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12 Jul 2005 : Column 209WH—continued
Women and Pensions
11 am
Vera Baird (Redcar) (Lab): Since 1997 women's equality with men has improved by leaps and bounds. We have seen the introduction of the minimum wage, much improved maternity pay and longer leave, and flexible working and child care, and soon there will be a duty on public authorities to promote gender equality. That has been done in pursuit of a genuine commitment to fairness and gender equality, which is part of our Government's commitment to equalities as a whole. Those ideologically driven developments have established an economic and social matrix that is fairer and more equitable than it was. Pensions are now the last untackled gender inequality issue.
The state pension scheme is unfair to women. It treats women differently from and worse than men specifically because they are women. It is unbelievable that in the 21st century in the UK, after eight years of our own Labour Government, that highly discriminatory pension system left over from an earlier era still exists. It forces the majority of women, who constitute, of course, the majority of pensioners, to survive either on a dependency income of 60 per cent. of their husband's income, or on what they can get back if, despite the discrimination inherent in the system, they have managed to pay national insurance at some time during their lives, which are characteristically split between working and caring. The net consequence is that many women are in poverty.
It is excellent that pension credit has brought 1.3 million women pensioners out of poverty, but they were able to be brought out of poverty only because they were in it in the first place. Two thirds of pensioners are women, so we are discriminating against the majority of pensioners, because women's income in their pensionable years is two thirds that of men. One huge reason why that is so, and what I want to speak about today, is that whereas 92 per cent. of men retire with a full basic state pension, only 16 per cent. of women have a basic state pension in their own right.
That figure swells somewhat if we consider the dependency element. If a woman is widowed, she can replace her national insurance record with that of her husband. However, a woman who is divorced at the time she retires can replace her paltry NI record with her former husband's only for the years that she was married to him. A woman who is widowed and remarries loses the dependency benefit from her first husband and takes on only the NI credits of the second husband for as long as they are together. If a woman is never married, she gets nothing at all unless she managed to build up some sort of record of her own, but only 16 per cent. of women are able to do that.
That is one example of how the Beveridge system—the discriminatory system that I am talking about—has always been inequitable to women, assuming as it does a male breadwinner and female dependent carer. Entitlement is haphazardly linked to life events that are out of one's control. In today's modern society, that dependency model does not work, as the figures show. Many women are in poverty in retirement.
More women work now, but their working lives are far more complicated than those of men and the Beveridge model of a working person, which requires 44
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years of unbroken full-time service—or very near to that—for a man and 39 for a woman does not fit women any better than the dependency model does. In fact, there is no model of modern pension provision in UK society that fits the patterns of women's lives. That is precisely why the current system is discriminatory.
In a recent article in The Guardian, Jackie Ashley stated the problem this way:
"Women have . . . entered the labour market and are vigorously encouraged by politicians to do so. Yet they have rarely been callous enough to shrug off all their traditional caring roles, for children and elderly relatives, and so they tend to work shorter hours than men, and . . . for a mix of different employers, with catastrophic effects on their . . . pension entitlement."
These days women are carers and workers at the same time. An Equal Opportunities Commission poll earlier this year showed that four out of five people asked felt that carers should have the same state pension rights as if they had been in paid work throughout that period.
There has, of course, been an attempt to give credit to people—overwhelmingly women—who care for children. Home responsibilities protection was brought in by the late, great Barbara Castle in 1978. However, it is not a weekly credit that gives the equivalent of a stamp for every week that someone looks after a child. What it does is reduce by a year the number of years for which a person must work to qualify for a basic state pension. It works only for full years, so if someone with a child at home thinks that it is time that she tried out a job and works for a couple of weeks but does not like it, she might make NICs for those weeks, but the price is that she loses her HRP, because that works only in terms of a whole year. Similarly, if a woman goes back to work 10 months after having a baby, as people are urged to do, she might get some stamps for the couple of months left in the year for which she worked, but she does not get home responsibilities protection because she has not been not working for a whole year. The problem arises in all kinds of situations. Children often need transitional support, as when they are changing schools and so on, and women are frequently in and out of work. Often the net effect is that for many years they are theoretically covered by the credit, but in fact they are receiving little credit and paying some NICs but not enough.
If the child is ill or disabled, they need even more support and the woman's work pattern is likely to be even more fragmented. That brings me on to carers, not just of children but of older people. A quarter of women between the ages of 45 and 64 are carers and 90 per cent. of carers are women. There is something called carer's credit, but that, too, is imperfect. It works by being passported to the carer through disability living allowance, which is available only to a person who needs 35 hours of care a week. So the person being cared for gets the DLA if they need 35 hours care a week and then passports the carer through to get their carer's credit. But what if the disabled person needs 30 hours care a week, or 20 hours, or if, as is often the case, two sisters share the care of a disabled parent? What if there are two parents to care for and one woman moves between the two? What happens then is that she gets no carer's credit. If a woman does part-time caring and has a part-time job because—no matter how skilled she is—she is unable to do a full-time job because of her caring, or if she earns below the lower earnings limit, to which I will
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refer in a minute, she will not make a contribution to her pension through national insurance, she will not get a credit from the state because she is below the lower earnings limit, and she will not get carer's credit, despite the fact that it is the caring that prevents her from working full-time. Indeed, it does not matter if the woman is caring part-time and doing two part-time jobs because earnings cannot be aggregated to bring earnings above the lower earnings limit. So, even though she may be working far more than 35 hours a week, she will not be able to get a contribution to her pension.
Let me explain what I have just implied about the lower earnings limit. If a person works in a job that pays below the lower earnings limit, that person is not credited with a contribution and does not pay a contribution. The real hardship arises because, first, the limit is probably set too high and, secondly, if a person is working in two jobs, the earnings from both jobs cannot be aggregated to bring their earnings over the LEL. That is a common pattern, at least in Redcar: large numbers of women work on things such as school dinners while the kids are at school and then, when their partner comes home in the evening, they go out to work in a convenience store or a pub. Those women have two jobs and also care for the children. They are very much employed full-time but it is to the peril of the accrual of their pension contributions.
Jo Swinson (East Dunbartonshire) (LD): Given that the majority of carers in Britain are women and that carers save the UK economy £57 billion a year, does the hon. and learned Lady agree that it is a grave injustice that the contribution of carers, which is as valuable as paid employment, is not adequately recognised? That lack of recognition leaves many women pensioners in poverty because they have not had the opportunity to build up their pension contributions.
