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Session 2006 - 07
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General Committee Debates
Pensions Bill

Pensions Bill



The Committee consisted of the following Members:

Chairmen: Mr. Roger Gale, David Taylor
Bailey, Mr. Adrian (West Bromwich, West) (Lab/Co-op)
Banks, Gordon (Ochil and South Perthshire) (Lab)
Brown, Mr. Russell (Dumfries and Galloway) (Lab)
Burt, Lorely (Solihull) (LD)
Creagh, Mary (Wakefield) (Lab)
Heppell, Mr. John (Vice-Chamberlain of Her Majesty's Household)
Hillier, Meg (Hackney, South and Shoreditch) (Lab/Co-op)
Keeble, Ms Sally (Northampton, North) (Lab)
Lancaster, Mr. Mark (North-East Milton Keynes) (Con)
Laws, Mr. David (Yeovil) (LD)
Penrose, John (Weston-super-Mare) (Con)
Plaskitt, Mr. James (Parliamentary Under-Secretary of State for Work and Pensions)
Pritchard, Mark (The Wrekin) (Con)
Purnell, James (Minister for Pensions Reform)
Selous, Andrew (South-West Bedfordshire) (Con)
Smith, Ms Angela C. (Sheffield, Hillsborough) (Lab)
Waterson, Mr. Nigel (Eastbourne) (Con)
Alan Sandall, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 23 January 2007

(Morning)

[Mr. Roger Gale in the Chair]

Pensions Bill

10.30 pm
The Chairman: Good morning, ladies and gentlemen. On behalf of Mr. Taylor and myself, I welcome you to the Committee. As long as I am in the Chair, hon. Members may remove their jackets. Mr. Taylor will no doubt make his own adjudication on the subject.
I remind the Committee that there is a money resolution in connection with the Bill, copies of which are available in the Room, and also that adequate notice of amendments should be given. As a general rule, Mr. Taylor and I will not call starred amendments, including those that might be reached during an afternoon sitting.
The Minister for Pensions Reform (James Purnell): I beg to move,
That—
(1) the Committee shall (in addition to its first meeting at 10.30 a.m. on Tuesday 23rd January) meet—
(a) at 4.00 p.m. on Tuesday 23rd January;
(b) at 9.10 a.m. and 1.30 p.m. on Thursday 25th January;
(c) at 10.30 a.m. and 4.00 p.m. on Tuesday 30th January;
(d) at 9.10 a.m. and 1.30 p.m. on Thursday 1st February;
(e) at 10.30 a.m. and 4.00 p.m. on Tuesday 6th February;
(f) at 9.10 a.m. and 1.30 p.m. on Thursday 8th February;
(2) the proceedings shall be taken in the following order: Clauses 1 to 11; Schedule 2; Clauses 12 and 13; Schedule 3; Schedule 1; Clauses 14 and 15; Schedule 4; Clauses 16 and 17; Schedule 5; Clause 18; Schedule 6; Clauses 19 to 24; Schedule 7; Clauses 25 to 29; new Clauses; new Schedules; remaining proceedings on the Bill;
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 p.m. on Thursday 8th February.
I am sure that I speak on behalf of everyone, Mr. Gale, when I say how delighted we are to be sitting under your experienced chairmanship on this important Committee, and also how much we are looking forward to the chairmanship of Mr. David Taylor, who is also very experienced.
The Bill has been widely welcomed, including on Second Reading, and there appears to be a broad consensus on the crux of the proposals that it contains. That is in large part owing to the extensive consultation and research that went on beforehand, not only in the exemplary work of the Pensions Commission, but in the national pensions debate in which more than 5,000 people participated, and in the White Paper consultation to which 350 organisations and individuals responded.
I put on record the Government’s gratitude to the members of the Pensions Commission—Lord Turner, Jeannie Drake and John Hills—for their work in shaping the proposals in the Bill. The Committee will agree that the Pensions Commission’s report is a model of what commissions can do to shape Government policy.
I also put on record my gratitude to the main Opposition parties for the spirit in which they have approached the Bill. The Government have tried to work closely with the Opposition parties on the principles and to give them as much access as possible to our thinking, and they have helped to shape some of the proposals in the Bill. Of course, that does not preclude the need for scrutiny of the proposals, and it is right that the Committee do so. In the past, Bills have gone through with a measure of consensus that some retrospectively say means that they have not been effectively scrutinised, so scrutiny is an important task for the Committee. The reforms contained in the Bill will put in place a state pension system that is fit for the 21st century, one that will meet the demographic challenges that we face, and address many of the injustices of the current system, particularly those regarding women and carers.
The Bill also puts in place measures to support the widening of private pensions saving. The Committee will have the opportunity to examine the issue of the delivery authority for personal accounts. I am sure that there will be some scrutiny of, and enthusiastic discussion about, the arrangements for the delivery authority. However, on a point of detail, it is worth saying at the outset that the Bill is not concerned with the details of the personal accounts scheme in themselves. As hon. Members will know, the Government are in the process of consulting on our proposals for the technical details of the operation of personal accounts.
I am pleased that we have been able to meet Opposition requests for 12 sittings without guillotine motions, on the basis that the Committee will now find its own way through proceedings. I am very lucky to be joined by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt), who will assist us in our discussions. There is a great deal of knowledge and expertise in the Committee. I look forward with interest to the points that will be raised and discussed, and I hope that we will be able to continue the consensual approach to the Bill that we have had to date.
Mr. Nigel Waterson (Eastbourne) (Con): I associate myself with the Minister’s remarks about you, Mr. Gale, and your co-Chairman, Mr. David Taylor. I am sure that you will both bring to the chairmanship of the Committee your usual rigour and occasional good humour.
I am delighted to be ably backed up, assisted and supported by my hon. Friend the Member for South-West Bedfordshire, and indeed my other colleagues. I take this opportunity to welcome all members of the Committee, pressed men and volunteers. I am tempted to say that they do not know they are born. Some of us bear the scars not only of the Pensions Act 2004 but even the 1995 Act, to go back a bit. As a fresh-faced Back Bencher, I was put on that Committee—I think to punish me for some long-forgotten sin—where I developed a taste for pensions legislation. It is nice to see some old faces here today—I mean that in the best sense—particularly among the officials.
Here we are again, trying to resolve the pensions crisis. The Government are perhaps the only body in the country who persist in claiming that there is no pensions crisis, but we are going to have a bite at that rather substantial cherry. The good news, as the Minister said, is that we have agreed an informal timetable for sittings, so we should be able comfortably to deliver the Bill by 5 o’clock on 8 February. That will be a massive step forward from the last Pensions Bill, which seemed to go on and on and on, primarily because the Government kept trying to amend their own Bill. I lost count, but I think that between the Commons and the Lords, the Government tabled about 1,500 amendments in the end.
We are proceeding on the basis that this Minister has a much better grip on things. It is worth putting on the record that at the Programming Sub-Committee he gave us a cast-iron guarantee that there would not be lots of amendments. Apart from the obvious technical and drafting amendments, which are understandable as long as they do not get out of hand, all the envisaged amendments of any substance are now before us. That is helpful, and it is on that basis that we will be able to deliver the Bill in 12 sittings. For those newcomers to the world of pensions legislation, I hope that we can deliver a few laughs, a few tears and some human interest, and that we can disagree without being disagreeable.
The Minister mentioned consensus, and it is important to understand what we mean by that. Unlike his TV appearances, the Committee will not provide an easy ride. The Conservatives have made it clear, as I for one did on Second Reading, that by consensus we mean total transparency and openness. As the official Opposition, we must be satisfied that the Bill will work, not just because that is the right thing to do for future generations of pensioners but because we have a sneaking suspicion that we might well be in power when a lot of it comes to be implemented.
The Minister has touched on the main issues. One is restoring the link between pensions and average earnings. That was in our last election manifesto, so it would be churlish of us to do anything but support it.
Mr. Russell Brown (Dumfries and Galloway) (Lab): On that specific point—that the issues of consensus and restoring the link were raised on Second Reading—I remind the hon. Gentleman, although I suspect that he has not forgotten, that the link would not have been guaranteed beyond one term had his party got into power.
Mr. Waterson: I ruefully admit that that might be slightly academic, but I take the hon. Gentleman’s point. I thought that all manifestos were for one Parliament. I seem to remember learning as a fresh-faced law student that one Parliament could not bind another, but there we are.
At any rate, the issue was there, as was a suite of policies to better the position of carers, particularly women. The Conservative party are delighted that the measures are being introduced, particularly those concerning women’s pensions. We will have a lot to say about the detail, particularly the issue of the cliff edge, as it has become known, although a steep incline is probably a better way of putting it.
The state pension age—Committee members will be relieved to know that this will not affect many of them—will rise slowly to 67 or 68. I thought that the Minister was trying to put down a marker concerning personal accounts. It is important to see the Bill as a seamless whole. Unless the state system is working, the private system will not work and vice versa. Unless the state provides a decent platform for private pension savings, issues such as means-testing will fatally undermine pension savings, so the two stand and fall together. Although the Minister is correct in saying that a second, much more detailed Bill dealing with the personal accounts system will be introduced this time next year—I imagine that we will be members of the Committee—it is vital that we take the opportunity at this early stage to put down some clear markers about how the personal accounts system should operate. The Opposition will certainly seek to do that.
On Second Reading, I said that I feared that Ministers were only too keen to appoint high-powered people to run the delivery authority and then leave them to deal with all the difficult stuff. The House needs to be clear about how personal accounts will work, how they will be delivered and whether they will be successful in the real world. Most importantly, we need to set out what constitutes success or failure.
I also talked about the four elephants in the room. I said that it was very important to discuss means-testing—I will come back to that in a moment in a different context. Secondly, I talked about levelling down and to what extent personal accounts will undermine good existing pension provision provided by responsible employers. Thirdly, I talked about the dangers of mis-selling to people who should not be auto-enrolled but advised to opt out of the new system. Fourthly, I mentioned confidence. We have tabled amendments dealing with issues such as the financial assistance scheme, the ombudsman’s report and all the unfinished business that the Government should be clearing away to try to ensure that personal accounts have a clear run and a good chance of taking off and being successful.
I return to means-testing. For us—and, I suspect, for the Minister as well—it is a central issue. Currently,50 per cent. of all pensioners are being means-tested. If we carry on as we are, it will be 75 per cent. by the middle of the century. That is clearly unacceptable, and the Government have already said so on record. The key issue is whether the reforms will reduce means-testing to an acceptable level. The Government say that it will be reduced to about 30 per cent. Independent bodies such as the Pensions Policy Institute put the figure closer to 45 or 50 per cent. There is a clear division. In fairness, the Department for Work and Pensions and the PPI have been trying to narrow the differences, but not with any great success.
That is why I raised the possibility on Second Reading of having a session, or perhaps half a session, of oral evidence on that subject. For the benefit of those Members who may not have been keeping up, we are operating under new Standing Orders. I do not claim to have read them all, but one of the key differences is that we will be subject to written evidence, which sounds like a good idea in theory. I have not seen any yet, but it will no doubt emerge. Like a Select Committee, we will receive it as we go along and it will eventually be produced in a bound volume, and I welcome that.
