House of Commons
Tuesday 16 January 2007
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
Foreign and Commonwealth Office
The Secretary of State was asked—
Arms Trade Treaty
The United Kingdom has led international efforts to secure a legally binding treaty to end the irresponsible trade in arms worldwide. On 6 December 2006 we successfully pushed through a resolution establishing a UN process to work towards a treaty, and we will continue to build support for the initiative in UN discussions during 2007 in preparation for the meeting of the group of governmental experts in 2008, which will look at the draft parameters of a treaty.
I am afraid that I do not carry the detail of the Department’s finances on this issue at my fingertips, but I will certainly write to the hon. Gentleman. A great deal of work is going on. We are preparing a paper, as are other contributors, to take forward the process of negotiation.
I congratulate my right hon. Friend and her predecessor on the UK Government’s leadership on this issue, which has taken place alongside the work of non-governmental organisations such as Amnesty International and Oxfam. Will she give an assurance that the UK’s objective is that such a treaty should cover trade in all conventional arms and all dual-use goods and technologies? Will she advise the House on what progress is being made in persuading the US Administration to modify their previous position and become an enthusiastic supporter of this noble effort to secure action against the abuse of human rights through the arms trade?
I thank my hon. Friend for his remarks, and I agree that a great deal of work was done on this matter by my predecessor. As my hon. Friend will know, we are certainly committed to such a treaty covering all conventional arms, and to focusing on some core principles about when trade is unacceptable. I thank him and his colleagues on the relevant Committee for the work that they do on scrutinising the export of arms. I fear that, although we are certainly engaged in discussions and will endeavour to persuade the United States of the merits of this process, it may take some little time. It was the only country to vote against the proposal.
In pursuing that welcome process, will the Secretary of State draw to the attention of the United Nations the unique circumstances that have led almost everybody to support this move? For once, we in this country have both sides of the House, the Christian Churches, the NGOs and the bishops all in agreement. The people of this country, and I believe the vast majority of the population of the world, think that this issue is important. Let us have a swift process please, and let us hope that the Secretary of State will win the day with this argument.
I thank the hon. Gentleman, and I am grateful to him for mentioning the Churches and the NGOs, because I meant to pick up on what my hon. Friend the Member for Kingswood (Roger Berry) said about those. The hon. Gentleman is absolutely right to say that there is even more support for these moves than we might have thought. We got a very good vote—139, I think—in the first committee, and 153 votes for the resolution. That is about three quarters of the membership of the United Nations. It has indeed been a cross-party, cross-faiths supported movement, and we will certainly get on with it as fast as we can.
I congratulate my right hon. Friend on her energy on this subject, but is she aware that in Africa one of the biggest suppliers of weapons is the People’s Republic of China? Will she invite our embassy there to seek to monitor that, and to put on the public record what we know about that huge new growth industry in a country that is not democratic and not really much interested in solving this problem?
My right hon. Friend is right to say that there is concern. One of the things that remains a source of some concern, and that we will continue to work on, is that although only the United States voted against the proposal, there is less involvement that we would like to see from other major arms exporters—not only China, but Russia, Pakistan, India and some of the Arab countries. It is important that the support that is built in taking forward the treaty should bring in the major arms exporters. One of the things that I hope and believe will help with that is the involvement of the arms industry itself, which understands the dangers of the unregulated trade.
Does the Foreign Secretary not accept that under successive Governments, the United Kingdom has had one of the strictest arms control regimes in the world, and that Britain’s defence industries make a huge contribution to the defence not only of this country, but of our allies? Those who are engaged in Britain’s defence industry—some 300,000 of our fellow citizens—are engaged in a noble effort, which should be supported by the House.
The hon. Gentleman is right to say that we have had stringent controls on the export of arms—quite rightly—under successive Governments. He is also correct to say that there is a right to self-defence, and that there is a legitimate trade. One of the excellent things about the initiative that we are taking forward is that it focuses, with the support of the existing industry, on the real dangers of unregulated trade.
His Majesty King Letsie III of Lesotho dissolved Parliament on 24 November for an election to be called within 90 days, in accordance with the constitution. The election will be held on 17 February. Our non-resident high commissioner, Paul Boateng, visited Lesotho on 4 December. High commission staff are monitoring the situation and remain in regular contact with Lesotho Government Ministers and officials, the chairman of the independent electoral commission, political parties and civil society organisations.
The Minister will be fully aware of the strong links that exist between Welsh communities and the Kingdom of Lesotho, especially in the field of education. He will know that among the problems affecting the country’s economic stability are poor health and the exacerbated problem of AIDS. The situation is being made even worse by the exodus of medical practitioners and doctors from the area. What are the UK Government doing to stabilise the situation so that Lesotho can deal with its health problems, tackle its economic problems and bring about political stability?
The United Kingdom is the only developed country to implement and review systematic policies that explicitly prevent the targeting of developing countries in the international recruitment of health care professionals. The NHS leads the way in the ethical recruitment of health care professionals and has worked with the Department for International Development to draw up a list of countries from which it will not actively recruit, including all countries in sub-Saharan Africa and the Caribbean. The NHS will contract only with private recruitment agencies that are signed up to the code of practice.
In retrospect, would not the Government have been in a better position if they had not reneged on a commitment to maintain a full-time high commissioner in Maseru?
One of the major challenges facing the new Government in Lesotho will be the delivery of primary education for the first time to the country’s young people. Will my hon. Friend commend the work being done to carry through the global schools initiative by Dolen Cymru/Wales link, which is sending school teachers from Wales to Lesotho for long periods to assist in the delivery of education to young people for the first time in a country that has been starved of opportunities in the past?
I commend the excellent work of Dolen Cymru in Lesotho. My hon. Friend reminds us of the strong links that Wales has with Lesotho and other communities; my town of Pontypridd has strong links with Mbale in Uganda. Such links are based on teachers and doctors working with professionals in those countries so that no money donated is wasted, and it is all used to the best effect.
At present there is no consensus among EU Governments on the future of the constitutional treaty. The German presidency has been asked by EU leaders to present a report to the European Council in June on possible next steps, following consultation with all EU Governments. I set out the Government’s approach in my written ministerial statement of 5 December 2006.
Will the Minister give an assurance that no Labour Government would sign a European Union treaty that would give permanent EU competence over United Kingdom affairs by removing the right of Parliament to amend or repeal European Union treaties through the relevant Acts of Parliament?
I am not entirely sure that I follow the reasoning behind that question. What is important is that successive British Governments have supported section 2(1) of the European Communities Act 1972, which was taken through the House by the then Conservative Government. Subsequent Conservative Governments—incidentally, they were supported by the shadow Foreign Secretary—have argued for extending the competence of the European Union, for example at the time of the Maastricht treaty. They have never argued for a referendum on the subject—I have checked—and neither did the shadow Foreign Secretary during all the time that he was in government. The people whom the shadow Foreign Secretary opposed during the Maastricht process are now running Conservative party policy on Europe.
The process is apparently being driven by Chancellor Merkel in Germany. Two decisions have been made by democratic vote in France and Holland, rejecting the constitution. When my right hon. Friend next meets Chancellor Merkel, will he remind her about those democratic decisions, and say that we respect democratic decisions even if she does not?
I think that my hon. Friend is being a little harsh on other EU Governments, who of course supported the idea of consultation and encouraged the German presidency. The reason why Chancellor Merkel is so interested in the subject at present is that Germany has the presidency. It is important that all member states find a way forward; there is no agreement at present, as I have said, but that is the purpose of the efforts being made by the German presidency—as, I suspect, efforts will be made by subsequent presidencies.
May I be helpful to my right hon. Friend—[Interruption.] May I be helpful—as always—and ask him whether, in a constructive mood, we could cease to accept any more transport directives until we have carried out an audit of the effect of European directives on safety for aviation, maritime affairs and, specifically, inland waterways?
In the same constructive spirit, may I too be helpful to the Minister? I suggest that he take Chancellor Merkel to one side for a cup of coffee and tell her that if she is looking for consensus, we have consensus in this country on the subject: we are agin it.
I am grateful for the hon. Gentleman’s support. I cannot help but notice that immediately behind him is the hon. Member for Shipley (Philip Davies), who, I understand, has been given permission by the Leader of the Opposition to campaign for the Conservative party to advocate leaving the European Union. There appear to be 57 different policies among Conservative Members, and that of the hon. Member for South Staffordshire (Sir Patrick Cormack) is only one of them.
My right hon. Friend will know that the German presidency has suggested a meeting on 25 March in Berlin, at which it hopes to make a Berlin declaration, which will consist of a statement of the fundamental values of the European Union. Will he tell the House that the Government will fully support such discussions, and that where there are matters on which Governments can agree, and that do not require constitutional change, we will move forward in a spirit of co-operation?
My right hon. Friend is right. The 50th anniversary of the signing of the treaty of Rome, which will be marked by a declaration in Berlin next March, is an important anniversary in the history of the European Union. It is right that we should not only celebrate the achievements of the European Union, but look to the future, as regards the principles that guide the decisions that we will take. It is vital that the United Kingdom should participate enthusiastically in that process, as we will, and I am sure that the Leader of the Opposition will join us in that celebration.
Does the Minister for Europe remember the serious disquiet in Scotland, Norway and Iceland following the enshrining of fisheries as an exclusive European Union competence in the constitution? Does he not agree that if there is a renewed constitution or similar treaty, it should command the support of nations inside and outwith the European Union, and those who might seek to join at a future date? Bearing that in mind, will the Government give a commitment to revisit the issue, should such negotiations be started?
My hon. Friend is quite right. What is important as we take the European Union forward—and the British Government have consistently advocated this—is step-by-step developments and benefits for the citizens of Europe. That is the best way of acknowledging the significant changes that Europe has made in the interests and for the benefit of citizens of the UK and elsewhere.
In reply to my written question, the Prime Minister confirmed yesterday that he responded to the German Chancellor’s request by appointing Mr. Kim Darroch and Ms Nicola Brewer to liaise with the German EU presidency on the drafting of the new political declaration and
“possible ways to take the constitutional process forward.”—[Official Report, 15 January 2007; Vol. 455, c. 788W.]
What terms of reference have Mr. Darroch and Ms Brewer been given? In particular, will they be told to make it clear to the German presidency that the EU constitution is not acceptable to Britain, and that a referendum would have to be held on any new treaty containing significant elements of the constitution?
Two very distinguished civil servants have been appointed to deal with the questionnaire that the German presidency will circulate to all member states. It is vital that member states find a way forward, and I am sure that the hon. Gentleman will join me in acknowledging that, because it is in the interests of both the European Union and the United Kingdom. We want to ensure that the UK is constructive and positive, and finds a way through the difficulties facing the EU. I have already made clear our position on a referendum in the UK.
President Bashir has now accepted UN support for AMIS—the African Union Mission in Sudan—and has allowed the first UN military personnel into Darfur. That is important, but it is only the first step. We urge the Government of Sudan, the UN and the African Union to work for full implementation of the joint support package and an urgent resumption of the political process. All sides need to observe the ceasefire, too, particularly the Government of Sudan, who have been bombing the rebels, as that is vital for progress on the humanitarian front.
There are three stages to the deployment: first, light support, in which 180 personnel, 34 of whom have already arrived, are expected to be involved; secondly, heavy support; and, finally, the establishment of a full hybrid African Union and United Nations force. There is no specific timescale, but everyone who wishes the position in Darfur to improve is anxious that as many of those people as possible should be deployed as soon as possible, and that is something for which we are all working.
Is it not correct that although it is six months since the Security Council agreed to put more than 20,000 peacekeepers into Darfur, very few countries have agreed to supply either troops or police? What can my right hon. Friend do to convince more of our allies to support UN resolutions on the ground? When that deployment is finally made, will she ensure that steps are taken to protect the women of Darfur, thousands of whom have been raped when they went out to do normal tasks such as gathering firewood?
My hon. Friend is right to draw attention to one of the most appalling aspects of the situation in Darfur. I understand her concern that there has not been a speedier commitment of forces ready to move into Darfur, but she will appreciate that one reason is that until now, the Sudanese Government have been unwilling to make clear their acceptance of the need for troops. It is difficult in those circumstances to persuade the international community to come forward as speedily as it should, but with our allies, we continue to push for such steps.
Given that the poisonous conflict in Darfur has now spread to Chad and the Central African Republic, and that as the right hon. Lady has acknowledged, foot-stamping by the Sudanese Government has already vetoed one vital United Nations troop deployment to Darfur, what further steps can and will be taken by the international community to rein in that violent barbaric regime, whose diplomatic sorcery is exceeded only by its unrelenting genocide?
As the hon. Gentleman will be aware, because I know that he takes a great interest in these issues, we have appointed a special representative to go and work in the area as a roving ambassador, and the United Nations has recently appointed Jan Eliasson, who was, I believe, in Sudan last week, to make his own fresh assessment of the situation. So further diplomatic efforts are continuing. In fairness, I ought also to say that President Bashir wrote a few days ago to say that he does accept the agreements made at Addis Ababa and the previous agreements, and will now proceed to implement them. We all hope that on this occasion that will be followed through.
Further to the answers that my right hon. Friend has given, can she say whether we have had bilateral discussions with the French, in particular, and with the Government of Chad, about how we can support the efforts of the international community more specifically?
We have had continuing discussions with a number of allies, including our French colleagues. As my hon. Friend knows, there is concern about the position in Chad. We are pressing all involved to uphold the Tripoli agreement and to stop the fighting that has been occurring on the border, not least through proxies on the border, and to take more concrete steps on the ground to try to re-establish a degree of peace, not least because, as I know my hon. Friend and the House are aware, the last thing we need in the region is to see instability and conflict spreading in Chad, to add to that in Darfur. I can assure my hon. Friend that we are doing everything we can to make progress on the matter.
