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To be fair to Lord Turner, he recognised that problem and suggested that eligibility to pension credit should remain at age 65, but that has not been accepted in the Bill. I was slightly encouraged to hear the Secretary of State say that the Government were considering the matter further, which may result in some resolution of
the problem. When the hon. Member for Bournemouth, West (Sir John Butterfill)—he is no longer in his place—was questioned about it, he said that it was all to do with health and particularly mentioned Scotland. Well, in Scotland, it is not all to do with health. It is to do with poverty, as the hon. Member for Aberdeen, South rightly said, and with poor housing. Nor is it just a problem in Scotland, as the same applies to many former industrial areas of England and Wales as well.
It can be argued that inequalities in life expectancy may be eliminated over time, but although we talk about greater overall life expectancy nowadays, there is still a gap between different areas and until such time as that gap is closed, the problem will remain. As Age Concern mentioned in its briefing—Citizens Advice made a similar point—the impact will be disproportionately negative for people on low incomes, who may not have much choice about when they retire. The TUC drew attention to the same problem. It also said that there were many uncertainties about future mortality trends and that the Turner commission itself had identified some gaps in the data on the future of pensions. We therefore remain unconvinced that we should proceed with proposals to raise the state retirement age. Age Concern has also asked for assurances that increases in the pension age will be matched by measures to ensure that poorer groups do not lose out.
There is an additional point. People may stay in the job market longer as a result of the changes and there are also the welfare reform proposals, which may bring many more people into the job market. The Government, in conjunction with the devolved Administrations, have to look seriously at how to create more jobs to mop up those groups. There is no point in getting people to work longer if the knock-on effect is on unemployment rather than pensions.
To end on a note of some consensus, there are some areas of the Bill where we support what the Government propose. [ Interruption. ] I am trying to be fair. We are generally supportive of the moves to create the national pensions saving scheme of personal accounts. However, I repeat that, in our view, that will work only in conjunction with a citizen’s pension, to give confidence to those who are expected to use that scheme; otherwise, it will face the same problems as the current system. We also recognise that moves to increase the coverage of the basic state pension are sensible and have been widely welcomed in as much as they will offer some help to women and carers.
We welcome the fact that the reduction to 30 years for the qualifying period, the carer’s credit and the changes to the second state pension will help to boost the income of women and carers who have missed out on paying national insurance contributions because of their sometimes broken work records. However, we share the reservations voiced by Age Concern, which has called for the 30-year qualifying period and abolition of the 25 per cent. rule to be retrospective. The reality is that many older women, who are often among the poorest pensioners, will not benefit otherwise. Again, that move would go a long way towards addressing some of the concerns of today’s pensioners. Only by doing that will we get a true consensus for moving forward.
9.16 pm
Mark Pritchard (The Wrekin) (Con): I am grateful to be called in this debate. I want to start with the comments made by the hon. Member for Angus (Mr. Weir) about a citizen’s pension. Although his aim in trying to give an uplift to the standard of living for Scottish pensioners may be worthy, I wondered how that could be delivered in the context of an independent Scotland and where the revenues to pay for such pensions would come from, given that much of the revenue for Scotland at the moment comes from other parts of the United Kingdom. Although worthy in its aspirations and aims, that policy would be ruinous for the United Kingdom, for pensioners in Scotland and, more importantly, for already hard-pressed taxpayers in Scotland, suffering under a Lib-Lab Administration.
I give a broad welcome to the Bill, although we have been waiting for some time for the Government to try to put right most of the wrongs that they have created—not least with the abolition of the dividend tax credit and the Chancellor’s raid on pensions. My hon. Friend the Member for Ludlow (Mr. Dunne) rightly pointed to the key issue of trust. How can anybody trust the Chancellor again on pensions? Should he become Prime Minister, I will take that key message to my constituents. I think that it will be received with open ears, based on experience of the Chancellor’s record. That raid on pensions stands at £5 billion and the figure is growing annually. That is a significant amount of money.