However, there is also provision for oral evidence in Committee. Again, that is a good idea in the right conditions, and it is absolutely crucial to the success of the reforms, but it is relatively narrowly defined. The likely witnesses will come from only two groups—the boffins from the DWP and the boffins from the PPI—so the evidence could be dealt with rather crisply. On the Programming Sub-Committee, the Government’s attitude was that they were not prepared to agree to that. Indeed, they took a rather strict view that the rules would apply only to Bills introduced for First Reading after Christmas. If that is the test, this Bill would fail it. So far, so good.
However, as was mentioned at business questions with the Leader of the House last Thursday, a precedent exists—the Local Government and Public Involvement in Health Bill. Even though the Bill received its First Reading before Christmas, the Bill’s Committee decided that it will take oral evidence. There is a precedent, and I understand that the Committee is sovereign with regard to hearing oral evidence during its deliberations.
Mark Pritchard (The Wrekin) (Con): Does my hon. Friend agree that, if we can hear oral evidence, it would square the circle and onward discussion in the difference of interpretation of how far the Bill will deliver a reduction in means-testing between the Department for Work and Pensions and the Pensions Policy Institute to which he referred?
10.45 am
Mr. Waterson: My hon. Friend is absolutely right. I shall return to that point in a moment.
I wish first to deal with the reaction of the Leader of the House when the matter was put to him by my right hon. Friend the Member for Maidenhead (Mrs. May) on Thursday. The right hon. Gentleman talked about Standing Order No. 83C and said:
“We are very committed—I include in this my right hon. Friends the Chief Whip and the Deputy Chief Whip—to making this system effective. If the Standing Orders say that not only the Programming Sub-Committee but the Public Bill Committee can decide on whether to have evidence sessions, that is correct.—[Official Report, 18 January 2007; Vol. 455, c. 921.]
In fairness, he referred also to the bedding down of the procedure and hence the First Reading rule to which I have referred.
We have a dilemma. The Government are worried, as I would be if I were still a Whip, about getting the business through by 8 February. Having oral evidence on this carefully defined subject with a controlled number of witnesses from two groups need not add any length at all to the time spent in Committee discussing the Bill. Indeed, to pick up the point raised by my hon. Friend the Member for The Wrekin, I believe that such proceedings could save the Committee time. Speaking for myself and, possibly just for once, the Liberal Democrats, I think that we shall be spending a lot of time on means-testing. It will keep coming up naturally throughout the Bill. If we can square that circle, such a process could shorten our proceedings.
Ms Sally Keeble (Northampton, North) (Lab): Let us bear in mind that we are members of a scrutiny Committee, not a Select Committee. On which clause does the hon. Gentleman want to take oral evidence to further our discussion about the detail of the Bill? Having read the Bill several times and tabled amendments, I cannot see any bit of it that refers to mean-testing. There are several proposals that will substantially increase pensioners’ incomes, especially those of women pensioners so that they will be taken out of means-testing. On which clause does the hon. Gentleman propose that we hear oral evidence?
The Chairman: Order. Before we go too far down that road, I understand the points that are being made but, by the same token, I must remind the Committee that no amendment has been tabled, so there is no amendment of that sort to discuss in respect of the programme motion.
Mr. Waterson: I am aware of that, Mr. Gale. However, I want the Government to reconsider the point or at least say that they will go away and discuss it seriously. It could help in the long run. It is fairly crucial to matters; otherwise, Conservative Members will vote against the programme motion.
It has been put to us in writing as well as orally that, in their goodness, the Government are arranging another seminar that hon. Members and no doubt lots of others can attend to talk about the issue. I do not know whether a date has been mooted or fixed, but we look forward with great excitement to another opportunity of a seminar organised by the Department for Work and Pensions. However, that is not the same thing as members of the Committee having the opportunity that they deserve to conduct their own investigation and to hear oral evidence within a narrow compass. It need not extend our proceedings in Committee at all; it could save us time and it seems eminently sensible. Will the Minister think again about such matters? If he is not prepared to do that, I shall invite my hon. Friends to join me in voting against the programme motion.
Mr. David Laws (Yeovil) (LD): On behalf of myself and my hon. Friend the Member for Solihull, I welcome you to the Chair, Mr. Gale, as well as Mr. Taylor, in due course. I thank the Minister for Pensions Reform for his constructive opening comments and welcome him and his fellow Minister to the Front Bench. We also look forward to entering into debate with the Conservative Front-Bench team, such as the hon. Member for Eastbourne who, as we have heard, has considerable experience on the Opposition Front Bench. He questioned what he had done to deserve such experience, which rather reminds one of the fact that the Paymaster General is now on what I think is her 11th Finance Bill, which is a real penalty so perhaps the hon. Gentleman should be grateful for merely a prolonged period on the Pensions Bill.
We also welcome the hon. Member for South-West Bedfordshire, who I think is within the age range that will be affected by the change to basic state pension age limits. Many of us were disappointed that the hon. Member for Eastbourne did not spot that a large number of us on the Committee, including a number of his hon. Friends, will be affected by these proposals.
This is an extremely important Bill. In this place we discuss an awful lot of issues, including a lot of legislation. The latter is sometimes presented as having the potential to make an enormous impact on our lives but—particularly from the Home Office and a couple of other Departments that I could name—quite often does not live up to our expectations. In contrast, this Bill is immensely important because it will affect almost everybody in the United Kingdom in one way or another, not only through changes to the state pension age but through changes to the number of contributory years for the basic state pension age, restoration of the earnings link and the introduction of personal accounts.
Therefore, this Bill will affect people’s lives in a very real and tangible way, whether that be in a perceived negative sense by asking them to work longer or in a positive one by enhancing the basic state pension. As the Minister said, it is therefore vital that we give all of the Bill proper scrutiny, notwithstanding consensus on its broad principles.
I should also like to welcome and thank the other individuals involved in helping to steer this Bill through, not only departmental officials but also those from the Opposition, such as the many lobby groups who take a great deal of time, care and attention presenting proposals for amendments and who provide us with useful briefing notes, which are sometimes reflected in our discussions.
I shall not repeat in precise terms the case that the hon. Member for Eastbourne made regarding oral evidence sessions. However, we strongly support his comments. The Modernisation Committee’s report gave a clear indication that oral evidence sessions can be immensely useful and potentially save time because they may involve taking evidence from Ministers and therefore save on some of the probing amendments that we often have to table in order to flush out ministerial thinking.
As the hon. Member for Eastbourne said, there is also an issue central to this Bill which impacts on many of the different proposals on the subject of means-testing. While one could say that the Department for Work and Pensions Committee did a pretty good job in taking evidence and in looking at all aspects of the Government’s proposals, it is clear that it did not manage to resolve the fundamental matter of the proportion of people and the target audience for personal pensions who will be affected by means-testing and therefore the knock-on consequences of that for returns in the personal accounts. That is a crucial matter and one for which an oral evidence session could be immensely useful. One gets the impression that the Minister is not particularly minded to give ground on this. Therefore, I wonder whether I might make some other suggestions if we have the fallback position of a seminar—
John Penrose (Weston-super-Mare) (Con): Just to reinforce the hon. Gentleman’s point, when the PPI and the Secretary of State gave separate evidence to the Select Committee on this point we ended up with an argument by proxy. It would have been much faster, and probably would have resulted in much greater clarity, if we had been able to have them in the same room to fasten down and home in on issues and allow them to address each other point by point. It would have helped our proceedings then in the same way as I suspect the hon. Gentleman is suggesting that it would help our proceedings now.
Mr. Laws: I am grateful for that point. As the hon. Gentleman indicated, he served on the Select Committee and is therefore particularly well placed to say which elements were unresolved by those proceedings. The Minister has offered us a seminar, as the hon. Member for Eastbourne indicated, and our hearts pulsate with excitement at that prospect. However, while not knowing whether we will be able to ask the Minister questions as part of that—as would be the case in oral evidence—we fear that it might simply be a lecture. It would be helpful to clarify that. We also do not yet know whether the PPI would be there to give evidence alongside DWP officials and put their case in its own terms, rather than second hand, or what cross-questioning would be allowed—of either group by Committee members, or of DWP officials by the PPI. We do not know how outside groups, who have the benefit of sitting and listening to the exchanges in oral evidence sessions as part of these hearings, would be involved.
So, even if we fall back on the less attractive seminar idea, there are ways in which the Government could make a seminar rather more meaningful and similar to the oral evidence sessions that the Modernisation Committee envisaged.
Andrew Selous (South-West Bedfordshire) (Con): To add to the list of questions that the hon. Gentleman has asked about the seminar, does he agree that one important issue is its date? Although many of us would like to see it held in this Committee, to have it at some point in the Committee stage would be useful.
Mr. Laws: I entirely agree with that point. We know that, sometimes, things are promised at this stage in Committee hearings that only emerge too late. If we are to have a useful seminar on this, it must be pretty soon. So, those are our concerns and I really hope that the Minister can respond positively on some of the specific points raised on that means-testing issue.
James Purnell: I shall try to respond to those points in the time available. On the levelling down issues, it will obviously be for you, Mr. Gale, to decide their relevance to this Bill. I would say that such things go into the issue of personal accounts, which this Bill does not introduce—it introduces the delivery authority—but we can continue that debate.
The point here is really about the precedents that we are setting. An oral evidence session fails the precedent test on two counts. First, a clear exception was introduced in the bedding down of these arrangements. The Bills introduced before December were clearly not required to have such sessions. Secondly, and perhaps even more importantly, the purpose of those oral evidence sessions is not to have a general debate on the proposals; it is specifically for there to be further questions about issues that have not been consulted on fully in the Bill.
In contrast, these issues have been scrutinised pretty much as well as any Bill that has ever been put forward. The PPI proposals have been put forward in formal evidence to the White Paper. We published a document specifically giving people the chance to read evidence about our means-testing assumptions and forecasts, which have been scrutinised by an independent commission and looked into by us and the PPI. With that all published, it would therefore set a wrong precedent to put this into the Bill.
We are happy to have that seminar, and I can happily reassure the hon. Member for Yeovil that people would be able to ask questions, and that we would indeed invite the PPI and outside groups. We are confident that we have set out the correct forecasts, modelling the effect of the state second pension. It is worth pointing out that if Conservative Members vote against this, they are not voting for the idea of evidence sessions but against the programme motion that they first suggested. So, I urge my colleagues to vote on the basis of forming the right precedent.
Question put:
The Committee divided: Ayes 9, Noes 7.
Division No. 1 ]
AYES
Bailey, Mr. Adrian
Banks, Gordon
Brown, Mr. Russell
Creagh, Mary
Heppell, Mr. John
Hillier, Meg
Keeble, Ms Sally
Plaskitt, Mr. James
Purnell, James
NOES
Burt, Lorely
Lancaster, Mr. Mark
Laws, Mr. David
Penrose, John
Pritchard, Mark
Selous, Andrew
Waterson, Mr. Nigel
Question accordingly agreed to.
