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Baroness Hollis of Heigham: My Lords, I thank the noble Lord for giving way. I take the point about people in Belgium retiring at the earliest point to draw retirement pensions. But the Minister was, as we would expect, fastidious in his choice of words. He did not indicate that those people were leaving work to retire. His description could very easily apply to a situation in which people were currently unemployed and therefore chose to re-label themselves as "retired" at the earliest possible age. All the evidence is that in most of Europe people are leaving work even earlier than in the United Kingdom. I suspect that my description of Belgium may very well be accurate.

Lord Mackay of Ardbrecknish: My Lords, the noble Baroness paints the usual picture that her party paints; namely, that almost everybody in this country is unemployed. The simple fact is that when I last saw the unemployment figures they were 8.5 per cent. for the United Kingdom and falling, unlike most of our friends in the rest of the European Community. So I do not think that her argument is a good one. I want to see as many people as possible carry on working. That is important for reasons that I have certainly mentioned in earlier speeches: what is called the support ratio, which is the number of people of working age as opposed to the number of pensioners.

The present pensioner system offers a flexible half decade of retirement. The Government propose to maintain and enhance that flexibility. Anyone who defers retirement beyond the new state pension age of 65 will be entitled to an increment for each successive year. That increment will be increased to 10.4 per cent. per year as against the present 7.5 per cent. No limit will be set on the number of years that a pensioner can defer beyond 65. In effect, that is a flexible decade and more, starting at 65.

As I hope to have shown, a flexible decade of retirement does not deliver the benefits that its supporters believe. Perhaps I may just point out that the argument about support ratios is still important. It is very important to the future of our country that we do not burden the working population with costs, especially in the social security budget, which, frankly, they and the economy are unable to sustain.

I have read out the figures before in Committee. I make no apology for doing so again. If we do not move on this issue, the number of people of working age will fall from the year 2010 to 36.2 million; the year 2030 to 33.7 million; and by the year 2050 to 32 million. Correspondingly, the number of people of pension age in the year 2010 will be 11.7 million; in 2020 it will be 13.5 million; in 2030 it will be 15.8 million; and in 2040 it will be 16.3 million.

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The proposal in the Bill will decrease the number of people above state pension age in, for example, the year 2030 from 15.8 million to 13.7 million and will increase the number of people of working age from 33.7 million to 35.8 million. With regard to the support ratios, the ratio of the number of people of working age per pensioner, which is set to go down if we do nothing to 2.12, will go up to 2.6 and 2.4 in the years 2030 and 2050.

Perhaps I can answer the noble Lord's question without him intervening. Of course, that is the present situation against 65. The problem with the flexible age of retirement is that it is very difficult to predict exactly when people will take the pensions, except for the point that I made about the experience in two quite small countries. That was quite limited experience, where there is much evidence that people have taken their pensions at the earliest possible moment. Thus, the situation may move closer towards a retirement at 60 than in fact the so-called pivot at 63.

Lord Monkswell: My Lords, I thank the Minister for giving way. He did not in fact guess correctly the question that I intended to ask. My question to him is: what estimate for the rate of unemployment was considered by the Government when they deduced their figures for the support ratios? Obviously, if there is an unemployment rate of 10 per cent. or 15 per cent., the figures are rather different from those with an unemployment rate, which it is to be hoped we would achieve under a Labour Government in the future, of between 1 and 2 per cent.

Lord Mackay of Ardbrecknish: My Lords, that is a nice promise. A Labour Government will have 1 or 2 per cent. unemployment. The noble Lord picks 10 or 15 per cent. as the norm, supposedly, under this Government. I have to tell him that the current rate of unemployment is 8.4 per cent. or 8.5 per cent.—one figure is for Scotland and the other is for the UK—and falling. Most of our European friends have higher rates of unemployment, including those countries which have been blessed with the wisdom of socialist governments, who, I have no doubt, the noble Lord and his friends consider to be their blood brothers in some way or other.

We believe that we have unemployment on a downward trend. We believe that, with a properly run economy—we are getting it that way with a lot of inward investment coming in and exports booming—unemployment is set to fall further. I cannot predict other than that the trend would reverse if the party opposite took over and started to put up the costs of employing people and of producing goods and made this country less competitive. Perhaps I am being diverted and should come back to the question at hand.

Baroness Hollis of Heigham: My Lords, the noble Lord thinks that there is a vote coming up and that he has to filibuster.

Lord Mackay of Ardbrecknish: My Lords, I do not think there is a vote coming up. I suspect that there are not enough members of the party opposite who really believe in this scheme of 63 and a flexible decade in order to muster a decent vote on the subject. Further

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down in the same Observer article, Mr. John Edmonds, the general secretary of the GMB union, who I understand is a significant supporter of the party opposite, said:

    "The party policy at conference is for a retirement age of 60. The party policy is straightforward and clear. I don't want any change in the party policy".

Given the way the policy of the party opposite changes so regularly—every other day it seems to me—I think that poor Mr. Edmonds has a shock coming.