Vera Baird : I am grateful for that intervention, and I wholly agree with the hon. Lady.
Getting women full basic state pensions under the current system is extremely difficult. How can it be changed so that the full pension is obtained more frequently? There is a provision that states that contributions by an individual adding up to anything less than to 10 years' worth are simply not counted. A person can contribute for nine and a half years and get no pension whatever. How can that be made better?
I suppose that home responsibilities protection could be changed to a weekly credit, so that while a woman was caring for a child aged under 16 the credit would genuinely replace the contribution through national insurance that she would be paying if she worked. I suppose that the quarter or the 10 years could be counted, given that there is no reason to leave it out—it used to be said that it was difficult to add up such small amounts and that the effort was not merited. I suppose that the LEL could be lowered. What I say to the government is: will they do all three, please? And will they do so now, without prejudicing any future plans?
Solving the carers problem is much more difficult, as the examples I have given show. What is a carer? If I give my elderly mother a Sunday lunch and a couple of suppers a week to help her out, does that make me a carer? Probably not. On the other hand, if I give her a
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meal every night and I take her to the hospital a couple of times a week, does that make me a carer? It is difficult to find a way of getting better credits for carers, because of the difficulty of defining a carer.
The other problem with trying to improve credits so that more women can obtain a full basic state pension is that such a change would take effect from only now on. If we changed the credits today, it would be 39 years before a woman could accrue a full basic state pension on the same basis as a man, because she would be receiving credit weekly while she was working or caring. That is a long time—a couple of generations—to wait. Between 2010 and 2020, the pension age will be increased by a further five years, so women will have to wait 44 years before those changes come into effect and give them a fair crack of the whip.
The other side of that coin is that unless we change the system, when the change to the pension age is introduced between 2010 and 2020, women will have to go on for five more years before they can draw their measly pension, and they will have the same inadequate opportunities as they have now to put one together. At the latest, we must improve women's pension rights by the time that change occurs.
If it is difficult to see how to put the credits right, if it is necessary to do so retrospectively in order to be fair so that I and the other women present can benefit, and if it is difficult to see how we can possibly do that for carers, what do we do? If we decide to credit in the men and women who are carers and the people—overwhelmingly women—who care for children, as the public think we should, who do we decide to leave out of the group who receive a basic state pension? Although I appreciate that the contributory system is well respected and highly thought of, should we get away from the contribution system as the basis of pension eligibility and instead consider some sort of universality?
I pay tribute to the pension credit for having helped 1.3 million women, but it helped them because they were poor. There are even problems with that system for women, however. First, it is means-tested, and women who have worked their whole lives, or who have been in and out of working and caring, should not need to be means-tested. Secondly, the pension credit is unfair to savers. As people know, if somebody receives a full basic state pension and has £20 a week income from other savings, they are allowed the pension credit up to £109 a week; however, they receive the pension credit from £79 of the basic state pension right up to £109, and therefore lose the benefit of their savings, because that amount is paid to them through the pension credit and they would receive the same amount even if they did not have their savings capital. In addition, there is a taper, so that all savings above the basic state pension level are kept in some proportion that tapers away but that does not happen to savings below that level. If I, a typical woman, have 70 per cent. of the basic state pension—about £50—and have the same £20 a week from some other income that I manage to scrape together despite my hardship, I will rightly and properly be paid from my £50 right up to the pension credit level, which will be welcome, but I will lose the entire benefit of my £20 savings income because the taper does not work until savings are above basic state pension level, so they just disappear. That is a final injustice.
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A further point is that people are starting to appreciate more widely that pension credit cannot go on for ever. More and more people will get it because it is, commendably, earnings linked, whereas the basic state pension and many private pension pots are not. Therefore, more people will be drawn into means-tested benefits—probably a distortion—and the way forward is likely to be seen to be some sort of shift to improve the basic state pension. However, unless the availability of the basic state pension is broadened to include the women of whom I speak, that will be of no use to them.
If the Tories had won the last election, they would have index-linked the basic state pension to get people out of pension credit, but they would not have index-linked the pension credit; they would have linked that only to the cost of living, which would have meant that women, who are far and away the major recipients of pension credit, would become poorer and poorer for want of that basic state pension. The BSP is the foundation on which to build whole retirement provision. It is the only way in which realistically to redistribute income to pensioners and is the only clear route to obtaining pension coverage for time spent out of paid employment to raise children and care for others.
The situation that I have outlined in a most skeletal, but accurate, way is what drove the last Secretary of State for Work and Pensions, my right hon. Friend the Member for Kingston upon Hull, West and Hessle (Alan Johnson), to accept that a report on women and pensions should be produced this year. He accepted that the present system is utterly incompatible with the new duty on public authorities to promote gender equality. How can these discriminatory pension structures possibly survive that? My right hon. Friend described the situation in respect of women and pensions a national disgrace. When and how will the Government rectify that national disgrace?
11.18 am
Tony Lloyd (Manchester, Central) (Lab): It is customary to congratulate the hon. Member who secures a debate on their sterling work in doing so, which I find a little absurd, but I have something more important to say, which is that my hon. and learned Friend the Member for Redcar (Vera Baird) has done us a great service by raising this important issue, because now is the right time to debate women's pensions.
My hon. and learned Friend gave a comprehensive account of an extremely technical issue. Sometimes when discussing pensions we become so frustrated by the necessary use of statistics and technical jargon that we lose sight of the real importance of the debate. The reality is simple: we are talking about poverty among older people in our society—people who by definition are not in a position to change their income structures or to establish new pension rights, and who are often unable to continue to support themselves through the normal means of work because such opportunities have disappeared as age, and sometimes health, dictate that the world of work is no longer accessible to them.
Some of the figures are frightening, such as that one in four single women pensioners now live in poverty. That is a disgrace to modern Britain and a national
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scandal. Women's retirement income is, in round terms, only half that of men. That is such an enormous disparity in our society that it makes even figures about the pay differential seem almost trivial—although I do not want to trivialise the gap between men and women's pay. Pensions show an enormous gap, which we need to begin to do something serious about.
David Taylor (North-West Leicestershire) (Lab/Co-op): Does my hon. Friend agree that poverty among women pensioners is strongly linked to the inequitable treatment of women in the workplace? In full-time work women earn 82 per cent. of what men earn, and in part-time work that figure is 60 per cent. In her working life, a woman of average skills will earn £240,000 less than a typical man. That figure rises to £380,000 if she has two children during that period. Pensioner poverty starts in the workplace.
