Clause
11
Additional
pension: simplified accrual rates as from flat rate introduction
year
James
Purnell:
I beg to move amendment No. 49, in
clause 11, page 12, line 35, at
end insert ‘and
(c) Part 3 contains
consequential and related
amendments.’.
The
Chairman:
With this it will be convenient to discuss
Government amendments Nos. 58, 56 and
60.
James
Purnell:
This series of technical amendments is intended
to maintain the current arrangements on widowed parent’s
allowance, set out in previous state second pension legislation. The
allowance is paid to those widows, widowers and surviving civil
partners who are under state pension age and have care of at least one
child.
Currently,
people receiving widowed parent’s allowance get an additional
pension based on the value of their late spouse’s or civil
partner’s SERPS or state second pension accruals. When the late
spouse or civil partner dies before reaching state pension age, the
calculation of the survivor’s additional pension takes into
account the fact that the deceased’s working life had been
foreshortened. That allows the deceased’s earnings to be
averaged over a shorter period, to the widowed parent’s
advantage. If, for example, the working life had been five years, the
average would be over those five years rather than over a whole
theoretical working
life.
For pensioners,
we intend to move away from that averaging so that we can arrive at a
much simpler system—the flat rate of £1.40 that I
mentioned.
Pensioners will not lose out because the earnings uprating of the basic
state pension more than makes up for any shortfall caused by the
removal of the complexity. However, if we were to bring recipients of
widowed parent’s allowance fully into state second pension
reforms, there would be a chance that some younger widows, widowers or
surviving civil partners would lose out overall. That is not our
intention. Our
amendments will ensure that those people’s pensions will
continue to be calculated on the same basis as now, and I hope that the
Committee will support
them.
4.30
pm
I repeat that
we do not want to change the position of widows, widowers or surviving
civil partners. That is why we have taken the earliest opportunity to
amend the
Bill.
Amendment
agreed to.
Clause 11, as amended,
ordered to stand part of the Bill.
Schedule
2
Additional
pension: simplified accrual
rates
Amendment
made: No. 58, in schedule 2, page 38, line 13, at end
add—
‘Part
3
Consequential
and related amendments
Social
Security Contributions and Benefits Act 1992 (c.
4)
3 In section 39
of the SSCBA (rate of widowed mother’s allowance and
widow’s pension) omit—
(a)
“and Schedule 4A” wherever occurring;
and
(b) subsection
(3).
4 (1) Section 39C of the
SSCBA (rate of widowed parent’s allowance and bereavement
allowance) is amended as
follows.
(2) In subsection (1)
after “section 46(2)” insert “and
(4)”.
(3) In subsection
(3) in each of paragraphs (a) and (b) for “sections”
substitute
“provisions”.
5
(1) Section 44 of the SSCBA (Category A retirement pension) is amended
as follows.
(2) In subsection
(5A) for “Schedule 4A” substitute “Schedules 4A
and 4B”.
(3) In
subsection (6) for “Schedule 4A” substitute
“Schedule 4A or
4B”.
6 In
section 46 of the SSCBA (modification of section 45 for calculating the
additional pension in certain benefits) after subsection (3)
insert—
“(4) For the purpose
of determining the additional pension falling to be calculated under
section 45 above by virtue of section 39C(1) above in a case where the
deceased spouse or civil partner died under pensionable age, section 45
has effect subject to the following additional
modifications—
(a) the
omission of subsection (2)(d),
and
(b) the omission in
subsection (3A)(b) of the words ‘before the flat rate
introduction
year’.”
7
In section 48A of the SSCBA (rate of Category B retirement pension for
married person or civil partner) in subsection (4) for “Schedule
4A” substitute “Schedules 4A and
4B”.
8 In section 48B of the SSCBA (Category B
retirement pension for surviving spouse or civil partner) in subsection
(2) for “Schedule 4A” substitute “Schedules 4A and
4B”.
9 In section 48BB of
the SSCBA (Category B retirement pension: entitlement by reference to
benefits under section 39A or 39B) in subsection
(5)—
(a) for “Schedule
4A” substitute “Schedules 4A and 4B”;
and
(b) for the words from
“subject” to the end substitute “subject to
section 46(3) above and to the following provisions of this section and
the modification in section 48C(4)
below.”
10 In
section 48C of the SSCBA (Category B retirement pension: general) in
subsection (4) for “Schedule 4A” substitute
“Schedules 4A and
4B”.
11 In Schedule 4A to
the SSCBA (additional pension) in paragraph 1(2) omit
“39(1),”.
Pension Schemes
Act 1993 (c. 48)
12
In section 42 of the Pension Schemes Act 1993 (review and alteration of
rates of contributions applicable under section 41) in subsection
(1)(a)(ii) for “Schedule 4A” substitute “Schedules
4A and 4B”.’.—[James
Purnell.]
Schedule
2, as amended, agreed to.
Clause
12
Additional
pension: upper accrual
point
James
Purnell:
I beg to move amendment No. 50, in
clause 12, page 14, line 4, after
‘revoke’, insert ‘any provision
of’.
The
Chairman:
With this it will be convenient to take the
clause stand part
debate.
James
Purnell:
At this rate, we will have finished the Bill by
the end of the afternoon.
Mr.
Laws:
No, I am speaking
soon.
James
Purnell:
Ah, that is the difference. There was a certain
amount of cognitive dissonance in the back of my head, which has now,
thankfully, been cleared
up.
Clause 11
introduces the new method of calculation for the state second pension,
which will consist of a simple flat-rate component and a residual
earnings-related element. I say residual because clause 12 brings in
the relevant provisions for phasing out the earnings-related element.
In our debate on clause 10, I explained that S2P was originally
intended to be a short-term measure to increase the pension
entitlements of low earners and certain carers, which complemented the
introduction of stakeholder pensions.
Let me take this opportunity to
correct a slight misapprehension possibly caused by hon.
Members’ remarks. We do not intend to abolish stakeholder
pensions with the reforms. They have had real success in reducing
charges, as we set out in our White Paper on personal accounts, and we
foresee them continuing to play an important role in both personal and
company pensions. We have made it clear that we plan
to remove the requirement on companies to have a stakeholder pension,
because it will be superseded by personal
accounts.
Mr.
Laws:
Is the Minister telling us that the Library is wrong
in its assessment of the lack of success of stakeholder
pensions?
James
Purnell:
We are very clear about the achievements of the
stakeholder pension and we set them out in great detail in the December
White Paper, which I am sure all hon. Members have read. In it, we
highlight the significant reduction in charges achieved by stakeholder
pensions.
As things
stand, S2P will eventually become flat-rate in around 2056, when the
low earnings threshold—the lower margin used for calculating
earnings-related S2P: the £12,500—finally catches up with
the upper earnings limit. That would have happened anyway because the
former is uprated by earnings and the latter by prices. In line with
the Pensions Commission’s thinking, however, we want to speed
that process up so that S2P becomes completely flat-rate around 2030.
To achieve that, clause 12 provides for a new cap on the
earnings-related component of S2P, which we have called the upper
accrual point. The changes are contained in subsections (1) to (3),
which amend sections 22, 44 and 122 of the Social Security
Contributions and Benefits Act
1992.
The clause also
applies the upper accrual point to defined benefit contracted-out
pensions. That is achieved through the measures in subsection (4) and
part 7 of schedule 1, which amend both the 1992 Act and the Pension
Schemes Act 1993. In its year of introduction, the level of the upper
accrual point will most likely be equivalent to the upper earnings
limit for that year. I say most likely because because it may be
necessary to vary slightly the level of the upper accrual point to hit
our 2030 flat-rate target, as I said to my hon. Friend the Member for
Northampton,
North.
