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CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 756-iv

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

PUBLIC ADMINISTRATION select COMMITTEE

 

 

GOVERNING THE FUTURE

 

 

Thursday 22 June 2006

LORD TURNER OF ECCHINSWELL and MS CHRISTINE FARNISH

Evidence heard in Public Questions 358 - 405

 

 

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

 

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

 

 


Oral Evidence

Taken before the Public Administration Select Committee

on Thursday 22 June 2006

Members present

Dr Tony Wright, in the Chair

Mr David Burrowes

Kelvin Hopkins

Julie Morgan

Mr Gordon Prentice

Paul Rowen

Jenny Willott

________________

Witnesses: Lord Turner of Ecchinswell, a Member of the House of Lords, and Ms Christine Farnish, Chief Executive, National Association of Pension Funds, gave evidence.

Q358 Chairman: Let me call the Committee to order and welcome our witnesses this morning, Lord Turner, who has been Chairman of the Pensions Commission, and Christine Farnish, who is the Chief Executive of the National Association of Pension Funds. It is very kind of you both to come along. We are not, as I hope we have warned you, primarily going to ask you about pensions or about the contents of your report, but what we do want to ask you about is the process of doing a report like this and being involved in a commission of this kind. The Committee is doing an inquiry into how the Government does long-term strategic thinking, and, therefore, we thought it would be extremely helpful to have someone who has been involved in doing long-term strategic thinking to come and help with our inquiry, so that is the context for the session. I do not know if either of you would like to say something very quickly by way of introduction or whether you would like to answer some questions from us.

Lord Turner of Ecchinswell: I would prefer just to go to questions.

Ms Farnish: So would I.

Q359 Chairman: Lord Turner, how did you get into this? Tell us the process by which you came to Chair the Pensions Commission.

Lord Turner of Ecchinswell: I was asked to do it in December 2002. I think the first person who mentioned it to me was Geoff Mulgan, who was then running part of the Number Ten Policy Unit, et cetera. He said that there had been a number of discussions between Number 10 and Number 11 about how to progress the issue of pensions policy and that a number of names had come up of people who might chair it, that I was one of those, et cetera, and that somebody might give me a call. I think it was Andrew Smith, who was then the Secretary of State for the DWP, who subsequently called me. You would have to ask other people about the background on how they decided on my name as somebody to ask to do that. I then had some discussions with Andrew Smith and decided it was a sensible thing to do.

Q360 Chairman: Did they explain why they thought that contracting it out to a commission headed by someone like you would be a good idea?

Lord Turner of Ecchinswell: I think part of the background of it, and one thing which might be worth mentioning, was that I had done a previous piece of work within the Number Ten arena as an independent strategic adviser to the Prime Minister on the issue of the Health Service between 2001 and 2002. These were a number of projects which were done by a number of different people, and I think the work that I had done then, the Prime Minister, in particular, had found useful. That was a confidential report, though I believe part one of it has now been released under freedom of information arrangements, but it was not intended as a wide public commission, it was a discussion of a set of issues about the future management of the Health Service, where I worked with the Department of Health but also Number Ten, and I think there was probably a belief that I had a working style which worked very effectively with the department involved and not antagonistically with the department involved but was also, perhaps, taking a wider perspective than is sometimes possible within a departmental Civil Service. I think also, although it was probably not explicit, it may have been reasonably explicit, an external commission can be a mechanism for addressing issues which are either very politically difficult to deal with within the to and fro of antagonistic political debate, and they can also be procedures for creating wider thinking than is possible within civil servants who at that time are almost necessarily servicing and supporting the existing ministerial line. I cannot remember whether they were explicit but I think both of those were implicit behind it, and I think they have always been implicit behind the role of commissions or royal commissions going back for many decades.

Q361 Chairman: Did you insist that there should be a clean sheet to start with, or was there a direction to you?

Lord Turner of Ecchinswell: I cannot remember whether I insisted. I think I was probably known as a person who it was implicit that there was going to be a clean sheet, and, therefore, nobody anticipated that anything would be left unturned. I cannot remember whether I said I felt that was required, but I think most people knew that that was my nature.

Q362 Chairman: It is sometimes suggested that government ought to contract out policy advice, that is to say, in this case it could have said, "We want a pensions policy. We would like you to contract to give us one".

Lord Turner of Ecchinswell: No, I do not think a government can ever do that. Ultimately governments have to decide, because that is democracy and that is the process and it is the responsibility of the Government to decide. I think what an external commission can do, however, is make recommendations and then it is ultimately up to government to come forward with a White Paper as a response to that. I think if people go as far as contract out, in the sense that people sometimes draw the analogy, for instance, with the Monetary Policy Committee, I think that is a misleading analogy. I think there are very few areas of public policy where it is possible to define the objective, for instance low and stable inflation, and then hand to a set of experts, "You pull the technical levers, so that you hit low and stable inflation and, as long as you do that, you are doing a good job and, if you fall outside that, you have done a bad job." There are very few areas of public policy, and it may well be that the setting of interest rates is almost the only one where you can literally contract it out. Everything else, I think, it has to be the case that you use a commission to provide advice, provide recommendations, but it is ultimately up to the Government to decide.

Q363 Chairman: I am struck by the fact that if we were appointing somebody to the White Fish Authority or the Potato Advisory Council, they would have to jump through all kinds of hoops. They would have to go through panels and be assessed and there would be selection processes, and yet we entrust someone with thinking about the whole future of pension policy and we just call them in.

Lord Turner of Ecchinswell: That is true. There was an interesting consequence of that, because it did not go through the Nolan processes, it was impossible to pay me anything, and I think that is the basic rule here - it may again be an implicit rule - that if you appoint anybody these days to any sort of quango or commission which involves any sort of payment, then you do have to go - I think those are the rules these days - through official formal processes and applications and panels of selection, et cetera; but where you have asked somebody to do something which is in a sense ad hoc in its working processes - the exact way that it works is simply made up, it has no defined constitutional role - then you can basically ask whoever you want to do it. Others will have to judge whether that is a sensible way of doing it, but that may be a perfectly sensible way to do it. It is, after all, how we appoint ministers. Ministers are appointed on total prime ministerial discretion, so it is not clear why, if a prime minister or a chancellor wants a piece of external analysis work done by somebody who is not a minister, there is necessarily any reason why they should not also be able to do that on the basis of ministerial discretion.

Q364 Chairman: It is a funny old business though, is it not? What I would like to ask you is whether the kind of model that we have adopted in your case (and I think most people think it has been highly effective in terms of the way that it has worked, the timescale that it has worked to and the nature of its product) offers as a model here for doing strategic policy thinking around government or was it a very special one-off exercise?