Tony Lloyd : My hon. Friend is right. In fact, he invites me to move immediately on to a subject about which I would have said a little later. In the end, one of the fundamentals of eroding the pensions differential is eroding the pay differential and making sure that future generations benefit from equal pay and proper equalisation of the opportunity to provide for pensions. As my hon. and learned Friend the Member for Redcar has already clearly pointed out, even if we do something now, it will take 40 years for the effect to be seen. We have to do something not only about the pay differential, but about existing pensions and the people who have been in the pension system throughout their working or caring lives.
My hon. and learned Friend made an interesting point about the role of women throughout their adult years. The traditional view of the role of women has changed enormously in modern society. I say with all charity to my hon. Friend the Minister for Pensions Reform that one of the difficulties of plotting out how to resolve the problem is that we are dealing with people whose lifestyles over a period of 40 years have become increasingly complicated. No longer do we have the stereotypical housewife who stays at home looking after the kids, or perhaps looking after elderly relatives, but neither do we have the brave new world of the total career woman. Neither exist. The reality in Manchester, Central, as in Redcar, is that many of my constituents have lifestyles that are much more complicated. At least one friend of mine is a double carer, who cares for two different relatives and tries to do some part-time work. She falls foul of all the rules—the lower earnings limit and the 35 hours caring threshold—because such things are not cumulative. A serious attempt to join up people's contributions in life would consider people who care but do not hit the requisite number of hours. It would acknowledge that people who work in more than one job are not untypical, particularly in the more socially deprived parts of modern Britain. If we could make some efforts in that respect, we could make a significant and material difference to the incomes, and therefore the lifestyles, of many of our fellow citizens.
My hon. and learned Friend has set out the subject well. We know the historical causes of women's pensions being significantly lower than men's—they are fairly well documented and include low pay, worse access to the labour market and occupational pension
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schemes, and less time in the sort of work that earns pension entitlement. Those things will not go away. Women will not stop being carers, and although we should be trying to make real progress, we are not going to solve the pay differential or give equal access to the labour market overnight. However, it would be dishonest to say that we have to wait for those problems to resolve themselves before we deal properly with pensions. We need pragmatism and early hits in pension entitlement.
I notice that the Secretary of State for Work and Pensions has begun to discuss the matter in a speech that he is making elsewhere today. I do not want to pre-empt the Minister's speech, so I will allow him to say what the Secretary of State has said, but I applaud the fact that the Secretary of State is now taking a real interest in the matter. It is important that the subject be considered at the very top of the political system, but I urge the Government to deal with it now.
Pension equalisation is long overdue. It will take a long time to achieve it, but we must regard it as a national priority. It is a scandal that so many people who have contributed to our society for many years and who are emotionally and rationally valuable to our political systems live in poverty. We have practically abandoned them because of the incompetence of our pension regimes in the past. We must deal with the situation now. We have the opportunity to do so. The political space exists, as does the Government's interest. If we do not ensure that women and pensions are an integral part of the pension changes on which the Government are consulting, we will miss an opportunity to resolve the issue in this era and for a long time to come.
This debate is very welcome, because it shines a bright light on an area that we must bring into sharp focus in political debate. If we do not do that, we are abandoning the people in constituencies such as mine and that of my hon. and learned Friend who have never had access to the labour market and who have therefore not had access to the proper pensions that they should have.
11.27 am
Dr. Phyllis Starkey (Milton Keynes, South-West) (Lab): I wholeheartedly associate myself with the remarks made by my hon. and learned Friend the Member for Redcar (Vera Baird) when she introduced the debate. She set out very clearly the scale of the problem and the huge inequality in pension provision for current women pensioners, which is likely to be pretty similar for women who are now over 50 and are therefore likely to be pensioners within the next 15 years.
I shall not repeat the points made by my hon. and learned Friend, but shall instead highlight the fact that the problem will continue for women who are currently aged under 50. The Government seem to believe that, although there is a problem for current women pensioners and for women over 50, the changes occurring in the labour market will mean that the problem will gradually diminish as women gain better access to the labour market. The Department for Work and Pensions working party report of December 2002 said:
"Much of the improvement in the pension position of future female pensions will come from labour market improvements".
I do not want to downplay the effect of the changes introduced by the Government to improve equality for women. The equal pay legislation, the outlawing of discrimination against women, the increased provision for maternity leave and maternity allowance, and the whole emphasis on improving child care provision, which helps parents—notably women, but not exclusively so—have all helped women to balance their working and domestic commitments better.
All those things are incredibly important, and they are likely to mean that the gap in male and female earnings, which is still large, should improve in time. Even with all those changes, however, I do not believe that the gap between male and female earnings will be closed in the foreseeable future. That is because caring responsibilities, although they are now shared between men and women more than they were in the past, are not shared equally; nor are they ever likely to be. Caring responsibilities are the major contributor to the fact that women's earnings are less than those of men.
Women in full-time work also earn less than men. The figure that I have is 75 per cent., although my hon. and learned Friend had a higher figure. We will not argue about the precise numbers, however, because we both agree that women in full-time work earn less than men in full-time work. One contributory factor is that women who take time out to have children are disadvantaged when they return to work. They tend to have poorer promotion prospects than men because their working career is shorter and they often take time out at crucial points in their career, when their male counterparts are just beginning to mount the promotion ladder. Women who take time out therefore find it difficult to get back in again.
Another major factor in reducing women's earnings is that 45 per cent. of women in work are part-time. Notwithstanding the greater protection that part-time workers have been given, part-time working tends to reduce promotion prospects. Obviously, those who work part-time also earn less than somebody who works full-time, even if they are paid the same hourly rate.
Women are concentrated in part-time employment partly because girls are still not attaining the same level of achievement as boys and are therefore unable to access work for those who are well qualified. I hope that we shall be able to alter that over time.
Sandra Gidley (Romsey) (LD): I agree with everything that the hon. Lady says about the pay gap, but does she accept that part of the problem is that women's job pathways are different? Women tend to go into the caring professions, shop work and jobs that are less well paid, whereas men may go into manufacturing and engineering. Something needs to be done to encourage young women to enter sectors of the workplace that are not traditionally regarded as female.
