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“We are unlikely to change our projections, because they still seem reasonable to us.”
I have a suggestion to make. Perhaps the Minister can take it up in his winding-up speech. As he knows, there is a new procedure to allow a Standing Committee to hold an evidence session or sessions. Why do we not factor into the Committee stage of the Bill an evidence session, bring along the boffins from the DWP and the other boffins from the PPI and get them to argue the case and their differing assumptions in front of the Committee? The issue is central and crucial.
The second major concern across the industry is levelling down. The National Association of Pension Funds and the Association of British Insurers, among others, have expressed concerns. In a recent report the NAPF suggested that if there is severe levelling down, pension savings could be cut by as much as £9 billion overall. Potentially, the Government have made matters worse by moving to a cap of £5,000—not what was recommended by Turner, but a figure which in theory could draw in almost all existing pension savers—a point touched on in his speech by my hon. Friend the Member for Grantham and Stamford (Mr. Davies). That, combined with the lack of a level playing field when competing with existing provision and the costs and red tape heaped on existing schemes by this Government—I am delighted to see the former Pensions Minister, the hon. Member for Croydon, North (Malcolm Wicks), in his place—highlights the real danger of employers switching to personal accounts. It must also be said that the levels of contribution built into personal accounts will not deliver a particularly comfortable retirement. True, it may, if it works properly, bring people into the system who are not saving at all, but equally it could reduce the standard of living in retirement for many people; it should be seen as a minimum, not the norm.
Thirdly, there is the potential for mis-selling to people who should be advised to opt out of the system. That was touched on by my hon. Friend the Member for Ludlow (Mr. Dunne).
Fourthly, there is the issue of confidence. The continuing plight of the 125,000 people who have lost pensions remains a stain on the Government’s record, and their unwillingness to follow the ombudsman’s recommendations is a disgrace, as well as a constitutional outrage. I am delighted that my hon. Friend the Member for Hemel Hempstead (Mike Penning) was able to make his usual stirring case for the Dexion pensioners. If these reforms are to work, the Government have to restore confidence in pensions generally. That means tackling the ombudsman’s
report in a constructive fashion, scrapping the financial assistance scheme, and sorting out finances to deal with the shortfalls in the FAS so that proper help can be given to the people whose claims predate the Pension Protection Fund. While they are about it, perhaps the Government could drop their visceral opposition to the scrapping of compulsory annuitisation.
We have heard much today about consensus, but what does that mean in reality? I think that the hon. Member for Yeovil (Mr. Laws) was talking about a consensus different from the one that we have been engaged in. He is still peddling the unaffordable and unworkable citizen’s pension. I am sure that the Minister was keeping a score card of the spending commitments that popped up in his speech.
Yes, we are engaged in a consensus-building exercise, for all the right reasons. Pensions reform will have effects for decades. We need to achieve the right results, and they must be robust and capable of passing the test of time and surviving changes in Government. Even if we agree with the Government’s direction of travel, we have serious concerns that are shared by lobby groups and large sections of the pensions industry. Consensus must be transparent: it cannot be an excuse for shallow analysis, argument by assertion or dodgy data. There must be no cosy deals, smoke-filled rooms or blank cheques. We will press Ministers hard, especially in Committee, to spell out the effects that the reforms will have on future and existing pensioners and on pension savings in the years to come.
As I have outlined, we wish to see fairness between different groups and generations. We want to be sure that personal accounts will generate more savings as well as more savers. Even in this Bill, we wish to put down some important markers about how personal accounts will develop. I fear that Ministers are all too keen to shuffle off some of the difficult questions to the delivery authority. As usual, my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) spoke with great authority on those matters. We will therefore seek to place in the Bill some clear criteria for the development of the authority and yardsticks for judging the success or failure of personal accounts in due course.