Does the Foreign Secretary agree that the situation on the ground in Darfur appears to be the worst that it has been for some time, with humanitarian access at its worst point since about 2004, given the withdrawal of NGOs, and with 200 people reported killed in the week up to last Saturday, journalistic access—for obvious reasons—increasingly rare, many thousands of people in danger of violence, and hundreds of thousands in danger of food shortages? Although I welcome, as the right hon. Lady does, the comments of the President of Sudan, will she comment on the fact that he is also reported as saying at the weekend that UN troops are not necessary, and that there are sufficient forces in Sudan already, from African countries—not a helpful approach to the situation? Given her previous statement last October that “negative consequences” will arise for the Government in Khartoum if the situation continues to deteriorate, will she reiterate that today, and even spell out what some of those negative consequences might be?
I am grateful to the right hon. Gentleman for making those points. In some ways he is right about the situation being dreadful and deteriorating, but in some ways it is not quite so bad, in that there is less fighting than there has been. What are particularly dreadful, and must cease, are attacks by the Government themselves, including in the past few weeks attacks on groups who had just agreed a ceasefire with the African Union commanders. That is a chaotic and ridiculous situation. The right hon. Gentleman is right to highlight the implications for the humanitarian effort. I am sorry to tell the House that there are probably fewer aid workers in Darfur now—for wholly understandable reasons; those are very brave people, who go into all sorts of horrendous situations—than for about two years, although there remain quite a number of food stocks. I know that the right hon. Gentleman is aware that we have tried to do everything we can to work with the humanitarian organisations, by helping to organise protected routes and so on. As I mentioned, the UN envoy was in Sudan only a few days ago. The right hon. Gentleman is right to highlight the fact that there is quite a small window of opportunity for the Government of Sudan to show that this time they are sincere in being willing to move forward with the UN and the African Union. If they are not able to do so, consideration of what action the international community can take, such as sanctions, will have to come to the fore again, which is not what anybody wants.
My right hon. Friend will be aware of reports that last week some 200 people were killed in clashes between ethnic African farmers and nomadic Arabs in southern Darfur. She will also be aware that the rebel forces have split into many different groups, which seem to spend as much time fighting one another as they do even the Government of Sudan. Would she go as far as to impress on the Government of Sudan the view that this is now not only a question of trying to bring in a force to deal with the normal conflict, but of ensuring that there is security on the ground, so the AU-UN force has to be brought in now, not in the future?
My hon. Friend is right to express concern about the fact that there seem to be even more splits among the rebels, and fighting within and between different rebel groups. That suggests that unless we can soon make more progress in pushing forward the peace agreement and encouraging the rebel groups who had not previously signed to do so, the administrative situation could deteriorate from where it is now. As he says, that makes the situation urgent as well as dangerous, and we will continue to work with our colleagues in the United Nations to try to see what can be done to help to resolve it.
After some years of lawlessness and little effective government, an historic opportunity now exists for a sustainable solution to Somalia’s difficulties. We are working with Somalia’s transitional institutions and our international partners to help to stabilise Somalia through early deployment of a security force, to restore governance through an inclusive political process, and to rebuild Somalia through increased international assistance.
Given that many fear that the clan-based warlords will simply reorganise themselves and continue the insecurity that Somalia has faced over the past 16 years, what steps will the international community take to foster reconciliation among the various clans so that we can tackle the long-term reasons behind the insecurity and violence that has blighted that country?
My hon. Friend is right to identify those concerns. As I said to the hon. Member for Blaby (Mr. Robathan), we are encouraging the transitional Government towards an inclusive political process, because we feel that that could help. There is a fairly widespread view in the international community that, paradoxically, recent events in Somalia have created a better opportunity for such moves than has existed there for quite some time. My hon. Friend the Minister for the Middle East has recently been in Yemen and Kenya talking to other people who are taking a great interest in these issues. We are doing what we can to seize the opportunity that recent events have created.
Thank you, Mr. Speaker. My hon. Friend the Member for Broxbourne (Mr. Walker) is far better-looking than me—[Hon. Members: “Hear, hear!”] That is what he tells me, but I do not believe him.
Further to the Foreign Secretary’s comments on the security force on the border between Somalia and Kenya, can she give the House an assurance that the quid pro quo for the Ugandan defence force’s involvement will not be to turn a blind eye to the creeping move against freedom of speech and freedom of the press in Uganda?
No; absolutely not. We welcome Uganda’s willingness to help resolve the situation in Somalia, but Uganda is not the only country in the world about which we continue to have and express concerns regarding some of its domestic policies, while welcoming its involvement in some international efforts.
Will the Foreign Secretary reconsider her earlier reply to the hon. Member for Blaby (Mr. Robathan) about the American air strikes in Somalia? Does she not accept that the United States performed a wholly illegal act, which will make the position worse? Several people killed as a result of the air strikes were nothing to do with Islamic Courts but innocent civilians who happened to be in the area. Does not she acknowledge that that makes the situation in Somalia far worse, rather than bringing about the necessary peace and reconciliation process to put an end to the misery that has been the life of most people in Somalia for at least the past three decades?
I certainly accept my hon. Friend’s final remarks that a peace and reconciliation process is important for the long term. As I have already said in answer to several other hon. Members, we intend to encourage the transitional Government to undertake a political process that is as inclusive as possible. However, I stress to my hon. Friend that it has long been public knowledge that extremist elements have operated as part of Islamic Courts and that al-Qaeda has operated in Somalia for some time. That poses a threat to people in Somalia as well as the wider international community. I take the view, which the Prime Minister expressed last week, that there cannot be a safe haven for international terrorists.
Does the Foreign Secretary agree that there is a short window of opportunity in which to establish a self-governing, stable democratic state in Somalia, which is a hugely important strategic area of the horn of Africa? She referred to the international stabilisation force that may be established today. What dialogue has she held on the matter with the international community? Does she agree that the force must have sufficient combat strength and an adequate mandate, and that there is a genuine danger of Somalia descending into a fundamentalist Islamic state if sufficient action is not taken in good time?
I agree with the hon. Gentleman’s opening remarks. Yes, of course there is a danger, but it has existed for quite some time. One reason for sharing his wish for speedy action to move in and support the Government in Somalia is that it is perhaps less of a risk now than it has been for a considerable time. We are very anxious to secure a force that has sufficient strength and the right kind of mandate. On dialogue with the international community, as it happens I was discussing the matter only this morning with the President of Tanzania. Our officials were heavily engaged in the international contact group and played a key role in trying to help broker and reach agreement. I therefore assure the hon. Gentleman that we are conscious of the need for speed as well as effectiveness, and we will do everything that we can. No one wants a security vacuum in Somalia, not least because of the dangers to which he and I referred of extremist elements there.
Democratic Republic of Congo
Unfortunately, exploitation of natural resources in the Democratic Republic of the Congo has been a driver of conflict when it could and should be a driver for development. Any sustainable solution will involve tackling corruption and ensuring responsible investment, effective and fair taxation and better control over borders and the resources themselves.
Stability and prosperity in the DRC will have a huge impact on not only its 60 million inhabitants but the peace and security of the whole central African region. That is why we supported the election process to the tune of £35 million and why we have increased our bilateral support to £62 million this financial year.
I thank the Minister for that reply. Before its eight-year civil war, Congo was among the world’s top producers of copper, cobalt and industrial diamonds—vast mineral wealth that should now be put to the service of the people of Congo, most of whom live on less than a dollar a day. Will my right hon. Friend work with his counterparts in the European Union to put pressure on the Kabila Government to reform the mining and logging sectors in Congo to ensure transparency in them?
My hon. Friend makes a number of important points. It is important that the DRC has already signed up to the extractive industries transparency initiative and the Kimberley process. We will continue to support the implementation of both those policies, as we will support the Congolese national committee charged with taking forward the implementation of the EITI. We are also seeking to help to promote responsible business behaviour in the private sector, and to improve the livelihoods of the many Congolese small-scale miners engaged in the extractive industries. As far as forestry issues are concerned, we are financing a study and a series of round-table discussions with non-governmental organisations and industry to develop new and innovative models for sustainable forest use in the DRC. We will also contribute to a multi-donor trust fund which provides support for improving governance in the DRC forestry sector.
Is the Minister concerned about the growing influence of the People’s Republic of China in African countries, not least the Democratic Republic of the Congo? The natural resources with which countries such as the DRC are richly endowed are of growing interest to the communist Chinese. Does he feel that that will be helpful to the development of such countries?
The People’s Republic of China is responsible for a huge amount of the world’s manufacturing industry these days and has legitimate reasons for engaging in trade in Africa and other continents. Concern has been expressed, however, about the extent of the influence that follows on from that legitimate trade, and we keep that matter under constant and close review.
Reforming natural resource extraction and other reconstruction measures in the DRC will require good governance and parliamentary scrutiny. Given our Government’s strong support for the recent democratic process, which the Congolese acknowledged to us when we were there and since then, will my right hon. Friend commit the Government to continuing involvement with the democratic process in the DRC, including giving strong support to strengthening the civil institutions and to making it clear that an effective parliamentary scrutiny role must be given to the opposition, who should not be excluded from parliamentary positions or commission chairs? Otherwise, we might find the country slipping back into conflict.
I am grateful to my hon. Friend for her question. The figures that I gave to the House earlier show that the United Kingdom was the largest single donor in assisting in the monitoring process, and I am grateful for her participation in that process. The United Kingdom was also the largest European supporter of the DRC in the last financial year. It is clear from the constitution that there is no specific role for the opposition in the DRC, but following the election, President Kabila said that he would be willing to provide an opportunity for such a role to be developed. The United Kingdom Government will offer expertise and assistance on the role of the opposition, and the Opposition in the United Kingdom, having long experience of that role, might wish to assist us in that.
I welcome the Minister’s acknowledgement that the DRC has signed the EITI and the Kimberley process. Signing is one thing, however; enforcing is something different. Will he give me an assurance that this Government and the European Union will ensure not only that those initiatives are extended, secured and supported but that any accusations of malpractice or trading in conflict resources by EU or British companies are thoroughly investigated and exposed, so that there can be no opportunity for the country to break down into conflict again or for the warlords to get revenue from conflict resources?
The right hon. Gentleman makes a good point. I alluded to the matter earlier. The DRC has signed up to those initiatives, and it is important that they are now delivered. The United Kingdom Government are engaged in supporting a committee that has been established in the DRC and charged with the responsibility for delivering those initiatives. We need to ensure that we can offer the necessary expertise and support to the Government there to ensure that those policies are carried through.
The British embassy in Damascus maintains regular contact with the Government of Syria. Our ambassador met President Assad of Syria and Foreign Minister Muallim on 7 January. The Prime Minister’s foreign policy adviser, Sir Nigel Sheinwald, visited Syria in late October 2006. He reiterated the Government’s hope that Syria will revise its policies to play the constructive role in the region that the international community expects.
I am grateful for that statement, but would not my hon. Friend be well advised to be cautious in approaching Syria, given the real concerns about its border to the east with Iraq, which insurgents and weapons are believed to cross, and suspicions surrounding its involvement to the west in Lebanon, where political assassinations are believed to be attributable to the Syrian Government? One can, however, imagine Syria playing a constructive role which would bring enormous relief to the region—for example, by offering a less warm haven to the political leadership of Islamic Jihad and Hamas in Damascus.
I read with great interest a publication to which my right hon. Friend put her name recently, in which she reminded us that former Israeli Prime Minister Ehud Barak once said:
“Our dispute with Syria is simpler to sort out than the Palestinian”
“on the Golan Heights there is no Temple Mount.”
That is an interesting observation. My right hon. Friend is right: there is no question but that putting life back into those agreements between Syria and Israel would have a galvanising effect on the peace process in the middle east. She is also right to highlight the enormous difficulties that have arisen as a consequence of Syrian foreign policy in recent years. There is, however, potential for change. I very much hope that the friendlier noises that we have heard recently as a consequence of such initiatives will increase, and that Syria can become part of a constructive move to peace in the middle east.
In welcoming the visit of Sir Nigel Sheinwald to Damascus, may I ask the Minister what has flowed from it? Given the importance that the right hon. Member for Liverpool, Wavertree (Jane Kennedy) rightly attaches to Syria and its dealings, does the Minister agree that we should do more to engage the Russians’ interest in encouraging the Syrians to play a more responsible role?
I agree entirely with the hon. Gentleman’s observations and approach to the issue. We are pressing the Russian Government to play a more constructive role in relation to Syria. We are encouraging them to urge the Syrians to look to their eastern border with Iraq, to reconsider their relationship with Hezbollah and, probably most importantly in view of what he said, to reconsider their support of the rejectionists in Damascus, in order to improve the situation in Palestine.
On Christmas day, the 72-year-old uncle of my constituents, Talib and Dianne Elam, was shot and died when American troops attacked his house in Baghdad. The family are Kurdish, suffered terribly under Saddam, and strongly support our intervention in Iraq and the new Iraqi Government. They are now desperate to find out the circumstances surrounding their uncle’s death. Will my hon. Friend raise the issue with our American allies and ask them to provide the family with as much information as possible?
As Iraqi Ministers have said publicly that they are satisfied that the vast majority of foreign jihadi terrorists enter Iraq through Syria, and as it is inconceivable that that can happen without the knowledge and acquiescence of the Syrian Government, will the Government not just respond to friendlier noises from Damascus but emphasise that no meaningful relationship can be achieved with that country unless it ceases such support?
We have made those points forcefully to President Assad on several occasions and will continue to do so; the right hon. and learned Gentleman is right. He might also have said that there have been indications that some of the jihadists who are moving into Iraq do not much like the regime in Syria either, and might just decide to stay there. The Syrian secret service is more than a little worried about that.
In a similar vein, do the British Government remind the Syrians that the instability in Iraq is likely to lead to the break-up of Iraq? Given the large Kurdish minority in Syria, it too could experience pressure for secession. On a more positive note, my hon. Friend made the important point that Syria can have a galvanising effect in the region if it comes on board on the right side. We might want it to have a galvanising effect on Hezbollah: to bring it out of violence and into the political process.
