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9 Mar 2010 : Column 36WH—continued
There are trends in the labour market that I think are particularly detrimental to women pensioners. Not only will women now have to wait until they are 65 for their state pension, but when they draw a pension it is increasingly likely not to be a final salary pension but a money purchase pension of the sort that the hon. Member for Leyton and Wanstead commented on in his contribution. Of course, money purchase pensions tend to be based on life expectancies. So, instead of a woman getting a final salary pension based on what she used to earn, which would be the same as for a male counterpart who earned the same amount, she will now get a money purchase pension that is lower for women than for men, because it must be invested and because women tend to live longer than men. That seems perverse. It seems to be a rule of pensions that women tend to lose out and there is a risk that, after making so much progress on women's pensions-as the Minister knows, I welcome the 2010 changes-we are now going backwards, because of a greater reliance on money purchase pensions. Women will not only not be able to draw those pensions until later than they do now, but, when they finally draw them, they will be lower their male counterparts' pensions.
I want to draw these threads together. I think that it is inevitable that state pension ages will rise, and my hunch is that they will rise somewhat faster than has been pencilled in. However, in my view the decision should not be partisan, party political and short-term, but taken one step away from party politics, along the lines that the Turner commission suggested. Furthermore, people will need plenty of warning of any rise in state pension ages.
However, as the hon. Member for Glasgow, East said we must also look at dispersion and not just at the average ages of retirement. There are probably tailored solutions that will enable us to deal with that issue, while recognising the welcome fact that we are living longer and that the pensions system-
Angela Eagle: Will the hon. Gentleman give way?
Steve Webb: I had just reached a beautiful conclusion, but never mind. I give way to the Minister.
Angela Eagle: I am sorry to interrupt the hon. Gentleman's peroration. However, I was just wondering what sort of tailored solutions he had in mind to deal with the question of dispersion. I ask that because there is an issue of the class or socio-economic bias of longevity and I wondered whether he had anything particular in mind when he talked about tailored solutions.
Steve Webb: I have two specific ideas in mind. The first was the idea that I mentioned of exploring the role of disability pensions as a kind of early retirement pension for a very specific sub-group, so that we might say, "If we push the pension age up for everybody, there is a small group who will be left behind who may have had a particular life experience-for example, ill health or early retirement-and we may need a specific mechanism of support for that group".
The second, and wider, idea is also related to something that I mentioned earlier: these socio-economic inequalities have pretty deep roots and there is a raft of social policies that one could think of to deal with them. As I have said, this is not just a pensions issue and it is not just a DWP issue, and our policy making needs to reflect that.
11.56 am
Mr. Greg Hands (Hammersmith and Fulham) (Con): I congratulate the hon. Member for Leyton and Wanstead (Harry Cohen) on securing this debate. I also congratulate him on a very well crafted speech, as well as giving him my best wishes for his retirement.
Like the hon. Member for Glasgow, East (John Mason), I have visited the football ground in the constituency of the hon. Member for Leyton and Wanstead. I must say that it was a particularly memorable day, not for the game of football-the score was Leyton Orient 0, Plymouth Argyle 0-but for the meeting afterwards of the Plymouth Argyle Supporters Association. The guest speaker was the late Michael Foot and it was a particular pleasure to see him then. Indeed, that Plymouth Argyle event was the last time that I saw the former leader of the Labour party alive. I must say that he gave the most exhilarating speech. It was one of the best speeches that I have ever heard, although it was about Plymouth Argyle's 1928 FA cup run. There were certainly no interventions from the assembled supporters during that speech.
I also wanted to congratulate the hon. Member for Leyton and Wanstead on making his case so robustly. Shall we say that he made it from a characteristically left-wing viewpoint? His stance was pretty much to ignore this country's gaping £175 billion deficit, as if it did not matter. Also, I noticed from his website, which I studied yesterday evening, that he has actually taken to praising the Prime Minister, which I am sure has not happened before, for his conversion to Keynesian policies. That says something about the leftwards lurch in the Labour party. Mr. Bayley, I welcome you to the Chair.
Unfortunately, the hon. Gentleman slightly ruined parts of his speech by getting just a little too enthusiastic in talking about deep recessions in the 1980s and 1990s, casually ignoring the fact that the deepest recession of all since the 1930s has been, of course, the one that we are just coming out of, and that has taken place under the Government whom he professes to support.
The hon. Gentleman also made some slightly bizarre comments. For example, he suggested that Lord Turner was trying to curry favour with the Conservative party. If that is the case, he does not seem to be doing it very successfully, given the fact that we are pledged to abolish his organisation, the Financial Services Authority.
The hon. Gentleman raised several interesting points, with which I will deal in detail. One was the possible effect of any rise in the pension age on inequality, which I think that we would all agree has increased under the current Labour Government. However, I doubt whether his proposals would make much difference. I will discuss the meat of his arguments in due course.