Lord Turner of Ecchinswell: I find that difficult to work out. For instance, I think there are some other problems which are not as amenable to this approach. Let me give you an example. I think if you said in relation to the Health Service, "Okay, the Health Service is a continual issue of public policy, it is a difficult issue, it is a highly politicised issue. Why do not we give to a group of three hopefully wise people the job of coming up with some dimensions of change to the Health Service?" I think that would be, in order of magnitude, a more difficult task than what we did on the Pensions Commission and would not be a sensible thing, because I think ultimately, although pension policy is complicated in many ways - there are a lot of technical issues - actually, when you come down to it, there are a manageable number of levers to pull at the end of the day. If you look at the recommendations that we brought forward, which were a change in the state pension age, a change in the indexation of the state pension, the introduction of the new form of pension saving, private pension saving, you can write them down on three pages and you can legislate to do them, and, once you have legislated to do them, provided there is a cross-party consensus that it is fixed, you can have reasonable confidence that it will happen; whereas there are other issues of public policy, in the Health Service above all, which are the very complicated management of over a million people who have to deliver things in a very complicated fashion, and there just are not a small number of choices to be made there. So, I think the first point to make is probably that where we are dealing with managerial delivery problems, those are not, I think, amenable to handing it to an external commission and coming up with " the answer on which we will legislate" in the same way that pensions policy might be, because the answers are not legislative initiatives. So, there are some areas of public policy for which, I am saying, clearly this model does not work. Whether there are areas where it does work, it may be, but I have not thought that through fully.

Q365 Chairman: I wonder how this relates to the way in which you operated. I was struck, looking at your background papers, that you said adamantly that you were not going to take written evidence, for example. If you had been a royal commission, which would be another model which we used to use and do not use any more, of course, you would have taken volumes of evidence from everybody in sight. I wonder how Christine feels about this. I sense reading it that you kind of knew how you were going to operate, you knew what the issues were, you did not want a lot of superfluous baggage and you identified these analytical blocks that you were going to work through to a conclusion. It was a very particular kind of process that you implemented, was it not?

Lord Turner of Ecchinswell: It was, and let me comment on that, and then Christine may want to comment on whatever it looked like from the outside. It is not quite true that we never had a written submission process. We did have a written submission process between the first and second report. After we produced the first report we said, "Here is our description of what we believe are the facts of the case and what will occur if nothing happens, and here is an array of the menu of things that we might be thinking about over the next year", and at that stage we did invite written submissions and we wrote out and alerted everybody who had been on the written submission list to the Government Green Paper of 1998, and I think we received, in total, about 150 written submissions, which were all clocked by the secretariat, et cetera, and, indeed, we had oral evidence sessions with Christine, NAPF, ABI, about ten or 12 major institutions came along; so we did do it at that stage. What is true is that we did not begin with that process, that for the first year and a half we basically ran an analytical process. We did publish, after about four months, a description of what that analytical process would be, and we asked for comments at that time from what we called "interested and expert parties" about that analytical process. We said, "In order to for us to establish the facts, we think we will have to look at these seven blocks of analysis. These are the sub-points that we will be doing. If somebody thinks we are missing a whole subject, please tell us, but this is what we are getting on with." I think that process of making it analytically driven to start with was absolutely essential, and if this model is applicable in other areas of public policy, I think it is something to learn. I think if you start with asking for huge numbers of written submissions your secretariat can get bogged down, to be blunt, with the bureaucratic and to a degree political (with a small "p") process of being polite to hundreds of people who believe they have a valid point of view where, frankly, beyond about the first ten or 15 who know what they are talking about, there is diminishing marginal utility of the other contributions. That may seem a very technocratic and elitist thing to say, but I think it is the truth of the situation, and I think you need to make sure that a secretariat does not get bogged down with that and that you actually get on with working out some facts. The final thing to say is I think it is important to remember some of the things we did in that first year and a half on facts. We worked out what was happening to pension saving in the UK. The answer is it was not what Office of National Statistics, Blue Book, National Income and Accounts said. The Office of National Accounts, Blue Book, said that pension saving had increased from about four per cent to seven per cent of GDP - that is the figure, if you looked at the national accounts book, the most fundamental book of UK statistics - and when we had reworked it, the figure was about four per cent, it was not about seven per cent. You are never going to get at that by a written submission, you are going to get at that by a team of people who are setting out on graphs what is occurring and then looking at it and saying, "Hang on, that figure does not tie with that figure, so we had better drive down, and drive down, and drive down, and spend hour after hour with the guys at Office of National Statistics getting incredibly detailed pages of print-outs on the table to work out what is going on here." I do think there are areas of public policy where we proceed too rapidly to the sharing of points of view before establishing the actual facts of the situation.

Q366 Chairman: Christine, how was it for you?

Ms Farnish: Let me briefly comment on what it was like to be on the outside of this process, representing an organisation with a huge stake in the process and the outcome. I think it worked very well, because it was done in stages and there were opportunities throughout the process for organisations like us to input, to meet the Commission, to submit evidence. We all knew who the Commissioners were, their doors were never closed, you could phone them up, you could write to them. There were plenty of opportunities where Adair and his fellow Commissioners gave presentations or spoke in informal meetings or other set-piece lecture type occasions, where we could hear the way the thinking was progressing and then make a contribution. So, it was relatively informal but there was a very good structure to it. The great thing was that the first piece of work that was done was a thorough evidence-based analysis of the problem, which was the first time that had been done in such an intensive way right across the whole pension system, with the results out their in the public domain for debate, for challenge, for people to agree that this is the scale of the problem we are facing. After that had been established, you could then move on to think about the policy options and the possible solutions; and I think that staging of the process was incredibly helpful in moving everybody forward and coming up with some good answers to these difficult, long-term problems. One of the reasons why this sort of process worked for pensions was that we are talking about something where there is a significant latency, in terms of you take a decision now but often it does not have an impact for many decades down the track. I think it is very difficult in view of the political process and the way in which policy-making works for that to be done well without periodic opportunities to step back and look at the overall impact and the long-term consequences.

Chairman: I know that we want to ask you some questions about that, but I will bring colleagues in.

Q367 Kelvin Hopkins: Lord Turner, was it to an extent because you were a safe pair of hands? You were a McKinsey man, CBI, close to Downing Street. A commission in your hands would not frighten the horses. You were the right person for the job. You would not worry them by coming out with anything too radical, especially with John Hills and Jeannie Drake, who might be pushed into or choose the more radical route?

