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I am not surprised that the Secretary of State is spending so much time reflecting on our plans, because he is so sensitive about the weakness of his own. That weakness is being discussed out there in the country, as he will discover when he goes out and talks to consumer groups, businesses and pension providers. These are their concerns.
The hon. Member for Runnymede and Weybridge said earlier that people acknowledge that there is a risk of averaging down attached to the Governments proposal to set a benchmark for personal accounts in terms of the employers contribution. There has to be some risk for the more marginal employers in those circumstances. Whether the Secretary of State likes it or not, however, what people out there really fear is not only some averaging down in existing provision, but that the personal accounts will not work. The Government could give generic financial advice on the matter, although the Secretary of State seemed unable to do so today, even in broad terms. The key factor, however, is that peoples economic interest in investing in the personal accounts must be clear, but at present it is not. I heard some Labour Members expressing concern about that earlier and I hope that the issue will be addressed in the debate.
I want to touch on a number of other key issues before I return to the question of affordability, on which I know that the Secretary of State will be desperate to intervene on me again. The first issue of concern is the earnings link. The Secretary of State expressed concern earlier when he was questioned about the frustration of people over the delay in restoring the link. Either he has not been getting out and about enough in his constituency or he was being somewhat optimistic about the perception of the Bill across the country. Hon. Members on the Back Benches, who can speak fairly candidly, know that members of the existing pensioner generation are immensely disappointed that the restoration of the earnings link is to be delayed until 2012 or even 2015. I am sure that if the Secretary of State and his Front-Bench colleagues were being perfectly straightforward, they would admit that they were deeply unhappy and embarrassed about the fact that the Chancellor has refused to allow them to make that commitment sooner.
The Secretary of State must know that millions of those in the existing generation of pensioners could be dead by the time the earnings link is restored. It could take until 2020 to get back to the level of state pension in relation to earnings that existed when these decisions were made in 2006, because until 2012 or 2015 the basic pension will continue to shrivel away in relation to average earnings. I cannot understand why the Government are not more embarrassed about that.
It was intriguing to hear the Secretary of States response to an intervention from the right hon. Member for Woking (Mr. Redwood) about the ambiguity in introducing the earnings link in 2012. He said that the Government could not introduce it earlier than 2012 because of the timing of the increase in the basic state pension age, which implies a link or coupling between the two. However, the Government are dealing with those two things in a completely disconnected way. They have made it absolutely clear that the basic state pension age will be increased in
2024 come what may, even though no commitment whatever has been made to a firm date for the earnings link restoration. If the Government want to delay restoring the earnings link until beyond 2012, surely it is logical for them to consider delaying the introduction of a higher state pension age, too.
I hope that the Minister for Pensions Reform will comment on the discretion that the Bill allows the Secretary of State to exercise in fixing the average earnings measure that will be used. Perhaps that should not greatly worry us and he will put our minds at rest. As the Bill makes such specific provision, however, and as so many different measures of average earnings could be used, I hope that some clarification will be made.
James Purnell: I hope that I can set the hon. Gentlemans mind at rest. The arrangements proposed in the Bill are similar to those that exist for inflation, which allow some flexibility. The measure that we propose to use is the same as that which we use currently for uprating guarantee credit in line with average earnings. Such matters change over time, however, and it is important to leave the Government of the day with flexibility in that regard.
Mr. Laws: I am grateful to the Minister for his clarification. I hope that we will seek to embed in the Bill the intention behind his comments. We are legislating not only for the period in which this Government will be in office but, he hopes, for the long term. We must therefore ensure confidence that the method of uprating will not be twisted around in the future.
I hope that I am equally successful in getting the Minister to intervene on one other point in relation to the earnings link. It might be regarded in some places as a small point, and he will no doubt smile again when I mention it; I have mentioned it to him before. The issue is that of the frozen pensions of about 1 million UK citizens who now live abroad. The obvious injustice is that half those pensioners will get their pensions uprated by prices, and half will get no uprating at all in future.
When the earnings link is introduced, that bizarre injustice will be increased. The Minister can intervene on me if I have got this wrong, but my understanding is that half of the UK pensioners living abroad in future will have an earnings uprating, and half will have their pensions frozen. The decision on whether people get an uprating will not depend on any great logic, but on an arbitrary, historic division of those countries that are and are not uprated. People who live only a mile apart but on different sides of a border, such as that between Canada and the United States, could receive totally different pensions. The existing anomaly will therefore be made even more confusing.
