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My hon. Friend the Minister mentioned Barbara Castle. I am sure that she would have welcomed the provisions for women in the Bill, but I do not think that she would have been proud of the continuation of the means-testing that is still inherent in our pension
system and the disincentives for people to save so that they can provide better for themselves than the state can do. Although it is good that the Government have accepted the recommendation of restoring the link to earnings, it will be some time before that happy event takes place. In the meantime, the disparity between the basic state pension and the means-tested pension credit will continue to grow, not narrow. That will mean that more people will be subject to means-testing, which will be counter-productive to our fundamental aims. Sadly, many people will thus be automatically enrolled into the new pension scheme when they would be better off using their money in other ways to save for their future.
It is unfortunate that we have not been able to have an adequate debate. I ask the Government to bear that in mind when they set out in future the arrangements for the Report stage of such complex and important legislation. For obvious reasons, the Minister talks about affordability when addressing the aim of reducing means-testing and improving the basic state pension. However, we have not been able to debate today the amount of taxpayers’ money that is spent on tax relief and the fact that the majority of that money goes to the 5 per cent. of people in our society who are the most wealthy.
We are shortly to have a new Prime Minister. I hope that this is an issue to which the Government will want to return, because if we are really concerned about creating a fair society and encouraging people to do more for themselves, we have to address it. We have to look at ways of ensuring that more resources are directed to those on lower incomes. If that means taking money away from those on higher incomes who have the ability to provide for their old age without substantial largesse from the taxpayer, that is something that a Labour Government should want to do.
I remain dissatisfied with the Bill, and I hope that there will be an opportunity in the other place to improve on it. I hope that I will be able to be more enthusiastic in supporting it when it comes back to this House.
6.36 pm
Mr. Weir: I want to make a few brief points. Looking at the ePolitix briefing for the debate, I see that it lists all those who contributed on Second Reading and notes that I was the only one who voiced any real concerns about the Bill.
Some of those concerns remain. There have been improvements, and I genuinely welcome what the Minister said today about those who are the victims of solvent employer pension schemes that have been wound up. I hope that that will help my constituents in the J & D Wilkie scheme in Kirriemuir to which I referred earlier. It is a regret that we did not have today the exact wording of the Minister’s proposals. That would have been useful because we could all have gone away a little more certain about what is to be done.
I share many of the reservations of the hon. Member for Birmingham, Selly Oak (Lynne Jones) and voiced similar concerns on Second Reading. One thing about which I am seriously concerned is the raising of the state pension age. I appreciate that that is some years
away, but there are grave difficulties with the proposal because of the use of averages. As I said on Second Reading, the difference in life expectancy between and within areas means that there is a danger that many people will never get the benefit of their pension. In Glasgow, for example, many people have a life expectancy of less than 70 years. There has been much debate about the reasons for that and the improvements in health and housing that may make a difference. However, there are still huge discrepancies in life expectancy in different parts of the country and even within areas, and that will prove problematic in future. If, as the pension age increases, it turns out that many people are not getting the benefit of their pension, that problem will come back and hit us.
This is a curate’s egg of a Bill. There are bits that I can wholeheartedly support. There are bits about which I have grave concerns. I will not oppose it, obviously, but my concerns remain. I look forward to seeing what happens when the Bill goes to another place. It leaves here slightly improved, but still with measures that cause concern.
6.38 pm
Mr. Laws: I should like to start on three points of consensus, and I shall try to be brief as other Members still want to speak. First, I echo the Minister’s comments in passing on our thanks to those people who have been involved in supporting the Bill through its various stages: the officials in his Department, those who advise us and the lobby groups who sometimes see their ideas and even their words taken up in the debates. We are grateful for all of that.
We would also like to thank the Minister for the very reasonable way in which he conducted himself throughout the Committee stage and for the fact that he tried, on the whole, to answer our questions. We can only wonder what future there is for a person who displays such qualities in the Government that we are about to get. We wish him all the best with that.
