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Last Updated: Wednesday, 2 November 2005, 14:33 GMT
Where now for pension and welfare reform?
By Julian Knight
BBC News personal finance reporter

David Blunkett
Mr Blunkett's appointment put pensions and welfare centre stage
At first glance, David Blunkett's resignation could not have come at a worse time for the progress of UK pension and welfare reform.

This autumn the government's reform agenda reaches a crescendo.

The results of what Mr Blunkett called "a radical review" of welfare reform is due for imminent publication.

The review will contain plans to overhaul the creaking system of incapacity benefit, widely seen as acting as a brake on economic growth.

In addition, a key report which will outline possible solutions to the UK pension crisis is due to be published on 30 November.

But with Mr Blunkett's departure, what now for pensions and welfare?

Heavy hitter

He was a big beast, and as such was welcomed by the work and pensions world as someone who had the clout to get things done
Malcolm McLean, Pensions Advisory Service

The appointment of Mr Blunkett, a political heavy hitter, was supposed to show to the world that pension and welfare reform was central to Labour's third term plans.

"He was a big beast, and as such was welcomed by the work and pensions world as someone who had the clout to get things done," Malcolm McLean, chief executive of the Pensions Advisory Service, told BBC News.

Prime Minister Tony Blair saw Mr Blunkett as being the man to tackle such tricky policy areas.

He had shown as Home Secretary and Education Secretary his willingness to take on vested interests and pushed through legislation which was unpopular with his own party.

These were attributes he would need aplenty as he took over at the Department for Work and Pensions (DWP).

Criticism

Mr Blunkett faced massive challenges at the DWP.

The UK pensions system, once the envy of the world, had fallen into disrepair and disrepute.

BLUNKETT'S REFORM PRINCIPLES:
Help people to help themselves by a "ladder to self-reliance", not just a safety net in time of need
See work as the best route out of welfare
Enable people to make informed choices themselves
Balance rights with responsibilities, while recognising the need for support and care where appropriate
Promote "solidarity between generations", and the importance of using government resources to help people cope with rapid economic and social change
Ensure the role of the state is "active, liberating and enabling"
Address the root causes of poverty and overcome "intergenerational disadvantage and exclusion"
Invest in the potential of everyone, and flexibility of support in and out of work

Many workers have had their pension benefits cut as employers reduced the amount of money they paid into schemes.

In addition, it was universally recognised that Britons are failing to save enough for their retirement.

The government faced widespread criticism that it had actually made the UK's pension problems worse through its decision to levy a tax on share dividends held by pension funds.

It has been estimated that since the tax was introduced in 1997 the government has collected almost 30bn from UK pension funds.

Mr Blunkett also faced having to reform - or possibly replace - the Child Support Agency (CSA).

The CSA has been dogged by claims of administrative failure and Mr Blunkett had described it as a "complete shambles".

"Crackers"

At the same time, Mr Blunkett was asked to formulate and oversee radical welfare reform.

Getting many of the 2.7 million Britons currently claiming incapacity benefit back into work is a key target of Labour's third term in office.

Mr Blunkett had nailed his colours firmly to the mast describing the current incapacity system as "crackers" and the housing benefit system as a "nightmare".

What we don't want is cabinet division and the sort of shambles as happened over the smoking ban... pension and welfare reform is too important
Neil Churchill, Age Concern

Mr Blunkett went on to outline his "eight principles" of welfare reform.

The upshot of Blunkett's eight principles was that the UK welfare system would be made less complex and that people must be shifted from claiming benefits back into work.

Neil Churchill, head of communications at charity Age Concern, told BBC News that his organisation had been encouraged by the progress of the reform agenda.

"There is a growing consensus that people who can work should be given as much encouragement as possible to do so. It helps no one to have millions on incapacity benefit."

"At present too many people are in their fifties or sixties are made redundant and can't get back into work. These people are forced to rely on incapacity benefit," Mr Churchill said.

So will the welfare and pensions reform agenda be derailed by Mr Blunkett's departure?

Mr Churchill says a lot depends on who replaces Mr Blunkett at the DWP.

"The appeal of Blunkett was that he could bring his cabinet colleagues into line and provide leadership," he said.

"We have now had three ministers at the DWP in just over a year and whoever now takes over needs to be a big hitter, of the order of David Blunkett.

"What we don't want is cabinet division and the sort of shambles as happened over the smoking ban... pension and welfare reform is too important."

Tackling pensions

One of the first things to greet the new minister will be the report of the Pension Commission.

The Commission has spent the past year drawing up proposals for how the UK's pension crisis can be solved.

"Whoever the new minister is he or she has to hit the ground running... there is little time for delay in tackling the crisis," Mr McLean said.

"And of course, the Treasury and Gordon Brown will want to have their say in how these issues are dealt with."


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