Unlike the
earnings limit, which on current trends will continue to rise each year
in line with prices, the upper accrual point will be fixed. That
enables the low earnings threshold, which is the top end of the band of
earnings on which the flat rate element accrues, to merge with the
upper accrual point much more quickly—in 2030, rather than the
mid-2050s.
Clause 12
provides, in addition, the necessary sunset order-making powers to
abolish both the low-earnings threshold and the upper accrual point
when they eventually merge and become redundant. That is provided for
in subsections (5) to (9). However, the order-making powers set out in
clause 12 allow only for the repeal of a whole Act or piece of
subordinate legislation. Amendment No. 50 clears that up, allowing the
necessary flexibility so that it will be possible to repeal individual
provisions. The repeals made by order are subject to the approval of
both Houses. That process will be carried out by an affirmative order,
debated in both Houses.
From around 2030, the S2P will
start to accrue on a completely flat-rate basis. Of course, any
earnings-related S2P and SERPS a person has accrued prior to that point
will be fully preserved and paid when they retire.
Amendment agreed
to.
Clause 12,
as amended, ordered to stand part of the
Bill.
Clause
13
increase
in pensionable age for men and
women
Question
proposed, That the clause stand part of the
Bill.
The
Chairman:
With this it will be convenient to discuss the
following: New clause 1— Report by Government Actuary on
trends in
longevity—
‘(1)
Beginning in April 2014, the Government Actuary shall present a Report
to Parliament every five years setting out the latest evidence on
trends in longevity.
(2) It
shall be the duty of the Secretary of State to make a motion in the
House of Commons in relation to any report under subsection
(1).’.
New
clause 21—Report on older workers not paying or being
credited with National Insurance
contributions—
‘The
Secretary of State shall present a report annually to the House of
Commons—
(a) analysing,
by local authority area and by job sector, the number and distribution
of people over 60 seeking work and not being credited with contribution
credits, and
(b) on the
training opportunities for people seeking to increase the number of
their qualifying years for receipt of a full Basic State
Pension.’.
New
clause 24—Independent Pensions
Commission—
‘The
Secretary of State must, no later than 1st January 2010, establish an
independent Pensions Commission
to—
(a) advise the
Government on affordability issues in relation to state pension
provision and the state pension
age,
(b) conduct and publish
gender, carer and state pension coverage impact assessment annually,
and
(c) publish annual
projections of the proportion of pensioners facing different withdrawal
rates.’.
New
clause 25—Job opportunities for workers over state pension
age—
‘Before
any increase in the State Pension age the Secretary of State shall
publish a report on improved training packages and flexible job
opportunities for workers over 55 years of
age.’.
Andrew
Selous (South-West Bedfordshire) (Con): I welcome you back
to this afternoon’s sitting, Mr.
Gale.
Clause 13 is
very important. It deals with the increase in state pension age. I note
from the schedule in the White Paper, which helpfully sets out the ages
and increases in retirement age, that in order to collect my basic
state pension I will have to work until my 66th birthday. I think, if I
am right about the Minister’s age, that he will have to work
until his 67th birthday before he collects his basic state pension.
Perhaps other Committee members should declare an interest if they
choose to speak to the clause and let us know how the measures affect
the age at which they will collect their basic state pension.
I believe it was Bismarck, the
German Chancellor, who first picked the age of 65 as the age at which
retirement benefits would be paid. I agree with my hon. Friend the
Member for Eastbourne, who has said on
more than one occasion that raising the state pension age is, in a
sense, a no-brainer when one considers the increases in longevity that
have occurred since Bismarck’s time. We must also, quite
properly, bear another issue in mind when we address the clause, which
is the question of inter-generational fairness. One option would have been to
load all the costs of increasing the basic state pension now on to
future generations—our children and grandchildren—by
sending the bill down through the generations to them so that
pensioners now and in the near future could enjoy higher pensions. That
would have been wrong. Virtually all of us exist in families and many
of us have children or even grandchildren, so we need to bear in mind
the effects of such a major change on different generations.
Returning from Germany, it is
worth considering briefly the history of the pension age in this
country. In 1909, I think, the Liberal Democrats first introduced
pensions at the age of 70. In 1925, the age became 65 for men and
women, which is the direction in which we are heading—we hope to
end up there by 2020. It was not until 1940 that the age went down to
60 for women, remaining at 65 for men. In a sense we are going back to
the future, to the 1925 position. Who knows? Perhaps at some point in
the future we will end up back in the 1909 position. I am certainly not
proposing that now, but given what might happen to longevity in the
future, we might arrive at that point
again.
New clause 1
contains a requirement on the Government Actuary
to
“present a Report to
Parliament every five years setting out the latest evidence on trends
in longevity.”
It would
also place a duty on the Secretary of State for Work and
Pensions
“to make a
motion in the House of Commons in relation to any
report”.
The Government
are right to point to the available statistical information, some of
which has been helpfully set out in the regulatory impact assessment on
the Bill, which points out that, on average, people enjoy 20 years of
life expectancy after reaching the current state pension age and that
that figure is expected to increase to 21 years after 2046. So far, so
good. So far, so
reasonable.
Mr.
Waterson:
Has my hon. Friend seen the most recent research
suggesting that every day average life expectancy increases by five
hours?
Andrew
Selous:
My hon. Friend, as always, is a fount of optimism,
hope and good cheer, as we like to be on the Conservative Benches. I am
heartened by his remarks, although there are one or two contrary
indications from other
bodies.
James
Purnell:
Does that mean that the longer the hon. Member
for Yeovil speaks, the longer we all
live?
Andrew
Selous:
The Minister is always sharp in his observations.
He would not be in his current position if he was not. None the less, I
am sure that we have all
been enlightened by what the hon. Member for Yeovil has had to say, and
no doubt we will be again when he makes his
contribution.
The
regulatory impact assessment on the Bill states that in 1950 only half
the population reached pension age. Today, that figure is three
quarters. By 2050, 90 per cent. of our fellow citizens will reach the
new proposed state pension age of 68. That statistical evidence appears
to be overwhelming and to justify the change in the age, which is one
means by which we are paying for the extensive package of measures
before us. It is interesting to note as well—this is my last
observation from the regulatory impact assessment—that the
Office for National Statistics does not compile projections for life
expectancy by social class.
The excellent House of Commons
Library brief on this subject contains some very revealing information
and goes into slightly more detail than the regulatory impact
assessment produced by the Department. Among other things, it tells us
that men in social class I have a life expectancy of 65—five
years higher than those in social class V. For woman in social class I,
that figure is 3.7 years higher than for those in social class V. Do
not ask me to define “class”. I shall leave that to the
statisticians.
Quite
staggeringly, the House of Commons Library brief also has this
sentence:
“Inequalities in life
expectancy at age 65 appear to have widened over
time.”
That is in stark
contrast to the information I have just given the Committee on the
overall increase in life expectancy. It is those inequalities on which
I want to
focus.
4.45
pm
There are not
only variations by social class; there are striking ones by area of the
country as well. In Glasgow city, male life expectancy is 69.9 years.
That means that for those who come under the new state pension age of
68, the average male in the City of Glasgow would enjoy under two years
of pension. Compare that to Kensington and Chelsea, which has the
highest life expectancy in the country, where for males it is 82.8
years. The corresponding figures for women are in Glasgow 76.7 years
and in Kensington and Chelsea, 82.8 years. The contrast is
stark—both by social class and by area. Those figures are from
an ONS news release from November
2006.
The most recent
figures that I could find on overall life expectancy are dated 2002
from the Commons Library brief. They say that overall in the UK, women
can expect to live to 84.1 years and men to 81.1 years.
