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Tom Levitt (High Peak) (Lab):
My right hon. Friend will be aware that issues such as the Turner and Newall pension fund are highly complex, but such events shatter
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confidence in pensions generally—both public and private. Although we should consider ways to ensure that such things do not happen again and protect those funds, is not the key long-term aim ensuring that those funds do not stand a risk of failing in the first place? Will he ensure that that message is taken forward not just for the individual cases that we seen so far, but for the totality of pension provision in the public and private sectors for the future?
Alan Johnson: I will, indeed. I understand my hon. Friend's concern about Turner and Newall. We picked up the recommendations in the Pickering report on the regulator's role, and that is another central element of the Pensions Bill.
As well as greater confidence, we need a revitalised voluntarism, and that means people need incentives to save. We are therefore, first, radically simplifying the taxation of pensions by replacing the existing eight separate taxing regimes, which are placed on top of each other, with one single lifetime allowance. That measure appears in the Finance Bill and has been widely welcomed. Secondly, we are also giving firms tax exemption on up to £150 worth of advice for each employee each year. Thirdly, for about 3 million lower-income working adults who are on the new tax credits, our reforms mean, as Adair Turner has pointed out, that they get 37p extra tax credit for every pound that they contribute to a pension.
Revitalised voluntarism means activating people to take advantage of what is already there. On this, we appear to have unanimity and consensus with the two Opposition parties. The commission pointed out that 4.6 million people work in companies in which the employer makes a contribution to their pension, but they have not joined the pension scheme. I cannot believe that that is a matter of informed choice. If it is, that is fine, but it is not and we need to find measures to deal with it. For example, auto-enrolment was one snappily titled approach. Its name does not send the blood pulsing through the veins, but it is an important contribution to that debate. We set out other issues that we think are essential to take forward in our Command Paper on informed choice. We are also taking steps to give people clear, tailored information about the choices they face today in relation to their prospects for retirement.
As a society, we need to end the head-in-the-sand culture, and the Pensions Commission report, uncomfortable as some of its evidence is for all of us, provides a major contribution. I will take the rap for the phrase "a pouch of fairy dust", but I believe that Adair Turner needs to take the rap for the phrase that there is no single magic bullet to solve the longer-term pensions challenge. However, the Government will build on the difference that we have already made in tackling the pernicious evil of pensioner poverty. We will build on the differences that we are making now in increasing the opportunity and rewards available from working longer, radically bolstering confidence in pension saving, enhancing incentives to save and empowering people to be able to make informed decisions about planning for retirement.
Just as we have evolved the state system in the past, so we will in the future. However, this evolution will be based on evidence and consensus where possible, and it
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will ensure that we strike the right balance between tackling pensioner poverty, helping all pensioners and ensuring the right incentives to save. I believe that yesterday's Turner report has really helped us with that debate. I look forward to engaging with the issues further over the weeks and months ahead.
1.59 pm
Mr. Steve Webb (Northavon) (LD): The new Secretary of State is a breath of fresh air and I hope that his candour will not diminish in direct proportion to his length of service in office. He said something important and significant this afternoon, as the hon. Member for Havant (Mr. Willetts) pointed out, and his contribution raised the tone of the debate from an argument about whose fault it is that we are in such a mess to one about how we will sort it out, which is what the focus of today's debate should be. I salute him for performing an important service for the House by taking us away from the puerile debate about who said what to whom and whose agenda we should pursue towards a consideration of how we will serve the needs of today and tomorrow's pensioners. I shall engage with him on the citizenship pension because it is an important way to reflect on where we might go from here.
The Conservative party initiated the debate and its motion outlines some of its proposals for reform, so it is appropriate for me to begin by examining what it says. We tabled an amendment to the Conservative motion because although we did not object to anything in it, there was an important omission. The Conservatives consistently and repeatedly fail to recognise the problems of women in the pension system. If hon. Members read the motion, although I trust that they have better things to do, they will discover that it makes no specific reference to the pension position of women.