My party remains committed, as we always have been, to boosting saving through the workplace and introducing auto-enrolment, but we wish to be sure that these reforms do not have perverse effects whereby millions will save to no purpose because of means-testing, or more generous existing pension provision will be eroded. We want the reforms to work, and we will work hard to ensure that they do. We will seek to persuade the Government when we think that they are going wrong. I am always infected by the optimism of the Secretary of State on the likely success of his reforms. I was interested to see his optimism on display in relation to another subject in The Mail on Sunday, where he is quoted as saying:
“I could emerge from nowhere to win, just like John Major.”
We wish him well in that endeavour too.
However, we broadly support the reforms. Why would we do otherwise? We have every hope and expectation of being in government when the reforms are implemented. For all the reasons that I have outlined, I shall not invite my hon. Friends to oppose Second Reading.
9.44 pm
The Minister for Pensions Reform (James Purnell): It has been a good debate and we welcome Conservative Members’ support for the Bill. I pay tribute to the Pensions Commission for its work. It laid the foundations for consensus and its report was a model of its kind. We should thank the commission for that.
We want to build a consensus because, as the hon. Member for Eastbourne (Mr. Waterson) said, the policy needs to last for decades. Building a consensus will help make that possible. We were delighted to learn that Conservative Back Benchers were part of the consensus. The hon. Members for Bournemouth, West (Sir John Butterfill), for Ludlow (Mr. Dunne) and for Hemel Hempstead (Mike Penning) all expressed their support for the policy. That also applies to all the Labour Members who spoke. It is worth noting that all our speakers were women—that demonstrates the radical change to benefits for women for which the Bill provides. It is nice for once to be the token man on this side of the House.
Paul Flynn: I am grappling with the conundrum of why restoring the link was denounced for the past few years as old Labour policy but is now acclaimed as new Labour policy. Does my hon. Friend agree that the best way of restoring full confidence in the Government’s intentions is to establish a link between the changes in the basic state pension and those in hon. Members’ salaries?
James Purnell: I am sure that my hon. Friend can put that proposition to the House authorities. I am glad to say that I am not responsible for that—he must lobby the hon. Member for Bournemouth, West.
I am glad that Conservative Members are at the heart of the consensus. They raised a couple of issues, with which I shall deal. However, I remain unsure whether the Liberal Democrats are part of the consensus. We shall find out shortly. I suspect that they do not want to vote against the Bill because they are worried about being accused of not supporting the improvements in it. Given that the hon. Member for Yeovil (Mr. Laws) said that he supported the Bill, but opposed almost all its policies; that he wants to end means-testing, but would not tell us how he proposed to do it; and that he wants to spend at least 0.5 per cent. more GDP on pensions, but when asked how he would fund it, he replied, “You’ve done it with health”, we have no idea about his policy for next election. Indeed, it fell apart before our eyes as he spoke.
James Purnell: I am happy to let the hon. Gentleman dig himself further into the hole.
Mr. Laws: Let me test the extent of the consensus on the Labour Front Bench. Earlier, the Secretary of State said that the vast majority of people who opted for personal accounts would gain £2 for every £1 that they put in. That appeared to contradict the Department’s report. Does the Minister stand unambiguously behind the Secretary of State’s every word?
James Purnell: Of course I do. The Secretary of State made the position clear when he intervened on the hon. Gentleman.
I believe that there is consensus in the House on the key planks of the reforms—it may even extend to the Liberal Democrats. There is consensus about restoring the earnings link, automatic enrolment and compulsory employer contributions. Indeed, there is consensus that it is right to complete Barbara Castle’s work and ensure that women are not second-class citizens in the pension system, and on eliminating the gender gap in equality.
Kelvin Hopkins (Luton, North) (Lab): I am pleased that the Government have decided to restore the link with earnings, albeit not until 2012. However, what do we say to the 3 million pensioners who will no longer be alive in 2012 and want something now?