The reason for going into that
background in a little detail is to highlight the importance of looking
at exactly what is going to happen to longevity in the
UK—overall, specifically for different groups of workers and,
again, in different parts of the country. My hon. Friend the Member for
Eastbourne intervened just now to say that our life expectancy
increased by five hours every day. That is a rosy prospect and one that
I am sure we all look forward to. Just to inject a slight note of
caution, I note in the report of the Work and Pensions Committee
entitled “Pension Reform”, its fourth report of the
session 2005-6—perhaps my hon. Friend the Member for
Weston-super-Mare was a Member of that Committee and he will comment on
it later—that in paragraph 382 on page 99, the National Heart
Forum said, looking at the changes in lifestyle of younger people, that
we may actually see decreases in life expectancy. We are all aware of
the current debate on obesity—in childhood in
particular—and we all know the impact on diabetes and other
medical conditions which concern everyone. It is therefore not certain
that increases in life expectancy will continue as they have been
recently. So it is
important that the House of Commons is updated, every five years, or
once a Parliament or so, on exactly what is happening in longevity and
that that report should be broken down by social class and by local
authority area.
John
Penrose (Weston-super-Mare) (Con): One of the things which
became apparent during the Select Committee’s inquiry to which
my hon. Friend just referred was that changes in life expectancy among
different social classes—in particular among those who had been
involved in heavy manual labour throughout their lives, and therefore
frequently had shorter life expectancies—was something which the
Government have recently been saying is to do with health inequality
rather than something which they will try and cover in this Bill.
However, the difficulty that was exposed in the report was that those
health inequalities were some of the most intractable and difficult to
deal with. It is all very well to say that health inequalities are not
the subject of the Bill, but unless there have been careful discussions
between the Department for Work and Pensions and the Department of
Health about co-ordinated cross-Government activity to reduce those
inequalities, many of the assumptions about longevity have a
questionable basis and are increasingly at
risk.
Andrew
Selous:
I am grateful to my hon. Friend. He is right. When
I read the report earlier I noted those comments about health
inequalities. I believe that the Committee looked at tying the
increases in state pension age to the Government’s reaching
their public service agreements target on health inequalities. This is
a clause stand part debate and we cannot look at these issues in terms
of departmental silos. That point was made by Help the Aged in its
briefing. It spoke of the need to look at all these issues in the
round. The increase in state pension age is related to longevity, but
it is also related to people’s retraining
opportunities.
Obviously the nature of work is
very different for the 29 million or so people in employment in the
United Kingdom. For just about all of us in this room, the heaviest
thing we will pick up in our working week will be the calculator on our
desks. For many of our fellow citizens, that is clearly not the case.
They work in physically demanding environments, perhaps involving heavy
manual labour, which clearly have an impact on their health. These are
points that the TUC and others have made very clearly. We have to bear
them in
mind.
Mr.
Laws:
The hon. Gentleman is giving us an interesting
oversight of the problem. However, if he knew that these health
inequalities and life expectancy inequalities were permanent and we
could not narrow the gap, would he argue for people being able to draw
their pensions at different ages, or for an earlier basic state pension
age for people with lower life expectancy?
Andrew
Selous:
My preferred route would be that outlined by my
hon. Friend the Member for Weston-super-Mare. It really is the function
of the Department of Health to start tackling some of these health and
education issues much earlier on. There is a point which my hon. Friend
the Member for Eastbourne will no doubt want to come to on later
clauses relating to rates of annuitisation. I believe that some of the
pension companies have had discussions with the Department about
annuitisation of pension benefits related to life expectancy. My
preferred approach would be to ensure that we dealt with inequalities
of life expectancy and health within the Department of
Health.
John
Penrose:
There is a further point to make to back up my
hon. Friend’s response. If one decides to adjust retirement age,
annuity rates or anything else by social class, one should bear in mind
that it is an incredibly nebulous thing to define. I would not like to
be in the Minister’s shoes guiding that piece of legislation
through Committee. I know that it is terribly fashionable among all
parties nowadays to claim to be working class, but almost everyone
would claim that they had been involved in heavy manual labour for
their entire working lives in order to qualify for a better
deal.
Andrew
Selous:
My hon. Friend is right. I do not pretend that the
answers to these issues are simple or straightforward. That brings me
back to new clause 21, which would require the Secretary of State to
present a report every year instead of every five years, looking by
local authority area and by job sector at
“the number and distribution of
people over 60 seeking work and not being credited with contribution
credits,”
and the
training opportunities for all
people
“seeking to
increase the number of their qualifying years for receipt of a full
Basic State
Pension.”
If we
are going to increase by eight and three years respectively the age at
which women and men they can draw their pensions, it is essential for
the House of Commons to have before it very detailed information on the
unemployment rates for men and women over 60 who have another eight
years or so to go before they can collect their pensions, and on the
training and retraining opportunities without which they will find it
extremely difficult to build up rights to a basic state
pension.
Those issues
were put before the Education and Skills Committee by the Age
Unemployment Network and Help the Aged, who commented on the Leitch
report on the UK skills gap. They thought that the report did not have
enough to say about training and retraining opportunities for older
people. They looked at people over 40—that is the right sort of
age, because in the world of work it is not realistic to stay in the
job in which one started until one’s late 50s or early 60s and
then try to find something else to do for the last eight or 10 years of
one’s working life. It will be sensible for people who think
that they cannot work, for example, in a steel mill until the age of
68, to start planning to
skill themselves up for other work, perhaps something less physically
demanding, well before they get to the age at which they cannot
continue their original work. I will not go through the
memorandum from Help the Aged in detail, but among its responses on the
skills gap, it notes at paragraph 7 that
“The record of both
employer and Government funded training does not inspire confidence in
responsiveness to these challenges. All forms of funded training
decline sharply from about 40 onwards”.
That is exactly the age at which we are
going to have to start increasing very significantly the training
opportunities for our fellow citizens if we are not going to deny them
the chance of getting a basic state pension until they are 68. I have
raised this point at a number of meetings on the issue with the
Minister and others, but I have not yet heard the kind of joined-up
thinking that we really need to hear from the Minister if our fellow
citizens are to think that this is a fair settlement that will give
them a fair chance of staying in employment throughout their working
lives to the age of 68.
It is also worth noting
something that I spotted on page 21 of the Library research paper. A
change that will not occur under the terms of this Bill, but which will
be brought in by way of regulation is that the old
system—brought in by a Conservative Government in 1983 at a time
of high unemployment—under which unemployed men aged between 60
and 64 were automatically credited with national insurance
contributions, even if they were not seeking work, will be removed as a
parallel measure. That is extremely relevant to clause 13, because
people who might well have given up the work that they had done all
their lives because they were just not able to carry on will not be
credited with the national insurance contributions in the way in which
they were before.
5
pm
James
Purnell:
Just to clarify, before we get any idea that this
is a measure that has not been scrutinised, the changes to auto credits
have been an upfront part of the package all the way through. Any
savings from that are re-invested into the overall reform plans that we
are putting forward and are easily outweighed by the reduction in the
number of contribution years to 30. So there is no hidden agenda there
and it has been absolutely clear ever since the White Paper in
May.
Andrew
Selous:
Well, what the Minister says is clearly correct,
but none the less it makes the requirement on the Secretary of State at
the heart of new clause 21 even more relevant because, in addition to
increasing the state pension age, the removal of these auto credits
will have an effect on that segment of the work force who concern me at
present.
We also
note, most intriguingly, that if we turn back to the Second Reading
debate, the Minister’s boss the Secretary of State said on this
general area that
“the
Pensions Commission...suggested that the Government continue to
make sure that pension credit was payable at 60. We are looking
carefully at that proposal as one way of addressing people’s
concerns”. —[Official Report, 16 January 2007;
Vol. 455, c. 667.]
It shows that it is always important to go
through Second Reading debates carefully, in particular anything said
by the Secretary of State, for that again has a direct bearing on
clause 13 and our discussions about making people work up to the age of
68 in order to get their pension.