My hon. Friend is right. We are very worried about Syria’s continuing support for Hezbollah. We know from intelligence that we have received from various sources that weapons are still moving across the Syrian-Lebanese border and down to Hezbollah. That is deplorable, and of course runs counter to the United Nations Security Council resolutions that forbid it.
The United Nations’ estimate of 35,000 civilians killed last year will, I think, dispel any lingering doubt that Iraq is in a state of civil war, and the resolution of that will desperately need Syria’s involvement. How can we reconcile the United Kingdom Government’s efforts in support of the recommendations of the Iraq Study Group, which favour engagement with Syria, with the White House’s rejection of that policy and engagement with a strategy involving, apparently, “seek and destroy” and hot pursuit across Syria’s borders?
I was encouraged to hear Condoleezza Rice say that she was prepared to go anywhere to pursue peace in the middle east, although I am not sure that she was specific about Syria. The hon. Gentleman must remember, however, that the House and the Government are responsible for British foreign policy, not American foreign policy. We will continue to do what we think is in the best interests of the British people.
Given that last weekend the President of Iraq went to Damascus to discuss with the President of Syria the sealing of the borders and exchange of security and intelligence information, is there not a strong case—in line with the Baker recommendations, and in the interests of our soldiers serving in Iraq—for discussions at ministerial level between the British Government and the Government of Syria?
We have regularly made clear—through the Prime Minister’s foreign affairs adviser and others, including our ambassador—that we deplore the fact that on occasion jihadists have been allowed to move through Syria and into Iraq to threaten our soldiers. We heard earlier from my right hon. Friend the Member for Liverpool, Wavertree (Jane Kennedy) what happens when certain elements disrupt society in Iraq and allow an anarchic situation in which people are killed at very high rates and very regularly. We have made very clear to the Syrians that we expect them to guard their frontier properly, and to ensure that jihadists do not move through Syria into Iraq to threaten our troops.
The Minister said a few moments ago that it was the role of the House and, indeed, Ministers to speak on behalf of British foreign policy. May I return him to what many people think is a distinct lack of coherence between the approaches of our Government and the American Government to involving Syria in the situation in Iraq? The Prime Minister spoke forcefully in support of the Iraq Study Group’s proposal that Syria should be engaged, and the Foreign Secretary herself said that she too supported it. Obviously Sir Nigel Sheinwald had been there. Yet, to all intents and purposes, President Bush has rejected the idea. What influence have the Government on the United States Government when it comes to engaging Syria fully in the process?
I would argue that we have as much influence as any country—outside the United States—on the face of the earth, and we will continue to argue the case in which we believe. That includes trying to engage with the Syrians and anyone else who is likely to make the situation better, not just in Iraq but in the middle east in general.
I remind the hon. Gentleman that there have been some very welcome moves recently. The Syrians are setting up an embassy in Baghdad, and the Iraqis have a reciprocal arrangement in Damascus. It is very good news that the two countries are establishing stronger diplomatic links: that must be seen as a positive development.
The hon. Gentleman is right to say that we must keep stating what we believe in, and we will continue to talk to whoever we think will make the position better than it is at present.
What assessment has my hon. Friend made of the recent statements of Khaled Meshal, who is thought to direct Hamas policy in Palestine from his base in Damascus? He recently said that Israel is a “reality” and that
“there will remain a state called Israel, this is a matter of fact”.
Does my hon. Friend think that that statement is sufficient to begin at least some third-party connections with Hamas, which is, after all, the elected Government of Palestine? Does he understand that many of us believe that we cannot talk only to Fatah in Palestine, but that there must somehow be a means of communicating with Hamas as well?
A debate is going on within Hamas about its attitude towards Israel. At the conclusion of that debate we should know whether it has moved in a direction that enables us to have a constructive conversation with it, but we cannot have a conversation with a political party—or a Government at present—that pays suicide bombers to kill innocent Israelis, any more than we could have one with any other despotic regime anywhere in the world. I recognise the validity of the proper democratic process by which Hamas was elected, but the British Government should not give money to a Government anywhere in the world that has such aims and carries out such terrorism. If Hamas shows signs of moving towards recognition of Israel, we will have to look seriously at that development, but until that happens we must dine with Hamas with a very long spoon.
Middle East Peace Process
We were pleased that there was a meeting between Prime Minister Olmert and President Abbas on 23 December, which signalled their mutual determination to find a way forward and produced concrete agreements to release $100 million in Palestinian tax revenues and to ease restrictions on movement and access, but it is clear that major challenges remain. We are working with the United States and the European Union on how we can build on that opportunity.
I join the Foreign Secretary in welcoming the moves to peace made by both Prime Minister Olmert and President Abbas, but is not one of the major challenges that remain—to use her words—the fact that Islamic Jihad has chosen to ignore the ceasefire of 26 November, since when it has fired approximately 60 missiles on civilian targets inside Israel? Israel has shown commendable restraint. Will our Government do what they can to bring to an end such rejectionist activities, and in particular put whatever pressure they can on the states that support Islamic Jihad, including Iran?
The hon. Gentleman is entirely right. We regret and deplore the attacks that continue, and continue to congratulate the Israeli Government and to encourage them to maintain their policy of restraint. It is of course a difficult and delicate time when such attacks are going on. It is yet another example of how many people do not wish a peace process to succeed in Israel and Palestine. I assure the hon. Gentleman that our Government will do everything that we can to support and encourage such moves to peace, including putting pressure on those who, as he rightly says, support such armed activities.
Is my right hon. Friend aware of reports that Hezbollah in Lebanon is rearming despite the presence of United Nations troops? What representations have been made on that?
Yes I am aware of those rumours. We continue to keep pressure on all involved to restrict such moves and to point out, as my hon. Friend the Minister for the Middle East did a few moments ago, that that is completely contrary to the United Nations resolution and that it will do nothing to help establish peace in the region.
The Minister for the Middle East has already acknowledged that one of the main keys to a settlement in the middle east is Syria. Is the Foreign Secretary aware of the fact that, as I learned on a recent visit to Damascus, a large number of senior Ministers in that Administration actively and genuinely support the Baker-Hamilton plan, and will she not emulate her German counterpart by going to Damascus to engage with those people to find a constructive way to reopen negotiations and dialogue with Israel?
As my hon. Friend the Minister for the Middle East said a moment ago, we keep such issues under review. It was a deliberate decision on our part to send Sir Nigel Sheinwald, and it was also a deliberate decision not to go at ministerial level at that time. We keep the matter under review and will continue to do so.
Hearts and minds are as relevant in the middle east as elsewhere. Does my right hon. Friend accept that the gruesome and botched executions that occurred in Iraq yesterday will be strongly condemned in the region, as I hope they will be in this House and in the country at large? Do the Iraqi authorities not understand by now the effect of such action on people generally in the middle east?
My hon. Friend will know that the British Government strongly oppose the death penalty and continue to make representations where we see that it is being carried out. The events to which he referred only highlight one of the many reasons that I think lay behind the wise decision of this House to abolish capital punishment in this country.
Will the Foreign Secretary report briefly on the Prime Minister’s visit to the middle east before Christmas, and in particular on whether his visit to the United Arab Emirates was the beginning of the strategy that the Opposition have called for to elevate our cultural, political and economic ties with the countries of the Gulf? Is there not a very strong case for such a strategy, and is it not vital if we are to build stronger British influence in the middle east than we appear to have today?
We do continue to have strong influence in the middle east, but the right hon. Gentleman is right to say that it is important to maintain, improve and step up our contact with the Gulf states, as my hon. Friend the Minister for the Middle East has assiduously been doing in recent months. Yes, it was a deliberate decision by the Prime Minister to undertake such steps. On the general issue of the principal outcome of the Prime Minister’s visit to Israel and Palestine, apart from confirming our support for and engagement in moves toward a peace process, the main thing that I would identify is the clear need, which was itself identified, to support and build capacity among President Abbas and his office and those who surround him and to seek to work with him. Steps to do so are under way.
Age-related Macular Degeneration
Mrs. Linda Riordan, supported by John McDonnell, Jeremy Corbyn, Ms Katy Clark, Mrs. Ann Cryer and Dr. Gavin Strang, presented a Bill to make provision for the treatment of age-related macular degeneration; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 9 March, and to be printed [Bill 45].
Bilingual Juries (Wales)
I beg to move,
That leave be given to bring in a Bill to amend section 10 of the Juries Act 1974 to provide that in certain cases all members of a jury be bilingual in Welsh and English; and for connected purposes.
The Bill’s purpose is clear: to ensure that in respect of some Welsh cases, the jury is bilingual and able to understand the evidence directly, in Welsh or in English, rather than through a translator. To reassure some Members, I emphasise at the start that this provision would apply only to some cases, and not to all cases heard in Wales.
I do not intend to argue today in favour of the principle of hearing evidence in the original language. That principle, I would contend, is already explicit in section 10 of the Juries Act 1974, which includes a requirement that jurors understand English and makes provision for their discharge if they do not. The question therefore is not whether we have a language condition for juries, but whether it is to remain an English-only condition or to be an English and Welsh condition in Wales. The answer is that it is important that both the content and quality of evidence be apprehended as clearly and fully as possible by juries. In cases where Welsh is used, juries should be able to understand Welsh, as well as English.
Much has changed since the 1974 Act. With respect to the demography of the language, there are now more Welsh speakers, and there are more younger speakers than older speakers. The language is getting younger. Many Welsh speakers live outside the traditional heartland areas of the north and the west. Indeed, according to the 2001 census, 40 per cent. of Welsh speakers live in the south and the east, in Cardiff, Newport and the valleys, and in Wrecsam. That has profound significance both for the demand for the use of Welsh in the courts and for the ease with which random selection of bilingual juries outside the heartland areas might be achieved.
Since the 1974 Act, the law on the Welsh language has changed. Historically Welsh was used in the courts both before and after the Acts of Union with the infamous clauses essentially banning the use of Welsh in the official domain. Given that most Welsh people up to the middle of the 19th century spoke only Welsh—they did not speak English—the use of Welsh in the courts was inevitable. Indeed, it was essential for the administration of justice. However, the clauses in the Acts of Union were in force until the position was clarified by the Welsh Courts Act 1942, which provided that Welsh might be used in some circumstances. That position was modified by the Welsh Language Act 1967 introduced by the then Labour Government, which established the principle of equal validity, which means that if something is done in Welsh it is as valid as if it were done in English. However, it also provided that when there was a discrepancy between a Welsh and English text, the English text would prevail. As was noted at the time, if it was said in Welsh that two and two was four and in English that it was five, it would be five. The situation was addressed again by the Welsh Language Act 1993, brought in by the then Conservative Government. The principle of that Act was that Welsh and English were to be treated on the basis of equality where that was reasonably practical and appropriate in the circumstances. And that is the current state of play in respect of the Welsh and English languages. In general and in the courts, Welsh and English are to be treated on the basis of equality.
In respect of Welsh cases, a wide variety of cases, up to and including cases of murder, are heard in Welsh. Sometimes each member of the jury is wholly bilingual, sometimes not, and simultaneous translation is widely used. But even though the standard of English-Welsh simultaneous translation is high, I contend that hearing evidence in translation is not the same as hearing and understanding that evidence, with all its nuances, in the original language. After all, juries are often told to judge a witness not just by what they say, but by how they say it. Much is communicated by other means than directly through language. Needless to say, were this Bill to be enacted, simultaneous translation would still be available for others attending the courts.
The point is that at present there is no guarantee that each member of the jury is able to understand Welsh—only that they understand English. That is simply not just. Welsh and English are not treated on the basis of equality, even though it would be reasonably practical and appropriate in the circumstances for them to be so treated—as the 1993 Act provides.
In Sir Robin Auld’s review of the criminal courts of England and Wales in October 2001, there was a suggestion that bilingual juries should be given further consideration in the interests of ensuring that each defendant has a fair trial. The result was the consultation paper of December 2005 produced by the Office for Criminal Justice Reform. This posed five questions in respect of bilingual juries, which were: would they be justified in principle; could they be reconciled with random selection; how would the power to order a bilingual jury be exercised; what were the wider implications for Crown Court trials in Wales; and what were the preferred options for the summoning of juries?
I do not have time today even to begin to discuss those matters, but I have seen some of the responses to the consultation paper. I want to refer to the opinions of the legal profession, as expressed by the Standing Committee for Legal Wales, which includes the presiding judge for Wales and many other individuals and institutions. I have also seen the responses provided by my hon. Friend the Member for Meirionnydd Nant Conwy (Mr. Llwyd) and by Mr. Gwynedd Parry of Gray’s Inn and the university of Swansea.
Those responses provide a comprehensive and compelling set of answers in favour of bilingual juries. However, the problem that we face stems from the Government’s lack of response to the consultation, and their inaction. The action that the Government should take is clear, and I humbly suggest that my Bill would offer a way to ensure that the Juries Act 1974 was properly amended. I trust that the Government will take heed.
In conclusion, I want to refer to the well known story of Dic Penderyn, hanged for his part in the Merthyr uprising. Dic Penderyn, of course, is emblematic to many Welsh people of all that was wrong with our systems of government and justice. On the scaffold, Dic is reputed to have said, “O Lord this is an injustice.” What he actually said was, “O Arglwydd dyma gamwedd.” Penderyn was tried in English but was sent to his death speaking Welsh.
Today, it would not be right for a defendant to face a life sentence unsure that the members of a jury had understood his evidence as perfectly as they might. Neither would it be right, in the case of an acquittal, for the family of a victim not to be wholly confident that the quality of the evidence against the defendant was apprehended in full by the jury. On both those counts, the case for bilingual juries is overriding. My Bill would ensure that neither of those two eventualities need prevail, and I commend it to the House.
Question put and agreed to.
Bill ordered to be brought in by Hywel Williams, Dr. Hywel Francis, Mr. Elfyn Llwyd, Mr. Dai Davis, Mr. Roger Williams, Michael Fabricant, Mr. Angus MacNeil, Andrew George, Nia Griffith, Adam Price and Mr. Dan Rogerson.