11 am
Ordered,
That, subject to the discretion of the Chairman, any written evidence received by the Committee shall be reported to the House for publication.—[James Purnell.]
<++++>

Clause 1

Category A and B retirement pensions: single contribution condition
Mr. Laws: I beg to move amendment No. 62, page 1, line 13, leave out ‘2010’ and insert ‘2008’.
The Chairman: With this it will be convenient to discuss new clause 12—Report on phasing in the 30 year contribution condition—
‘The Secretary of State must, not later than 1st July 2007, lay before Parliament a report on the costs and feasibility of phasing in the condition introduced by paragraph 5A(2)(a) of Schedule 3 to the SSCBA (inserted by section 1(3) of this Act).’.
Mr. Laws: Amendment No. 62 gives us an early opportunity to test the Government’s thinking on one of their most important Pensions Bill proposals—clause 1, which deals with the new qualifying conditions for the basic state pension. It is fair to say that this part of the Bill has been widely welcomed from different quarters because of the impact that it will have on the number of people able to secure a full basic state pension. The clause will replace the previous contributory requirement of 39 years for women and 44 for men with a lower 30-year requirement, which will begin after 6 April 2010.
The Liberal Democrats welcome this watering down of the contributory principle. We feel that the contributory principle has become something of a fiction compared with what Mr. Beveridge aspired for it to be, particularly when the basic state pension has ended up being set so far below the level of means-tested benefits, to which people are entitled even if they have not built up any contributions at all. We said earlier and in other places that we prefer a residency requirement, but this is the Bill that has been presented to us and we must deal with it, acknowledging that there is not enough Conservative and Government support for the move to a residency basis for state pensions.
We recognise that the way that the Government implement the change will make a big difference for the generation who will acquire their pensions after 2010. There will be something of a big bang as we pass6 April 2010, when many people who would not have acquired a full basic state pension before will be able to do so. We have all seen the Government figures indicating that among those retiring after April 2010, women in particular, who have been disadvantaged by the existing system, could end up with a much better deal.
It would be useful to hear from the Minister, however, what total of all women will still not have a full basic state pension after 2010. Most of the Government’s figures have focused solely on the portion of women retiring after 2010 who will get a full basic state pension, which risks creating the impression that the step change will be greater than it is. The Government will still be dealing with a stock of women, if I can put it in such unglamorous terms, who will be disadvantaged for some time by the existing system.
There has been a great deal of debate and discussion about the cliff-edge effect. The hon. Member for Weston-super-Mare will be aware that it was considered in some detail when the Select Committee took evidence from the Secretary of State and various organisations. The Committee recommended that the Government should consider mitigating the gap in entitlement between those born before April 1950 and those reaching the state pension age under the new rules. We have tabled other amendments on the matter, which I am keen not to pre-empt.
The Government have set themselves against retrospection under the proposal mainly on cost grounds. Given the existing pensioner population, if they allowed people to have a full basic state pension on the basis of 30 years, it would cost about £1 billion. The Government have said that that is too high a bill and that they are worried about the information about carers and other groups to credit them in and whether it would be reliable enough. They therefore accept that there is a cliff edge, but feel that nothing much can be done without imposing a large financial cost. The new clause that will be introduced by the hon. Member for Eastbourne will involve a discussion about some potential solutions to such problems and invite the Government to consider whether the cliff edge has to be as sharp as it is.
The purpose of amendment No. 62 is to test the Government’s thinking on why a more modest improvement could not be made. It would still involve a cliff edge, but one that fewer people would fall over. The amendment would bring forward the date for the lower number of qualifying years from 2010, the Government’s existing date for the start of the cliff edge, to 2008. In other words, fewer people would be affected by the measure and there would be a lesser sense of unfairness, because the problem is that the Bill will go through; there will be a general sense that women and others will receive a much better deal and then many women still under state pension age will find that they do not receive the benefit of the changes.
John Penrose: As the hon. Gentleman said, the Select Committee covered such matters in some detail several months ago. He might have intended to come on to what I am about to say, but does he have any positive or negative estimates for the net cost impact of his amendment?
Mr. Laws: No. It would obviously have the cost of bringing us forward by two years, but that is one of the issues on which we expect the Minister to be well briefed and to explain. We also expect him to tell us in all honesty and candour about the numbers of women and others who would benefit from bringing the cut-off year forward from 2010 to 2008, so we can know whether the change and its cost is worth the improvement that it would mean for many people.
Mr. Waterson: Is the hon. Gentleman saying that he has not actually come up with a costing for the option? It will make a bit of a nonsense of our Committee proceedings if he sprays around spending commitments without even being aware of their dimensions.
Mr. Laws: The hon. Gentleman makes an important point. When we bring forward major proposals, we need to have placed them in some sort of financial context. However, even if I had tabled a parliamentary question on the matter on the same day that I tabled the amendment, I fear that we would not have so far received an answer. As the hon. Gentleman knows, questions remain unanswered from the Department for Work and Pensions that go back a couple of months. Although it is usually good at answering parliamentary questions, I am not convinced that I would have had an answer by now.
Rather than impose a further burden on the Minister and his traffic-light system, I shall simply allow him to tell us the details today. I think that the hon. Member for Eastbourne will confirm to me that, in spite of the excellent and thorough job done by the Select Committee on the whole pensions issue, the useful evidence that it took and its good sittings, the costing of different solutions did not come up in the evidence-taking proceedings so it did not give us any guidance on the issues. I shall give way to the Minister, who I think will be helpful.
James Purnell: I apologise to the hon. Gentleman for not having already costed his proposal. I accept that that is my fault. In the spirit of continuing consensus, the estimated additional net cost would be £100 million in 2008 and roughly double that in 2009. The additional costs would persist until about 2030.
Mr. Laws: I am extremely grateful to the Minister for his co-operative approach. It merely demonstrates the extraordinarily prudent approach taken by those on these Benches compared with amendments tabled from other quarters, and perhaps even by me later in our proceedings.
It is worth highlighting the reason why the issue is of such concern. Because of the way that the new cut-off date will work, a woman retiring only a day before it could find herself with a state pension totally different from that of a woman retiring a day later. In extreme circumstances, people who in other senses have similar characteristics could have pensions that are as much as £1,000 a year different. Over a 20-year period—moderate life expectancy beyond retirement age—that could mean a difference of £20,000.
There will also be differences between individuals, including women. A woman who has one year less than the existing qualifying years, say 38 years, who retires and takes a state pension before the cut-off date is not entitled to a full basic state pension, but someone with a much lower number of qualifying years who retires a day or two later could find themselves with a higher pension. That is not something that only affects women, as a number of the members of the DWP Committee pointed out. It also means that men retiring in 2009 could have very different pensions fromthose retiring in 2010—pensions based not on total qualifying years, but on the dramatic shift in the number of qualifying years required for a full basic state pension. The hon. Member for Weston-super-Mare had a colleague on the DWP Committee who asked the Secretary of State for Work and Pensions whether a man retiring with 43 years of qualifying contributions in 2009 would have a lower pension than a man retiring a few days after the 2010 cut-off date with a 30-year period of qualifying contributions.
There will be a great sense of unfairness regarding the measure, which is why many people have argued that there should be a retrospective attempt to count in individuals who are excluded at the moment. Obviously, the Liberal Democrats have a natural sympathy for that view as believers in a residence-based pension. The Government are not going down that line and we will debate the proposals on retrospection, but we see no enthusiasm from the Government to make any changes to the scale.
In their response to the DWP Committee report, the Government say why they do not believe it to be appropriate to make changes to the existing legislation and to be more generous. The first argument that the Government deploy is weak. Paragraph 52 of the Government’s response to the report states:
“It is important to recognise, however, that women born before that date”—
women born before the April 2010 cut-off date—
“will keep the State Pension entitlement they have been expecting during their working lives.”
The majority of people who do not benefit from the change will not regard the fact that the Government are not going to erode their existing state pension entitlements in some way as an enormous bonus. The argument is a poor basis for opposing any attempt to moderate the effect of the measures.
In paragraph 53 of the Government’s response to the report, the DWP uses another semi-excuse, which the hon. Member for Weston-super-Mare will recall from the DWP Committee proceedings. The Secretary of State for Work and Pensions said that the only thing he could say to the Committee was that it was important to bear in mind that women retiring up to 6 April 2010 have the opportunity to do so at age 60, but women retiring after that date do not. Paragraph 53 states:
“It would be unfair for people to gain from both these existing rules and the proposed changes.”
That is a dubious point. Given that the increase in the state pension age relates to women rather than men, the Government’s argument does not hold for both categories of people. Also, the way in which the Government plan to phase the increase in the state pension age actually means that some women who end up working after 2010 will do so by an almost inconsequential amount of time.
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Some of the people who lose out because of the 2010 cut-off date may actually be retiring only a day or month later than those who retire before the cut-off. Therefore, the idea that those people who will work beyond 2010 and then go on to claim their basic state pension will have a terrible penalty imposed on them by the Government by having to work longer—and therefore that it is intuitively fair that they will receive the offset of a lower number of qualifying years—sounds like an argument that some clever person in the Department for Work and Pensions’ spin operation has concocted after the proposals were brought forward rather than being a persuasive argument in itself, one devised from first principles.
From the Minister’s response on the clause that suggested that this particular issue be given reconsideration, we get the impression that there is no prospect of his signing up to something that will create a massive Bill. We also get the impression from both the Minister and the Secretary of State that they understand that there are some very legitimate concerns due to the way in which the Government have sought to introduce this in 2010—which, to be fair to the Government, they have done in order for the provision to have rapid effect.
Andrew Selous: Before I speak to amendment No. 62 and new clause 12, I should like to welcome you to the Chair, Mr. Gale. I have had the pleasure of serving under your chairmanship before and I know that you will be firm and fair with all of us during our proceedings. It is also a pleasure to be opposite the Minister. We both served on the Select Committee on Work and Pensions. Indeed, I seem to remember that some of his proposals found their way into the Bill as, I have to say, have a number of ideas from the 2005 Conservative manifesto. Therefore, there is indeed genuine consensus on a number of issues.
On my own side, I know that my hon. Friends the Members for Weston-super-Mare and for The Wrekin also serve on the Select Committee for Work and Pensions. My hon. Friend the Member for Weston-super-Mare has been on it slightly longer but I know that both of them will add the expertise gained from that Committee. From my own experience in the last Parliament, I know how valuable that is.
Amendment No. 62 brings the introduction of a reduction in the number of qualifying years for a full basic state pension two years forward to April 2008 rather than April 2010. As the hon. Member for Yeovil was good enough to say in his introductory remarks, that does nothing about the cliff-edge problem—which new clause 12 seeks to look at—but merely brings it two years forward. The hon. Gentleman also told the Committee that he had not actually done his own costing on what this amendment would do—but the Minister, having run his calculator over it, rescued him with a quick intervention. If I heard correctly, it was £100 million in 2008 with £200 million in every year going forward. A quick adding-up of those figures tells me that by 2013, the possible end of the next Parliament, that would be a bill of £1.1 billion or so—a not inconsiderable sum.