The Select Committee, on which
my hon. Friend the Member for Weston-super-Mare serves with
distinction, looked at this area. I think that it was talking about
guaranteed pension credit still being available from the age of 65, and
was worried about the disincentive effect on working. I will also be
interested to hear in the Minister’s response how the
Department’s discussions are going, what careful study they have
done of that area and what conclusions they have
reached.
New clause 24 would require the
Secretary of State to set up an independent Pensions Commission. I
understand the reasons for that but I am not in favour of in effect
setting up another quango. What would it cost to set up that
commission? Those of us who stand for Parliament and seek public office
should take the hard decisions. It is not up to us to shuffle off the
requirement to take difficult decisions to an independent body. Indeed,
it could be unsettling for an outside body constantly to review what is
going on in the world of pensions. It is much more important for the
information to be provided by the Secretary of State—whoever he
or she may be at any future time—so that we, collectively as
Members of Parliament, can look at it, weigh up the needs and assess
them against other demands on the public purse. If the hon. Member for
Yeovil wants to press new clause 24 to a vote I am afraid that my hon.
Friends and I will not support him.
I am more sympathetic to new
clause 25, which is similar to our new clause 21. I commend the hon.
Gentleman on attempting to require the Secretary of State to consider
flexible job opportunities. I tabled two new clauses that were not
selected, one on flexible working and one on work opportunities for the
disabled. Flexible working is incredibly important for older workers.
Many of them are unable to work full-time. Perhaps we must get used to
the idea that the peak of one’s working life in terms of hours
worked and income is a few years before retirement. Those of us who
have grown up under regimes of defined benefits have got used to the
peak of one’s working life being at the point of retirement, on
which the defined benefit pension was based. That will not be the case
for a lot of people in future, and flexible job opportunities will
allow people to stay in employment up to the age of 68. Some employers
are excellent on that—Asda is one that is worth
mentioning.
The need
for a detailed analysis by each local authority to match training
opportunities with people to enable our fellow citizens to stay in work
up to the age of 68 is what interests me the most. I will listen with
great interest to what the Minister says about
it.
Mr.
Laws:
As ever, the hon. Gentleman has given us an
excellent overview of and introduction to the subject. I was delighted
by a number of things that he said. I was particularly pleased to hear
that people listening to my speeches can be expected to have a longer
life expectancy, although they may not wish they
did at the time. I was also pleased to hear that he expects this place
to continue to zero in on a move towards the policy that my
predecessors set out so clearly and effectively in 1909. That policy
underlines the prudence of my party in fixing a state pension age that
at the time was five years advanced of life
expectancy.
Andrew
Selous:
I am sure that the hon. Gentleman is aware that in
1909 the life expectancy of those engaged in heavy manual labour was
about 50—some 20 years short of 70, the age for which David
Lloyd George brought in the state
pension.
Mr.
Laws:
As I said, that demonstrates the prudence of my
party, although the hon. Gentleman raises a serious point, which I
shall come to. Following his guidance, I also declare an
interest—fortuitously, on a clause about the state pension. I am
disappointed that he did not mention that, but I will be affected in
the same way as him and will be slaving on until I am
66.
The
Parliamentary Under-Secretary of State for Work and Pensions
(Mr. James Plaskitt):
Not on this speech, I
hope.
Mr.
Laws:
No, although I could be persuaded, if provoked by
the Minister, to move him on towards his retirement age. I noticed that
he looked a little sheepish when I mentioned declaring interests, and I
fear that he may be another Minister who is legislating on the matter
without being affected
himself.
The hon.
Member for South-West Bedfordshire highlighted the three points that we
are debating: the proposal that the state pension age should rise in
the future; what monitoring and assessment mechanisms should be in
place and whether there should be an independent commission to report
on them; and how older workers can be encouraged to stay in the labour
market rather than retire or become unable to work before the new state
pension age comes in.
It is notable that although the
increase in the state pension age will have a large, somewhat adverse
affect on many individuals who will have to work for longer to get
their basic state pension, it has surprisingly been one of the less
controversial parts of the package. That is partly because of the
strength of the case that the Pensions Commission put together and
partly because there is consensus among the parties about the need to
improve the architecture of pensions, which means being able to fund
it. Perhaps it is also because the changes in the state pension age
will not begin to have an effect until 2024, which is still some way
over the horizon, so people are not focusing on it.
However, to give some credit to
the Government and the Pensions Commission, the consensus emphasises
that if we want to make such changes, the right way to do so is to have
long lead-in times so that people can plan and adjust for the future.
The experience of changing the women’s pension age in this
country from 60 to 65 between 2010 and 2020 and of the changes going on
with the pension age above 65, as well as the changes in other
countries, such as the United States, demonstrate the case for making
such announcements well in advance.
The hon. Member for South-West
Bedfordshire highlighted one of the possible risks in increasing state
pension ages in such a way when he talked about the inequalities
between the life expectancies of different groups. He rightly pointed
out that there are some pretty dramatic differences in life expectancy
across the country, citing the case of Glasgow where, I think he said,
life expectancy is still below the age of 70. That is a striking
statistic given that life expectancies in some parts of the country are
probably above 80, and it demonstrates the enormous health inequalities
that need to be tackled.
I asked the hon. Gentleman
whether he wished to tinker in some way with the state pension age or
the pension system to give an advantage to people with lower life
expectancies in terms of the age at which they can claim their pension,
and he said that he did not want to do that. Broadly, we agree that
that is the right approach. We are concerned that there would be too
many complexities in trying to introduce some other finesse system and
that there would be a difficulty in managing the effect on work
incentives for certain groups. It is also not obvious that we have any
state policy that seeks to deliver a set period of time for individuals
in their retirement or a set amount of pension that we apportion to
each. If we did, the consequences could be dramatic because women, who
have a longer life expectancy, might suddenly find that people propose
that they retire later or have a smaller pension pot. I cannot imagine
people wanting to make that proposal, although I stand to be
corrected.
As the
hon. Gentleman said, the situation highlights the importance of
Governments of all parties seeking to reduce the inequalities of life
expectancy. To do that, it might be necessary not only to improve
health provision across the country but to address some of the
fundamental inequalities of income, wealth, work conditions and housing
that without doubt lie behind the big inequalities in life expectancy.
We must not lose sight of that in a debate that does not easily allow
such issues to be aired.
Associated with the point about
a higher state pension age are new clauses 21 and 25, which seek to
encourage the Government to provide more opportunities for people
beyond the ages of 50, 55 and 60 to stay in the labour market. We are
all conscious of the enormous impediments of prejudice against people
who are older and who seek jobs later in life. We are also conscious of
the fact that a lot of people have difficulty in having the right set
of skills later in life. We are aware that for some time a large
proportion of the adult population above the age of 55 or 60 has
dropped out of the labour market and the educational system and gone on
to incapacity benefit. The concern is that some of that might have been
disguised unemployment, particularly during the periods when we had
high
unemployment.
5.15
pm
I received a
parliamentary answer yesterday from the Under-Secretary of State for
Work and Pensions, the hon. Member for Stirling (Mrs.
McGuire), showing that in the cohort between the ages of 60 and 64,
more than one in five are on incapacity benefit. That is only one area
of concern in relation to people over the age of 60 who might not yet
be in the labour market. Some
of the points that have been raised so far highlight
that it would be one thing to increase the state pension age to 66, 67
or 68 but that it would be quite another challenge to ensure that
people have the skills and support to stay in the labour market for
that period of time. The latest figures—the
Minister will correct me if I am wrong—suggest that after a long
period of ever-earlier retirement we appear to have passed a turning
point when people are beginning to work for longer, as we might have
expected. However, that may be due not entirely to a pre-planned,
rational process but to people discovering as they near retirement that
their pensions are not in as healthy a state as they might have wished.
New clause 25 and new clause 21, tabled by Conservative Members, invite
the Minister to say what the Government intend to do about
that.
