What is the difference between a Government that gives bad advice and an insurance outfit that gives bad advice?
You know. The Government gets away with it and anybody else gets caned. We have seen it twice over now with pensions.
The Thatcher Government, in its privatisation heyday, got the idea that individuals should take charge of their destiny by buying "portable" pensions which went with them when they changed jobs.
It ran a huge advertising campaign urging anyone who could to buy a personal pension. This flashed a bright green light at the commission-driven insurance sales fraternity. They went for it, selling private pensions to anyone who would sign on the dotted line, supposing the Government was on their side.
Bitter miners and exminers abandoned the admirable coal industry scheme after their strike was defeated. Teachers and nurses, disillusioned by "cuts", signed their way out of excellent public sector schemes. Robert Maxwell's theft cast a pall over company schemes. Some advisers dutifully explained that if you are in a decent occupational scheme you can never match it with a personal pension because your employer pays more than you into the occupational scheme.
But nobody was in a mood to listen. The Government ad campaign had done its job.
When the chickens came home to roost financial advisers and life companies accused of mis-selling (for the most part rightly) were forced to pay compensation - plus even larger sum to administer the process. Yet hardly anybody, certainly not the Parliamentary Ombudsman, blamed the then Government for fomenting the debacle in the first place. The taxpayer escaped without paying a penny. No Minister was pilloried.
Now we have we have a similar situation with the Blair Government. Again it arose from crass publicity. The department of Work & Pensions, then headed by Alistair Darling, put out leaflets urging people to join and stick with company pension schemes. These failed to contain the necessary wealth warning - that if your company goes bust and the scheme is poorly funded you may get nothing for your contributions.
Meantime, the self-same Government was weakening pension schemes by depriving them of tax relief on dividends and also scaling back the minimum f unding requirement.
It was straightforward bad advice - just like the Thatcher Government's posters. The difference is that this time there is no insurance industry to pick up the tab. Some 85,000 luckless individuals are said to have lost most or all of their pensions. Tony Blair puts the liability at #15 billion - off the end of the scale for the Government's #400 million Assistance Scheme.
The Ombudsman says the taxpayer should pay. The Government retorts that it is not her job to hand out public funds on this scale. Nor is it, in my view. This is a political decision, arising from a political blunder.
Moral: Governments should not give financial advice.
