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The setting up of the Turner commission was greeted with a great deal of scepticism. Opposition Members thought that the Government were trying to avoid the issue by putting it out into the long grass and that when the commission reported, the Government would bury
the report. That was probably the general feeling among Opposition Members. In fact, the Government have not buried the report, and the level of consensus that we have already seen during today’s debate suggests that we have come quite a long way.
I was disappointed by the amendment tabled by the Scottish National party. Its tone is somewhat sour. That is not the tone of the Conservative amendment or that of the Liberal Democrats—I am not normally nice to the Liberals.
Mr. Weir: The point made by my party’s amendment is that the White Paper omits any discussion on the central point. We talk about consensus, but consensus outside the House rests not on these proposals, but around the idea of a citizens pension. We wish to bring that approach to the House and to discuss it. We seem to be the last people standing in the House who are still talking about a citizens pension, but we will continue to do so.
Miss Begg: I think that the hon. Gentleman has made my point for me. A citizens pension did not necessarily have full support from the general public or in the House. There was some support—I was part of that—for a universal entitlement. There were those who thought that that might be a good way forward, based on residency. It is interesting that, since the Government came up with their proposals in the White Paper, which expand the coverage of national insurance contributions, many of the organisations that thought that universal entitlement was one of the easier ways to go forward are quite happy with what is proposed. The change in the proposals will produce the same result as that which would have been reached with universal entitlement.
I never signed up to a citizens pension because it had too many elements of the old dependency pension, which we want to get rid of, especially for women. It depended on women being dependent on men. There are also issues about living in the country and being a citizen of the country. That led to issues about taking the pension abroad. I find it slightly ironic that some Members have signed the early-day motion that asks the Government to consider restoring the link to inflation for those who live in Commonwealth countries, while others are advocating the citizens pension, which would not follow many such people to Commonwealth countries, especially if they had been out of this country for 20 years. The situation is not quite as clear cut as the hon. Member for Angus (Mr. Weir) makes out.
How do we build a consensus? My route through this process is perhaps an illustrative one. It might be that that is why I am slightly disappointed in the attitude of the SNP, given that it has been unable to move from its rigid position to grasp what some of the changes are. Scottish Widows has been mentioned several times today. I remember participating in an event for Scottish Widows a couple of days after the publication of the second Turner commission report. My initial reactions at that event were based very much on a first quick reading of the Turner commission report. I thought that it scored highly in terms of what it offered for women carers. For me, that was a big tick. It was something that I had been looking for in any future pensions policy. I took the view that women who had
been so discriminated against in previous pension policy should receive equal recognition along with men in work.
I wanted to see whether the Turner commission proposed to continue the Government’s work on poverty reduction. Again, it did so, so that was another positive. Initially, I was not keen on the proposal to raise the state retirement age, which I thought was a bad idea, particularly for manual workers and people who live in communities such as Glasgow where the average life expectancy is 69. People die young, and many of them are not economically active beyond 50. I was therefore extremely dubious about the proposal to raise the state retirement age.
As for the national pension savings scheme, I did not know enough about it, so I was not in a position to judge whether or not it would be a good idea. I therefore held off expressing an opinion, whether positive or negative, until I found out a great deal more. However, my views have changed, not because I believe that the basic pension should be based on a different principle but because consensus building involves looking at all the different components. Crucially, the White Paper and the original Turner proposals are part of a whole—there is an interplay between different elements, so that, in practice, if one removes one major element, the other elements simply do not work. I therefore disagree with the SNP—if its members had looked more carefully at the White Paper they would realise that it includes many of the things that they want to achieve in pensions policy. They are not necessarily present in the form that they want, but they are there none the less.
Mr. Weir: There are some parts of the White Paper with which we agree, but may I stress again that we are in favour of a citizens pension, which is why we tabled the amendment? Yes, there are some things with which I agree and, if I have an opportunity to catch Madam Deputy Speaker’s eye, I hope to explain what they are.
Miss Begg: If that is the case, the SNP should have tabled an amendment adding their proposals to the end of the motion, as did the Liberal Democrats, because that would enable them to retain the positive aspect of the motion. In fact, their amendment removes it.