Mr. Laws: There is no discrepancy. If someone is entitled to a citizens pension and has paid their taxation, of course they should be entitled to the uprating. The hon. Gentleman cannot, however, justify the Governments proposal under which a British pensioner living in Canada will in future have their pension frozen, whereas a British pensioner living in the United States will get an earnings uprating. Is the Secretary of State happy about making an existing injustice even worse through the restoration of the earnings link?
I shall make progress, as other Members want to speak [Interruption.] I hear demands for me to raise other points. If my hon. Friend the Member for Solihull (Lorely Burt) catches your eye later, Mr. Deputy Speaker, she will want to raise some of the issues and concerns about women and carers. The Government could go further on some of those points. I welcome the speech of the hon. Member for Colne Valley, who picked up on one anomaly that may arise. I hope that the Minister for Pensions Reform will comment on the issue raised by the hon. Member for Runnymede and Weybridge about the money from scrapping contracting-out of defined contribution schemes and what it will be used for. That is an extremely important question.
The Secretary of State raised the issue of affordability and the price that we ought to pay for getting the pension system right. Our contention is clearthe Government are building on an insecure and sandy foundation, which will undermine the personal accounts scheme. In that respect, our argument is exactly the same as the Conservative partys, except that we are taking it to its logical next step. We are saying that something should be done about it, rather than simply aspiring, as those on the Conservative Front Bench have done, to finding some money to do something about it in 20, 30 or 40 years time.
On affordability, I understand that the Secretary of State must operate within the plans laid down by the Government. It is notable that the Government are seeking to deliver pensions reform while cutting the state pensions share of GDP. It is no good the Secretary of State shaking his headthat is precisely what his figures show. That is why we have such a problem with means-testing.
The Secretary of State needs to pick up on two issues. As he knows perfectly well, we would introduce a citizens pension using the offset method at about 0.4 or 0.5 per cent. of GDP. That, of course, is a significant amount. The issue, however, is what the consequences would be of not finding the money, over a period of time, to improve the basic state pension. If the consequences are that the entire pension reform programme is undermined, spending such money would be sensible.
Had we asked the Secretary of State, who was a Health Minister for a considerable period, to comment in 1996-97 on what increase in expenditure would be needed to deliver a decent NHS, he would have been constrained in his answer by the limited commitments made by the then shadow Chancellor. If any of his hon. Friends had suggested that the share of GDP spent on health should increase by 2.3 per cent. over 10 yearsfive times the amount that we are talking about for a reform of state pensionshe would have regarded
such a proposal as idiotic. However, that is what has happened. The Government are spending £65 billion more in cash terms than in 1996-97 on the NHS, and £50 billion more in real terms.
Anybody can seek to influence the debate and scare ill-informed opinion by waving large numbers around. However, over time, Governments who seek to make a priority out of particular areas of expenditure can do so, as the Governments record on the NHS has shown. If the Government want to find some savings to improve the state pension architecture, I hope that they will adopt exactly the proposal suggested by the Select Committee on Work and Pensionswith the support of the excellent hon. Member for Aberdeen, South (Miss Begg)and establish a commission to look into the reform and sustainability of public sector pensions.
The current feeble proposals for reform mean that a Government who propose to cut the share of GDP going into the state pension architecture over the next 15 years are miraculously finding the money to raise the share of GDP to be spent on public sector pensions by 50 per cent. Finding the money to spend on public sector pensions before finding the money to put into the basic state pension architecture indicates a bizarre set of political priorities. If the Minister wants to find money for his reforms and make the pensions system work, he should consider reforming public sector pensions and adopting the Select Committees proposal.
Ultimately, the Government must decide whether or not the pension reforms will work, and the biggest obstacle to their successful operation is the extent of means-testing. If the Government do not take account of shared concerns about that problem they may find that while, as in 1975, there is a loose consensus on the principles of reform, it is likely that in 20 or 30 years we shall be looking at a set of reform proposals that have failed to deliver on their basic objectives.
Mr. Deputy Speaker (Sir Michael Lord): Order. Before I call the next speaker, I should tell the House that further to the point of order raised earlier by the right hon. Member for Haltemprice and Howden (David Davis), the Home Office has now placed in the Library the three ministerial written statements that were due today.
Ms Sally Keeble (Northampton, North) (Lab): I was interested by the speech of the hon. Member for Yeovil (Mr. Laws). I think that the thrust of some of the Liberal Democrats political arguments about the citizens pension is wrong, and that any amount of special pleading about the technicalities will not deal with the basic underlying issue of whether pensions should reflect something of the contribution that people make during their lives.