Lorely Burt (Solihull) (LD): Does the hon. Gentleman agree that if we were able to bring these proposals forward by two years then the cliff edge, while it may not be done away with, would be perceived as a great deal fairer by today’s pensioners? Does he also agree that the Bill as it stands does nothing to alleviate the situation for today’s 11 million existing pensioners?
Mr. Laws: I am most grateful to the hon. Gentleman for putting his party’s position so clearly. Paraphrasing, would it be fair to say that he is offering pensioners not a penny more than the Government are? Is that right?
Andrew Selous: The Bill is the subject of a consensus across a great deal of the House; I noticed that even in the Minister’s letter of 22 January to Committee Members, he says,
“that consensus reaches across most parts of the House”.
We in the official Opposition are committed to the increases in public expenditure within this Bill but are not going further at this stage.
In all seriousness, we have not heard from the hon. Member for Yeovil how he will be paying for his proposals. I have a basic rule of political honesty and transparency in my own life, in that if I see someone advocating a spending increase, I always ask how it will be paid for. We have to have that, or it is too simplistic and does these debates no credit; the people listening to them outside this House do not view us as serious practitioners if we just flash a credit card when we come with a shopping list of items and have no serious answer for how we are going to pay for them.
Lorely Burt: What does the hon. Gentleman make, then, of the comments in the briefing from Help the Aged, which says that the cost of the proposals it is putting forward, not dissimilar to £1.1 billion,
“should be considered against the £4 billion that goes unclaimed every year by pensioners in means-tested benefits, and the£4 billion every year that the Government is likely to save from ending contracted-out rebates for the state second pension”?
Andrew Selous: The hon. Lady is right to talk about Help the Aged. The charity has provided the Committee with a useful briefing, which I am sure many of us have read in detail. I wonder whether she has read the 2003 briefing from the Fawcett Society and Age Concern, which mentioned 2010 as the date on which many of the changes they argued for throughout the last Parliament should take place. We all receive a great number of briefings. As serious practitioners and custodians of the public purse, our job must be to take hard decisions.
If the hon. Member for Yeovil chooses to press the amendment to a vote, my hon. Friends in the official Opposition will not support it. New clause 12 is an attempt to deal with smoothing the cliff edge, which the hon. Member for Yeovil quite rightly raised in his opening remarks. New clause 12 would require the Secretary of State, within five months of the end of this Committee, to lay before Parliament a report on the costs and feasibility of phasing in the 30-year contribution condition, which would be done as soon as possible, with the final changes being made a few years after 2010.
That point was made on Second Reading by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), and I know it is one that will exercise every single Committee member, because there will not be a suburb, district or village in any of our constituencies in which pensioners will not come up to us to say, “I retired on this date, but my neighbour a couple of doors down retired one day later.” One lady could retire on 5 April 2010 and her next-door neighbour on 6 April, but they will find a massive financial difference in their pension entitlements for the whole of their retirement. This is a serious issue, and people outside will not understand why it is taking place. They will not forgive the Committee if it does not probe the Government very hard to find out what more can be done than is currently proposed to smooth the cliff edge.
Ms Keeble: I am grateful to the hon. Gentleman, who I know does a lot of work on detailed issues for constituents. In the situation that he mentioned, in which only one of two people gets their entitlement, has he worked out whether the other one will actually be worse off if, for example, they get pension credit and their income is made up by other means?
Andrew Selous: The hon. Lady makes a fair point. The successor of the minimum income guarantee, the pension credit, exists precisely to make up for that. However, she will know from her own constituency casework that there will be anger and frustration on the part of people who find that their basic state pension—what they believe is their entitlement and what they have worked for for all those years—is very much less than they believe it should be, especially people who have had almost identical working lives and retire within a short time of each other.
My hon. Friend the shadow Secretary of State is committed to the statutory uprating of pension credit. He made that commitment on Second Reading, so the hon. Lady is right to say that other money will be made available. Notwithstanding that, there will be real anger and upset among our constituents about the difference in the basic state pension.
Mr. Laws: Could the hon. Gentleman tell us a bit more about how the proposed transition will work so that we can make a judgment about it? Can he confirm that as he is talking about a zero-sum proposal, he is going to have to take money away from some gainers? Could he also say who those people would be?
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Andrew Selous: The hon. Gentleman asks an extremely fair and proper question. Given what I said about his proposal, he is right to ask it. I will answer those questions if he will allow me to develop my argument a little further. I propose a phasing-in, and new clause 12 proposes that the Secretary of State should produce a report. I do not have the Department’s national insurance computer, but I have tried to elicit some information. If he will bear with me, I will sketch out a possible scenario. I am not actually proposing it in new clause 12—indeed, Mr. Gale, you would not allow me to do so—but as I am probed to give an example, I will go down that route.
I contend that phasing in clause 1’s proposals need cost no more than the Government’s proposed big bang approach, in which all the reforms will take place on 6 April 2010. I do not feel that the Government have given us a proper answer as to why they cannot phase them in. Is it purely for administrative ease that 6 April was chosen, or will the national insurance computers take two years to re-programme, preventing any earlier introduction of a phased implementation? I am not sure whether I caught a nod from one of the Ministers, but we will find out when they reply.
The Government have also said that they believe that phasing in the changed 30-year contribution condition would lessen its impact. I find that a curious argument. The Bill should not be about a big splash impact. It is not press release territory; it is about basic equity and fairness in introducing as fairly and reasonably as possible changes on which the Government and official Opposition have attained consensus. The facts at the moment are that women born before 6 April 1950 will lose out, as will men born before 6 April 1945. I tabled a series of written questions to the Minister before Second Reading, and he answered:
“Changes could be made more gradually to avoid this situation, for example, by phasing in the reduction in years needed for a full basic state pension and we have explored different ways to do this.”—[Official Report, 15 January 2007; Vol. 455, c. 908W.]
Earlier introduction would mean a quicker but less immediately generous increase in women’s pensions. To answer the hon. Member for Yeovil—I am not suggesting this as a policy, merely giving him an example of the type of thing that could be done on a cost-neutral basis—men currently require 44 years for a full basic state pension. The requirement could decrease to 42 years in the first year after 6 April 2010, to 38 the following year, and to 34 the year after that, down to a 30-year contribution condition by 2013.
If the report could be done quickly enough for us to work out the finances so that it would not cost any more, we could start reducing women’s contribution earlier. To answer the question by the hon. Member for Solihull, if we brought down women’s contribution requirement to 36 years in 2007, 35 years in 2008,34 years in 2009, 33 years in 2010, 32 years in 2011,31 years in 2012 and 30 years in 2013, that would phase in the change. It would mean a less generous introduction for men and women immediately after 2010, no change for men up to 2010 and immediate help for women who need it.
Those are my proposals. I do not know what the cost of the proposals would be, which was why I tabled a series of questions to elicit the costs of that idea from the Department. It said that it was
“unable to provide the information in respect of the particular phasing options you have set out in the time available”,
and that some of the other information for which I had asked was available only at disproportionate cost. That may be the case. I do not quibble with that. The Minister was good enough to ensure that I received a timely reply to my questions, for which I am grateful. That is why new clause 12 that I tabled, along with my hon. Friend the Member for Eastbourne, does not call for a particular proposal such as the one that I have just outlined as an example.
I call on the Secretary of State to provide such information. He has the capacity to do so. He has the access to the national insurance computer to bring a report to Parliament on the phasing and feasibility of smoothing the cliff edge, so that we can see how such a proposal would work.
Mark Pritchard: When we have replies saying that the information can be obtained only at disproportionate cost, the example given by my hon. Friend shows that it is worth pursuing such information. If it would be better than that proposed by the Government, the disproportionate cost is not on the former but the latter.
Andrew Selous: My hon. Friend makes a good point. He will share my frustrations at being in opposition when such information is not as readily available as we would like. That is something that we are trying to change.
I turn now to a case study provided by Help the Aged. The hon. Member for Solihull mentioned its excellent briefings and I concur with her about its serious work on such issues. Its briefing sent to members of the Committee refers to an example of a lady called Jane who is retiring in 2009 at the age of 60. She has had in many ways a typical working life. She worked for four years before she had children at the age of 22 in 1973. She did not receive home responsibilities protection in 1978, so she lost five years of potential pension rights. She returned to part-time work in 1980 to 1985 and she did not earn enough to build up years towards her pension. After that, she worked for20 years during which she saved into a private pension. She then retired early due to ill health.
Given that history, the lady needs a full 39-year record to receive a full basic state pension. That is reduced by two years because of the home responsibilities protection that she did receive. As a result, she has 24 of the 37 years required for a basic state pension and will receive £55 a week. Had that same person with an identical work history during her lifetime been born just one year later, her 24 years of work would now count against 27 qualifying years that are needed because she would receive an extra year of home responsibilities protection. She would receive£75 a week, which is a £20 increase a week and £1,040 a year over a retirement of perhaps 20 years. That is £20,000 of additional pension and it is why I believe so strongly that we should examine the proposals.
Ms Keeble: The hon. Gentleman did not say whether the person was married and explain the position of the spouse. If the lady had to retire early because of ill health, presumably she received disability benefit. If she is on pension credit, she would then receive a disability upgrade so she would be far better off getting the support that the state rightly gives to people who are disabled, including pension credit, than going down the road that the hon. Gentleman is suggesting of only the basic state pension. He might ask the Minister if my understanding of matters is correct. I believe that it is.
Andrew Selous: The hon. Lady is clearly right. Other premiums are available such as pension credit, disability benefit and so on to which the person may be entitled. I am surprised if the hon. Lady’s experience is different from mine, but the pensioners to whom I speak in my constituency feel genuine anger about the level of the basic state pension and any additional amounts of pension that they do or do not receive because of their life-work history. That is just one example from Help the Aged; later, in our debates on clause 1, I will have case example after case example—provided by Age Concern and the Fawcett Society—of real anger among women who are upset about the limited nature of their basic state pension, and do not want means-tested top-ups.
Ms Keeble: I understand the point about the handling of the basic state pension. The point is that, with pension credit as I understand it, someone disabled can access particular support. It is about making sure that people have the right income in old age; people are mostly cross because they are poor.
Andrew Selous: I understand the hon. Lady’s general point and, as I said in my earlier remarks, the shadow Secretary of State is committed to the statutory uprating of pension credit in future. Importantly, until we get higher pensions for people we will need pension credit and the associated benefits of top-up pensions. Yet I still find anger among the pensioners to whom I talk in my constituency, and elsewhere, about their low pension levels at present.
James Purnell: This is an important debate, and one that this Committee is quite rightly having. I am grateful to hon. Members for tabling those amendments, and I want to echo the remarks of the hon. Member for South-West Bedfordshire. It was a pleasure to serve with him on the Committee—one which, like the current one, does a good job of both scrutiny and producing proposals on a cross-party basis. When I was offered this position, I went back with some trepidation to look at our proposals on pensions, with their quite wide-ranging reforms. I was relieved that we were acting much in line with what that report, to which he was a co-signatory, had suggested.
