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Session 2006 - 07
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Public Bill Committee Debates

Social Security Benefits Up-rating Regulations 2007

The Committee consisted of the following Members:

Chairman: Mr. Mike Hancock
Alexander, Danny (Inverness, Nairn, Badenoch and Strathspey) (LD)
Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)
Banks, Gordon (Ochil and South Perthshire) (Lab)
Clappison, Mr. James (Hertsmere) (Con)
Crabb, Mr. Stephen (Preseli Pembrokeshire) (Con)
Duddridge, James (Rochford and Southend, East) (Con)
Foster, Michael Jabez (Hastings and Rye) (Lab)
Hall, Mr. Mike (Weaver Vale) (Lab)
Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)
Hoey, Kate (Vauxhall) (Lab)
Lancaster, Mr. Mark (North-East Milton Keynes) (Con)
Laws, Mr. David (Yeovil) (LD)
McDonnell, John (Hayes and Harlington) (Lab)
Mudie, Mr. George (Leeds, East) (Lab)
Purnell, James (Minister for Pensions Reform)
Ruffley, Mr. David (Bury St. Edmunds) (Con)
Sheridan, Jim (Paisley and Renfrewshire, North) (Lab)
Glenn McKee, Committee Clerk
† attended the Committee

First Delegated Legislation Committee

Tuesday 8 May 2007

[Mr. Mike Hancock in the Chair]

Social Security Benefits Up-rating Regulations 2007

4.30 pm
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I beg to move,
That the Committee has considered the Social Security Benefits Up-rating Regulations 2007 (S.I. 2007, No. 775).
Once again, it is a pleasure to serve in Committee under your chairmanship, Mr. Hancock.
There are a number of issues about the regulations, but I should say at the outset that we have brought forward the debate not to try to vote down the proposed uprating of pensions for this year—far from it—but to draw the attention of the Committee to some issues that are not contained in the regulations. The Minister will be familiar with those issues, because my hon. Friend the Member for Yeovil, who is not with us today, has raised them on a number of occasions.
Mr. Mike Hall (Weaver Vale) (Lab): On a point of order, Mr. Hancock. Is it in order to raise issues that are not on the agenda?
The Chairman: On this occasion, the absence of the hon. Member for Yeovil will go through, but we will not go any further.
Danny Alexander: Thank you, Mr. Hancock, for that degree of latitude.
The regulations uprate pensions in line with prices, and Liberal Democrats have argued that pensions should be uprated in future in line with earnings with immediate effect, rather than delaying that until 2012 as the Government have with their Pensions Bill. However, in the context of the regulations, the important issue is the anomaly whereby the uprating applies to pensioners living in the UK and to UK pensioners living in certain countries outside the UK, but not to pensioners living in other countries outside the UK. In other words, British pensioners in receipt of a UK state pension who live in certain countries, such as European Union countries, will continue to receive the pension on an uprated basis in line with the regulations. However, certain UK pensioners in other countries, such as Canada and other Commonwealth countries, will not receive any uprating, as they have not received upratings on the occasion of previous debates, which my hon. Friend the Member for Yeovil mentioned in the debate on the equivalent set of regulations last year.
I know that the Minister has met representatives of the groups of UK pensioners from the countries that are excluded from the regulations, who would have continued to receive their pension in full in the UK. However—I think that this is right, and the Minister will correct me if I am wrong—it is proposed to uprate a number of countries through the regulations, but perhaps up to 150 countries will continue to be uprated by zero under the regulations and well into the future.
That arrangement is arbitrary and illogical. When they were elected in 1997, the Labour Government committed themselves to dealing with unfairness in society. It is beyond the scope of this Committee to debate how far and to what extent they have achieved that commitment, but I believe that there is unfairness here. The precise manner of addressing it is wide open to debate, particularly about affordability and finance, which are important in dealing with the anomaly in these regulations as in previous regulations. None the less, there is unfairness, and it would be welcome if the Minister would at least say that the Government will put in place a process to examine, explore and understand the nature of the problem and suggest various options for remedying it.