Dr. Starkey : I agree. The jobs in which women are over-represented do indeed tend to be less valued and lower paid. There is a whole agenda about encouraging girls to think ahead and to take the right choices at school and post-school to enable themselves to gain well paid employment.
That is one aspect of part-time work, but there is another. It is a tremendous strain to balance caring responsibilities with a full-time job, so many women—it
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is largely women who do this—choose to accommodate their carer's role by taking part-time work that fits around it, thereby trapping themselves in a situation in which they earn less money.
Let me quote again from a DWP document. The Department recently conducted an analysis of women's attitudes to pensions, which shows:
"There is some evidence of a cultural shift over time. Younger . . . women . . . seemed more likely to value a degree of financial independence. They recognised that many partnerships do not endure."
Marriage breakdown is important in explaining why women often finish up with lower pensions. They rely on their male partner to provide the pension for both of them, but the relationship then breaks down, and they are left with no pension or with a very diminished one.
The document goes on to say that women feel that it is important for them to make pension provision in their own right. However, elements of traditional gender roles and financial dependency persist in the lives of many young women, particularly those who are married or who have children. It notes that
"the effects of changing values and expectations are often diluted by other factors. This tends to perpetuate the pension gap."
The DWP is therefore well aware of the fact that younger women still tend to put their caring responsibilities, or their potential caring responsibilities, ahead of making proper provision for a pension for themselves in their own right.
Tony Lloyd : Does my hon. Friend agree that our society benefits enormously when people make those choices, so that we must not create an incentive not to be carers? We need to ensure that carers are offered proper protection by the rest of society.
Dr. Starkey : I agree absolutely, and that takes me to my next point. I agree with all the suggestions that have been made about ways in which pension provision can properly recognise and compensate for the caring contribution. I want the Government to do all that has been suggested and to ensure that the system is as effective and comprehensive as possible.
Without a future Government becoming incredibly intrusive into the detail of people's lives, and women's lives in particular, it will never be possible to devise a credit system that will fully compensate for women's caring responsibilities. To take an example like the ones cited by my hon. and learned Friend the Member for Redcar, what of a woman who, for example, picks up her grandchildren from school at the end of the school day, looks after them for an hour or so and gives them their supper before their parents pick them up for the evening, and looks after parents and parents-in-law, making sure that they are safe, visiting them several times a week, and taking them to hospital or on other journeys?
That sort of caring responsibility is a mix of relatively small individual caring responsibilities, but they add up to a quite big caring responsibility. I do not see how any credit system could adequately match the flexible and changing responsibilities that that woman might have, which would have influenced her in her decision to work
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not full-time but part-time. That is why we should support the model for future pension provision that has been put forward by a group of organisations fronted by the Equal Opportunities Commission and including Age Concern and the TUC.
The suggestion is that there must be a common entitlement to a basic pension for every individual, regardless of household circumstances, which is not based on a contribution record through the national insurance system. Some residence qualification is obviously necessary, but over and above that the entitlement should be available to everyone regardless of circumstances. That should be backed up by a flexible state second pension that would encourage everyone to accumulate additional entitlement, with a private or occupational pension or savings. That is the model that seems to me best to match the extreme complexity and flexibility of a woman's working life.
I shall say something briefly about occupational pensions. Because women in work tend to earn less and because they have an interrupted work record, they also tend to have a much poorer occupational pension in their own right than a man does. In particular, there is a tendency for their earnings to drop more than a man's earnings as they approach retirement age; a woman's responsibility for her children tends to lessen at that time—although as a parent of adult children I note that they seem to call on one's time, and indeed finances, considerably—but other caring responsibilities, for elderly relatives, increase as a woman reaches retirement age. As a result, the proportion of women over 50 in full-time employment is smaller than the proportion of young women in that category.
Those circumstances affect contributions to women's occupational pension schemes. That is why—although I know that the suggestion is divisive and many people find it threatening—we need to move away from final salary pension schemes. Such schemes favour men, who are more likely than women to have continuous employment records and to have been promoted to higher levels by the time they near retirement. Occupational pension schemes that take into account lifetime earnings rather than just earnings as a person nears retirement are likely to be more favourable to women and need to be considered.
I, too, welcome the debate. The Government seem to be getting the message, and I look forward to receiving further good news from the Minister, and to hearing that the needs of female pensioners will be fully considered when pensions are reviewed.
11.40 am
Miss Anne Begg (Aberdeen, South) (Lab): I, too, pay tribute to my hon. and learned Friend the Member for Redcar (Vera Baird), whose wealth of knowledge on pensions is far beyond anything that I might purport to have. She has revealed the inequalities in the present pension system and shown how difficult it is for women to qualify for a full state pension. She has detailed knowledge of how unfair the credits system can be and of the difficulties faced by women with a variety of working patterns. She set out clearly, for us and for the Government, what needs to be done.
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I do not think that any Labour Member is critical of the pension credit. It is an important measure that has lifted 1.3 million women out of poverty and has made a huge difference to people's lives. I am sure that, like me, hon. Members found during the general election campaign that women pensioners were delighted with what the Government had done for them. On more than one occasion, women said to me that they had never been so well off in their lives. The fact that they are feeling well off on £109 per week plus housing benefit and council tax benefit reflects how badly off they were during their working lives. None the less, the pension credit has done the business for women who had been almost completely left out of the pension system.
David Taylor : I too encountered good numbers of women during the general election campaign who said just that. However, that could be merely anecdotal evidence. Exit polls showed that, sadly, the greatest loss in our party's support was among women aged over 55. There is a discrepancy, is there not?
Miss Begg : I have not looked at the figures for my constituency, where there are many middle-class women who did not benefit from the pension credit because of the dependency model of the basic state pension—many of them were doing all right because they had inherited their husbands' contributions and were therefore better-off widows. However, in working-class areas, particularly among those living in sheltered housing complexes, most of the women felt that the Government had done a great deal for them and they came out to vote Labour with great enthusiasm. The fact that I am here is a tribute to that. I have a marginal seat and had they not done so, I would not have won it.
The debate is not about criticising what the Government have done: they had to take action in the short term if they were to fulfil their promise to end pensioner poverty, and the savings element of the pension credit has had a huge impact. The debate is about looking forward. How do we ensure, as we move through the 21st century, that the state pension system and the occupational and private pension systems are fit for their purpose? How do we begin to tackle the inequalities of the last century that my hon. and learned Friend the Member for Redcar so ably laid out?