In general, the White Paper is a follow-up to the Turner commission proposals. I like what the White Paper says about women and carers—it is not the universal entitlement that I wanted, but I am sure that my hon. Friend the Minister for Pensions Reform will explain in his winding-up speech that the proposals on women and carers put money in their hands much more quickly than a citizens pension or universal entitlement based on residence. However, the Government should explain more thoroughly why a residence qualification is not a simple option and why it is much more complicated than many of its supporters believe. That fact is sometimes missing from the debate, as people are still thirled to the idea that residence is easy to determine.
I have changed my view, as I said, about the state retirement age, not because things are any better for people who live in Glasgow, but because the White
Paper proposes a phased introduction in future. The proposal will not affect anyone who is over 47 today, but the Government must make sure that the pensions system is flexible enough to allow people to change jobs. People rarely want to retire completely after 30 years in a job—often, they are tired of that particular job or the treadmill of work. Having spoken to many people who have accepted an early retirement package, they gained a second wind when they started a new job. The financial security of their pension settlement allowed them to go off and do something that they always wanted to do. Often, they started jobs in which they gave a great deal back to society and, as a result, they benefited a great deal themselves.
When I was a teacher, some of my colleagues complained that they could not work beyond 60. That may well be true of secondary school teaching, given the rough and tumble that the job entails, but it is not a case of people’s working lives being over. It is crucial that the pensions system allows individuals who have had enough of one job to move on to another one without jeopardising their pension entitlement. What convinced me of the worth of the national pension savings scheme was a visit to Sweden by the Work and Pensions Committee to see how such a scheme operates there. I appeal to the Government, however, not to establish as many funds as have been established in Sweden, because choice has led to inertia, and most people opt for the default scheme to avoid confusion. I accept that the issue still requires a great deal of discussion.
We must achieve consensus among hon. Members, but my right hon. Friend the Member for Birkenhead was right that it is the people outside who are important, so we must consider what they think is fair and justifiable in future pension provision. Some people have great ideas about the shape of the pensions system, and we have heard about one of those ideas from my right hon. Friend. Some say that if we set out from a different starting point—that is the SNP’s position—we could design a much simpler, more coherent system, and I am sure that we could. Some want to pick and choose different parts of the package to avoid difficult decisions. They want to pick the good bits that will improve pension provision while avoiding measures that have to be put in place to pay for it.
People have different ideas, but there is one problem common to all of them—not one of them has achieved the consensus built by the White Paper and the Turner proposals, and not one of them can do so. The Turner commission was successful, because it did not give everything to everyone. My hon. Friend the Member for Bradford, North (Mr. Rooney) talked about vested interests. Trade unions, employers and pensioner groups did not get exactly what they wanted from Turner, but they did get something. Similarly, everyone, both inside and outside the House, can buy into something in the White Paper, which makes it possible to build consensus. No matter how brilliant a proposal, it simply will not stand the test of time without consensus. To carry out the proposals in the White Paper will be a serious test of political will for everyone. We must not fail, because if we do, future generations of pensioners will not receive what they are entitled to. They are depending on us.
6.38 pm
John Penrose (Weston-super-Mare) (Con): I should like to pick up some comments made by the hon. Member for Aberdeen, South (Miss Begg) who, like me, is a member of the Select Committee on Work and Pensions. She said that we are debating something that is important not only to us and to people outside the House today, but to future generations, as it will make a difference to their lives. She was right to highlight the comments of the right hon. Member for Birkenhead (Mr. Field), who said that it is not enough to try to forge a consensus, either in the House or across the nation, that is effective today—we must forge a durable, stable consensus that will last not for a few years or even the life of this Parliament, but for decades and generations.
That durability is vital not only because the working life of someone who is 16 and about to enter work today will be potentially 50-plus years—and therefore they have a right to expect that any pension scheme and pensions environment that they are saving into will be stable throughout their working life so that they can plan effectively for their retirement, however distant that may be—but because instability is the enemy of simplicity. In other words, every time we change our pensions system we add another layer of change, another layer of regulation and another layer of complexity to our existing pensions organisation.