Andrew
Selous:
As the hon. Gentleman would agree, in respect of
the will, or the need, to work later on in life, many of our fellow
citizens are doing so. I understand that 9.6 per cent. of men over 65
and 11.1 per cent. of women over 60—386,000 men and
751,000 women—are in employment either because they actually
enjoy working or because they need to work to supplement very meagre
pensions. For example, they may be one of the 125,000 whose pension
schemes have collapsed and who have no remedy. We need to bear that
capability in mind when we discuss these
issues.
Mr.
Laws:
The hon. Gentleman makes a very good point.
Obviously, some people already seek to work longer, as he said. Others
may struggle to work up to the existing pension age and beyond and we
must ensure that we cater for them.
The issue to which I want to
draw attention now is not the increase in state pension age, which we
support and which is relatively uncontroversial for us, or the need for
more training and support for older individuals, which is also
relatively uncontroversial; it is the more fundamental point about the
need for an independent commission to keep these issues in mind in the
future.
New clause 24
asks the Secretary of State to establish an independent pensions
commission to consider three different areas: first, affordability
issues in relation to state pension age and state pension provision;
secondly, coverage of gender and carer issues and how the state pension
provision is expanding; and thirdly, means-testing and its impact on
saving.
I was
disappointed that the hon. Member for South-West Bedfordshire did not
give our proposal more of a fair wind. He said that he was worried
about two things, one of which was cost. He seemed to accept the
Secretary of State’s line that there would be enormous costs
associated with setting up a vast quango. Provided that it was a small
and effective group, as the Pensions Commission was, the cost should
not be disproportionate. If there was a cost to bear as a consequence
of the new clause, and it meant a greater degree of continuity and
rationality in UK pension policy in the future, that cost might be
quite small.
The hon.
Gentleman said that he did not want an outside body to dictate pensions
policy to Members of
Parliament and I agree with him. We do not propose a body that would be
able to dictate to Parliament or to the Secretary of State what
proposals to introduce; that would be entirely wrong. Parliamentary
sovereignty should remain on those issues, which should be a matter for
the Secretary of State. If an independent pensions commission were to
make recommendations, it would be difficult to be sure that it would
take into account the different factors that Government Departments
have to consider when they formulate policy, such as the affordability
of their proposals in relation to other Government policies. Therefore,
I would not want there to be an automatic presumption that, if an
independent pensions commission of this type determined that there was
going to be an increase in life expectancy in the future and that it
would have a particular impact on the cost of the state pension
architecture, there should then be an automatic feed-through that our
state pension age should go up by a certain amount. That would be
wrong, because there could be other things happening within Government
expenditure that might lean the other way. People would be nervous if
they felt that we were establishing some kind of escalator process, in
which every time they felt that they were getting close to state
retirement age some new commission would report and move it up another
year or two. I am not thinking of a process as automatic and as
unthinking as
that. However, by
rejecting what was after all in broad brush terms one of the
recommendations of the Pensions Commission, we may be making an
important mistake. I am not yet persuaded that what the Government have
in mind, with some form of periodic review, will replace the type of
proposal that the Pensions Commission itself was making for good
reasons. I may have misunderstood the extent of what the Government are
offering, which, when the Minister responds, may be a bit more inviting
than I assumed. If that is the case and I have missed something in what
the Government have said, I
apologise.
The
Pensions Commission has been astonishingly effective in creating a
consensus between the three parties and, to a large extent, with the
pension policy groups outside Parliament, on the shape of pension
reform. Before the last general election there was no party proposing
an increase in the state pension age, but there are now at least three
parties, including the minority parties. There was no party, which I
can recall, that was suggesting that there should be a compulsory
employer contribution, of the type that we now have. There was no party
that was suggesting that the earnings link could be permanently
restored. There was no party proposing auto-enrolment into personal
accounts. There was no party proposing precisely the formulation for
crediting into the state pension and increasing coverage that we now
have in the Bill.
The
pensions commissioners, in binding that consensus together, have done
an outstanding job, which they achieved because they were seen to be
genuinely independent, even though the commission was established by
the Government, and able to bridge the differences of philosophy
between the parties, to the extent that there were any. Their figures
and statistics have been extremely impressive. There has been a feeling
on the part of all the main parties,
therefore, that there was pressure to move away from the usual party
political debate and to engage with the serious proposals
made.
Andrew
Selous:
The hon. Gentleman accepts the case for a pensions
commission when we were looking at a once-in-a-generation change of the
pensions system in this country. I agree that the Pensions Commission
did the most fantastic job and shifted opinion markedly, as he
outlined. However, does he not think that an ongoing independent
pensions commission would lead to uncertainty? The public now need
certainty that the agreement will last—for a generation,
indeed—and that may be a reason not to have the body continuing
into the
future.
Mr.
Laws:
I understand the hon. Gentleman’s point. He
is right that some of the really important decisions have been taken by
the Pensions Commission and agreed between the different parties.
However, the commission itself and Lord Turner did not take the view
that the consensus could be well maintained over time without the
presence of such a body—I am about to refer to the report.
Intuitively, that sounds sensible to me. If we went out on to the
streets and asked the men in the pub in Yeovil whether they would be
more confident of the pensions consensus being glued together in the
future by continuing the usual party political processes, they would
say that they would not be reassured at all. I think that if they were
offered instead the prospect of a credible independent commission
continuing to report, to impose a discipline on parties that sought to
challenge the consensus, and to supply information about issues that
different parties might not particularly want to be aired but which
needed to be aired in the interests of honesty, there would be a much
greater chance of keeping some sort of coherence and underlying
stability for the pensions consensus. That was clearly the view of Lord
Turner and the other commissioners, who made the case powerfully for an
independent commission in their second
report.
In the final
report, the commissioners say on page 42 under the heading of
“Securing and maintaining
consensus”:
“British
pension policy for decades has been bedevilled by a lack of
continuity.”
They point
out that that has not been the case in many other countries, even when
they have pension systems of our kind. They go on to say
that
“over the long-term
the likelihood that consensus can be maintained, and that the
inevitable adjustments to policy can be made with continued cross-party
support, could be improved if debates on pension policy were informed
by independent analysis of key trends in demography and pension
provision. We therefore reiterate our recommendation, made in the
Second Report, that a permanent Pensions Advisory Commission should be
created, charged with monitoring developments and laying before
Parliament every three to four years a report describing relevant
trends and spelling out the unavoidable trade-offs which
result.”
In
figure 18 on page 43, the commissioners set out the types of issue that
they want the independent commission to cover, including life
expectancy and changes in the future, the trade-off between public
expenditure and state pension age, gaps in life expectancy by
socio-economic groups and how they are changing over time, the latest
trends in private
pension provision, and an analysis of trends in retirement ages and
employment rates among older people—in other words, many of the
issues that we are dealing with in discussing these new
clauses. I have to
say, as objectively as I can, that I am more persuaded by the case made
by the commissioners in favour of that type of permanent independent
body reporting on a periodic basis than I am by what I understand to be
the Government’s alternative. The Secretary of State was quizzed
about the issue by the Select Committee on Work and Pensions on 7 June.
He said that he was not in favour of an independent pensions commission
and he has rubbished that before on the basis that it would be another
quango. However, he acknowledged that if periodic reviews could be done
to a specific timetable, that would be
acceptable.
In their
response to recommendation 47 in the Select Committee’s
comprehensive report—I am referring to the section entitled
“Uncertainty and the need for more research”—the
Government welcome the Committee’s comments and talk about
having “future periodic reviews” dealing with future life
expectancy. My concern is that it sounds as though that will be
controlled by the Government; it will be at the discretion of the
Government. I do not know how many issues the periodic reviews will
cover—whether it will be only life expectancy or whether it will
be all the issues that the Pensions Commission wanted covered. One
wonders whether that type of process will have the same credibility and
impressive independent analysis—and therefore exert the same
pressure on the political parties to stay together or to respond to the
parts of the pensions consensus that are not working—as Lord
Turner
proposed.
