Consideration of Bill, as amended in the Public Bill Committee.
Equalisation of and increase in pensionable age for men and women
I beg to move amendment 1, page 1, line 6, leave out ‘December 1953’ and insert ‘April 1955’.
With this it will be convenient to discuss the following:
Amendment 3, page 1, line 8, leave out subsection (4).
Amendment 4, page 2, leave out lines 12 to 18 and insert—
‘6th April 1955 to 5th May 1955
6th May 2020
6th May 1955 to 5th June 1955
6th July 2020
6th June 1955 to 5th July 1955
6th September 2020
6th July 1955 to 5th August 1955
6th November 2020
6th August 1955 to 5th September 1955
6th January 2021
6th September 1955 to 5th October 1955
6th March 2021
6th October 1955 to 5th November 1955
6th May 2021
6th November 1955 to 5th December 1955
6th July 2021
6th December 1955 to 5th January 1956
6th September 2021
6th January 1956 to 5th February1956
6th November 2021
6th February 1956 to 5th March 1956
6th January 2022
6th March 1956 to 5th April 1956
6th March 2022.’—(Rachel Reeves.)
Government amendments 13 and 14.
Amendment 5, page 2, line 19, leave out ‘1954’ and insert ‘1956’.
Amendment 6, page 23, line 20, in schedule 1, leave out from ‘(a)’ to end of line 22 and insert ‘delete “2024” and replace with “April 2020”.’.
Amendment 7, page 23, line 31, in schedule 1, leave out ‘6th December 2018’ and insert ‘6th April 2020’.
In my first foray from the Dispatch Box, I would like to say that I look forward to having a continuing dialogue with the Minister on this subject. He has a formidable reputation in this field. He told me at our first meeting that one of my former students is now his researcher; that, I think, makes him doubly formidable. I would also like to pay tribute to my predecessor, my hon. Friend the Member for Leeds West (Rachel Reeves). She, along with thousands of women, has led the campaign to highlight the burden being placed on up to 500,000 women by the acceleration of the timetable for the equalisation of the state pension age. I think we can all agree that she has done a very important job of work.
We welcome the Government’s concessions as laid down in the amendments, but we do not think they go far enough. The Government are no longer condemning 245,000 women to an extra waiting period of between 19 and 24 months, and that is welcome; but it is too little, too late. The cardinal fact about the Bill remains that 500,000 women will still have to wait up to 18 months longer, and 330,000 will have to wait exactly 18 months longer, before reaching their state pension age. The Government have chosen to break the all-party Turner consensus that women’s state pension age should not reach 65 before 2020, and they have also broken the coalition agreement, which promised that women’s state pension age would not reach 65 before that year.
I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)—this is the only time I am ever going to say that—on his new post. He mentioned Lord Turner. Is he aware that following the improvements in demographic projections that have taken place since Lord Turner produced his report, he is now on record saying that if he had been writing his report then, he would have gone much further much faster?
The Minister is of course right. I believe that since the Turner report, longevity predictions have risen by 6.5% for men and 5.5% for women. There is no doubt that the issue is complex—no one is denying that—and there may well be a case for going further faster, but the burden of my argument involves the half a million women who must wait for up to 18 months. Our view is that that is a disproportionate burden, imposed without fair and due notice.
I should like to make a little more progress first. I shall be happy to give way after that.
In 2005, in the days when the Conservative party was trying desperately to shift the perception that it had not changed, the present Prime Minister said:
“If you put eight Conservative men round a table and ask them to discuss what should be done about pensions, you'd get some good answers… but what you are less likely to get is a powerful insight into the massive unfairness relating to women's pensions.”
I am grateful to the hon. Gentleman for acknowledging that the Government have moved some way on the transitional arrangements, but may I ask him a question that I asked his predecessor, the hon. Member for Leeds West (Rachel Reeves), in Committee? How does he expect to fund the changes that he proposes?
What the hon. Gentleman has said is interesting, given that when the Labour party was last in power, it did not really bother about saving for tomorrow. This is what his predecessor said when the point was raised in Committee:
“this is outside the period of the comprehensive spending review and the budget deficit reduction plan.”—[Official Report, Pensions Public Bill Committee, 5 July 2011; c. 8.]
As the hon. Gentleman knows, we are not going to suddenly stop spending and raising money after the budget deficit has gone. If we keep making unfunded pension commitments, that will add to the deficit and the debt in the future.
That was not so much an intervention as a speech. The fact remains that the difference between the Government’s proposals and ours is £10 billion over 10 years. That is £1 billion a year. Is the hon. Gentleman really saying that a saving of that kind cannot be found in a more sophisticated way, without placing an unfair and disproportionate burden on those women? I do not agree, and nor does any other Opposition Member.
The Prime Minister was right when he suggested that if you put eight Conservative men around a table you would get some interesting answers on pensions, but you would not get the right answer. The Prime Minister was right then, and the Government are wrong now. The Minister’s amendments are welcome, and I am sure that he would personally like to go further, but he does not sit at the Cabinet table, although perhaps pensions Ministers should be in the Cabinet. This concession thus remains too limited. Some 500,000 women will still have to wait up to 18 months longer before reaching state pension age.
Turning to a point the Minister made earlier, this is not an easy issue, and there are great challenges, including that of longevity. As people live longer, the state pension age needs to rise to ensure a decent state pension for all. Labour set in train the Turner consensus: the state pension to rise in line with earnings; the retirement age to rise to 68 by 2046; and private pensions to be opt-out rather than opt-in. Labour also maintained the timetable for equalisation set out in the Pensions Act 1995.
Members on the Government Benches ask why we did not implement that, but Labour made great strides on pensions. Some 1 million pensioners were lifted out of poverty between 1997 and 2010. That is a real achievement. The poorest pensioners were lifted out of poverty. No pensioner lives in absolute poverty any longer. I must also point out that we had to do that because the previous Conservative Government left the pension system, and particularly the poorest pensioners, in a very difficult situation.
The hon. Gentleman takes us back into the mists of history, but surely today’s announcement can be warmly welcomed by all Members on both sides of the House? The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) describes this announcement as “just a sticking plaster”, however. I cannot think of any other sticking plaster in history which has cost £1.1 billion and helped 250,000 people. That cannot have been the case even when the right hon. Gentleman was at the Treasury.
Perhaps because I have a historian’s perspective, I do not consider 35 years ago to be the mists of time. I think that that era is relevant to our discussion of pensions today.
We cannot sit still and do nothing on pensions. We accept that changes have to be made; we have no complaint about that, and we accept the Minister’s point about rising longevity.
I am very pleased that my hon. Friend has taken up his new post. I am sure he agrees that a balance must be struck between dealing with rising longevity by having a plan to increase the state pension age over time, and offering short-term certainty to women who need to be able to plan their personal finances. We must not keep adjusting our pensions policy just because longevity keeps on rising. A sensible balance must be struck.
My hon. Friend makes her point with greater eloquence than I could muster, and she sums up the crux of our case.
Labour set two tests for the Pensions Bill, and the Government continue to fail both of them. They fail the first test of giving fair and due notice, to which my hon. Friend just referred. Even if amended in line with the Government proposals, the Bill will not give those 500,000 women fair and proper notice of the rise in their state pension age.
The hon. Gentleman did not respond to the earlier point about needing to strike a balance between what this country can afford economically and what any Government might like to do. As Age UK has said, £1 billion to help 250,000 women is a big step forward. We should welcome that, rather than play petty politics with it.
Actually, I did answer that point very simply. This has nothing to do with the deficit, and there is a £10 billion difference between our position and that of the Government over the 10 years after 2016, which amounts to £1 billion a year. If the hon. Gentleman is saying that that £1 billion a year is a fair and balanced outcome, all I can say is that, given the greater burden being placed on 500,000 women, Labour Members disagree with him.
The hon. Gentleman mentions that the deficit will be brought down by 2015-16. That may be the case, but this country will still owe £1.14 trillion or £1.15 trillion. Does he think it fair and just that our children and their children, and probably their children, will be taking on that debt?
Does the hon. Gentleman not understand his own Government’s policy, which is to eradicate the structural deficit by 2015? [Interruption.] According to the Government, the deficit will have gone. [Interruption.] The Secretary of State, from a sedentary position, makes the distinction between debt and deficit. I can tell him that I am well aware of that distinction, but I suggest that Members on the Government Benches are not so clear on this. I say that because £1 billion a year is one 1,000th of the debt that the hon. Gentleman just—
I welcome the hon. Gentleman to his place. I am wondering whether he taught my son, who is still at Oxford, as now I am really worried. Let me ask him a simple question. The simple fact is that he is getting confused. His argument was originally about the deficit and it has now drifted, rightly, into being about debt. However, debt is not some esoteric issue. If we do not pay off that debt and have a plan to pay it off, all our interest charges rise. The key thing is that it stacks up. Whether or not it is one 1,000th—or whatever he calculates—we have to make a start. We are making a major start on debt repayment. If, as he says, we are talking about only—as he says—£1 billion a year, he needs to tell us where he is going to find this sophisticated £1 billion to replace it?
I thank the Secretary of State for his intervention. I am sure that his son is getting a better education than I could manage to provide, as he rather ungallantly suggested. The fact is that this is one 1,000th of the £1.3 trillion debt, and the issue is one of balance and proportion. Is £1 billion—
I, too, welcome my hon. Friend to his first outing at the Dispatch Box. Perhaps this exchange has just illustrated all too clearly why women are deserting the Tories in huge numbers—it is because they do not feel that they should be the ones who have to bear the burden of the debt that exists. It is that balance that the Government have failed to understand.
My hon. Friend, with her usual sagacity, gets to the heart of the matter. Given that we are talking about a small amount of money in the scheme of things—[Interruption.] The two tests that we have set are: do the Government’s plans give fair and due notice to the women concerned, and do those plans bear proportionately on all women affected? The answer is no and no. The Bill continues to place the longevity burden disproportionately heavily on women in their later 50s.
Conservative Members may not be able to understand the point my hon. Friend is making, but Labour Members clearly comprehend it. The Government have given us a target for when they will have paid off the structural deficit—we are into different territory. I was hoping that my hon. Friend might tease out from the Government how much of the overall changes they are making to the social security budget will bear on women compared with on men and women.
I thank my hon. Friend for giving way and I am conscious that people watching this debate who are affected by it will begin to wonder whether we have somehow lost the plot. I have a constituent who has taken early retirement under deficit cuts and expected to get her pension when she was 64. She will now have to wait until she is 66 and she tells me that there will be a period when her money will simply have run out and she will have nothing to fill that gap. Does my hon. Friend agree that that could not by any stretch of the imagination be deemed to be fair?
That bears precisely on the point. We are talking about real women and we must give due credence to their fears and anxieties, especially about due notice.
On fair notice, the fact remains that under the Government’s amended plans some women will have only five years to prepare. The shock of having to adjust at such short notice to a rise in the pension age of between 12 and 18 months cannot be overestimated—this reflects the point made by my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). These women feel genuine anxiety. The 500,000 women in question made decisions based on what they thought was a contract with the Government that they had paid into the system for a certain amount of time and would get their state pension at a certain age. The Government have moved the goalposts dramatically for these women; there is no getting away from that and it is another way in which the Government are breaking the consensus we appeared to have in 2010.
The Government are going down a dangerous path with this Bill, which sets a precedent by which the principle of reasonable notice of changes in citizens’ state pension age is dramatically reduced. The precedent is important because as longevity rises and as the Minister already suggested, there will inevitably be further uplifts in the state pension age. The principle of reasonable notice is broken by this Bill.
The independent Pensions Policy Institute was very clear in its evidence to the Select Committee on Work and Pensions on that point. The 1995 Act gave women 15 years’ notice and although the Pensions Policy Institute understood that longevity is rising and that it is necessary to make changes more quickly, it still maintained that 10 years needed to be the minimum notice that any woman was given.
I am grateful to the hon. Gentleman for giving way and I share his concern that the principle that the goalposts can be shifted with very short notice is serious. Does he agree that the problem with the longevity argument is that there are huge disparities in longevity according to people’s occupations as well as geographically? I am sure that affects his constituency, as it does mine.
The hon. Lady makes a good point. That is an issue that my right hon. Friend the Member for Croydon North (Malcolm Wicks) often raises: averages can hide great disparities in social class as well as gender. That is a very important issue and I am sure the Minister is well aware of it.
The principle of reasonable notice is broken by the Bill. The Government’s concessions do not meet the fair and proper notice test, which is a principle of crucial importance. The second test we set for the Government was the proportionality test. They are unfairly and disproportionately singling out women aged 57 and 58 for harsher treatment. I do not suggest that they have singled them out deliberately—of course not—but I do say that they are not doing enough to compensate those women who have lost out in a birth date lottery that is not of their making. These women cannot, on the whole, afford the burden that the Government are placing on them, and they have certainly done nothing to deserve it. The Government should not make those women carry the heaviest burden of rising longevity—that is unfair and unjust. Some 500,000 women will still have to wait between a year and 18 months longer than they would have to reach state pension age. As I have previously stated, 330,000 women—one third of a million—will have to wait exactly 18 months longer, with the psychological and financial burdens that imposes.
There is a further, regional unfairness in relation to the availability of work. If people are to work for longer, where are the jobs to come from? That will affect the hon. Gentleman’s constituency and mine as well as those in the north-east of England and many other places. Also, if people are filling jobs at the ages of 65 and 66, the knock-on effects on youth unemployment will be substantial.
The hon. Gentleman makes a very important point. If women and men are to work for longer, we have to look at the figures for employment. My understanding is that up to 38% of women aged between 56 and 60 are not in employment at the moment. That is a real issue, which I am sure the Minister is considering.
