Former pensions ministers criticise DWP/HMT pensions split

Written by Natalie Tuck
08/11/17

Two former pensions ministers have criticised the split of pensions between the Department for Work and Pensions and the Treasury.

Speaking at the Festival of Financial Planning in Birmingham, 7 November, both Ros Altmann and Steve Webb spoke about their issues with parts of pensions under both departments.

Webb said the setup is “fundamentally problematic”, whilst Altmann stated the split “makes little sense”. Altmann said there is a “different mindset” between the two departments because the DWP think about pensions as a benefit, whereas the Treasury think about them as a cost. However, the two former ministers differed over their solution to the problem.

Altmann said that during her time in government, she tried to persuade former Chancellor George Osborne and former Prime Minister David Cameron to have the state pension under the responsibility of the DWP, and move all private pensions over to the Treasury.

On the other hand, speaking at the conference, Webb suggested taking the ‘P’ out of the DWP, by moving pensions, both state and private, over to the Treasury. However, Webb said this would be a risk to pensions because the Treasury “hates pensions”. He also said it may lead to less industry engagement with policy development, as the Treasury has less of a requirement to consult on policy than the DWP.

Furthermore, Altmann, who noted that her stint as Pensions Minister could be described as “painful, brutal and short”, said that she was surprised to see how little power a pensions minister has. She cited the issue of women’s state pension age increases and net-pay schemes as two areas she would have liked to change but could not.

“One of the problems the Pensions Minister usually has is that you are responsible to your Secretary of State, and it is the Secretary of State that makes these kinds of decisions, and the Secretary of State is junior to the Treasury ministers, so you don’t really have the power to make massive changes,” she said.

This was echoed by Webb, who said on some occasions he was not told about pensions policy changes prior to them being announced by Osborne at the Budget, such as changes to the lifetime allowance.

However, he said it is possible to get reform done but the duration of your time in office is a key part. For example, he noted that the new state pensions took “four agonising years” to get the primary legislation through.

“The key thing is buy-in from the Treasury, as Ros [Altmann] said, the Treasury are the gods in all of this. The great advantage we had with the new state pension is that I was told that they don’t mind much what we do, as long as we don’t spend any money.”

Despite asking to spend some money in the first year, Webb was told he couldn’t and had to spend less money in every single year. “That’s why the transfer to the new state pension isn’t quite as gleaming and slick as one would wish,” he said.

“But it is possible to do these things, if you have the time to stick with it. That’s why it matters that unfortunately the role of pensions minister has been demoted, it really does matter[…]If you think about the current minister Guy Opperman, you wish him very well, you hope he succeeds, but if he does, what will his reward be, he’ll get to be a mid-ranking minister in the department for fish [sic]. That is a serious problem because if he knows that his tenure is 15 months, on average, what’s he going to be able to see through.”

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