Perhaps more importantly, we add our congratulations to those of the Minister on the work of the Pensions Commission. It is worth bearing in mind that none of the big measures in the Bill was included in its entirety in the manifesto of any of the four main parties before the last general election. To succeed within a very limited period in proposing a coherent package of reforms and persuading not only the Government, but both main Opposition parties and some of the other groups represented in the House, to accept it is a major achievement. I hope that many of those reforms will last and influence the shape of the pensions system for many years to come. I think in particular of the restoration of the earnings link, the increase in the state pension age, auto-enrolment and the other changes to the pensions contributory system. There is a great deal of consensus on those measures and on the direction of travel, which is why we, too, do not intend to divide the House on Third Reading.
Earlier, the hon. Member for Eastbourne (Mr. Waterson) teased me about whether there was a parallel consensus, which only the Liberal Democrats were part of and which could exist alongside the
apparent universal consensus on the Pensions Commission’s proposals. In fact, there is. I put it to him that if he went to every saloon bar and village hall in the country and held a public meeting on pensions, he would find that there is indeed a parallel consensus on three points. It is perfectly possible to hold both the existing consensus and the parallel consensus in one’s mind at the same time. The hon. Member for Birmingham, Selly Oak described the elements of the parallel consensus in her comments. As the hon. Member for Eastbourne will recognise as I describe them, the elements of that consensus are threefold.
First, the Government have said that there is a great degree of certainty about the reforms. In their response to the Committee on Work and Pensions, they said:
“There is no ambiguity around this commitment”—
for example, in respect of the earnings link. However, that comes as news to many people in this country and in this House who feel that there is a great degree of uncertainty, not least about the arbitrary way in which the earnings link is to be restored, which has created uncertainty and will increase the amount of means-testing in the meantime. There is no guarantee that the state pension will be uprated by the greater of the increases in prices and earnings—the Labour party has dropped its commitment to that. More seriously, there is not even a commitment in the Bill to uprate pensions by a measurable and defined index, which the Engineering Employers Federation has said gives the Secretary of State almost carte blanche to determine the way in which the uprating takes place. That is worrying for all of us, because none of us knows which party will be in government in the future or how they might decide to reinterpret some of the changes made though the Bill. In a nutshell, if one goes to any pensioners’ group in the country, one will find a parallel consensus on dissatisfaction with the uncertainty and the long time before the changes take effect. That is why although all of us here may be pleased about the pensions consensus, people in the rest of the country are not.
Secondly, because the restoration of the earnings link is being delayed and because, as the hon. Member for Birmingham, Selly Oak said, we are building on such a low foundation of the basic state pension—because the Chancellor has insisted that pensions reform take place in an environment where for 10 years we will not increase the share of GDP that goes to state pensions—we have an enormous amount of means-testing. In the short time left I shall not repeat the entire debate, but today I was interested to hear even the Minister start to moderate his claims about the number of people who will benefit from personal accounts. On Second Reading, the Secretary of State said that the vast majority of people would gain more than £2 for every £1 invested, but today we have been told that a good majority of people will be net gainers—in other words, the claims are being scaled back.
The Government have not yet been able to answer the point, so I continue to believe that half the target audience for the personal account—people on lower incomes, whose risk of becoming subject to means-testing is greater than it is for the rest of the population—could be subject to means-testing in 2020, 2030 or 2040. A large number of people might find
either that the £2 for £1 no-brainer offer that Adair Turner and his commission tried to deliver is not realised for them, or that—worse still—they fall into the small but not negligible category of people who will actually lose by investing in a personal account because of the effect of means-testing not only on the pension credit, but on housing benefit.
The Government’s problem is that the more they deal with the mis-selling problem by not auto-enrolling various groups for personal accounts, or by not making sure that those groups get generic advice, the more they displace the mis-selling problem and make it a take-up problem, in which lots of people who should have personal accounts do not. The Government have yet really to deal with that problem. Some of us have concerns that the Government are building on an unsound foundation. If we are right about those concerns, the personal account part of the package, which we will hear about later this year, could be a failure, and if it is it will pull the rug from under a lot of the reforms, and that will affect what is delivered.
The final point on the parallel consensus is that people recognise that there are some huge issues with which the Government have not yet dealt. The hon. Member for Eastbourne touched on our disappointment today about pension compensation, but there are bigger issues with which the Government have not yet dealt, including the reform of public sector pensions, and the reform of tax relief in ways that are strongly hinted at in the Pensions Commission report and the Select Committee report.