We have now seen the appearance of something that may become an old friend of this Committee over its next few sittings: the Liberal Democrat money tree. It may be a mere sapling here, but we know well what happens to saplings planted by the hon. Member for Yeovil. They grow into a veritable forest, which I fear casts rather a shadow over the public spending plans of the hon. Member for Twickenham. Pretty much every time that the former makes one of his eloquent speeches, it contains the avoidance of a hard choice. Inevitably, that means some extra spending—
Mr. Waterson: And a lot of fertiliser.
James Purnell: I would probably tax your patience with the extension of that metaphor, so I will leave forestry to go into the contributory principle. There is a difference of principle between us and the hon. Member for Yeovil about whether the contributory principle is a good thing that should be retained and strengthened. When we asked the public what they thought about the contributory principle, through the national pensions debate, they also said that it should be preserved and strengthened. When asked whether people’s contributions in the form of work or caring should be rewarded, there was overwhelming support, but they thought that other types of contributions—for example, when people are unemployed—should not be rewarded in that way. I can see that the hon. Gentleman is itching to intervene.
Mr. Laws: I have been provoked into action. Surely, the result of these Government consultations was not strong support for the contributory principle at all. The consultations showed a strong support for a basic minimum pension as of right. Can the Minister confirm that, and indicate how he believes it strengthens the contributory principle to significantly reduce the number of years that people need to contribute?
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James Purnell: I am happy to do exactly that, and I refer—as I am sure the hon. Gentleman knows—to the votes at the end of the national pensions day, which showed a proportion well in excess of 80 per cent. of people supporting exactly what I have just said. I am happy to provide him with further details.
That supports the contributory principle by ensuring that caring and work contributions are put on the same footing, so that people can build up a full basic state pension or a full state second pension through caring contributions alone. That could not be done previously. The limit of 30 years has been set as a way of ensuring fair outcomes for two different people, but there is still a contributory element within the proposals. People who work or care for their whole working life will end up on £135 a week. It is worth mentioning state second pensions, because if we focus on the basic state pension alone, we will give a misleading view of what people get from the state pension system.
Mr. Laws: Will the Minister give way?
James Purnell: May I just make a point about the hon. Gentleman’s residency proposals? It may help to answer the question that he wants to ask.
It is not clear what the hon. Gentleman’s residency proposals are. On Second Reading, the proposals were falling apart in his hands. In one intervention, he said that people would get credits for paying their taxes; he then said that credits would be earned by residency. Of course, if the proposal is that a person gets an extra year for every year of residency, we have exactly the same issue that we have at the moment—not everybody would build up their contributions and there would have to be a means-tested safety net.
The difference between a residency and a contributory system is not to be found in whether entitlements are different according to the length of time that people have contributed, but in how contributions are made. People who do not benefit from the system outlined in the Bill who would benefit from a residency system include those who have not been working or caring—prisoners, I dare say, would benefit from a residency system. It is worth scrutinising whether that is something more or less in line with what the public want.
Mr. Laws: I would be happy to offer the Minister a seminar on our proposals, if he has the time to attend.
An interesting point arises from the contributory principle and a reduction in the number of years. Presumably, it would have been possible to have stuck with the existing number of years for contributions by making other changes, such as including other groups of people. Will the Minister say why the Government have chosen 30 years as the number for qualifying years, and whether they contemplate reducing the number further to, say, 20 or 25 at some stage in the future?
James Purnell: We will have an opportunity in the future to debate the latter point and the research that the Government are proposing to undertake about people who will not be covered by the 30-year qualifying period. That number was chosen because it achieved the right outcome in terms of equalising pension entitlements between men and women quickly, which leads neatly to the point that I wanted to make about the hon. Gentleman’s resident system—his proposals would make no difference to equalisation at all in 2010. The reason why we thought it better to go for the solution in the Bill, rather than that proposed by the Pensions Commission, is that it ensures that75 per cent. of women are covered in 2010. A residency system would make no difference at all—residency would have to be built up overnight.
Mr. Laws rose—
James Purnell: I do not wish to test the patience of the Committee by giving way to the hon. Gentleman again. I am sure that hon. Members will be delighted to attend his pensions seminar, to which I am sure there is an open invitation.
Mr. Laws: I do not wish to test the Committee’s patience too much either. However, will the Minister accept that if the residency criteria were to be applied in a backward-looking sense, the citizens pension proposals would achieve more than the Government’s? There is an issue of whether the Government are rejecting a residency system because of impracticalities, or because they fundamentally disagree with residency and want to stick with contributions come what may.
James Purnell: The answer to that question is both. Residency is wrong in principle, and the task of going back and working out people’s residency over the past 50 or 60 years would be an administrative nightmare, hugely expensive, and impossible.
The Government’s normal approach to introducing changes such as those proposed is to phase them in. Pretty much every Public Bill Committee, whether happening today or even this Session, will have some kind of debate about the introduction of measures and the way in which people fall on either side of the line. One of the inevitable consequences of making changes to legislation is that some people will benefit and others will not.
The normal practice is to phase measures in. The reason why the Government have decided not to do that now is that we want to benefit as many people as possible as quickly as possible. We wanted to make quick progress on increasing the number of people, particularly women, who get a full state pension. By bringing all the measures in on the same day in 2010, we achieve the significant increase that the hon. Member for Eastbourne generously described as a steep incline, rather than a cliff edge.
We could move the reduction in qualifying years to 30 over a few years, but that would mean that fewer people would benefit overall. It would not give anybody extra benefits unless we introduced it before 2010, as I will discuss later; it would just remove benefits from some people to reduce a perceived discrepancy between them and people falling before the 2010 date. That would not be of great comfort to constituents. We would be saying to people retiring before 2010, “We have made no difference to your outcomes, but we have reduced what other people will get.” I am not sure that that would reconcile them.
John Penrose: Is there any reason why the beginning of a multiple step-down process like the one that he was just saying was not possible could not be brought forward of 2010? Is there some IT or other reason why not? Also, his point about a series of steps not being an inherent improvement contradicts the approach of this Government and many Governments before them to, for example, changes to the retirement date. Those were made not in a cliff edge but in a series of steps, for the very reasons that he mentioned, and it seemed palatable to more people at the time.
James Purnell: I suppose that that is because people would be happy to be over the cliff edge under these measures and unhappy under the state pension measures. If he wants to introduce a proposal that we move to 68 in 2010 for everybody all in one go, I should be happy to debate it with him.
I confirm to the hon. Member for South-West Bedfordshire that the Government have explored options for mitigating the cliff edge. We are happy to provide any information that is easily available, consider what he has said today and see what further information we can provide him with. I have received more information during the course of my speech, but I do not think that we have costed the exact option that he rattled through.
When changes are made, an introduction date is necessary. As the hon. Member for Yeovil acknowledged, his amendment would not change that. The cliff edge would be greater, or in fact significantly worse. Instead of going from 50 per cent. of women to 75 per cent. retiring with a full state pension in 2010, we would go from 40 per cent. to 75 per cent.
Mr. Laws: Shock, horror!
James Purnell: I am just responding to the hon. Gentleman’s argument and his worries about the cliff edge. His amendment would not only cost more money but make the problem worse.
Andrew Selous: For the Minister’s benefit, because I realise that an awful lot of written questions go through his office, the example that I gave in my speech just now was precisely the same one that I tabled in a written question to his Department about 10 days ago. His officials have had the precise figures for about a week and a half.
James Purnell: I am aware of the question; I was just unable to judge as quickly as the hon. Gentleman went through it that the example was the same one that he tabled.
Bringing the line forward would not only substantially increase the costs, it would make the cliff-edge effect even starker. The only way to abolish the cliff edge fully would be to remove it for everybody. We could say that we will introduce the change in 2008 or 2010 and that the 30 years will apply to everybody, retired or not. Unfortunately, as has been mentioned, that would cost £1 billion, which puts us definitely in tree rather than sapling territory. That would not be an appropriate use of money, given that it would provide people who had already retired no incentive to save and the benefit would not be felt by poorer pensioners because they would lose that money pound for pound in pension credit. It is a significant amount of money. We are left with a choice between a cliff edge and a phase-in. If we phase it in, people will lose out who would benefit under our proposal.
That is why we think that introducing the changes in 2010 is the most logical step, as that is when the state pension age will start to rise. There is a kind of justice to the idea that people who retire before 2010 will be retiring at the state pension age of 60 but will not benefit from these changes whereas the cohort of women who do benefit from this are those who will also partly be paying for it from the state pension age rising.
Mr. Laws: What about men?
James Purnell: In fact the proportion of men who will benefit is significantly smaller than women. The proportion getting a full state pension is increased from 90 per cent. to around 95 per cent. While that increase is not inconsiderable, this is a proposal that significantly benefits women rather than men.
In response to the hon. Gentleman’s point and the one made by the hon. Member for South-West Bedfordshire, I am advised that it would not be possible to introduce this from 2008 because of the lead time for making changes to both the pensions computer system and the national insurance recording system computer. That lead time is at least eighteen months, similar to that for changes in the private sector.
Mr. Waterson: This echoes one of the consensual discussions that we had a while ago. However, it is something that has been preying on my mind since we have some aspirations to be in Government. If it takes that long to re-program the computer, there must be a problem with the IT. What are they using—a Sinclair or something?
James Purnell: Neither of us is a computer expert. We probably do have to defer to the people whose job it is to do this day in, day out. One of the things that is clear from making changes in Government is that we have a system which affects everybody in the country. Therefore, going through all of their NI records and making changes, even moderate ones, takes a significant amount of time.
I hope that the hon. Gentleman recognises that the Pension Service is one of the best organisations in Government in terms of its reputation for delivering transformational change. The National Audit Office produced a pretty complimentary report about the changes that the Pension Service had brought in. All I can do is repeat to him the official advice that I have been given.
On the subject of phasing, we are happy to come back with any further information if we can provide it. As I said in my introductory remarks, phasing the proposal in from 2010 is not terribly attractive. All that does is take benefits away from people who would be benefiting under these proposals. I wonder very much whether that is something that hon. Members would want to defend to their constituents who would be equally likely to come to their surgeries and say, “I understand I was about to get this benefit but because of your amendment being passed, I will have a lower pension for the rest of my retirement.” As I have said, phasing it in with a start-date of 2009 would do very little to address the concerns that have been put forward and would break that intuitive link between 2010 and the state pension age rising.
I hope this explains why we have chosen to introduce these measures in this way. We want to have a quick introduction in order to get the best balance between fairness and speed of improvements. I would therefore urge hon. Members not to press their amendments. If they do not, I will ask my colleagues to oppose them.
Andrew Selous: I would like formally to move new clause 12. I understand that we will vote on that in about three weeks’ time at the end of the Committee but I give notice that I will seek to move it. In brief response to the Minister, I appreciate that I galloped through my figures and do not expect him to take note of what I said in my speech. However, I hope that he has had my written question, as I tabled it as a Front Bencher only about 10 days ago. My proposals in that discussed making changes from 2007.
What the Minister is really saying is that it is too late and that there is no time to make those changes. My rebuke to the Government would be that they did not start this early enough and that the computer changes were not made early enough to start making changes in 2007. I was talking about a benefit now and not about delaying benefits later.