Perhaps Members on the Government Front Bench will not really be interested in what I am saying, or believe it, so let me quote the right hon. Member for Birkenhead (Mr. Field), who is a well-respected Member of the House and a renowned expert on pensions. He said:
“when Labour came to power we had one of the strongest pension provisions in Europe and now probably we have some of the weakest”.
So, even Labour Members of Parliament have recognised that fact, and it is not just one Labour Member of Parliament. Others have expressed concerns in the House today. Indeed, the hon. Member for Birmingham, Selly Oak (Lynne Jones) has expressed grave concerns about certain elements of the Bill. I am sure that her criticism of the Government is not based on the fact that she is not re-standing under a Labour flag, but is genuine and sincere—there is no reason why I or her constituents should question that.
Pension credit has been discussed in detail and I do not wish to repeat the points that hon. Members have made. However, I earlier raised the important question of Europe and the 2 million economic migrants who have come to the United Kingdom since Labour has been in office. We welcome those people, who, in the majority of cases, have made a great contribution to the economy and the social fabric of our nation. However, it must be said that their pensions might represent another ticking time bomb, even though there are arrangements in place with other members of the European Union about the transfer of pensions.
I noted that the Secretary of State’s response to my question on the matter indicated that people who had not accrued 30 years’ contributions towards their basic
state pension would nevertheless receive a pension credit on top of anything that they had paid in for that pension. Anyone who has worked hard, saved and paid contributions for 30 years will have a basic state pension that reflects their individual efforts, while those who, for reasons of portability, geography, or the timing of their entry into the United Kingdom—whether they be European nationals, or people who have decided to become UK nationals—have not made such contributions will receive a top-up from the British taxpayer. That is a worrying indicator for the future, and given that the scale of economic migration is unlikely to decrease over the next few years as the European Union is joined by new members, such as Croatia, Serbia and Turkey, it is likely that UK taxpayers will be picking up the bill even for the pensions of the foreign nationals who come and settle here. People in some parts of the country are fed up with picking up the bill for all sorts of things at the moment, so I would be interested to hear what the Minister has to say about that. I am not making some sort of xenophobic or scaremongering comment, but asking a reasonable and rational question in the national interest: is this affordable, given the scale of migration?
Hon. Members on both sides of the House have come across the Motherwell Bridge pension fund, and I am aware that Ministers have made several comments vis-Ã -vis the financial assistance scheme and that fund. However, the FAS does not pay out 100 per cent. compensation. Many of my constituents are much aggrieved that, although they have worked hard and made provision for their retirement, the financial rug has been pulled out from beneath their feet. What protection will there be in the future for people who have made such provision, albeit through different financial vehicles?
I suppose that savings are the starting point of the whole debate. I believe that Help the Aged has said that means-testing is pernicious, and the trouble with the Bill is that it does not go far enough to try to end means-testing. Means-testing is a clear disincentive to saving. Many hon. Members will have constituents who have made provision for their retirement, yet who see people who have not made such provision receiving equal benefits—or even sometimes better benefits—to those who have made the effort to save. Of course, not everyone has been in a financial position in which they have been able to make provision for their retirement, so clearly there are many exceptions. However, the principle of rewarding people who save is not taken forward far enough in the Bill. I hope that the Government will flesh out in a little more detail how they will incentivise people to save and reward those who make the effort to save.
I have other points to make, but I want to be kind to my hon. Friend the Member for East Antrim (Sammy Wilson). I know that he will make relevant points about the Bill and about the emperor from Neath, the Secretary of State for Northern Ireland, who is again seeking to introduce measures through orders, rather than through the hopefully revived devolved Assembly of Northern Ireland. Lastly, I would like to mention the local government pension scheme. Many of my constituents think that
the Government have been disingenuous in trying to open up so-called negotiations and “reasonable” dialogue on the local government pension scheme. There are several thousand dedicated and skilled local authority workers in my constituency, and they are right to expect transparency and honesty from the Government.
