We are serious about creating a consensus on the future of pension policy and this debate has genuinely helped to set that in train. We do not want to create consensus for its own sake or to agree with the Opposition just for the sake of it. Indeed, where there are differences, we will continue to explore them.
However, pension policy is different. Workers put away their money for 20, 30, 40 or 50 years and it is therefore right that they should expect politicians to try to create a stable framework within which they can make their decisions.
Over the past 30 or 40 years, the political class has not achieved that stability. The system has changed frequently and has left savers with what the Pensions Commission found to be the most complex pension system in the world. Our task now is to address that issue and to seek to take the political instability out of the system. Just as Bank of England independence has made it easier for companies to invest, so a consensus on the future of pension policy will make it easier for workers to save. That is why the Government called todays debate and tabled a substantive motion. It gives the House a chance to signal to the public that we will work together where appropriate to seek to create that consensus.
I welcome the spirit in which Opposition Front Benchers have responded to the motion. Both main Opposition parties have tabled constructive amendments that start from the basis that the White Paper can be the building block for a consensus on the future of pensions. Indeed, the Conservatives amendment identifies some key concerns and we want to work with them to explore those. We have no objection to their amendment to our motion.
As the hon. Member for Weston-super-Mare (John Penrose) said in an impressive speechI do not say that just because I will appear before his Select Committee tomorrow morningit is important not only to think that we have a consensus, but genuinely to explore whether we do have a consensus. Occasions such as this mean that we can have proper scrutiny of the policies in advance, which is surely far better than finding out later that we did not have the consensus that we thought we did.
To start with todays pensioners, as several hon. Members didin particular, my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne)we believe that we have done a significant amount for them. I shall not repeat everything that my right hon. Friend the Secretary of State said, but we are spending 1 per cent. more of GDP than if we had just continued with the policies of 1997. The White Paper promises to increase pension credit in line with earningsa major change.
The second point concerns raising the state pension age. The hon. Member for Angus (Mr. Weir) made it clear that his party would oppose that, and the issue was also addressed by my hon. Friends the Members for Aberdeen, South (Miss Begg), for Dumfries and Galloway (Mr. Brown) and for West Bromwich, West (Mr. Bailey). However, they made the point in a slightly different way. They knew that there were concerns about the state pension age, and wanted them to be addressed. That is the right way to think about the matter.
The Government accept that questions remain about how the state pension age should rise, and that we must keep open the option of paying pension credit at 65. We also accept that we must continue to look at the extending working ages agenda, and at health inequalities. We recognise that we have to deal with all of that, but those who oppose raising the state pension age must be clear about whether they believe that any such change should play no part in the proposals.
The Pensions Commission has created a consensus around the fact that people are living longer and that raising the state pension age has to be part of the solution if we really want to tackle the challenges that that raises. Those hon. Members who oppose a rise in the state pension age must explain how they will cope with the fact that in the future people could work less and less yet still expect to have the money to pay for an ever longer retirement. The difficulty is either that far more will have to be levied in taxes, or that people will have to save at a level far higher than has ever before been expected of them.
Mr. Weir: My point, which I raised with the Minister both in this debate and earlier in the day, has to do specifically with inequalities in different parts of the country and in different socio-economic groups. Does he agree that that problem must be addressed if the retirement age is to be raised?
James Purnell: That is what our health inequalities agenda is about. My constituency suffers from exactly those problems that the hon. Gentleman described, with people dying 10 years earlier than elsewhere, but it is impossible to deal with such problems without raising the state pension age. I assume that he is not proposing differential state pensions for people in different socio-economic classes, and I am sure that he will accept that life expectancy has risen in all socio-economic groups. Although it is right that we must look at how a rise in the state pension age might be implemented, it is clear that it will have to be introduced.
The second major issue in the debate had to do with personal accounts. My hon. Friend the Member for Bradford, North (Mr. Rooney) made some very good points about that, as did the hon. Member for Bournemouth, West (Sir John Butterfill). Questions were raised about employer contributions, governance, charges, generic advice and compliance, and we want to discuss those matters with all parties in the House. We have said already that we want to invite Opposition Front-Bench Members to our pensions summit, when the details of our policy will be explored.
My hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz) spoke eloquently about a matter that worried a number of hon. Membersthe interaction between means-testing and automatic enrolment. How can we automatically enrol people if we are not certain that they will be better off in retirement? Our response is that that is not the test that should be applied. No saving is certain, and people never know for sure what their careers will hold. They do not have 20-20 foresight about when they will work, how much they will earn or when they will be unemployed.
Instead, the real test of automatic enrolment is whether it will give people a reasonable expectation that they will be better off on retirement for having stayed in the scheme. We believe that we can provide some very good answers to that. In response to the specific request from the Conservative spokesman, the hon. Member for Runnymede and Weybridge (Mr. Hammond), we assure the House that we will be happy to publish the research that we used to make our decision, so that people will be able to look at it and make up their own minds.
There are two reasons why we believe that people will have a reasonable expectation of being better off under our proposals. First, those who leave their money in a personal account will immediately have it doubled by the employer contribution and the state contribution. Secondly, the charges on personal accounts will be much better, so people will be able to keep much more of their pension pot in retirementwe think about 25 per cent. morethan is the case with other forms of saving. The return on personal accounts should compare favourably with other forms of saving, and we believe that that, interacting with our reforms to state pensions, will help us to convince the vast majority of people that they will be better off.
The key point is that although, under our proposals, as a base case, a third of people would be means-tested, only 6 per cent. of them would be on the guarantee credit alone and thus facing 100 per cent. withdrawal rates. Those people may not have known that they would end up in that situation, so they will be better off due to the existence of the guarantee credit. The alternative would be to tell them, We know that you do not have a good state pension but we will not provide a safety net for you.
We shall be able to publish evidence to show that we can give people a reasonable expectation that they will be better off, but the scheme will not involve compulsion. People will be able to make their own decisions, so it is right on the one hand to enrol them automaticallyto use inertia for the saver culturebut on the other to leave them with a choice about whether they continue to save.
Mr. Laws: Due to the impact of means-testing, the individuals whom it is most difficult to encourage to make additional provision will have the least incentive to save because their employer contribution will be wiped out. Does not that concern the Minister?
James Purnell: We want to work with the hon. Gentleman on developing those issues, but to respond to his point, if I understand it correctly, people at the guarantee credit level will often have made no contributions because they are low earners and, in any case, may not have known in advance that they would end up in that situation. As I said, people do not have 20-20 foresight.
I shall address the remaining issues as quickly as I can[ Interruption.] I accept the injunction of the hon. Member for Runnymede and Weybridge and shall take a few more minutes to answer the points that he made. We want to look at the issue raised about levelling down in relation to personal accounts and to work with the Opposition on that. We recognise that there are concerns, but we talked to a large number of employers before we produced the White Paper and they made it clear that where they contribute more than the minimum 3 per cent. to which we have been referring, they do so as a way of retaining and attracting employees. Typically, they contribute far more than 3 per cent. The hon. Gentleman was right to say that the other side of the coin of compulsory contributions will be the cost of regulating the schemes. We want to look seriously at where we can deregulate the costs.
The hon. Gentleman asked whether anything had been ruled out of the regulatory review. I am happy to make it clear that nothing has been ruled out. We have made it clear that we want to balance employer costs against protection for employees, and I am sure that he will agree with that. There will be a stakeholder scheme, but we will look at all the issues and come back to him in due course.
A number of points were raised about the ombudsman. We have great sympathy for people who lost their pensions, which is why we extended the financial assistance scheme. Members asked whether people could receive an interim payment before the age of 65. They can indeed apply for that.
We have been clear about the core pension definition; it is in the leaflet and there is nothing underhand about it. People who do not qualify under the 15-year rule may qualify for deemed buy-back into their state second pension rights. I will be happy to write to Members whose constituents are in that situation.
To reiterate our argument: we do not accept that we caused the downfall of those pension schemes and we do not accept that we are liable for them. We think that the ombudsman made a leap of logic that is not justified by the evidence. There were never guarantees from the Government for those schemes, and although we have huge sympathy for people, which is why we set up the financial assistance scheme, it would be an unjustified step to make the further argument that we were liable for those losses.
My final point is about public sector pensions, which were raised by several Members. At the last election, the Conservatives said that they would not implement changes to public sector pensions. They said:
We have no current plans to alter the terms of public sector schemes...We know there is some concern over extending the public sector retirement age and we will listen to any practical concerns people have.