The Bill fails the two tests, in that it is unfair and there is an undue lack of notice. It also fails the proportionality test. Take the case of Laura Davis, who is 57, single and suffers from a heart condition and acute osteoarthritis, which hampers her mobility. She works full time but her commute is a struggle. She was hoping for a dramatic revision of the Pensions Bill’s terms. Laura, from Watford, Hertfordshire says:
“It is a shame the Government could not meet us half way and say that no one in my age group would be required to work longer than a further 12 months….That would have been a better compromise.”
That is a compromise that the Opposition suggest, and it is why we seek to amend the Bill through our amendments to part 1, which I shall now address.
Our amendments do meet the tests of due notice and fair treatment for those half million women, and would ensure that no women would wait more than an extra 12 months to reach their state pension age. Our amendments would also bring forward the uplift in state pension age to 66 for both men and women, from 2026 to 2022, because we recognise that, as the Minister and other Government Members have emphasised, this is a difficult issue. There are no simple answers, and tough decisions will have to be taken. Our amendments would balance the sustainability of the pension system with the need to treat all women fairly. They offer a substantial saving of £20 billion, but not at the expense of those women. As I emphasised earlier in response to some amendments, the difference in annual savings from our amendments versus the Government’s is equivalent to 0.1% of central Government spending in 2011-12, or 1.3% of the Government’s annual pensions budget. Given the undue, disproportionate and unfair burden being placed on such women, I do not think that is too high a price to pay.
I welcome my neighbour to his first appearance at the Dispatch Box. Given what he has just said about his party believing that this is not too high a price to pay, and given that the changes are not coming in and affecting those women until 2019-20, is he making a commitment today that were Labour to win the next election, the changes would be reversed?
We are clear that we cannot have constant changes in pensions legislation. One of the problems that we face is precisely that— constant chopping and changing of the timetable, so we will vote for our amendments tonight in the hope that in their wisdom the Government will accept them. In that case we will all be happy, or at least those of us on the Opposition Benches.
Having been born in 1954, I need to declare an interest in the debate. The hon. Gentleman has argued for the spending of an extra £10 billion, but he cannot come to the Dispatch Box and argue for that without saying where the money is coming from. Is he going to put taxes up, cut some other spending programme or borrow more money? Will he please tell us?
To make the position clear to the hon. Gentleman, we are proposing savings of £20 billion. The Government are proposing savings of £30 billion. These savings will come into effect from 2016. No sensible Opposition or indeed Government would set out a spending plan for the next Parliament five years before it would come into effect. If the hon. Gentleman considers his position to be credible, the difficulties that the Liberal Democrats are facing become a little easier to understand.
Does my hon. Friend agree that it goes beyond cheek for a Liberal Democrat to question what we might be saying to the electorate in the next Parliament when that party signed an agreement a year ago and is happily voting in support of the Government Bill tonight?
My right hon. Friend again makes a telling point. The Liberal Democrats signed a pledge on tuition fees which they immediately went into government and trashed, yet they want the Labour party to tell them what the spending plans of a future Labour Government would be five years down the line. As my right hon. Friend says, that is pure cheek.
In the event that a modification in the timetable is necessary, and in answer to the questions about where the savings would come from, it may well be that the Government would do better to speed up the timetable for a state pension age of 67 and 68. That is something that we would consider. It is a much more sensible option than this disproportionate, unfair and unjust hit on women aged 57 and 58, of whom there are 500,000.
My hon. Friend’s point is well made. The Government’s position seems to be based on an assumption that women work for pin money. There is no understanding that women take time out for child care, that their pension pots are much smaller than those of men, and that these changes will create genuine hardship for the women on whom they impact.
My hon. Friend is right. She represents a constituency where many women will be affected, particularly low-paid women. The proposed change has a socio-economic dimension of which I am sure the Minister is aware.
The amendment would make a real difference to the lives of the women affected. It is designed to secure a limited reform, targeted at a specific group whom the Government are not treating fairly, and it would give rise to costs representing just over 1%—one 100th—of the annual pensions budget.
The Chancellor has previously said that
“we are not going to balance the budget on the backs of the poorest and the most disadvantaged,”
but the costs of this Tory-led Government’s acceleration of the state pension age equalisation timetable targets a group with limited resources.
I thank the hon. Gentleman for giving way. He is making a passionate point, and he talks about social justice and fairness, but all those on whose behalf he speaks up will ask, “If the Labour party ever get back into power, will they enact these changes?” It is a fair question for everyone to ask, and it is fair that he gives us an answer today.
Eleven billion, that’s right.
Given the £11 billion commitment that the hon. Gentleman is making, and the £12.5 billion commitment that the shadow Chancellor has made, at what point do these billions of pounds add up to real money in the minds of Labour Front Benchers?
The hon. Lady talks about real money, but the situation is clear: we are proposing £20 billion of savings starting in 2016; her Government are proposing £30 billion of savings. This measure would involve £1 billion a year over 10 years.
I understand that the hon. Lady has some actuarial experience, so she must understand that no sensible Opposition or, indeed, Government would put down in law that five years down the line they will still be committed to the same proposal. That is just common sense.
Does my hon. Friend agree that, as we talk about billions on one side of the House and billions on the other, the great irony is that public borrowing is up, when based on the Government’s predictions? If we are to talk about billions being out of place in terms of budgets, perhaps that is a good place for us to start.
My hon. Friend makes a very good point. The Government are very good at finding money when they want to, yet, on issues that affect a significant number of women—half a million—and given the anxiety and financial cost involved, they just seem unmoved.
Let us reflect a little on the kind of women we are talking about. According to the Library, the median total private pension of a fit 56-year-old woman is £9,100. That is not £9,100 a year; that is £9,100 in total. The same figure for a man is closer to £53,000—and not only that: these women are more reliant than men on the state pension. Often, it is a woman’s only source of pension income, and 40% of such women have no private pension savings at all—[Interruption.] No one suggests that that is the Government’s fault, and that is a pretty simplistic suggestion from a sedentary position by the Minister, the hon. Member for Basingstoke (Maria Miller), but the fact is that 40% of these women whom the Government are going to make wait between one year and 18 months have no private pension. The state pension is all they have.
That particularly resonates with my constituents in Inverclyde, where over 1,000 women who do not have a large pension to look forward to will be affected by this Bill. These are women who have taken time out to look after their children and are now providing child care for their sons and daughters, and perhaps looking after elderly relatives as well. These are women who can ill afford to lose out on their state pension, and also needed the time to prepare for this.
My hon. Friend is spot on. Caring is a very important issue in this context. A third of these women are already retired, in their late 50s, and are often caring for relatives. Of course, men have caring responsibilities too, but in significantly lower numbers than women.
These women also earn less, on average, than men. They have less chance of making up for the £7,800 in lost pension income that the 330,000 women waiting for 18 months are estimated to lose. If pension credit is added to that, some women are losing up to £11,000, and that is before taking into account the benefits that accrue at state pension age, such as the winter fuel allowance, free travel and so on. This is a serious financial loss to these women.
My hon. Friend has made the very point that I was going to make. These women are losing out not only on pensions, and potentially pension credit, but on the passported benefits that are so important for low-paid pensioners, such as the winter fuel allowance, free bus travel, free dental work and free prescriptions. Those things are really important to this group of women, and they will have to wait longer to receive them.
That is absolutely right. There is no doubt that this is a significant blow to these 500,000 women. That is why we have tabled our amendments. If they were passed this evening, the 330,000 women facing an 18-month hike in state pension age would have restored to them the average amount of £7,800. If they were on pension credit, they would also have restored to them up to £11,000 and all the other benefits that accrue at state pension age that my hon. Friend mentioned. I say it again: this is a serious, significant issue for a large group of women.
Our amendments offer the Government one last chance to show women that they get it. We are all aware of the Government’s growing problem with women voters. We hear the reports of the Prime Minister huddled in No. 10 surrounded by advisers and pollsters explaining to him just how grim the news is regarding the opinions of women voters. Support for this Government among women is falling off a cliff. According to the reports from inside No. 10, the pollsters are telling the Prime Minister that 25% more women than men believe that the economy is going in the wrong direction, while 10% more women than men are saying that cuts are falling unfairly on women—and no wonder, given this Bill, among other things. According to the leaks from inside No. 10, favourability towards the coalition among women is now 12 points lower than it was 18 months ago. Women are twice as likely to think that their children will have a worse life and less opportunity than their generation. Overall support from female voters for the Conservatives and for the Liberal Democrats has slipped significantly, and we know today that the Government are falling further behind in the polls.
Our amendments offer the Government a chance to show that they get it and that they understand that what matters to women is the impact of Government policies on their lives and the lives of their families. Our amendments offer the Government a chance to show belatedly, on an issue that matters, that they understand women’s priorities. I commend our amendments to the House.
This is slightly earlier in the debate than I expected to be called. I will speak briefly on the amendments tabled by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the Government amendments.
I know that we will have a fuller debate later, but much of the Bill has complete agreement across the House and is extremely welcome. The changes to the state pension age seem to have overshadowed many of the other issues in the Bill. As I said on Second Reading, I and many of my Liberal Democrat colleagues were deeply concerned about the effect of these changes on women who are being asked to work significantly longer at short notice.
The hon. Gentleman who has just spoken—I will not repeat his constituency name, as saying it once was an achievement—said that the state pension age has to rise, and I think that we all accept that. We are all living longer. The gains in life expectancy have been significant and are continuing. In 1970, someone reaching 60 could expect to live for 18 years. Last year, that had risen to 28 years. That puts a significant financial burden on the state. By the time I retire, I fully expect the retirement age to be somewhere north of 70. Goodness knows whether there will even be a state pension by that point.
When we are increasing the state pension age, we need to ensure that it is done as fairly as possible. I and my colleagues, a number of whom are present, have been vocal in our efforts to change the timetable. I know that the Minister and his colleagues in the Department for Work and Pensions have been actively working within Government to ensure that the timetable is fairer and that those who are worst affected by the changes are protected. In my view, the initial draft timetable was not fair to the women who were worst affected. I am pleased that the Government have listened to the concerns that were raised by many people and have tabled today’s amendments. I am sure that the Minister will tell us more about them in his summation.
I hear what the hon. Lady says, but will she explain to the 300,000 women who will have to wait longer than anybody else to receive their state pension—between a year and 18 months longer—why they should have to pay more of the burden than anyone else?
Later in my speech I will move on to comments that relate to the hon. Lady’s point.
Capping the state pension age increase to a maximum of 18 months will protect 250,000 women, as we have heard, and 250,000 men. Therefore, 500,000 people will be better off as a result of the Government amendments. As we have heard, that is costing more than £1 billion. I am grateful to the Secretary of State and the Minister for managing to get £1 billion out of the Treasury. That is no mean feat. A problem with any change to the state pension is that the costs are in the billions, not the millions.
I will make some progress first.
That problem makes it extremely difficult for small changes to be made. Given the financial circumstances, with the issues of debt and deficit that we have discussed, and the fact that other Departments are asking for money in the millions rather than the billions, convincing Treasury officials to be more generous cannot be easy. I hope that all hon. Members appreciate that the £1 billion going to these 500,000 people is a significant amount of money that has been found by the Government.
From the tenor of the hon. Lady’s remarks, it sounds as though she is satisfied with the concession that the Minister has achieved. I congratulate him on the distance that he has gone and I do not underestimate the difficulties. However, is the hon. Lady confident that the women in her constituency who will still be affected will be as easily persuaded as her?
I was just going to move on to the fact that, although I am delighted by the changes, in an ideal world I would have liked us to go further. I would have liked to see the cap closer to 12 months than 18 months, but we are not in an ideal world and the cost associated with that would have been significant. I understand that the cost of capping at 12 months would have been close to £3 billion, which would have been a significant amount of money to find. That would have been an uphill struggle. We have to appreciate the scale of the money that has been found to make things better for the women who are worst affected.
There has been a broad coalition campaigning on this subject, including Age UK, Saga and Members of all parties. Some have been extremely constructive in their campaigning and in the pressure that they have put on the Government, whereas others have been slightly less constructive at times. Some of what the Labour party has proposed today is, I think, unrealistic. It is unhelpful to the attempt to make as much progress as we would like towards helping the women who are most affected.
The Labour amendments tabled in Committee and today on Report that would delay the entire increase by two years are not sensible or realistic. Regardless of what the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East says, £10 billion would be a huge black hole in the public finances, and it would be a significant amount that the Government would have to find. [Interruption.] I am told that it would be closer to £11 billion. I am not going to start the debt versus deficit debate again, but there would be a huge black hole if we accepted a Labour party proposal that would require an unfunded promise of £11 billion.
I would be grateful if the hon. Gentleman could clarify to us where the money that he proposes spending would come from. Unless we tackle the financial crisis in this country and the financial circumstances that we face, my child and all our children and grandchildren will be paying off the debt. We have to tackle the debt—it is real money that needs to be found, and a £10 billion black hole would be a significant one to fill.
I am sure we all have great sympathy with the women who have been most adversely affected by the changes, but do you not agree that the Labour party’s argument would be far more credible if it were able to tell us where it would make up the difference? Then we would be able to decide on the matter, as opposed to being told, “It is only £11 billion, we should find it from somewhere else.”