Andrew
Selous:
Before the hon. Gentleman concludes his remarks,
will he tell us what would be the maximum annual cost that he would
budget for a pensions
commission?
5.30
pm
Mr.
Laws:
I do not have a figure to pick out of the air, as
the hon. Gentleman can imagine, but I would certainly have in mind a
very small number of people—similar to the number of
commissioners in the Pensions Commission. I imagine that to have a
group of that type monitoring the situation and preparing
reports—which would be issued periodically, every three or four
years, as the Turner commission suggested—would not be
particularly expensive. If it would help the hon. Gentleman, I am happy
to table a question to the Minister, or perhaps he can tell us today
what sort of costs would be involved. However, I would not get too hung
up on the affordability of a little pensions commission quango. If we
are really that worried, I am sure we can find some existing quangos to
cull to save the
money.
Mr.
Waterson:
I have been delighted to listen to the hon.
Gentleman as his plans for a semi-detached quango begin to unfold. Will
he at least undertake that his party would refer any of its proposals
to the commission, to ensure that there was an independent view of
their likely cost to the taxpayer?
Mr.
Laws:
I am not sure whether I understood the hon.
Gentleman’s point. He wants the new body to do the kind of
costings work that the Pensions Commission did. That is a very good
idea, and I welcome it. I notice that despite the excellent work of the
Pensions Commission, the Government have been using all sorts of
numbers for the cost of different policy options. Sometimes,
apparently, the citizen’s pension will cost £9 billion;
the other day, the Secretary of State started the Second Reading debate
by saying that it would cost £10 billion; by the latter stages
of the debate, it was something between £20 billion and
£30 billion. The debate needs to be informed by something better
than the Secretary of State pulling figures from the
air.
I urge that we do
not get too hung up on whether we spend a million quid on a few people
doing such work. If the prize of that cost was some kind of future
coherence and stability for our pension system, which involves the
investment and allocation of hundreds of billions of pounds, spending
that bit of money for a few people to oversee the system would look
like the biggest bargain possible.
In a helpful briefing note
issued last year, the Pensions Policy Institute set out different
options for establishing a commission. It set out four types: a general
advisory commission, one that would make recommendations, one that
would set policy and one that would be for public information purposes.
What we have in mind is definitely not simply a public information role
such as that of the New Zealand Retirement Commission, and certainly
not a policy-setting role that would oblige the Government to act in
particular ways. We have in mind a commission with a general advisory
role that might well make recommendations, on which it would ultimately
be for the Government and Parliament to make a decision.
It is a pity that the
Government have not taken on board that important proposal from the
Pensions Commission. They have adopted a lot of the Pensions
Commission’s report and worked hard to secure the consensus that
we have so far. There have been bogus arguments about quangos and more
serious arguments about Governments not liking to give away
power—they do not like to be criticised by outside bodies or
hear that means-testing or some other controversial aspect of policy is
not working. I detect a disappointing tendency on the part of the
Government to run back to the usual element of pensions policy, which
is to keep it in the hands of the Government of the day and one party.
That has not proved a successful way of running the pensions policy of
this country since the magnificent Liberal Government of
1909.
James
Purnell:
That last note was slightly harsh, given that we
have tried to have a wide range of seminars on exactly the issues that
have been raised about the policy and about the private savings side of
what we are doing. We have published documents on our pension credit
forecasts, setting out all the assumptions, and on financial incentives
to save. We have engaged very much with people’s concerns and
when possible tried to allay them by publishing extra
information.
I think
I recall answering recently a parliamentary question tabled by the hon.
Gentleman about all the
independent research that had been done on both White Papers, which
listed a number of independent consultancy reports. Given what he has
just said about the very reasonable budget for the quango that he
proposes, I am looking forward to his shredding his press release on
the outrageous costs of those —[Interruption.] Exactly. He
is obviously comforted; he obviously thought that it was not enough and
should have been more—but there we are. I am glad that that
particular PQ will not be boomeranging back in the form of a Lib Dem
press release. One
reason why we want periodic reviews is because of the good political
consensus that has been achieved on the reforms. The best way to
maintain that consensus is through the political process rather than by
subcontracting policy to an outside body. We agree with the hon.
Members for Yeovil and for South-West Bedfordshire that the Turner
commission’s work was exemplary. However, there is now a
framework that we can hope to maintain for the next few decades, and
there is a danger that an independent commission would constantly
uproot, question or cause uncertainty about the stability of the
framework.
I shall
just respond to one point raised by the hon. Member for Yeovil. There
was one body calling for automatic enrolment, a more secure state
pension and the locking in of our progress on pensioner poverty before
the last election. He does a disservice to his erstwhile colleague,
Lord Kirkwood, who chaired a very good Select Committee inquiry, after
which it recommended all those measures. The hon. Member for South-West
Bedfordshire was also involved in
that.
Before I speak
to the clause, I thank hon. Members for tabling new clauses 1, 21, 24
and 25, which provide us with an opportunity to discuss the important
issues related to the rising state pension age. That change is the hard
choice that makes the rest of the Bill possible, so I shall begin by
restating the case for it. We live in an ageing society. While the
state pension age has remained unchanged for the past 50 years, average
life expectancies have changed. In 1950, a man of 65 could expect to
live 11 years longer, but that expectancy has nearly doubled to 20
years longer today. The same figure for women has also increased
significantly in the same period from 15 years to 23. Without reform,
the number of pensioners would rise from 11.4 million today to 17.5
million by 2050.
We
are not alone in facing this challenge, and state pension ages are
increasing in other developed countries. In the US, the age at which
people can draw a full pension will be 67 by 2027—sooner than
here. In Europe, several countries have already increased the pension
age, and the German and Danish Governments recently proposed raising
the pension age in those countries from 65 to 67 by 2029 and 2027
respectively.
Based
on current projections, in 2050, men of 65 will have an average of 24
years of life ahead of them, and women 27 years. The core of the debate
has not been about the principle of increasing the state pension age,
but about its effect on the parts of the population that have a lower
life expectancy. The reasons for those differences in longevity are
complex, and there are many causal factors. The differences exist
within all income groups, although below-average life expectancy
is, of course, more prevalent in lower socio-economic groups and,
therefore, in more deprived areas. Those inequalities are not
acceptable in a modern society, and we are working hard to tackle them.
I want to reassure the hon. Member for Weston-super-Mare that the
Government do have a framework for tackling health
inequalities—the public service agreement target. The Department
of Health has the lead responsibility on that, but we support it in
that work. He will understand that these are long-term issues that are
quite difficult to shift given the cultural and behavioural roots of
health inequality, but some progress is being achieved. The Department
of Health reports that in 20 per cent. of the areas with the worst
health and deprivation indicators, we are on track to meet the target.
In a further 40 per cent. of areas, we are on track to meet our target
for either men or women. More progress is needed, but the indicators
are going in the right direction.
John
Penrose:
I am sure that the Committee is pleased to hear
of the progress in that important area. Do the Government have any view
on how long it will take at current rates of progress to even out the
inequalities in life expectancy that we talked about
earlier?
James
Purnell:
I cannot tell the hon. Gentleman that off the top
of my head. I believe that the targets take us to 2010, but they are
not to eradicate health inequalities, which would be a very significant
achievement. The debate is sometimes framed in terms of the gap between
the highest and lowest socio-economic classes, which reflects one part
of the debate but not all of it. Those two classes—the very,
very richest and the very, very poorest—represent only
10 per cent. of the population. They are relevant in that they indicate
the existence of groups that are much more deprived than the rest of
the population, but the difference in life expectancy between manual
and non-manual workers, for example, is significantly less. That gap is
two and a half years, as opposed to five years between the extremes of
social classes I and V. I hope that that provides some interesting
context.
