some of those questions about these reforms in the same way as we are doing.  Tom wants to see and I want to see as well that this benefits people on modest incomes and not just the privileged few so we’ll be asking detailed questions and asking the government for answers about will people still be able to buy a whole life annuity and will they be able to get a good rate on that.  That’s really important so that people on modest incomes who have managed to save a little bit during their working lives will know that they can still get that security so there are still questions the government has to answer but I think it’s right that people who have done the right thing and saved get a bit more flexibility especially when we know and Ed has said for a couple of years now that the pension market isn’t working for ordinary people.

CB: Agreeing with the government is becoming a bit of a habit isn’t it?  You’ve agreed on pension reform, on the welfare cap you are going to be going into lobbies on Wednesday agreeing with the government again, tell us why. 

RACHEL REEVES: Well we agree on some things and I think it is responsible for politicians to say where they agree as well as where they disagree but on energy markets, on the bedroom tax, there’s plenty of areas where we are not in agreement with the government but we do need to ensure that we are controlling the costs of social security and so we will be supporting this week a cap on the overall society security bill.  Now the reality is again this is an areas where the government need to go further because during the course of this parliament the government are going to be borrowing a staggering £13 billion more on social security than they originally planned and in the budget this week …

CB: Under Labour the number of people who never worked in their lifetime doubled didn’t it?  

RACHEL REEVES: Under Labour the employment rate reached a record high …

CB: By importing people from abroad.

RACHEL REEVES: No, this is a proportion of the workforce who are in work and even under this government, for all their claims about job creation, the employment rate hasn’t reached the level it reached under the last government.  If you look at what has happened to long term unemployment, the number of young people out of work for more than a year has doubled under this government but the point is that social security is going up under this government because they have failed to tackle the root causes of the rising social security bill so we have got more than five million people who are paid less than a living wage and are having to draw on housing benefit and tax credits, we have got those rising numbers of long term and youth unemployment and we have got the housing benefit bill going up because house building is at an all-time low.  Unless you do something about those things, the benefit bill is going up so under the Tories and the Liberal Democrats benefits are going up, a Labour government would take the action that’s needed to control the cost of social security.  

CB: They can’t be doing everything wrong because if you look at today’s polls, that gap which was a healthy gap as far as Labour were concerned a year ago has narrowed down now to virtually nothing so whether it’s recovery of the economy, whether it’s welfare reforms, whatever this government is doing the voters are liking it and now  you have got these pension reforms, the older voters tend to vote so that causes you another headache.  There is every possibility now that you’ll be in opposition for another five years.  

RACHEL REEVES: Well there have been different polls out this weekend and some of them had a wider gap between us and the Conservatives but the most important poll is what happens on election day and I’m confident that Labour have got the right policies, whether it’s freezing energy bills, cancelling the bedroom tax, extending childcare, we’ve got the policies to address the cost of living crisis to help ordinary families.  

CB: Rachel Reeves, thank you very much indeed.

RACHEL REEVES: Thank you.