Bilingual Juries (Wales)
Hywel Williams accordingly presented a Bill to amend section 10 of the Juries Act 1974 to provide that in certain cases all members of a jury be bilingual in Welsh and English; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 2 March, and to be printed [Bill 46].
Orders of the Day
[Relevant documents: The Fourth Report of the Work and Pensions Committee, Session 2005-06, on Pension Reform, HC 1068-I, and the Government’s response thereto, Cm 6956.]
Order for Second Reading read.
I beg to move, That the Bill be now read a Second time.
This Bill takes forward the key recommendations for pensions reform made by the Turner commission in 2005. These reforms will help to lay the foundations for a sustainable and affordable pensions system marked by significantly less means testing and greater personal responsibility for ensuring financial security in retirement. They will also provide a fairer deal for women and carers.
The Bill makes important changes in five key areas. First, it will establish a simpler and more generous state pension that will provide a solid platform on which people can save, while continuing to target resources on those most in need. Secondly, there will be new rules on eligibility for the basic and second state pension which, for the first time, will properly recognise the social contributions that people make. In doing so, it will deliver fairer outcomes for many women and those with caring responsibilities.
Thirdly, the Bill will pave the way for a new system of personal accounts that will make it easier for more people to save for their retirement, thus sharing the responsibility for pension saving more clearly between individuals and Government.
Fourthly, the Bill will facilitate a streamlined regulatory environment that will strengthen existing pension provision, reduce the burden of regulation and help employers who already provide good workplace schemes. Finally, it confirms a higher state pension age for the future, which will keep the proportion of life spent receiving the state pension broadly stable for each generation, and help to secure the long-term financial stability and sustainability of the state pension system.
The Bill represents probably the biggest change to our pension system since Clement Attlee’s post-war Labour Government implemented the Beveridge reforms. Thanks to the work of the Pensions Commission and to the national pensions debate, I hope and trust that these reforms will enjoy widespread support both in the House and outside. Those of us in the House today, when, as I hope, we support the Bill later tonight, have the opportunity to cement that consensus and, for the first time, to offer all our constituents a framework of long-term stability on which they can plan for their retirement with confidence.
The Bill comes after 10 years of progress, since the Government came to office, in reducing the poverty that had all too often become associated with old age.
Can the Secretary of State tell us what the increased cost will be in the first full year of implementation? Does the big increase mean that the Chancellor is blocking early implementation of the measure and delaying it until well after the next election?
The figures have all been set out, but in relation to the right hon. Gentleman’s point, the Government are presenting the legislation and the Government are behind the reforms. He might like to look at the last page of the Bill to see which Ministers support it.
We are all aware that it was the Conservative Government who broke the earnings link in the first place, and that in statements in the past the Opposition have made it clear that they are proud of that fact. Can my right hon. Friend inform the House about the work he has done to forge a new consensus on this significant issue?
It is important that there should be consensus, if possible, about long-term reform of our pension system. That is precisely why my right hon. Friend the Prime Minister established the Pensions Commission in 2002. It has done sterling work in helping to forge agreement across the parties about the future of our pension system, which is a good thing. My hon. Friend draws attention to the actions of the Conservative Government in relation to pensions, and I want to say one or two words about that in a second.
We all look forward to the hon. Gentleman’s rewriting of the history of that issue. I know that he was a supporter of breaking the link to earnings, so perhaps he will provide his justification for that later. It certainly had the effect of reducing public spending—obviously so—but it created the legacy of pensioner poverty that we had to address when we came to office, and in relation to which we have made significant progress.
In 1997, one in four pensioners faced the indignity of living below the poverty line. Many had to live on as little as £69 a week. Change to put that right was our first priority, and rightly so. Since 1997, 1 million pensioners have escaped from relative poverty, and more than 2 million from absolute poverty. We are spending £10.5 billion a year more—nearly 1 per cent. of gross domestic product—on pensioners than we would have done had we continued the policies that we inherited in 1997. We have increased the basic state pension by significantly more than inflation, equivalent to more than £350 a year extra for a single pensioner. The poorest third of pensioner households will, on average, be £2,000 a year better off in 2006-07 than under the system of 10 years ago. As a result of all those measures, pensioners are, for the first time in a generation, less likely to be poor than any other group in society.
Our second priority was to improve confidence in the private pensions market, which is why we acted to clear up the pensions mis-selling scandal and why the Pensions Act 2004 created the new pensions regulator, the Pension Protection Fund and the financial assistance scheme. However, despite those important changes, real and obvious challenges remain for the long-term future of our pension system. That is why, as I have already said, my right hon. Friend the Prime Minister established the Pensions Commission in 2004 to assess what further reforms might be necessary to meet them.
The commission identified four major issues. First, people were not saving enough for their retirement. Secondly, by 2050, there will be 50 per cent. more pensioners than today, while the ratio of those in work to those in retirement will have halved. Thirdly, as a result of a historical legacy, the current state pension system is, as we all know, complex and delivers unfair outcomes, especially for many women and carers. Finally, if we maintain current indexation policies, the basic state pension will be worth only £35 in today’s earnings terms by 2050 and more than 70 per cent. of pensioner households could be eligible for pension credit.
The Secretary of State is right to say that many pensioners are, thanks to the Labour Government, much better off today, but the Pensions Commission recommended the restoration of the earnings link by 2010 or 2011, and Government proposals do not introduce that measure until 2012 at the earliest. Is not my right hon. Friend concerned that that is too late to improve incentives and it may also mean that the value of the state pension could continue to decline—in the view of Age Concern, to the equivalent of only £75 a week?
My hon. Friend is right, but she will also be aware that Lord Turner and the pension commissioners have welcomed the Government’s proposals for taking the commission’s conclusions forward. We have always made the point—and this is particularly incumbent on those who hold ministerial office—that it is important to make it clear to our electorate that we will carry out the reforms when we believe them to be affordable. That is rightly a judgment for the Government and Ministers to make. It should be challengeable, as it is in the House and elsewhere, but we believe that we are taking a prudent and sensible course of action. I do not believe that restoring the earnings link in 2012 will materially affect any of the calculations or assumptions that underpin the Turner report, particularly in respect of those who are most likely to benefit from the reforms.
Although the restoration of the link is welcome, how does the Secretary of State respond to the National Pensioners Convention, which argues that the link is not being restored to its previous level? Previously, the Secretary of State had the option of making a link to either earnings or prices—whichever were more beneficial—but the pension is being linked now only to earnings. Why not return to the previous position?
There is some flexibility in the Bill with respect to the issue of prices or earnings, which I believe is right. I am surprised that the hon. Member for Angus (Mr. Weir) has found the time to join us today, as I thought that he was busy celebrating the 300th anniversary of the Union—[Interruption.] I am sure that many of his constituents are.
I believe that the Bill addresses all those crucial challenges head on. Crucially, it does so in a way that promotes personal responsibility for dignity and security in old age with outcomes that are fair, simple, affordable and, above all, sustainable. Part 1 provides for a simpler and more generous state pension, a simplified state second pension, new rules on eligibility that will give women and carers a much fairer deal, and a higher state pension age.
Because it is linked with our policy for increasing the state pension age. I have to say that I am not going to give way to the right hon. Gentleman again in this debate—[Interruption.] No, the questions are certainly not too difficult. In fact, I am now tempted to give way again, but I know that the right hon. Gentleman will make his own speech in his own way later, as he always does, but I understand that he is one of the few Conservative Members opposed to the principle of automatic enrolment and mandatory employer contributions. I suspect that we will see the right hon. Gentleman take issue with his own Front-Bench spokesmen later in the debate.
The Secretary of State has indicated that the delay in making the earnings link is because of the link with the higher state pension age. Does he agree, therefore, that if the Government decide to delay the improvement of the earnings link until beyond 2012, there should logically be a delay in introducing the higher state pension age?
No, I do not accept that. I will come to those points later, because the issue of the state pension age is important.
As proposed in the pensions reform White Paper last May, the first three clauses reduce the number of years needed to qualify for the basic state pension to 30 and also replace home responsibilities protection with a new deal of weekly credits for carers. For the first time, a life of social contributions will be properly recognised and rewarded on an equal footing with work.
The measures that my right hon. Friend is announcing are important, but will he also look at the position of people who work in a number of part-time jobs and do not pay national insurance? If they worked in those jobs cumulatively, they would pay national insurance. They might miss out on a state pension in later life. Will he look again at whether something can be done for people in that position to enable them to pay national insurance or to deem national insurance to have been paid?
We have been looking closely at that issue. My hon. Friend has raised it with me on a number of occasions. It certainly came up during the work of the Turner commission. I have to say honestly that what she proposes would be extremely difficult from an administrative point of view. However, we are more than happy to continue to look at the issue. She might want to discuss that with me. I suspect that my hon. Friend the Minister for Pensions Reform will deal with that issue in Committee.
If the hon. Gentleman will just give me one moment, I am trying to make an announcement, but I do not seem to be getting very far. Some people who have paid voluntary national insurance contributions since the publication of the White Paper last May might have chosen not to do so if they had been aware of the proposed changes on eligibility entitlements. That applies most obviously to someone due to reach state pension age after April 2010 who already has 30 qualifying years. I can announce that the Government will make arrangements whereby individuals in that position will be eligible for a national insurance refund.
A lot of the welcome changes that the Secretary of State has just been talking about represent a great improvement in the condition of women and will benefit women. However, there is one area where women are disbenefited: in relation to the Pension Protection Fund. As I understand it, on divorce, pensions paid from the Pension Protection Fund are not regarded as pensions. When is a pension not a pension? When it is compensation from the PPF. That means that those payments are not available for adjustment between the parties to a divorce. Will he do something about that?
These issues are generally very complex. The PPF is not actually the subject of the Bill, although I am sure that the hon. Gentleman will want to table some amendments—I am not trying to help him out there. My understanding is that it is perfectly appropriate for a court to take PPF income into account during the process of finalising the financial arrangements on settlement, so I think that there is a way through on that one. It might be more helpful if I were to write with more detail, setting out the position more fully.
I hope that the announcement that I have made about national insurance contribution refunds will be welcome to hon. Members on both sides of the House. Today, less than a third of women reaching state pension age get a full state pension. In 2010, as a result of the Bill, the figure will reach 75 per cent. By 2020, it will reach 90 per cent. That means that in 2020, more than 300,000 extra women will be entitled to a full basic state pension when they retire, rising to almost 500,000 more by 2025. That will be a major step forward for women in our society.
Yes, we have looked at that issue carefully and it has been a major concern for us. The proposals in the Bill and the other reforms that we are taking forward will be of some assistance.
Clause 5 will restore the earnings link and allow for that to happen from 2012 or, in any event, by the end of the next Parliament. As a result, by 2050 the basic state pension will be worth twice as much in real terms as it is today. The clause also places in primary legislation the Government’s pledge to uprate the standard minimum guarantee element of pension credit by earnings.
The Government are committed to reducing the extent of means-testing in the future, thus ensuring that pension credit continues to be targeted at people who would otherwise have been poor in retirement, or those who have only small and modest savings. The clause provides the means of securing that important outcome. As a result, by 2050 less than a third of pensioners will be eligible for pension credit, with only about 6 per cent. receiving the guarantee credit alone, and it may be possible for small savings to be taken as a lump sum through the process of trivial commutation. In the vast majority of cases, those receiving pension credit will be continue to be rewarded for saving for their retirement.
The restoration of the earnings link and measures to increase both simplicity and intelligibility are welcome. I think that the right hon. Gentleman would accept that the overall litmus test or yardstick for the Bill should be whether means-testing will be reduced. What is his estimate of the scale of the prospective reduction over a 10-year period and a 20-year period?
We think that means-testing could be significantly reduced. As I said, if we do nothing now, it will reach about 75 per cent. of pensioners by 2050. With these reforms we can get the figure down to about 30 per cent., so there would be quite a significant reduction. I am trying to make the point that the majority of people in receipt of means-tested additional financial help will be those who have saved for their retirement, so they will be given a reward for saving.
There is an argument to be had about the role and extent of means-testing in any pension system. The Liberal Democrats would remove it entirely and adopt a universal citizens pension at a totally unaffordable cost of between £10 billion and £20 billion a year. I think that we can dispense with that solution as a rational contribution to the debate, but there is an argument to be had about precisely how the balance should be struck. It is right and proper that we have a system that encourages people to save and rewards those who do so, and that is what means-testing will increasingly achieve in the future.
The Secretary of State mentioned trivial commutation. Has he given any thought to the level at which that should be set, especially when the new personal savers accounts come in, to ensure that the Government give the message that it always pays to save?
My hon. Friend makes a good point. At present, the limit on trivial commutation is set at £15,000. It is right that that should be subject to ongoing review and continual analysis. We in the Department will do that, together with our ministerial colleagues in the Treasury. I assure hon. Members that we are aware that the matter needs proper scrutiny.
The Secretary of State will know that Lord Turner’s aspiration for the personal accounts was that for every £1 that a person saved, he or she would get £2 back because of other contributions. Is the right hon. Gentleman in a position to tell us what proportion of the target audience for personal accounts he expects to get that two-for-one return or better?
I think that the figures are set out in a document that we published when we produced the second pensions White Paper, but I am afraid that I do not have them to hand. If they are not in the document, perhaps we can return to the matter in Committee. We believe that the vast majority of people will be able to look forward with some confidence to receiving £2 back for every £1 put in.
Clause 4 will abolish adult dependency increases. The existing dependency increase provisions are a hangover from the immediate post-war period when single breadwinner households were the norm. We live in a very different world today. There is no justification for the taxpayer subsidising couples when only one member has reached pension age, no matter how young the other member of the couple may be. Furthermore, entitlement to adult dependency increases is based on an all-or-nothing earnings limit that creates a disincentive for younger women who are married to men drawing a state pension. If those women earn over that amount, the state pension of their husbands is automatically reduced. The money that we are saving by scrapping ADIs is being reinvested, under the reforms, to provide more generous eligibility criteria for state pensions, so that women, in particular, can qualify for a full state pension in their own right. There is no adverse impact on those with low or modest incomes, as the increases are taken into account on a pound-for-pound basis in calculating pension credit.
