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Kali Mountford:
I am grateful to my hon. Friend for giving way so early in her already brilliant speech. What does she think of the various proposals made today about how we give advice, bearing in mind that young people are least likely to go to an independent financial adviser? Whose responsibility does she believe that it is to ensure that people are properly advised
about the sorts of pension plan they might make, especially given the comments of my hon. Friend the Member for Bradford, North (Mr. Rooney)?
Ms Johnson: I am grateful to my hon. Friend for that intervention because it leads nicely to the comments that I wanted to make about the need to think carefully about the way in which young people receive financial education. Most young people get lessons from their mum or dad or perhaps listen to their peer group, but the advice and guidance available to young people is limited. We must consider the way in which we engage with young people in schools, colleges and universities, and the use of role models who can send a positive message to young people about the necessity to take financial responsibility early in life and plan one’s financial future. We have used role models in other ways, for example, to encourage young people, especially boys, to read books and eat healthier food.
There is much cynicism about financial advice. Those whom we approach to provide good financial advice must be organisations and groups that we can trust. I was interested in the comments of my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz), about the use of citizens advice bureaux and the important role of trade unions and other voluntary groups.
I am pleased that the White Paper emphasises the role of personal accounts through the NPSS, which could be important for young people. It is a simple proposition for people to get their heads around—the 8 per cent. is divided between the employee, the employer and the state. The personal account will start at 22 and go through to 65. It is interesting that 22 has been chosen as the starting age, and I wonder whether people who are younger than 22 and who want to opt into the account should be allowed to do so.
The account will be introduced by 2012 and it will help young people to understand how saving for their future can help them. We know that most young people will have many jobs in their employment lifetimes, and they can take the account with them from job to job. I also understand that the self-employed or those who do not work at different points in their lives can also be included in the scheme. Hon. Members on both sides of the House have discussed the need to keep the management costs of the scheme at a minimum, which is correct.
In the spirit of consensus in the Chamber this evening, will my hon. Friend the Minister for Pensions Reform look at the proposals that the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) introduced in his private Member’s Bill, the Rights of Savers Bill, earlier this Session? That Bill would have introduced a savings scheme for people to use flexibly throughout their lives, so they could use that money, for example, to pay for a deposit on a house or to take a career break to access education. Such transactions would be limited and managed, and people would have to pay back the money in order to ensure that they do not reach the age of 65 and find that they have no money in their savings accounts. A flexible savings account is a good idea to allow for the choices that people make throughout their lives. That Bill was considered in Committee, and it contains some ideas that the Government could take forward.
My right hon. Friend the Member for Southampton, Itchen (Mr. Denham) recently introduced a ten-minute Bill, which was about making sure that jobs are advertised with the full pension benefits clearly set out. That would allow people to make a positive decision based on the pension advantages of a particular job, and it would help young people to make sensible decisions about their financial futures.
On the role of women, I am pleased that the outdated model that has been used since Beveridge, which involves women being dependent on their husbands for pension provision, has been addressed in the White Paper. That situation is a scandal, and many hon. Members have discussed it this evening. The number of women MPs that we now have in the House of Commons means that the issue has not been allowed to stay at the bottom of the agenda—it has moved right to the top—and it is right that we should sort it out. We know that with a reduction to just 30 years of contributions by 2025, 80 per cent. of women will be entitled to the basic state pension, which is right and proper. We also know that the home responsibilities protection will become a positive weekly credit, which will ensure that more women are included in the basic state pension within the proposals in the White Paper.
I want to comment on women who have multiple low-paid jobs. We should examine how to include such jobs in the pension provision. My hon. Friend the Member for Bradford, North (Mr. Rooney) said that people with such jobs, who are mainly women, will still not be included, and I wonder whether my hon. Friend the Minister for Pensions Reform will comment on that point.
I am pleased that the White Paper includes a proposal for a new credit for those who care for more than 20 hours a week for someone who is in receipt of severe disability benefits. In my view, any carer who is caring for someone for more than 20 hours a week should receive that new credit—it should not be dependent on the benefit received by the person for whom they are caring. I could not let this opportunity pass without mentioning the Hull carers centre, which I visited a few days ago. I was lobbied very hard to ensure that carers are kept in the public eye and that those people, who do such sterling work, get the credit that they deserve and the pension that they deserve. I was also asked to raise the issue of people who reach the age of 65 and receive their pension, but suddenly find themselves losing out on their carers allowance. Can that be considered in future?
I should like to say a few words about raising the retirement age to 68 by 2050. I am very aware that in my constituency, Kingston upon Hull, a baby boy born today will have a life expectancy that is six years less than that of a baby boy born in Kingston upon Thames. There is a marked difference straight away. I hope that the Government will think carefully about how to beef up the work that is already going on with health inequalities and public health to address the problem of different life expectancies across the United Kingdom. We want the White Paper to be fair, but as it is it will not be fair on some of my constituents.
