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Session 2006 - 07 Publications on the internet General Committee Debates Pensions Bill |
Pensions Bill |
The Committee consisted of the following Members:Alan
Sandall, Committee
Clerk
†
attended the Committee
Public Bill CommitteeTuesday 23 January 2007(Morning)[Mr. Roger Gale in the Chair]Pensions Bill10.30
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.
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
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
]
AYESNOES
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 1Category
A and B retirement pensions: single contribution
condition
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.
11.15
am
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.
Therefore,
notwithstanding the fact that almost any changes are likely to have
some cost, we hope that the Government will be flexible on this issue
and remain open to reasonable ideas that seek to moderate this cliff
edge or reduce the number of people facing the cliff edge. The Minister
is entitled to say, as I have already said, that we are replacing one
cliff edge with another. However, that may be perceived as unfair for
those people who are still below the state pension age and who feel
that this Bill could have enormous benefits for them, but who later
find that they narrowly miss the cut-off date because of having to wait
two years. I hope that the Minister will not be closed to proposals of
this type, and that he will tell us not just about the cost of this
proposal but about the number of women who would benefit and the number
who would be affected. I hope that he will go that extra mile to make
these important and welcome proposals more acceptable to those who
currently find them extremely unfair and
harsh.
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?
Andrew
Selous:
The hon. Lady is clearly right that if we spend
£1.1 billion on any social or economic problem, there will be an
impact bringing relief to
those affected. The trouble is that, as politicians, we have competing
demands on the public purse across every single Government Department.
We know that to be the case, even from a brief listen to this
morning’s news on the radio. However, there are questions of
affordability and I have not heard, either from the hon. Lady or from
the hon. Member for Yeovil, how that £1.1 billion is to be
raised. I, for one, would like to know which taxes will rise to pay for
it and I hope that he will share that information with us and with the
electorate before this year’s May elections. I have to wonder
what his hon. Friend the Member for Twickenham (Dr. Cable) would say
about that. I am mindful of the attentions of the Shadow Chancellor and
will be careful about any spending commitment. In fact, my hon. Friend
the Member for Eastbourne and I will not be making spending commitments
during this Committee, as I know that my hon. Friend the Member for
North-East Milton Keynes would be taking a note and having a word with
the hierarchy of my party.
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?
11.30
am
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—
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?
11.45
am
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.
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.
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.
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.
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.
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.
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.
‘(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.
Ms
Keeble:
Will my hon. Friend the Minister
pick up on some particular points in responding? Many of my
constituents continue to work after retirement age,
sometimes because financially they have to, and sometimes—for
social or many other different reasons—because they want to. The
issues raised by this amendment are important, so I was disappointed
that the hon. Member for Yeovil did not give a fuller speech, because I
wanted to hear some justification.
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.
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.
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.
Lorely
Burt:
I wish to elaborate a little on
some of the comments made by my hon. Friend the Member for Yeovil.
Amendment No. 24 is a modest attempt to address the cliff edge, which,
as the Minister has already
mentioned, is particularly difficult and important for women. Women have
fewer opportunities to bring their contributions up even to the 30
years proposed by the Government, owing to other responsibilities that
they often take on, such as caring and bringing up children. The
30-years provision is welcome. However, we hope to ensure with our
modest proposals that even more women manage to make it just a wee bit
past the cliff
edge.
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.
James
Purnell:
This has been another helpful and important
debate on helping people to gain a full contribution record and
extending working lives to help people work longer. The UK has a good
record on
that. Other European countries look on our ability to get older people
to continue working with envy. As the hon. Member for South-West
Bedfordshire said,1.2 million people over the state pension
age are still working, and that number is going up very rapidly indeed,
which is a good thing. In his last intervention, he referred to the
fact that people over 65 do not have the right to continue working. It
is worth picking that up briefly and saying that for the first time, as
a consequence of our age discrimination laws, they have a right to
request flexible working after the age of 65 and are protected from
being fired illegitimately on age grounds before 65.
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
]
AYESNOES
Question
accordingly negatived.
Question
proposed, That the clause stand part of the
Bill.
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.”
On the
issues that we have not debated under the clause stand part debate, I
pay tribute to the seminal campaign that the Fawcett Society and Age
Concern ran in 2003. I attended their meetings with the Under-Secretary
of State for Constitutional Affairs,
the hon. and learned Member for Redcar (Vera Baird), and others during
the previous Parliament. Many of the document’s demands and
requests for policy change have found their way into the Bill. Indeed,
they found their way into the Conservative party’s 2005 general
election manifesto. That is one reason why my colleagues in the
official Opposition are broadly happy with the clause.
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.
The hon.
Member for Weston-super-Mare, who was here earlier, will be aware that
a report on excluded groups was also one of the recommendations of the
DWP Committee. The Government responded relatively positively to the
proposal, perhaps more positively than the Secretary of State did
during the DWP Committee
sittings. When asked about the pensioners of the future who would not be
entitled to a full basic state pension, he replied simply that such
measures would apply to those who do not meet the qualifying
conditions. We are hoping that the Minister will shed a bit more light
on the issue of the categories of people who will be excluded. We would
like to know how the Government foresee their policy developing to
reduce the numberof individuals who do not receive a full
basic state
pension.
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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