Lord Turner of Ecchinswell: No, I do not think so. I do not think that is it. I think that is a strange interpretation of an environment where we spent several years of big debates about whether we had gone beyond our terms of reference. I think cautious chairmen of commissions read their terms of reference at night each day before going to bed to make sure they have not exceeded them. I think I can say, in retrospect, whatever the terms of reference are, our challenge was to deal with the problem. Also, I do not think it is a correct description that John or Jeannie would have come up with something more radical. It depends what you mean by "more radical" in this environment. You would have to ask others why they selected me, but I think I have a reputation for saying things as they are and for taking the analysis wherever the analysis goes and arriving at whatever the conclusions the analysis leads me to. I happen to think that is the McKinsey training. The McKinsey training is a bizarre thing called fact-based analysis, which is if the facts take you in a certain direction you end up in a place where you did not know you were going to be to start with. I think, in some ways, it is the opposite of a safe pair of hands, because you do not know where you are going to end up when you start.

Q368 Kelvin Hopkins: I may say, I was one of those who were pleased with the direction of travel which your report has indicated, despite some criticisms. But were any differences evident between, shall we say, Number 10 and Number 11 Downing Street? Clearly at a later stage there appeared to be some tension, and, indeed, it is suggested that the stance taken in the Government White Paper was finally decided by the Prime Minister, effectively pushing the Chancellor into a corner?

Lord Turner of Ecchinswell: I do not think it is terribly useful for me to go through the details of what has been extensively discussed in the press. I think there was probably right at the beginning a slight ambiguity within the terms of reference as to whether we were only going to look at private pension savings or at the state pension system as well, and it has been inferred by many people that that may have reflected a slight difference of point of view between Number Ten and Number 11 to start off with. We very quickly arrived at the conclusion that it was impossible to end up with sensible conclusions on the private pension side without also commenting on the state side, and we went through a process that resulted in the White Paper that we ended up with. I think that is all I can say.

Q369 Kelvin Hopkins: If one could take a more historical perspective, it seems to someone like myself, who takes a more left view of pensions, that for two or three decades we were pushing in the wrong direction, the super tanker, one might even say the Titanic, was sailing towards a couple of icebergs and these were starting to become more evident, even to the Government, and something had to be done, something sensible had to be done. It was not a question of playing politics, but something had to be done with the ship that was sailing into difficult waters. Is that a fair description?

Lord Turner of Ecchinswell: I think there was a correct decision made at the time of setting up our commission that we needed to step back and look at the totality of our pension provision in the UK, because I think, as our report set out clearly, UK pension policy, with remarkable continuity between the previous Conservative government and the Labour government until now, has been based upon some propositions which when you stepped back and looked at them turned out not to be true. The proposition has been that the state would be able to do less and less for the average citizen in terms of pension provision because private pension saving would voluntarily grow to fill the gap. That was the overt policy which lay behind contracting out, behind approved personal pensions, behind the link of the BSP to price indexation under the Tories, and it remained the proposition of public policy in the 1998 Green Paper, which overtly said that the balance of pension provision would shift from the state to the private side. The crucial thing that we did in the November 2004 first report was say that this fundamental proposition that voluntary private provision is growing and will grow to fill the gap left of a retreating state just is not factually correct, so we had better face that and we had better work out what we are going to do about it.

Q370 Kelvin Hopkins: People like myself are very pleased indeed that you turned the Titanic away from the iceberg at the last minute it seems. But projecting what you said, would it not have been better to start where Barbara Castle and Rooker-Wise had left off and move on from there, instead of going through the two decades of pain with attempts to create private provision which were destined to fail?

Lord Turner of Ecchinswell: My judgment on that is that correct pension solutions are political economy dependent. What I mean by that is I am a great admirer of the Swedish pension reforms, which are a reasonably generous form of "pay as you go", earnings-related pensions system provided by the state, but that is not what we came up with for the UK. If I had been Chair of the Swedish Pensions Commission I would have ended up with something different. You have to live within an environment as to what is the attitude to the overall role of the state and the overall level of taxation, and we ended up believing that in the UK there will only be the political support for providing a good, adequate flat-rate pension provision and not an earnings-related "pay as you go" tier. My interpretation of what happened in the 1970s is that British pension policy got committed, on the basis of an apparent but not real cross-party consensus, to trying to do earnings-related pensions on top of flat-rate. There was, however, no political consensus about the extra tax that that would require, and we have spent the last 25 years doing two things badly rather than one thing well. We have had an inadequate and increasingly means-tested flat-rate pension and, on top of that, we have had a complicated earnings-related pension, so complicated and so salami sliced by changes that nobody can understand what it is. What the Commission did to a degree was, at the end of the day, to say, "We have got to go round in a circle and we have got to go back to the state only does flat-rate pension provision but it at least does that adequately." In some sense it is almost back to Beveridge, as John Hills has suggested, rather than back to 1970s Barbara Castle. The Rooker-Wise amendment is, of course, the particular thing of the earnings indexation, but the other bit of Barbara Castle in the 1970s was the introduction of SERPS, which interestingly passed through the House of Commons with almost total support but without really the established consensus about the level of taxation which was going to be required, or contributions which were going to be required, to pay for SERPS, and I think that is part of the story. One of the reasons why we have ended up for the last 25 years linking the basic state pension to prices was to make way for SERPS expenditure within constrained public expenditure, and we have sort of called a halt to that game.

Q371 Kelvin Hopkins: Finally, you have been subject to a certain amount of criticism for not going far enough, quite rightly, by people like Ros Altmann and by the National Pensioners Convention and one or two others. But to an extent was what you came up with in the end a political balancing act? Did you not have to throw some red meat to the Chancellor in the form of deferring the restoration of the earnings link (raising the pension age and a number of other things) to disguise the fact that you were actually moving away from private provision back to sensible state provision?

Lord Turner of Ecchinswell: First of all, the delay of the indexation from 2010 to 2012 was a decision made by the Government in the White Paper. It is not something we set out, though we did discuss the possibility. There is no magic about 2010, you could delay it a bit, but we also clearly said there is a point beyond which you delay it where you undermine the architecture. Were we operating within a political reality? Yes, to a degree, but I do not think that is just in relation to the present Chancellor. I do think that some of those who say to us, "Why were you not more radical? Why did you not propose a citizens' pension now at an adequate level?" have to answer the question, "Okay, that is very fine, but where are you going to get one per cent of GDP from in 2010?" The easiest thing in the world for an external commission is to say that, looked at from the point of view of pension policy, we would like, within the next five years, another one per cent of GDP devoted to it, and then the guys who do defence policy can say the same, and the guys who do health policy can say the same, et cetera. We decided we were not going to do that, we were going to propose something which we thought was doable within a reasonable set of public expenditure forecasts. So, to that extent, it was not giving red meat, or any other form of food, to the Chancellor, it was simply living in the real world. On the state pension age, that was not a give away to the Chancellor. I think that is an absolutely core and fundamental and sensible piece of policy. There is no way that it is possible to afford a pension rising in line with earnings at a fixed state pension age in the face of the increase in life expectancy that is occurring. It is unaffordable and it is unfair between generations. The fair principle between generations, the one which has a sense of intergenerational solidarity and fairness, is that each generation should have roughly the same proportions of life spent paying into, and receiving from, a state pension. Let us be clear. That was not something which was political, that is an issue of principle which we strongly believe in.