Kali Mountford:
My hon. Friend is making a valid point about health inequalities. When pensions were first introduced, life expectancy for working people was
only 48, yet they could not receive a pension until they were in their 70s. Does she therefore accept that we have at least seen some improvement?
Ms Johnson: My hon. Friend is right. However, my concern is that to achieve consensus in the country we must ensure that people accept that the White Paper is fair. At the moment, people in certain constituencies may miss out on the options on pensions that we are putting forward.
It has been suggested that a new body should oversee the pensions decisions that we make to ensure that they fit in with what happens in the next 10 or 20 years. Certain organisations are pushing hard for a permanent pensions commission to ensure that our proposals on treating people fairly in future are realised.
A few issues remain to be addressed, but on the whole I welcome the White Paper. I am particularly delighted that women and carers are at the heart of it.
9.22 pm
Mr. Nigel Waterson (Eastbourne) (Con): This has been an excellent debate. I particularly enjoyed all the talk about longevity and the amount by which it will have increased during the course of the debate—although there have been one or two speeches during which my whole life has flashed before me. I will not say which ones they were.
According to my arithmetic, there have been some 18 Back-Bench speeches, so I apologise to hon. Members if I do not go through them all but pick out one or two that deserve particular mention. My hon. Friend the Member for Hemel Hempstead (Mike Penning) made a powerful speech on behalf of his constituents who are scheme members of the Dexion company and have suffered a great deal. His comments on the ombudsman’s report were extremely just and valid. The hon. Member for Belfast, North (Mr. Dodds) also spoke about the ombudsman’s report and about the failings of the financial assistance scheme.
The Chairman of the Select Committee on Work and Pensions, the hon. Member for Bradford, North (Mr. Rooney), had some valuable thoughts on the White Paper to share with us. As always, the right hon. Member for Birkenhead (Mr. Field) had something distinctive to say. Apparently, he is not signed up to the concept of consensus; in fact, he delivered a substantial broadside against the whole idea. He talked about his concerns over what he called the Chancellor’s IOU and whether it would ever be redeemed for pensioners.
My hon. Friend the Member for Weston-super-Mare (John Penrose) made a fluent speech about the need for durability in the system and the reforms, the problems of complexity and the need for stability. Although the hon. Member for Yeovil (Mr. Laws), the Liberal Democrat spokesman, made some sensible points, I was not quite sure at the end of his speech where his party stands on the consensus-building adventure on which we are all now embarked.
I had the dubious pleasure, as shadow Pensions Minister, of being involved in every Commons stage of what became the Pensions Act 2004. If ever a measure cried out for pre-legislative scrutiny, that was it. But no, the Government drafted the Bill with the minimum of
consultation, drove it through with a timetable motion and ignored our regular predictions about the law of unintended consequences. We therefore welcome the fact that the White Paper talks about revisiting the provisions of that Act. I warned at the time that any good that the Government sought to do through the Bill would be overshadowed by the plight of those who had lost pension rights through no fault of their own. My prediction turned out to be true. Nothing has done more to undermine public confidence in the pensions system than the losses felt by those honest, decent people.
In May 2004, facing defeat in the House, the Government cobbled together their financial assistance scheme. We said from the outset that it would be inadequate. None the less, the Government forged ahead, setting up a wholly separate structure in York to administer it. I even recall proposing amendments in Committee that would have set up a parallel mini-pension protection fund, funded by unclaimed assets but administered by the same people as the main PPF. The Government would not have it, however, and one can now see why.
The FAS was to be kept quite separate, as it was always going to pay out much smaller benefits than the PPF. The differences are stark. That is true even with the latest review of eligibility. In a recent Westminster Hall debate, the Minister for Pensions Reform made it clear that only about a third of the 125,000 people affected will benefit from the scheme, even with the extended coverage. At that stage—although the figures may have improved in the intervening few days—a grand total of 93 payments had been made, which, according to my arithmetic, leaves only 39,907 to go. He made the position clear:
“Given the limited amount of money that we had available, it was correct to target it at those closest to retirement”.—[ Official Report, Westminster Hall, 20 June 2006; Vol. 447, c. 415WH.]
Several hon. Members on both sides of the House have explained the unfairnesses that result from those decisions.
It was obvious at the time, and has become ever more obvious since, that the FAS was designed primarily to get the Government over a temporary problem and to assist some Labour Members in marginal seats, with greater or lesser success, of which my hon. Friend the Member for Hemel Hempstead is living proof. Throughout its short life, the emphasis of the FAS seems to have been on limiting eligibility and excluding claims. The novel concept has been introduced of a core pension, with which the hon. Member for Belfast, North dealt in detail. We have heard that FAS payments are not inflation-linked, that they only start at 65 and when wind-up has been concluded, that they are capped at £12,000, and that the entire payment is subject to tax, despite the expected pensions including a tax-free lump sum.