James Purnell: We have increased pensioner benefits roughly in line with earnings if we take into account winter fuel allowance, free television licences and tax cuts—
James Purnell: Tax cuts for older people—the increased age-related allowances.
Let me make progress and answer as many points as possible because several important matters were raised. My hon. Friend the Member for Burton (Mrs. Dean) raised the important issue of her constituent who might miss out on extra pension contributions because child benefit had been paid to the father rather than the mother. My hon. Friend has campaigned on that issue resolutely, and I am delighted to be able to tell her that we will address that problem through the Bill. I think that her constituent will retire after 2010, so she will be able to benefit from the new regulations that will define those engaged in caring. Although that will usually mean that the credit goes to the person receiving child benefit, there will be flexibility to address the particular issue that my hon. Friend raised.
The hon. Members for Runnymede and Weybridge (Mr. Hammond) and for Grantham and Stamford (Mr. Davies) raised the issue of the cliff edge. We need to remind ourselves of why we are introducing the Bill. We are doing so because at the moment only 30 per cent. of women receive a full state pension, compared with 85 per cent. of men. We want to put that right in the Bill. We could have followed the ordinary way of introducing policies such as these, which is to phase them in over time. If we had done that, however, we would have made progress too slowly—so we decided to bring in the policy in one stage in 2010, at which time 75 per cent. of women will benefit, compared with the 30 per cent. who benefit now.
The hon. Member for Runnymede and Weybridge said that he wanted to bring in such a measure retrospectively for everyone and not have the cliff edge, but that would cost £1 billion, which is simply unaffordable. I am sure that he accepts that a line has to be drawn somewhere, and we have to say where that is to be. No one would benefit from his suggestion of phasing in the policy after 2010. The only difference that that would make is that women who would have benefited from our proposed changes would not do so.
I understand why hon. Members have raised this issue, but a line has to be drawn somewhere, and 2010 seems to be the right time because before that women will be retiring at 60, whereas the women who will benefit from this measure will be retiring later.
We will of course look in detail at the points raised by my hon. Friends the Members for Northampton, North (Ms Keeble) and for Colne Valley (Kali Mountford) about women who are doing two jobs that pay below the lower earnings limit. The problem should be addressed by the reduction in qualifying years to 30, however, and if we were to introduce a separate measure to deal with it, it would be complex for employers and could have consequences for the employment of those on low wages. We would therefore be reluctant to do that.
My hon. Friend the Member for Aberdeen, South (Miss Begg) raised the issue of grandparents and we will be happy to look into the matter. It is worth saying, however, that it is possible to designate a grandparent as the recipient of child benefit if both parents are working. My hon. Friend might want to consider whether that is an adequate solution to the problem that she raised.
Many Members, including my hon. Friends the Members for Northampton, North, for Aberdeen, South and for Amber Valley (Judy Mallaber), and the hon. Member for Hemel Hempstead (Mike Penning), mentioned carers. We will examine in detail in Committee the solution that has been put forward today—to include the provision as part of the local authority assessment period—to determine whether that would be an appropriate way of responding. Those are the points that were raised about women and carers and I hope that I have been able to address the concerns that some Members have expressed while welcoming the broad thrust of our proposals.
Another key part of the debate related to the uprating of the basic state pension, which was raised by the hon. Members for Runnymede and Weybridge and for Yeovil. It is worth remembering that the last time we debated this issue, Opposition Members said that this measure was never going to be introduced. Fortunately, the Bill spikes that particular accusation by guaranteeing in legislation that the link will be restored in the next Parliament. Our policy on this is clear. Our objective is to restore the link in 2012, subject to affordability. However, the hon. Member for Runnymede and Weybridge could not even guarantee that. He could not guarantee that he could support his public spending plans. He could not even answer the point that my hon. Friend the Member for Burnley (Kitty Ussher) raised, to which I shall return later. However, he has less of a problem than the hon. Member for Yeovil.