Q372 Chairman: I said we were going to do the process of making pensions policy as opposed to pension policy.

Lord Turner of Ecchinswell: I am sorry.

Chairman: No, it is not your fault. We shall cross the line, I am sure, endlessly, but we should nevertheless perhaps try to preserve it.

Q373 Mr Burrowes: What could your Commission offer to the table that could not have been provided DWP internally or the Strategy Unit in the Cabinet Office or, indeed, by Lord Birt, as the Prime Minister's strategy adviser, doing the Blue Sky thinking making sure they had thought about pensions as well?

Lord Turner of Ecchinswell: I think the particular thing that a commission of our sort did was the sort of, to a degree, Blue Sky thinking free from short-term Civil Service constraints, but in the public arena rather than privately. If you compare it with two alternative approaches, I think if you simply do Blue Sky studies, however good they are, however fact-based, however, analytical, but they are literally just private reports for the Prime Minister, there is a limit to the extent to which you will build public consensus. There is also a limit, frankly, to which you will learn from people who know things. Christine described earlier that, although in the first year and a half we did not have a formal written consultation process, I had probably spoken at three or four NAPF conferences or meetings, John or Jeanie did the same, and Christine would come to informal meetings with us. There was a continual interchange of emerging ideas with all of the groups which, as it were, had a major interest or which had a major policy expertise in this area. I think that is very important, because ideas are developed by sharing your initial ideas with people who know something about it and arguing them out. So, that is compared with the Lord Birt, Blue Sky thing. Compared with the Civil Service, I think government always has a problem, and if you go back many decades, the history of the British government, probably of all governments, involves an attempt to create devices to get round this problem, that civil servants to a degree have to defend the existing governmental line, and the Government line, particularly for a government which has already been in power for six or seven years, necessarily involves defending the policy which has been in place for the past six or seven years, so you end up with an institutional tendency for defence. One of the things that struck me looking at the Civil Service, DWP and other areas, is how much very intelligent, capable energy is devoted to answering parliamentary questions, but answering them in a fundamentally defensive fashion. Let me give you this very specific example. I mentioned earlier the fact that the Office of National Statistics' figures were wrong. The first inkling that there was something wrong was in questions which were put forward by David Willetts back in about 2001, and if you look at the institutional reaction of DWP at that time, it was denial. It was, "We must now get a clever civil servant to write us an answer that proves that the figures are correct." It was not, "That might just trigger a thought that the figures are wrong. Let us take our three brightest, clever people, send them over to ONS for the next week and only let them out of the room when they have torn every figure apart and made sure that the figures are right not wrong." One of the things that government has to do, but also businesses have to do, and I think the military have to do, is create institutional space for people whose job is not to defend the existing line, who faced with criticism do not say, "Let me prove why I am right", but faced with criticism say, "We had better check out whether that criticism is right or wrong", and so external commissions are to a degree an institutional device for allowing governments not to be defensive of existing established policy lines.

Q374 Mr Burrowes: Is it not also a device for allowing the Government to put it out to an independent commission and suck and see the public reaction and then reject it as well?

Lord Turner of Ecchinswell: It can be that as well. There can be a process of political management. Let me give you one completely overt example on that. I have to say that within about the first three months of my time at the Commission it was obvious to me that the answer would have to involve some combination of a more generous, less means-tested state pension but that the only way that that was fair or affordable involved an increase in the state pension age. That was not a dramatic insight. If I had sat down with Christine on day one----

Ms Farnish: We had made that proposal in 2002!

Lord Turner of Ecchinswell: That was obvious to us, but it was obvious to us very early on. But we worked in an environment until a year ago where not a single politician would say publicly that the state pension age was going to have to go up, though I have to say, quite a lot of them would it say to me privately, and so you are to a degree used as a device for telling society the obvious truths of what is going to have to occur. Where politicians are caught (and this is not meant as a criticism) they are caught in a systemic trap that they cannot be the first to say it. Let's be blunt, if three years ago any one of the political parties had said the state pension is going to have to go up, the other parties would have attacked them for it. They would not have said, "Yes, that does strike us as a fairly essential part of the solution." They would have used it for short-term political advantage, and a commission is sometimes used as a way of helping public policy to progress to the obvious in a way that antagonistic party politics makes it very difficult to do.

Q375 Mr Burrowes: How much of your Commission was in a sense you leading the way in forming public opinion? You say that you wanted to gain a consensus. You seem to align yourself with it and in that sense there is a suspicion there of it becoming taller than the political process in a sense. Can you say whether there was any coordination, for example, with the Government's national pensions debate and whether really you are there to help them in their communication strategy as opposed to perhaps robustly challenging their thinking and public thinking?

Lord Turner of Ecchinswell: Let us be clear, that by the time we got, for instance, to the National Pension Day in March this year, the National Pension Day in March this year was essentially a consultation around the proposals that we had made in the second report; so it would be pretty unlikely that we would be sitting there saying, "We disagree with these proposals put forward", because they were the proposals that we had put forward. That was a government process of consulting on our proposals.

Q376 Mr Burrowes: You say you wanted to gain a consensus. How far do you see your role to be able to just increase people's understanding and allow people to come to an acceptance of the way forward, and how far did you want to lead the way?

Lord Turner of Ecchinswell: I am not sure there is a firm distinction there. We had an inkling originally, and then slowly we grew to the point of view that there would have to be both an increase in the state pension age but that the pension that you get at that later age should be linked to earnings not prices. Then, having intellectually arrived at the idea that that was a required part of the solution, we were continually involved in the process of trying to convince people that that was a required part of the solution. So, you are building a consensus but you are building a consensus around something that you have become intellectually convinced of, and we were doing that at the time of the second report and we were doing it publicly, we were doing it privately. One of the things we did do after the first report was that we did have public meetings, completely open public meetings in Belfast, in Cardiff, in Edinburgh, and, I forget, there was one outside London in England - because one of the other commissioners did that I cannot remember where it is - but at those we were deliberately, for whoever turned up, setting out figures on what was happening to life expectancy, what would happen to the sustainability of the pension system if we did not increase the state pension age, but also how far the value of the basic state pension was going to fall if we did not link it to average earnings. We were trying, by setting out facts, to make people go through the same intellectual process that helped them arrive at the conclusions that we had arrived at. One was trying to create a consensus around a point of view that one has arrived at intellectually.