The direction of travel is right, but the hon. Member for Cannock Chase (Dr. Wright) said earlier, on pension compensation, that he feels that the Government have half-built a house. Similarly, on pensions reform, we feel that the house is not yet complete. Given the degree of consensus, we hope that we will not have to advocate knocking down any of the walls in future, but there is a long way to go before the house is completely built, so that we can deliver the pension system that the country really needs for the future.
6.46 pm
Mr. Austin Mitchell (Great Grimsby) (Lab): Of course, as a loyal Labour Member, I welcome the Bill, but the welcome is fairly cool because the Bill is not as generous as I would have liked it to be. In any case, I have to welcome it, because I have not been able to express the dissent that I wanted to express on subjects that have been mentioned by my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones)—the earnings tie and the age of retirement. It is ludicrous that those two major issues, which are of overwhelming importance, are not even being discussed on Report. I hope that they can be covered far better in another Chamber, because they need to be discussed, and the situation needs to be changed.
I welcome the Bill because it is a solution to problems, and particularly because it improves the position of women, although it is not before time. The situation has been monstrous, but it will be changed, thanks to the Bill. I also welcome the Bill because it provides a platform for the future, when I hope that we can eventually be more generous, but it is not a
platform on which I want to stand in Grimsby and tell my constituents, “However old you are, hang on until 2015, and you’ll get a better deal.” That is not the kind of result that I wanted from a Bill as all-encompassing and all-important as this one. It does nothing for current pensioners, and we could have tackled the two problems together.
First, on the earnings tie, some 21 per cent. of pensioners are now below the poverty line; that is 2.2 million people. The earnings tie could and should have been restored by now, or much earlier. We will restore it eventually, but eventually is a long, long time away, and many of us will not actually reach it. Let us face it, our pensions are among the lowest in the world. They are lower than pensions in many of the countries that are new entrants to the European Community, including Slovenia, Latvia and Estonia. The Cheeky Girls will not be retiring to Wales; they will go back to Latvia, Estonia or wherever to get better pensions than they would get if they stayed in this country. It is monstrous that our pensions should be so low, compared to those of those new entrants. We need to help.
Our poverty line is 60 per cent. of median earnings, and pensioners should not be required to live below that line. We can only ensure that they do not by restoring the earnings link earlier. I agree that pension credit goes a long way; it is a salutary innovation of the Government’s that I have long welcomed. The pension credit, née the minimum income guarantee, is a welcome development, but it is means-tested, and because the increase to the basic pension is not as closely allied to the increase in earnings as it should be, means-testing, which is implicit for pension credit, will increase enormously. The gap between the pension credit and the actual pension will be much wider as time passes. Means-testing channels a limited amount of money to those most in need, but it is not claimed by many people who need the money, so it is an inefficient way of increasing pensions. We should therefore restore the direct tie to earnings.
My second point of dissent concerns the raising of the retirement age, which will be painful for many people. It is ludicrous to expect people in hard manual jobs whose physical strength is often broken by a life of hard manual labour to carry on working until they are 68. Fishermen, for instance, lead a tough life, and the pension arrangements in the industry are very bad. French fishermen retire on a full pension at 55. What am I to say to the former fishermen in Grimsby? Should I tell them to carry on fishing when they are over 65, over 60, or over 55? It is ludicrous to introduce such measures, as the system must be graduated. We must channel pension support to the poorest and to people whose jobs involve hard manual labour. After all, people in the poorest areas live 12 years less than people in the richest areas, and the pension system should be able to cope with that situation. I wish to brief, and I shall not wander over two previous debates, as the hon. Member for Eastbourne (Mr. Waterson) did. I welcome the Bill—it is a cool welcome—but I worry intensely that it does nothing for people now.
6.52 pm
Miss Kirkbride: I am grateful to be called to speak, and I shall make a brief contribution.
I largely welcome the provisions of the Bill, even though I am disappointed that the Minister and some of his Back Benchers could not support the cross-party amendment that was tabled earlier—I pay tribute to the Labour Back Benchers who did support it—as it would have greatly benefited my constituents who worked at United Engineering Forgings, which became bankrupt, and at Kalamazoo. They would have greatly appreciated the lifeboat scheme proposed by the Opposition, as they are seeking immediate benefit, because they will not have the security of pension payments for some time. I very much hope that when the Minister has conducted his review, he can reannounce the proposals that the Conservatives introduced today in his own words, and that finally the benefits of the Pension Protection Fund will be available to people who must currently use the financial assistance scheme.