Politicians and external stakeholder groups being what they are, there is no shortage of good ideas about how to change the pensions system. Every five, 10 or 15 years, one of those good ideas bubbles up and the temptation is to make an adjustment. That has happened consistently over the life of the existing pensions settlement, and has led to us having one of the most complicated pensions environments in the developed world. Therefore, stability and durability are vital if we are to avoid the same ratchet effect continuing for the next 20, 30 or 40 years, and even more complexity being added to the settlement that we are trying to debate today.
These are not just theoretical possibilities. As we stand here today, we can all see issues on the horizon that could lead to a need to reopen the debate that we are having today. We have already heard about the issue of pensioners overseas, some of whom have their state pensions frozen. I suspect that that will not go away and will probably come up in years to come in this House. The temptation to reopen the debate on that point, and potentially to debate an injustice, will be great.
In the White Paper is an acknowledgement that when the earnings link is restored at some point in the future, a caveat will be built into that date—namely, that it will be reinstated subject to it being affordable. If, when we get to that date, it is not affordable, that will undermine much of the so-called consensus that we are building up today. Again, the temptation, quite legitimately, on both sides of the House will be to reopen the debate at that time.
Finally, in the White Paper the Government also acknowledge that there is an issue over changing life expectancy, so they have quite properly built into their projections on how the pension age will rise in future a series of review dates, to check that those rises in
pension age still make sense. If they do not, those review dates will inevitably be an opportunity for instability, for this pensions consensus to fracture and for the debate to be reopened.
Those are just three examples of potential issues on the horizon that could lead to instability over the lifetime of this consensus. I am sure that all here would agree that if we can see three or four of those today, the chances are that there are several dozen more that we cannot spot that will almost certainly crop up unexpectedly during the course of the next decade or two. Therefore, I urge the Government to consider mechanisms to reduce that uncertainty—mechanisms to build stability and durability into this consensus so that we have fewer opportunities to reopen the debate, and so that the pensions consensus has built-in stabilisers that will allow it to ride out any changes, or most of the changes, that we can reasonably foresee.
Let me give some examples. How do we ensure stability and consensus? The weakest way of doing that, I am afraid, is what I can see in the White Paper, and that is to try to establish a pensions consensus today. That, on its own, is no mean feat and I am not trying to downplay that achievement. It is a vital and necessary part of achieving a proper pensions settlement for a generation. However, it is not enough on its own because future generations of MPs will inevitably come up with new ideas and have the urge to reopen the debate, doubtless for genuine and valid reasons.
So what else do we need to build into today’s consensus to allow that settlement to ride out the years? There are a couple of examples elsewhere. Sweden has a balancing mechanism—it is effectively a mathematical formula that allows its state pension system to adjust automatically for changes in national growth rates and longevity rates, and for other external macro-economic shocks. It is probably not perfect, but it does mean that when something comes up that might otherwise fracture that consensus, the system adjusts automatically. The debate can be reopened, but it does not have to be. The system has a built-in stabiliser.
I offer that as just one example for the Government to consider, perhaps in relation to longevity and retirement age, where establishing some principles, and potentially even a formula today, might very well allow the system to ride out some shocks in future. In fact, the Minister for Pensions Reform was at a meeting that I attended this morning where a member of the Turner commission urged him to do something similar to that to establish some principles that would guide future generations. I would argue that in fact we could go a step further than that and build a formula into the Government’s published proposals today.
Another alternative is one that we can pluck from one of the ideas suggested by the right hon. Member for Birkenhead. I am not signing up to all his proposals, but one of his ideas is to have an independent board of trustees, which he models on the governors of the Bank of England, that is at arm’s length from the Government, that is independent and that is charged with commenting on and maintaining the consensus and the settlement that has been established today. We could build that into the role of the trustees for the NPSS. I am not trying to tell the Government how to do it—all I am saying is that if
they can establish an external, arm’s length body of experts who have access to high quality analysis and have a duty and obligation to comment on any proposed changes to the pensions settlement, they will be a vital item of ballast and a way to ensure that the debate in 10 or 20 years’ time does not diverge from the central principles that we are setting out today, or if it does so diverge, only does so for the very best reasons and because it is founded on solid analysis.