That is a significant difference from the position they appeared to adopt today. However, in the spirit of consensus, I do not want to push that point too hard; nor the point made earlier that they have made spending commitments of £15 billion by 2050. Nor shall I add up all the spending commitments that the Liberal Democrat spokesman has made today. According to my calculations, on top of his £10 billion for the citizens pension, there was another £3.4 billion on the basic state pension, £400 million on uprating pensions for people overseas and another £3 billion to implement the ombudsmans report. He has made a fairly significant number of spending commitments.
Mr. Philip Hammond:
The Minister must not go on repeating those things. He knows very well, and he has heard me say clearly today, that our purpose in putting these issues into the public domain was to get them aired and to have a debate about them. I said clearly earlier that just because we were drawing attention to certain aspects of the package did not imply that we thought that they were wrong. It merely implied that
we thought that they had not been given sufficient attention, they had not been discussed properly and they had not been understood by the public.
James Purnell: We welcome that clarification. We will certainly bear it in mind next time there is a Daily Mail piece on the latest stealth tax that has been uncovered in the detail of the White Paper. We recognise the spirit in which Opposition Front-Bench Members have approached the debate.
Kali Mountford: I know that it is late in the day, but some important points were raised about carers and women. Will the Government give an assurance that those points will be looked at closely before the end of this process?
James Purnell: I can give that assurance. I welcome the welcome that was given by Members on both sides of the House to the provisions for women and carers. The pensions proposals will address a long-standing injustice. We will work
We are serious about consensus. We welcome the spirit in which people have approached the debate. It is quite right to say that Opposition Front-Bench Members do not have to sign up to all the proposals. If they want to, they can decide to come forward with alternative proposals, and we recognise their right to scrutinise what we have put forward. However, Lord Turners injunction on cherry-picking was about saying that people could not just sign up to the benefits without also saying how they would pay for them. We will apply that test. When people come forward with proposals, we will ask whether they will be costed, because that is the only way in which we will generate a genuine consensus around these policies that will last for the future.
That this House welcomes the White Paper Security in retirement: towards a new pensions system [Cm 6841] as the basis for a consensus on the future of pensions policy; recognises the importance of consensus in ensuring long-term, affordable and sustainable pension reform; and therefore welcomes the commitment of all major parties in the House to engage in the process of consensus building, while acknowledging that a number of concerns remain to be addressed in the course of that process, including the impact of the projected future level of means-testing on savings behaviour, the design of an auto-enrolled savings scheme, the need to strengthen existing occupational pension provision to reduce the risk of levelling down on the introduction of personal accounts and the need to restore public confidence in the fairness and security of the pensions system.
That the draft Mobile Homes Act 1983 (Amendment of Schedule 1) (England) Order 2006, which was laid before this House on 24th May, be approved .[Mr. Alan Campbell.]
That this House agrees with the Report [22nd June] of the Liaison Committee. [Mr. Alan Campbell.]
That the following amendments be made to Standing Orders and to the Resolution of the House of 13th July 2005 relating to Liaison Committee (Membership):
A. EUROPEAN STANDING COMMITTEES
That Standing Order No. 119 (European Standing Committees) be amended, by leaving out in the Table in paragraph (6) the words Office of the Deputy Prime Minister and inserting the words Communities and Local Government.
B. SELECT COMMITTEES RELATED TO GOVERNMENT DEPARTMENTS
That Standing Order No. 152 (Select committees related to government departments) be amended in respect of the Table in paragraph (2), by
(i) leaving out item 11 and inserting, at the appropriate point, Communities
and Local Government/Department for Communities and Local Government/11; and (ii) in items 12 and 14, in column 2, leaving out the words Office of Science and Technology and inserting the words Office of Science and Innovation; and that all proceedings of the House and of its select committees in this Session in respect of the Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee shall be deemed to have been in respect of the Communities and Local Government Committee.
C. LIAISON COMMITTEE
That the Resolution of the House of 13th July 2005 relating to Liaison Committee (Membership) be amended by leaving out, in paragraph (2), the words Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions and inserting the words Communities and Local Government .[Mr. Alan Campbell.]