Q377 Mr Burrowes: If you can look in hindsight at the processes, is there anything in the process of this kind of thinking, if you were able to start again, that you think could be improved, that you would wish to have done better, perhaps also drawing upon the experiences in the private sector and the voluntary sector and perhaps bringing Christine in in terms of the way that this kind of strategic thinking can be done?

Lord Turner of Ecchinswell: In retrospect I would not change much, because we feel that the result has been a successful result and, therefore, once you have had a reasonably successful result, you tend to think the process was a reasonable one. There were lots of twists and turns along the way. We did not know there were going to be bits of the process which we ended up with, but I really would not change fundamentally, I think the structure of the team, the number of civil servants we had on the team, the division between the first report, the second report and the final report, I would do it again roughly in the same shape, if I had to do it again.

Ms Farnish: I think it went very well and we were extremely lucky, but some of the reasons why it went well were, first of all, the Commissioners did manage to flex their original terms of reference. One of the key things is getting the terms of reference right at the outset and ensuring that they are broad enough to allow the whole system to be looked at. One of the problems that has bedevilled pensions in the past is that the state system has been looked at separately from the privately funded system quite often, with different bits of government involved, and there has not been a joining-up of thinking. The way in which the two parts of the system interact has often not been considered fully. So, that was very fortuitous, and maybe with a different Commission, people with less strength of mind and strength of intellect and strength of vision, we might not have had that at the outset. Then there was the real determination to get to the bottom of the evidence and, where there were dodgy statistics, to make sure that we got good evidence, and that, again, was fortuitous. It is possible that you could have had the same process and a different group of people and that would not have happened. Then the decision to do it in stages, which I think was a very wise one. They took people with them by first of all laying out the evidence, which was pretty irrefutable, but it was the first time that rather unpalatable picture had been painted that took us through to 2030, 2040 and showed us how weak our system would be unless we did some quite difficult things. After having got everyone to that level of understanding, you can then move on and think about the difficult things that then need doing and then get to that point. We were lucky, and there are lessons to learn as to who is in charge, how the terms of reference are framed, and making sure that the process is staged in that way.

Q378 Chairman: Is it the case that different commissioners would have arrived at a different conclusion, or is it the case that these McKinsey facts lead inevitably to one conclusion?

Lord Turner of Ecchinswell: I think Christine is right to stress one thing. I think our terms of reference to begin with were ambiguous and I think it would have been possible that a different commission might have felt more constrained by the initial terms of reference and might, therefore, not have done a wide enough look at all of the decisions. I think, if I had to change one thing, I would re-change the initial terms of reference to say, "Look at the totality of the pension system and tell us what you think ought to change." I think it would have been an easier way. We would have avoided some debates along the way if it had been clear that that was the sensible terms of reference to start with.

Q379 Chairman: Leaving that on one side, would other commissioners have reduced it?

Lord Turner of Ecchinswell: If you approach the facts of what is happening to life expectancy, what is happening to the spread of means-testing, what is happening to the cost, I think it is highly likely that any independent commission with a reasonable spread of backgrounds and an intellectual process of analysis would have ended up with some variant of, "The state system has to be simpler, more generous, less means-tested at a later age." I think you might well have had a different commission which might have gone more in the direction that Christine would have wanted and Christine's organisation would have wanted, which was to unify the basic state pension and the state second pension into one pension immediately. So, there are details, which are set out in chapter five or chapter six, of some of the trade-offs about how specifically you go towards the end point, and I think you could have imagined a different commission which might have taken a slightly different point of view on whether its job was to decide to define the ideal world or to live within some implicit political constraints. It might have been different in detail, but I am pretty sure that anybody who had set about it with roughly the same process of action would have ended up with, "The state system has to be more generous, less means-tested, as fast as possible, simpler and at a later age." I think we would have definitely got there. On the private side, would one have necessarily ended up with automatic enrolment? I think that would probably be where one would have gravitated towards, simply because the more you look at it there are problems with both compulsion and full voluntarism, but that may have been the unpredictable bit of it, that on the private side you might have imagined other people stressing more: "Let us do strong encouragement through tax relief", et cetera, rather than going the automatic enrolment route, although I think what was intriguing about automatic enrolment was that once we came across it as an idea and began to share it as an idea, it very rapidly got a lot of support from an awful lot of parties.

Q380 Mr Prentice: Are we going to have a Turner Mark II in 20 years time because the assumptions that you have made have not turned out to be correct?

Lord Turner of Ecchinswell: What we said in the Pensions Commission is that we did recommend there should be some sort of successor body or periodic analysis, specifically to make sure whether the assumptions are correct and not, we believe, to then overturn policy entirely but to keep a continual set of adjustments on the route. Let me point out two aspects where that may occur where we just do not know whether our assumptions are going to be right or not, but where the key thing is to adjust in the light of emerging experience. One of these is life expectancy. We talked about the state pension age going to something like 68 by 2050 as being what was required on the existing forecast of life expectancy, but we know we have got the life expectancy forecast way wrong in the last 25 years. Twenty-five years ago we were saying it would now be 15 years for a man aged 65, now it is 19. We could well be that wrong in future, but, even if we are wrong, what we should be adjusting is the detail not the principle. The principle on the state pension age is that the state pension age should adjust so as to keep roughly stable the proportions of life spent paying into and receiving a state pension. If by 2025 we realise that, through genetic breakthroughs or other aspects of science, we are looking to life expectancy for a man aged 65 in 2040 being not 23 years but 28 years, then we will have to take the state pension age higher at that time. Our idea was that what one should be doing is always telling each generation about 15 years in advance what their state pension age is, but it is the principle that is important.

Q381 Mr Prentice: I understand that. What I am trying to get it is to what extend is it possible to predict the future? In your work plan, the one that you published in June 2003, the seven blocks that we have heard so much about, it is not just increasing life-span but you have got to make assumptions about demographics, you have got to make assumptions about migration. The nature of the demography of the United Kingdom has been transformed in the last quarter century, and what kind of projections can you reasonably make on that? While I am at it, you talk about labour force participation, we have got a growing Muslim population in this country. I think about 30 per cent of Muslim women are in the labour force, compared to 70 per cent of white women. What kind of projections did you make specifically on this about the participation of Muslim women in the labour force in a quarter of a century's time?