The hon. Member for Glasgow, East made some similar points and mentioned the important factor of differential life expectancies, with which I am familiar, as my constituency includes large estates ranking among this country's bottom 1 per cent. in terms of deprivation, literally next door to some of the country's wealthiest people. Differential life expectancies are an issue in my constituency. He was right to say that in debates such as this, the focus is inevitably on average life expectancy rather than the range of life expectancies. As was said in
interventions on his speech, it would be difficult to design a pension system that took into account the range of life expectancies, but we would be interested to consider any proposals of his. He also made some valid observations about wealth inequality.
The hon. Member for Northavon (Steve Webb) made several interesting points. He kicked off by discussing the need for a long lead-in before any changes, citing the 15-year lead-in of the Pensions Act 1995. That is a valid point-we would all like as long a lead-in and warning as possible-but we must also consider what is affordable. Getting the balance right is the key question before us today.
The hon. Member for Northavon made a number of points without setting out any policy of his own, as far as I could tell, about what the retirement age should be. He attacked the Conservative party's proposals, including asking whether we had taken legal advice. I am not aware of any Liberal Democrat policy that has come with legal advice attached. Perhaps he would like to attach legal advice to some of his proposed policies on this issue and others.
Angela Eagle: The hon. Gentleman must admit that there is an issue with equality and the requirements in European law to equalise pension ages, to which the previous Conservative Government responded by passing the 1995 Act. Perhaps he can give us at least an indication. Surely Conservative Front Benchers took some kind of legal advice on their proposal to increase the male retirement age in 2016-that is certainly what the shadow Chancellor appeared to be saying in his speech-and the female retirement age either straight away in 2016 or in 2020. If the Conservatives propose the latter, they would be legislating to make the retirement ages unequal again, which is clearly against European law.
Mr. Hands: I thank the Minister for that lengthy intervention. To correct her, our policy is to raise the pension age at some point after 2016. It is important to do that. In terms of some of the details of the implementation, we will have to wait and see. She can argue the issue during the coming general election campaign.
The hon. Member for Northavon discussed the need for measured, steady progress, with which I think we would all agree, but he did not say towards what, in terms of a retirement age. He said that he departed somewhat in his conclusions from the hon. Member for Leyton and Wanstead. To be fair to the hon. Member for Leyton and Wanstead, his conclusion was absolutely clear, but the hon. Member for Northavon rather left the impression that he was still on the same vehicle, having failed to outline any idea of what he thought the retirement age should be.
I urge the hon. Member for Leyton and Wanstead to correct his website, which says that
"the Shadow Chancellor George Osborne has said that he would save £13 billion a year by raising the retirement age for men and women to 66 by 2016."
Most parts of that sentence are untrue, as I have explained. In fact, his website is riddled with untruths about Conservative policies. He says that
"900,000 children would miss out on Child Trust Funds which the Tories have said they will scrap."
That is utterly untrue. We have said that they will be restricted to poorer families, not scrapped. I would be grateful if he corrected that reference as well. This debate gives me the opportunity to set the record straight.
In his article "Pension Justice" on the Poptel website and again today, the hon. Member for Leyton and Wanstead discussed the widening gap in life expectancy between the rich and poor. We all agree that that is a concern, but maintaining the status quo on pensions will not do anything to address it. If we accepted his line of reasoning, the logical outcome would be different retirement ages for different professions or those from different socio-economic groups. I am not sure whether he would necessarily advocate that, but it certainly follows from what he and others have said.
There is a blatant inconsistency in the hon. Gentleman's argument. If it is unfair in his terms to raise the retirement age for all when the rich live longer than the poor, how can it possibly be fair to maintain a lower retirement age for women when women live longer than men? I would be grateful if he explained that. If life expectancy is the touchstone of fairness, the hon. Gentleman ought to advocate a retirement age well in excess of 65 for women that is phased in as quickly as possible. That would take his argument to its logical conclusion. I do not think from his demeanour that he is in favour of doing so. Most people accept that differentiating state pensions according to life expectancy would be unfair and unworkable. On the same grounds, continuing to differentiate according to sex cannot be right in the longer term, particularly when life expectancy suggests the opposite case. That is a matter of common ground between the Opposition and the Government.
To return to the matter in hand, it is the Labour Government who have destroyed pensions in this country, contrary to what is said on the hon. Gentleman's website. Labour's first welfare reform Minister, the right hon. Member for Birkenhead (Mr. Field), summarised Labour's record on pensions when he said on Radio 4 in September 2004 that
"when Labour came to power we had one of the strongest pension provisions in Europe and now probably we have some of the weakest".
In my contribution to this debate, I will stick to a simple plan, outlining first the Labour Government's failures on pension provision and then the Conservatives' plans in the short and long term to do something about it. According to the Office for National Statistics, the number of people in private sector pension schemes fell from 6.2 million in 1995 to 3.6 million in 2008. As the right hon. Member for Birkenhead said, we had one of the strongest private pension systems in 1997, but not any more.
The Prime Minister himself, as Chancellor, raided pension funds, taking £5 billion a year out of people's savings. Occupational pension schemes have closed down under the ever-increasing weight of regulation and bureaucracy, while Labour has allowed a pensions apartheid to grow up between the public and private sectors.
John Mason: Is the hon. Gentleman suggesting that it is because of regulation that defined benefits schemes are closing down?