9.25 pm
Sammy Wilson (East Antrim) (DUP): I thank the hon. Member for The Wrekin (Mark Pritchard) for giving me some of his time, so that I could contribute at the very end of this debate, especially as the issue is so important. Often, because of the way that business is dealt with in the House, representatives from Northern Ireland do not have the same opportunities as other Members to express their views and make amendments. In the short time available to me, I would like to put it on record that we broadly support the legislation. We judge it on three points. First, we ask whether it re-establishes the link between earnings and/or prices and pension payments. Secondly, we ask whether it will encourage saving. Thirdly, we ask whether it will help vulnerable people, especially women and carers, who are often described as second-class citizens when it comes to pensions.
As far as the re-establishment of the link is concerned, there is the promise—but it is only a promise—that the link will be re-established by 2012 or 2015. The concern that many Members have expressed is that a large number of people currently living in poverty will die in poverty, without having received the upgrade in pension, and without benefiting from the Government’s proposals. Indeed, in many cases, their poverty will increase as the real value of their pension falls between now and 2012 or 2015.
On encouraging savings, I listened to the Secretary of State’s opening speech, in which he talked about moving away from, and relying less on, means-testing. Of course, means-testing provides a disincentive for people, especially those on low incomes, to save for their pensions. For such people, there was not much benefit to be had from forgoing some of their income for a pension later on, as means-testing would kick in anyway. I remain to be convinced that the reduction in means-testing will be as great as the Secretary of State says. There are proposals in the Bill, especially to do with personal savings accounts, that could encourage people to save and make more provision for their pensions. However, like many other hon. Members, I am not sure that there is enough confidence for people to be attracted to personal savings, given the way in which the Government have raided pension schemes and destroyed personal pension schemes.
On help for women and carers—the people who do worse in the pensions system at present—some of the proposals, such as the 30-year qualifying period and the measures for those who provide care for 20 hours a week, go some way towards dealing with the problem, but as other hon. Members pointed out, there are still people who will fall through the net. Indeed, Carers UK says that about 15,000 people will still not be covered. I realise that time has run out, but I appreciate the opportunity simply to put on the record our support for the Bill’s general principles. We will examine the detail of amendments and other changes made during its progress through the House.
9.29 pm
Mr. Nigel Waterson (Eastbourne) (Con): It is a great pleasure to follow the hon. Member for East Antrim (Sammy Wilson), and I am grateful that he made his points both well and concisely.
We have had an excellent debate, although enthusiasm for the Bill was tempered as Members examined the detail of the reforms and the hard choices and difficult issues that have to be worked through. We are in the 10th year of a pensions crisis, largely created and certainly made worse by the Government. Savings have almost halved, and 2 million pensioners live in poverty. Some 125,000 people have lost their pensions, and 60,000 pension funds have been wound up—a point eloquently made by my hon. Friend the Member for The Wrekin (Mark Pritchard). We should not forget the human stories among the welter of figures, statistics and projections. Hon. Members may have seen an article in the Daily Mirror only a few days ago about Alan and Joan Brown, whose bodies were found when a bailiff called at their home in St. Helens. The article reported that Mr. Brown was a factory worker
“whose employer went bust in 2001 and he was expecting a redundancy payout plus his pension ... But liquidators found a major financial problem and hundreds of staff at Ravenhead Glass in St. Helens ... were left empty-handed.”
When Mr. Brown’s daughter was asked if the crashed pension fund contributed to her parents’ deaths, she replied:
“Yes, it played a part.”
Let us be in no doubt: we are talking about real flesh-and-blood people who face real problems. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) made clear in his opening speech, we broadly support the principles behind the Bill, but that does not mean that it does not contain imperfections and unfairnesses. We have argued for many of its principles which, if properly implemented, should improve pensions.
Paul Flynn: The last time that there was unanimity in the House on a pensions Bill was when Barbara Castle introduced the state earnings-related pension scheme. Ten years later, however, the Conservative Government reneged on that unanimity and virtually wrecked SERPS. Will the hon. Gentleman give an undertaking that for the foreseeable future any Conservative Government will respect the unanimous decisions that I expect the House to make on the Bill?