I accept the point made by my hon. Friends the Members for Manchester, Central (Tony Lloyd) and for Milton Keynes, South-West (Dr. Starkey). The Government say that things will get better as more women work, and work longer hours—that that will somehow fill the gap and solve the problem—but it will not. Women who work do so for less pay than men and they generally work fewer hours and in lower-skilled jobs than men.
Aberdeen happens to have the largest gender pay gap in Scotland and one of the largest in the United Kingdom. In Aberdeen, women's earnings are 60 per cent. of those of their male counterparts. There are two reasons for that. First, our work is dominated by the oil industry, a high-paying industry with jobs in the offshore sector filled predominantly by men. Secondly, we have a large number of people in work—a large gender pay gap tends to coincide with high employment rates. We have high employment in Aberdeen, but women generally work in the service industries—in the
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caring sector and in companies that service the oil industry, often cleaning or similar work. A large gender pay gap is therefore inevitable, and when the women retire it will inevitably translate into a pensions gap.
My hon. Friend the Member for Milton Keynes, South-West said that many women have different work patterns from their male counterparts simply because that is how they choose to live their lives. We have made huge strides forward in equality and women have the chance to compete equally in the jobs market, but despite 30 or 40 years of feminism women are still under pressure. Women cannot always choose how to live their lives. They still bear the burden of the caring responsibilities, both within and outwith the home, and I doubt that that will change. If it was going to change dramatically, it would already have done so.
Jackie Ashley, whom my hon. and learned Friend the Member for Redcar quoted, pointed out the fact that although women now expect to have full-time jobs, they still have caring responsibilities. Unfortunately their male partners do not always take the equality agenda as seriously and shoulder the full burden of care and responsibility. They might pick the kids up from school from time to time or do the washing occasionally, but in most partnerships it is predominantly the woman who does those jobs. Women are trying to juggle lots of different balls to ensure that they are both earning and fulfilling those responsibilities.
We face a demographic time bomb not only in this country but across the whole western world, because people are living longer. As a result, the caring responsibilities of women are changing. Once, a woman might have cared for the children, then gone to work, and then cared for an elderly relative for a few years, but elderly relatives now live 20 years or more longer. It is interesting to note that the women who turn 60 this year are the first of the baby-boomer generation to reach retirement age. Looking forward, they can see their elderly relatives, who are now in their 80s, having difficulty accessing care from outwith the family structure. They are especially concerned about the quality of the care homes that their elderly relatives are in and they are determined that that will not happen to them, but at the same time they are looking back to their daughters, who, like them, have been caught in the trap of not being able to build up enough credits and who will be unable to build up a full entitlement to the basic state pension. Beyond that, those baby-boomer women might also be considering their grandchildren—perhaps picking them up from school and undertaking other caring responsibilities. In that way, three generations of caring fall on to one generation of women, who are reaching their 60s. That burden will not ease as more women go into work and as people, particularly women, live longer.
We have a chance to change things. The debate is timely—the Turner commission will report later this year. The Government should now consider the shape of the pensions industry, both state and private, to find the best model to take us through the next 50 years. The Beveridge model has done us well, but it was a model of its time. It was right in 1950, but is not right for 2005 and it will not be right for 2050. Society has changed, as has
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the way in which people live, particularly women, who no longer expect to be dependent on a husband, partner or other person for the whole of their lives, as may have been the case when Beveridge set up the original state pension system. We are looking for a new Beveridge model: something as imaginative and forward-reaching as that model was, which will take into account how our lives have changed.
It is important that we get away from the dependency model. My hon. and learned Friend the Member for Redcar was absolutely right about pension credits and how they could be made more flexible. With such a complex system, the question at the end of it is: who do we leave out? Today, we think that no one should be left out, which means that the only answer is that the basic state pension should be universal, but not in the way in which the citizen's pension proposed by a number of people is universal, because that proposal does not get away from the dependency model.
The Government have the chance to be much more radical and forward looking. Rather than tinker with the pension system to solve inequalities, as we have done up till now, we need to create something fundamentally different. They should certainly consider the comments of my hon. Friend the Member for Milton Keynes, South-West about building up a second pension and the universal nature of the basic state pension. It is only by being that radical and visionary that we can end once and for all the inequalities that my hon. and learned Friend the Member for Redcar so amply illustrated.
11.53 am
Sandra Gidley (Romsey) (LD): As is customary, I congratulate the hon. and learned Member for Redcar (Vera Baird) on securing the debate and on her recent promotion. I had feared that her wings would be clipped and that it was a ploy of the Government Whips, but I am delighted to see that she is in as fine form as ever. I am also delighted that the subject of women and pensions is up for discussion.
The hon. and learned Lady mentioned Jackie Ashley's excellent article, in which she writes:
a couple of whom are present here today—
"cite a couple, Jim and Kathy, both aged 50; he is a gas fitter and she works part-time at Debenhams and part-time in a newsagent's, as well as caring for relatives, though they have no children. As things stand: 'Jim works 40 hours a week and will be comfortable; Kathy works 60 hours a week and will be penniless. What did she do wrong?'"
That is an unanswerable question.
People are beginning to acknowledge that there are inequalities in the pension system in relation to women. The previous Secretary of State for Work and Pensions, the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson), seemed to be aware of the problem and committed to tackling it. In some ways, I am disappointed that he has moved on. He said to the Work and Pensions Committee:
"My enthusiasm has not waned for tackling a real and substantial problem which is that women's pensions are . . . a national scandal".
I hope that now that he has moved to the Department of Trade and Industry he will be able to address some of the problems mentioned today—the pay gap and the nature of women's work—which feed into the pensions problem.
Adair Turner produced a welcome chapter on women's pensions in his recent report. Although it was a sound analysis of the problem, there were disappointingly few realistic or positive suggestions on how the problems could be addressed. Perhaps we will see more in future.
The reality of the present position has been outlined by hon. Members and the facts are stark. One in five single women face poverty in retirement; many women have no occupational pension; half receive less than the full basic state pension; and, on average, for every pound received by a man in a pensioner couple, the woman receives just 34p. The Government have made welcome efforts to address the problem, but the take-up of the minimum income guarantee and pension credit is not good. Government figures show that in 2002–03 as many as 550,000 single female pensioners were below the poverty line because they did not claim the minimum income guarantee. I will return to that point later.