Clause 9 provides that people can accrue entitlement to the state second pension, based on new crediting arrangements. That means that about 180,000 more people, including 110,000 women, could accrue entitlement to the state second pension in 2010 through the new carer’s credit. As the Pensions Commission recommended, we are phasing out the earnings relation, through provisions in clauses 10 to 12, to create a clear space for personal accounts. However, we are going one step further by replacing the complexity of the current system with a flat-rate amount of £1.40 a week on top of the basic state pension for each qualifying year spent either working, caring or doing a combination of both.
Let me be clear: no one loses out because of the withdrawal of the earnings relation. The earnings uprating of the basic state pension more than makes up for the changes. Even the highest earners are better off—a high earner who worked from age 25 would get £102 from state pensions in 2053 under the current system, but under the proposals in the Bill, they would get £139, so the measure is not a stealth tax, as some have suggested. There are no overall losers under our reforms to the state pension system.
What thought has been given to economic migrants—we know that there were more than 500,000 of them last year, from various countries—who settle in the UK and may become UK citizens, if they are unable to accrue 30 years-worth of contributions while they are settled in the UK? That does not appear in the Bill. Secondly, what discussions has the Secretary of State had with his counterparts in other European Union countries about the transfer of economic migrants’ basic state pension contributions from their home country to the UK pension fund?
Entitlement to the basic state pension or the state second pension will be based on the number of qualifying years in which the person paid into it, as well as on where they live and what other rights they have when they retire. If they do not have 30 years-worth of contributions, but retire and are settled in the United Kingdom, they will be entitled to as much of the state pension as they have paid for, and potentially to a pension credit top-up, too. Those rights are portable, and it is important to remember, in the context of the European Union, that we have an obligation to pay pensions under the terms of various regulations, particularly the 1408 regulations. The system is relatively clear, and I am not really entirely sure what point of substance the hon. Gentleman was raising—
No, I do not want to give way to the hon. Gentleman again. If I have not dealt with his point, my hon. Friend the Minister for Pensions Reform can deal with it in Committee.
Taken together with the basic state pension, the simplified entitlement effectively provides a single state pension for most contributors, giving people a much clearer picture of what they can expect to receive from the state in retirement. For example, by the 2050s, someone who had contributed for most of their life through working or caring would be entitled to about £135 a week from state pensions in retirement, instead of between £90 and £100, which is what they would receive today, before the reform is made. As they could be confident that the entitlement would lift them clear of pension credit, they could plan their private saving effectively, too.
Some of us argue that the improvements in the basic state pension should be greater, and should be made more quickly, to improve the foundation for private savings, but the Secretary of State points to the issue of affordability. Is he not concerned about the fact that a large proportion of state expenditure on pensions goes towards supporting the personal pensions savings of higher-rate taxpayers? Could not some of those resources be switched to helping people on lower incomes, by improving the basic state pension?
In her previous intervention, my hon. Friend prayed in aid the Pensions Commission. The commission considered precisely that point and said that it was not sensible or possible to do the sorts of things that she argues we should do. In any event, let me make it quite clear that tax relief for pension contributions is not a matter for me.
I will not give way to my hon. Friend again on that issue because it is properly a matter for the Chancellor to consider in the normal Budget-making process.
No. If the hon. Gentleman does not mind, I would like to make progress. Perhaps he can make his points in his own speech.
Finally, clause 13 legislates for a gradual increase in the state pension age, which will increase by one year every decade between 2020 and 2050, and each change will be phased in over two consecutive years in each decade. In making a commitment to increase the state pension age to 68 by 2046, the Bill seeks to set a course for 40 years. That is a major step for any Parliament, but it is absolutely the right thing to do. Those gradual increases will not eat into the retirement that people can expect to enjoy, as they are designed simply to match the increase in life expectancy over that period. The Pensions Commission report made it quite clear that the state pension age should increase to reflect rising longevity, and our decisions are fully consistent with its recommendations on the issue.
My right hon. Friend is right that that is important, and it is the right policy to pursue. What would he say to manual workers with hard jobs who will not enjoy the life expectancy that others enjoy after retirement? Is there a case for looking at their specific circumstances?
I welcome my hon. Friend’s support for the policy and I accept his concern, which is shared by Members on both sides of the House. It is worth making two points. From an historical perspective, when David Lloyd George and the Liberal Government introduced the state pension in the early part of the last century, it was payable at the age of 70—the average life expectancy for the people mentioned by my hon. Friend was barely 50—so it was not a brilliant deal. We are not proposing anything as draconian. Secondly, the Pensions Commission identified that problem and 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.
It is worth bearing in mind the fact that life expectancy has increased for people in all parts of the United Kingdom, as well as for all occupational groups. We can all look forward to a longer period in retirement, but if we want the state pension to be simpler and more generous—that comes at a price, as we all know—we have a choice. Either we try to find a way of making the additional expenditure sustainable in the long term without the need for tax rises, or we go down the easier route that some hon. Members would advocate by loading it all on to tax rises and passing the bill on to future generations. I do not believe that it is prudent or responsible to pass that problem on to our children and grandchildren, who would pay the cost of the package in extra taxes. That is dodging the issue, and I do not think that we should do it.
While it is unpopular to talk about working longer, the simple fact is that if we are not prepared to increase the state pension age, we will create an unsustainable financial burden for future generations which, as I said, is the wrong thing to do. The increase in the state pension age is therefore at the heart of the Bill, ensuring the sustainability of the reform package and locking in the essential stability that is needed in any successful pensions policy. Part 2 implements a number of measures designed to support good quality employer pension provision by reducing the regulatory burden and making the existing system simpler for employers and providers.
Clause 14 allows occupational pension schemes to do away with the complexities of the detailed rules on guaranteed minimum pensions by converting members’ rights accrued between 1978 and 1997 into a new scale of benefits. The requirement for the new rights granted after conversion to be of at least equal actuarial value to those that they replace will properly safeguard members’ interests, while the fact that a scheme is allowed to adopt a unified and streamlined benefit structure will enable administrative savings and give members greater certainty about their rights in the scheme as well as greater flexibility to transfer successfully to other schemes.
Clause 15 abolishes contracting out for defined contribution schemes, as recommended by the Pensions Commission. During the Bill’s passage through Parliament, we intend to take powers to enable us to remove the complex rules governing rights accrued in contracted-out defined contribution schemes, following the outcome of the review of the open market option for annuities that we expect to be completed by the end of the year. The removal of those rules will simplify the management of rights for both schemes and members, reducing costs to schemes and supporting our aim of simplifying pensions regulation. In addition to the measures in part 2, our rolling deregulatory review offers the opportunity for further radical change, not merely to rewrite existing legislation but to cut red tape and make it easier to deliver workplace pensions.
My hon. Friend the Minister for Pensions Reform today announced further details of the institutional review that will consider how the functions of organisations involved in the regulation and protection of workplace pensions—such as the pensions regulator, the Pension Protection Fund and the Financial Services Authority—can best develop within our new pensions settlement. It will also extend to cover those involved in the provision of advice, mediation, dispute resolution or compensation for pensions.
My right hon. Friend has acknowledged that the private savings element is crucial. Can he give an assurance that in the years ahead, those who retire on a stock market downturn will get as fair a deal as those who retire on a stock market upturn?
There is a way of trying to manage risk in relation to equity investments, which is called lifestyling. It is a way of loading the risk early on in the investment programme and moving into bonds and safer investments later. The detail of how all those investment decisions are made is not properly a matter for Ministers and is not covered by the Bill. That is rightly a matter for professional fund managers to address in the way that they invest those pension investments to which we are all contributing.
The right hon. Gentleman has been extremely generous in giving way. I ask my question on behalf of a number of constituents who are worried—that is, a clearly defined group of people who are finite in number, who took early retirement through a private pension scheme that has subsequently gone bankrupt. The Secretary of State knows that as a result of previous changes to legislation, such people get a much reduced income, although they could not have anticipated such a change in their circumstances at the time of making those arrangements. Will he therefore consider using the Bill as a vehicle to address the wrong done to that group, who could not anticipate the change in their arrangements, given that as a result of the PPF, anybody considering taking early retirement in the future will be well aware that their income in later life might be reduced?
That is probably one of those interventions for which I wish I had not given way. The hon. Lady has made an important point. I raised the matter in relation to a point about the PPF that the hon. Member for Angus made earlier. The Bill makes no provision for the Pension Protection Fund. If the hon. Lady wants to table an amendment in Committee or on Report, it will give Ministers an opportunity to discuss any specific proposal that she has. The Bill makes no provision to deal with the issue that she raised, but we stand ready to consider any detailed amendment that she might wish to table.
Part 3 provides for the creation of a personal accounts delivery authority—
I am extremely grateful to my right hon. Friend for giving way. Has he considered giving that authority clear statutory objectives at the outset, one of which should be to minimise the effect that it has on good workplace pensions?
Indeed; we will do that. We made clear in the White Paper that we published in December what the express statutory remits for the personal accounts delivery authority should be. We have chosen not to set them out in the Bill because the House has not given consideration to the legislation to set up the personal accounts system, and it would be pre-emptive if the Bill sought to make provision when the substantive legislation has not been brought forward. I can assure my hon. Friend that we will introduce legislation, I hope in the next Session, and that that will be one of the express statutory objectives of the new personal accounts authority.
The authority will be an independent body with financial sector expertise that will, in the first instance, advise the Government on the design of the operational structure of these new accounts and prepare to put in place the necessary contractual arrangements with the private sector. It will then be responsible for beginning the process of creating the infrastructure to deliver the scheme from the contracted providers.
The creation of the delivery authority provided for by the Bill is the first step towards establishing personal accounts. Following the current consultation on last month’s White Paper, we intend to legislate further on the detail of the new low-cost personal accounts, which will be the catalyst for a new savings culture in our country. They will help, rather than compel, people to save for their retirement. The accounts will be transparent. It will be the people’s money, not the Government’s.
Savers will have choice over which funds to invest, and auto-enrolment will secure economies of scale so that individuals can take the benefit from lower charges and higher returns. Simple, low-cost, flexible and portable personal accounts may generate an additional £4 billion to £5 billion of new net saving each year—equivalent to about half a percentage point of gross domestic product. They will help millions of people to take greater responsibility for building their retirement income by giving them greater opportunities and incentives to save and building on the solid platform provided by the changes to the state pension system in the Bill.
Part 4 contains a number of technical and financial provisions and provides that the operation of the personal accounts delivery authority will extend to Northern Ireland.
The Secretary of State said that the delivery authority will be independent. How does he reconcile that with the provisions in schedule 6, whereby the appointment of the chairman and the deputy chairman is at the discretion of the Secretary of State?
That will not compromise the independence of the delivery authority. The Secretary of State is the right person to make those appointments. I wonder who else the hon. Gentleman would entrust with that responsibility, given that the scheme is being set up by Parliament and must eventually be properly accountable to Members in this place.
When people take out a pension, they are putting their money away for 20, 30 or 40 years, or even longer. They expect the framework in which they make that decision to save for their future to remain as stable as possible over that period. Today, we can make it clear that our intention is to help people to save with confidence. Over the past 30 years, as the Pensions Commission highlighted, the pensions environment has failed to provide that stability. On top of demographic changes and stock market fluctuations, policy has frequently changed, under numerous Governments, leaving us with what the Pensions Commission described as arguably the most complex system in the world. We owe it to our constituents and to future generations to reach beyond the normal partisanship of party politics and to establish, through this legislation, a pensions system that can truly stand the test of time.
The Bill gives every Member of the House the chance to demonstrate, first, a strong resolve in addressing the pensions challenge that we face as a country, and secondly, the opportunity for all of us to make common cause with our constituents in helping them to plan for their own financial security in retirement. In supporting the Bill tonight, right hon. and hon. Members will take a major step towards a sustainable, affordable and trusted system that will meet the needs of those in retirement both now and in the future. That is why I commend the Bill to the House.
The Bill before us proposes to create a more generous, more widely available, less means-tested and simpler package of state retirement benefits. It will address the worst elements of unfairness in the current system and provide a platform for a workplace pension savings scheme intended to rekindle the savings habit, particularly among those on average and below average incomes. We support those objectives and we support the principles of the Bill—although, as I am sure that the Secretary of State would anticipate, there are issues that we will want to examine in Committee.
As the Secretary of State acknowledged, the measures to achieve those objectives form a coherent package, and the reforms stand or fall together. Although the Bill contains the substance of only one part of that package—the reforms to state pension provision—and creates the mechanism for further development of the second part of the package, which is the personal accounts workplace saving scheme, we will need to consider the bigger picture as regards the problem that we are seeking to address and the Government’s proposed response to it.
The challenge that we face as a society is demographic change. In a nutshell, people are living longer, and in the future there will be fewer workers to support a larger number of pensioners under our pay-as-you-go state pension system. At the same time, with earnings outstripping increases in the basic state pension, the real value of the basic state pension in earnings terms has continued to erode. The Government’s response has been a dramatic expansion of the means-tested, top-up system of pension credit. On the Turner commission’s projections, if nothing changes by 2050, 75 per cent. of all pensioners will be on means-tested pension credit. That matters for two reasons.
First, although means-tested retirement benefits have undoubtedly succeeded in taking a significant number of pensioners out of poverty, for many, the system is complex, intrusive and inaccessible. There are 1.5 million pensioners who do not claim the pension credit to which they are entitled. Half of them live in poverty. For them, the combination of the falling real value of the basic state pension and complex, means-tested pension credit means a descent into deeper poverty.
Does my hon. Friend agree that the complexity of pension credit adds cost to the system? It would be preferable to pass the cost on to pensioners and help alleviate their poverty rather than investing it in a complex system that is unwieldy for them to use. [Interruption.]
I am sure that my hon. Friend intended to say that we should reduce the costs and pass the savings on to pensioners in the form of higher benefits. I am sure that all hon. Members agree that the goal should be to reduce the administrative cost of benefit payment systems in order to use more of the available money for the people who need it.