I completely agree. There is strong feeling throughout the House that in an ideal world, none of us would want to see the problem exist. We all accept that the state pension age will have to increase, because we are living longer and there is a black hole in the finances. I have said that in an ideal world, I would like to see the increase capped at 12 months, but we are not in an ideal world and we have to find a compromise that is workable and affordable. I appreciate that there are women who will be negatively affected by today’s proposals, and I am sure that we all have huge sympathy for them. However, I am glad that the Government have found the resources needed to mitigate the difficulties faced by those who are most severely affected.
Does the hon. Lady not agree that in politics, choices are constantly made, and that there are a number of choices that could be made in this case? There are those, for example, who argue that the 50% tax rate should be reduced at an early date, and there are those who argue that the generous tax reliefs given to people on higher rate tax who contribute to pension schemes could be ended, giving substantial savings. Does she agree that there are always choices, and it is not just a question of asking where a particular sum of money will be found?
I completely accept that political decisions are a matter of priorities and choices—all hon. Members understand that, because we are all involved in political debates and decisions. As I have said, in an ideal world, I would like the cap to be reduced. However, given the financial circumstances, the Government’s proposal is a compromise that I can accept. I understand that some will be negatively affected, but we have made significant progress. Half a million women and half a million men will benefit from the proposals, which I accept as a positive compromise.
My hon. Friend makes the point that we are not in an ideal world. A large part of the reason why we are not in the world that we would like to be in is that the previous Labour Government left us with a record deficit. Labour Members are now talking about another £10 billion. Does she agree that it is ludicrous for them to talk about unfunded commitments, and that they should instead apologise for the mess that they left the country in?
We need to focus on what is realistic and affordable. The Bill will affect people’s lives, and we need to ensure that the state pension is affordable and sustainable long into the future. I want to receive the state pension that I have paid into when I come to retire, and I am sure all hon. Members and people out there in the country would want the same thing.
I welcome the fact that Labour Front Benchers are now more positive toward to today’s proposals, and that they are prepared to accept that the Government have moved to the significant benefit of a large number of women, even if a realistic approach is somewhat lacking in their proposed amendments.
Does not the hand-wringing between 12 months and 18 months, and billions here and there, show the utter vanity of the UK spending billions on Trident nuclear weapons, when we are finding difficulty in paying money to old age pensioners?
The hon. Gentleman tempts me into an area into which I will not follow him. That is an issue for another day, although my position is probably not too dissimilar from his.
Given the financial circumstances and the constraints that the Government face, the deal proposed today is a good one. The Government’s amendments substantially mitigate the worst problems, and we should bear it in mind that £1 billion is a huge amount of money.
I hope the Minister can now concentrate on introducing a flat-rate pension for those whose retirement age is increased. That would make a massive difference to the amount that people get from their basic state pension when they retire, and it will benefit women in particular. Will he confirm that he still plans to introduce a flat-rate pension for 2016, so that women who are affected by the state pension age increase that we are discussing will be the first, or among the first, beneficiaries? In that way, although they retire later, they will do so on a significantly enhanced state pension, which would mitigate some of the financial implications of the Bill.
I commend the Minister and his colleagues in the Department for Work and Pensions for their efforts, and for their achievement of parting £1 billion from the Treasury to make the changes better, so that the effects are mitigated for those who are hardest hit. I hope that he continues to work to improve retirement income for both men and women.
It is a pleasure to follow the hon. Member for Cardiff Central (Jenny Willott). I may touch on some of her themes as I make progress.
The Minister will forgive me for repeating some of the issues that I have raised before, not least in Committee. My main point is this: pension policy in Britain has always been at its best when it goes with the grain of how our society works and of how our people work and live. It is also at its best when we have the courage for long-term planning, with time scales and periods of notice that enable men and women to plan their lives and their retirement properly.
This Parliament first legislated for old age pensions more than 100 years ago, because it started to understand the extraordinary fact that, for the first time in broad numbers, working people were outliving their working lives: hence the need for an income in old age. We then had the great national insurance reforms, which the Liberal party should have much credit for introducing, including particularly those in the great report by the Liberal reformer, William Beveridge.
I was thinking of William Beveridge as I was listening to the hon. Member for Cardiff Central. When Beveridge produced his report in 1942, it was hardly in the most auspicious public spending circumstances. He, and those in the Labour party who supported the Beveridge plan, was subject to huge opposition from many—but not all—in the Tory party, and particularly from the Treasury. Imagine the huge opposition from the Treasury to the outlandish idea that we could have a new national insurance settlement in the post-war world, at a time when we did not know where our pennies were coming from. But today the Liberal party has been blown away by a little puff from the lips of the Treasury. Thank goodness that in the 1940s there were decent strong Liberals, who were not blown away when the Tory monetarists spoke.
If Beveridge’s national insurance plan enabled us to see a future that still lasts today, we can think of other things that ran with the grain of how people worked and lived in this country, not least the home responsibilities payments, which started to recognise that women had children and needed to leave the labour market, but should be properly insured for those responsibilities through the national insurance system. Later we introduced similar provisions for those caring for elderly relatives and others.
We face the challenge of longevity and we are all united in understanding the demography. Pension ages in both the occupational sector and the state sector need to increase, and that is where we reach agreement. However, I disagree with the crude, deficit-influenced way in which this policy is being forced through Parliament. The coalition Government assume certain points that I wish to question.
One assumption is that, broadly, everyone in society is benefiting from improved longevity and will live well into their late 70s and 80s, regardless of their social class and location. Where we live in our cities, towns and rural areas is closely related to socio-economic status.
Not at the moment, because I want to set out the three assumptions before I deal with the hon. Gentleman’s false—or possibly accurate—assumptions.
The second assumption is that British people live and work in similar ways. It is assumed that we start work and retire at more or less the same. The third assumption is that if we increase—as it appears we will—the pension age and the age of retirement, work will somehow be available. If people do not retire until 66 or 67, it is suggested that this Government’s extraordinarily brilliant economic and employment policies will deliver labour for the people. It is those three assumptions that I wish to question.
Longevity and extended life expectancy are key to this argument. You point out that longevity is not necessarily equally spread across society. Are you saying that certain sectors of society have benefited from improved longevity more than others, and that for some, life expectancy has not risen at all?
Certainly for some people it has not, but broadly speaking it is my understanding that it has risen for all socio-economic groups. My assumption is that it will continue to increase, but it is the differences by social class that the hon. Gentleman’s question enables me to tease out—
With respect, I think that what I have to say will be helpful to the hon. Gentleman, and I am sure that he will tell me where I get it wrong, if I do.
I want to analyse mortality by social class. I shall talk about men in particular, although there is a class difference among women too. People in social class 7 tend to be in routine occupations. For example, they might be labourers, van drivers, packers or cleaners; many women would be cleaners. We hear a lot about longevity and how we will all live to 100: the Minister keeps telling us—he issues a press notice every few months—that one fifth or one sixth of us will live to 100. It might surprise the House, therefore, that 19%—almost one fifth—of men from social class 7 die before the age of 65. Almost one fifth of these hard-working working-class people in tough jobs—no doubt they have had tough lives too—die before 65.
I put that point to the Minister and the House because, before glibly raising the pension age to 66 or 67, we need to recognise that many of our fellow citizens do not live to 65. Furthermore, 10% of women in social class 7 die before the age of 60, while among the professional classes, that figure is only 4%. I should have said earlier that, in contrast to the 19% figure, the proportion of men in the professional classes who die before the age of 65 is 7%. So there is a huge social class differential, and if we are not careful—we need to do the arithmetic very carefully—and if we glibly increase the pension age, we might rule out more and more people from ever getting their old age pension.
The right hon. Gentleman raises some important issues. I do not think that he was Pensions Minister at the time, but he will be aware that it was the Pensions Act 2007 that ultimately raised the state pension age to 68. Why did he support that, given the points that he is making now?
I recognised the logic of demography and longevity and the need to raise pension ages, but since ceasing to be a Minister of any kind, I have had more opportunity to think about this and to study it—[Laughter.] The Minister might try thinking independently. It is not a bad idea. I would not giggle at the idea that we rethink our positions from time to time. I have rethought my position on this, not least because the Government are going helter-skelter towards raising the pension age in ways that the Labour Government never foresaw.
I am grateful to you for giving way for a second time. You said that 19% of men in social class 7 die before they reach 65. Of those, how many were in work at the time? Is this a social problem relating to health, or is it caused by the nature of the work that they have done? I ask because I am concerned that we are saying that we cannot raise the pension age because of this particular group, when in fact everyone’s life expectancy, regardless of how tough a life you have, has increased over the past 20 or 50 years.
Order. May I help the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe)? I follow closely the question of women’s pension age and longevity, but he should not be addressing me—which is what he is doing when he says “you”—he should be addressing the rest of the Members in the Chamber. He has used that term several times now, and I gently ask him to observe the convention.
The right hon. Gentleman has much experience in these matters. However, may I put it to him that the reason why he voted in 2007 for the increase in the pension age was simply that the statistics to which he referred had changed so much? In 1911, when the first pensions were introduced—to be paid at 65—the average life expectancy of a male in the United Kingdom was 66. He made the point that some people today still die before the age of 65. Back in 1911, the vast majority of males died before that age. Life expectancy today is now 87 for the average male. Does he not agree that the changes in the state pension age reflect a huge change in longevity, and that the pension age has actually risen very slowly?
I am bound to say that life expectancy is not 87. On average, a girl born in the UK will live to 82 and a boy to 77. Obviously, however, once they have survived to the age of 65 many people are likely to live into their 80s, so I understand the broad point being made.
I shall conclude later by talking about a sensitivity that we could introduce into the system that might meet some of those problems, although the Minister has so far resisted it. However, now I want to refer to the association between social class and location, which various colleagues are interested in and knowledgeable about. This is not just about the broad difference between living in Kensington and living in parts of Glasgow; even within many of our big cities there are huge class differences in mortality. Across Sheffield, for example, there is a difference in life expectancy of more than 14 years between different parts of the city, and even in Kensington and Chelsea—the borough with the highest life expectancy—there is a difference of eight years between the most and the least deprived wards—which, for those of us who know Kensington, is not so surprising. Those differences and unfairnesses are reflected in terms of where people live in our cities.
Before I mention the idea that I have been trying to persuade the Minister to accept, I want to apply some pressure elsewhere: where will the jobs come from? We are living through a period of rising unemployment, and many people, including graduates with good degrees, in their 20s, 30s and 40s, cannot get jobs. Are we confident that if we make these accelerated changes—as the Minister knows, the acceleration is the difference between what the Labour Government did and what the coalition Government are doing—the work will be available?
Now 39% of 62-year-old men and 52% of 64-year-old men are not working, which means that huge proportions of men approaching what is meant to be their retirement are effectively retired from the labour market already. Furthermore, 36% of 58-year-old women are not working. I fear that we will be extending a kind of benefit twilight zone, in which people who are ineligible for their state pension—because we are raising the pension age—will jog along on incapacity or other benefits, with no one in the jobcentre pretending that those folks will get work—even the Minister will not be able to pretend that they will—and a huge army of people living in a state of desperation in that twilight zone.
I am sure that the right hon. Gentleman will share our concerns about last week’s unemployment figures, which showed an increase among young people and women. Is there not a concern that unemployment levels for women are rising, and does that concern not need to be expressed tonight in the House?
That is the concern. Ironically, we are having this debate while the spectre of mass unemployment—as Liberals will remember, William Beveridge called it the giant evil of idleness—rears its ugly head, yet we are accelerating the increase in the age at which people will get their retirement pension.
The geographical variation is extremely gross if one adds in people who are economically inactive. The proportion of people who are economically inactive varies from place to place. Merthyr Tydfil is an obvious example in Wales. Last time I looked, the constituency of Witney had three economically inactive people searching for each job, while in the Rhondda that number was 154. That is a gross variation, and is not something to be disregarded.
That is an extraordinary variation, and one of the implications is that in order to make good policy and ensure good practice in pensions and other areas, we in this Parliament—including those on the Government Benches—need to have some understanding of how people work, and not just think of our own circumstances.
The right hon. Gentleman is making a powerful point given the current economic circumstances, but we do not know what the employment circumstances will be in 2016 or 2020. Does he agree that the more essential point is that because people see investing in their pensions as a long-term decision, it is the short-term way in which these changes are being introduced that is creating all the unfairness? People had certain expectations and had made contributions, but the benefit from those contributions is now being denied them.
Yes, hence my introduction, when I argued that pensions policy in this country has always been at its best when it goes with the grain of how people live and makes long-term decisions that individuals can plan around. It is the acceleration of the process that we are now discussing. It is extraordinary that, having taken so much money out of the pensions system, the Conservatives—and, I suppose I have to say, the Liberals—now want credit for putting some of it back. That is a bit of Tory arithmetic that I am not terribly impressed by.
That issue—how the shift from the retail prices index to the consumer prices index will affect the real value of pensions in future—is a subject for another day, although colleagues might want to touch on it today. My guess is that that shift, which seems quite dry and technical, will become the big pensions swindle of the 21st century. I am therefore not quite as impressed by the triple lock as the loyalist hon. Lady is.
Does the right hon. Gentleman not acknowledge that whereas his proposal was to uprate the state pension in line with average earnings, which would mean an increase of 1.8%, the triple lock chooses the best of the three? That is an incredibly important reinforcement of our state pension.
Yes, but I hope that the hon. Lady will consider my point about CPI and RPI, because we are talking about billions of pounds that could be lost to British pensioners when that change is implemented over coming decades.