I shall pray in aid another Labour Party document. Perhaps it was not a Labour Party document. It is only a Labour Party document when the party wants to agree with it. I refer to the interesting report of the Commission on Social Justice. It came to the conclusion that 65 was the right age. With that, if not with anything else in the document, I completely agree.

Baroness Turner of Camden: My Lords, does the noble Lord understand that I was not referring to Labour Party policy particularly but to a document produced by your Lordships' Select Committee in 1988-89? It was an all-party document which made a strong recommendation for a flexible decade of retirement. It was a very distinguished committee. Not only was I a member of it but it was chaired by the noble Lord, Lord Allen of Abbeydale, a noble Lord with considerable experience in these areas.

Lord Mackay of Ardbrecknish: My Lords, all committees of your Lordships' House are distinguished. Clearly, the noble Baroness, Lady Turner, is putting them a cut above—perhaps a considerable cut above —the Commission on Social Justice. I might agree with her about that because she is praying in aid a committee of your Lordships' House against the Commission on Social Justice.

This has been a difficult but interesting and important debate on what conclusion we should come to on equalising pensions. There are a number of proposals about and there have been for some time. As I mentioned at the beginning of my speech, we looked seriously at all the propositions in front of us, including the flexible decade of retirement. We have concluded, for some of the reasons I have given this evening and for some of the reasons I gave—dare I threaten your Lordships—at even greater length during the Committee stage, that the proper proposal to go for is a common retirement age at 65. Attempts were made in Committee and have now been made at Report stage to persuade me to change my mind. However, the logic of our position is backed up very clearly by the same move taking place all over the world. Most of our friends in the European Community and most of our competitor countries around the world are moving their retirement pension age up, to 65 and indeed in some cases beyond.

One cannot be oblivious to what is happening in the rest of the world. The Government's decision is a right and sensible one. While a flexible retirement age, with a pivot at 63, has its attractions, it has some serious downsides, not just for the economy but for the individual who may be tempted to retire at 60 with a much reduced pension upon which he or she would have

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to live for the rest of his or her life. I should have thought that that would be a subject that would interest the noble Baroness, Lady Hollis of Heigham.

Having heard the debate, and having explored the issues, I hope that the noble Baroness will withdraw the amendment. But if we must have a vote on it, I am confident that my noble friends will support me.

9.30 p.m.

Baroness Hollis of Heigham: My Lords, that must be the first confident statement the Minister has made today. I concede that were we to have a vote his noble friends would probably support him. The Minister failed to address the two substantive points that I sought to make. Despite a newly alert and invigorated Minister, we had, I am afraid, the same tired old arguments about tempting people to retire at 60; we would all retire young; and what is happening in Europe.

We were trying to make two basic points on this side of the House. Whether the Minister acknowledges this or not, there is a gap now between when people leave the labour market and when they will draw their pension. The Government's actions are making that gap wider. The Social Justice Commission, which the Minister is fond of praying in aid when it suits him, noted that 59 per cent. of men between the ages of 55 and 64 are now not in work. That is the majority of men. Some have retired with an occupational pension. They have to live on something. Nothing the Minister said seemed to recognise the world in which we now are as opposed to the world we were in when the Tory Government inherited from the Labour Government a half-way decent pensions policy which they have now warped and deformed by their changes to SERPS and subsequent changes to unemployment policy, such as record counting.

That world has changed. We have seen men in manual employment leaving work earlier; more and more jobs fragmented into part-time jobs; and an increasing casualisation of the labour market. The Minister did not say one word to connect the world of pensions to the world of work. I am amazed. I should have thought that by now the Minister would have appreciated that pensions carry into old age the life chances, the affluence of support and the opportunities one has experienced in work. As they are shrinking in work, there are further problems to be addressed with regard to pension age. The Minister offered no recognition of that at all. He gave us just the tired old stuff about dependency rates for the third and fourth time around the roundabout.

I wish that the Minister could sometimes strengthen the depth of his briefing and take on board what is happening in the world of work to see how that maps on with the increasing insecurities and uncertainties of the pension world that we are facing. At the very time the world of work is becoming precarious, the Minister is trying to make the world of pensions more harsh and rigid. That is absurd. He must intellectually start calibrating those two things otherwise—I am sure he

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will not mind me saying this—he is failing to put the message of an appropriate task for social security to his department and to his colleagues.

The first point relates to the gap that now exists between the world of work and the world of pensions about which the Minister said not one word, as though the speeches made by my noble friend Lady Turner and myself had never been heard by him. I am sure of course that that was not the case.

The second point that the Minister did not acknowledge was that the difference between our position and his is choice. On the one hand, the Minister knocks a flexible decade, because many people might retire at 60. He says that we are tempting them, as though he, the Minister, knows what is in other people's best interests rather than trusting them to make an informed choice for themselves. Then he went on to say that they have half a decade of flexible retirement at the other end. In other words, on the one hand he is conceding flexibility when it suits his case, but he rejects it when it suits the fortunes of the people on the ground.

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