Tony Blair at NAPF: Vested interests biggest block to reform

The short term demands of voters are making it almost impossible for policymakers to drive pension and other social welfare reforms says former prime minister Tony Blair.

Delivering the keynote speech at the NAPF investment conference in Edinburgh today, Blair said the need for tough decisions on reforming both state and public sector pensions was being exposed by the financial crisis, but that resistance from vested interests made doing nothing an easier option for politicians.

Blair said “Despite the recovery in stock prices , the recovery is fragile. Pumping money in has given liquidity. But solvency and growth remain issues. And this will make it harder for politicians to take the right decisions.

The truth about deficit reduction is it is not about right versus left but about right versus wrong. You have got to have it, but you have got to do it in a way that does not damage growth.

“People come out to defend vested interests in the public sector and to an extent in the private sector. So short-term politics make it hard to make changes.

Blair reiterated his view that the state pension should only form a foundation upon which individuals should make their own provision. Asked whether he considered the state retirement pension would become unaffordable within a generation, Blair said: “No, I don’t think so. But you can’t deny people are living. State pension is affordable but it can only ever be a base. We need to get people to provide for themselves.

“We put in changes to retirement age. But need to get a different concept of retirement. State pension is still affordable but you have to build on that foundation the understanding of private responsibility. People are taxpayers and they are also pensioners or prospective pensioners. You can only resolve it on the basis people will do more for themselves privately.”

Asked whether the biggest blocker to change in public policy on pensions was political or bureaucratic, Blair said: “In this instance it was political. I didn’t have a problem with advisers telling me what to say. You get a lot of interest groups coming in with their arguments. And the arguments are complex. Take quantitative easing and its effect on the economy for example.

Blair also gave an impassioned rejection of the Coalition Government’s approach to Europe, arguing it would be folly for the UK to not be part of the world’s biggest trading block.

He said: “I am a strong believer in the UK being in the EU. I feel this in the same way I feel about Scotland separating form the UK. In a world that is ever more connected to disconnect yourself makes no sense.

“China is going to become an immense power over my children’s lifetime. There is no way they are going to treat Britain more seriously out of Europe. There is a short-term question – does Europe need change. The answer is yes. But it’s better if we make changes as a strong voice in Europe.”