Let me reach my conclusion. We suffer from over-generalisations in this field. I am fed up with macho commentators, often from the political, professional and business class, who somehow assume that everyone will live to a ripe old age and that those in their 60s will have portfolios full of all sorts of opportunities—a directorship here, writing a book or doing a television programme there. Many people, not least those on the Government Benches, talk about a world of that kind—I do not want to get the hon. Lady over-excited: she has had many chances to respond, but she knows who I am talking about. Given the typical life cycles for the late 20th and early 21st centuries, more and more of our children and grandchildren will effectively not get started in their careers until their early 20s or even their mid-20s. With the rise of university education, the pattern of many people’s working lives will be like that.
However, that pattern is not at all typical of everyone in our society. When we recall the question that the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe) asked about the mortality of those people, let us remember that there are still many working people coming up to retirement who started their working lives as 15 or 16-year-olds. They are the packers, the cleaners, the van drivers, the heavy manual workers and the care workers. By the time they reach retirement they are worn out. They are physically knackered, if I am allowed to use those words. They are tired, they are exhausted and what they need, in an old-fashioned sense, is a rest. They need to retire. They are not people like the hon. Gentleman, who I suspect will still be sprightly in his late 60s and 70s, with his portfolios and all the rest of it; they are physically worn out. They have been working since they were children, and they need a rest.
I am grateful to the right hon. Gentleman for giving way. He is making a powerful argument and some interesting points, but they relate to increasing the state pension age, full stop. This is not an argument about the escalation of that process; it is an argument about whether we should change the age at which people can claim their state pensions, which is separate from the debate that we are currently having.
My argument is that it is wrong to treat someone who starts work at 15 or 16 equally to someone who starts their first proper job at 21 or, with post-graduate qualifications, 23, 24 or 25. People who start earlier have often been in the labour market doing tough manual work—tougher work than any of us have ever done—for 10 more years than the likes of us. My argument is that we should reconstitute our national insurance system to recognise the contributions that they have made, so that anyone in work for, say, 49 years and paying contributions throughout that time should at the very least be able to take not an early pension, but a pension at a more reasonable age. If that brings about a difference between when they take their pension and when their grandchildren who went to university take theirs, that would be fair.
If we do not start to understand some of these social, employment and class sensitivities as we helter-skelter towards higher state pension ages, we will make mistakes and, with great unfairness and injustice, and leave people behind. Many of those people will never get their pensions, because they will be dead before they qualify for them. That is not a sign of a decent British pensions system that understands how our society is evolving.
I rise to speak on behalf of the hundreds and possibly thousands of women who have contacted me on this matter. I also speak as a woman who is directly and personally affected by the Government’s changes, so I am in a position to tell the Government what is happening to women of a certain age when it comes to pensions.
The women who have contacted me have told me that they expected changes in the pension age. They know that we are all living longer—or rather, that some of us are—that we need to plan for our retirement better and over a longer period, that we need to pay more for our pensions and that there needs to be some equalisation between when men and women access their pensions. They understand and recognise all that. However, it is the speed at which the changes are being implemented that is causing anxiety and fear among women who no longer have time to plan and save for their future.
I absolutely agree with my hon. Friend. I, too, have been contacted by hundreds of concerned women in my constituency. Although we acknowledge the Government’s concessions, which they probably made because of the pressure that those women have put on them, they will not meet everybody’s needs. Hundreds of my constituents will still be up to £11,000 worse off, with not enough time to plan for a reasonable pension in their old age.
I absolutely agree. This is just one more Government policy, on top of others that directly affect women and young people more than any other group, that will impoverish women. Whatever last-minute fixes the Government come up with, it remains wrong to penalise disproportionately women who happen to be between the ages of 56 and 58, many of whom have worked all their working lives. Many of them will have held several jobs in order to keep their families. They have paid their taxes and their bills, and, quite frankly, they deserve better than this.
Does the hon. Lady accept that the pension is one of the few certainties in life and that it is now being ditched for women of a certain age, as she aptly puts it? Those women have planned meticulously for when their retirement will begin and what they will use their pension for. They have planned how it will be broken down into housekeeping and into meeting the needs of their grandchildren, for example, but that is all being thrown askew by these proposals.
Absolutely. This is causing not just anxiety but fear among those women, many of whom have been barred, until recently, from private company pension schemes because they were having to work in several part-time jobs with very low incomes in order to keep their families. They are now being let down by a Government who are simply not giving them sufficient time, which is all that they are asking for, to plan for the change.
Given what we have heard from the right hon. Member for Croydon North (Malcolm Wicks) about the failure of people’s health to keep up with the increase in longevity, does the hon. Lady agree that many of those women will not be in the best of health and will be having to look for jobs at a time when their health might be compromised and they are not nearly as fit as they used to be?
I absolutely agree.
The Chancellor has told us that he will not balance the books on the backs of the poor abroad, so why is he prepared to balance the books to a disproportionate degree on the backs of 500,000 women who just happen to have been born between 6 October 1953 and 5 March 1955? Why is it okay to do that to those women? The Government need to listen to the women of this country and accept Labour’s amendment so that no woman will have to wait more than an extra 12 months to reach their state pension age.
I am delighted to be called to speak in the debate. I welcome amendments 13 and 14, which show that the Government have listened to their people, and I congratulate the Secretary of State and the Pensions Minister on successfully providing some relief to women in their 50s in my constituency. I pay tribute to all those from Gloucester who came to see me about this issue, led by Patsy Toleman, and to those who were encouraged by the campaign led by Age UK to write to me about it.
Like others on both sides of the coalition Government, I have been very active in writing to and making the case personally to the Secretary of State and the Chancellor, and I am sorry that the Opposition have been less than generous in their recognition of the value of capping at 18 months the increase in the wait for their pension for 250,000 women. They should perhaps be reminded that Age UK has said that
“we can’t emphasise enough the great achievement that this change represents as it will cost the Government £1 billion in lost cuts to expenditure.”
I have not heard specifically from any of those who originally lobbied me on this issue. No doubt they will be hearing this debate, and I think that they will recognise, as all Members should do, that the Government cannot simply brush aside the issue of expenditure as those on the Opposition Front Bench did when they were in government. The interest that all our families are having to pay on the mountain of national debt built up by the hon. Lady’s party over the past 13 years means that an amount greater than the entire education budget is being spent on debt interest alone. That affects every woman in her constituency and in mine.
I welcome the statement by the Pensions Minister that he intends to end the uncertainty for women who are waiting to learn what their state pension age will be, and that he will be communicating with those who are affected so that they can properly plan for their future. As the right hon. Member for Croydon North (Malcolm Wicks) said earlier, uncertainty about planning is an issue, and I am glad that the Minister will be addressing it. He will no doubt say something about that later.
I also welcome other aspects of today’s announcements, particularly the move to simplify the single-tier pension system, which will significantly benefit women who have had to take time out of the labour market because of their caring responsibilities, as many hon. Members, including the hon. Member for Aberdeen South (Dame Anne Begg), have pointed out. I should be grateful if the Pensions Minister could also say something about that.
The hon. Gentleman has rightly said that the Government have listened to the case that has been made, that they have made additional money available and that they will give people some notice of the changes in the pension age. Does he accept, however, that for many people who are carers, for example, or who are in part-time work or in and out of work for other reasons, the time horizon that is now being made available to them will not give them much chance to plan for their retirement?
In a perfect world, everyone would have liked the changes to have gone further, but I believe that capping the additional waiting period at 18 months represents a significant step forward in providing time for preparation. We are not, alas, living in a perfect world—
I am grateful to the hon. Gentleman for giving way. We have heard several Members on the Government Benches talk about a perfect world, but does he accept that we did not have a perfect world in 1909, when the first pensions legislation was discussed, and that we certainly did not have one in 1945? Other Governments nevertheless saw that it was right not to take this kind of action, despite the very difficult financial circumstances in which they found themselves.
I do not believe that that analogy is relevant. As I pointed out earlier to the right hon. Member for Croydon North, any analogy that stretches to compare today’s announcements with those in the original pensions legislation in 1911 is inaccurate, because it leaves aside the critical factor that life expectancy back then was hugely different from what it is now. In fact, the vast majority of people then did not live long enough to collect their pension, whereas today people will be living for 40, or possibly 50, years beyond their pension age—[Interruption.] The hon. Member for West Ham (Lyn Brown) is chuntering away, but the reality is that there are people in the public service who are drawing their pension in their 40s or early 50s, and it is not inconceivable that they will live for another 40 years.
I will not give way on that point.
The arguments of the Opposition, who tabled amendments 1 to 7, have been extremely disappointing. My constituents will have heard three main points from the Opposition Front Bench. First, the Opposition have opposed the changes made by the Government on the basis that they do not go far enough. Secondly, the Opposition have strongly intimated that if elected in 2015, they would not implement the changes that they recommend tonight, which reeks strongly of hypocrisy. Thirdly, they have made it clear that they are not concerned about the additional £11 billion costs of their proposals, as they could be dealt with in the future and, therefore, should not affect our debate today. That is an entirely irresponsible attitude, which is entirely in keeping with the words of the former Chief Secretary to the Treasury when he announced that he was sorry there was no money left. It is very disappointing that the same philosophy is still strongly in evidence from the Opposition Front-Bench team.
I was in the Chamber when the shadow Minister commented on £1 billion a year being only one thousandth of the debt, thus implying that it was a small amount of money. If we are talking about people being in touch with reality, surely my hon. Friend would agree that people outside this place will wonder about the economic credibility of an Opposition party that says £1 billion is not a lot of money.
My hon. Friend is absolutely correct. As an American economist once said, “A billion here, a billion there, and sooner or later you have a large sum of money”. It is disappointing to hear such an irresponsible approach to spending and to the interest being paid by everybody in this country on our vast mountain of national debt.
Let me conclude. Tonight, I shall vote in favour of amendments 13 and 14. I recognise the significant achievement, to which Age UK has paid tribute, represented by the welcome changes that will benefit large numbers of women across the country. I pay tribute again to those women in my constituency who lobbied me on the issue, for whom I fought a long and quiet campaign with Ministers. I shall not vote for amendments 1 to 7, and I greatly regret the fact that the Opposition continue to table motions that they would not implement were they in power.
The Government’s amendments are an admission that they realise, at long last, that they got it very wrong about the acceleration of the new state pension age for women. On Second Reading and in Committee, there was always a promise that the Government would come up with some sort of transitional arrangements for the group of 500,000 women who will have to wait more than a year, and particularly for the group of 33,000 women who will have to wait for two years before qualifying for the state pension. However,all they have done is to shift the timetable six months later. Why cannot they go the whole hog and take the anomaly out of the system altogether? If they were to do as the Opposition ask and delay all the increases to the age of 66 until after 2020, once the initial transition is over for women between 60 and 65, there would be no anomaly that would require transitional or any special arrangements at all. There would then be no unfairness specifically to women—it is, of course, only women who have been affected by the changes—and that would also answer the question posed by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) about the lack of time available for the group of women affected to prepare for the new pension age.
If the Government have recognised that issue, it is a shame that they could not go further. I suspect it is probably because the Minister, to whom I pay tribute, has found that getting anything out of the Treasury is like getting blood out of a stone. I recognise that getting just over £1 billion is a huge achievement, but in the overall scheme of things, and given the effects of the change, it would have been better—it would have been better if acceleration had not been proposed in the first place—if the problems had been properly recognised.
Before Government Members applaud themselves and welcome the change too much, perhaps we should think about the enormous campaign that was waged against the proposals. Would that campaign have existed if the Government had proposed at the outset what they propose now? In other words, when all this started, if it had been proposed that there would be an acceleration of the women’s state pension age up to 66 before 2020 so that 300,000 women would have to wait 18 months longer—on top of the delay they were already facing because of the timetable already set—would there have been the same outcry and the same campaign? I think that the answer to that question is unequivocally yes.
Just because the Government have made something bad slightly less worse, it does not mean that what is being proposed is not particularly bad. Someone who, after an accident, is told by a surgeon that they will lose both their legs, and who finds out after they come out of the anaesthetic that they have lost only one might feel a degree of elation that this was better than they had expected. However, someone going into an operation expecting to lose a leg who does lose one would still feel disappointed. In other words, the amendments that we are being asked to vote on still do not amount to a good deal for the group of women concerned.
I simply want to observe that if any of us went into an operation expecting to lose both legs and a doctor managed to save one of them, surely we would feel that the doctor had done rather a good job. The analogy with the Minister’s announcement this evening is not irrelevant.
The hon. Gentleman has just made my point for me. Yes, we would feel a lot better, but if we had gone into the operation not expecting to lose either leg, but discovered afterwards that we had lost one, we would be absolutely devastated. The result would appear to be the same, but the emotional trauma caused in the meantime is quite different. That is exactly the position faced by these women.
The women we are talking about are not rich; they are not people for whom a billion pounds here or there amounts to pennies or not much money. These are women who have made the financial calculation that they will be able to get their state pension at a particular age. Some of them are still making the calculation that they will get the state pension at 60. I received an e-mail today from someone who could not understand why her pension age had gone up by 30 months. It is because she had not taken into account the original equalisation. That is no fault of the Government, but it illustrates the fact that people need a lot of time to prepare for the change, and even if they have had the time, they are not always prepared for it.
For the group of women who had not realised that the state pension age was going up to 65, it is a double whammy to discover that it is now going up to 66 and that they must face waiting that extra time, perhaps with no income at all. Many of these women will be in that position, even if they have taken early retirement for one reason or another. We know that by the age of 65, only about 40% of women are still in work; they might have fallen out of work for various reasons. Those women will have been depending on getting not just the basic state pension, but probably pension credit and all the other passported benefits that were mentioned earlier. For these women, there is a big hole in their financial planning. We have heard much about the Government’s debt meaning that they cannot possibly afford to do right by the group of women concerned, but the effect will be on those women’s personal debt. They will have to borrow money or in many cases live in pretty dire circumstances if they do not get the pension when they were expecting to get it.