The reasons that women lose out have been highlighted. It is worth remembering that the pension system was designed in the 1940s, when women's lives were very different: by and large, they did not work, they did not divorce and there was an assumption that they would be looked after by a man. Life is different today, and it seems obvious that we need a different pension system to reflect that. Another problem is that child care and other caring responsibilities are not recognised by the current system. The pay gap has also been mentioned: the average woman earns £241,000 less over her lifetime than a man in an equivalent job—provided that she does not have children. If she has two children, her earnings decrease by a further £140,000. If women work, they often work in low-paid sectors, where it is not common to have access to occupational pensions. Finally, older pensioners are poorer and more likely to be female.
We have to approach the problem in two ways. First, what can be done in the short term to help women who have retired or are close to retirement to maximise their income? That is a sticking-plaster solution, however, and we need to think more about whether we have to change the system for the long term.
We have mentioned the low uptake of benefits. Quite simply, means-testing is incredibly unpopular. If we are stuck with that situation, more has to be done to encourage pensioners to take up the benefits to which they are entitled. The big problem is that they do not. I am aware that pensions advisers are spending a lot of time on the phone, ringing people up and trying to make sure that they are claiming their benefits. However, not everybody is on the phone—it is an expense that some cannot afford. Recently, local pensions advisers have been prevented from going out into the community, from talking to groups in sheltered housing schemes or other pensioner groups, and reaching other people in that way. It seems to me that although hitting the phones may be effective to an extent, the women—and men—in the greatest poverty are probably not being reached.
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Miss Begg : Will the hon. Lady pay tribute to the Pension Service in Aberdeen, which has been doing as the hon. Lady suggests? Advisers have been going into communities to contact the hardest-to-reach pensioners, with some success.
Sandra Gidley : The hon. Lady has described what should be happening. I am surprised that it still happens in Aberdeen, given that the people who were doing it in Romsey have been stopped because of cuts in the DWP work force. I should be interested to know whether it is still being done, because the Romsey changes were made a few months ago and were quite unpopular with those who had to put them into practice. It might be a local decision, although I understood that it was national; perhaps the Minister can clarify that.
For the current generation of women the married woman's stamp is another problem, which has not been mentioned today. Many women say that they were unaware when they opted for it that it could significantly affect their personal pension entitlement. The Government must inform all women who pay the stamp of its implications and allow a longer period in which to pay fuller contributions so that women will have a pension in their own right.
Carers' credits have been mentioned. We can talk at length about systems of carers' credits, reducing the number of years' contributions that are required if someone is to benefit from a pension, or even reconsidering the lower earnings level. However, those are all sticking-plaster solutions that will help pensioners in the short term but will not tackle the fundamental problems. For the future we need a pension that takes account of caring responsibilities and values them. We need a pension that takes account of gaps in employment, helps to tackle the inequalities caused by women's lower pay and—keeping in mind the 1940s system—takes account of the reduced reliance on the man as provider.
During the general election the Liberal Democrats proposed a citizen's pension system. While I was listening to the hon. Member for Milton Keynes, South-West (Dr. Starkey) I realised that she was talking about something not too dissimilar to Liberal Democrat policy. A consensus seems to be growing that an entitlement to a pension in one's own right, based on residency rather than national insurance contributions, is the fairest way to go, and should be considered.
Miss Begg : I understood that the Liberal Democrats' proposal for a citizen's pension still contained a dependency element: it proposed one pension for a single person and one for a married couple. On our side of the argument we see that dependency model as the old model, which we should be getting away from.
Sandra Gidley : The hon. Lady is right about the difference between the single person's and married person's pensions, but our philosophy was to take one step at a time. Entitlement was the first step. Personally, although I cannot speak for the rest of the party, I would support something without the dependency element. If we bear in mind the fact that fewer women are now marrying and the divorce rate is higher, that may become less of a consideration over the years. Nevertheless, it is still a consideration now.
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The advantages of a universal entitlement or a citizen's pension include recognition that child care and other caring responsibilities are just as valuable to society as paid work. Many of the caring behaviours that people adopt save the state significant amounts of money and it seems perverse to penalise rather than recognise people who willingly and voluntarily look after their loved ones. If the system provided a universal entitlement, there would be no need for complicated carers' credits. That would also eliminate the need for means tests, which are unpopular and degrading. Even if the citizen's pension were introduced at the age of 75, as highlighted in the Liberal Democrat manifesto, 2.8 million women would benefit.
To sum up, the 1940s system is out of date and needs reviewing. Ministers have hinted that the problem should be examined and that some sort of citizen's pension or universal entitlement is the way to go. I hope that the Minister for Pensions Reform can reassure us on that point.
12.5 pm
Mr. Nigel Waterson (Eastbourne) (Con): It is a great pleasure to take part in the debate, which is the latest in a series called by the hon. and learned Member for Redcar (Vera Baird). I congratulate her on securing this debate and the several previous ones. She has been a doughty and persuasive campaigner on women's issues, particularly women's pensions, so it must be all the more disappointing to her that the Government have made so little progress on the subject. Indeed, the Minister had better be careful, because I am not sure that I did not detect in her final comments a veiled threat to sue the Government over the apparent problems of gender discrimination inherent in the present system.
We all accept that the system was designed for a very different era. It was not some Tory plot prior to 1997 to do down women pensioners; it was, as the hon. Member for Romsey (Sandra Gidley) said, a system that was designed in and for the 1940s to accommodate the social systems that were in place at that time.
In her excellent opening speech, the hon. and learned Member for Redcar spoke to some extent about pension credit. As the hon. Member for Romsey said, there must be a high proportion of women among the 1.5 million or so people who are eligible for pension credit but who do not yet claim it. That, of course, is the great problem with a means-tested system. I think that we can all agree with the previous Secretary of State for Work and Pensions—now the Secretary of State for Trade and Industry—and many others who have said that this is one of the great untackled inequities in the pensions system. As I said, its causes are historical, but that does not make it defensible.
Like the hon. and learned Member for Redcar, I was present at the launch some time ago of a report called "One in Four", which was produced jointly by Age Concern and the Fawcett Society. The report makes clear the problems of the many women who are forced by their lack of pension provision to live in poverty. I shall not rehearse the statistics and the facts, because that has been done very ably and comprehensively already, but the report does cover several cases, including that of Christine Dunn, who is one of my constituents. She tells of how she worked for the NHS
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for many years, before taking a break to bring up her children. She then had all sorts of problems with her pension provision, but she is one of the many women who have worked their way out of the problem to a large extent. Aged 40, she went on to retrain as a teacher at her own expense and she has now built up an adequate second pension. She says:
It is fair to say that significant numbers of women in that situation have been able to requalify and develop their own occupational pension in later life, but far from all women—indeed, far from most women—have been able to do so.