Mr. Waterson: If the hon. Gentleman had attended our debate earlier, he would have heard a discussion of that historic subject. I will, however, come on to consensus and its limits.
We have serious concerns about the Bill. Linking the state pension with average earnings is the right thing to do—indeed, it was promised by my party at the last election, so we support the principle of the Bill. However, like many hon. Members, we are concerned that the measure could take a long time to implement and that implementation is still subject to the Chancellor’s escape clause. We should not be surprised by the Chancellor’s grudging attitude to the policy. After all, he built his now-tattered reputation for fiscal prudence by telling the Labour party that it could not restore the link with earnings. In her excellent speech, the hon. Member for Colne Valley (Kali Mountford)
was good enough to concede that the decision to break the link was “reasonable and rational”. We are concerned that current pensioners and people who are about to become pensioners will lose out—a view also expressed by the hon. Members for Angus (Mr. Weir), for Birmingham, Selly Oak (Lynne Jones), and for Glasgow, North (Ann McKechin). In its briefing, Help the Aged says that
“reducing the contribution record to 30 years for a full Basic State Pension will produce a cliff edge of differential entitlements for those retiring either side of April 2010, failing to lift many current pensioners out of poverty and creating problems for women retiring between now and 2010.”
We welcome the changes to provisions for carers, and particularly to women’s pensions, which are the last great unfairness of the pension system, and must be addressed. Again, that was dealt with in our last manifesto. The issue was touched on eloquently by the hon. Members for Northampton, North (Ms Keeble), for Aberdeen, South (Miss Begg), for Solihull (Lorely Burt) and for Amber Valley (Judy Mallaber). An excellent technical point was made by the hon. Member for Burton (Mrs. Dean) about paying credits to the right partner—a subject that we will want to consider in Committee.
On the reactions of outside bodies, the general secretary of the National Pensioners Convention, Joe Harris, stated:
“The government has completely ignored the needs of today’s pensioners and the fact that over 2 million of them still live in poverty, the vast majority of which are women. 3 million older people will have died before ministers restore the link with earnings”.
I have mentioned the cliff-edge problem for women pensioners, which will create some glaring unfairnesses in later years.
We see the force of the argument for gradually increasing the state pension age, but we wish to hear much more from Ministers about flexible working practices and retraining for older workers. It is interesting that Ministers have downgraded their estimates of the saving from abolishing the contracted-out rebate. We wish to hold the Secretary of State to his promise that that saving will be reinvested in pension saving.
On personal accounts, we agree with boosting workplace saving and with auto-enrolment. That also harks back to our last manifesto. However, for us there are not just one but four elephants in the room. The first is means-testing. That is the cancer that eats away at saving for retirement. Unless the growth of means-testing is put sharply into reverse, the Government’s reforms have little chance of success. Even after the reforms, the Government’s own figures suggest that means-testing will continue at about 30 per cent. That is bad enough. Apart from those who are among the 30 per cent., how are people to know early in their career whether they will be one of the 30 per cent.? A respected independent body, the Pensions Policy Institute, has reached a very different conclusion. It thinks the figure could be 45 or even 50 per cent. Attempts to narrow the gap between the PPI and the DWP have apparently not borne fruit.
Mr. Quentin Davies:
Does my hon. Friend agree that since the Government are not bringing in the new earnings link until 2012 at the earliest, and possibly not
for a few years after that, and that in the meantime the pension credit remains earnings-linked, over the next five years or so the means-testing problem will get a good deal worse because the discrepancy between the two figures will increase?
Mr. Waterson: My hon. Friend is right. If we carried on as we are until 2050, on the Government’s own figures, by the middle of the century 75 per cent. of pensioners would be subject to means-testing.
I was explaining that the PPI and the DWP have been unable to narrow their differences. The PPI told me today:
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