Lord Turner of Ecchinswell: We did not make a specific forecast.

Q382 Mr Prentice: It is in your work plan?

Lord Turner of Ecchinswell: We did not make a specific forecast at the level of different participation rates. We did cast an eye over the issue of whether there were major differences in pension provision by ethnic groups, et cetera, but it was not something which formed a key part of the forecast. Let me return to the demographics. There are three aspects to the demographics: what happens to longevity (life expectancy), what happens to the birth rate, what happens to immigration? On longevity what I have said basically is you set out a principle and if the facts change, the details change, which is why we do not think it is necessary to declare in advance what the state pension age will be in 2050, you have a principle. The other two factors that could change are the birth rate and the immigration rate. If the birth rate and the immigration rate were significantly higher than we suggested, and on that we did no scenarios, we simply took the GAD (the Government Actuaries Department) principal forecast for birth rate and immigration rate, then it will be the case that the affordability of the pension plans will be greater than presently it seems, that the increase in state expenditure on pensions will be less than the 6.2 % to 7.7% we forecast because GDP will be bigger. On the other hand, there will be other social problems for society. There will be bigger school rolls, there will be bigger expenditure on education, there will be more complicated debates about transport congestion and housing and all sorts of other tensions. And so I suspect that within any reasonable bound of what happens to immigration rates or to fertility rates, the basic structure of the pension system will make sense. I think it is extremely unlikely that those will increase so much that we say, "Oh, if we had realised we were going to have so many workers, we would have afforded"----

Q383 Mr Prentice: I understand.

Lord Turner of Ecchinswell: I think it is unlikely, and we did in the second report show that you really had to have radical changes in immigration levels to change those public expenditure forecasts significantly.

Q384 Mr Prentice: You are telling us that your report of the principles will stand the test of time, but they may need tweaking because you get different data streams coming in and so forth?

Lord Turner of Ecchinswell: Yes.

Q385 Mr Prentice: You have talked about fact-based analysis, you have talked about dodgy statistics and you have talked about the Government Actuary. We have just had the Government (and we will be coming on to this in a few minutes) kicking the ombudsman's recommendations into touch because they could cost too much, like 15 billion. After what you have told us about dodgy statistics, what weight, what credence should we give to the Government's statistics in this area?

Lord Turner of Ecchinswell: The issue of the ombudsman's report is not one which was in the remit.

Q386 Mr Prentice: You must have a view on it.

Lord Turner of Ecchinswell: Well, if I do it is an entirely private point of view, which it is not appropriate for me to put forward. All I can say is that we believe that the facts and figures in the Pensions Commission are as close to being certain as you can get and that the scenarios on which we have forecast the future, we have set out where are the key uncertainties that would change policy, and we believe the principles would be robust in relation to any reasonable variation in the facts which will emerge.

Q387 Mr Prentice: I want to bring Christine Farnish in on this one?

Ms Farnish: I wonder if I could make a comment on your previous question before we come on to the ombudsman's report.

Q388 Mr Prentice: I have forgotten what my previous question was?

Ms Farnish: It was about might we need another review in 20 years' time. I think it is most important that we do not sit back and wait for 20 years to monitor progress with this reform package: because the package is a complex one, it is still going to keep a lot of complexity in the system and it is one where the reform process is going to be rolling out gradually over a number of decades before we get to Nirvana, and there is quite a big political risk, if I could put it like that, in ensuring that the reforms proceed in the way most people would now like them to and do not get side-tracked by short-term events or other priorities that successive governments might face. We think that it would be very helpful to have some sort of mechanism, perhaps a regular review process that has some continuity built in, that monitors the progress of the reform package, makes sure that fairness and affordability and the other high level principles are sustained, with a review body that future governments would need to consult before they proposed any further tweaking of the regime in an open and transparent way so the advice back from this body, which would be----

Q389 Mr Prentice: An upstanding commission of wise people?

Ms Farnish: Yes. Not a big new bureaucracy but something that can be called upon and regularly, maybe every five years or so, looks at the way in which the system is going. I think Adair is right that on the state side it looks as if the overall shape should not need to change too much, touch wood, but the funded side, with the new automatic enrolment defined contribution savings system, is untried and untested. We do not know how the market is going to respond to that, we do not know the numbers of people who might stay in the system and save for their retirement and we do not know what impact it will have on existing provision. That really does need to be quite carefully monitored.

Lord Turner of Ecchinswell: I agree.

Q390 Mr Prentice: That brings me on to this point about people's behaviour when it comes to pensions. I find it all very complicated, and I am sure for most people out there they find it quite daunting trying to make informed decisions about future pensions. You have been involved in this. We have got this controversy raging with the ombudsman's recommendations in the report. Where do you stand on this? Do you think the Government had an obligation to make it quite explicit that its view on how people should save for their retirement and make the information clear, understandable in the expectation that people will follow it?

Ms Farnish: With any pension system there are risks. There are even risks with the state pension. I noticed when I got my statement from the Pensions Service a few months ago - I asked for one, I thought it was the sort of thing I ought to do - there was this nice little disclaimer at the bottom saying, "Please note, this is what it looks like at the moment, but this could change subject to changes in the law." So there is a risk with what I am going to get from the state. There is also a risk with what I might get with either a company pension scheme or a personal pension. There is always a risk; nothing is absolutely cast-iron. That point is not very often made and it should be. However, there is obviously a need to encourage and get more people to save for their pensions, and so this is quite a difficult area to get right. I think, overall, millions of people have benefited from being automatically enrolled, as they used to be in the old days, into company pension schemes and other good ways of saving for retirement without them experiencing a down side. Unfortunately, that is not universally the case. Your pension, if it is a defined benefit sort of pension, is only as good as the body which is sponsoring it which, for many people, is their employer, the company sponsor (the other bit of the DB pension system is the state).

Q391 Mr Prentice: What I am trying to say is have people been let down by the system but they have not had the information put to them in a way that they can readily comprehend? Have they been let down?

Ms Farnish: I think the system has let down those people who now find themselves in the very difficult and distressing circumstances that the ombudsman's report covered. Yes, the system has let them down. I think it is very difficult to lay the blame at any one party's door, because no-one was then talking about the risks in the system. However, the Government did pass legislation in the 1990s and then regulated increasingly the private pension system but gave the impression, generally, that pensions were safe, pensions were secure, pensions were protected, that pensions were funded to a minimum standard. That was the general sense out there which ordinary people would have taken and it would not have been reasonable to expect them to take any other sense, I think. Even if pension schemes at the time had disclosed pages and pages of small print about the risk, there is the real question as to whether anyone would read and take notice of that, because we know that sort of disclosure does not work particularly well elsewhere in the retail finances services market.