May I briefly put on record one aspect of the Pensions Bill that is lacking—and I do not think that the Minister will find this surprising? Yesterday, the Minister graciously agreed to meet some of my constituents who took early retirement and are particularly affected by the provisions of the Pensions Act 2004 which immediately cut the pension benefits payable to people who took early retirement. I am not sure that the House anticipated that when it introduced the Bill those people would be uniquely affected by its provisions. For many people, benefits were cut by at least by at least 10 per cent. and in some cases by 70 per cent. of what they were expecting, which has a knock-on effect on their wives’ and, indeed, widows’ pensions if they pre-decease their spouse.
A much wider issue is therefore involved. It clearly cannot be addressed today, as the Bill is about to complete its passage in the Commons, but fresh amendments could be tabled in the other place to try to improve the position of people who took early retirement. They are not asking for a great deal—they are just asking for an improvement to their present predicament. The Minister obviously has to cost that with regard to the existing PPF commitments, but we believe that there are ways of taking the issue forward. I implore him to take a further look at the matter, as he said that he would do so. I am grateful to you, Mr. Speaker, for giving me the chance to put that on the record in the Chamber.
6.55 pm
Kelvin Hopkins (Luton, North) (Lab): I entirely agree with everything that my hon. Friends the Member for Birmingham, Selly Oak (Lynne Jones) and for Great Grimsby (Mr. Mitchell) said, so I do not need to say it again, but I wish to make some other points.
The direction of travel has changed as a result of Turner and pressure from the pensioners’ movement and Members of this House. We are starting to move in the right direction, very slowly, with very small steps, but I would say to my hon. Friends on the Front Bench that many Labour Members will be pushing to go much further than they are suggesting. The pension is far too low, it is still means-tested, and the earnings link has not been restored and will not be for some time yet. I make no bones about the fact that I want a
substantially higher pension that is not means-tested—we should use the taxation system to redistribute income instead—with an earnings link restored when the pension reaches the level of 25 per cent., instead of 15 per cent., of earnings.
On occupational pensions, if the Government do not secure the system and ensure that people trust in it, believe in it and continue to support it, in the end the only fall-back will be a thoroughgoing state system. That would be perfectly acceptable for a socialist like myself, but not so acceptable, I suspect, for my hon. Friend the Minister. I leave that thought with him.
On affordability, I think that that is a nonsense word. If my children had said when they were young, “Can we have more pocket money?”, and I had said, “I can’t afford it”, they would have said, “That’s nonsense, dad—we know you can afford it”, and they would have been right. What I would have meant was, “I choose not to give you any more pocket money”, which is a very different matter. Compared with other countries in Europe, particularly those in Scandinavia, Germany and France, we have a lower gross tax take and a lower level of public spending on public services. I want to see much higher levels of both. The Scandinavian economies are very successful, and we could go much further in their direction. Affordability is a non-argument: what it means is, “We choose not to give you higher pensions because we don’t want to pay for them.” That is unacceptable.
I want much higher pensions for our pensioners that are comparable with pensions incomes in other developed countries, and I am perfectly happy to have a much more progressive system of taxation to pay for it. I understand from a recent written answer that there is a massive surplus of £73 billion in the national insurance fund. If the upper earnings limit on national insurance contributions was removed, that would equate to an extra £6.5 billion. There is plenty of money, but it happens to be in the wrong pockets. We should take the money from those who may have too much and give it to those who have too little, the majority of whom happen to be our pensioners. I want a redistributive taxation system and much higher pensions without means-testing.
6.58 pm
Mr. Dai Davies (Blaenau Gwent) (Ind): I will be very brief, as there is not much time left.
As a former trustee of the British Steel pension scheme, I think it important that we pay tribute to the union trustees who work extremely hard on protecting schemes. We should consult trustees more on how we can help to protect schemes; they should be fully involved. Having worked within Allied Steel and Wire for the Community union, formerly the Iron and Steel Trades Confederation, I think that occupational pension schemes are a great asset, but they need to be boosted and looked after.
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