It is notable that the Government rightly invited Lord Turner and his Pensions Commission to consider the much broader question of the future of UK pensions. That lengthy, well considered and sensible process led to a serious of excellent reports which have, in due course, informed the Government’s proposals for pensions reform. In this case of remaining unfairness and arbitrariness in the way in which pensions are paid to UK pensioners, as contained in the regulations, a similarly independent process would be appropriate and a welcome step forward in addressing issues that many hon. Members, if not all, have had raised with them by their constituents or former constituents who now reside in the countries where residents are excluded from the uprating regulations, despite the fact that they are UK citizens who have contributed to and will continue to receive their UK pensions.
The Minister may choose to defend the existing situation, which is embodied in the regulations, by saying that people have a free choice of where to go and that they could choose to live in countries where the uprating regulations apply instead of living in countries where the pension to which they have contributed is not uprated. I would counter that by saying that surely in the 21st century our aspiration should be for people to make their own decisions, and the suggestion that they should be influenced by historical arrangements and whether their basic state pension will be uprated is bizarre.
The Minister has heard this argument a number of times, but the number of people who are affected by the anomaly is increasing. More than 500,000 UK pensioners were living abroad in 1990, but almost1 million are doing so now, and soon there will be more than 1 million. Given that 11 million or 11.5 million people are drawing the basic state pension, we could soon reach the position in which perhaps one in10 people in receipt of basic state pension will be living overseas, some of whom will benefit from the regulations and some of whom will not.
The rules by which it is decided whether someone benefits from uprating are illogical, arbitrary and unfair on those who miss out. Those people feel that unfairness very strongly, and I hope that the Minister will at least seek a way forward. Remedying the situation will cost money, and I am conscious of the fact that any solution must be affordable. My hon. Friend the Member for Yeovil has proposed affordable ways of solving the problem, but what is needed—
Mr. David Ruffley (Bury St. Edmunds) (Con): I thought that the hon. Gentleman was going to pass over affordability, which has been described by the hon. Member for Yeovil without going into the details. Will he give us some details?
Danny Alexander: In the Pensions Bill Committee, my hon. Friend suggested how that could be affordable, but the figures would depend on the point from which the uprating went forward. It has been estimated thatif we were simply to take the pension of the existing pensioners in those countries and from now on uprate from that level, the cost would be £15 million,£20 million or £30 million in the first few years, obviously increasing thereafter, but there would be a steady progression rather than a substantial initialcost. A range of costs has been given. Ministershave bandied about figures of billions and hundredsof millions. That is why I would argue that an independent review of the problem is needed to try to find an affordable way forward.
Mr. Ruffley: The problem with the hon. Gentleman’s proposition is that there would be unfair treatment of pensioners. He proposes that those who are able to benefit from the uprating would go forward but that there would be no retrospective uprating for existing pensioners who live abroad. How can the Liberal Democrats square that inconsistency?
Danny Alexander: I am pleased, I think, that the hon. Gentleman recognises the unfairness in the current system. I believe that that was the implication of his point.
There are two stages: first, to recognise the illogical and unfair aspects of the current system; and, secondly, to work out what can practically be done, given the constraints of public finances, if not to resolve then at least to ameliorate or improve the situation of those pensioners who will be affected by the regulations. I am putting that fairly modest proposal to the Minister, and I look forward to hearing his answer to it.
Mr. James Clappison (Hertsmere) (Con) rose—
The Chairman: Order. Unfortunately, Mr. Clappison, you are just a little too late. I call Mr. David Ruffley.
4.42 pm
Mr. Ruffley: Thank you, Mr. Hancock. It is always a pleasure to see you in the Chair. This is the first time that I have actually served as a humble supplicant under your chairmanship. I think that you have done extremely well in your chairing of the Committeeso far.