Those are just two or three possible examples—
Danny Alexander: The hon. Gentleman makes an important point about the need to have a stable and enduring consensus, rather than simply creating one now that then has the opportunity to fall apart after subsequent elections. Does he agree that one of the merits of some sort of independent commission, which he is discussing at the moment, is that it would also help to build public trust in the consensus because lack of public trust in the pensions system is one of the biggest problems that we face?
John Penrose: I agree that lack of public trust in the pensions system is one of the biggest problems that we face, and a degree of external comment by acknowledged experts might very well help build up trust. It is crucial to remember that if we believe that the proposals in the White Paper are worthwhile—there is a fair degree of unanimity on many aspects—valuable, and should stand the test of time, let us not sell them short. Let us instead build in stability, durability and mechanisms to ensure that they last, rather than simply trusting to hope.
6.48 pm
Mr. Russell Brown (Dumfries and Galloway) (Lab): It is a pleasure to follow the hon. Member for Weston-super-Mare (John Penrose). I say that because those who can speak in this Chamber without notes are to be admired. I hope to be here until I am of pensionable age, and perhaps can match that on one occasion at least.
The pensions issue has an impact on almost every household and is of importance to today’s pensioners. The White Paper, “Security in retirement: towards a new pensions system” is very much about looking to the future and the pensioners of tomorrow. I hope that the whole House would agree on two aspects of pensions provision. The hon. Member for Weston-super-Mare mentioned one of them—the sustainability of anything that we introduce into the pensions system. It must be sustainable, as Members would not be prepared to accept the option of going back to the levels of pensioner poverty that this country has witnessed in the past.
Equally, on the second aspect, Members have referred to what the Government have done for today’s pensioners. There was much to be admired in the introduction of the minimum income guarantee, followed by the pension credit and the savings credit. Like many other Members, I have met pensioner groups in my constituency. In all fairness, we get some stick about what the Government have done, but many people in my constituency—people from a solid trade union background and people with roughly the same
political leanings as myself—do not always recognise how redistributive the Government were in what they did for the poorest pensioners. Nevertheless, although we have done some positive things, I always admit that there remains much more to do.
I want to reflect on what has brought us to the current stage of unrest, uncertainty and disappointment. Occupational or works pensions are one important issue, and how some companies reached their current position is another. A significant number of final salary pension schemes have been closed. Speaking as one who worked for 23 years with a multinational company—or rather I was employed for 23 years, as working and being employed by a company are two different things—I witnessed what happened when it wanted to reduce its numbers. Of course, the big advantage was a good redundancy package, but an additional carrot was access to a pension scheme. The company I was employed by was not alone, as it happened right across the country during the 80s and early 90s. When people get early access to a pension scheme and people are living longer, it undoubtedly puts pressure on the schemes.
I have to say that the same thing happened in the public sector. As a councillor for 11 years during the days of Mrs. Thatcher, I experienced the squeeze on local government spending in the late 80s and early 90s, which was also pursued by her successor, John Major. Council departments across the country were asked to reduce numbers, but those who decided to leave were the people on high salaries with big pensions. Pension funds cannot sustain the sort of numbers that we saw moving out of the public sector, especially local government, over those years.
The Government are trying to put a message across about the importance of preparing and saving for old age. I regret to say that some of today’s pensioners send out the wrong message at our surgeries, although I understand why they feel angry. Irate pensioners sometimes complain about the couple down the road, neither of whom work and who are in receipt of pension credit, getting exactly the same money or perhaps even more than they do. The big argument then is whether it is worth saving for old age. The answer has to go out loud and clear from this Government from this Chamber that it is indeed right to prepare for old age.
The country is witnessing a significant demographic shift like never before. In my constituency of Dumfries and Galloway, it is projected that about 4,000 or 5,000 jobs will not be filled between 2012 and 2015, simply because people are growing older and more people are retiring in the area, while at the same time many young people are leaving the locality due to the lack of decent, well paid jobs.
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