Indeed, and there will be many such examples.
Women who hoped that their campaign would move the Government feel very disappointed. It is true that those in one group may have to wait for 18 months rather than two years, but they are still extremely disappointed at the Government’s failure to recognise that what they propose will have a disproportionate effect on a number of women who no longer have time to plan adequately for the future.
The hon. Lady is being very generous in giving way.
Age UK led the campaign that generated so much awareness of the issue among women and prompted them to raise their concerns, rightly, with their Members of Parliament. Age UK has welcomed what the Government have done, and has acknowledged that 90% of women will now work for only one extra year. I know that the fact that 10% may have to work for an extra 18 months is a challenge for them, but this is a solution for that 90%, and campaigners have welcomed it.
It is not a solution for the 90%, because they will still have to work for an extra year, on top of the extra years for which they were already having to wait for their state pensions. I believe that Age UK made that comment at the time of the Government’s announcement. Of course all Members agree that the position is better than it was before, but it is still not good enough. If my inbox is anything to go by, women who thought that their problems would be solved when they first heard the announcement have now made their calculations and discovered that for a large number the goalposts have not been moved at all, and that they have been moved by only a small amount for others.
In my view, it is a pity that the Government ever went down this route. They could have begun the accelerated rise in the pension age to 66 after the completion of the equalisation, between 2020 and 2022, rather than in the period before 2020. Obviously some wonk at the Treasury thought “What a good idea this is—it will save billions of pounds”, without recognising the anomaly that it would create and the difficulty that it would cause for this group of women. If Conservative Members want to know why their stock among women is falling rapidly, I will tell them. The fact that the Tories do not understand that decisions such as this suggest that they imagine women can somehow cope with reductions in their income has made women realise that many of them simply do not understand their lives or appreciate their problems.
The Government’s proposal may be better than what was in the original Bill, but if we vote for it tonight our decision will be final, because that will then be the timetable for the acceleration of women’s pension age to 66. Labour Members believe that certainty is necessary when it comes to pensions and that we must allow people to plan in advance, but whoever wins the next election, the last thing that any Government will be in a position to do is start fiddling with the system. What is fundamental to our argument is that a group of women have had no chance to plan, and I see no way in which any Government will be able to deal with that.
I may be Chair of the Select Committee, but I am afraid that I have no direct say in what should be in a Labour or any other manifesto. However, common sense tells us that whoever is in power after the next election—the Liberal Democrats might have a majority then, and might want to reverse the arrangement—voting against the amendment tonight will remove any chance of our ever finding a solution for this group of women. Events will have moved on, the timetable will have been set, and the pension age will have already changed by the time of the next election. That is what I mean about the lack of time in which to plan.
I hope that Members will accept that it is wrong that this anomaly has been created. I hope that those who have listened to the women in their constituencies will do the right thing tonight, and will vote for the Opposition amendment. That is what I shall be doing.
I am genuinely grateful for the opportunity to support the amendment to which my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) spoke so eloquently. I welcome him to the Dispatch Box.
Many women in my constituency have contacted me about this issue, and none of those who have contacted me over the weekend, yesterday or today have expressed the view that the Government have gone far enough; they all support the amendment. I found it almost stomach-turning to hear the hon. Member for Cardiff Central (Jenny Willott) congratulate herself on winning this concession from the Government. I do not think that even Labour Members should take credit for the achievement—lacking though it is in ambition—and I certainly do not think that the Liberal Democrats should do so. I wish that some of the honourable and good Liberal Democrat members of the Bill Committee mentioned by my right hon. Friend the Member for Croydon North (Malcolm Wicks) had had the guts and the principle to propose similar amendments when they had the opportunity. This feels a bit like Groundhog Day: it is the Health and Social Care Bill all over again.
Credit for the victory, such as it is, lies with all the women who have written to us, e-mailed us, telephoned us, and come to the House to make their case. They have said, “We will not sit back and let the Government do this to us.” Every evening as I leave this place, I see a touching reminder in the poster in the tube station showing those women, although I must confess that at first I considered it rather strange that there was also a man in the photograph, and wondered what that could be about. The fact is that this change will have an impact not just on the women concerned, but on the families for whom they have made plans. In the light of the rising cost of child care, they have asked themselves, “When can I help my sons and daughters to make better lives for themselves and their families?” I have to say that I think my sons and my daughter have similar plans for me, which I intend to resist for as long as possible.
The Government, particularly the Liberal Democrats, have not just broken their promise to women; they have broken their promise to their families as well. What an appalling lack of ambition from a Government! They have repeatedly called on Labour Members to say how we would pay for our proposals, so let me give them a couple of examples. Through the future jobs fund, they could take a million young people off the dole queue so that they were back at work and contributing to the system. They could scrap their top-down reorganisation of the NHS. They could ask the Secretary of State for Communities and Local Government whether he has any money left in the pocket where he found the bin money. This is not about arithmetic; it is about political will. It is about the Government saying, “We believe that this is something worth doing, and it is something to which we will commit ourselves.”
I am very grateful. We let a lot of things past, but will the hon. Lady clarify one point? She mentioned—I think I quote her accurately—getting a million young people back to work through the future jobs fund. Can she tell the House how many permanent jobs young people actually got when Labour ran the future jobs fund?
Perhaps we can have that conversation another time. The point is that the Government do not have the political will to do something about this. In opening for the Opposition, my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East mentioned that it is not just the Prime Minister of this Government who does not “get” women; the whole team do not “get” women.
At Prime Minister’s questions two weeks ago, I watched the Prime Minister’s Parliamentary Private Secretary gathering—almost dragging—women from their seats in order to create a female halo around the Prime Minister. He and his Government need to understand that the reason he is turning women off has nothing to do with stage management or presentation. The reason is the policies—such as the one we are discussing—which are adversely and unfairly impacting on women. I urge Liberal Democrat Members in particular, who have at times pushed the Government on this issue, to go the whole hog tonight and back the amendment.
When a Government consider an inequality impact assessment, that is not political correctness gone mad—it is not just something the previous Labour Government left for the current Government. Rather, it is about good government and good decision making, so that when a Government make a decision, they are in full possession of the facts about how that decision will impact on people.
I would have some sympathy for the hon. Lady’s cause if she could explain where we might find the money to fund what she wants. [Interruption.] This is not about the future jobs fund. Will the hon. Lady tell us where the Labour party would find the cash?
The hon. Gentleman should be extremely grateful to me for giving way, as he has not had the courtesy to be present for the entire debate. The fact is that when this Government want to find money, they can do so.
This decision betrays an appalling lack of ambition. I understand that the Government are not doing well in growing the economy, and they are probably a little disappointed in themselves—as, indeed, others are disappointed in them. Perhaps they have little faith in this country’s ability to recover and come out of the recession, with people back in work and contributing to the state. However, none of that serves to explain why this group of 500,000 women have to pay the price. Why do they have to pay for the Government’s plan to reduce debt?
For every one of those 500,000 women who will work for longer—300,000 of them for the full 18 months—there is a real story, such as that of a woman who works in the care service and who wrote to me. If she had known a few years ago that she was going to have to work extra time, she would have got out of the care sector while she could. She thinks she can struggle on until her retirement age as it stands now, but given the physical demands of her job, she does not think she can do another 18 months of lifting and handling.
Unfortunately, the hon. Member for Gloucester (Richard Graham) has left the Chamber. He talked about women retiring at 40 and 50 and living another 60 years of retirement. He is not talking about the women we are talking about. The women who need this money most are the women this Government are hurting most.
I urge Members to consider fairness, and to consider giving these women a fair chance. This is our one opportunity to stand up for those 500,000 women—the women who have been contacting us, appealing for justice. I hope we will all do the right thing tonight.
As so much that I agree with and endorse has been said, I am sure I can be very brief.
That we have had any concessions at all from the Government today is a tribute to the many women who have contacted Members on both sides of the House. We are disappointed, however, as this is a half-baked measure. It is half-baked in two respects. It is half-baked as it deals with only part of the problem and only some of the women who are adversely affected, when, as my hon. Friend the Member for Aberdeen South (Dame Anne Begg) said, we had an opportunity to solve this problem and move forward. It is also half-baked because it does not offer a holistic response to the situation these women face. Rather, it addresses only the question of when we might grudgingly start to hand them their state pension, and it does not deal at all with the other elements of public policy that will be needed to support those women if they are not going to be eligible for a state pension until later.
Especially as we know that women’s private pension pots are significantly lower than men’s, it is regrettable that we are seeking to delay their access to the state pension before the new auto-enrolment in the National Employment Savings Trust has been in place for long enough for them to have had the opportunity to begin to build up a private pension pot. If these women are expected to remain in the workplace for longer, it is regrettable that there are no signs that the Government’s Work programme will be adapted to be better suited to helping older women find, or remain in, jobs. No thought has been given to how the Work programme will support those women.
I would be grateful if the Minister said what assessment has been made of the other financial benefits these women may have to rely on if they are not able to find paid work at the ages of 64, 65 or 66, and whether the cost the Government are talking about includes the additional level of those benefits. That is a particular concern because if women are using up their savings, they may have to draw further on the state when they reach retirement.
Other colleagues have pointed out that many older women provide child care for their children’s children. Will those children in future have to access paid-for child care that the Government will in due course be subsidising through the tax credit or universal credit?
Also, what is the health strategy in relation to the health needs of these women? We know that women in their 60s are more likely than men to suffer from functional disabilities. Some 40% of women at age 60 have limitations in activities of daily living, and 20% have severe limitations. I have not heard that the Minister has given any thought to that, or had any discussions with colleagues in the Department of Health to ensure that we are also securing better health for those women if we expect them to remain in paid work for longer.
The key additional points I wanted to make were about the absence of a holistic response from the Government. They have hastily introduced a half-baked measure—and a fairly vicious measure for the many hundreds of thousands of women who are still being put in a situation in which their retirement is substantially delayed without their having the resources to carry themselves through to that point. I urge the Minister to think again.
The Minister may feel that he has heard my speech before, as we discussed his Government’s plans to accelerate the rise in state pension age at some length in Committee. However, as he did not fully address the points I made then, I make no apology for making them again.
My constituent, Lorraine Smedley, e-mailed me on Friday asking if anything can be done even at this late stage. The answer must be yes. The Minister can still change his mind; he can accept our amendment that would ensure that no one would wait more than an extra 12 months to receive their pension. Also, if he chooses not to listen, Members on the Government Benches can still decide to join the Opposition in the Lobby tonight. I hope they will do so, although the contributions we have heard so far suggest that they will not.
Members who were not fortunate enough to serve on the Bill Committee will not know about my constituent Lorraine, so let me explain why she is so angry about the Government’s plans. Lorraine worked for the national health service for many years, but, having put aside some savings, she decided to take a part-time job as she moved towards her expected retirement date. She had worked out that she could supplement her part-time wage until her retirement. She told me:
“I thought I was close enough to my retirement age to know where I stood.”
Even with the Government’s welcome concession, Lorraine is still being asked to work for an extra 15 months, and she says she does not know what to do. Working those extra 15 months before she receives her state pension is not a prospect she relishes. Her job as a community care assistant is demanding, both physically and emotionally, and she is not sure that she will be able to continue; and with the cuts in public service spending and public sector jobs, she may not have a job anyway. The prospect of claiming benefits is anathema to Lorraine. She was determined to pay her own way her whole life, and having left school at 16 and paid into the state pension pot all those years she feels that she should not have to rely on benefits now.
Lorraine’s case highlights the two reasons why the Government’s proposals are unfair. First, they do not give women adequate notice of the change. The Minister has sprung these changes on women in their late 50s without giving them a realistic time scale in which to make preparations for the loss of pension payments that they have earned and expected over many years. In 1995, the then Government legislated for the equalisation of state pension ages. Women who were expecting to retire at 60 learned that they would have to wait until they were 65 to do so. They may not have liked it but they had many, many years to adjust. Yet that same group—those same women—who knew that they would have to work or wait for an extra five years for their pension, are now being asked to accept a further rise of more than a year with just five or seven years’ notice of the change.
The second reason why the Government have got it wrong is that the changes lead to one group being asked to bear an unfair share of the burden. According to the Department’s impact assessment, the proposals in the Bill affect about 5 million people—2.3 million men and 2.6 million women. About 4.5 million people will have their state pension age increased by a year or less, and their position is unaffected by the Minister’s last-minute amendment. An estimated 500,000 people, all of them women born between 6 October 1953 and 5 October 1954, will still have their pension age increased by more than a year. Some 300,000 women will experience an increase of exactly 18 months. No man will have to wait more than 12 months extra to receive his pension. How is that fair?
I accept that there has been a significant upward revision in the life expectancy of those reaching 65 over the next decade and that those benefiting from increased longevity should share in the costs. As we live longer, we need to pay more towards our income in retirement and/or work longer. The women like Lorraine who have written to me do not disagree—they understand that they may need to work longer—but they think that they should pay a fair share. The Minister did not explain in Committee so I hope he will explain now how it is fair that those 500,000 women have to pay a bigger share than anyone else, particularly given that we also know that they, as a group, are not well-equipped to bear a greater share of that burden.
As my hon. Friends have set out, these women are less financially secure than men and are much more likely to be reliant on the state pension. If they do have savings for their pension, those are likely to be much less than those of men. These women are likely to have taken time out of the labour market to care for children, thus affecting their contributions record and their salary level. They are likely to have worked part-time and to have been excluded from an occupational pension scheme until the 1990s. The Department’s own figures confirm this: the median pension savings of a 56-year-old woman are, as has been said, just £9,100, whereas the equivalent figure for men is £52,800, which is almost 600% higher.
