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Mr. Geoffrey Clifton-Brown (Cotswold) (Con): My right hon. Friend is making a cogent speech, but is there not another element that has not yet been considered in the debate? During the past seven years, the Government have taken on a large number of extra public sector employees, who have significant pension contributions. We are all finding that our police and fire budgets are under pressure because of those increased contributions. Is that not something that we must consider very seriously in the future if we are to afford present pensions?

Mr. Dorrell: My hon. Friend makes an important point in referring to the multiplier in our public funding commitments. We must consider the funding implications not only of the choices that we make about the state retirement pension, but of what are essentially choices in the private sector in relation to other employment groups, because the groups to whom he refers are those for whom the public sector picks up the employer's obligation, which is privatised elsewhere, so he is entirely right.

In a world where people expect to make these choices increasingly for themselves, using information that they know and that we have traditionally not regarded as relevant to pension decision making, we have to extend our understanding of what it means to base pensions policy on individual choice. I want to mention something that is hugely sensitive, hugely dangerous and, to my knowledge, is never mentioned in the context of pension policy development: the impact of the improving understanding of genetics.
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If we are to make choices about how long we will save and how long we expect to live in retirement, the idea that we can do so blind to the knowledge that is now available to us about genetically influenced life expectancy seems a bit like living in a world with nuclear arms and preferring them not to be there. That reminds me a bit of the Victorians who, it is said, used to put skirts around the legs of their pianos because it was not decent to look at them. I must say that I always suspect that that is a proverbial story.

If we are to make real choices, informed choices—to pick up a phrase that was used earlier—we must understand the reality that people in the real world use all the elements I have described to make decisions about how long they will work and how long they expect to live in retirement. If we work through the implications of real personal choice about when people will retire, we realise that we have a considerable way to go before we reach a workable set of policy structures.

3.59 pm

Rob Marris (Wolverhampton, South-West) (Lab): It is a pleasure to follow the right hon. Member for Charnwood (Mr. Dorrell). He ended up referring to choice, and I, too, shall cover that issue later in my speech. Unlike the Opposition Front-Bench spokesperson, the hon. Member for Havant (Mr. Willetts), the right hon. Gentleman put forward an intellectually coherent case and differentiated between the situation facing pensions and that facing pensioners. They are obviously linked but, for reasons of life expectancy and lifestyle choices that he and others have mentioned, the question as to the future of pensions as saving vehicles must be separated intellectually from the position of pensioners—both those today and prospective pensioners.

The debate is about an Opposition motion, but I shall begin on a point that the hon. Member for Havant did not cover when he opened the debate. Surprisingly for a man who is reputed to have two brains, his approach lacked intellectual coherence. For example, he castigated the Government about means-testing, but he wants to keep the pension credit. It appears that, under Conservative proposals, means-testing would wither, but the pension credit would stay. However, a key plank of the pension credit is means-testing, and rightly so.

The hon. Gentleman produced figures and a 10-point plan—I am sorry, an eight-point plan; there may be a couple of points more now—that he hardly dealt with today, except after questions raised by the hon. Member for Northavon (Mr. Webb), the spokesman for the Liberal Democrats. The hon. Member for Havant opened the debate on a Conservative motion and he is one of the authors of the eight-point plan, but he totally resiled from it and hardly mentioned it. He did not offer a coherent way forward and he did not defend or explain the plan. In particular, and perhaps for understandable reasons, he did not explain that some of the proposals in the eight- point plan would benefit the most well-off in our society the most. That is not a suitable way forward for pensions or for pensioners.

The hon. Gentleman said nothing about women pensioners. That is a huge problem, and it is very belatedly being recognised, partly through sterling work from my hon. and learned Friend the Member for Redcar (Vera Baird).
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The hon. Gentleman also gave figures on economic inactivity that struck me as extraordinary. I question them, to put it mildly. The labour force participation rate in the United Kingdom has gone up markedly in recent years, but the motion refers to "economic inactivity" and he spoke about growing or static economic inactivity. That is comparing an absolute figure—I think that he gave a figure of 7.39 million—with the relative figure that one should use because the work force have grown markedly, partly because we are an ageing population, as has been repeatedly said in the debate.

The Conservative party's proposals for restoring the link between pensions and earnings, attractive as the concept may be to many of us, do not add up. As I understood it, the hon. Member for Havant more or less admitted in response to questions from the hon. Member for Northavon that there is a £500 million hole, but suggested that we should worry about that in the second term of a Conservative Government, if we ever got one. In a way, he is right: there is a big question mark as to when there might ever be a second term of a Conservative Government. The pendulum swings and, no doubt, it will happen, but the pension debate will have moved on by then.

On his eight-point plan, the hon. Gentleman spoke about scrapping the obligation to use savings to purchase an annuity at the age of 75. I realise that it is a contentious issue. It was raised forcefully by the right hon. and learned Member for Rushcliffe (Mr. Clarke) in his excellent and interesting speech. Although I did not agree with all of it, he referred to the private Member's Bill introduced by the hon. Member for Bournemouth, West (Sir John Butterfill). People who have funds in retirement plans and hold the funds without an annuity after the age of 65 have had tax relief on the funds while they were accruing and on the contributions that they put into them. There is a risk that unless society says to them, as a quid pro quo, that they should buy an annuity, they could blow the money and be dependent on—hey, we are back to it—means-tested state benefits. That is the concern. It might or might not happen, but it is reasonable for society to say, as a quid pro quo, that at 75 they must get an annuity.

Andrew Selous (South-West Bedfordshire) (Con): It is a pleasure to serve on the Work and Pensions Committee with the hon. Gentleman. Perhaps I can help him with the figures cited by my hon. Friend the Member for Havant (Mr. Willetts) that he was questioning. The figures came from the Government's labour market statistics for September 2004, which were produced by the Office for National Statistics. They show that in the three months up to July 2004, the total number of 16 to 24-year-olds who were not in work or full-time education was 1.069 million. My hon. Friend was referring to the Government's figures.

Rob Marris: The hon. Member for Havant certainly did refer to that figure, but I was talking about the figure of something like 7.93 million—I recall that from memory, so it might be wrong—that he cited regarding overall economic inactivity. I was not talking about the figure to which the hon. Member for South-West Bedfordshire (Andrew Selous) referred. The fact that the hon. Gentlemen have been talking about figures
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from that three-month period shows a classic difficulty with the pension debate, given that we are talking about a possible pensions settlement and consensus for the next 30 or 40 years.

Andrew Selous: I shall be more specific and go back to the figure of some 7 million. The same September 2004 labour market statistics from the ONS showed that there were 7.6 million economically inactive people in 1997, but that that figure has now increased to 7.85 million.

Rob Marris: I know from serving with the hon. Gentleman on the Select Committee that he is at least as adept at maths as me—he might have a calculator in his pocket, but I cannot do the calculations on my feet. He is talking about a situation in which the figure of 7.6 million people increased by 250,000 to 7.85 million over an eight-year period, although I hazard a guess—it is an informed guess, but it might be wrong—that the overall labour force has increased by a greater proportion over that time. Economic inactivity has thus fallen proportionately overall, although it might well be true that the absolute figure has increased from 7.6 million to 7.85 million. However, if we consider the whole work force and prospective work force in our society, which includes the economically inactive, economic inactivity has proportionately fallen in the United Kingdom over the past seven years.

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