Did my hon. Friend notice that the Secretary of State tried to imply that linking the standard pension only to prices was a Conservative, not a Labour policy? Is not it the case that, by 2010—the last date for an election in this Parliament that could remove the Government from office—the Labour Government will have enforced a state retirement pension that increases in line with prices for 13 years, never believing that changing it was affordable? We need to know why they believe that they can afford it if they stay in office thereafter.
My right hon. Friend is right, and I shall deal with affordability shortly.
The second reason why the increase in means-testing matters is that, although its use has allowed poverty in retirement to be targeted at relatively low cost to the Exchequer in the short term, its expansion has a long-term cost—a reduction in the incentive to save. Since Labour came to office, the savings ratio in this country has almost halved. It is not difficult to understand why. An effective marginal 60 per cent. withdrawal rate acts as a major disincentive to saving for retirement for those who are either caught in that trap or believe that they might be caught in future.
Now the Government propose to change tack and halt the erosion of the value of the basic state pension. The Secretary of State knows that the 2005 Conservative manifesto pledged to link the basic state pension to earnings. At the time, the Government condemned that pledge as unaffordable. We therefore welcome the conversion to a commitment to the earnings link from 2012 and the simplified contributions rules, which mean that men and women who have worked or cared for someone for 30 years will be entitled to a full basic state pension in their own right. We also accept the increase in state pension age that will partly finance the changes.
The Government have taken major steps forward and the Secretary of State should be congratulated on his success in persuading the Chancellor to agree to the provisions, especially given the unconventional style of his charm offensive on No. 11.
I am a little confused—perhaps the hon. Gentleman can enlighten me. My understanding of his party’s policy is that it would reduce the proportion of gross domestic product that the state spends. Although I welcome his talk of consensus, I am confused about how he can agree with the broad thrust of our policy when his would reduce the finances with which his party could operate.
The hon. Lady has not done her homework. She is not quite at one with the Secretary of State, who has urged us to form a consensus. She is apparently upset by our agreeing with much of the Bill.
Let us consider the costs. I think that it was the Age Concern brief that pointed out that, for all the Government’s grandiose rhetoric, what they are actually doing is putting in place a system that will, over 45 years, use approximately the same proportion of gross domestic product to fund a higher number of pensioners in retirement. The Secretary of State has always argued that this reform package must be affordable. It is affordable, and that is why we are prepared to support it, and why it will secure consensus in the House.
I share my hon. Friend’s perhaps faint praise for the Government’s acceptance of the Conservatives’ policy of raising the basic state pension in line with average earnings. Does he share my concern, however, that the Government are not so enthusiastic about extending the abolition of means-testing? That might call into question the success of personal accounts.
The hon. Gentleman mentioned his party’s election manifesto pledge to restore the link between pensions and earnings. If my memory serves me correctly, however, it was not a full-blown commitment to restore the link for anything beyond one term. Does he not recognise that the pensioners of this country need and deserve a sustainable system? People are not looking for a policy commitment that lasts for only four or five years.
The hon. Gentleman is absolutely right. The commitment that we made at the last election was the commitment that it was prudent to make at that time. We have already heard today that the Chancellor has insisted that the Secretary of State’s commitment will be effective only in 2012 or 2015. We believe, however, that restoring the earnings link to provide that stability is affordable now.
The Turner commission emphasised the need for a bipartisan approach to pension reform. We agree—but not because of a lack of evidence to make a partisan case. We know who is responsible for accelerating the collapse of Britain’s pension provision from the strongest in Europe to among the weakest, as the right hon. Member for Birkenhead (Mr. Field) has suggested. We also know whose decision it was to mount a £5 billion a year raid on our pension funds. We know who has presided over 60,000 occupational pension schemes entering wind-up, and who is responsible for the Government’s lamentable failure to respond effectively to the challenges of the ombudsman’s report and to address the needs of the victims of the pre-Pension Protection Fund pension scheme failures. We still agree with Turner, however, because, whoever is responsible for having exacerbated the problem, it makes sense in the national interest to work together to pursue political consensus in trying to sort the matter out for the future.
The principal measures in the Bill will not be implemented until the next Parliament. Nobody knows which of us will be implementing them. The proposed changes will affect people’s long-term planning and savings behaviour over a 40 to 50-year time horizon.
Does the hon. Gentleman accept that there was no point in restoring the link with earnings while so many pensioners, especially women, did not get the state pension anyway? We could have increased pension levels until kingdom come, but a large number of pensioners would have remained in poverty because they did not get the state pension at all.
With respect to the hon. Lady, I have already acknowledged that by welcoming the proposal to standardise the contribution requirements for men and women at 30 years’ work or caring.
Consensus cannot mean a blank cheque for the Government of the day. The building of consensus, however important, does not excuse the Opposition of the day from their duty to scrutinise the Government and hold them to account. A lasting consensus will be one that is built on solid foundations, on transparency, on knowledge and on a widespread understanding of, and acquiescence in, the proposed changes. It will not be one that is based on ignorance. It must be a consensus that embraces all of our society, and not one that is built in the Westminster village behind the backs of the people whom we are here to represent. Even while supporting the Bill, therefore, we must debate the unresolved question of the level of mean-testing. We must carefully consider the changes proposed, identifying the winners and losers as the state pension pot is redistributed, and we must analyse critically the proposals for personal accounts. We will therefore approach 2012 as a society that has made a set of decisions openly, with a full understanding of what we are doing, why we are doing it and what we are seeking to achieve.
I am bound to say that we have been disappointed by the Government’s management of the consensus-building process. The country at large has little or no understanding of the state pension reform, beyond the headlines of the earnings link and the increase in the state pension age. Even more worryingly, a large proportion of employers—particularly smaller ones—who will face compulsory pension contributions under the package are completely unaware of the additional burden. Closer to home, I was surprised by the Secretary of State’s announcement today that he intends to incorporate new provisions in the Bill, which we are only now considering on Second Reading. We have not had any discussions about those new provisions, and know nothing about them. While we have appreciated the opportunity to have a couple of briefing meetings with the Minister and his officials, it has been difficult to obtain some of the key information required to scrutinise the proposals properly.
I tabled a dozen or so parliamentary questions in July, seeking information about the proposed changes. Those questions fell unanswered at Prorogation in November—no doubt the victim of the Minister’s traffic light scheme. Despite a ministerial promise on 15 November to answer them anyway, not one had been answered to me a month later—[Interruption.] The Minister says from a sedentary position that they have all been answered now. When did the answers arrive? This morning. In the meantime, typically, as soon as the House resumed for a new Session in November, the hon. Member for Yeovil (Mr. Laws) re-tabled all of my questions word for word. He has had a bit more success than I had; so much for consensus-building.
To return to the substance, hanging over the debate is the unresolved difference in projections of the level of means-testing that will remain in the system and its impact on savings behaviour and thus on the likely success or failure of personal accounts.
I agree with the hon. Gentleman about the need to reduce means-testing as much as possible. There are two ways of doing that: one is to improve the value of the state pension and its universality as compared with means-tested benefits; the other is to hold down or reduce in real terms means-tested benefits. Can he assure the House that Conservative policy is no longer to do the latter, because the Conservative party was advocating that at the last election?
I assure the hon. Lady that we accept the pension credit regime put in place by the Government, including the statutory uprating of pension credit to which the Secretary of State referred. I will deal with her point in a moment.
The Department for Work and Pensions and the Secretary of State have said today that means-testing will be limited to less than 30 per cent. of the pensioner population by 2050. However, the Pensions Policy Institute, a respected independent think tank, believes that 45 to 50 per cent. of pensioners could be affected. That is an important difference and, on balance, most people in the pensions sector appear to trust the PPI’s modelling more than the DWP’s. Confidence in the DWP statistics is perhaps not enhanced by, for example, the use of one figure to project the growth of state second pension income in the means-testing model, and a lower figure to project state second pension income in the model for the future cost of Government spending programmes.
Since September, we have been urging the Government to try to reach an agreed position with the PPI so that Parliament and the country can understand the nature of the platform that the changes in the state pension system will provide as a base for the personal accounts savings system. It is hugely disappointing that the Bill should come to Parliament today with such a large discrepancy between the different projections of the future level of means-testing unresolved.
We recognise that whichever figures are right, there is no quick or easy way of reducing means-testing. Having introduced extensive means-testing of benefits for pensioners, neither this nor any other Government would be prepared to see an increase in the number of pensioners in poverty. That is the answer to the question from the hon. Member for Birmingham, Selly Oak (Lynne Jones). No Government would be prepared to see a de-linking from earnings of the pension credit threshold, which, as it is defined, would push more pensioners into poverty. Nor is it possible for any fiscally responsible party to promise to erode means-testing by massive increases in basic state entitlements, as some have been tempted to do.
Conservative Members, however, have a long-term aspiration to see the level of pensioners means-testing gradually reduced. I invite the Minister to commit the Government to the same long-term aspiration, so that collectively we can send a clear signal to potential young savers that the major political parties are committed to a long-term reduction in disincentives to save that might otherwise deter those savers from seeking to provide for their own well-being in retirement.
If I heard the hon. Gentleman correctly, he said that although he was very concerned about the issue of means-testing, he would not propose to do anything to diminish the Government’s own projections of the level of means-testing. Is that really his position?
What I have said to the hon. Gentleman—and I do not imagine for a moment that he would do anything different—is that we do not intend to attack the pension credit threshold, which would be one of the two ways of closing the means-testing gap in the short term. It would be a case of either reducing the level of means-tested benefits or increasing the level of basic state pension entitlement in a way that would be fiscally unaffordable. But the fact that there is no short-term ready way of dealing with the position does not mean we should not aim, over 20, 30 or 40 years—a time scale which is relevant to incentivising young savers—to send a clear message that we aspire collectively to reduce the level of means-testing in the system over time.
I want to make a little progress.
In a moment I shall deal with the part of the Bill that introduces the personal accounts delivery authority, and with the wider elements of that part of the reform package. First, however, let me draw attention to some issues that need to be addressed in the interests of transparency.
There is a great deal of concern about the element of uncertainty over the starting date for the earnings link in 2012 which the Chancellor has introduced into the equation. We have a long-term framework for public-expenditure projections. The Treasury, we are asked to believe, cannot take a view on whether the earnings link will be affordable in five years’ time, but is apparently quite happy to enter into 20-year private finance initiative contracts and the ordering of military equipment for delivery in a decade.
It must be concluded that this is simply another example of the Chancellor’s wish to have the last word on every single subject: of the “clunking fist” insisting on stamping its mark on every step that the Government take. Rather than a graceful move allowing the Prime Minister and the Secretary of State to take the credit for having the good sense to adopt our policy of an earnings link for the basic state pension, an elaborate, confusing and—if I may say so to Labour Back Benchers—politically costly contortion has been performed, so that long after the present Prime Minister and, I suspect, the present Secretary of State are gone, the Chancellor can be the one to announce that the earnings link will definitely be introduced in 2012. That, I suggest, is the worst kind of manipulation for party or, in this case, factional political reasons.
We understand that every commitment any Government make is always implicitly subject to affordability, but given the long-term framework for public expenditure decisions, that caveat can be intended only to protect against a catastrophic and unpredicted downturn in the economy. Therefore, unless the Chancellor knows something that he is not telling us, we need the Government to be much clearer about 2012 and to say explicitly that that date will be delayed only in the most extraordinary and extreme economic circumstances. Anything less will introduce an element of doubt and confusion that will undermine one of the fundamental purposes of the whole reform package: to create stability upon which people can plan their own futures.
Although the hon. Gentleman makes many political points, it is clear from what he is saying that his party has no aspiration to reduce the level of means-testing faster than the Government proposals. I ask him to respond to a point I made earlier about higher level rates of tax relief on pensions contributions. I asked the chair of the Pensions Commission—Adair Turner—about that, and while my right hon. Friend the Secretary of State was correct in his statement about Adair Turner’s view, Adair Turner said that one way of being able to release money for improving the basic state pension would be to hold down the size of the total pension pot that is available for tax relief. Would the hon. Gentleman like to comment on that suggestion?
The hon. Lady is absolutely right, and Lord Turner is absolutely right to observe that that would be one way of doing that. However, as the Secretary of State said, Lord Turner went on to say that it would not be the right way of doing that, and I agree with his analysis.
Let me respond to the first part of the hon. Lady’s question. She said that my party did not have any proposals for reducing means-testing any faster than the Government. I have made it clear that we accept that there is no quick or easy way of reducing means-testing in the short term that is both fiscally affordable and does not increase pensioner poverty, but—
Perhaps the hon. Lady will let me answer her first question before she seeks to ask another. I hope in this debate to get Ministers to establish whether the Government, while recognising all the difficulty that there is and the impossibility of doing anything more in the short term, none the less harbour an aspiration in the medium to long term, when it becomes possible, to reduce means-testing further; or do they, as some Opposition Members suspect, think that means-testing of between 30 and 40 per cent. is a desirable status quo that they would want to preserve in the long term? I simply seek to establish that we are all on the same page in respect of the long-term wish list.
Perhaps the hon. Lady will deal with this matter in her speech, and I can then intervene on her if that proves to be appropriate.
The second area of concern relates to the transitional arrangements for moving from the existing required years of contribution to a blanket period of 30 years of work or qualifying caring in 2010, because, to be blunt, there are no transitional arrangements. As the Bill currently stands, there will be a sudden step down, from 39 years to 30 years for women, on 6 April 2010. Therefore, a woman with 30 years-worth of contributions who reaches the age of 60 on 5 April 2010 will spend the rest of her life on approximately three quarters of a full basic state pension, while her neighbour who reaches the age of 60 a day or two later will enjoy a full basic state pension. The average life expectancy for women at 60 years of age is 24 years, so the difference in terms of current earnings over the remainder of those women’s lives would be something in the order of £26,000. That cannot be right and is bound to lead to a real sense of injustice. It offends one of our basic principles, accepted by the Government, for the assessment of the pensions reform package: that it must be equitable, and be seen to be equitable, between different groups in society. It should not be beyond the wit of a competent Government to devise a cost-neutral phasing approach that avoids the perceived injustice of a cliff edge in 2010.
