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Session 2005 - 06
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Standing Committee Debates

Social Security Benefits Up-Rating Regulations 2006

The Committee consisted of the following Members:

Chairman: Mrs. Joan Humble
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
Boswell, Mr. Tim (Daventry) (Con)
Bottomley, Peter (Worthing, West) (Con)
Buck, Ms Karen (Regent's Park and Kensington, North) (Lab)
Burrowes, Mr. David (Enfield, Southgate) (Con)
Clark, Greg (Tunbridge Wells) (Con)
Cousins, Jim (Newcastle upon Tyne, Central) (Lab)
Curtis-Thomas, Mrs. Claire (Crosby) (Lab)
Devine, Mr. Jim (Livingston) (Lab)
Dobson, Frank (Holborn and St. Pancras) (Lab)
Flello, Mr. Robert (Stoke-on-Trent, South) (Lab)
Hepburn, Mr. Stephen (Jarrow) (Lab)
Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)
Laws, Mr. David (Yeovil) (LD)
Mactaggart, Fiona (Slough) (Lab)
Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions)
Watkinson, Angela (Upminster) (Con)
Mark Egan, Committee Clerk
† attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
Keeble, Ms Sally (Northampton, North) (Lab)

First Standing Committee on Delegated Legislation

Monday 15 May 2006

[Mrs. Joan Humble in the Chair]