Mr. Hands: Yes, partly. The excessive extra regulation piled on in that area is certainly part of it. I think that the general climate under this Government for pensions has been extremely unhelpful.
Under Labour, more and more pensioners have been dragged into the web of means-testing. The means test is an insult to the dignity of older people. Government figures show that the poorest pensioners are getting poorer, while many are not claiming the benefits to which they are entitled due to the complexity of the system. Not surprisingly, therefore, recent polls have shown that 51 per cent. of people would not trust the Government to act in their best interests on pensions. That was published in a document entitled "Trust and confidence in pensions and pension providers", issued by the DWP itself in October 2007.
Where do the Conservatives stand? We recognise that we need to tackle the debt crisis, which will also affect many pensioners, while ensuring a decent standard of living in old age. That is why we are calling-
Hugh Bayley (in the Chair): Order. The subject of this debate is raising the pension age. The hon. Gentleman should restrict his remarks to that proposition rather than making a more general statement about his party's pensions policy.
Mr. Hands: Thank you for your guidance, Mr. Bayley.
We are calling for a review of the state pension age coupled with the re-link of the state pension to earnings growth to provide a larger pension for all. We believe that the Government should announce an updated review of the state pension age, as recommended by Adair Turner's Pensions Commission.
Angela Eagle: Parliament has legislated to re-link earnings and pensions within the lifetime of the next Parliament. The hon. Gentleman is saying that that will be coupled with an increase in the state pension age. Even according to the rather muddled speeches of the shadow Chancellor, that will not happen until 2016, which is after the lifetime of the next Parliament. Can the hon. Gentleman explain the inconsistency?
Mr. Hands: There is no inconsistency. We have said that we will restore the earnings link by the end of the next Parliament. There is also the question of how that will be funded, which the Government are ignoring. We believe that a review should consider whether the rise in the pension age from 65 to 66 should be brought forward from 2026, but start no earlier than 2016 for men and 2020 for women. I look forward to seeing the corrections on the website of the hon. Member for Leyton and Wanstead in relation to Conservative policy.
Steve Webb: The hon. Gentleman is being generous in giving way. I believe he criticised me a moment ago for not being specific about where we should end up. Will he explain in what way promising a review is specific?
Mr. Hands: Saying that we will review the provisions shows a clear intention. We have also talked about dates, whereas the hon. Gentleman has not mentioned any ages or dates. It is not on for him to criticise the Conservative party for not being clear on this matter when he has provided nothing on Liberal Democrat policy. He has merely suggested that he disagrees with the hon. Member for Leyton and Wanstead, whose position is clear, without proffering any alternative.
In conclusion, we believe that raising the pension age should be combined with a renewed commitment to re-link the state pension to earnings growth in the next Parliament to ensure a decent standard of living for all in retirement, halt the spread of means-testing and restore the incentive to save. Through a new office for budget responsibility, an incoming Conservative Government would carry out a full review of public sector pension liabilities and other questions that are before us. The Government should find ways to cap the biggest Government pensions, including those of senior civil servants. The shadow Chancellor outlined further proposals at the Conservative party conference last year. Our biggest ambition is to reverse the effects of the Prime Minister's tax raid on pensions, which can be fulfilled only once we have got on top of the deficit. That may take more than one Parliament to achieve, but we are determined to get Britain saving.
The Government have an astonishingly bad record in this area. I will be interested to hear the Minister's explanation of where we go from here. I have outlined the position of an incoming Conservative Government-we look forward to implementing it.
12.13 pm
The Minister for Pensions and the Ageing Society (Angela Eagle): The debate has been revealing and interesting, and I congratulate my hon. Friend the Member for Leyton and Wanstead (Harry Cohen) on securing it and on his speech. Although I did not agree with every aspect of his analysis, as ever he showed great insight. He has a great record of pursuing issues of pensioner well-being and poverty through the Work and Pensions Committee, of which he ought to be proud.
My hon. Friend spoke about the unpromising start of the national employment savings trust. This is a landmark pension reform and its size and complexity should not be underestimated. It deals with the biggest gap in pension saving, which concerns those on medium and lower earnings in the private sector. When it is up and running, it will give up to 10 million people-including 7 million to 9 million new savers-guaranteed employer and Government contributions to a workplace pension for the first time in many years. At present, the default option is no saving at all, and that has been happening since the previous Conservative Government made the changes to personal and private pensions that destroyed pension provision in this country.
This landmark reform has been achieved through consensus across the board. Although my hon. Friend does not agree with all aspects of it, I hope that he supports the use of inertia, which means that people will be enrolled automatically. This is the best chance that there has been for a long time to improve the saving and retirement prospects of many people who currently have no savings to call on.
The state pension age was set at 65 for men and women in 1925 and was reduced to 60 for women in 1940. As hon. Members have said, the only change since then has been through the Pensions Act 1995, which legislated to equalise the state pension age in phases starting from this year, with the pension age for women rising to 65 by 2020. That gave a 15-year warning that equalisation would take place. One reason for that legislation was to ensure an equalisation of benefits, which is required under European law.
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