Mr Prentice: That is very clear. Thank you.

Q392 Chairman: Are you saying there that the Ombudsman was right?

Ms Farnish: My personal view is that it is most unusual for a group of people to have suffered this sort of loss in these sorts of circumstances and not to have any recourse to redress. I think general feelings of fairness would suggest that something needs to be done. It is difficult for me to see who might be able to put that wrong right other than the Government. I think there is an issue as to the level of redress that might be appropriate. I note that other compensation systems elsewhere in the financial services landscape, if you like, which cover contingencies of insurance companies going bust, banks going bust, investment funds going bust, advisers going bust, never compensate to 100 per cent; it is always a proportion of the loss that is compensated. It is a fine judgment and it is regulated, but it is generally a reasonably fair proportion. I think the difficulty in this case is, again, one of the bits of legislation that the Government introduced back in the late 1990s. Under the Pensions Act there were regulations on the priority order for who got what when a company went bust, and the pension scheme was left under-funded. One of the reasons we have seen some of these dreadful injustices was because that priority order was not a fair priority order; we can see that now with hindsight. It did not allow a fair sharing of the assets that were left in the scheme, for whatever reason. I guess in those days nobody thought schemes would become as under-funded as they did once the circumstances changed and we were in a different economic climate.

Q393 Chairman: Lord Turner, you told us at the beginning that you had a reputation for telling it like it was and yet you have developed a bout of coyness in relation to the Ombudsman's Report.

Lord Turner of Ecchinswell: Let us be clear on our approach to that. We were asked to look at the design of the pension system going forward. The role, to be blunt, of voluntarily provided defined benefit schemes in the private sector going forward is going to be very small. Certainly the final salary scheme is going to be primarily a public sector arena. Our job is to define the system for the future. There are then a whole set of issues about what is received from the past, on which, although very interesting and we might be interested in as private citizens, we did not, as a Commission, comment. We did not comment on the issue of women who had perhaps been wrongly advised, or not, to take the option of the lower national insurance payment and the lower basic State Pension that they now receive, because that is, as it were, a legacy problem inherited from the past. We have not been involved in the debates about the set up of the Pension Protection Fund. We have not been involved in the issues of compensation from the past. Our attitude has been to look to the future system, the system which will exist over the few decades. It is not to deal with all the problems that exist from the past, whether they be problems for government, for individuals or for corporates. In the course of this, I would meet with many business people - because I am a businessman as well as in public policy - and they would say, "Tell us what you are doing on pensions policy" and then they would say, "What is your advice about the management of our pension liability deficits and the FRS17 accounting treatment?" I would say, "Actually, we really do not have a point of view on that. That is a separate problem." Although I said our terms of reference would have been best wider to start with, I do not think they need to cover all of the problems.

Q394 Chairman: I was not asking you to pronounce as the Chairman of the Pensions Commission; I was asking you to pronounce as someone who is neither the government nor the Ombudsman but who has given a lot of thought to pensions issues.

Lord Turner of Ecchinswell: Maybe I will do that in a year's time, but I think at the moment anything I say in this forum is not seen as a private statement, it is seen as the statement of the Chairman of the Pension Commission and it will get coverage which relates to that, so I would rather not.

Q395 Chairman: What about the argument that says if people cannot trust the role of government in all this, as the guarantor of this system that is being established, then the whole thing is not worth bothering with, and the question of trust is at the heart of this question about responsibility, as Christine was saying, in relation to what the Ombudsman has said.

Lord Turner of Ecchinswell: I will make a generic statement: It is clearly important, looking forward, that the Government creates an environment in which it is making clear what is promised in the pension system and what is not promised. That will be very important, for instance, within the National Pension Savings Scheme. Except where people invest in real Government bonds, the return will not be guaranteed, and we should studiously avoid in the National Pension Savings Scheme and the language which surrounds it the use of words like "guaranteed" except where there is a guarantee. The only form of funded investment where the Government gives a guarantee is where the investment is in real indexed Government bonds held to maturity. That is the only circumstances in which you can buy an investment off the Government and be told definitively in advance: "This is going to give you x per cent real over the next 30 years." Given the history of the past, looking at both the Government and at the retail financial services industry, we do have a legacy which clearly shows up in public surveys of a distrust of both government and of the retail financial services industry and it is going to be very important, going forward, that we are absolutely clear and that we only promise those things which can be delivered.

Q396 Chairman: When Government literature talked about safety, protection, guarantees, they were wrong to do so.

Lord Turner of Ecchinswell: I think I am going to avoid that question and just stick to the general point I have made.

Q397 Mr Prentice: I was intrigued, interested in what you were saying about the DWP civil servants defending the line, locked into a position, and they do not want to stray from there. Most Labour MPs were locked into the line as well, that there was not going to be a link between pensions and earnings because we wanted everything to be targeted, targeted on the poorest pensioners. Now we have done a belly flop, have we not, and we have only done it because of the Turner Commission?

Lord Turner of Ecchinswell: I think that is probably not true entirely.

Q398 Mr Prentice: I think it is.

Lord Turner of Ecchinswell: Within the Labour Party, and indeed within the other parties, there was always a debate about means testing. I think there was an acceptance of the logic - and it was a logic that we supported - that in 1997, faced with the existence of pensioner poverty, faced with the fact that the Government was clearly committed to tight public expenditure limits for the first two years and ongoing, that the only way to deal with the inherited problems of the past, in terms of people who just did not have enough pension income, was on a means-tested top-up basis. Therefore, the debate about means testing has never been means testing good or bad; it has been how much means testing and whether you can have too much of something which can be a sensible thing up to a certain level. I think that debate has always been there. Certainly if you talk to Frank Field, Frank has not been constrained by his membership ----

Q399 Mr Prentice: Yes, but I am talking about the briefings we get as Labour MPs from the Treasury.

Lord Turner of Ecchinswell: Since I am not a party to those on either side -----

Mr Prentice: You know what is happening. Anyway ....

Q400 Julie Morgan: I am interested in operating in the political reality, the blank sheet that you say you started with. I think this has been a successful outcome and I think the proposals for women are particularly welcome. Women MPs, in particular, have been lobbying government ministers for years to do something about women's pensions and the position in which women find themselves in retirement. I wondered if you ever had any steer at all from government ministers: "Oh, you must do something about women."

