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Mr. David Laws (Yeovil) (LD):
I congratulate Lord Turner on his report. We agree with its basic analysis and long-term vision of the pension system. We, like the Conservative party, are willing to work with the
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Secretary of State to find a consensus on reforming the pension system, if he is able to find a consensus within the Government with which it is possible to work. May I test the extent of that consensus by asking him whether he agrees with the Turner report's conclusion that the existing pension system is not fit for purpose looking forward? Similarly, would the Chancellor agree with those words from Lord Turner's report?
Do the Secretary of State and the Chancellor of the Exchequer share Lord Turner's analysis that significant future growth of means-testing would undermine voluntary private pension provision by the very groups of people most in danger of under-provision?
Does the Secretary of State agree that the Chancellor and his lieutenants were wrong to brief that the Turner proposals were unaffordable? Will he acknowledge that Lord Turner addressed that directly in his report?
Does the Secretary of State accept that we face a choice between two alternatives? We can choose either the complex means-testing system introduced by the Chancellor in 1997 and designed initially to deal with the issue of poorer pensioners, or the simple system described by Lord Turner, which would give people responsibility for individual savings on top of a better state pension. Are not both the Chancellor and Lord Turner talking about affordable systems, and is not the real issue which is likely to be more sustainable in the years ahead?
Does the Secretary of State agree with Lord Turner and me that it would be unsustainable for 70 per cent. of pensioners, or more, to retire in 2050 and have to claim means-tested benefits? Would it not be ludicrous to suggest, as the Chancellor seemed to in his leaked letter, that a Labour Government would consider breaking the link between earnings and means-tested benefits for some of the poorest pensioners in Britain? Is that not utter nonsense?
Does the Secretary of State agree, again, with Lord Turner and me that it is also ludicrous to expect, as the Chancellor seems to, that the share of national income devoted to pensions will remain static over the next 40 years despite a 50 per cent. increase in the pensioner population? Does he agree that the Chancellor should not be allowed to wreck a consensus on pensions reform that includes not just those in different parts of the House, but every major body that made representations to the commission?
Does the Secretary of State agree that if there is a higher state pension, the trade-off will have to be a significantly better state system that is fairer to women and takes people out of means-testing? Does he agree that so far the Government, including his right hon. Friend the Secretary of State for Trade and Industry, have made a pig's ear of the reform of public sector pensions, which will make the Turner proposals much more difficult to introduce? Does he agree that sooner or later the Government will need to go back and think about the affordability and sustainability of public sector pensions if they are to reach a conclusion that is sustainable and fair to everyone in Britain?
A consensus is emerging in Britain about the way in which pensions policy should develop. Sadly, it seems to be a consensus with which only one man is out of step: the Chancellor of the Exchequer. Does the Secretary of State agree that it would be a tragedy for people in this
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country—for every pensioner in this country—if we missed the opportunity to secure a national consensus because of the veto of one powerful man in the Cabinet?
Mr. Hutton: We established the Turner commission with the precise objective of reaching a national consensus on the long-term future of our pensions system. I find it bizarre and regrettable that the hon. Gentleman should seek to turn Turner, as it were, into a negative. We have made clear today that we will study every aspect of the commission's proposals carefully and in detail with Members and with people outside, which I think is the responsible thing to do.
As far as I am aware, the only people who have pre-empted any of Lord Turner's recommendations are the hon. Gentleman and his party, and I am afraid that, in true Liberal Democratic fashion, they got it hopelessly wrong. The hon. Gentleman's principal proposals on citizens' pensions were expressly rejected by the Pensions Commission, as we read on page 9 of the report. [Interruption.] The hon. Gentleman will not have another chance to speak on this occasion, but his hon. Friends may, and we will of course continue the debate. I fear that it may run and run.
The hon. Gentleman asked a number of questions about public expenditure, and about the affordability and sustainability of the package. All those decisions will form part of the debate that we shall have, and the options that we decide are sensible will have a profound bearing on the impact on public spending. I will not trade figures or get into an argument about them today, because I think that that would be premature.
I consider that any unpredictable expansion in means-testing would be a bad idea. We must look at the issue in the round, and we must look at Lord Turner's proposals. We must not, however, lose sight of one important and fundamental fact. Targeting additional support on the poorest pensioners was the right thing to do, and we did it in the face of opposition from the hon. Gentleman and his hon. Friends. Lord Turner has made it absolutely clear that it was the right thing to do, and it has made a significant difference to millions of pensioners. Now we need to move on to the long-term settlement.
Mr. Frank Field (Birkenhead) (Lab): Will the Secretary of State convey my thanks to the Pensions Commission for its work? Will he also use the first opportunity he has to assure the Chancellor that all Labour Members, and the vast majority of people in the country, thought the Chancellor was right to concentrate help on the poorest pensioners, in record terms, after we were elected in 1997? That, however, is not a long-term strategy when we expect to see 70 per cent. of pensioners being means-tested and a bill rising to 13p in the standard rate of tax.
I welcome my right hon. Friend's statement that today marks the next stage in our debate. Does he accept that that debate is likely to revolve around the question of whether we should opt for a higher state pension and increased taxation to pay for a decent minimum, or an increase in the retirement age with increased savings? Labour Members need to make a decision and enact it
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in the current Parliament. If we think that we can kick pensions reform into the long grass until after the next election, we may find that the electorate believe that many of us should join it.
Mr. Hutton: I am grateful to my right hon. Friend for his opening remarks and, indeed, for all that he said. Obviously we shall need to examine the commission's proposals in detail, along with the means by which they can be implemented.
My right hon. Friend mentioned means-testing. We shall have to examine the specific issues raised by Lord Turner and his fellow commissioners, because it would be impossible for us to deal with the country's long-term pension needs without doing so.
I accept my right hon. Friend's point, and I look forward to his contribution to the debate, which I am sure will be significant.
Mr. David Ruffley (Bury St. Edmunds) (Con): Can the Secretary of State guarantee that he will not rewrite, in any way, the deal allowing public sector workers to retire at the age of 60 for the next 40 years?
Mr. Hutton: We have made it clear that we will not revisit that deal.
Mr. John McFall (West Dunbartonshire) (Lab/Co-op): I commend Lord Turner for the national pension scheme in particular, and ask the Secretary of State to give it serious consideration.
Witnesses from the financial services industry who gave evidence to the Treasury Committee for its report "Restoring confidence in long-term savings" asked for compulsion, but the stampede from defined benefits to defined contributions and the accompanying smaller contributions from employers mean that more of the risk is borne by individuals. On grounds of equity and risk, will the Secretary of State seek a sensible compromise from all parties to ensure the desired outcome in relation to the contributions of employers, employees and other individuals?
Mr. Hutton: We need to think about all those issues. Lord Turner and his fellow commissioners submitted a specific proposal relating to the national pension savings scheme, but when Members study the report in detail over the next few days, they will see that it proposes a number of other ways of securing the same objective.
I hope that Members and people outside will focus on the important question of how society can do more to encourage people to take responsibility for securing their retirement income in old age. It is at the top of the list of our priorities, and I think that our debate on that part of the report will define the overall framework on which we ultimately decide.
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