I was adding to my Laws index during the debate, and I shall now tot up the small spending commitments that the hon. Member for Yeovil has made. He is going to try to deal with the cliff edge, and with the issue of people having two jobs that pay below the lower earnings limit. He said that he would deal with frozen pensions—that is another £400 million—and that he would spend 0.5 per cent. of gross domestic product on his citizen’s pension. He also said that he would spend
another £1.5 billion on restoring the earnings link immediately. I know that he has a money tree, but his proposals represent a friendly-fire attack on his own shadow Chancellor, who must feel dread every time the hon. Member for Yeovil opens his mouth. Of course, when in Government affordability is the limit of the possible. We have made clear how the proposals are affordable. They are affordable because of the tough decisions taken in the Bill on the state pension age. We are grateful for his and the Conservative party’s support on that issue.
Others, including the hon. Member for Angus (Mr. Weir) and my hon. Friends the Members for Aberdeen, South and for Glasgow, North (Ann McKechin), raised the issue of the effect on poorer socio-economic groups. I understand those concerns. As the hon. Member for Angus said, that issue affects English industrial towns as much as it does other towns. For instance, people in my constituency die earlier than those in richer parts of the country. The right solution, however, is to address the causes: poverty, health inequality and occupational health. We must ensure that there is support for people who cannot work when they are closer to retirement. The wrong answer would be to duck that choice and pursue a policy that we cannot promise to deliver, because we cannot know how it will be affordable over time.
The third issue that I want to address was raised by many Opposition Members—means-testing. It is an important issue, and the Bill more than halves the proportion of people who would have been subject to mean-testing. It is worth taking a step back and reminding ourselves what means-testing means in this context, namely, giving more money to poor people, disabled people and carers. The hon. Member for Yeovil talks about reducing the number of people who are means-tested, but 80 per cent. of those people who will get pension credit under our proposals in 2050 will receive more than the £115 under guarantee credit. Does he want to tell us how he will end means-testing? We would be interested to listen, as he clearly failed to answer that point in this debate.
The hon. Member for Yeovil’s policy on means-testing fell apart during the debate. At one point, he said that his citizen’s pension would be based on people paying tax. Then he said that it would be based on the number of years for which people had been resident in the country. If so, he will have to have some kind of means-tested support for people who have not been resident for more than a certain number of years. He refused to say whether he would take benefits off people getting more than £115 under our proposals. Half of those people are getting more than £115 because they are disabled or are caring for someone with real care needs. Is he seriously proposing taking money off someone on £170 a week who is caring for a sick husband or wife, so that he can say that he is reducing means-testing? I will give way to him if he will confirm that.
Mr. Laws: Does the Minister accept the PPI figures that make clear that, because of the effect of means-testing, in some extreme circumstances people who put £1 into personal accounts could end up losing the majority of their money?
James Purnell: Yet again—for about the fifth time—the hon. Gentleman has refused to answer the question. Until he answers some of those questions, he will have no credibility on the issue of means-testing. I look forward to debating such issues in Committee, as it is important that they receive proper scrutiny. We will also scrutinise his leader’s policy to abolish the state second pension, which would mean 7.5 million people losing up to £1,000 a year. I am sure that my hon. Friends will be happy to discuss that policy with him at the next general election.
We will be very happy to examine the Conservative party’s spending plans. We are glad of its support in theory for the Bill, but its shadow Chancellor’s spending plans clearly mean a reduction of public spending in GDP— [Interruption.] He spelled that out clearly. The proposals that we are debating tonight mean an increase in public spending in GDP. Until the hon. Member for Runnymede and Weybridge tells us how he will fund that, his commitment will only be theoretical, not real.
Bill accordingly read a Second time.
PENSIONS BILL (PROGRAMME)
Motion made, and Question put forthwith, pursuant to Standing Order No. 83A(6) (Programme motions),
That the following provisions shall apply to the Pensions Bill:
Committal
1. The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 8th February 2007.
3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
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