Although, like Lorraine, I welcome the Minister’s amendment, it just does not go far enough. Women should not bear an unfair burden, which is why I support the Labour amendments. They would mean that 1.2 million fewer people would have to work longer and would ensure that nobody would be asked to work more than 12 months extra to receive their pension.
To be perfectly honest, it is disgraceful that the Government are not giving these women enough time to plan their retirement properly and it is clear that the changes that the Government are now proposing do not remedy the situation that they got themselves into with their initial proposals. It is wrong that women who have worked hard—doing all sorts of things, not necessarily paid work—for many years are now being denied their well-deserved pension for an extra 18 months with so little notice.
Nobody is denying the demands of longevity and the fact that we have to think ahead. However, we have to plan ahead properly and in a structured way. That is why in 2008 Labour legislated that the state pension age would become 66 by 2024 to 2026. That time scale was set out to give people 16 to 18 years in which to plan. As hon. Members will recall, the Turner report recommended a minimum of 15 years’ notice for any changes in the pension age and that is a very important point to note. Obviously the Government have brought that forward significantly, leaving many women with very little time in which to plan for a delayed retirement. Some 500,000 women will have a delay of up to 18 months before they get their pensions and about 330,000 women will have a delay of a full 18 months. The Government are determined to introduce this change, despite the fact that before the election we were given promises by both the Conservatives and the Liberal Democrats that there would be no change before 2020.
The particular women that we are talking about are the most vulnerable. Those who depend most on the state pension are those who have the lowest incomes, those who have perhaps had the least opportunity to make contributions and those who have worked in the least well-paid jobs. As has been clearly expressed by my hon. Friends, women are far more reliant than men on the state pension because their pension pot is usually very small. Very often they have been limited in the opportunities they have had in this regard. They may have taken years out for child care, limited themselves in order to be able to pick up their children after school or limited themselves by geographical location. Often this group of people are enabling their own sons and daughters to work and have a decent income for their families by providing very valuable child care for the grandchildren. We often refer to these women as the “sandwich generation” because at the same time as they are looking after those grandchildren they are often coping with their own elderly parents.
Of course, these women are often more vulnerable to the cuts. An enormous number of cuts are being made in all sorts of jobs, in not only the public sector, but the private sector. The Government’s growth strategy is clearly failing, and often it is not just the lack of public procurements, but the lowering of income levels in the whole of a region or town which is making it harder and harder even for private businesses to flourish. Women are often doing more casual work or are working part-time, and as they are the ones who have often come latest to the jobs they are often the ones facing redundancy. It is often extremely difficult for older women to find new posts, particularly in areas with geographical limitations or not very good bus services, and if they need to be back to collect the grandchildren from school.
A number of these women are widows. My right hon. Friend the Member for Croydon North (Malcolm Wicks) has clearly explained the demographics and set out the number of men in certain groups who die young. Some 19% of men in certain social categories die before the age of 65, many of whom leave widows and they, like other groups, are not best placed to face the difficulties of trying to keep house and home together in difficult financial circumstances. If they do not receive their pension until a certain age, they will be losing not only the state pension, but pension credit and the various concessions and entitlements that are limited to people of state pension age.
If there were a genuine growth strategy, the argument about freeing up jobs would not be valid, because as more jobs are generated people who stay in work longer have more money to spend and so it is easier to create more jobs that younger people can take up. When there is no economic growth and the spiral is downwards, there is more bed-blocking—or job-blocking—whereby older people staying in work makes it more difficult for youngsters to get started.
So although Labour Members welcome the fact that the Government have made something of a concession, we are very disappointed that it is only a half-measure. In fact, it is nothing but window dressing. It is the sort of Christmas present that is wrapping with absolutely nothing inside—an empty cardboard box with some paper round it. The correspondence that I have received indicates to me that my constituents are not fooled by it and are worried that they will still be facing much of the same difficulty as they were with the original proposals.
I shall support the amendments tabled by those on my Front Bench to ensure that we try to give the maximum number of women the maximum amount of benefit that we can, rather than the Government amendments, which are, quite frankly, laughable. They are a disgrace because they do not address the main thrust of the problem and they leave a lot of women with a large gap and very little time in which to work out how to deal with it.
The concession made by the Government is, of course, a welcome one. The fact that we are saying that it is not enough does not mean that it is not welcome, but I do ask why they have taken so long to arrive at this point. On Second Reading, back in June, not a single Government Back Bencher spoke in favour of the Government’s proposals on the acceleration in women’s pension age. They were clearly unhappy but were prevailed on at the time, it would appear, to vote for Second Reading by being told that some form of transitional arrangement would be forthcoming.
Those of us who were privileged to serve in Committee asked for the transitional arrangements so that we could debate and scrutinise them, which is what a Committee ought to be about, but we were told that they were not ready because they would be very complicated. “By the way,” said the Minister, “Where are your transitional proposals? Why have you not come up with any?” As a new Member, I thought that perhaps it was commonplace for the Opposition to be expected to come up with proposals for the Government because they have not thought them up yet—
We had amendments. We tabled amendments that were not a million miles away from those that we are proposing today, because we felt that, in the circumstances, a proposal to cap the period of time for which women would have to endure this change was the best thing to do. Our amendments were not supported by either Government party in Committee, but we had clearly made proposals that ranked as transitional, because—lo and behold—four days before this final chance to debate the subject in the House, a proposal was made. It is not some complex transitional arrangement that would take civil servants hours, weeks or months to work out but fairly straightforward and involves capping the period of time. In my view, that proposal could have been made in Committee without any difficulty and it could also have been made at any time over the months that have passed since the Committee stage ended in July.
I suspect that one of the main reasons this rabbit has apparently been pulled out of the hat at the last minute is to prevent any great campaign being restarted for further change and to prevent people asking for more. Like Oliver—most of us nowadays, unlike the cruel people in Victorian workhouses, think that Oliver was right to ask for more—the women who have contacted my colleagues and me over the past few days are still asking for more because they feel that the Government’s proposals remain unfair. They have alleviated the proposals for one group of women but not for all those who are affected and, in my view, those women are right to ask for more.
The Government have been extremely calculating. By not making their announcement until almost as late as possible while still making it in any way credible, they calculated that they would foreshorten the possibility that their Back Benchers might again be contacted by many of their constituents who would argue that the proposals are still not enough. The fact that they have given the shortest amount of time to this very successful campaign is clearly tactical.
In this debate, we always come back to the money question—it happened repeatedly in Committee and in many interventions on Opposition Members today. We are asked where we will get the money and told to come up with a specific statement about where we will find it. That happens not just as regards this proposal but day in, day out—[Interruption.] It is not unreasonable for us to say that we would not start from here. That is not unreasonable because we have a very different view about the choices and the fairness arguments that it is right to make and about how to progress our public finances over the next period.
Another argument that often comes up states that one cannot borrow one’s way out of a crisis or out of debt. It seems we cannot cut our way out of a deficit either, or out of more debt, because public borrowing, far from having come down in the past year and a half, is rising. We would not start from here because our entire economic strategy would be different. Our view—as we said a year and a half ago and as it remains—is that to attempt to reduce the deficit within this Parliament was reckless, that it would not be successful and that it would risk higher unemployment and the stagnation of the economy. That is what is happening. If the economy continues to stagnate, tax revenues will fall with fewer people in work and fewer businesses thriving. Falling tax revenues are a big reason why we have a deficit in the first place. This is not simply about Government spending, as is sometimes suggested.
Tax revenues will fall and benefits payments and other outgoings will rise, and those are very important considerations. In saying that we would not start from here, it is perfectly reasonable for us to make it clear that we would not want to be in the position that the Government seem determined to drive us into.
Under the Labour proposals for auto-enrolment for pensions, protection was given, but under the coalition Government’s proposals the same protection is not given as there are conditions and people fall outside them. Does the hon. Lady think that that is another example of the difference between the two sides? Labour gives the option of protection and the coalition does not.
That certainly is such an example. If we are to give people the opportunity of saving for their pensions into the future, it is important that we take seriously the proposals for auto-enrolment and NEST and build them up in a way to which everybody should give their full support. Although I am sure that the Government have not officially said that they are not giving them their full support, I was struck as I read an article in The Sunday Times a week last Sunday by a suggestion that the Government might be backing off on the speed of the introduction of auto-enrolment. That might have been a piece of kite-flying, as I gather it relates to a piece of work that is being done internally for the Government, which will not be published and which we cannot see, about how to make yet more savings and attempt to grow the economy, but nevertheless that story reached the newspapers. I am sure the Minister will tell us that we have nothing to fear when we reach the relevant part of the debate.
We are constantly asked where we would find the money and, interestingly, despite the comments that Government Members made from a sedentary position a few moments ago, when my hon. Friends the Members for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and for East Lothian (Fiona O'Donnell) made suggestions, they were pooh-poohed.
Does the hon. Lady accept that one reason why people were incredulous about some of the suggestions made earlier is that the £11 billion required by Labour is equivalent to the whole budget for the Department for Environment, Food and Rural Affairs and roughly double that of the Department for Culture, Media and Sport?
We are talking about a spending period over 10 years, so it is not equivalent to the budget in a given year. Even in those terms, we are always making choices, and I will not accept lessons from a party with many members who are publicly saying that, as quickly as possible, they want to reduce or take away the 50% tax rate. That is something they are keen to do and that is their choice. They can make the case for it, but if they bring that proposal forward, I for one will certainly oppose it. That is another way of deciding how money is going to be spent and how money is going to be collected—and that is only one example.
In an earlier intervention, I mentioned the pension tax relief system, which gives a huge amount of money to people who already have a lot of money. If someone wants to save £100 into their pension pot and they are on 20% tax, in order to get £200 tax relief they have to find £800 from their pocket, but if someone is on 50% tax, they have to find only half the amount they want to save. That is unfair; it is a subsidy to those who already have a lot of income and assets. If at the end of this decade we are finding it difficult to make ends meet and we cannot help the group of women we are talking about, perhaps we should be thinking about that system.
The women who are affected by the measure will be making exactly those comparisons. They know that choices are made in politics and that choices are made by Governments, and they know that it is not impossible for the Government to change their mind on this proposal. They did not campaign for it during the election; indeed one of my hon. Friends has suggested that it was probably drawn up in a great hurry and seemed like a good wheeze at the time, but it puts a particular burden on a group of women many of whom cannot easily afford the changes. I want to emphasise, as several of my colleagues have done, that it should not be assumed that these women have a job and can just go on doing that job, or that they will still be in that job in three, four or five years’ time.
I could not have put it better myself.
Another question that the Minister has to answer is whether the Government, in looking for the savings they plan to make by going down this road, have put into the mix the additional costs that might arise in relation to some of these women, some of whom will not be able to work and might claim benefits. Some might claim jobseeker’s allowance for a period and others might claim employment and support allowance if they are in ill health, although some of them will find that those benefits are cut off very quickly in certain circumstances because of other Government proposals. They will then be thrown back to spending any savings they may have made towards retirement.
A woman in her 50s or early 60s who finds herself in that position may not be able to claim benefit for very long. If she has a partner or has savings of any sort she will not be eligible for the means-tested benefits that come in after six months in the case of JSA and that, under Government proposals, will be lost after a year even for people who are unfit to work and are in a work-related activity group. They will find themselves eating up—literally in some cases—their savings to make it through to their postponed retirement date. Of course, at that stage, those women will no doubt have to claim additional top-ups to help their financial situation. I would like to be satisfied that the Government have taken those costs into account. The women themselves will have to meet extra costs, and so will the Government. The proposal is ill-thought-out and there has been a lot of time to rethink it. Like all the women who have been campaigning on this, I am extremely disappointed that the Government are not prepared to support our amendment tonight.
This is an incredibly important stage of the Bill, about which I have received hundreds of e-mails. I am sure that Members of the House from across the political divide have received e-mails specifically concerning women aged 58 and 56. We have had a number of discussions about this matter, including a Westminster Hall debate at which the Minister was present.
I know that I may sound very boring if I repeat again the concerns of those women and of Opposition Members about why this particular provision should not go through. Everyone accepts that the state pension age needs to rise in order to pay for a more generous basic state pension. This principle underpinned Labour’s Pensions Act 2007, which continued the 1995 timetable for equalising women’s state pension age with men’s by increasing it to 65 by 2020, and then legislated to increase both SPAs to 66 by 2027, to 67 by 2036 and to 68 by 2046. That was agreed and there was cross-party consensus on that.
The coalition agreement stated:
“The parties agree to....hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for man and 2020 for women.”
However, the Bill proposes an acceleration in the equalisation for women by 2018 and increases both men’s and women’s state pension age to 66 by 2020. This will hit women aged between 56 and 58 particularly hard, as they will have very little time to prepare or amend their existing plans. As has been pointed out by my colleagues countless times, those women have worked very hard in their lives but often for not very high pay, so they will not be getting very generous pensions in any event, yet they are going to be hit even harder.
The proposal will affect 4.9 million people—2.6 million women and 2.3 million men. Some 500,000 women born between 6 October 1953 and 5 March 1955 will have their state pension age delayed by more than a year, and 300,000 women born between 6 December 1953 and 5 April 1954 will have theirs delayed by 18 months exactly. For the 300,000 women facing an 18-month delay, the loss of income will be around £7,500; for those in receipt of pension credit, the figure will be closer to £11,000. That sudden and dramatic change in women’s expectations regarding their state pension age and retirement income comes with just five to seven years’ notice, which simply is not long enough for them to make adequate alternative arrangements in their retirement planning.