I also welcome the Minister to the debate. It is conceivable that this is the last time that he will be in Committee as the Minister for Pensions Reform. If we are to believe the newspapers, he will go on to an even bigger and more important portfolio, although it is difficult to imagine what could be more importantthan pensions. That is the view that the modern Conservative party takes, and I believe that it is the view of the Liberals and the Labour party. Pensions are an important issue—perhaps more important than they have been for the past couple of decades.
I am, as I have said, a modern Conservative, butI am a bluff old traditionalist when it comes to parliamentary procedure. I do not want to try the Committee’s patience, but I want to speak to some of the regulations—in other words, to speak in order. I hope that that is permissible, Mr. Hancock, becauseI have a problem with the prayer. I appreciate the intention of the hon. Member for Inverness, Nairn, Badenoch and Strathspey to ventilate the issues around the uprating of the basic state retirement pension, but, by annulling the regulations in total, which appears to be the object of the prayer, other important changes would not go through, and I—and, I am sure, the Minister—would deprecate that.
For instance, the earnings limits for child dependency payable with the carer’s allowance would not be increased in line with the retail prices index. Instead, it would be left at last year’s levels. That would be the effect if regulation 4 were not to come into operation. Similarly, regulation 5 of the statutory instrument increases the amount of benefit a person must be left with if they live in a care home and the care home costs are paid directly from their benefit. I do not doubt that the hon. Gentleman wants those important increases, which do not involve recipients of basic state pension who are absent abroad—in other words, living on foreign soil—but the effect of his prayer would be to stop them going through. It would be useful before the debate ends to clarify the Liberal Democrats’ intentions.
Danny Alexander: I thought that I had made it clear at the outset that it was not our intention to preventthe sensible measures contained in the regulations going forward but to highlight an inconsistency and unfairness in the regulations, which is what I have done.
Mr. Ruffley: I thought that it would be wise to play for safety on that issue, as the hon. Gentleman has not yet begged to ask leave to withdraw the prayer. We need to make it clear on the record that the Conservative party supports important upratings, which the prayer should not be seen to annul. I hope that the hon. Gentleman understands why I laboured that point for the avoidance of doubt.
The Chairman: Order. To help the Committee, I should say that the hon. Member for Inverness, Nairn, Badenoch and Strathspey does not have the right to seek to withdraw the prayer, which would have to be voted on.
Mr. Ruffley: I am interested by that illuminating flash of insight from you, Mr. Hancock. I was under the impression that last year leave was given to withdraw. That issue is, however, for the hon. Gentleman and not for me.
I wish to press on rapidly and talk about the uprating of pensions for British citizens who live abroad, which is an extremely sensitive and important topic. Our citizens who now live abroad have an entitlement to the basic pension, but they can feel frustrated and annoyed that they have been treated unjustly, when they understand that some in their position will receive an uprating in accordance with the retail prices index and some will not—it depends on which country they live in.
My hon. Friend the Member for Eastbourne (Mr. Waterson) is my party’s excellent spokesman on this issue. He is careful, detailed and sensitive to all pensioner issues, as, I hope, most of us are. He spokeat length on the subject during the third and fourth sittings of the Pensions Bill.
For the record and for those of us, particularly pensioner groups, who will read these proceedings, it will be useful to have a quick recap of the regime and of why there is the problem with which we all struggle—inconsistent uprating that depends on which country a pensioner lives in. In certain countries outside the UK, pensions have been payable since 1929. That applied initially to the Dominions, but to other countries later. In 1955, the basic pension became payable worldwide.
To get a scale of the numbers affected by the decision to uprate the basic pension according to the retail prices index or not, I should say that more than1 million people receive the UK state pension overseas, which costs the UK Exchequer about £2 billion a year. Just over half that number of people—530,000—live in countries for which the UK state pension is not uprated. By living in those countries, those people receive their basic pensions at the rate when they first became entitled, or, if they were already pensioners, at the date when they left the UK. Of those people, approximately 245,000 live in Australia, approximately 153,000 live in Canada, approximately 47,000 live in New Zealand and approximately 38,000 live in South Africa.