Social Security Benefits Up-Rating Regulations 2006

The Chairman: Before we begin, I shall suspend the Committee for 15 minutes if there is a Division in the House and for 25 minutes if there is a second Division immediately afterwards. I add that hon. Members may remove their jackets, if they wish to do so.
4.30 pm
Mr. David Laws (Yeovil) (LD): I beg to move,
That the Committee has considered the Social Security Benefits Up-rating Regulations 2006 (S.I. 2006, No. 712).
I welcome you to the Chair, Mrs. Humble. I also welcome other hon. Members, including the Under-Secretary of State for Work and Pensions, the hon. Member for Warwick and Leamington (Mr. Plaskitt), and the Conservative spokesman, the hon. Member for Daventry (Mr. Boswell). I expected to see the Minister for Pensions Reform, and I had intended to start by welcoming the opportunity to deal with a new Minister who has a relatively open mind about this long-running issue. Nevertheless, the Under-Secretary has been in his post for a relatively limited time, and this is perhaps the first time that he has had to debate the issue, so I hope that I can encourage him to put aside his civil service briefing, which has probably been dusted off having been in the Department in a relatively unchanged form since the 1950s or 1960s.
We want to give hon. Members an opportunity to debate the long-running issue of the uprating of pensions for British pensioners living abroad. [Interruption.] The hon. Member for Worthing, West (Peter Bottomley) has added from a sedentary position that we are also debating the non-uprating of many of those pensions, because half of the individuals involved have the uprating and half do not.
Peter Bottomley (Worthing, West) (Con): May I take this opportunity to congratulate the hon. Gentleman and his party on tabling the prayer that led to this important debate?
Mr. Laws: I am grateful to the hon. Gentleman for making that comment early in the debate. I should acknowledge, however, that many hon. Members from all parties have raised the issue over the years. Unfortunately, they have usually done so from the Back Benches and have been unsuccessful in persuading the Government of the day of the strength of their case or of the fact that this is an issue of natural justice. I sincerely hope, therefore, that the Minister will demonstrate the fair-mindedness thatI saw when we were colleagues in Select Committee—I am not sure whether he is shocked or whether he approves, but he was fair-minded.
The context for our debate is the current discussion about reforming the state pension system. If the briefings are accurate—I am sure that they are—the Government will have delivered their White Paper to the House by this time next week. The Minister must acknowledge that the White Paper, and the debate that is bound to take place, provide an opportunity to look afresh at this issue, which has been bubbling in UK pensions policy for the best part of 40 years. Indeed, when I was preparing for the debate, I came upon a report by the Social Security Committee from 1996, paragraph 8 of which stated:
“In the early 1960s, criticism of the policy began to build up. By 1963, the Ministry of Pensions and National Insurance was regularly receiving correspondence from MPs and from pensioners living abroad protesting at the unfairness of not paying increases to those living abroad.”
As the hon. Member for Worthing, West knows, hon. Members have been raising this issue, rather unsuccessfully, for the past 43 years. Indeed, the matter is quite unusual, because the case is extremely strong on social justice and fairness grounds, but for a long time we have been unsuccessful in persuading any Government of its merit, and I shall go on to examine the reasons why.
The White Paper, which will be produced in a week or so, is an obvious occasion on which to review policy. According to newspaper briefings, the Government are considering changing the uprating system for pensions and examining a link with earnings, rather than with prices. The question how pensions for British citizens living abroad will be dealt with in future must be addressed seriously when the White Paper is produced. I have already received letters from individuals asking whether the earnings link, which the Government may introduce from 2012 or thereabouts, will extend to pensioners living overseas who are or are not in receipt of an uprated pension, so we will not be able to avoid the issue, whether we like it or not.
There is a long-standing anomaly in how we treat British citizens who have gone to live abroad, and the Library has provided some interesting information about the anomalous way in which we treat pensioners in different countries. As this is a relatively rare opportunity to put the issues on the record, it is worth going into detail.
Peter Bottomley: We are talking about the basic state pension, not the pension that the Prime Minister might have if he decided to live in part of north America, or the pension that I might get, as a Member of Parliament, if I chose to live in an old Dominion or a fully foreign country; we are talking about people who have an entitlement, through their contributions or their former responsibilities, to a basic state pension.
Mr. Laws: I am grateful to the hon. Gentleman for that helpful intervention. He has put on record early in our debate what we are talking about—the basic state pension, which is set at what many hon. Members would consider an extremely modest level which is not sufficient in itself to take pensioners in this country out of poverty. We are discussing a very modest minimum rate and pensioners who moved out of the United Kingdom many years ago and who may have received no upratings at all since then. Such people may be living on very low incomes, or they may be dependent on means-tested benefits from the state in which they live, which is something that many of the countries that end up picking up a bill that the UK Government and UK taxpayers have not been willing to pay so far deeply resent.
A helpful note for this debate from the Library sets out the situation on which countries will get an uprating and which will not. At the end of September 2004, 990,000 UK state pension recipients were living overseas, so we are talking about a very large number of people, and we are also talking about a figure that is likely to increase considerably in future. I tabled a parliamentary question the year before last about the number of people in receipt of the basic state pension abroad, and the figures have gone up quite dramatically from 576,000 as recently as 1990 to 952,000 in 2003. In other words, since 1990, the number of people who have moved overseas has pretty much doubled. That underlines the fact that 30, 40, 50 or 60 years ago it was comparatively unusual for people to decide to retire abroad. Nowadays, however, communications are much easier, costs of travel are much lower, and the extent of integration across the world is much greater, which means that people have friends and family in other countries and may be willing or keen to move abroad when they reach retirement age.
The issue is already important. Nearly 1 million people are affected, half of whom have lost out seriously, and the number is likely to be greater in future. Of those 990,000 people, some 520,000 or 52.5 per cent. live in countries where their pension is not uprated by prices, so they receive the basic state pension to which they are entitled when they move overseas, but it is not uprated as a consequence of price inflation. Somewhat counter-intuitively from the UK citizen’s perspective, the vast majority of those individuals live in Commonwealth countries—237,000 of them in Australia, 151,000 in Canada, 45,000 in New Zealand and 37,000 in South Africa. Although most of the people whom we are considering live in those four countries, UK citizens who are affected live in a large number of other countries, too.
The countries with which we have reciprocal agreements under which the annual increases are paid were listed in a parliamentary answer last July. It is worth mentioning which they are to highlight the bizarre and anomalous division between the countries in which we do and do not pay the uprating and to set out how that situation has arisen. The written answer stated that
“The UK currently has reciprocal agreements which provide for the uprating of state pension with the following countries: Barbados; Bermuda; Bosnia-Herzegovina; Croatia; Isle of Man; Israel; Jamaica; Jersey and Guernsey; Mauritius; Philippines; State Union of Serbia and Montenegro; Turkey; USA and the former Yugoslav Republic of Macedonia.”
There does not seem to be any logic that determines that the United States of America, Jamaica and the state union of Serbia and Montenegro should all be in one category. The written answer continued:
In other words, there is uprating in a group of European countries and in a complete and utter hotch-potch of other countries, and there is no logic that determines which are included and which are not. Indeed, there is not even any logic in relation to geographic areas, because among the island nations of the Caribbean, Barbados, Bermuda and Jamaica all experience uprating, whereas Trinidad, Antigua and Bahamas do not.
Mr. Tim Boswell (Daventry) (Con): Does the hon. Gentleman agree that the plot thickens further in that Guadeloupe and Martinique are both French overseas territories and are therefore members of the European Union, and so, as I understand it, the social security arrangements extend to them? The Minister is nodding.
Mr. Laws: The hon. Member for Daventry is right. Martinique is affected in the way that he describes. As my noble Friend Lord Jones of Cheltenham set out recently in the House of Lords, the situation is bizarre in that even pensioners in British overseas territories are not covered by the uprating regulations. Indeed, those living in Bermuda, Gibraltar and the sovereign-based area on Cyprus have their UK state pensions uprated, but those living on the British Virgin Islands, the Cayman Islands, the Falkland Islands, Montserrat, Pitcairn Island, St. Helena and the dependencies, the Turks and Caicos Islands and Anguilla do not have the uprating. Were there any pensioners on the British Antarctic Territory and the British Indian Ocean Territory, their pensions would be frozen too.
Peter Bottomley: I am not surprised, if they are on the British Antarctic Territory.
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