That leads us on to the ombudsman’s report. She made three findings of maladministration against the Government. It is clear that the Government took steps on two separate occasions to weaken the minimum funding requirement. The report quotes the then Secretary of State saying in March 2000:
“As a matter of principle, we believe that when someone loses out because they were given the wrong information by a Department, they are entitled to redress.”—[ Official Report, 15 March 2000; Vol. 346, c. 308.]
Ministers have peddled a figure for the cost of compliance with the ombudsman’s recommendations that is grotesquely misleading. No wonder Lord Turner appeared to back compensation when he gave evidence recently to the Public Administration Committee. We believe that the Government’s position on the report is wholly indefensible.
We have heard much about consensus today. We in the official Opposition have said for a long time that we need political and social consensus if we are to have sustainable long-term pensions reform. Recently, Ministers have been saying the same; even more recently, they have been putting their money where their mouth is, and we welcome that. Why is consensus so important? Because Governments come and go. I do not mean to be gratuitously offensive to the Government Front Bench when I say that Ministers are here today and gone tomorrow. It is good to see the Minister’s distinguished predecessor, the Chief Secretary to the Treasury, the hon. Member for East Ham (Mr. Timms), sitting beside him.
Nothing would be worse for confidence in the system and for long-term saving than an Opposition with the stated intention of unpicking any reforms when they took office. No doubt the Government have taken a hard-headed view and concluded that consensus is a vital underpinning for their reforms—or, as the Secretary of State put it to the Select Committee, something to make pensions reform “stick”. All credit to him for that.
What, then, does consensus mean? It means that we can seek to reach agreement with the Government on the basis of full information about the various aspects of their proposals. It means supporting the Government when we think they are doing the right thing. How could we do other than that when they are implementing policies from our last manifesto? It means opposing them when they are doing the wrong thing, or doing the right thing in the wrong way.
However, it is also important to understand what consensus does not mean. It does not mean writing any blank cheques, or abdicating our duties as the Opposition to scrutinise the detail and hold the Government to account. That is not least because we expect and hope to be the Government one day, and that day may not be far off. We want to inherit a pensions system that works, or is on the way to being mended. That means that any reforms must pass our six tests.
Mr. Waterson: It is test inflation.
These are the six tests. Do the reforms deliver pensioner dignity, rolling back means-testing? Are they fair as between different groups in society, between generations, between the sexes and between public and private sectors? A number of Members, including my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), dwelt on the issue of public sector pensions. Are the reforms affordable? Are they transparent? Do they encourage personal responsibility? Are they simple and easy to understand? If they pass those tests, they will have our support.
Let it be clear, however, that we do have concerns. The Government accept that a third of all pensioners will still be subject to means-testing, with all that that implies for the discouraging of saving. The Pensions Policy Institute puts the figure at 45 per cent. The Government are also working on the basis that between 20 and 50 per cent. of workers will opt out of the NPSS. A recent workplace attitude survey by AXA showed that nearly a fifth of employers would encourage staff to opt out, a point made by several Members today. According to the PPI, the pensions system will hardly be any less complex after the reforms than it is now. As we have heard, the proposals create a cliff edge that will generate unfairness for some women.
Raising the state pension age is all very well, but where will the jobs come from for the notional increase in the work force? What retraining opportunities will be available? What about the millions of people who are below even the current state pension age and who want to work but cannot get a job? That point was made by the hon. Member for Bradford, North.
Organisations such as the Association of British Insurers and the National Association of Pension Funds have expressed concern about employers’ levelling down their pension provision in line with the contribution levels of the NPSS. As the NAPF put it:
“The danger is that, while reducing the number of people not saving at all, the White Paper could turn some adequate savers into under-savers.”
Given the Government’s inauspicious record when it comes to large IT projects, we have concerns about the architecture of the NPSS. What advice should be available to employees and what regulatory framework should apply?
We do not want to run the risk that, when the dust has settled and the smoke has cleared, we are no better off and still have a high level of opting-out, low persistency, a levelling down by employers and existing savings simply moved from one part of the system to another. However, we intend at all times to be constructive, pragmatic and sensible. If we disagree with Ministers, we will try not to be disagreeable. Those are the ground rules under which we intend to operate as the official Opposition. On that basis, we look forward to working closely with Ministers, officials, other political parties and all other interested organisations. We owe no less to future generations of pensioners.
9.35 pm
The Minister for Pensions Reform (James Purnell): This has indeed been a good and important debate. Here we are, six hours after the start, with another hour of life expectancy, as my right hon. Friend the Secretary of State informed us. I read the other day that the best way to improve one’s life expectancy is to semi-starve oneself and be exposed to small but regular doses of radiation. I am not sure whether that does increase life expectancy, but it would probably make life seem a lot longer.
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