If we were to apply the uprating to all the British people receiving the state pension abroad, however, there would be a considerable cost to the UK Exchequer. In 1994, the issue was powerfully and trenchantly pointed out by my right hon. Friend the Member for Richmond, Yorks (Mr. Hague), who was then a Minister in the predecessor Department. He said this in debate, when I think the issue first achieved some political salience in the public policy debate:
“We are familiar with the arguments in favour of a change of policy, and we are sympathetic, but we cannot disregard the huge cost involved.”—[Official Report, 6 July 1994; Vol. 246, c. 432.]
Those huge costs then are even bigger now more than 13 years later. Whether one likes it or not, annulling the regulation would represent a huge financial commitment, whichever party sought to support it and see it through. The Conservative Opposition are also concerned about the cost and, principally for that reason, we will not be supporting the prayer before the Committee today.
Kate Hoey (Vauxhall) (Lab): The hon. Gentleman knows that the issue has attracted support from across all the parties and that there have been a substantial number of early-day motions. I think that the Minister himself met with one of the representatives from a pensioners abroad group recently. Does the hon. Gentleman not agree that the cost is not as much as is sometimes portrayed? Secondly, many of those people, because they have not had their upgrading, will be forced to come back to this country, which will cost even more in health protection and care and all that. Should there be an all-party view here, so we can move forward? Clearly the situation is unfair and terribly unjust.
Mr. Ruffley: I agree with the hon. Lady’s first point that the cost issue needs to be looked at carefully, and I will go into that in the next part of my speech. There is no point in saying that the cost is huge, because there may be less cost, depending on the way in which one does the uprating.
The hon. Lady’s second point is more speculative, if I may say so. The suggestion that individuals who live abroad will migrate back to this country because they do not have the annual uprating is logically correct—they would come back here and fall back on to the UK benefits system rather than merely taking the basic pension, which they do whether abroad or here. I think that the hon. Lady is implying that they would claim income support or the successors to the minimum income guarantee. In other words, the proposition is that they would be more of a “burden”, which is not the word that I would use, if they were to return and claim more benefit than if they had stayed in their foreign country of residence. That is logically possible, but I am not entirely convinced that the absence of an uprating would get people to move back to this country or that that would be the trigger to put them back on the public purse here.
I agree with the hon. Lady’s first point, which I shall turn to now. There are logical ways of delivering an uprating. The first is that all pensions that have not been uprated by RPI could be brought up to this year’s level, with pensioners in effect being given arrears to compensate them for the non-uprating in previous years. The hon. Member for Inverness, Nairn, Badenoch and Strathspey has said that that was not in the mind of the hon. Member for Yeovil, but I think it useful to get a handle on the figure, when people such as me, and no doubt the Minister in a few minutes, say that that would be a disproportionately heavy cost to the Exchequer. The hon. Member for Vauxhall is right that we need to know what order of magnitude weare talking about. In a debate in another place on21 February, the Minister, Lord McKenzie of Luton, estimated the cost of uprating frozen pensions to current levels—in other words, backdating—to be about £3 billion. That would bring all pensions up to current levels and pay the arrears. If the Government decided not to go the whole hog and not to pay the arrears, the estimated total cost is around £420 million a year.
As the hon. Member for Inverness, Nairn, Badenoch and Strathspey has mentioned, the hon. Member for Yeovil said this in the debate this time last year:
“It is extraordinary that anyone should suggest that all arrears for pensioners living in such countries should be dealt with.”—[Official Report, First Standing Committee on Delegated Legislation, 15 May 2006; c. 9.]
It seems unambiguous that the Liberal Democrats are not arguing for backdating and for clearing up all the arrears, and I think that that is what the hon. Gentleman said a few moments ago. As I sought to make clear in my intervention, however, if it is Liberal Democrat policy to support an uprating going forward but not to take account of arrears, that means thatthe Liberal Democrat prayer today involves another inconsistency. Will the hon. Gentleman accept that if the arrears are not paid, the policy would introduce an inconsistency, not between people living here and people living abroad, or between people living in countries where there is no uprating compared with people living in countries where there is an uprating, but between all pensioners living abroad?
