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Oral Answers to Questions
(11 years, 6 months ago)
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Neil Carmichael (Stroud) (Con)
1. What recent assessment he has made of the security situation in and around the Falkland Islands.
The Minister for the Armed Forces (Mr Andrew Robathan)
The Ministry of Defence undertakes regular assessments of potential military threats to the Falkland Islands to ensure that we retain an appropriate level of defensive capability to address any such threats. There is no current evidence of the intent, or indeed capability, to launch a credible military threat to the south Atlantic. However, we remain vigilant and committed to the protection of the Falkland islanders.
Neil Carmichael
What discussions has the Minister had with our allies regarding security and safety in the region, particularly for the Falklands, but also across the Southern ocean?
Mr Robathan
Personally, I have had no such discussions with our allies in Latin America, but we are very engaged with the region—rather more so than other recent Governments. Indeed, in the past six months ministerial colleagues have made nine visits to Latin America, and there have been a similar number of inward visits from the region, and of course we continue to encourage them to support us. I was particularly pleased that Stephen Harper, the Canadian Prime Minister, last week singled out the Falkland Islands. [Interruption.] He is from north America—well spotted.
Mr David Hanson (Delyn) (Lab)
What assurances can the Minister give the House that the Falkland Islands will remain as well defended after the comprehensive spending review, following the comments of generals and others in the military over the weekend about the potential pressures on the defence budget in future?
Mr Robathan
I think I can assure the right hon. Gentleman that the islands will remain well defended. I spent four months of my life in the Falklands Islands back in 1989 and know the strategic situation there. I know that the British Government, like previous Governments, are determined that the Falkland Islands will remain British for as long as the Falkland islanders wish them to be so.
Mr James Clappison (Hertsmere) (Con)
As we discovered in 1982, the defence of the Falklands ultimately depends on the skill and resources of our armed forces. When the head of the Army warns that further cuts would run the risk of “damaging the professional competence” of our armed forces, surely it is time for us all to sit up and take notice.
Mr Robathan
I think that my hon. Friend will know that we are in a very difficult financial situation, which was left to us by the previous Government. I do not think that any Defence Minister came into government wishing to see a reduction in our armed forces.
Mr Robert Buckland (South Swindon) (Con)
2. What assessment he has made of the effect on NATO’s defence capabilities of the US strategic realignment towards Asia.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
We are assured that there will be no decline in the US commitment to NATO and its members. The collective benefits of NATO membership, however, come with a collective responsibility to share the burden of the alliance’s roles and missions and to pull their weight. We are discussing how all allies can contribute more to our collective security, including through the NATO defence planning process, as discussed most recently at the NATO defence ministerial meeting early this month.
Mr Buckland
What specific assessment has my hon. Friend made of the willingness of European NATO partner nations to step up to the plate when it comes to security in Europe, the middle east and north Africa and to take into account the Pacific pivot?
Dr Murrison
First, it is important to say that the Government welcome the rebalancing of US forces towards the Asia-Pacific region, which is very much in line with our assessment and renewed engagement in the area. It is hoped that partner nations will make similar determinations, noting of course the US’s continuing strong engagement in Europe and the MENA—middle east and north Africa—region, with UK encouragement, and approaching collective security and defence with renewed vigour against a very unfavourable economic backdrop.
Mrs Madeleine Moon (Bridgend) (Lab)
What assessment has been made of the capacity of the Government-owned contractor-operated organisation to facilitate joint trilateral and bilateral procurement with NATO allies?
Dr Murrison
It should be no different from the current situation, but I am sure that the hon. Lady will support any measure we can take to improve defence deliverables and salvage the current position from the mess we inherited.
Mr Julian Brazier (Canterbury) (Con)
Does my hon. Friend agree that America’s understandable decision to shift its focus towards the Pacific puts all the more responsibility on countries such as Britain, which after all are much closer to the potential threats than America is, to keep up our armed forces despite the economic situation?
Dr Murrison
Clearly we cannot ignore the economic situation, because it poses a clear and present danger to this country and others. I think that it means that we will have to renew our efforts with our friends and allies to ensure that they, too, spend significant sums of money on defence, but I should emphasise that the US is quite clear about its continuing commitment to Europe and the MENA region, and I think we should take some comfort from that.
Mr Russell Brown (Dumfries and Galloway) (Lab)
NATO’s defence capability includes the protection of the nuclear umbrella. Does the Minister find it incongruous in respect of NATO membership to have, on the one hand, a policy of unilateral disarmament and, on the other, to seek the protection of that nuclear umbrella? That is the policy of the SNP.