Women are already at a disadvantage in terms of pension provision. The median pension saving of a 56-year-old woman is just £9,100, whereas the equivalent figure for men is £52,800—almost 600% higher. It is not fair to speed up the equalisation timetable because it will hurt women disproportionately, especially those aged between 56 and 58. I know that we hear about the financial constraints, but if the Government can find £3 billion for the completely unnecessary reorganisation of the national health service, which nobody wants—we have not heard any practitioners in the medical field say that those provisions are right—are they really saying that they cannot find a bit of money for women who have worked hard for so long in their lives? The proposal is measly penny-pinching. The Government are hurting the people who are already the poorest in our society and hitting them even harder. If money can be found for the wasteful reorganisation of the NHS, I am sure money can be found for the provision to be deleted.
I urge the Minister to reconsider this aspect of the Bill and think about those women, who have worked hard all their lives. He should think for once about ordinary working people who are looking forward to some kind of pension, although they will retire later than they thought they would, and he should give them time to prepare for their pensions.
It is a pleasure to support Government amendments 13 and 14 and to ask the House to reject amendment 1.
I welcome the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) to his new role. With due deference to the good people of Kilsyth and Kirkintilloch East, I hope he will forgive me if henceforth I refer to him as the hon. Member for Cumbernauld—I hope they will not take offence at that. As he knows, his predecessor, the hon. Member for Leeds West (Rachel Reeves), to whom he referred in his speech, enjoyed a meteoric rise by shadowing me for 18 months. I hope to do the same for his career.
Before I move on to the amendments, I want to place on record my appreciation of one of the Department’s officials, Evelyn Arnold, who has worked for the Department for 36 years. I know that the right hon. Member for East Ham (Stephen Timms) will have enjoyed working alongside her as well. She is stepping down from a legendary career. It is not often that we pay tribute on the record to the officials who make us sound far better informed than we otherwise would, so I would like to do that formally today.
We have heard £1 billion described today as “window dressing”, “a bit of money” and “penny pinching”. That summarises the difference between opposition and government. It reminds us how we came to find ourselves borrowing £150 billion a year when £11 billion, which is the cost of amendment 1, is regarded as small change and not worth worrying too much about. When pressed about where the £11 billion would come from, the Opposition said, in effect, “We’ll find it at some point,” but there was no specific answer.
It was revealing that the hon. Member for Edinburgh East (Sheila Gilmore) said, “We keep being asked this question.” They keep being asked the question because they keep making unfunded promises. My right hon. Friend the Chancellor pointed out that last week’s Opposition amendment cost £20 billion. Today’s would cost another £11 billion and, as the man once said, “Soon you’re talking about serious money.”
The Government amendments are, as the Chair of the Select Committee graciously said, a huge achievement, which is to say that at a time when the public finances are, if anything—because of the global economic situation—under even more pressure than they were at the time of Second Reading back in June, to identify £1 billion is an important sign of the Government’s commitment to fairness in pension reform.
The Minister wants to make a great deal, and some of his supporters made a great deal, of having extracted that sum from the Treasury, but is he not again mistaking the position? He starts talking about the fact that we are apparently in a very difficult situation, worse than a year ago, and then says, “And we’ve managed to find a billion,” but this is a long-term planning issue—it is not about what has happened in the past year.
I notice that the hon. Lady dismisses the odd billion here or there again as of no great consequence. We have to make these decisions in the context of the real world. That is the difference between government and opposition. The hon. Member for East Lothian (Fiona O’Donnell), who spoke in the debate, said that it would take guts—that was the expression she used—to support an unfunded £11 billion promise, which the Opposition know they will never have to fund and would not implement if in government. That is a very odd definition of “guts”.
As the hon. Lady knows, the coalition agreement referred to the possibility of raising the state pension age for men from 2016 and for women from 2020. Obviously, what we have done since that coalition agreement was produced is sought expert legal advice. We were advised that delaying the equalisation between men and women would have been illegal under European law. That comes to the heart of one of the questions that has rightly been asked, which is, why do the changes affect women more than men? The reason is that they are two separate changes brought together.
The first is the more rapid equalisation, and the second is the equal treatment of men and women from 65 to 66. The equal treatment of men and women from 65 to 66, not surprisingly, affects men and women equally, so the thing that affects women more is equalisation. That is what the Pensions Act 1995 does. It leaves men’s pension age at 65 and equalises women’s pension age, raising it from 60 to 65. Lo and behold, that Bill affected only women, because equalising the pension age so that women get the pension at the same age as men rather than earlier affects women. Not surprisingly, a change that was happening in any case, which we have speeded up and which affects only women, added to a change that affects men and women equally, produces the expected result.
Let me address that directly. What is striking as soon as one looks at the evidence on longevity is just how far behind the curve we are. When the male state pension age was set at 65, it was not so much a case of Lord Hutton writing reports on pensions as a case of Len Hutton striding out at the Oval. That was the era that we were talking about. In that almost 100 years, there have been incredible increases in life expectancy, yet the male state pension age will still be 65 for another seven years. That shows how far behind the curve we are.
The views of Lord Turner were cited by the hon. Member for Cumbernauld and by others, with some suggestion that we are breaching the Turner consensus. However, Lord Turner has breached the Turner consensus, if I may say so. He said in a news interview a couple of years ago, and the world has moved on even since then:
“If I was redoing my report I would be more radical, arguing for an even faster increase in the state pension age.”
That is exactly what we are doing, in line with the Turner consensus.
Does the Minister accept that although longevity has increased, healthy working life has not kept pace with longevity, and that there is a serious issue, especially for the particular group of women under discussion, many of whom will not be in the best of health in their late 50s and early 60s? That is one of the reasons why shifting the goalposts twice for this group of women is having such a disproportionate impact.
The issue of health is certainly important. Almost all the figures that have been quoted through the debate assume that the women whose pension age is being delayed will have no money. If, as the hon. Lady rightly says, they are unable to work because of ill health and the household has no other resources, they will get a significant amount of that money through employment and support allowance and other benefits.
Clearly, there are differences between individual groups and, as the hon. Lady and the hon. Member for Arfon (Hywel Williams) pointed out, between different parts of the country, but if we look at England, Wales and Scotland, for example, in terms of life expectancy at 65, in England for men since 1981 life expectancy has increased by seven years. In Wales for men it has increased by seven years, and in Scotland for men it has increased by seven years. For women, each of those figures is six years, respectively. So although there are differences, there have been substantial increases across the board.
Yes, there is big variation. I accept that point, but there have been increases across the board and we cannot say that because they have not happened for every individual in every part of the country and in every social group, we will do nothing. That is what got us into the present mess in the first place.
I note that the Minister acknowledges that for some women with no other source of income, instead of receiving their state pension they may for a time continue to receive out-of-work benefits. Can he address two points in relation to that? First, what do the Government estimate will be the cost of those women receiving such benefits for an extended period? Secondly, does he not understand that for women who are at that age and stage in their life, being expected to claim something called jobseeker’s allowance is a tremendous insult or a tremendous concern because they know that they are not genuinely jobseekers? The labour market does not want or need them.
On the hon. Lady’s first point, we have of course taken account of the fact that there will be some women, and indeed some men, for whom the changes mean that instead of receiving a retirement pension, they receive jobseeker’s allowance, employment and support allowance or another benefit. To give her an order of magnitude on that, without making allowance for that, the Bill would have saved around £33 billion. Taking account of that, we estimate a saving of around £30 billion, so getting on for 10% of the savings is lost through paying other benefits. That is entirely right and proper. In a way, her observation is backward-looking rather than forward-looking. We are moving to a world in which the idea of early retirement and drawing a pension at 60 years old or below, as in some public service schemes, is simply from another era, and the idea that someone should seek work, particularly if they are able-bodied, into their 60s is going to become entirely normal. The idea that it is somehow offensive to say that someone should look for work in their 60s is an idea from a bygone era; it is not the world that we are moving to.
I am interested in the arithmetic that the Minister has just presented on how his savings have been adjusted, because some people will not be in work. Given that many people in the year or two before retirement are not in work, will he publish the detailed figures so that the House can scrutinise them?
As a former Minister, the right hon. Gentleman will know that the figures were published with the Bill in May: they are from the impact assessment.
We have had a number of contributions, and in the short time available to me I shall refer to some of the points that have been made. As I have said, the hon. Member for Cumbernauld stated that his £11 billion should be spent and regarded it as a small sum, because he took the annual equivalent, divided that by the national debt and came up with a small fraction, as though somehow one can make £11 billion disappear. Well, the Labour party did make £11 billion disappear regularly, so he is keeping up that tradition, I suppose.
My hon. Friend the Member for Cardiff Central (Jenny Willott) asked where state pension reform fits into the measures before us, and I am pleased to tell her that we remain entirely committed to such reform, but one irony of all this is that the very group of women whom we are most concerned about, and whom we have heard most about in this debate, are probably the single group who will most benefit from our ideas on state pension reform.
In particular, many women who spent time bringing up children, before either home responsibilities protection came in or the state second pension introduced crediting, would benefit substantially from such reform. So, yes, their pension age will rise, but as our reforms take hold such women will benefit substantially, and my long-term commitment to pensions justice for women will be delivered. That is certainly my goal.
The right hon. Member for Croydon North (Malcolm Wicks) made the point that he has made before about differences in life expectancy and about people who leave school earlier, but his proposal for starting the national insurance clock running at different ages would create different anomalies. He says that somebody who leaves school and goes into a manual job could get their pension earlier, but someone who leaves school and goes to a desk job would also get their pension earlier, and people would then say, “Is that fair?” There are anomalies whichever way we do it.
The right hon. Gentleman did, however, raise the issue of people in the lowest socio-economic groups, but I remind him that over a 20-year period to 2002 men in the routine class, the lowest—as it were—socio-economic group, saw life expectancy at 65 years old increase by 2.5 years, and, given that the Bill increases the state pension age for men by only one year, the improvement in life expectancy for men, even in the group whom he is most concerned about, is running ahead of our proposed increase in the state pension age.
I repeat to the right hon. Gentleman that his points about the differences between groups are an argument for doing nothing. He supported the Pensions Act 2007, which will raise the state pension age to 68 years old, and we need to address health and occupational inequalities, rather than do nothing while we wait. That is the Opposition’s counsel—let us wait another decade—but the trouble is that we have already waited a century to move the state pensions ages, so how long is long enough?
My hon. Friend the Member for Gloucester (Richard Graham) quite properly raised the important issue of notifying people of any changes, so I shall share with the House our plans. I very much welcome the fact that, subject to the House approving the Bill tonight and their lordships approving it in due course, we will be able to write directly to those affected to tell them exactly how they stand, thereby ending a period of uncertainty.
We will write to those women born between April and December 1953, just over 250,000 of them, early in the new year; to those born between December 1953 and April 1954, another 250,000 people, in February; and to another 250,000, born between April 1954 and April 1955, in March. The last group covers all women who would have been affected by the original equalisation timetable.
Will the Minister also advise those women of their right to employment and support allowance? Will he confirm that, if they claim ESA, are turned down, wait seven months—as some have in my constituency—for an appeal, and that period crosses over their entitlement date to the state pension, their appeal will still be heard and any benefits backdated?
Perhaps the hon. Lady does not understand what I am saying. I am talking about people who will reach state pension age in seven or eight years’ time, so I am not sure that writing a letter, stating, “In the event you are on a certain benefit in seven or eight years’ time, and the delay in tribunals in such and such,” is germane to my point.
The Chair of the Work and Pensions Committee, the hon. Member for Aberdeen South (Dame Anne Begg), in a characteristically balanced contribution—[Interruption]—I spotted the balance even if nobody else did. She described the changes we are making today as a huge achievement, then said, “Well why don’t we go the whole hog,” but there are 11.1 billion reasons why we are not going to go the whole hog, and I am sure she understands that point.
The hon. Member for Edinburgh East said, “Well, I wouldn’t start from here”—and so say all of us. I do not think that any one of us would have chosen to inherit an annual deficit of £150 billion that had to be cleared up—[Interruption.] Members say from a sedentary position, “This isn’t about the deficit,” but a sequence of deficits creates a debt, which will be £1.4 trillion at the end of this Parliament, and that is both a capital sum and the interest that our children and grandchildren will have to pay, so we should take responsibility for it and tackle it.
The hon. Member for Stretford and Urmston (Kate Green) said that the Work programme does not do anything for older women, but its beauty is that providers do not get paid unless they tailor what they do to the individual in front of them. For example, we find that the biggest barrier for many potential older workers is IT skills; they are entirely job-ready but not necessarily up to speed with technology. So, if that is the barrier, the Work programme provider does not need to come to my right hon. Friend the Secretary of State for approval, as in the old days, asking whether it is on a departmental checklist; they just get on with it, help the person obtain the skills and are rewarded only if they get that individual a job.
I understand how the Work programme proposes to reward providers, but does the Minister not accept that older women are particularly disadvantaged when seeking to access the labour market? Can he tell us, therefore, whether there will be an incentive payment to such providers in dealing with those older women?
The incentive is clear: the providers do not get any money at all unless they help someone into work.
The hon. Member for Llanelli (Nia Griffith) mentioned grandparents: women in the age group under discussion who by taking care of grandchildren enable their sons and daughters to work. That is an important point, and that is why I was pleased to carry through in office proposals that had previously been brought forward on national insurance credits for grandparents—when their daughters are not using them—to ensure that their state pension rights do not suffer.