To take one example, a pensioner who moved to Canada in 1990 will receive a lower UK state pension than someone who moved to Canada in 2000. If we started uprating both pensions by a defined percentage, the person who moved more recently would receive a larger year-on-year increase. One might ask where the equality is under the Liberal Democrat proposal. Surely in order to maintain consistency both between and within countries, it is essential that arrears are dealt with. However, that is not the proposition that the Conservative Opposition seek to prosecute. Given the economic cycle and the prudent fiscal stance that any future Conservative Chancellor of the Exchequer would want to adopt, paying off the arrears in the event of an uprating is not a sustainable proposition.
The third logical alternative to uprating would be to uprate pensions in line with earnings. The Pensions Bill, which is still passing through Parliament, re-links increases in the basic pension to average earnings from 2012, which, as average earnings are typically higher than RPI, will be a considerable boon and benefitto future pensioners. That is unambiguously a Conservative proposition. We said it first, and we are happy that Her Majesty’s Government decided to put it in their Bill. We welcome in a bipartisan way this measure to reinstate the link with average earnings.
Mr. Hall: Will the hon. Gentleman remind the Committee who broke the link between average earnings and pensions?
Mr. Ruffley: It was a long time ago and a different Administration. It was, of course, Baroness Thatcher. The interesting thing about grown-up politics these days, as I am sure that the hon. Gentleman will concede, is that when parties get it wrong, they look at the evidence and the impact on lives and on social policy. We are quite happy to admit when we have made a mistake. We are now happy to rejoice in the fact that we were the first major political party to say that there should be a partial reinstatement of the link, although it was not indefinite and was for the course of a Parliament, as the Minister will no doubt remind me. However, it was the first statement by a mainstream, major political party about reinstating the earnings link.
The hon. Member for Weaver Vale would be churlish—he is not a churlish man—if he could not concede that the Conservative party has changed in that respect. It is quite a big change to say that that is not an appropriate policy for the 21st century. My right hon. Friend the Member for Witney (Mr. Cameron), the Leader of the Opposition, is surely right to ram home that policy, and I am happy to have a platform here to ram it home in support of him and members of the shadow Cabinet. [ Interruption. ] The hon. Member for Weaver Vale has barracked me from a sedentary position, but it is good-natured, so I shall move on. He has made his point and I have made mine, and we have done so in our different ways.
Having said that, I shall make a couple of observations about state pensions paid abroad. The state pension set-ups in New Zealand and Australia are particularly interesting, and they give rise to a couple of specific questions that I want to ask the Minister, which, to my knowledge, have not been ventilated so far. I think that these questions break new ground, and perhaps he will help us after I have explained the point.
In Australia, the basic state pension equivalent cannot be claimed by Australians living in foreign countries, unless there is a reciprocal agreement. As I understand it, if someone emigrated from Australia to the UK in the 1940s, they would not be eligible for an Australian state pension. Until 28 February 2001, we had a bilateral agreement with Australia allowing residents of that country to count toward UK state pension rights and vice versa, but the Australian Government ended it. In New Zealand, a strict residence condition applies at the point of claiming. If one gets to the point of claiming a pension and leaves New Zealand to reside elsewhere, the pension is halved unless there is a reciprocal agreement with the new country of residence. In contrast with those two regimes, it seems that the UK offers a reasonably decent deal to UK pensioners residing abroad—it is not the complete and utter shambles that the Liberal Democrats have tried to make out. New Zealand and Australia are not necessarily illiberal regimes, but the picture there seems draconian compared with ours from the examples that I have given.
My second point is that if we were to pay upratings in relation to the index of retail prices in the UK,which would happen if the Liberal Democrats’ proposition were accepted, it would not necessarily be representative of the increase in the cost of living in that person’s country of residence. That seems an obvious point, but not one that the hon. Member for Inverness, Nairn, Badenoch and Strathspey has made. There is no logical connection.