It is interesting, if not slightly amazing, that we debated an enormous piece of pensions legislation at great length last year, but that nothing in the Pensions Act 2004 really began to tackle the issues that we are debating. That gives us an interesting take on the Government's priorities. The hon. and learned Member for Redcar referred, rightly as always, to the concession that was wrung out of Ministers in Committee for the Department to produce an annual report on women and pensions. I hope that the Minister will be able to tell us when the first of those much-foreshadowed reports will hit the streets. It is also worth recalling that it was the hon. and learned Lady's amendment, supported by my hon. Friends and me, that forced the Government to make that concession: it had not been their intention to produce such a report.
I am proud and pleased that my party went into the general election with some thought through policies on how to better the lot of women pensioners. We do not need to jettison the contributory principle to deal with the patent inequity of women's pensions. We have heard a lot about the citizen's pension or the universal pension. One of the problems with that, apart from the difficulties of making it work, let alone paying for it, is that people often talk rather glibly about it, but each of them means something different by it. I do not know what happened in Romsey, but I am pleased to say that when I explained to my constituents in Eastbourne during the election campaign that the Liberal Democrats wanted to junk the contributory principle, I found that that was not a popular policy—albeit not quite as unpopular as local income tax. It was not popular because people have an affection for the contributory principle. How often have people come to our surgeries and said, "I have paid my stamp but I cannot get this or that"? We believe that there are more targeted ways of dealing with the issue.
Had we won the election, we would now be doing four things. First, we would abolish the 10-year rule on national insurance contributions. Secondly, we would offer better pensions to those who take time out of the labour market—predominantly women, as we have said—via a much more flexible weekly credit. The present system, as all speakers have said, is inflexible and unfair. Thirdly, we would make it easier for people to buy back the years when they failed to make national insurance contributions. It is interesting that the Government's new rules on private pension saving are much more flexible than those that apply to the state pension and its entitlement. Finally, we would lower the
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bar for state pension rights, currently £79 a week, to give access to a state pension to people on very low earnings, such as those on £60 to £79 a week.
All those are practical, common-sense and targeted ways of dealing with the problems that have been described in this debate. We do not need to throw out the entire contributory system to tackle the unfairness.
Dr. Starkey : I accept the advantage of a weekly credit rather than the yearly version of home responsibility protection, but does the hon. Gentleman not accept that it would be impossible to make even a weekly credit respond to mixed caring responsibilities such as those that I described for my hypothetical grandmother with elderly parents? That would involve the sort of intrusiveness that I suspect the Conservative party would oppose most strongly.
Mr. Waterson : The hon. Lady is absolutely right that we are opposed to the intrusiveness of, for example, means-testing—we would like that trend to be reversed. She makes a good practical point. Whoever is in power if and when the matter is addressed will also have to address the issue of cost. I have seen it estimated that people who voluntarily care for members of their families save the Treasury up to £60 billion a year. There would have to be a definition of what constitutes caring. At least the flexibility of a weekly credit would be a step forward.
In conclusion, I would urge all interested and committed right hon. and hon. Members to sign early-day motion 544, which my colleagues and I have tabled on the issue of women's and carers' pensions. It makes many of the points that I have made today, and expresses dismay at the lack of Government commitment to dealing with the issue in the Pensions Act 2004 or subsequently. It also recognises that we do not have to lose the contributory principle in order to deal with the issue, and calls on Ministers—particularly the Minister for Pensions Reform—to consider the plight of poorer female pensioners when considering further reforms to the state and private pensions systems.
12.15 pm
The Minister for Pensions Reform (Mr. Stephen Timms) : I too begin by congratulating my hon. and learned Friend the Member for Redcar (Vera Baird) on securing this debate and on the consistent way in which in recent months she has led a sustained campaign to improve pension provision for women. The campaign in Parliament has been important in building the wider concern that has been reflected in this debate, and it is playing a prominent part in the national debate to consider the kind of pensions that will be needed in future.
Women pensioners are significantly more likely than male pensioners to be living in poverty. A number of speakers have pointed out the reasons for that, which include time taken out of the labour market, conditions in the labour market, the greater incidence of part-time work among women, straightforward discrimination in conditions and more varied patterns of working. All of those provide challenges that we need to address.
This morning I met the chief executive of the Pensions Advisory Service. He told me about the women and pensions helpline set up in November and December
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last year. It received 8,000 calls, and seven out of 10 of those callers were not making any private pension savings. A lot of callers had queries about the reduced rate married woman's national insurance contribution, to which the hon. Member for Romsey (Sandra Gidley) referred, and many were confused and uncertain about the value of home responsibilities protection, which my hon. and learned Friend the Member for Redcar mentioned. It is important to address all of those issues in this debate.
I shall outline action that has been taken to address some of the problems. They have certainly not been ignored, as the hon. Member for Eastbourne (Mr. Waterson) suggests—as well as the action that we want to take to make further progress.
When we came to office, our priority was to tackle the bad legacy of inequality for today's female pensioners highlighted by my hon. Friend the Member for Manchester, Central (Tony Lloyd). The introduction of pension credit has particularly helped women. I had the same experience as my hon. Friend the Member for Aberdeen, South (Miss Begg) during the general election campaign when speaking to women who had been helped substantially by the introduction of that measure. Two thirds of the recipients of pension credit—2.18 million people in all—are women. There is more work to be done to increase take-up, although that has risen dramatically in the past year as a result of the kind of initiative that my hon. Friend described. The latest estimates indicate that up to 90 per cent. of single women pensioners entitled to the guarantee element of the credit now receive it. A smaller proportion receives the savings credit, and we need to do more to further increase take-up. There is no doubt that the majority of those who stand to benefit most from pension credit are now doing so.