James Purnell: I think—although I may need correcting—that it would be outside our powers to start making those changes before this Bill had been approved by both of the Houses.
Andrew Selous: I understand these are detailed technical points in terms of what the computer can and can not do. However, this matter of unfairness will be a hard one for all of us to explain to our constituents.
12 noon
John Penrose: My hon. Friend will be aware that the Department for Work and Pensions has solved the problem of long computer lead times and lack of funding to introduce computer changes before a Bill is completed by introducing a section 82 proposal for the changes to the computer system that are required for incapacity benefit. That went through a couple of weeks ago and I presume that a similar process would be possible for the proposal, if necessary.
Andrew Selous: My hon. Friend shows the benefit of the detailed briefings that sometimes only members of the Work and Pensions Committee are lucky enough to receive. My new clause is simple; it asks the Secretary of State to produce a report. I still have the feeling that where there is a will, there is a way. The Minister said that legally it would not be possible to have made such changes, but I issue the same rebuke that perhaps the whole process could have been started a little earlier so that it could have been phased in and there would not have been the problem of delaying changes post-2010. I will be asking my hon. Friends to vote in support of new clause 12 as and when that is voted on in a few weeks. Should the hon. Member for Yeovil press amendment No. 62 to a Division, I shall call on my hon. Friends to oppose it.
Mr. Laws: We have had a useful debate. I am sorry that we have so far not persuaded the Government of the way that will moderate the effect of their proposals and the feeling of injustice that will be felt, particularly by those who expect to gain from the proposals, but do not as a consequence of the lag until the Bill becomes an Act and the start date of 2010.
The Minister gave a couple of reasons why he rejected the various proposals. His argument against amendment No. 62 was that it would make the position worse and that people throughout the country would be protesting and upset at an even more dramatic cliff-edge effect. The Bill seems a version of Purnell’s law. It contradicts the point made by the hon. Member for South-West Bedfordshire when he suggested that it was difficult to spend money without making people happier. Under Purnell’s law, it is possible to table an amendment that costs £100 million, yet still upset more people by making the cliff edge worse.
I do not agree with the Minister that there will be large numbers of presumably unhappy people as a consequence of the date being brought forward to 2008. Surely there would be celebrations among the large number of people involved. The Minister did not tell us how many people would be affected by the amendment, but it would be useful to know that at some stage although I could always table a parliamentary question about it. I am a little disappointed that the Minister does not see the perceived injustice between the Bill going through Parliament and becoming an Act, and then a big lag before the new system comes in.
The hon. Member for South-West Bedfordshire posed some interesting ideas in his new clause about how a new system could be phased in. I am grateful to him for responding to my questions about how that would happen. As is seen in many Committees, it is tempting to table new clauses and amendments asking for reports, but not asking Ministers to sketch out much detail. The hon. Gentleman deserves credit for saying what proposals he had in mind. I was gratified to hear that he was talking about introducing some proposals earlier rather than simply phasing them in after 2010, which would run the risk of upsetting many people without doing much to ameliorate the position of women. To that proposal, the Minister’s answer—rather parodying again—was the “computer says no” answer, which is said so often on modern television.
Lorely Burt: “Little Britain”.
Mr. Laws: So my hon. Friend, who is more in contact with youth culture, tells me.
It would be extremely useful to receive more information about the boomerang new clause, which will be subject to a Division at the end of our proceedings as the hon. Member for South-West Bedfordshire said. Will the Minister explain whether the constraints on the provision that stop it being brought forward would make it impossible to do anything in 2008? He mentioned the computer issue and the timing of the Bill’s passage. He also said that he would prepare a briefing for the Committee indicating the proposal’s potential costings and problems, which the hon. Member for South-West Bedfordshire touched upon. That would be very useful. If we are going to vote on the proposal in a couple of weeks’ time, it would be very helpful to have the benefit of a note on it prepared by the DWP experts.
James Purnell: I am very happy to assure him that we will do both of those things.
Mr. Laws: That is very helpful indeed. It will mean that when we vote on the new clause later, we will be much better informed, and we look forward to that.
At the end of his comments, the Minister fell back on the argument, used by the Secretary of State in front of the Select Committee and in the Government’s response to the Select Committee’s report, that the 2010 date was tied in some logical way to the increase in the state pension age. I find that an unpersuasive argument tacked on to justify this particular phasing. Although men are not as disadvantaged as women under the current basic state pension system, men who retire before and after the cut-off date will still face the anomaly that I talked about. Therefore, very many men as well as women will feel that it is unjust. At the moment, I do not detect an enormous swell of support for the amendment among other Committee members. In its absence, we will look forward to the Minister’s briefing note on new clause 12, which will give us an opportunity to return to the issue. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Laws: I beg to move amendment No. 24, in page 2, line 32, at end insert—
‘(5) If the contributor has reached the state pension age and not made the necessary National Insurance contributions or accrued the necessary credits for entitlement to the full Basic State Pension, the contributor may defer claiming the Basic State Pension and may continue to pay NI contributions until the entitlement to a full Basic State Pension has been accrued.’.
The Chairman: With this it will be convenient to discuss amendment No. 46, in page 2, line 32, at end insert—
‘(5) In sub-paragraph (2), the term “working life” includes periods where a contributor is earning while entitled to be paid a Category A or Category B retirement pension but is not in receipt of that Category A or Category B pension.’.
Mr. Laws: It is me again, I am afraid. Lest I am in danger, after my speech on Second Reading, of being accused of taking up too much time—although I find it difficult to believe that any hon. Member would accuse me of that—I shall be brief. The amendment is designed to allow people who are not fully entitled to the basic state pension and who are over the state pension age to go on working, defer claiming their basic state pension and carry on paying national insurance contributions until, potentially, they have accrued a full entitlement.
No doubt the Minister will have costings on the implications, although he is indicating that he might not have bothered on this amendment. One would assume, however, that the matter would need to be looked at in the round because of its effect on work incentives. One would hope that the Government would encourage people to stay on and work beyond state pension age. There is a lot of scope for improvement in that area. Only today, some of the major lobby groups released reports indicating that even Government Departments are trying to shove people out at the age of 65, and we know that many other Government Departments and even parts of the private sector have been encouraging people to leave at an even earlier date. We see the amendment not only in the spirit of seeking to improve the existing contributory system and to generate an additional element of flexibility, but as one part of a package of measures that could be strung throughout the Bill to incentivise people to stay on and work beyond state pension age.
I think that the issue came up at some stage when the Select Committee was taking evidence. I was not able to find the reference to it, but I am pretty sure that it came up. The Secretary of State’s response, although not unsympathetic, was that the Government had considered the proposal but could not find a way of implementing it that would satisfy their reservations, although—if I am right in saying that the matter was referred to—they had not sketched out precisely what those reservations were. Rather than making a prolonged speech, I would like to hear the Minister’s response on why the Government have so far decided that this is not a route down which they can proceed.
Mr. Laws: I cannot win.
Lorely Burt: Will the hon. Lady give way?
Ms Keeble: Yes.
Lorely Burt: I hope to make a Back-Bench speech to supplement the comments of my hon. Friend, so she need not fear; we will plough a full furrow.
Ms Keeble: It is nice to see the hon. Member for Yeovil deferring to a female colleague.
Mr. Waterson: Does the hon. Lady agree that this is a novel departure even from the Liberal Democrats point of view? Now, they will not only give us no costings for any of their proposals, but give us no arguments for them either.
Ms Keeble: Sometimes I would expect neither costings nor justifications, but there we go.
Mr. Laws: A consensus.
Ms Keeble: I do not think there has been much of that round here.
To continue, I want to hear some justification from my hon. Friend the Minister for what would happen for the individual in this scenario, as many of my constituents will go out to work, then have a career break or do some caring. They might come back to work quite readily, but will not have the necessary national insurance contributions, so the issue then is what they do about their pensions. If they defer taking a pension for a couple of years, the value of their later one is, I believe, higher. Therefore, there is no point in them ending up paying hefty national insurance contributions out of their sometimes quite modest wages for those few years—between the ages of 60 and 63, or whenever—because they will gain no benefit at all.
In effect, that is a mis-selling of national insurance; they will make contributions, but because of the increased value of their deferred pension their net gain will be nothing. That is before we get into issues about all of the other benefits, which we were talking about previously with the hon. Member for Leighton Buzzard. It is an issue of the value that they see as a result of their extra pension contributions. It would be helpful to explore whether this amendment actually does something for people or—even disregarding points about all the other benefits that people can claim—whether it does not add to their income and simply means that, for those couple of years when they are perhaps back at work with the kids having left home, they are having an unnecessary salary deduction made from their income.
Mr. Waterson: I am following the hon. Lady’s argument closely, but has she given any thought to one of the more sensible provisions in the 2004 Act, which for the first time allowed people not just to defer pensions but to take a lump sum? How does her argument apply to people who are going to take that enhanced lump sum under such provisions?
Ms Keeble: I must confess that I had not thought about that, so I will perhaps refer it to my hon. Friend the Minister. It seems to me that an awful lot of this Bill is about the details of how these regulations and provisions work to affect people in their day-to-day lives, and to ensure that they get the best possible outcome.
12.15 pm
Andrew Selous: The hon. Lady referred to me a moment ago as the hon. Member for Leighton Buzzard. That is the largest town in my constituency and I am inordinately proud to represent it. However, just in case the residents of Dunstable, Houghton Regis and the 40 villages that I represent feel cheated, I should mention that I am the hon. Member for South-West Bedfordshire, rather than for Leighton Buzzard, albeit I am incredibly proud to represent it.
Amendment No. 24, tabled by the Liberal Democrats, and amendment No. 46, tabled by my hon. Friend the Member for Eastbourne and I for the official Opposition, essentially have the same purpose. They would allow men and women to earn qualifying years for a basic state pension after reaching state pension age, assuming that they were still able to remain in employment. Recently, one of my constituents was forced to retire on reaching 65. He had a particular reason to continue working, because his mortgage went on until he was 72, but he was forced out of work. Some of our constituents will not be able to pay national insurance contributions or accrue home responsibilities protection as a parent or carer earlier in their careers. The amendments will be important, for example, for those people with early caring responsibilities that did not meet the eligibility criteria for home responsibilities protection.
I am informed that increasing numbers of pensioners—some 1.2 million—are in work at the moment and that this is the fastest-rising group being added to the work force at the moment, having increased by some 200,000 since 2004. The amendments would help such people, who often have small pensions. There is no reason for the Government to deny people the right and ability to continue paying national insurance contributions after state pension age to increase their basic state pension. This would be money coming into the national insurance system and I cannot see that there would be a cost, because the pensions would be paid for by contributions made by people. As we have a population that is enjoying good health later in life, about which we are all pleased, this will become an increasingly important issue for all of us. I should be interested to hear the Minister’s reasons, if he opposes the amendments.
The amendment also retains the contributory principle, which is so beloved of the Minister and his Government. Although the amendment has not been specifically costed, because people are making contributions—the hon. Member for South-West Bedfordshire has elaborated on that—the cost would be very small in relation to the number of people who would be able to claim a basic state pension. Presumably, those people would not be dependent on Government hand-outs and means-tested benefits such as pension credits. I hope that the Government will give the proposals a second look.