Meg
Hillier (Hackney, South and Shoreditch) (Lab/Co-op): I am
delighted to hear the Opposition’s concerns about health. In my
constituency, men’s life expectancy is six years shorter than in
Kensington and Chelsea, as the hon. Member for South-West Bedfordshire
mentioned, but does my hon. Friend agree that there is an important
“but”: the constituency includes a lot of migrants to
this country who have lived physically difficult lives in other
countries, perhaps without adequate health treatment? Although I would
not want to be such a pessimist as to say that we will never meet some
of the targets, some of the people over 50 in my constituency have
particularly challenging health needs because they have not benefited
from the national health service, and all that it can provide, for most
of their life.
James
Purnell:
That is absolutely right. This debate is closely
tied to deprivation. There are wards in Kensington and Chelsea that
have a lower life expectancy than some wards in Glasgow. People in the
richest parts of Glasgow live longer than those in the poorest parts of
Kensington and Chelsea, so the debate is slightly more complex than it
is sometimes given credit for.
Our core point is that those
health inequalities need to be addressed, but the way to do so is not
to adjust the state pension age. The hon. Member for Weston-super-Mare
made the point clearly that having different state pension ages for
different socio-economic groups might lead to perverse incentives,
although I think that I might face hurdles at the interview stage if I
tried to squeeze myself into a lower state pension age
category.
John
Penrose:
You are not working
class?
James
Purnell:
Exactly. The question is not whether there are
health inequalities and whether they should be addressed: I think that
all parties agree that there are and that they should be. The question
is whether our proposals are proportionate and fair, given those
inequalities.
As has
been mentioned, the Office for National Statistics does not produce
projections of life expectancy broken down by socio-economic group. We
therefore cannot predict the development of trends with the same degree
of confidence for individual groups as for the average. Analysts in the
Department for Work and Pensions have estimated life expectancy for
manual and non-manual workers, based on past trends that have been
provided by the ONS. With that qualification, extrapolating from those
data in line with ONS projections, it appears that by 2050 we would see
an increase in life expectancy at 65 even among manual workers, that is
more than the three years by which we propose to increase the state
pension age.
I can
say slightly more about variations in
longevity—
5.45
pm
John
Penrose:
Will the Minister confirm that manual
workers’ projected increase in longevity will mean a narrowing
of the gap in life expectancy between manual and non-manual workers by
2050?
James
Purnell:
I think that that is just an extrapolation
from what has been happening in the past few years, but I am happy to
correct it. What the statisticians have done is to take the past
evidence and project it forward.
John
Penrose:
Is that narrowing the
gap?
James
Purnell:
That is narrowing. It means that there has been a
narrowing and if it were extrapolated forward the narrowing would
continue to happen. We can say a little more about the difference in
longevity between areas of the UK.
Ms
Keeble:
May I point out to my hon. Friend and perhaps to
Opposition Members that similar work on health inequalities—the
Black report—was carried out and was suppressed by the
Conservative party when it was in
government?
James
Purnell:
That is a very good point. It is good to see that
attitudes have been changed by our period in government and that people
are trying to draw on our consensus. So by 2046 when the transition to
68 will be complete, projections indicate that the geographical gap
will have narrowed. So, for example, taking Scotland, which is often
where the debate starts, the average male life expectancy at 68 will
have risen to 20.1 years, 1.3 years longer than it currently is at 65.
That is not the average life expectancy for everyone but the life
expectancy for people who reach the state pension age at that
time.
That presents a
reduction in the current differential at state pension age of about six
months. So if those projections prove correct, men in Scotland will on
average see higher gains than men in England over the next 50 years. As
with the figures for the UK as a whole, by 2046 there is no reduction
in the numbers of people in constituent countries projected to survive
to a higher pension age at 68 compared to the numbers that currently
survive to age 65. More would be reaching 68 under the new proposals
than reach 65 today.
So if we draw it down to
specific localities, which is what the hon. Member for South-West
Bedfordshire asked me to do, although we do not have projections at the
local level, the story is still one of increases in life expectancy in
all areas—even in Glasgow, which has the lowest life expectancy
of any local authority in the UK. Over the past two decades, life
expectancy for men aged 65 increased by just under two years. For
women, as for women elsewhere, life expectancy increased at a slower
rate, by a year and four months, but a 65-year-old Glaswegian woman is
still likely to live three and a half years longer than a Glaswegian
man.
It is worth
placing in context something that the hon. Member for South-West
Bedfordshire said. It is true that the average life
expectancy in Glasgow is 69.9 years, but the Pensions
Commission went to some lengths to explain that using the figure for
life expectancy at birth underestimates life expectancy at pension age.
People who reach pension age expect to live longer than 4.9 years in
retirement. So life expectancy at 65, rather than at birth, is
currently 13.4 years and, as the Pensions Commission
explained, that is an underestimate. People who reach 65, on a snapshot
basis, have a life expectancy of 13.4
years.
Mr.
Waterson:
Will the Minister give
way?
James
Purnell:
I will finish my point and then the hon.
Gentleman can leap to his feet. There is a better measure, which is the
life expectancy of the cohort; that factors in expected improvements in
longevity and gives a true estimate of about 16 years. So people who
reach 65 in Glasgow today have a life expectancy of about 16 years;
that is, they live to 81.
Mr.
Waterson:
I have a great interest in the subject, not only
from a personal point of view; we could all declare that interest, but
I have a constituent who is 110. Looking at the issue from a cohort
point of view, it is fine looking at Glaswegians who make it to 65 and
are going to live for another 12 or 13 years, but what about the ones
who have not made it to 65? I appreciate that taking the figure at
birth might be very misleading
nowadays, particularly given—I hope—health improvements.
However, Scotland spends 20 per cent. more per head on health than
England, yet has the worst health outcomes in western Europe, although
I guess that that is for another day and another Bill. How do we square
off the fact that many of those people will not have reached 65 and
that longevity figures at 65 are by definition somewhat
misleading?
James
Purnell:
As I said earlier, more people will reach the
state pension age under the proposals, even once it is extended to 68.
More people will reach the state pension and people will be living for
longer after that as well. The hon. Gentleman will be interested to
know that, for the first time, the Scottish Executive have set a target
of increasing the rate of improvement in inequalities, measured across
a range of indicators, in the most deprived communities by 15 per cent.
by 2008. That includes coronary heart disease, cancer mortality, rates
of adult smoking and smoking during pregnancies, which I am sure will
reassure him.
Although
I accept that there are limitations on what the current data can tell
us, I am confident that our timetable for change will not
disproportionately affect those with below-average life expectancy, as
compared with their position today. As a further safeguard, we have
made clear our intention to commission periodic reviews of the evidence
on life expectancy, to ensure that our timetable remains on track. That
will include consideration of whether the qualifying age for the
guaranteed pension credit should remain at 65 after 2024, which relates
to the point that the hon. Member for South-West Bedfordshire made in
his speech.
I wish to
clarify what the Secretary of State said. He was not saying,
“We’re thinking about it because we haven’t made
up our mind now, and we’ll come back in the next few
months”. The point is that the situation in 2024 might be very
different from the situation now. We do not know what progress will
have been made on health inequality or deprivation. We therefore made
it clear in the May White Paper that the decision whether pension
credit should remain at 65 as the state pension age increased should be
considered closer to the time. I hope that that gives the hon.
Gentleman the explanation that he was
after.
The hon. Member
for South-West Bedfordshire might be reassured to know that any man or
woman between the ages of 60 and 65 who seeks work will continue to be
eligible for credits, as now. Auto credits were for men aged 60-plus,
whether they were seeking work or not. The hon. Gentleman mentioned
that auto credits were introduced in the 1980s by the Conservative
Government. Some say that they were introduced to reduce the
unemployment figures at the time, although I would not want to comment
on that.