The hon. Member for Romsey referred to some local difficulties. I shall be happy to write to her about what is happening in her area. In my experience around the country, joint teams of Pensions Agency and local authority staff have been very active in encouraging pension credit take-up, as is happening in Aberdeen. Alongside measures such as winter fuel payments and the tax and benefits changes, the pension credit has lifted 1.3 million women pensioners out of absolute poverty since 1997. As a result of the changes, pensioner households will, on average, be £1,500 better off this year than they would have been under the 1997 system and the least well-off third will be an average of £2,000 better off. That is an achievement that we can all welcome.
We have also taken steps to tackle the underlying causes of pensioner inequality and poverty. As we heard, when the state pension system was established in the 1940s, those with caring responsibilities were inherently disadvantaged. That is why, when she was Secretary of State for Social Services, the late Barbara Castle took the initiative to introduce home responsibility protection in 1978. I note the advantages, to which my hon. and learned Friend the Member for Redcar drew attention, of a flexible credit system rather than the present inflexible form of home responsibility protection. Other Members touched on that as well. It is a point that we need to consider carefully as we look at the future shape of the system. I assure my hon. and learned Friend that a woman will not lose HRP if she
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does a few weeks work in a year. If she is entitled to child benefit for the full year, she will benefit from HRP if she does not otherwise have a qualifying year through contributions or credits. The difficulty with HRP is that the year in which the child is born is typically not covered by HRP. There are other inflexibilities as well.
In introducing the state second pension, we have, for the first time, given carers the ability to develop rights to a second pension in the state system. That is a significant improvement. Nearly all the 1.9 million carers being helped by the state second pension are women, as are two thirds of the 5.8 million low earners. The state second pension means that the proportion of women who accrue significant state second pension entitlement is similar to the proportion of men who do so.
We have also taken steps to help parents to balance work and family life, including the working tax credit, child tax credit and increased access to affordable and good-quality child care. Couples with children are now able to claim the 30-hour element of the working tax credit if they jointly work 30 hours or more. That makes it easier for families to share work as best suits them. It also means that women are more likely to have the option of going to work and accruing a pension than used to be the case.
As we heard, women have tended to be in lower-paid jobs than men. One of the disadvantages of that is that state pension rights may not be accrued under a threshold level of income. We have addressed that problem in two ways. First, the introduction of the national minimum wage has benefited more than 1 million people, of whom 70 per cent. are women. The Low Pay Commission estimates that that has had the biggest impact on increasing women's pay of any measure since the Equal Pay Act 1970. Secondly, the separation of the lower earnings limit from the primary threshold level means that low earners can start to accrue state pension rights at a lower income than that at which they start paying national insurance contributions. That has been an improvement.
Women are also more likely to be in part-time work than are men. The Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 and the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (Amendment) Regulations 2002 ensure that 6 million workers, the majority of them women, are not treated less favourably than comparable full-timers in their terms and conditions, including access to occupational pension schemes. My hon. Friend the Member for Manchester, Central made an interesting point about aggregating different part-time streams of income that are earned concurrently. I imagine that that would be difficult, but it is an interesting point that we should consider to see whether we can help more people.
Tony Lloyd : My hon. Friend is trying to be helpful. Does he take on board the associated points about the needs of carers who are part-time workers in more than one job and who fall foul of the present threshold on carers' hours?
Mr. Timms : There are a range of issues relating to carers that require thought and reflection in the context of the debate. We have established the women and work
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commission to consider how to close the gender, pay and opportunities gap within a generation. I hope that that will lead to some important proposals. Finally, we have taken action to address the issues of the flexibility and portability of pensions, in particular through stakeholder pensions. I should say to the hon. Member for Eastbourne that aspects of the Pensions Act 2004 have helped, for example by aiding portability through helping people who have been in jobs for only a short period of time to take a cash equivalent transfer value of their pension rights to another scheme.
Due both to changes in society and the measures that we have taken, improvements are being made. However, my hon. and learned Friend the Member for Redcar and the other hon. Members who have spoken in this important debate have made a strong case and I willingly acknowledge that we need to do more to ensure fair outcomes for women and carers in the future. That is why fair outcomes for women and carers is among the key principles of pension reform that we set out in February. It will certainly be one of the principal criteria in the public debate against which the Government's proposals, when they are introduced, will be measured.
In the background is the changing demographic picture. Over the past 20 years, women's life expectancy at birth has increased by about three months every year. That is a dramatic change in longevity. It is wonderful and to be celebrated, but it adds to the challenges faced by the pensions system. An ageing population with an increasing dependency ratio needs a sustainable and affordable pension system that can provide a long-term solution for everybody, not just a quick fix for pensioners today and in the immediate future. That is why we have launched the national pensions debate. As broad a consensus as possible is crucial to a long-term solution to the pensions challenge. We want to involve Members of this House from the different parties, as well as industry groups, trade unions, interest groups and the public.
The Equal Opportunities Commission wrote to my right hon. Friend the Secretary of State for Work and Pensions last month outlining the desired outcome for women and carers of any reform of the pension system.
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That letter was signed by my hon. and learned Friend the Member for Redcar and a wide range of organisations and individuals. We share the aspirations set out, such as better recognition of unpaid caring work.
The women and pensions report will aid the principle of assessing options against how they will provide fair outcomes for women and carers. The report was announced in response to an amendment tabled in Committee by my hon. and learned Friend during the debate on the Pensions Act last year. My right hon. Friend the Secretary of State announced this morning, when speaking to the Fabian Society, that we will publish that report later this year at an event in the national pensions debate that will focus on how to make our future pensions system work well for women.
Miss Begg : If my hon. Friend gets it right and is up to the pensions challenge, instead of talking as I was this morning of a new Beveridge, perhaps in 50 years' time our successors will be talking of a new Timms. That would certainly secure his place in history.
Mr. Timms : I am grateful to my hon. Friend. There might be other contenders for the Beveridge crown, but I will certainly have a go.
There is a lot of work, a lot of reflection and a lot of discussion on pensions at the moment. The concerns that have been raised in this debate will be among those that are most prominent in the debate that will follow the publication of the Pensions Commission report in November. I should say to the hon. Member for Romsey that, as intended, the first report was analysis; the second report, which will follow later this year, will contain proposals. Many people will want to assess those proposals against the benchmark of the concerns that have been set out in this debate and will be aired in the months ahead. My right hon. Friend the Secretary of State for Work and Pensions and I met representatives of the Equal Opportunities Commission two weeks ago, and I shall be meeting Fawcett Society representatives later this month. I am anxious to ensure that we engage effectively with a range of people who are concerned about the specific issues that have helpfully been raised today.
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