Lord Turner of Ecchinswell: I think there was a process of agreeing early on that the issues of the pension system as it related to women had to be there on the agenda. That was not clearly in the terms of reference but it was in our work plan and there were processes of discussion which led to the fact that had to be. Again, in the early days of exploring and understanding what all the issues were, it was clear that there were very major issues that related to women, and that was obvious from all the lobby groups that made that argument to us. Of course, Jeanie Drake herself had been, through other institutional roles, deeply involved in those debates and therefore was in a very good position to make sure we were well aware of those issues. I think there has been a slowly gathering process over the last two to three years of general political support for the fact that, whatever we came up with, people were expecting something relating to women and there was a willingness to accept that there would have to be a shift in policy to deal with that. If you look at the statements that Alan Johnson made when he was Secretary of State and, in particular, that David Blunkett made when he took over as Secretary of State, when he said, "Whatever else we do, we have to find a way that deals with the situation of women pensioners" I think it was one of those where it was always on the table. It was going to be analytically on the table, we always knew we were going to come up with stuff, but it was one of the areas where, by the time we came up with our proposals, we were pushing on an open door and it was clear the door was open. Within the final six months, if you look at where the contentious issues and the non-contentious issues were, the contentious issues remained the indexation of the BSP to earnings, and when; it remained the state pension age; and it remained things like the compulsory employer contribution. The package relating to women had become largely non-contentious by the time we reported.

Q401 Julie Morgan: How did you, in the process, consult women and draw women into the debate? - particularly, say, Muslim women, as Gordon raised.

Lord Turner of Ecchinswell: I think it would be true to say we did not explicitly deal with the issues of Muslim women. Let me draw a distinction here. There are some issues that you can deal with within pension policy design and there are other issues which may affect women or particular groups of women which may manifest themselves in pension provision but you will never solve them by pension policy design. By that I mean that you can redesign the state pension system to make sure that more women are likely to end up with a full basic state pension - and that has been done. We talked at length with the Equal Opportunities Committee, the Fawcett Society and other groups submitted evidence to us. They argued the case to us. That was always part of the debate. If you look at the position of Muslim women however, the fact is, that whatever you do with the pension system, the fact that so few Muslim women are in the workforce will be a problem, because it will make it highly likely, even if they get a full basic State Pension on the improved systems for care and responsibilities, et cetera, that they will have very little provision on top of that. But that is not a social problem that is addressable by pension policy: it is to do with the level of integration into society; it is to do with language skills; it is to do with social attitudes to work et cetera. So it is something that you note on the way through as an interesting issue but not something which, as the Pensions Commission, you can dive off into because the proposals you would have to have to deal with it would be about other areas of policy entirely from pension policy.

Q402 Julie Morgan: Were you satisfied with what the Government produced in the White Paper?

Lord Turner of Ecchinswell: Do you mean particularly on the issue of women?

Q403 Julie Morgan: Yes.

Lord Turner of Ecchinswell: Yes, I think it was a reasonable way forward. We ourselves debated it. If you read one of the sections of chapter five, we debated the alternative merits of two ways forward, one of which was to improve the contributory system but still leave it contributory and the other was to go for a fully universal system. The trade-off there is that, if you go for a fully universal residency system, first of all you have the difficulty of what is the test of residency - and that is not a trivial bureaucratic problem - and, secondly, you are undoubtedly giving at least a small amount of money to some people who do not need it (as it were, the self-chosen non members of the workforce who are married to perfectly rich spouses, et cetera) - and why would you do that, given the limits on public money? - but you have the great advantage of simplicity and cutting through all the problems. If you stick with the contributory system, there are some people you would like to get to a full basic State Pension but whom you will miss. But it is a system that exists, it is a system that has a lot of support among ordinary people: something for something. We talked about the trade-off. We said, on balance, that we would come down on the universal side, but the fact that the Government went with an improved contributory system was something which will produce very similar effects. Indeed, in the early days, there will be a slightly faster progress to women retiring with full basic State Pensions than under our proposals. So we were not unhappy with a way which was not exactly what we proposed but has a similar impact.

Q404 Chairman: We have had some very interesting evidence from you. Could I quickly ask two things, as we end. You said that, if you had been chairman of the Swedish Pension Commission, you would have produced a different report because Sweden is a different country. That prompts me to ask - a quick question, a quick answer, perhaps - what you think a fact is. It seems to me you are making judgments about what we think about the size of the state.

Lord Turner of Ecchinswell: That is true. There are facts like: What is the present level of savings? How many DB schemes have closed to new members? It is an important point to realise that a lot of those facts which we established in 2004 were not previously known. Indeed, people had previously worked on non facts: they had accepted things which were five years old which no longer applied. Those are facts but there are also judgments. You are absolutely right, the judgment that the UK is not suddenly going to be a country which spends nine or 10 per cent of GDP on a pension system, whereas Sweden is, is a judgment about a political economy context.

Q405 Chairman: The Committee went to Sweden recently. The different political context was striking there, but also the complete commitment to find a pension settlement that would endure across generations and across parties. You, doing this work in this country, find an entirely different context. First of all, we are not good at generational stuff. There is a famous quotation from Harold McMillan, talking about pensions policy: "In the long run we shall all be dead so do not let us bother too much as long as we do not spend too much in the next two or three years." We are interested in the short term and we do not do consensus politics. We sometimes say we are going to and then it breaks down at the first touch. When you come and do this kind of work in this political context, how different is that?

Lord Turner of Ecchinswell: I think it is different. At various stages, people have said to us: "As commissioners, you are involved in an impossible task because you are trying to get cross-party consensus for something which lasts. Politics is politics. There is not cross-party consensus because we are in a political environment and policies do not last because every Parliament is sovereign and every government is sovereign and it can throw it over." To which I have always said, "We have got to stop believing that things which are specific to the British political culture are facts of life." The US has a remarkably stable social security system, which has been stable for about 70 years and which has been reformed with cross-party consensus on a number of occasions with the conditions of that reform declared 30 years in advance. Sweden, within the last ten years, has made major reforms to its pay-as-you-go pension system - very major changes, on a cross-party basis, to make it sustainable for the future, with a whole load of automatic adjustment mechanisms, pre-set in advance, so that they know in advance how they are going to respond to changing information about the birth rate or longevity. There is something about the British adversarial parliamentary system which makes that more difficult. There is something about British policy which, empirically, over the last 25 years has not achieved that continuity at all. But, however difficult, we have to try to, because, unless we get a little bit more Swedish or American in our pension policy, we will muck it up again.

Chairman: That is exactly the note on which I think we should end. Thank you very much indeed. We have had a very interesting session. Thank you for speaking to us so directly and helpfully.