The intention
behind new clause 1 is sensible. Trends in longevity are important, and
any responsible Government would want to keep them under review.
However, as the hon. Gentleman is aware, the Government Actuary already
has a statutory duty to carry out a review of the national insurance
fund every five years, the starting point of which is an analysis of
demographic trends. That report—the Government Actuary’s
quinquennial review—is laid before the House in the normal
manner. Indeed, we can expect the next report by 2008. That means that
subsequent
reports will more or less meet the hon. Gentleman’s proposed
timetable. I therefore see little value in imposing another legislative
requirement to review trends in
longevity. Raising the
state pension age is also a key part of the Government strategy to
balance time spent working with time in retirement, which brings us to
paragraph (a) of new clause 21. We agree that it is vital to understand
the characteristics of older workers so that we can constantly improve
our policy of supporting them in seeking work. I therefore hope that
the hon. Gentleman will be reassured to know that the “Older
Workers: Statistical Information Booklet” is published
biannually by the DWP and is freely available from the
Government’s Age Positive website. Again, I do not see a very
good reason for legislating to introduce another report. I hope that on
those two particulars the hon. Gentleman is assured that there are
already Government research publications that will address those
needs.
Paragraph (b)
of new clause 21 and the thrust of new clause 25 relate to training
opportunities. The hon. Gentleman is quite right to raise that issue;
it is important not only in the context of raising the state pension
age but in the general economic context in any case. Even if we were
not raising the state pension age, the issue of helping older workers
to work for longer would be important, partly because people tell us
that they want to, and partly because it is crucial if we are to reach
the 80 per cent. employment rate that the Government have set as a
target. About half of the recent increase in employment has been made
up of older workers, so that trend is already growing, but we want to
work on what more we can do to support them.
A significant amount of work is
going on in this area, such as the Opportunity Age document that was
published before the last election, and chapter four of the White Paper
that was published in May. We keep our mind completely open on such
matters and if there are particular policies that the hon. Member for
South-West Bedfordshire thinks that we should pursue, we are happy to
do so. We keep the policy area under review, and we are happy to hear
any suggestions from him or from stakeholders.
I do not think that there is a
magic bullet that will help older workers to stay in work. There are
things that Governments can do, but it is just as much a matter of
cultural change. One can legislate on age discrimination, but changing
the attitudes of employers is just as important, as is changing
individuals’ attitudes. I agree with the hon. Gentleman’s
overall point about the need to help older workers to work, and I hope
that I have set out by mentioning those documents, and the
implementation of the Leitch review, that we have an important range of
policies in this area, which we are happy to continue to discuss with
him and others.
New
clause 25 would require the Department to produce reports on flexible
job opportunities for workers aged over 55. That is an important issue,
but the Government are publishing several studies on flexible working,
the most recent of which was the third work-life balance employee
survey, the executive summary of which was published by the Department
of Trade and Industry last July. There is a range of
publications in this area, but—this is the point where I will try
to be consensual so the hon. Member for South-West Bedfordshire may
want to listen to what I
say—
Mr.
Waterson:
It will be in
Hansard.
James
Purnell:
It is always better in the telling, when you are
there, than it is reading it dry on the
page.
It is important
that we collect the right information in order to ensure that the
policy remains correct in the future, and as the hon. Member for Yeovil
knows, we do not think that the right way of doing that is through an
independent commission. There is a danger that that would undermine the
stability of the proposals, rather than improve it. We agree that much
of the evidence on which we have based our reforms will have to be kept
under review. We have already announced a review of generic advice led
by Otto Thoresen, which we are undertaking with the Treasury.
It is important to ensure that
we collect the right information in a more general way to ensure that
the policy remains right for the future. The best way to do that is not
to set in legislation exactly what should be reviewed in the future and
when that should take place. If our predecessors had tried to set out
in 1982 whether it would be right to have a Pensions Commission in
2002, that would not necessarily have been a very effective exercise.
Instead, we want to consult a range of stakeholders on what evidence
needs to be kept under review to ensure that we have a first-class
evidence base. We propose to consult later in the year, and we will
then publish our plans on how we intend to build and maintain a
credible evidence base that will support future policy considerations
on a range of issues. I hope that the hon. Member for Yeovil will take
that in the spirit in which it is intended—a reassurance based
on the argument that he and the hon. Member for South-West Bedfordshire
made.
Mr.
Laws:
The Minister is, by rejecting this proposal,
rejecting one of the proposals put forward by the Pensions Commission
itself to sustain this consensus in the future. Will he tell us which
arguments he has deployed to Lord Turner in rejecting this key plank of
his
recommendations?
James
Purnell:
Lord Turner and I have not discussed this
specific detail. We have discussed the overall thrust of the proposals,
and he is very happy with the way in which we are implementing this
aspect, and the private pensions side, of what he proposed. Were we
hypothetically to discuss that proposal, I would say that, because his
commission has achieved such a high level of consensus, we believe that
progress can now be achieved through the political process rather than
through a standing commission, which would be difficult to maintain in
practical terms. As I said, setting out now what it should consider in
the next 10, 20 or 30 years would be a heroic task. We believe that the
right way to deal with the matter is to have periodic reviews of
individual issues rather than a standing commission, which might keep
the whole of the policy framework in play.
6
pm
Mr.
Laws:
I am grateful to the Minister for being so patient.
He has said that he will consider the issue and consult on it, but can
he indicate what the Government’s thinking is now? In
particular, how often would periodic reviews occur, who would do them,
and would they simply consider statistical issues or would they result
in policy
recommendations?
James
Purnell:
We shall be consulting later in the year on that.
I do not want to prejudge the consultation, but the general principle
is very much the one that the hon. Member for South-West Bedfordshire
set out. We believe that the trade-offs are for politicians to make,
and that the situation is not analogous to that of the Bank of England,
where a particular decision can be made within a policy framework.
Decisions that go to the heart of the policy framework should be taken
by politicians. We think that that is
right.
I hope that I
have reassured the hon. Members who tabled new clauses 1, 21, 24 and
45, and I urge them not to press them. If they do, I shall urge my
colleagues to reject
them.
Andrew
Selous:
I have listened carefully to the Minister’s
response to the debate. On the basis of what he said, I am prepared to
withdraw new clause 1, because he has satisfied me that it replicates
an existing requirement in respect of the work of the Government
Actuary’s
Department.
However, I
am not satisfied on new clause 21. I respect the fact that the Minister
said that some of the work had been done, but his response on paragraph
(b), which deals with training opportunities, was particularly poor. I
understand that it is not part of the Minister’s departmental
remit to deal with training, but the need for co-ordination in the area
is paramount, and the opportunity to knit the work together and review
it coherently on an annual basis in conjunction with the Department for
Education and Skills would be valuable for the Department. Therefore, I
serve notice that I shall ask my colleagues to vote in favour of new
clause 21 at the appropriate
time.
Mr.
Laws:
I am grateful to the Minister for his detailed and,
as ever, patient response, and I accept the points that he made on a
couple of the issues around the edges of this debate. I am still
genuinely
disappointed that he will not take up the Pensions Commission’s
recommendation of a body to give advice to politicians on how the
pensions system should develop. I can easily anticipate the thinking in
Government and in Departments about such issues. I can understand the
temptation and pressure, once the commission has been established, made
recommendations and produced what appears to be a consensus, to
repatriate policy and to avoid a situation in which a standing
commission appears to be monitoring the effectiveness and success of
Government policy, but I think that we will be less successful in
making the pensions consensus stick and making the policy work if we do
not accept Lord Turner’s recommendation. I hope that there will
be further debate on it in another place, and that the arguments will
be more convincing than mine appear to have been. As I do not detect
upwelling support throughout the Committee, I shall not press the new
clause to a
vote.
Question put
and agreed to.
Clause 13 ordered to stand
part of the Bill.
Schedule 3 agreed
to.
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