Having listened carefully to my constituents, I believe that they expect there to be some link between contributions and pensions. They do not expect people to be left with nothing, but they do expect peoples input during their working lives to be recognised when they retire. In particular, the contribution made by women as carers
should be valued. I am very pleased that, probably for the first time, that important issue has been dealt with. It is well understood by my constituents, and many women, especially Labour Members of Parliament, have campaigned for it to be built into our pensions system. I pay tribute to the former Member of Parliament for Sheffield, Hillsborough, Helen Jackson, who did a huge amountlobbying the Government and lobbying around the countryto ensure that the inequalities faced by women in retirement were remedied.
I was first made aware of the importance of womens pensions shortly after the 1997 election, when I was going from door to door speaking to prospective constituents. I met a woman who had had a miserable marriage. She had worked throughout her life, but had paid the married womans stamp. When her children had grown up and left home she divorced her husband, who was some years older than her. Then, at the age of 58, she had been swept off her feet and had married a much younger man, a sort of toyboy.
Ms Keeble: My hon. Friend clearly approves of that. Two years later, however, that woman found that she had lost her pension. As a married woman who had worked and been financially independent throughout her life, she was told that she could not have a pension until her husband retired. To say that she was spitting teeth would be putting it mildly. It was she who first brought home to me the level of womens understanding of pensions, or at least their understanding, through bitter experience, of poverty in retirement.
The Bill will make a big difference, and I am very pleased that for the first time ever the disadvantage inflicted on women pensioners has been recognised by the Government. The Bill would deal specifically with the problem of the constituent who first alerted me to the issue, because it allows women who retire before their husbands to obtain class B pensions without having to wait for their husbands to retire. It will therefore bring direct and practical benefit to a large number of women.
Other elements in the Bill will right the wrongs that have left so many women pensioners in poverty. At present, one in five single women pensioners risk being in poverty owing to their different working patterns and the impact of child care, widowhood and divorce. The effect of divorce has not been sufficiently recognised. In 2002, 40 per cent. of divorced older women were in receipt of minimum income guarantee, and nearly 63 per cent. of divorced and separated older women currently have no private pension income at all.
Clause 3, an important clause, concerns pension credits for parents and carers. A welcome aspect of the Bill is the extension of carers ability to claim the credits that they need in order to obtain pensions, but it is important for the new entitlement provisions to be drafted widely enough. That is something that worries carers groups. Constituents have expressed to me a fear that in its present form the Bill may be too restrictive, as it defines entitlement according to
existing regulations or in terms of benefit entitlement, including, in the case of those caring for children, entitlement to child benefit. That means that some carers may miss out. It might be more constructive to replace or supplement the proposed arrangement with a system of certification by local authorities. There would be logic in that, as local authoritiesthrough the director of education and childrens services, and through social services departmentsare responsible for commissioning care for children and vulnerable adults. They would therefore be able to issue certificates identifying the carer and the amount of care being provided.
Let me give an example that has arisen a number of times in my constituency. There is a high level of employment among my constituents, and women have traditionally worked. My constituents are also very family-orientated. Ifunfortunately, this is a frequent reason for family breakdownsa lone mother has become involved in substance abuse or her physical or mental health collapses, the grandparents will often take in her children and, in many cases, care for them into adulthood. In some instances, a grandmother who is still of working age must give up her job. In others, the grandparents will not obtain the child benefit book. Not wishing to bother with the bureaucracy of having it altered, they may deliberately leave it with the childrens mother to maintain a link between her and her children, and perhaps also to encourage her to think about getting the children back.
I understand that, in such a case, a grandmother would not be able to obtain credits towards a pension because of the work that she had done in caring for the children, unless she could qualify as a foster parent. I have contacted social services departments on several occasions about the possibility of securing foster payments for grandparents, but I am not sure that they could qualify as foster parents, which is what I gather the legislation requires. Carers who look after a number of different people for shorter periods would not qualify either, unless the hours were right. Moreover, carers would have to be claiming the right benefits. Disability living allowance must be at the higher or middle rate, not the lower rate. Parents, or in many cases a lone parent, with a number of children receiving the lower rate would have to stop working to look after them.
I hope that my hon. Friend the Minister will give some indication of Government thinking, and will say whether he is prepared to consider the possibility of local authorities being able to issue certificates stating who is or is not a carer. We certainly need some way of ensuring that people with a valid status as carers can obtain support without having to be in receipt of all the right elements of benefit.
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