Earlier this year, in February, we debated the Social Security Benefits Up-rating Order 2007—in fact, I took it through on the Floor of the House—to increase the basic state pension by the September 2006 RPI, which was 3.6 per cent. That figure was not chosen at random—it was the best estimate. In other words, it was supposed to be the rise in cost of living faced by British people in this country, and that is what those who claim pensions in this country got, as did recipients of various other benefits. However, it is worth remembering that throughout the 1990s, Japan experienced prolonged periods of deflation, which means logically that people claiming UK pensions in Japan would have received a fairly substantial real-terms increase in their basic state pension if it had been uprated according to the UK’s RPI. That increase would have borne little relation to changes in theircost of living. People talk about illogicality and inconsistency, but the regime is replete with such little inconsistencies and illogicalities and no Government have found a way of getting around that problem.
I want to pose a question to the Minister. A lot of the frustration that Members hear about from constituents who are pensioners living abroad concerns the apparently random nature of the reciprocal agreements between the UK and foreign Governments, which means that pensioners living in some countries get uprated, but those living in others do not. We have agreements with Bosnia, Turkey, and the United States. Those living in the island nations of Barbados, Bermuda and Jamaica get annual upratings, but if they were to move to Trinidad, Antigua or the Bahamas, they would not, which is an anomaly. Some West Indian and Caribbean countries have reciprocal agreements with the UK, but others do not.
In light of those discrepancies—I could cite many others—will the Minister restate his Department’s attitude, not to current arrangements, but to any proposed social security reciprocal agreements? In a debate last year, a Minister pointed out that most of the UK’s existing reciprocal social security agreements are more than 25 years old and that no further bilateral agreements of a similar kind had been made in recent history. The common argument from the Government is that they are merely following the line laid down by previous Administrations of both political colours.
That seems fair, but the end of the bilateral social security agreement with Australia in 2001 impliesthat things are not set in stone for international Governments. Will the Minister comment on that, and in doing so, will he comment further on a question that has been asked of me? Would he be open to suggestions of reciprocity, if other countries were to come up with such proposals in the next few years? For instance, some of us would find it sensible if residents in countries such as Canada were to lobby their respective Governments to negotiate reciprocal agreements with the UK. I understand that, as he will be aware, Canada and Australia are floating the idea of seeking new such arrangements.
Allegedly, such Governments have been frustrated by the UK Government’s refusal to enter fully into preliminary negotiations. If that is true, it would be valuable to hear it today. We do not need to have an argument about the existing regime, because previous Conservative and Labour Governments signed up to it. The regime has been going on for half a century. It is not a problem, and we do not need to debate it. We need to hear, however, whether there is likely to be a change in the status quo, whether Governmentshave made proposals for new reciprocal bilateral agreements, and if so, what the status is of those negotiations with the Minister’s Department.
I have one final question for the Minister. Conservative Members have some concerns, which were expressed powerfully by my hon. Friend the Member for Eastbourne in his usual indefatigable way when talking about pensions. He tabled a question at the end of last year:
“To ask the Secretary of State for Work and Pensions how many (a) Canadian and (b) Australian pensioners residing in the UK are in receipt of (i) pension credit and (ii) other means-tested benefits; and what the total annual cost is of these benefits to each category of pensioner.”
The Minister responded by saying:
“The information is not available as nationality data is not collected”.—[Official Report, 8 January 2007; Vol. 455, c. 194W.]
I am sure that the Minister agrees that having those data would allow for a more informed debate on the narrow issue covered by the regulations—the payment of British state retirement pensions to people abroad. It would also have given us the ability to come with a better cost to the Exchequer for the lack of any reciprocity agreements with Canada or Australia.
A pensioner from Australia, for instance, will be eligible for more UK means-tested benefit, because he is not receiving a pension paid for by the Australian Government, which seems a rather important point. To put it crudely, an Australian in this country might be able to find ways of claiming benefits, support and assistance, for the want of any reciprocal agreement between Australia and the United Kingdom extant at this time.