Dr Murrison
It is always nice to find common ground with the hon. Gentleman and the Labour party. On this subject, we are in violent agreement.
Michael Fabricant (Lichfield) (Con)
3. When he next plans to visit the National Memorial Arboretum and Armed Forces Memorial.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
May I start by thanking the Royal British Legion for its custodianship of the National Memorial Arboretum and the trustees of the Armed Forces Memorial for its upkeep? As my hon. Friend will recall—we were there together—I visited the arboretum and laid a wreath at the Armed Forces Memorial on 11 November last year. My right hon. Friend the Secretary of State for Defence also visited in November last year and my noble Friend the Under-Secretary of State for Defence will attend the annual ceremony to unveil the new names on the memorial next month.
Michael Fabricant
The National Memorial Arboretum, which is in my constituency, receives more than 300,000 visitors a year and is a real testament to those who died before the second world war and, with the Armed Forces Memorial, those who have perished since that war. What plans does the Minister have for the commemoration of the 100th anniversary of the first world war? Will anything be done at the National Memorial Arboretum then?
Dr Murrison
My hon. Friend takes a close interest in the National Memorial Arboretum and the Armed Forces Memorial, so he knows well that they were established primarily to commemorate the fallen from 1 January 1948. He will also know that I am the Prime Minister’s special representative for the centenary commemoration of the great war. In that capacity, I am well aware of a number of projects that will involve the National Memorial Arboretum. As my hon. Friend takes such a close interest in both the arboretum and the memorial, I am sure that he will be intimately involved with them.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
I have not yet had the pleasure of visiting the National Memorial Arboretum, although I hope to in the near future.
Stephen Doughty
I will.
I will be attending the memorials for Armed Forces day on 22 June in Penarth in my constituency. What assessment has the Minister made of the scale and support of memorials on Armed Forces day this year? I assume and hope that they are growing.
Dr Murrison
Memorials are certainly a focus for our remembrance and always central to any commemoration of the fallen. I look forward to Armed Forces day this year. I am sure that, as ever, it will be a great success.
Andy Sawford (Corby) (Lab/Co-op)
On Armed Forces day at the National Memorial Arboretum and around the country, I hope that hon. Members will join me in remembering Lance Corporal James Ashworth, who was recently posthumously awarded the Victoria Cross for his conspicuous bravery in Afghanistan; he is only its 14th recipient since the second world war. The commitment of our troops in the field in Afghanistan lends itself to a proper recognition at the National Memorial Arboretum.
Dr Murrison
I add my tribute to that of the hon. Gentleman. It is our intention to remove the memorial currently in Camp Bastion to Staffordshire when that is appropriate. Preparatory work for that will begin later this year.
John Glen (Salisbury) (Con)
4. What assessment he has made of progress in development of the B-variant of the joint strike fighter aircraft; and how many countries have expressed an interest in its procurement.
Gavin Williamson (South Staffordshire) (Con)
11. What assessment he has made of progress in development of the B-variant of the joint strike fighter aircraft; and how many countries have expressed an interest in its procurement.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
Development of the short take-off and vertical landing variant of the joint strike fighter aircraft is progressing well. I saw for myself our third aircraft, of which we have now taken receipt, when I visited Lockheed Martin’s facility in Forth Worth in April, and my right hon. Friend the Secretary of State also witnessed an F-35B demonstrating its hover capability at Pax River last month.
The STOVL variant, the mainstay of the US Marine Corps, has conducted nearly 3,000 flight hours to date, including vertical landings and short take-offs from the USS Wasp. The US, Italy and the UK are the three nations currently committed to procuring the STOVL variant. The UK is working with all joint strike fighter European partner nations to determine the most cost-effective support solution across Europe.
Mr Dunne
As my hon. Friend knows, the aircraft will be based at RAF Marham in Norfolk. The precise mix of aircraft embarked will depend on the mission, but the carrier will routinely have 12 fast jets embarked for operations whenever she sails outside of home waters, while retaining the capacity to deploy up to the 36 previously planned, providing combat and intelligence capability much greater than legacy systems. The aircraft carrier will also be able to carry a wide range of helicopters, including up to 12 Chinook or Merlin transports and eight Apache attack helicopters.
Gavin Williamson
Moog aviation based in my constituency will be a major supplier of components to the new short take-off and vertical landing engine fitted on the joint strike fighter. Will my hon. Friend assure the House that he will do all he can to promote the export opportunities for the JSF, which will act as an enormous boost to many aerospace component manufacturers in the west midlands?
