New pension bill among Blair's 'radical' election plans

London Briefing: With Tony Blair's announcement that the phoney war is over and the general election campaign is officially under way comes the news that the prime minister "plans a radical programme for his third and final term". Cynics might be forgiven for asking why it has taken seven years of a New Labour government for them to start promising radical policies; perhaps it takes that long for a new government to get warmed up these days.

The most radical - that word again - legislative programme is promised for pensions. A pension commission led by Adair Turner is due to present its final report this autumn and a new pensions bill will be enacted quickly thereafter. At least, that's the promise according to Commons leader Peter Hain.

Apparently, the government has decided that the UK faces a pensions crisis or timebomb. But this is such a sensitive area that they are doing all they can to avoid it becoming an election issue.

Anything that smacks of difficult choices must not be discussed. In the same breath, politicians express bewilderment over voter apathy and stress that they understand that reconnecting with the electorate is important if people are to be encouraged to vote. Simply telling the truth never occurs to them of course. Simple but difficult truths can wait for the first Queen's speech of the new parliament.

Turner has already quantified the extent of the crisis: in an interim report he suggested that the pensions shortfall already amounts to £57 billion (€83.2 billion). According to the venerable commission, we either have to work longer or save more if we are to plug this gap. Gosh, what a surprise.

The idea that these facts can be kept hidden from the electorate until after the election is risible. The British people were alerted to the problem 20 years ago when Margaret Thatcher changed the indexing rules for state pensions (uprating changed from an earnings to an inflation basis, thereby saving the government a fortune).

Ever since then, awareness has grown that the government simply cannot afford its pension promises. All that has happened is that various interest groups have had plenty of time to plan their strategy such that when the time comes for a fight they will do their utmost to ensure that somebody else bears the brunt of any changes. That fight has already started, with public sector unions successfully recently heading off the merest hint of an upward shift in the retirement age.

Unfortunately, we are not going to be told the truth, even when the independent commission issues its report. The idea that Britain is not saving enough for retirement is probably wrong, as Tim Congdon, economist at Lombard Street Research, argued this week. The problem is not with total saving (which is ample) but with distribution: poor people, shockingly, don't save enough. The honest conclusion to draw, which means that it will never see the light of day, is that taxes will have to rise to redistribute income, not raise the aggregate saving rate.

Everyone understands the pension timebomb. It has resulted from people living longer. It will be cured only by working longer. Either this is too difficult for politicians to grasp, or too awful to contemplate.

Taxes are going to rise for reasons that have nothing to do with retirement planning and the government is going to use the pensions crisis as an excuse. There are plans to make people contribute more to private pension plans; the government might impose directly some form of pensions tax.

Most of us think that National Insurance is supposed to be for our old age, but I guess that proves how gullible we can be.

The Treasury, scared of the prospect of all those extra pension contributions attracting tax breaks under today's rules, wants to restrict tax relief to the basic rate - another stealth tax. That the Treasury is partly responsible for the funding gap with another stealth tax - worth £5 billion a year - raid on pension funds in Gordon Brown's first budget is merely ironic.

Apparently, the new pensions bill is just one of 40 that the government has pre-written for the new Parliament. Where do these people find the time? How many of these new bills will explicitly call for tax rises? How much money will they cost? Sadly, we are about to find out.

Chris Johns is an investment strategist with Collins Stewart. All opinions are personal.