I take the hon. Gentleman’s point about the need for smoothing, but in addition to the basic state pension, many people will have some private savings or some form of private income for a second pension, or there will be various top-ups. It is almost certainly completely inaccurate to focus on one element of people’s income post-retirement and say that they will suffer for the rest of their lives because of this cliff edge, and it is misleading for the many women who will benefit from these changes.
The hon. Lady has eloquently made the case for our canning the Bill and all going home. She has just said that the basic state pension does not really matter because there are lots of top-ups. The whole premise on which the Secretary of State is working is that we have to stabilise the basic state entitlement in order to promote saving over the long term.
This is the point at which I was going to discuss the voluntary contributions that have been made and are still being made—an issue that we have raised with the Secretary of State on many occasions—but as a result of his announcement today, he has, perhaps happily, reduced my speech by a couple of minutes. However, I should like him to clarify one part of that announcement. Will contributions deemed by the Treasury to be precluded contributions—those that cannot increase someone’s entitlement to benefit—made from the conclusion of today’s Second Reading debate be refundable? I think that that is the intention behind his announcement, although it was not 100 per cent. clear whether the measure will be effective from today or from some later stage in this Bill’s passage.
I did not intend to interrupt the hon. Gentleman, but I am grateful to him for letting me in again. The refunds will be made from 25 May, which was the date of publication of the White Paper.
Excellent. So the refunds will be retrospective, which deals with one of the concerns that, as the Secretary of State knows, we have raised. That has slightly pulled the rug from under the Minister for Pensions Reform, who said only last Monday at departmental questions that
“contributions paid at the time should not be refunded”.—[Official Report, 8 January 2007; Vol. 455, c. 16.]
So he was doubtless in the loop on the discussions, just as I and my hon. Friend the Member for Eastbourne (Mr. Waterson) were.
The third issue on which I want to touch is the changes to the state second pension. We accept that these changes are part of the financing package that allows the introduction of the earnings link, while containing state pension spending within a given percentage of gross domestic product. However, there will be a distributional impact on different groups within society, and it is important that those affected by these changes understand them. Essentially, those earning above £34,000 a year will continue to pay national insurance contributions on a growing part of their earnings above that level, but will no longer receive any earnings-related element of pension accrual on those contributions. So the part of the contribution that pays for the earnings-related state second pension becomes a straight tax.
Many in this House will be thinking, “So what? People on £34,000 a year and above can handle that.” However, because this will be frozen in money terms, over time, the tax will affect everyone on £18,000 a year or more in today’s earnings terms. As Amicus said in its briefing, it will affect people on average and below average incomes. For those who have contracted out of the state second pension into an occupational or personal pension plan, their contracted-out rebates will reduce or end altogether, depending on whether the scheme is defined benefit or defined contribution. So their contributions to their chosen DB schemes will be reduced, and those in DC schemes will be forced to contract back into the state second pension scheme at the very point where it is reducing the earnings-related benefits that it provides. Part of the package that may be, but it will strike many people as an odd way to promote confidence in long-term pension saving, and it has received little or no publicity outside the narrow confines of the industry and the Westminster village.
What of the huge cash saving to the Government from abolishing contracted-out rebates? Perhaps the Government could make it clear what the figure is. The White Paper originally gave an estimate of £4 billion, and the briefing that most Members will have received refers to that figure, but the regulatory impact assessment says that it is less than £2 billion. That is a slightly disconcerting lack of precision on the part of the bookkeepers. Whether it is £2 billion or £4 billion, it has not been taken into account in the Government’s overall costing of the reform package. In other words, the Government have not taken into account that cash saving. The Secretary of State has said that it, or part of it, should be used to support pension saving, but we have heard no such commitment from the Treasury. I would be grateful, as would many people outside this place, if the Minister, when he winds up tonight, could make it clear whether the Government intend that that money, or a proportion of it, will be available to support the introduction of personal accounts and funded pension saving, and whether that position has been agreed with the Treasury.
The fourth issue that I want to highlight is the proposed change to pension savings credit that will create a band of 100 per cent. withdrawal rate for some of Britain’s poorest pensioners. Those with an income just above the basic state pension with, for example, a tiny occupational pension or small amounts of savings income will be hit the hardest. Almost 1.5 million pensioners will be worse off than they would be under the existing system. For example, by 2010, a pensioner with an annual income just £250 a year above the basic state pension will lose £145 of savings credit. The Government say that that is part of the package, but hitting the very poorest savers is an odd way to encourage saving for retirement among those on lower incomes, and I urge the Minister to look again at that provision. I guarantee that our colleagues on both sides in the other place will want to do so if he does not.
Part 3 of the Bill establishes the personal accounts delivery authority with a remit to work up the detail of the scheme that the Government have outlined or propose amendments to it. The promotion of pension saving to the millions of people who are not saving at all or not saving adequately is an essential element of this reform package. My colleagues and I had to think long and hard about Turner’s proposals to use auto-enrolment and compulsory employer contributions to provide a targeted workplace saving scheme focused on the lower paid. Despite the burden the proposals will impose on business, we took the decision to support them and, by doing so, allowed the debate to move on to one about the shape and form of personal accounts. We took that decision because we believed that it was in the national interest for us to do so. But as the debate has moved on, several problems have arisen. First, the level of means-testing projected for 2050 on either model represents a serious disincentive to pension saving. The Government envisage a model based on generic advice only, but it is clear that with 30 per cent. means-testing, let alone with 45 or 50 per cent., many people will be, understandably, confused about whether they would merely save themselves out of means-tested benefits to which they would otherwise be entitled. It is unclear at this stage who will take on the thankless task of giving that generic advice, and who will pay for it. Pension saving will not be right for everyone in a means-tested environment, and in a model free from individual advice, we all have an obligation to ensure that Government do not promote saving that does not pay, with the potential for the mother of all pension mis-selling scandals.
The issue cannot be fudged or avoided. It must be confronted head on. The Government must stop making statements like the one that the Secretary of State made earlier or the one on the Minister of State’s blog that
“even a part-time worker earning £6,000 could receive almost £2 in retirement—getting out double what they put in”.
If any pension provider made such a statement, he could expect the regulator’s knock on the door about five minutes later. If we are to have an open and transparent debate about the value of personal accounts and if we are to convince people of their credibility as a long-term savings vehicle, the Government must be disciplined in the way they present the possible returns. When he winds up the debate, I want the Minister for Pensions Reform to give a commitment that the Government from now on will use the same regulated assumptions and restrictions to express projections of returns to savers in personal accounts that regulated pension providers are required to use. In that way, we will hear no more sloppy “£2-for-£1” offers; instead, projections of returns to different groups of savers will be expressed in the industry-standard, regulated form.
I agree with what the hon. Gentleman says about the importance of accurate advice, but did he hear the Secretary of State say earlier that he believed that the vast majority of people going in for personal accounts could expect a return of better than £2 for every £1 put in? Does not that contrast with the Department’s published research, which says that most people will get £1 for every £1 that they put in?
I heard the Secretary of State’s earlier remarks, but I am not sure that the hon. Gentleman is exactly right in what he says. My point is that telling people that they will get back £1 for every £1 that they put in at the start of their working lives is very different from telling them the same thing in the last year of their working lives. They are two very different propositions, and that is why we have regulations that require investment providers to use assumed rates of return when they present a proposition to the public. My suggestion to the Minister is that the Government need to be equally disciplined.
Our second concern is an overriding one, and has to do with the risk of levelling down among employers who currently offer good-quality occupational pension schemes. The personal accounts system will allow an employer either to offer personal accounts with a 3 per cent. contribution, or to auto-enrol all employees in that employer’s own pension scheme, provided that it has an employer contribution of at least 3 per cent. The overwhelming majority of occupational pension schemes have employer contributions in excess—and sometimes substantially so—of 3 per cent. The evidence is that many employers faced with the prospect of much higher uptake of membership of pension schemes as a result of auto-enrolment, and thus much higher costs, will compensate by reducing their contribution level over time. If they do not do that for all employees, they will certainly do it for new joiners. The achievement of more savers but less saving would represent the ultimate failure of the personal accounts dream.
We believe that the Government must insert into the delivery authority’s remit a statutory obligation to seek to minimise the levelling down that I have described. They must set out, for the authority and for Parliament, the explicit criteria against which the scheme’s successful implementation will be judged. How much levelling down is an acceptable trade-off for how many extra savers and how great an increase in total saving?
Thirdly, personal accounts were presented as a targeted intervention to deal with the market’s failure to provide pensions for people on lower incomes. The Turner commission specifically recommended a £3,000 annual contribution cap to prevent unfair, state-subsidised competition for the savings of higher earners. Like most of us, Turner thought that those people could be left to make their own arrangements.
The Secretary of State has asserted that cherry-picking Turner is not an option, but the Government have ignored his advice. They have said that they will set a cap at a minimum of £5,000 a year—a level that would embrace more than 95 per cent. of all current members of occupational pensions schemes. In other words, the Government have moved by stealth from introducing a targeted intervention aimed at a specific and under-served group of savers to making a grab for almost the whole of Britain’s occupational pension savings sector.
That would be a disaster for the pensions industry, for occupational pension scheme members, and for the political consensus in respect of a targeted intervention. It would also make it almost impossible to measure the scheme’s success in attracting its target audience of low-income savers, and I hope that that is not the Government’s intention. The Government must revert to the original intention behind personal accounts, which was that they would be a targeted intervention to support people on average or below-average incomes, and that means that they must take Turner’s advice on the level of the contribution cap.
We support the principle of targeted intervention to promote workplace saving through auto-enrolment and compulsory employer contributions, but such a scheme will work only if it is based on political consensus. In trying to turn it into something other than the one Lord Turner recommended, and which the original White Paper proposed to introduce, the Government are pushing the boundaries of that consensus too far.
The details of personal accounts will be set out in a future Bill, but I hope I have made it clear that if the consensus underpinning this Bill is to extend to the Bill introducing the personal accounts scheme, the Government must address the questions I have raised. In particular, they must revert to targeting the scheme on its intended audience.
The need for pension reform is clear and the need for political consensus to underpin sustainable reform is even clearer. We are willing to play our part in building a robust consensus based on a solid proposition and underpinned by open and transparent analysis of the challenges that have to be addressed. As my remarks about personal accounts have confirmed, we believe that, taking the package as a whole, we have some way to go in building such a consensus. The Bill makes a good start, by delivering reforms to the state pension system that will form the foundation on which the broader reform package is constructed.
In Committee, we shall ask the Government to answer the points about the implementation of state pension reform that I have raised this afternoon. We shall ask them to acknowledge our concerns about personal accounts by giving clear guidance to the delivery authority about the required outcomes, and to address the threat to the climate of confidence in personal accounts posed by the ongoing public relations disaster that is their record on occupational pension scheme failures.
We welcome the Bill and I sincerely hope that by the time the Bill to implement personal accounts comes before the House, the Government will have acted to address the serious issues that hang over the future of that project, and thus rebuilt the political consensus without which it cannot succeed.
On a point of order, Madam Deputy Speaker. On today’s Order Paper there are three written statements from the Home Office: “Criminal records update”, “Independent Race Monitor” and “Prevention of Terrorism Act 2005”. As yet, none of those statements has been put in the Vote Office and we believe that at least one of them—“Prevention of Terrorism Act 2005”—refers to another piece of bad news; namely, the loss of another suspected terrorist under the control orders legislation. I am concerned that the Government, who should have published those statements by now, are trying to bury bad news. Is there anything you can do, Madam Deputy Speaker, to accelerate the release of those written statements?
Ministers on the Treasury Bench will no doubt have heard the point that the right hon. Gentleman made. Written ministerial statements should indeed be laid in the House promptly, and I shall have the right hon. Gentleman’s point investigated.
The last time the House debated pensions we ended on a note of consensus about consensus. I agree with the hon. Member for Runnymede and Weybridge (Mr. Hammond) that that is a good place to start.
I want to dispute with the hon. Gentleman a little, however, and travel a short way down memory lane in respect of his point about the link with earnings. He is right to have given that some analysis, but it needs a little bit more. I think that the previous Government’s decision to break the link with earnings was rational and they did it for good reasons. That point bears thinking about this afternoon, as we are deciding whether to restore the link. We have to do so for good reasons. Those reasons, and the link’s affordability and sustainability, must be considered in the context of why it was rationally broken, which was because the economic circumstances of the time were entirely different.
I remember that time very well indeed. I was a parent, recently divorced and buying a house by myself for the first time. When I went out shopping in the morning, I did not know whether interest rates would have changed by the time I got home in the evening. Those were different times. It was reasonable and rational in those circumstances to take that decision when pensioners did not know whether their pensions would change or whether they could afford things any more. I believe that the Government were right to say at that time that prices were rising fast and getting out of control. It was reasonable and rational to decide that carrying on was not the right way for pensioners to move forward. There was a big debate in the House and both sides divided on what was the best thing to do at that time. Now, however, the circumstances are completely different and there are completely different controls on the economy, so it is possible to look at affordability. Now is the time to move forward.
I want to concentrate most of my remarks on another issue—that of unfairness, which I believe has been built into the pensions system for many years because it was part of our social history and part of what we thought of as normal for family life. It was always regarded as normal for mum to stay at home and for dad to go out to work. That was just the ordinary way of things, but the world has changed and everything has to change with it.
It is now right to look ahead at a number of issues. We were looking at a demographic time bomb in the 1980s, particularly in respect of how many people would be in work. We did not properly look forward to its impact on pensions, but now it is coming home to roost. It could be said that the demographic time bomb is about to explode. Now is the right time—looking back 30 years and looking forward another 30 years—to take decisions. If we do not take them today, we will be making a very big mistake indeed. We have to view the issues in that context. The hon. Member for Runnymede and Weybridge is entirely right in his analysis of demographic change, so now is the right time for the Bill.