The topic is important. We all understand the financial pressures that all our constituents who are past pensionable age are experiencing. It is up to politicians—men and women of good will in all parts of the House—to take the issue extremely seriously. I am therefore delighted that the regulations are being debated, but I hope that the Minister will, in my spirit of honest inquiry and seeking after truth, reflect on some of the questions that I have put to him, mindful all the time of the fact that the modern Conservative Opposition will not be supporting the prayer, for the reasons that I have outlined.
5.11 pm
The Minister for Pensions Reform (James Purnell): May I say what a pleasure it is to serve under your chairmanship for the first time, Mr. Hancock? This has been a good debate and I should like to respond to the points that have been raised.
The hon. Member for Bury St. Edmunds made some cogent points about the generality of the regulations. I agree entirely with those points, so I will not detain the Committee by repeating them. It was with real sadness that I saw that the hon. Member for Yeovil was not here when we started our debate. However, I was delighted that the hon. Member for Bury St. Edmunds made up for his absence. His speech was as cogent and well argued as it was long, and it was very long and very well argued. The hon. Member for Yeovil would be proud of him in his absence.
I should like to make one general point about the regulations, which is that we welcome the theoretical support that we have received from all parts of the House for the plan to restore the basic state pension’s link with earnings. We are still confused about how the official Opposition would pay for that, however. Given that their third fiscal rule commits them to cuttingthe amount of public spending of GDP year-on-year, whereas our plans will increase the proportion of public spending of GDP, there is a significant and growing gap. At some point before the general election, they will have to tell us how they will fill that gap, whether by increasing taxes or reducing spending elsewhere. I have never got an answer out of the hon. Member for Eastbourne, so perhaps we shall get one from the hon. Member for Bury St. Edmunds.
Mr. Ruffley: I could not let that gross provocation pass without intervening. The Minister knows that we have not published our spending plans. We have made it quite clear that there will be no cuts in public services under a Conservative Government from the levels at which they currently stand in aggregate. For a Labour Government to continue down that path debases politics, because it just ain’t true.
The Chairman: Order. I think it would be wise if we left that there.
James Purnell: I am very happy to leave it there, noting in passing that the Opposition cannot stick to their mantra in this case, because the point involves an increase in spending. However, we shall have many more opportunities to test the gap between their theory and the reality of their proposals.
I am glad, too, that there is no difference between us on the substance of the issue. The hon. Gentleman made it clear that the Opposition do not propose to spend any extra money in this area, which is a long-standing issue that goes back to the 1970s. Governments of all colours—although not the Liberal Democrats; unfortunately we have not had a Government of their colour in this period—have said that they have had no intention of either negotiating new reciprocal arrangements or changing the status quo.
To run through the points that have been made, we are aware of what regulation 3 does, so I shall skate over it. As hon. Members know, regulation 3 comes out of an arrangement that we entered into with various other countries, which was about ensuring that people do not pay towards social security entitlement in two different countries but then receive entitlement inonly one. We do not have any plans to negotiate any new reciprocal arrangements. I understand that the Australians terminated their arrangement unilaterally, but protections are in place to continue payment to the people affected. The core point is not really about reciprocal arrangements; it is about cost.
The hon. Gentleman made a rather good point about the fact that the comparison between ourselves and other countries is sometimes less complete than it should be, and he asked me to comment on it. It is true that in Canada, if a pension is payable abroad, it is uprated, but it is quite hard to get a pension that is payable abroad, because someone has to have lived in Canada for at least 20 years from the age of 18. As the hon. Gentleman knows from the Pensions Bill, which is going through Parliament, we are getting rid of such periods of qualification. Therefore, in terms of who can qualify for a pension, our system is much more generous.
Similarly, in Australia the pension is paid at the full domestic rate for only 26 weeks. After that period, it continues to be paid at the full rate only if the person had resided in Australia for 25 years or more, so the period is even longer than in Canada. In New Zealand, as the hon. Gentleman has said, there is a residence-based pension, which is not payable in the UK. In India, there is no national contributory pension system similar to ours, which is also the case in South Africa. The comparison between the two types of regime—the one here and the ones that apply in the countries without reciprocal arrangements—is more subtle than it is sometimes painted. Ours is more generous in terms of coverage, but it is not uprated in those countries that we have been talking about today.
