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Mr. Webb: We all want to salute the work that carers have done in the past, but saluting them is not enough if they are now retired and drawing a pathetically inadequate pension. Nor is it enough to increase the basic state pension, because they get a reduced percentage of it. The right hon. Gentleman does not want to means-test them, so what would he do for them?
Mr. Field: Quite a few of those people will have had carers allowance, so we have the records and we could check them. Some flexibility is possible, depending on who they cared for and how. That seems a more appropriate approach than the suggestion that the whole national insurance system should go because we have not yet devised a way of justifiably paying additional pensions to those who have grown weary looking after other people.
There is no dispute about that anywhere in the House. It is just that some of us baulk at the idea that under the guise of helping a moderately small number of elderly women who have carried out caring functions, we should overthrow one of the real successes of the welfare statethe contributory principle. People do not think of it as taxation. They think it is being earmarked for them and they think it is their duty as citizens to contribute to the national insurance system when they can, and that they thereby have a right to draw from it. The electorate would not be keen that we should put that system aside without thinking.
Kali Mountford: I am grateful to my right hon. Friend for giving way on the contributory principle. In his thinking on the matter, has he considered what would happen if we moved from a pay-as-you-go scheme, which we currently have, to a funded scheme, which could be developed under the national insurance principle?
That will be my third point. It is the scheme about which I hope the Government will be thinking. My hon. Friend is right to highlight it. We cannot go
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into the election without laying down some outline plans for reforming pensions in the next Parliament. It would mean that almost 10 years had elapsed since we were elected, yet we still had not got on to the major subject of long-term reform of pensions.
It was a clever wheeze last year to set up the Pensions Commission and to toss the pensions time bomb into the long grass. We have now had a report from the Adair Turner commission, which has mowed the long grass. The pensions time bomb has not only been found, but it is ticking and people want to know what sort of approach each of the political parties will have when they go into the election.
It is an important call for the Government to make. If they continue to say that Adair Turner's commission will not make its final report until June next year, they will soon be trapped in that timetable. The timetable did not come down from Mount Sinai; it is the timetable that the Government gave the report in the first instance, and what Governments lay down, they can revoke. I suggest that they ask Adair Turner to make his report by the end of February next year so that all the political parties can study the detailed proposals and shape their election manifestos accordingly. I do not want us to go naked into the next election without putting before the electorate the main outlines of the kind of programme that Labour will support if it is returned in the next Parliament.
I come to that alternative and to proposals associated with the pension reform group, which tie in with the point just made by my hon. Friend. There are three main areas of policy within which the Turner commission says we will have to work if we are to have a viable long-term policy. First, I do not believe we can maintain the present retirement age. It was not Mr. Gladstone but that other great Liberal, Lloyd George, who first introduced old age pensions. He introduced pensions for those over 70, although life expectancy was 48 years. Since then, life expectancy has increased and we have endlessly brought down the retirement age. It is not sustainable.
As the Secretary of State said, and as we all know from work in our constituencies, there are a number of peoplenot just those who worked in heavy industry, but those who cared for their parents as the parents became increasingly frail and then diedwho are simply knackered and who cannot work to the current retirement age, let alone to one that we raise. That is why proposals to reform incapacity benefit are crucial.
The original proposals for an old age pension came in when the trade unions, the friendly societies and the mutual aid societies realised that they were going bankrupt because there was no retirement income and people were claiming sickness benefit until they died. They therefore dropped their objection to a state retirement pension. If we are to raise the retirement age in the longer term, we must have a robust system of incapacity benefits for people who are genuinely worn out by the worries of this world and who can rightly draw an income from incapacity benefit. But the electorate will not buy that if we do not reform incapacity benefit. So we must raise the retirement age and link it with a workable and robust new incapacity benefit.
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Secondly, the Turner report asks what we will do with the state pension. I do not believe that people will be prepared to accept, as the Institute for Public Policy Research is proposing, that we use the contracted-out rebate to put into a pay-as-you-go scheme so that we can immediately and substantially raise the state pension. That would mean transferring considerable sums that go towards a funded or investment-based pension scheme to a pay-as-you-go scheme, without any certainty that when those workers who were losing that substantial contribution to their funded or investment pension would get the same deal from taxpayers, many of whom are not yet born, so goodness knows how we can judge what their views would be.
Although there is a role for a pay-as-you-go scheme, that must be double-backed by a funded scheme. It needs to be a simple scheme and one that everybody is in. It should be looked after by trustees who are at arm's length from the Government. There would therefore be no possibility of the private market mis-selling, as everybody would be in the scheme. People who were in an additional form of provision would keep all that provision on top of the guaranteed minimum pension that they would get from the combined pay-as-you-go and funded scheme. I hope the Government would consider ways of accommodating the Conservative Opposition, who are very keen that in addition to making the minimum compulsory contributions, people should save.
If we are thinking about how the national insurance collection system can meet the future, rather than justifying its past record, then as well as collecting the contributions for the new funded scheme which in the first instance will be the contracted-out rebate, I hope the Government will start discussions with the private sector. If the private sector is successful in selling policies to those who want income additional to the new guaranteed minimum pension, I hope the Government will be prepared to collect those contributions through the national insurance scheme and pay them over to the companies, so the national insurance scheme would become a collection point servicing both the new funded scheme and the private sector.
That raises the big question, which no party has yet faced: what is the legitimate role of voters through their Government and of voters as individuals in providing for their retirement income? Labour has had a noble illusionbut it has been an illusionthat somehow we can use a collective state scheme to model the best of the private company pension schemes, and that we can deliver the resources that will give people an income of two thirds of their income before retirement. That is not on.
We must be much more modest about what we can do collectively. What we can do collectively is try to deliver that minimum guaranteed pension made up of a pay-as-you-go and a funded scheme. That goal is modest, but we have never achieved it in this country. The private sector's role will be to persuade people to make additional savings. It is not in taxpayers' interest either to legislate or to use huge amounts of taxpayers' money to try to bribe people to make additional savings. We know that the richest pick up the bribesthis is the first year in which more than half of all tax concessions on pension savings have gone to those who pay higher rate tax.
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I want to make three points. First, although it is cosy to say, "Labour's approach to pensions reform rests on evidence-based research", at the end of the day we must make a political judgment about the policy on which we want to campaign. Secondly, it is highly dangerous for us to go into the election without suggesting the main direction of our reforms, if the electorate return us. Thirdly, in making such proposals, we must answer the three questions that the Adair Turner commission addressed to all political parties. What role will raising the retirement age play? What role will a modernised state pension play? What role should funding provision play in seeking, for the first time ever in this country, the approval of the electorate to guarantee a minimum but adequate pension for all those who have played their part. Whether people work or undertake other functions that we value, we should salute them not by giving them credits, but by saying that this year's workers must pay this year's contributions for those people who carry out vital functions on our behalf.
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