Crises in all but confidence
Workplace Thought Leadership Team | October 26, 2021
Time to read: 3 minutes
The last few months have seen the crises facing the country multiply – some anticipated, some out of the blue. As predicted by many, inflation has begun to bite, whilst support schemes from over the pandemic, such as the Universal Credit uplift, are now being removed.
Meanwhile, petrol station forecourts became visible markers of an unexpected fuel crisis. Roads across the UK were gridlocked as panic-buying turned a rumour into reality. Whilst blaring horns and grappling drivers grabbed the headlines, an altogether more fundamental crisis has enveloped the energy industry, with a perfect storm of market forces constrained by government policy throwing it into a spiral.
While these crises grab media attention, overshadowing other areas of interest or concern, the political impact of these wide-ranging, overlapping and cumulative crises has been minimal. The Conservatives continue to lead in the polls as Labour’s position stagnates between five and seven points behind the party of government. YouGov analysis of its poll following the Labour conference remarked on how the event had failed to move opinion in Labour’s favour.
In recent weeks, however, the Government has begun to seize the agenda and introduced a raft of new policy measures. The UK’s net zero strategy has been released, alongside a roadmap to sustainable investing, which will require asset owners to substantiate sustainability claims they make. Moreover, it has now been confirmed that simpler annual statements for auto-enrolment defined contribution (DC) pension schemes will come into force in October 2022.
September and October brought with them the expected conference season with their usual parade of rallies, fringe events and anticipated speeches. Labour’s was a tempestuous affair, as Keir Starmer sought to undo Miliband and Corbyn-era party rule changes on the reasonable gamble that no-one was watching events in Brighton. He did not, however, emerge unscathed, as critics and allies alike wondered aloud why the Labour leader had failed to capitalise politically on the fuel crisis engulfing the country by focusing more on internal disputes than on attacking the Government’s failures.
The Conservative conference was an altogether more triumphalist affair, with members revelling in the win of the 2019 election and relieved to be meeting once again in person. The Prime Minister, Boris Johnson, hailed the success of the vaccination programme for facilitating the reopening of the UK economy, including the all-important nightclub sector which enabled Michael Gove – dubbed ‘Jon Bon Govi’ by the PM – to show off his dance moves. It took voices from outside the conference complex in Manchester to bring the party back to earth. Following the rapturous reception of Boris Johnson’s speech in the hall, the CBI and Adam Smith Institute, usually on the supportive side of Tory economic policies, raised concerns about the impact of the prime minister’s vision of a high-wage economy without a simultaneous increase in investment and productivity.
The Road Ahead
Conservative conference was condemned with the moniker of “rhetoric heavy, policy light” which, whilst accurate, is perhaps a little unfair given the plethora of policy announcements expected between now and the end of the year. Within the next month alone, the Government is set to announce a budget, a spending review; as well as its recently announced net zero strategy, green finance roadmap, and a heat and building strategy, before leading the global COP26 climate summit in Glasgow in November. A busy autumn for the Government will see proposals on immigration and climate put to the test, whilst the Treasury seeks to square the circle of public finances following the crisis.
This legislative agenda has direct implications for pensions. We will see the completion of the Dormant Assets Bill’s journey into law, expanding the industry led and government backed dormant assets scheme which looks to reunite people with their financial assets. Where that has not proven possible, more businesses, including insurance and pensions, investment and wealth management, and securities sectors, will now be allowed to participate voluntarily in transferring dormant assets into the scheme where they will be used to support good causes, social investments and environmental initiatives. People will still be able to reclaim their assets in full at any time.
The draft Online Safety Bill (OSB), which has become a focal point for a discussion on the prevalence and prevention of online pension scams, is receiving its first proper examination by MPs, with the Joint Committee established to look at the Bill required to report by 10 December. Following the tragic death of Essex MP, Sir David Amess, ministers have hinted that the OSB could appear before the House for its second reading by the end of the year.
Yet there is scope for further developments: the Treasury has shown, through its temporary suspension of the pensions triple lock, a willingness to interfere with what had been a political third rail – raising the spectre of further taxation and/or the removal of reliefs. We will likely see the first regulatory and legislative steps to enable the Government’s vision of an “investment big-bang” to take shape, and the Government is obliged to respond to a Work and Pensions Select Committee report on stewardship by the end of November. All of this occurs in the context of strained public finances which create the need for the Government to take tough decisions.
Those in, those out, those in-between
To help meet these challenges, the first reshuffle of the Johnson cabinet since 2019 saw some long-expected changes. Education Secretary, Gavin Williamson, was sent to the backbenches as was Robert Jenrick, whose relationship with property developer Richard Desmond elicited claims of Conservative Party cronyism across sections of the media. Dominic Raab, criticised for his handling of the crisis in Afghanistan, was removed from the Foreign Office and placed in the Ministry of Justice, and appointed Deputy Prime Minister.
Winners in the reshuffle include Liz Truss, rewarded for her feel-good tenure at the Department for International Trade with a promotion to Foreign Secretary; Nadine Dorries, elevated to run the Department for Digital, Culture, Media and Sport; and, Nadhim Zahawi, whose widely-praised work on the vaccination rollout saw him rewarded with the post of Education Secretary.
The implication to draw from these changes is that the Government is gearing up for a period of focused action when Parliament returns following conference season. With a government that seeks to govern in the same campaigning language with which it won its majority, the move has already been seen as placing the Conservative party on the footing for a general election – which may come as early as Spring 2023.