Philip Hammond’s appointment as chancellor of the exchequer is unlikely to see the Department for Work and Pensions regain control of pensions reform, according to former pensions minister Steve Webb.
Webb, now director of policy and external communications at insurer Royal London, said the huge revenue implications of pensions tax changes means the exchequer is unlikely to delegate to Damian Green, the new secretary of state for work and pensions.
Green’s appointment was announced on Thursday, the day after Prime Minister Theresa May kicked off a widespread reshuffle of the cabinet by naming Hammond as chancellor.
If you finally get your dream job of being chancellor, the last thing you’re going to say to the DWP secretary is, ‘Don’t worry, I’ll just delegate pensions to you mate’
Steve Webb, former pensions minister
A Remain campaigner and one-time financial journalist, Green’s previous frontbench experience was as immigration minister and then police minister in the coalition government. He has known Theresa May since university.
Green was made Conservative shadow spokesperson for work and pensions in 1998, and according to analysis from website The Public Whip has hardly ever voted against his party.
The appointment came after leadership contender and previous work and pensions secretary Stephen Crabb resigned, saying it was “in the best interests of my family”.
Following the change at the helm of the DWP, it is not clear whether pensions minister Ros Altmann will continue in her current role.
New kids on the block
As the new appointments rolled in, some pension professionals said the reshuffle might see the DWP take the lead on future pensions policy.
Sarah Swift, pensions partner at law firm Eversheds, said George Osborne’s tenure as chancellor had seen an unusual amount of significant pensions-related budgets.
“That may have been George Osborne’s personal involvement and his personal desire for the future shape of pensions,” she said.
She added: “Now that it’s Philip Hammond, I’d anticipate that going forward perhaps the Treasury might take a back seat in setting pensions reform.”
Swift clarified that while the lifetime Isa might fall by the wayside, Hammond was unlikely to drop the secondary annuity market, which is at a more advanced development stage, or the potentially lucrative changes to pension tax.
Webb said the Treasury was unlikely to give up control over pension taxation.
“I’d be astonished if the Treasury wanted to release its grip on anything that is remotely to do with tax,” he said.
“If you finally get your dream job of being chancellor, the last thing you’re going to say to [the DWP secretary] is, ‘Don’t worry, I’ll just delegate pensions to you mate’.”
He said the current power dynamic between the DWP and Treasury is cemented by the fact that Altmann sits in the House of Lords rather than the House of Commons.
“I just think it’s hard, to be fair to Ros, when you’re not in the place where the real politics is seen to happen,” he said, adding that the media’s focus on the Commons means reform plans are more likely to be introduced by elected Treasury ministers.
The former MP said a healthy economy, not political personalities, was the most important driver of adequate retirement provision.
On the new chancellor’s attitude to public spending, he predicted the hawkish nature of “hardline Hammond” would be at odds with “moderniser May” in Number 10.
Such personal political conflicts have hampered the progress of pension reform policy and confused consumers, according to Jon Greer, pensions expert at Old Mutual Wealth.
“What we have seen is, almost, government departments not having a coherent policy on pensions,” he said, highlighting the conflict between auto-enrolment and Osborne’s pensions Isa ambitions.
Instead, he said a non-political, commision-aided approach to reform might harmonise reform efforts and deliver the stability the sector needs.