Mr Dunne
The UK is the only tier 1 partner in the joint strike fighter partner programme, which is the largest defence programme in the world. UK industry will provide approximately 15% by value of each JSF to be built, which will secure aerospace industry jobs in this country for decades. Five hundred British companies are already involved in the programme through fair and open competition. Indeed, the UK’s decision to revert to the STOVL variant has increased orders for Rolls-Royce lift system engines for STOVL aircraft, from which the company in my hon. Friend’s constituency will benefit. The British defence industry is exceptionally well placed to benefit from any future export opportunities for this fifth-generation aircraft.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Will the Secretary of State and his team listen to those of us, on both sides of the House, who believe that if we can persuade more of our European partners to switch to the B variant, it will provide a perfect example of how European nations can stand together?
Mr Dunne
As the hon. Gentleman will know from his work on the Defence Committee, the orders for the aircraft will depend on the capability requirements of the customer nations. Italy is the European nation that is already procuring the same variant as we are; other nations that have declared an interest thus far have different capability requirements.
Nick Smith (Blaenau Gwent) (Lab)
How many joint strike fighter aircraft do the Government plan to have operable by 2020?
Richard Graham (Gloucester) (Con)
5. What compensation is given to employers to reflect the additional cost incurred by them through the call-up of a reservist.
The Minister for the Armed Forces (Mr Andrew Robathan)
Reservists’ employers are key partners in mobilisation and the Ministry of Defence recognises that they may incur additional costs when their reservist employee is mobilised. The reservist and their employer have the legal right to apply for financial assistance.
Under the terms of the Reserve Forces (Call-out and Recall) (Financial Assistance) Regulations 2005, an employer can claim the amount by which the replacement costs incurred exceed the relevant earnings of the reservist, subject to a cap of £110 per day. In addition, employers may claim for certain non-recurring costs that they incur in replacing the reservist, including agency fees and advertising costs. An employer may also claim the cost of retraining the reservist following their return to work.
Richard Graham
I am grateful for that encouraging response. Does my right hon. Friend agree that service in the Territorial Army gives men and women alike invaluable life skills, and does he share my belief that, given youth unemployment levels, there are real opportunities to help young people get into the TA through events such as my recent jobs fair in Gloucester? Will he say a little more about the promotion of such opportunities in the TA?
Mr Robathan
I absolutely agree that service in either the regular armed forces or, indeed, the reserve forces offers a great deal of training in life skills, basic values and behaviour, and that that is of value to employers. I would encourage anybody to join the Territorial Army or the reserve forces, and I think that those who join and experience the reserve forces often find that they are much more suited to joining the world of civilian work than they might have been beforehand.
David Wright (Telford) (Lab)
There is solid support across the House for the TA and the reserve forces. I know that the Government are undertaking a review and looking at their recruitment targets. However, there is uncertainty about the future of key regiments. When will the Minister make an announcement, and will he ensure that we protect the Royal Mercian and Lancastrian Yeomanry?
Mr Robathan
The hon. Gentleman tempts me to reveal what has yet to be decided through the White Paper on reserves, which we confidently expect to be published before the summer recess. By that, I mean this summer recess, not next year.
Mr John Baron (Basildon and Billericay) (Con)
The Government have promised to make up the difference between civilian and reservist rates of pay. What estimate has been made of the cost to the Government of that policy?
Mr Robathan
Already, reservists are paid the same or very much the same as regular service personnel. We are looking at all aspects of this subject. Again, I am afraid that my hon. Friend must wait for the White Paper on reserves. I am relatively confident that enough people will come forward to join the reserves and that we can look forward to having a vibrant reserve Army.
Mr Jim Murphy (East Renfrewshire) (Lab)
Tomorrow, the Government will announce the next round of Army redundancies, which will be painful for everyone who is affected. To fill that gap, it is crucial that the reservists plan is a success. There may well be a problem of reservists losing out in job interviews, as some employers worry about a prospective employee being away for prolonged periods. Does the Minister accept that it is crucial to consult on new rights at work to protect our reservists, who do much to protect our country?
Mr Robathan
The right hon. Gentleman raises an important point, about which we are very well apprised. When the White Paper comes out, he will find much that satisfies him. He will know that the Secretary of State has said that we are considering financial incentivisation for employers, and for small employers in particular, who suffer disproportionately. If one person out of a work force in single figures leaves, it has much more impact than one person deploying out of a thousand people from a large employer.
Martin Horwood (Cheltenham) (LD)
6. What recent discussions he has had with representatives of former Gurkhas; and if he will make a statement.
The Minister of State, Ministry of Defence (Mr Mark Francois)
There have been no recent ministerial discussions with representatives of former Gurkhas. However, the Government place great value on the contribution of Gurkhas, past and present. I am aware of recent approaches by representatives of ex-Gurkhas to other right hon. and hon. Members on a number of issues, including the possibility of ex-Gurkhas joining the reserves.