The hon. Gentleman made a point about data on nationality. The reason why we do not collect those data is that the system in the UK is based on national insurance contributions, so there is no need to collect the data. Of course, we could always have more data on anything, but as he knows, doing that produces a burden, which produces a cost, and other parts of the Conservative brain are very keen to reduce those costs, as are we. Therefore, given that there is no need to collect those data, it would be a superfluous piece of red tape to start collecting them now just to inform our debates better here.
Mr. Ruffley: Before the Minister concludes, I think that there is a resource implication where those reciprocal agreements do not exist. Will he comment on the speculation that the Canadian and Australian Governments are seeking to enter negotiations with Her Majesty’s Government? Is that true or not?
James Purnell: At different times, both the Canadians and the Australians have raised this issue. It comes down in the end, however, to the fundamental point about cost. It is not a question of saying, “We can’t do it because there’s no reciprocal arrangement.” The question fundamentally, both for the hon. Gentleman’s party in government and for my party in government, has been where the money would come from.
The hon. Gentleman is right to say that thereare just over 1 million people living abroad who currently receive a UK state pension, at a cost of about £2 billion. It is worth saying that not all those people are UK citizens. The figures cited by the hon. Member for Inverness, Nairn, Badenoch and Strathspey made it sound as though about 10 per cent. of UK nationals who are claiming a pension reside overseas. Actually, many of those will be people who came to work here, built up national insurance contributions and then took that entitlement with them when they returned to their country of origin. However, because there is a very large of number of people in that group—1 million—the cost of changing the position wouldbe very significant. As has been said, it would be£420 million in the first year, and that cost would rise relatively quickly, because of both that ageing population and the growing number of people who migrate in a global economy. Backdating the payment would indeed cost £3 billion.
It is unusual for a Liberal Democrat to try tocontrol the cost of their spending pledges. They do not normally mind about that terribly much, but the problem with trying to control the cost in the way in which the hon. Member for Yeovil has suggested is that people end up benefiting by only very small amounts. Yes, the cost in the first year is £30 million if it is linked to prices, and £50 million if it is linked to earnings, but the cost is relatively small, because it is merely an uprating of the existing amount. By 2050, however, the cost would be just under £2 billion. Of course, one can get away from the cost of the backdating if one does not introduce it straight away, but it rapidly catches up with the Government. Even in the world of the Liberal Democrat money tree, £2 billion is not an insignificant sum, and it would have to be found from somewhere. Without an idea of where the money would come from, the Government are not minded to change their position.
I am glad to hear that the hon. Gentleman does not propose to vote against the uprating. The Liberal Democrats famously once voted against an uprating and tried to deny income to millions of pensioners and benefit recipients all over the country. It is interesting that they voted against the uprating last year, and if they are not voting against it this year, we are starting to persuade them. I am sure that people all around the world who are following this debate will note that with interest.
5.21 pm
Danny Alexander: We have had a useful and interesting debate, albeit one that does not in any way answer my concerns that the system is unjust, arbitrary and illogical. It will not satisfy the many hundreds of thousands of UK pension recipients who live abroad and who do not receive a full pension. I accept the Minister’s point that some may not be UK citizens, but even then they still number in the hundreds of thousands. I am sure that they will note that the Government were not even willing to take forward the relatively modest proposal that I made in my opening remarks for an independent look at the question to see whether it can be solved. I accept the Minister’s point about the need to ensure that a change is affordable, but we need, too, to recognise the injustice. I am sure that there will be many other occasions on which the matter can be debated, so I do not propose to detain the Committee any further.
Question put and agreed to.
That the Committee has considered the Social Security Benefits Up-rating Regulations 2007 (S.I. 2007, No. 775).
Committee rose at twenty-two minutes past Five o’clock.

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