The hon. Member for Edinburgh East asked why we did not do all that earlier and referred to Second Reading, but I remind her that in that debate my right hon. Friend the Secretary of State said that the basic principle of the Bill is right—that we move to equality sooner and to aged 66 in 2020. We have been entirely consistent with what he said, but he also said that we need to make sure that the transition is fair and that those most adversely affected are helped. That is exactly what we deliver on today with the amendments.
We have identified, notwithstanding the difficult fiscal position, £1.1 billion to ensure that half a million people face a shorter increase in their pension age, and that a quarter of a million women who could have faced up to 24 months will now face a maximum of 18 months. It is worth keeping in context the fact that nine out of 10 people affected by the Bill will see an increase of one year or less in their state pension age.
The hon. Member for Bolton South East (Yasmin Qureshi), who spoke last, said, “Well, it’s only a bit of money,” and, “It’s penny pinching,” and all I can say is that many people think that £1.1 billion is a lot of money. I know that it is a naïve observation, but I am in that category as well.
It was important to allocate to this issue a large amount of time for debate today, but we have simply had a repeat of what we heard in Committee: “Find £10 billion or £11 billion—it’ll come from somewhere, it’s not really a lot of money.” From the Government, however, we have seen a serious balance struck between introducing the fiscal responsibility that was all too often lacking under the previous Government and listening and responding to the needs of those most affected by the Bill—and I commend our amendments to the House.
This been a very important debate. I thank the Minister for his reply, but he has not satisfactorily answered the question repeatedly asked by Labour Members, which is fairly straightforward. Why are these 500,000 women paying a disproportionate price? Why are they having disproportionately to carry the burden?
Our amendments, if accepted, would mean that not one of the half a million women affected by this Bill would have to wait more than an extra year for their state pension, and, importantly, that they would have at least nine years’ notice of the rise in their state pension age. At the same time, the state pension age of 66 for men and women would be brought forward to 2022. That would be a fair package, and it would keep the Government to the promise made in the coalition agreement. I should like to withdraw amendment 1 and test the will of the House on amendment 3.
Amendment, by leave withdrawn.
Amendment proposed: 3, page 1, line 8, leave out subsection (4).—(Gregg McClymont.)
Question put, That the amendment be made.
Proceedings interrupted (Programme Order, this day).
The Deputy Speaker put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).
Amendments made: 13, page 2, leave out lines 14 to 18 and insert—
‘6th January 1954 to 5th February 1954
6th May 2019
6th February 1954 to 5th March 1954
6th July 2019
6th March 1954 to 5th April 1954
6th September 2019
6th April 1954 to 5th May 1954
6th November 2019
6th May 1954 to 5th June 1954
6th January 2020
6th June 1954 to 5th July 1954
6th March 2020
6th July 1954 to 5th August 1954
6th May 2020
6th August 1954 to 5th September 1954
6th July 2020
6th September 1954 to 5th October 1954
6th September 2020”’.
Amendment 14, page 2, line 19, leave out ‘“1960” substitute “1954”’ and insert ‘“5th April 1960” substitute “5th October 1954”’.—(Steve Webb.)
New Clause 2
Qualifying schemes: administration charges
‘(1) Section 16 of the 2008 Act (qualifying schemes) is amended as follows.
(2) In subsection (3) for paragraph (a) substitute—
“(a) administration charges due from J while J is an active member exceed a prescribed amount,
(aa) administration charges due from former active members while J is an active member exceed a prescribed amount,
() while J is an active member, the scheme contains provision under which administration charges that will be due from J when J is no longer an active member will exceed a prescribed amount, or will do so in particular circumstances,”.
(3) After that subsection insert—
“(4) For the purposes of subsection (3) administration charges are due from a person to the extent that—
(a) any payments made to the scheme by, or on behalf or in respect of, the person,
(b) any income or capital gain arising from the investment of such payments, or
(c) the value of the person’s rights under the scheme,
may be used to defray the administrative expenses of the scheme, to pay commission or in any other way that does not result in the provision of pension benefits for or in respect of members.
(5) In subsection (3)(aa) “former active member” means a person who at some time after the automatic enrolment date was both a jobholder and an active member but is no longer an active member.”’.—(Steve Webb.)
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 1—Obligation to inform scheme members about provider and product options—
‘Providers of Qualifying Schemes under section 16 of the Pensions Act 2008 (c.30) must, when informing members of their own range of annuity and similar products, explain clearly that alternative and more suitable options from other providers may be available.’.
New clause 9—Duty to establish a review into transfers into the National Employment Savings Trust (NEST)—
‘Within two years of the passing of this Act the Secretary of State shall establish a review into allowing transfers into the National Employment Savings Trust (NEST).’.
New clause 10—Duty to review any order on contribution limits in the National Employment Savings Trust—
‘In section 70 of the 2008 Act (Contribution Limits) at the end of subsection (1) insert—
‘(1A) Any order under this section shall be reviewed by the Secretary of State within two years of the Pension Scheme being opened to members.’.
Amendment 18, in clause 6, page 6, line 37, leave out ‘three’ and insert ‘one’.
Amendment 19, in clause 8, page 8, line 1, at beginning insert ‘Subject to subsection (2A),’.
Amendment 20, page 8, line 4, at end insert—
‘(2A) An order made under subsection (2) must not increase the amount in section 3(1)(c) by more than—
(a) the general level of earning; or
(b) in percentage terms by more than the percentage increase in the Lower Earnings Limit for national insurance purposes.’.
Government amendments 15 and 16.
This is a broad group of proposals relating to private pensions. I shall speak in support of Government new clause 2 and Government amendments 15 and 16. As we have a relatively short time to discuss these issues I will also deal with the other amendments in the group, and do not anticipate making a further contribution to the debate.
Government new clause 2 deals with charges. Obviously, charges are important, as I am sure the whole House will agree, because money that goes on charges does not turn into pensions. The Government are therefore keen to ensure that charges are at a reasonable level and are transparent. For example, following on from the policies of the previous Government, we have gone ahead with the introduction of the National Employment Savings Trust, which will be a low-cost provider designed to ensure that charges across the market are brought down. There is evidence that new entrants to the market and existing providers are already looking at charges significantly lower than many people have experienced on their pensions in the past.
In Committee, concerns were raised about whether the Government should be capping charges. As the right hon. Member for East Ham (Stephen Timms), who is responding for the Opposition, is well aware, the Government do have powers to cap certain pension scheme charges. In considering this issue, we became aware of the anomaly that we do not have that power in relation to people who are no longer active members of pension schemes but who are deferred members, and in particular deferred members of qualifying schemes for auto-enrolment. If we want to cap charges—I will come back to that issue in a second—we do not currently have the power in primary legislation to cap them for deferred members of qualifying schemes for auto-enrolment. The purpose of Government new clause 2 is to give us that power, so that if we want to impose charge caps, we can do so systematically and without unintended omissions.
Our thinking on charge caps is that in general, we do not believe there will be a problem with charges. Particularly in the early years of auto-enrolment, it will be the very largest firms that come into the system. They will have the resources and time to shop around, they will be able to strike good deals, and they will have the National Employment Savings Trust available to them. We expect that for big and medium-sized firms, relatively low charges will be the norm.
However, concern has been expressed about the fact that it will be not the individual pension policyholder but the employer who will choose the provider. That may be a small firm that has little interest in the scheme and is choosing a provider because it has to, rather than because it has an active interest in pensions. It therefore may not put the time and effort required into shopping around, and it may choose a high-cost provider. The members of the scheme, who may not pay much attention to its fine print, may find themselves with above-average charges. If that were to become a problem, we would want the power to do something about it, particularly in the case of deferred members. Once someone has ceased contributing to the scheme or working for the firm, they have even less connection with the scheme and even more vulnerability.
The Minister has referred to the transparency of the current charges in the pensions industry, yet in his evidence to the Work and Pensions Committee, the gentleman who advised the Government on the matter—I regret that I have forgotten his name—made the point, which I am sure everybody in the House would endorse, that existing pensions provision is extremely cloudy. It is extremely difficult to know what the charges are, because the wording is imponderable in many instances. Why is the Minister so sanguine about what will happen in future? It certainly has not happened in the past, and it certainly is not happening now.
There are two significant differences between past and future provision. First, we have established NEST, which did not exist before. It has been set up as a low-cost provider, so we have guaranteed that there is such a provider out there, particularly for small firms, which are the least likely to shop around. Secondly, there is a saying that pensions are not bought, they are sold. In other words, individuals tend not to go out and look for a pension but instead have one sold to them. In a world of auto-enrolment, the opposite is the case. Employers have a legal duty to select a provider, and that makes providers’ costs much lower. Rather than having to bear the huge costs of individual salespeople going out and selling to individual policyholders, employers will instead seek out providers. The costs of the whole process will be much lower, so that will be a significant step in the right direction.
I will not, if the hon. Lady will forgive me, because I am going to try to cover about six topics in not very much time, so as to give everyone else a chance to respond.
Government new clause 2 has been tabled in response to our discussions in Committee, and will give the Government a power that I think previous Governments either thought they had or would have wanted to have. It is the power to cap charges for deferred members of qualifying auto-enrolment schemes. I think that is probably a relatively uncontentious power. Were we to bring it into force, that would clearly be the subject of separate debates and discussion in the House, but I hope the House will be happy that the Government should have that power.
Government amendments 15 and 16 are technical amendments to clause 14, dealing with what would otherwise have been a problem in section 30 of the Pensions Act 2008. Although that section currently allows employers to use a defined benefit, hybrid or money purchase scheme as an alternative scheme, it does not allow them to use a workplace personal pension scheme. Clause 14 corrects that omission, but there is a risk that an individual might be automatically enrolled into a personal pension scheme, and then required to pay contributions immediately for up to four previous years. The amendments protect individuals from that scenario. They correct what we believe to be an error in previous legislation. I hope that the House will find my explanation helpful, although I can go into far greater detail if threatened.
I welcome new clause 1, tabled by my hon. Friend the Member for West Worcestershire (Harriett Baldwin), who serves on the Work and Pensions Committee. I believe that, in a rather intimidating fashion, it has been signed by pretty much all the Committee’s members, so I think I have to give it a fair wind. It is about what is known in jargon as the “open market option”—in other words, the fact that people often forget that when they save for a pension, they are doing two things. First, they are building up a pot of money—the accumulation stage—and then they are turning it into a pension, which is the “decumulation” stage. Those are two entirely separate processes.
All too often, someone can save with provider A—I will not use the name of a company—and think that they have to take their pension from provider A, which they do not. Broadly speaking, as a rule of thumb, it is estimated that the market can be divided into thirds. Roughly a third of people shop around and go somewhere else, a third of people shop around and stay with their original provider, and a third of people do not shop around at all. There is clearly a danger that at the crucial point when somebody sets their income for the rest of their life, they may not be getting the best value. The open market option reminds people that they can shop around, and indeed prompts them to do so. However, as I have just indicated, take-up of that option is not as high as we would wish, or as I believe the insurance industry would increasingly wish, so we need to do more.
I take new clause 1 as a probing amendment, and it is important in getting the issue on the table. As drafted, it would have one or two problems. It would bring some schemes within its scope that should not be, such as final salary schemes. Those are qualifying schemes for auto-enrolment, but we do not want to give final salary scheme providers a duty to tell people about their right to buy an annuity. That would not be appropriate. The new clause also duplicates some existing duties. For example, the Occupational Pension Schemes (Disclosure of Information) Regulations 1996, as I am sure my hon. Friend is well aware, state that when members have the opportunity to select an annuity, they must be informed of their right to buy one on the open market. They must also be advised that there are different types of annuities available, which may have different features and different payment rates. There are also 1987 regulations that relate to contract-based business. So there are rules about the open market option, but I think we would all agree that they are not working as well as they should. I am sure that is the point of my hon. Friend’s new clause.
The Government welcome the opportunity to discuss the open market option. We believe that it is critical for consumers to think about the shape of annuity that is most appropriate to their circumstances and compare rates across providers. There are comparison websites available, which is a helpful development, but people have to know about them to look at them. They have to consider the option in order to know what questions to ask.
I am pleased to say that, in an example of joined-up government, we are working closely with our colleagues at the Treasury on the matter. I regularly meet my hon. Friend the Financial Secretary, who leads on it, to discuss the open market option, and we have a joint working group examining that very issue. My hon. Friend the Member for West Worcestershire will be pleased to know that earlier this year, we asked that working group to consider what is called a default open market option arrangement—in other words, whether we could make shopping around the default, so that people would have to make an active choice to stay with their current provider. There are practical issues to consider, such as what would happen to someone who failed to shop around, whether there should be a point at which their own provider paid them a pension, and what information people should have. However, the principle is attractive, and certainly my hon. Friend the Financial Secretary is keen to go as far as we can.
Progress has already been made. One might say that a working group is often the last refuge of a scoundrel—not the Financial Secretary, I should add; I meant myself. However, this is a working group with teeth. To give one example, the Association of British Insurers, which has engaged actively with us on the matter, has already said that its members will cease sending out to people, with the letter saying that they can get an annuity, the application form from their own provider. They will stop saying, “You can shop around, but here in the same envelope is a form to get an annuity from us.” Instead, a person will actively have to say, “I want my annuity from you; give me a form.” That is a small step in the right direction, but I believe we need to go further.
I will be pleased to hear the arguments and concerns of my hon. Friend the Member for West Worcestershire, but we are certainly seized of the importance of this issue. We do not believe the new clause is quite the way to deliver what is needed, but the Government very much welcome it, and the spirit of what she is trying to achieve.