The Bill is also right in its social context, as we are seeing changes in family life and changes to work patterns. It is also right to think about young people and what we expect of them. I do not think that it would be right to tell young people that we expect them to pay for the needs of older people tomorrow so that the elderly can enjoy a luxurious retirement at their expense. It would not right be right to shift the burden of responsibility on to them. We need to draw some logical conclusions from that.
I am left looking at a particular group of people—those who have traditionally been left out of the pension market almost altogether. I refer to working women, 30 per cent. of whom draw full state pensions, but the majority of whom do not. That is because, despite huge changes in social life, women are still the main carers. Women are still the main people who look after young children and who, at the end of their working lives, remain the main carers of elderly parents or others in the family who are in need. We have to recognise that. It is not just a family responsibility, but the responsibility of us all, because the economic impact is huge. We are talking about a contribution to the nation of billions of pounds. It is not just thousands of pounds of investment for the family, but billions of pounds of investment for the whole country. We owe these people—not only but mainly women—a huge debt of thanks.
The Bill goes a great deal of the necessary distance. It is not just a matter of saying thank you, as thanks are worth nothing if they are not backed up with something positive. There are a number of ways of dealing with that problem. The debate that has led to the consensus considered a whole range of ways of opening up the whole Pandora’s box by starting from scratch and devising a new pensions system. We could have started again and looked at how citizens could be rewarded for their contributions to society. That would have been one rational way of proceeding, but it would have been extraordinarily expensive and might have thrown away another factor that our society has grown to value. There was already an in-built consensus about it and everyone understands it. I am talking about the national insurance system.
The national insurance system is a misnamed system. It is not really an insurance system by anybody else’s standards. It is not an insurance system in the sense that means that someone gets rewarded if their house burns down. It is not that kind of insurance. It is not the sort of savings scheme that anybody else would recognise as a savings scheme. It is the kind of British system that only the British really understand. We know and love it, and we know what it means to us. There is a definite consensus about it. Everybody who pays it knows what it means to them. It was right not to scrap it, but to say, “Let’s see what we can do with what we already have, and what will bring the benefits that throwing that out and bringing in a new citizen’s pension scheme would have brought.”
That was the right way to go. It has addressed all the concerns about people who work, but miss out some valuable years of their adult working lives because they are making important contributions to family life by bringing up children and looking after elderly or disabled people in their family. Recognising that was crucial. Reducing the qualification period to 30 years was a simple, but crucial, mechanism. At a stroke, it achieves what an otherwise much more complex way of achieving the same end would have done. I congratulate the Government not just on listening carefully to what women were asking them to achieve and achieving that end, but on doing so in a rational way. I am grateful for that.
I ask the Government to think again, however. I made this point in an intervention, but for the benefit of the House I will explain it more carefully. There is a group of people—it may be a small group—who I fear may get left out of all this. A person could take on a number of part-time jobs, all of which added together as though they were one job could result in an amount of money that would qualify that person to pay national insurance. At the moment, none of those jobs, on their own, would qualify for national insurance.
A person might do one job before their children go to school, another after the last child has been dropped off at school, another after they have picked the child up from school, and another after the child has gone to bed. People fit those jobs around their family life. All the jobs are for just a couple of hours and are low paid. They are all proper jobs and they are all a valuable contribution to our economy. Added together, they do not come to a whole day’s work that any one employer would recognise, but all of us would recognise them as a full day’s work. However, those people pay no national insurance contributions and so do not qualify for a state pension. That has the feeling of unfairness about it. I recognise what the Minister has explained to me about administrative burdens. However, I hope that we can find a way around the problem.
The picture that my hon. Friend is painting implies that the issue is about people fitting their working lives around their families. She is quite right, but we also have to accept the fact that there are employers who do not offer employment to people on anything more than a very part-time basis. That means that there is no real opportunity to work the requisite hours for paying national insurance, even if employees want to do so.
Both situations arise, and, in both cases, people are falling out of the system and being disenfranchised. Some people are not getting the opportunities of others who work exactly the same number of hours for exactly the same pay, but do so for one employer—that is the problem. People working for one employer will qualify because they pay national insurance, but those about whom I am talking will not, although, interestingly, they may pay tax cumulatively. However, they may not pay national insurance in such a way, which is unfortunate because it means that they do not get their entitlement.
I ask the Government to consider whether it would be possible to deem the national insurance of such people to have been paid. We have changed other aspects of the system to allow such credits to be made. Such a process would impose an extra burden on the Exchequer because we, the Government, would be making a payment on behalf of those people’s employers. However, if we did not do so, there would be a difficulty when a person had several employers because one would have to pay the employer’s part of the national insurance contribution. That could give rise to negotiations among employers that would not go very well at all, so I can appreciate that that process could be difficult. That is why I propose the simple solution of deeming a credit for those people.
At the end of someone’s working life, it might be that such credits would not be necessary because they had qualified in any event under the 30-year rule. However, would it not be sad if part of a person’s working life, in which they had spent five or six years working in the way that I outlined to fit around their children, did not go towards allowing them to meet the 30-year rule and thus to qualify for a full state pension? If we introduced my proposal into the Bill, we could enhance it further.
As I am a Back Bencher, I have not fully costed my proposal. I accept that that might present a problem for the Government and that the Bill must hang together as a whole. However, the Secretary of State has worked with me quite closely in the past, for which I thank him. Before I stretch his patience yet further with my attempts to get such a measure into the Bill, I make the plea that he work with me throughout the passage of the Bill so that, by the end of the process, it can hopefully be improved yet more.
I congratulate the hon. Member for Colne Valley (Kali Mountford) on her thoughtful speech. I start where she started, with a note of consensus about the Bill. Although many of us have put this on record before, it is worth pointing out that the Bill has its origins in the report of the Pensions Commission. I pay tribute to the work that Lord Turner and his two fellow commissioners put in, as well as that of all the staff of the commission. The Work and Pensions Committee’s report on this matter pointed out that the way in which the Turner commission operated and managed to influence the political and academic debate, and the debate in the sector, was a model for the way in which such independent commissions can work to have an impact on Government policy.
In the spirit of generosity, I congratulate the Secretary of State, Work and Pensions Ministers and their departmental officials on managing to deliver the Bill on time, especially given the opposition in government at the beginning of the process to the substance of many of Lord Turner’s proposals. It must have been tricky to secure the agreement of the Chancellor. We can only hope that his agreement will survive beyond any point at which he might take over as Prime Minister later this year. We hope that some of the proposals with which he earlier disagreed will be brought forward.
It is worth reflecting on the effect that the Pensions Commission had in helping to forge an agreement on pensions policy. The range of issues on which there is now agreement between the three political parties is far broader than anybody could have expected, even before the last general election. They agree on the earnings link, on raising the state pension age—traditionally a controversial and sensitive issue—on the issue of women’s pensions, and on a number of other key issues, including auto-enrolment. As the hon. Member for Runnymede and Weybridge (Mr. Hammond) suggested earlier, the Conservatives support the compulsory employer contribution. Those are all marked changes for the parties collectively, so it is worth paying tribute to the Turner commission and the Government for getting this far.
I hope that the Secretary of State will excuse me for injecting a note of caution about that great consensus, because as he and other hon. Members will know, in the past there has been cross-party consensus on pensions issues on a number of occasions, and that consensus has not always lasted. Yesterday, I was looking at “The Five Giants: A Biography of the Welfare State”, the influential and impressive book on the welfare state by Nick Timmins, now of the Financial Times. In an interesting passage worth reflecting on today, he recalls the last time that there was major consensus between the three political parties on pensions reform. It was in 1975, when there were proposals to link the basic state pension to earnings, and to introduce a state earnings-related pensions system. Nick Timmins says that, in 1975,
“After all the controversies which had surrounded pensions for two decades, the Bill which was to affect the future of pensions of millions was given an unopposed second reading with fewer than a dozen MPs in the chamber.”
There are a few more than a dozen MPs present at the moment, but we will see what the numbers are at 10 o’clock. I suspect that today’s Second Reading may be unopposed, too. Mr. Timmins continues:
“The opposition spokesman who waved it through was a fresh-faced Norman Fowler, just a few weeks into his new job.”
Of course, just a few years later, the Government who introduced the Bill were swept away. The account goes on:
“A decade later, he”—
that is, Norman Fowler—
“was to attempt to consign SERPS to history.
But in 1975, the pensions industry was desperately concerned to have its future settled after the frustrations of the previous two decades. The new scheme did provide a clear role for the private as well as the public sector”.
The Bill, essentially unchanged, became an Act, but within a few years the great hopes for a consensus proved to be a pipe dream.
Perhaps the hon. Gentleman could clear something up for me, because I am now genuinely confused about where he stands on the issue of consensus. The last time I heard a spokesman for his party speaking about the issue, he started off by saying that the Liberal Democrats supported the cross-party political consensus on the Bill, and ended his speech by saying that we should have a citizen’s pension, which fundamentally undermines the principles set out in the Bill. Will the hon. Gentleman make absolutely clear to the House whether he supports the architecture proposed in the Bill, and if so, will he stop banging on about the unaffordable citizen’s pension?
I am grateful to the hon. Gentleman for paving the way for the next part of my speech, in which I will discuss our support for the citizen’s pension, and the problems that will arise from building a future pension systems on the sandy, unsound foundations of the basic state pension system, even after the reforms. We have spelled out many times that although we agree with the Bill’s principles, and although we believe that it heads in the right direction, we have major concerns that it will not deliver a decent foundation pension, and about the extent of means-testing. The hon. Gentleman shares many of those concerns, and I have often been on public platforms with him when he expressed anxieties about means-testing. The truth of the matter, as we discovered this evening, is that he is not prepared to do anything about it, as his aspiration is to deal with the issue in 20, 30 or 40 years’ time. It is a serious problem, however, so the time scale of such an aspiration is not satisfactory.
I am interested in what the hon. Gentleman has said. We have heard a great deal about consensus in the House, but is it not more important to secure consensus outwith the House about how we are to proceed? That can be done only by addressing the problem of means-testing and making improvements to the affordability of the basic state pension by offering a citizen’s pension.
The hon. Gentleman makes an excellent point. If the Secretary of State and the hon. Member for Runnymede and Weybridge listened to people outside Parliament they would realise that there is considerable consensus on the proposals and the Bill’s principles. At the pensions conferences that I attend, people fundamentally agree, as far as I can establish, that we are seeking to build on a basic state pension foundation that entails too much means-testing and may therefore fail. At the pensions conference organised by the Financial Times in November—I believe that the Minister for Pensions Reform spoke at that conference, and that the hon. Member for Runnymede and Weybridge attended, too—representatives of the pensions industry were polled on their attitude to the critical issue of pension reform and means-testing, and whether or not the Government were building on a solid foundation. My recollection is that the overwhelming majority of people who expressed a view did not believe that the Government were building on a firm foundation. The hon. Member for Angus (Mr. Weir) therefore made an excellent point by suggesting that the consensus outside the House is that the Bill is not perfect. There is support for its principles, but there are major concerns that there is too much reliance on means-testing, which is dangerous. I shall come on to discuss that.
The hon. Gentleman is talking about the citizen’s pension as if it were a panacea and its mere introduction would result in the abolition of means -testing. That would not be the case if the citizen’s pension were introduced at the level of the basic state pension. The citizen’s pension will not, in itself, end means-testing unless it is introduced at a level equivalent to the pension credit, which makes it unaffordable in the short term.
The hon. Lady signed up to the excellent report on the issue by the Select Committee on Work and Pensions, which shares my concerns about the extent of means-testing in the system. She is quite right to say that any reduction in means-testing that does not involve cutting means-tested benefits would result in more universal state pension provision, which I believe she supports, and a higher state pension. She will be delighted that I shall discuss the economics of that proposal later.
First, however, may I discuss the issue that has the greatest potential to hole the consensus on pensions? The previous consensus faltered after 1975 because there were essentially two problems: the first was one of affordability—no doubt, we will return to that later—and the second was one of political philosophy. In 1975, the House signed up to a formulation that required the state to be involved in the first tier of provision and to deliver a second tier—namely, the state earnings-related pension scheme. Differences over affordability and in philosophy led to the breakdown of that consensus.
I am not convinced that those are the two points on which the present reform will falter. It is difficult to see it faltering over the issue of affordability, at least in the next 20 years or so, because as the Secretary of State knows, the deal that he has done with the Chancellor involves a reduction in the share of gross domestic product going into state pensions between now and 2020. The Minister for Pensions Reform shakes his head, but if he looks at his own report, he will see that the share of GDP being spent on pensions goes down from 6.2 per cent. now to 6.1 per cent. in 2020. He is frowning again, but he will confirm those figures when he reads the detail of his report later.
Is it possible that the Minister is confused because he has not used a net present value calculation? Something similar happened when the occupational pension fund cost was calculated for the ombudsman. That may be why the Minister thinks the proportion of GDP is going up instead of down.
The hon. Lady cleverly makes her point about the pension compensation. I cannot speculate on the reasons for the Minister not reading his own reports, but when he looks at them in detail and at the regulatory impact assessment for the Bill he will see, in black and white—we are grateful for the statistics being so clear—that between now and 2020, the share of GDP spent on state pensions will fall from 6.2 to 6.1 per cent. So the reform is not in any sense an unaffordable solution. Indeed, it is an incredibly cheap solution, which is why there are the problems with means-testing.
I do not believe the reform will falter on philosophical grounds, either. There seems to be a relatively strong agreement, at least between the Front-Bench teams of the three political parties, and I think on the part of the nationalist parties as well, that the state’s responsibility is to focus on the first-tier pension and try to take people out of poverty. The Government rely to some extent on means-testing to do that poverty prevention work. There is an assumption that the second pension will be independent of the Government, will not depend on their good will in future to continue, and will involve private accounts which individuals own. That is a different approach for the Labour party, by comparison with both the state second pension and the state earnings-related pension scheme, but it is more likely to endure.