John Penrose: The hon. Lady said that the cost of the proposals would be very small. I think that most pensions experts and actuaries would say that provided that liability is properly calculated, they should self-fund easily as long as not too much of an uplift is given for deferring pensions, as the hon. Member for Northampton, North mentioned, or for the additional years of contributions made. Provided that the uplifts are set properly, they should be self-funding. In fact, the net contribution to the public purse should be either neutral or positive.
Lorely Burt: I am extremely grateful to the hon. Gentleman. I am not an actuary or an analyst, so I am happy to rely on the assessments of people who know a lot more than I about the matter.
If people who have not yet built up the entitlement to a full state pension choose to carry on working, should they not be given credit for those extra years of work? After all, the state pension age is rising. The Government have passed recent and welcome legislation against ageism and discrimination against older people who wish to continue working. Older people still have an enormous amount to give.
Andrew Selous: Although the hon. Lady is right to say that there have been changes concerning older people in the workplace, older people still do not have the right to carry on working once they are past retirement age.
Lorely Burt: The hon. Gentleman is right. However, we hope to encourage an improvement in this country’s culture and attitude toward the contribution that older people undoubtedly have to make in the workplace.
The proposals are modest. Older people have an awful lot to give, and our amendment asks only that that contribution should be acknowledged and should contribute to their future pension entitlements.
Anybody who wants to see the Conservative party policy making machine at play can look at Webcameron and see the party leader discussing that issue with the hon. Members for Eastbourne and for Runnymede and Weybridge (Mr. Hammond). The hon. Member for Eastbourne was on the side of the Confederation of British Industry against getting rid of retirement ages altogether, and the Leader of the Opposition said, “I understand the argument for doing so, but it must be balanced with the needs of business.” That is absolutely right. It is something that we keep under review, and we will continue to consider the evidence on whether a mandatory age of 65 is necessary.
Mr. Laws: Will the Minister clarify what his own Department’s policy is? Does he allow his staff to work beyond 65?
James Purnell: Yes, we do. As a matter of policy, the DWP got rid of the default retirement age of 65.
Mark Pritchard: Perhaps this is slightly divergent, but I think this is an opportune moment to ask the Minister whether he would give that same advice to the Church of England which requires bishops to retire at a particular age.
James Purnell: From the look on your face, Mr. Gale, I do not think that I will respond on that particular issue. Our reforms do make a significant difference to the number of years required. As has been said, that goes a long way towards addressing the issue dealt with in the amendments. There will be some people who reach state pension age without a full contribution record even if that record is reduced to30 years.
When I first looked at each of these amendments I thought that they looked like a good idea and wondered why we should not support them. The reason is that they create much greater complexity both for businesses and individuals and there is a much more effective way of achieving the same goal without that complexity, namely a state pension deferral. In my previous speech, my hon. Friend the Member for Northampton, North made my case by talking about pension credit and she has done the same again by referring to the importance of deferral.
It is worth saying that we would not want this to happen for everybody. One of the reasons why there are good incentives to work after state retirement age is that people do not have to pay national insurance contributions. I am sure that the whole Committee would agree that it would not be a great step forward if we imposed this requirement on everyone. Therefore, it would have to be limited just to people who wanted to make voluntary contributions.
That would create genuine difficulty for businesses. At the moment, all payroll systems can work on the basis that those over state retirement age will notpay national insurance contributions. Under these amendments, they would have to record who wanted to make those contributions. Under the Liberal Democrat proposal, they would have to record whether or not they had 30 years of contributions because if they did, they would not be able to make any further ones.
That system would inevitably lead to overpaying and the issue of refunds. Instead of a system that is extremely simple whereby business can simply not collect contributions over state retirement age, different records would have to be maintained for everybody over state retirement age. That might reduce the attraction of those employees for some employers.
John Penrose: The Minister seems to be saying that the principal reason for opposing this is that it would be administratively difficult to achieve successfully. Has he considered that a fairly large number of payroll systems out there are already adjusted for any companies that have private pension schemes to cope with additional voluntary contributions and other such matters? This would not be a big change for any salary schemes that are in place undertaking such measures for private schemes. Many companies already outsource their payrolls. Would he also accept that for those who do not have 30 years of contributions and want to make a bigger uplift to their pension than can be achieved through a deferral, allowing additional cash injections to be made after retirement age could be vital?
James Purnell: It would actually be a very big change because they would have to be collecting something new, namely people’s national insurance records, identifying whether people wanted to make these extra voluntary contributions or not. Therefore, it would be a big change, particularly for small businesses. It would also be very complex for the individual because they would have to make a trade-off between extra national insurance contributions. They would have to decide whether the extra amount that they got in state pension entitlement was worthwhile and that would be different at different levels of earnings. It would make the system complicated in a way that the hon. Member for Eastbourne tried to address in the last Committee on the 2004 Bill, in which he tabled an amendment asking that everyone who is deferring be given actuarial advice on whether to do so.
The combination of these two measures would make this situation very difficult for the individual. Therefore, we think that it is much better to achieve this outcome through people deferring. There are very generous deferral arrangements in which people get an increase of over 10 per cent. for every year that they defer. That is in effect getting exactly the same outcome as paying national insurance contributions. It has less complexity for the individual and for businesses. I therefore think that it is a much better solution and would urge that the amendment be withdrawn.
Andrew Selous: I am tempted to think that we are coming back to the computer again; that we are being given complexity again as the reason why something cannot be done. I am slightly surprised by what the Minister says. He was good enough to say that he looked at these two amendments and thought that they seemed sensible. I stress that they would involve only a right or ability for those who requested it, not a blanket policy.
I am somewhat sceptical about the Minister’s comments that the amendments are hugely complex and would involve big change. Employers have systems for collecting national insurance, so I cannot believe that things would be that complicated. I fully agree that people should take advice on their individual circumstances. If, as the hon. Member for Northampton, North properly said, the right solution for a person is to defer and they choose to do so, that is excellent. However, as my hon. Friend the Member for Weston-super-Mare, who sits on the Select Committee, said, for some people the route suggested by the amendments will be the right one to go down. It should be self-funding overall and I urge my colleagues to support the amendment.
12.30 pm
Mr. Laws: The debate has been most interesting and quite novel. The hon. Member for Northampton, North started by accusing me of speaking for an inadequate period. I may need to come back to that point in some of my later speeches on the earnings link in citizen’s pensions. I was also accused by the Minister of tabling an amendment with no spending implications; I am sure that that will not happen too often. Even the Minister was unable to suggest that it would involve some fantastic and unaffordable amount of money. The Minister went as far as to say that it looked like a good idea, from which I took further encouragement. Furthermore, we almost debated the retirement ages of bishops, so it would be fair to describe the debate as “wide-ranging”.
The context of the debate is also important. Both sides of the House appear to be saying that they want to create an environment in which it is easier for people to work later and in which there is greater ability and flexibility on retirement ages. I was pleased to hear that the Minister is allowing staff at the Department for Work and Pensions—I assume that he did not mean only his private office—to work beyond age 65. I shall be interested in tabling questions on how many staff in the current environment are taking up that offer and given the opportunity to do so. That will be interesting.
The hon. Member for Northampton, North and my hon. Friend the Member for Solihull did a marvellous job of fleshing out my perhaps unnecessarily brief speech. They described why the amendment is so important and why sometimes the deferral issue does not work to take account of all the concerns that they expressed.
In response, the Minister came up with a number of counter-proposals. He mentioned the deferral issue, already referred to by the hon. Member for Northampton, North. He fell back on the “computer says no” argument, which may recur as often as the points that he will endeavour to make about the financial implications of various amendments. He said that it would be immensely complex for business and individuals.
However, we are not talking about a vast number of individuals. Furthermore, we are discussing the introduction of all sorts of changes to the pension system in respect of personal accounts. People will have to take greater responsibility for their income in retirement, understand pensions and make their way through what at present is an impenetrable and complex pension system—I mean not only the state but the private architecture. It is difficult to believe that we cannot get around that complexity, particularly for individuals, and that the Government have explored as fully as they could how the mechanisms necessary to make the proposal work could be implemented for businesses.
I got the impression that the Minister accepted that there was a good idea but that he and his Department had not had the time to flesh out in detail whether it could be made to work. For that reason, I should like to press amendment No. 24 to a Division.
Question put, That the amendment be made:—
The Committee divided: Ayes 7, Noes 9.
Division No. 2 ]
AYES
Burt, Lorely
Lancaster, Mr. Mark
Laws, Mr. David
Penrose, John
Pritchard, Mark
Selous, Andrew
Waterson, Mr. Nigel
NOES
Bailey, Mr. Adrian
Banks, Gordon
Brown, Mr. Russell
Creagh, Mary
Heppell, Mr. John
Hillier, Meg
Keeble, Ms Sally
Plaskitt, Mr. James
Purnell, James
Question accordingly negatived.
Question proposed, That the clause stand part of the Bill.
The Chairman: With this it will be convenient to discuss the following:
New clause 23—Entitlement to a Basic State Pension—
‘The Secretary of State shall prepare a report on those groups reaching state pension age in 2010 who will not be eligible for a full Basic State Pension.’.
New clause 29—Category A and B retirement pensions: contribution condition—
‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.
(2) In paragraph 5—
(a) delete sub-paragraph (2);
(b) in sub-paragraph (3) delete the words “The second condition is that” and, for the words “the requisite number of” in sub-paragraph (3)(a), substitute “30”; and
(c) delete sub-paragraphs (5) to (8) inclusive and insert the following sub-paragraph—
“(4A) Regulations may modify sub-paragraph (3) above for the purposes of its application in a case where—
(a) the contributor concerned has paid, or been credited with, contributions, or
(b) contributions have been deemed to be, or treated as, paid by or credited to him,
under the National Insurance Act 1946 or the National Insurance Act 1965.”.’.
New clause 30—Widowed parent’s allowance and bereavement allowance—
‘(1) Schedule 3 to the SSCBA (contribution conditions) is amended as follows.
(2) After paragraph 5A (inserted by section 1(3) of this Act) insert—
“5B (1) This paragraph applies to a widowed parent’s allowance or bereavement allowance in a case where the contributor concerned dies on or after 6th April 2010.
(2) Paragraphs 5A(2) to 5A(4) of this Schedule shall apply to an allowance to which this paragraph applies as if it were a Category A or Category B retirement pension.”.’.
We have had a fairly substantial debate on new clause 1. Ordinarily, I would draw the line and not permit a stand part debate, but it is convenient to take new clauses at this stage. I therefore urge members of the Committee to concentrate their comments on the three new clauses. With that in mind, I call Mr. Selous.
Andrew Selous: I will be mindful of your injunction not to range too wide of clause 1, Mr. Gale. However, there are important issues in relation to women’s pensions generally that we did not touch on earlier when we talked about the cliff edge. I shall cover them as briefly and concisely as possible.
