Select Committee on Work and Pensions Minutes of Evidence

Examination of Witnesses (Questions 180 - 183)



Mr Dismore

  180. What assumptions have you made about uprating in your calculations? Obviously MIG at the moment, certainly for this Parliament, is guaranteed against earnings.
  (Mr Hawksworth) We have made the same assumptions as in policy scenario one.

  181. You have assumed that it would all be uprated with earnings.
  (Mr Robinson) Yes.
  (Mr Hawksworth) Yes.

Andrew Selous

  182. The Chairman said earlier that he wanted to return to the incentives for savings which we touched on. Could we very briefly do that? Presumably quite a major plus of what you are outlining would be you would expect people to start saving much more and that you would do something to close the £27 billion saving gap that we heard about last week. Could you add a few concluding remarks on that?
  (Mr Robinson) I think I answered that earlier when I said that the overall impact of saving is ambiguous in our reform package, as it is in any reform package because there is a range of offsetting effects. It is difficult to make confident predictions about how people's behaviour would change but we do not see it as a first order priority that we need to increase the overall level of savings.


  183. Peter, I was slightly teasing you about the timing of all of this and I was interested in your answer. Certainly ideas are always valuable and welcome. We are seeing the Minister in a week's time to look at State Pension Credit. Do any of you have particular things that you think would be valuable, urgent short-term improvements you could make, which would be worth having that we could put to him next week?
  (Mr Brooks) The way to get from where we are to our proposed solution is to raise the Basic State Pension by more than the rate of increase in earnings. If you simply did that at the right rate for 10 years you would get to what we are proposing. In a way there is an incremental solution which gets you to the same endpoint.
  (Mr Robinson) And the Pension Credit effectively then would phase itself out over that decade.
  (Mr Hawksworth) I would say that the fundamental question to ask him is: what is the long-term vision that the Government has for the State Pension system? For example, we have three policy scenarios here which are utterly different. I would also like to make one point about what Andrew Dilnot said when he said that under the Government's scheme total State Pension spend was broadly unchanged. Andrew has not done any modelling on this because he thinks it is not worth looking beyond ten years at pensions policy; maybe he is right. We have and the answer is that it is not broadly unchanged on the basis of scenario one; it does go up from 5 per cent to around 6 per cent and that is the same on our figures or on the Government's figures as demonstrated in the annex to the paper we sent you three weeks ago. Maybe 5 to 6 per cent is "broadly unchanged" but it compares with a regime where it was going from 5 per cent to less than 4 per cent. There has been a big shift if you accept policy scenario one and that big shift relaxes the affordability constraint and allows in all the other options we have looked at. Testing him on what his long-term vision is, is the key thing.
  (Mr Robinson) And a more specific question relating to that: what do you expect to happen to the Basic State Pension? Do you really think it will continue to be price-indexed and will decline and decline and decline?

  Chairman: That has been very thought provoking, thank you very much. I am very grateful to you. We certainly look forward to reading the papers you have sent us and thank you very much for your appearance this morning.

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