I suspect that I am alone in the House in that I listened to the entire conference speech made by the hon. Member for Havant, but I heard no explicit reference in it to women's pension problems. Perhaps the most damning thing of all is that although the Conservatives have come up with an eight-point plan to tackle the pensions crisis, and despite the fact that the majority of pensioners are women and a greater majority of the poorest pensioners are women, that plan makes no mention of women's pension problems. When challenged on the issue, the hon. Gentleman says, "Yes, we must have a think about that." The problem is important, so he should not think that something should be done about women after the plans have been drawn up. The problems for pensioners will not be solved unless the problems facing women pensioners are tackled, so the Conservative party's consistent failure to address the matter represents a glaring omission. I think that the hon. Gentleman is aware of the problems, so I am disappointed that he has not come up with any concrete solutions.
The right hon. Member for Newport, East (Alan Howarth) highlighted the fact that simply linking the present national insurance contributory pension to earnings at its present inadequate level in proportion to what people are already getting is a policy of giving less money to women. We would start from a position in which women get less and reinforce our plans to tackle that problem with a link to earnings. I hope that the
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Conservative party will come up with proposals to tackle the problems, but they have been sadly lacking from the debate so far.
Mr. Frank Field: The hon. Gentleman is quite right to say that a link to earnings will not solve all the pension problems. Where do the Liberal Democrats stand on the link? Do they believe that it should be made, or will they omit it from next year's election manifesto?
Mr. Webb: I can give the right hon. Gentleman a clear answer to that question. The first point in our first Parliament plan is a proposal to link the pension for over-75s to earnings. We intend to do that on the basis of a pension paid to citizens, rather than a contributory pension, as a result of which women will benefit equally to men rather than in proportion to their contribution records. When we extend that pension from the over-75s to all pensioners, it is our intention that the citizenship pension will be linked to earnings. It is almost a quarter of century since the earnings link was broken and the state pension has become devalued to such an extent that increasing it to a credible level and linking it to earnings in one go would simply not be plausible, so we have reluctantly had to prioritise people. We will start with older pensioners, who tend to be women and the poorest pensioners.
Sir John Butterfill (Bournemouth, West) (Con): The hon. Gentleman says that the pension will be paid regardless of contributions. Would that not lead to the anomaly that women who had worked and opted to pay the full contribution would be no better off than those who opted to pay the lower married woman's contribution? Would that be fair?
Mr. Webb: The hon. Gentleman makes a perfectly fair point on which I can reassure him. One of the advantages of our phased approach is that women who retired today would receive an enhanced pension for the next 15 years because of their additional contribution. By the time that we extended the pension from over-75s to all pensioners, the married woman's stamp would have worked its way through the system because as he will know, no new women have been able to opt to pay that stamp since 1977. There would be a transitional problem with the system, albeit one that would last for perhaps a decade or more, but women who paid the full stamp would continue to benefit from that. We think that we must begin to end the penalty on caring that is inherent in a contributory system.
The Secretary of State referred to the funding hole in Conservative proposals. Just as the electorate will not accept the Government saying, "Mr. Turner will come up with the answers next summer, so vote for us and we'll implement them", they will not accept the fact that the Conservatives promise money for pensions without being clear about where it will come from. To be fair to the hon. Member for Havant, he has produced a document including tables and figures to show how the money will be found. One of my colleagues asked me the other day how the Conservatives were being allowed to get away with such implausible costing of their policies, so I thought that it was about time that we had a little look at them—believe me, I know something about that subject. I am sure that the hon. Gentleman will contradict me at each step if I make a mistake.
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The Conservatives propose that £7 will go on the pension on the basis of a real earnings growth of 2 per cent. The hon. Gentleman has costed his proposals and said that if real earnings grow at 2 per cent. throughout the next Parliament, he will be £180 million short, although that is actually a gross understatement. However, as the Secretary of State said, there would be a cumulative problem. When the hon. Member for Havant scraps the new deal, he will give himself £600 million in year 1, which is far more than he needs, but although he will still receive £600 million in years 2, 3 and 4, the cost of the policy will rise every year. Although he will have nearly £500 million more than he needs in the first year, he will have £500 million less than he needs in the fourth year. His policy suffers from a structural lack of funds. He would be £180 million short over a Parliament at the very least, but in the final year of a four-year Parliament, he would have introduced a structural deficit of £500 million. Where would the money come from? I was hoping that the hon. Gentleman would intervene on that point.
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