As for new clause 23, I am always happy about the provision of information with costings to Parliament. It is a sensible proposal as it means that that particular demand on the public purse can be weighed up among all the other demands on the Exchequer from different Departments. It is a sensible and straightforward new clause.
New clause 29 tabled by the hon. Member for Northampton, North would make a retrospective change. I generally consider that we should be cautious about retrospective legislation. Conservative Members have not brought forward costings, nor has the hon. Member for Yeovil or the Minister, and I shall certainly be asking the hon. Lady how much her retrospective proposal would cost, how it will be paid for and whether indeed she will be sharing that information with her electorate before the May elections this year. The Committee expects an answer to those valid questions.
The hon. Lady has raised a serious issue under new clause 30. Paragraph 23 of the explanatory notes to the Bill shows that existing contributions will continue to apply even after 6 April 2010 for widowed parent’s allowance and bereavement allowance. Will the Minister explain why that is the case? Help the Aged has asked, for example, whether it means that a widow may not qualify for bereavement benefit at the full rate, even though her husband would have qualified for a full basic pension under the new rules. I look forward to his explanation.
However, I note that paragraph 34 of the explanatory notes states that
“bereavement allowance and widowed parents’ allowance, payable to a surviving spouse or civil partner, would be calculated by reference to the new credits...when the contributor dies on or after 6 April 2010.”
In 2002, only 13 per cent. of women received the full basic state pension. Today the figure is 30 per cent. By 5 April 2010 it will be 50 per cent., jumping to 70 per cent. as a result of the changes under the clause. The Government estimate that by 2025, 90 per cent. of women reaching state pension age will be entitled to a full basic state pension. It is a phenomenal change. There are arguments about the rate of change, and there is not a Member in the room who would not like to reach that percentage more quickly. However, we must be mindful of all other demands on the public purse.
One feature of the clause is its proposal to abolish the 10 or 11-year rule. Many women hugely resented that rule. They had paid in perhaps £4,000 or £5,000 in national insurance contributions, for which they received no benefit whatever when they reached state retirement age. It was the equivalent of a fraudster scheme taking money off the public. Indeed, it was similar to Farepak taking money off people over a certain period and then giving them nothing in return.
That particular pension regulation was outdated, and many Opposition colleagues campaigned against it through the 2005 Conservative party manifesto. The new proposal has found its way into the clause, and it is right that we wave the rule off into history, so that however short or long one’s period of work, it rightly counts towards one’s entitlement to a full basic state pension and to the state second pension. The Minister rightly reminded us earlier that we must remember that other element of the state pension system, too.
The clause deals with issues that are important to women. The previous Parliament heralded those issues in 2003, with, funnily enough, 2010 foreseen as the date on which many of the changes would come in. My hon. Friends thoroughly welcome the steadily rising percentage of women who will reach state retirement age entitled to a full basic state pension.
My final point is a general one about voluntary contributions for people who have several part-time jobs, but whose earnings from each job are below the earnings limit. They can make voluntary class 3 national insurance contributions to qualify. I shall be interested to hear from the Minister what more we can do to help people—women, in particular—who have several part-time jobs, earn from each a wage underneath the lower earnings limit and do not benefit from clause 1, so that by paying those contributions they benefit from a full basic state pension on their retirement.
12.45 pm
Ms Keeble: New clauses 29 and 30 are probing new clauses to find out from the Government their approach to and thinking on the matters before us. Obviously, the financial impact of the proposed new clauses would be substantial. The hon. Member for South-West Bedfordshire asked about the financial impact of proposed new clause 29: it would be about£1 billion, which is a huge amount of money. That is why I reiterate that the proposed new clauses are designed to find out the Government’s thinking and their approach to these matters.
The aim of the two proposed new clauses is to extend the right to a full state pension to some pensioners who receive the reduced basic state pension. Offset against that is the impact that the proposed measures might have on any other benefits to which those pensioners are currently entitled. I am sure that the Minister will also deal with those issues.
It is a technical issue. I am looking to the Minister for information about the trade-off between the different pensions and benefits to which people will be entitled as balanced against the contributions that they have made, and also about the costs to the public purse.
Mr. Laws: I ought to reciprocate the hon. Member for Northampton, North by saying that I would have liked a still longer speech on these very important proposed new clauses. Perhaps we will go through our proceedings urging each other on to greater things and longer speeches.
I shall begin on a consensual note, as the hon. Member for South-West Bedfordshire did. Clause 1 is important: it will tackle a number of major injustices that have been a feature of the pensions system. It will lead to a better deal for women in particular. The Minister knows that we go our separate ways in terms of our visions for the future of the pensions system, but I welcome the effect that the measures will have on many women. I commend all those individuals and groups who have been active over many years for raising, and lobbying on, the issue of justice for women pensioners. Members from all parts of the House have raised the issue of the way in which the pension system has let women down. The hon. Member for South-West Bedfordshire raised the issue of the contributions that women have made which, scandalously, have not given them any sensible return in retirement. Many of those injustices are being remedied by clause 1.
Proposed new clause 23 asks the Secretary of State to prepare a report on those groups who will reach state pension age in 2010, but who will not be eligible for a full basic state pension. In other words, the proposed new clause is yet another Liberal Democrat contribution to the amendment paper that has no consequences for spending. To meet the demand for a costing of the report that the Minister will inevitably make, perhaps I ought to say that it will be cheap to produce. Although the proposed new clause is probing, I hope that the Committee will accept it, or that the Minister will indicate what research the DWP is doing on the subject, and what the time scale is for concluding and publishing any research.
We would like the Government to look at the matter retrospectively as well, as the hon. Member for Northampton, North suggested, because we risk becoming excited and complacent about the latest figures showing how many people will be entitled to the basic state pension as a result of the proposals if we do not bear in mind that cohorts of existing pensioners not entitled to the basic state pension will be around for many years. Could the Minister put on record the projected figures on the proportion of men and women, and of the pensioner population as a whole, who will not be entitled to the basic state pension in 2010, 2020 and 2030, rather than looking only at the new generations of pensioners who will be covered and whose lot will be improved by the Bill?
The Government response to the Select Committee report said that they are undertaking further analysis using administrative data, survey data and primary research to examine in detail the characteristics of the individuals who might not receive a full basic state pension even after reform. Where possible, that analysis will consider those reaching state pension age in 2010 as well as after 2025. It would be useful to know how that research is proceeding and when the Government intend to publish it. Will it be a long-term project, or might it emerge—he said optimistically—during the passage of the Bill?
I think that this is the part of our proceedings in which the Minister would invite me to return to the issue that I raised earlier about the Government’s attitude to the contributory principle. It is clear that the Secretary of State and the Government as a whole have a strong adherence to the principles behind it—the Secretary of State made that clear in his evidence to the Select Committee—but at the same time, the Government are taking an approach that will reduce the number of qualifying years of contribution required to get a full basic state pension. It is a slightly unobvious way of underpinning a commitment to the contributory principle to erode it by reducing the number of contributory years. Presumably the Government could have gone about it in other ways by focusing simply on the reasons why people were not credited with contributions in particular years and changing the relevant regulations.
Help the Aged’s evidence to the Select Committee asked what the rationale was for selecting 30 years rather than 25 as the new qualifying period for the full basic state pension. The Minister touched on that issue earlier. I think that he said that that was the total number of years necessary to ensure that a significant proportion of those retiring after 2010 had the full basic state pension, but it would be interesting to know a little bit more about what research was conducted to determine the 30 years and whether the Government would be willing to consider reducing it further.
The hon. Member for Northampton, North has tabled important new clauses for which we have considerable sympathy given our general attitude to pension issues. She has already outflanked me in the spending stakes, proposing from the Government’s own Benches an amendment that would add £1 billion to the cost of our modest and disciplined proposals. It was interesting that she managed to get away with it not only by speaking quite quickly—the Minister might have been delving into his notes—but by describing them as probing amendments. Those are clearly clues that I could use during the rest of our proceedings to get off the hook when he accuses me constantly of making unaffordable spending pledges. Apparently I should simply describe them as probing amendments.
The benefit of the hon. Lady’s point is that it highlights that a large number of pensioners will continue not to benefit from the new arrangements after 2010. Many will be individuals who do not claim all means-tested benefits that the Government make available. The debate raises issues of pensioner poverty, contradicting the Minister’s earlier suggestion that anything retrospective would have no impact on pensioner poverty.
The new clauses are interesting, and I look forward to hearing from the Minister about them. In particular I hope that he is able to accept the principle behind new clause 23.
James Purnell: I am grateful for the welcome from the Front-Bench spokesmen, who in an auction of adjectives described the clause as very important and a phenomenal step. I shall take phenomenal. If we were not in such a consensual mood, I would point out to the hon. Member for South-West Bedfordshire that his party had 18 years to address the issue. Barbara Castle was the last person to address it, but I shall not make the point too sharply.
I shall follow your strictures, Mr. Gale, and confine myself largely to the new clauses. The background to the issue is that we can never have a universal state pension. There must be some criteria by which we test eligibility; otherwise, as Members will readily understand, there would be all sorts of problems. The system would be open to all comers and there would be genuine issues about fairness.
The measures set out in clause 1 take us a great deal closer to full coverage while maintaining a modernised contributory principle. I can only repeat to the hon. Member for Yeovil that the principle is contributory because those who contribute more will receive more basic and second state pension. Further, the level of 30 years will achieve the best outcome. It is better than his suggestion of examining people’s contributions over the past 30 to 50 years, which we would have to do to achieve the same effect that we achieve just by widening the available categories.
All sorts of circumstances could result in someone not receiving a full basic state pension. They may have decided, for example, not to return to work after having children, because they felt that they would be financially comfortable; or they may be a recent migrant who has spent a significant part of their working life in another country. People who contribute less should not receive the same amount as those who contribute more.
The hon. Member for Yeovil said that there may be other more complex examples of people who do not receive a full state pension. The Secretary of State told the Select Committee that we are happy to research that point. The research will be challenging and it will involve in-depth questioning. People often do not remember their exact contribution records or their exact working and caring histories, but we aim to have it ready by the summer. I can give him that assurance. I hope that he will feel it unnecessary to table his new clause on Report, given that we have already committed to undertake its provisions, and indeed, given that we have already started to do so.
New clauses 29 and 30, which my hon. Friend the Member for Northampton, North tabled, would apply the new single contribution condition to all pensioners, widows and widowers. The hon. Gentleman’s referral to her speech is not enough to get him off the hook. I am happy to let him off if he says that he will not be able to change the level of means-testing because he does not propose to spend any more money, and that he will not be able to establish a citizen’s pension because he will not have the funds to do so. As long as he continues to say that he can reduce means-testing without taking any money off anyone, or without increasing the amount of spending overall, we will continue to let him wriggle on his hook.
I have sympathy with the sentiment behind my hon. Friend’s new clauses. It is the only solution to the cliff edge. However, as I explained, their implementation would be extremely expensive, and I do not think that she intends the Government to spend that extra money merely to understand the reasons behind their policy decision. The Pension Service would also have to reassess the pensions of more than 2 million pensioners in one go.
It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.
Adjourned till this day at Four o’clock.
 
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