Martin Horwood
Given the Government’s ambition and determination to create a large, integrated and fully trained reserve force, would it not be a powerful reinforcement of that strategy to give automatic reserve liability to Gurkhas, who have residency rights and, as the Minister rightly said, are famous for their contribution and military skills?
Mr Francois
The fighting spirit of the Gurkhas has never been in doubt. They serve in the Territorial Army and all ex-Gurkhas who are living in the UK can apply to join the reserves. The recently launched TA Live campaign encourages all ex-regulars, including Gurkhas, to join. We hope that as many of them as possible will do so.
Wayne David (Caerphilly) (Lab)
When he was Leader of the Opposition in 2009, the Prime Minister said of the Gurkhas:
“They are the bravest of the brave…they have fought and died for this country in some of its toughest battles. We owe them a huge debt. We need to treat them properly in return.”
In the light of those comments, can I take it that there will be no announcement tomorrow about redundancies for the Gurkhas?
Mr Francois
I am afraid that I cannot give the hon. Gentleman the blanket guarantee that he has asked for. He will have to wait until tomorrow’s announcement.
Bob Stewart (Beckenham) (Con)
Everyone in this House is a total supporter of the Gurkha regiment and former Gurkhas. However, now that the Gurkha regiment costs roughly the same as an English regiment, how can it be that we will scrap four infantry battalions in the next 18 months, some two years at least before the reserve Army comes into full being? That seems crazy to me. I am referring in particular to the 3rd Battalion the Mercian Regiment, the Staffords.
Mr Francois
I am sure that my hon. Friend, with his military background of which the House is well aware, is as proud as any Member of the House of the service record of the Gurkhas for this country. As he is aware, we have a particular arrangement with the Sultan of Brunei regarding one of the two Gurkha battalions, which helps to defray part of the cost of their service to the country. That arrangement is likely to continue and our decisions are partly based on that. I reiterate our great pride at having Gurkhas in the British Army. That is something that we wish to continue.
Hugh Bayley (York Central) (Lab)
7. What the outcome was of the recent NATO Defence Ministers’ meeting; and if he will make a statement.
The Secretary of State for Defence (Mr Philip Hammond)
The key outcomes of the recent NATO Defence Ministers’ meeting included allied endorsement of the concept of operations for NATO’s post-2014 “Train, Advise, Assist” mission in Afghanistan; agreement to national capability targets apportioned to allies as part of the NATO defence planning process; and a commitment to conduct follow-on work on how NATO might prevent, respond to and recover from a cyber-attack against systems of critical importance to the alliance.
Hugh Bayley
The UK is one of a small number of alliance members that spend 2% or more of their national income on defence. Was the need to raise defence expenditures by those countries that do not meet the 2% threshold raised at the meeting, and what is the Secretary of State doing to try to ensure that other countries in the alliance share the burden with us?
Mr Hammond
The adequate resourcing of European NATO members’ defence budgets was raised, but—as I have already said in the House—we must also be realistic about the situation that most European countries are facing in their public finances. The more fruitful vein for the next few years will be to ensure that we get true deliverable military capability with the budgets that countries already spend.
Mr James Arbuthnot (North East Hampshire) (Con)
I know my right hon. Friend believes that NATO’s output is more important than the 2% target of defence spending, but does he accept that if we abandon that 2% target, we will reduce the pressure on improving the output from NATO?
Mr Hammond
I am grateful to my right hon. Friend and I think both issues are important. It is important to be clear that in the medium to long term we must expect NATO members who want to benefit from the advantages of membership to pay the subscription price, as it were, in the form of adequately resourced defence budgets. In the shorter term, reality dictates that we focus on turning the budgets we already have into real, deliverable military capability. There is enormous headroom between what is delivered now with the £200-odd billion of NATO European defence expenditure, and what could be achieved if it were properly organised.
Angus Robertson (Moray) (SNP)
Will the Secretary of State confirm that northern European NATO allies such as Denmark, Norway and Iceland believe that the challenges of the Arctic and the high north are extremely important? Will he also confirm whether the Ministry of Defence has any plans to take part in air policing for NATO from Reykjavik?
Mr Hammond
We have no plans at the moment to take part in air policing operations from Reykjavik, but we recognise the importance of the high north, not least because such a large proportion of Britain’s primary energy resources now come from the Norwegian sector of the North sea. The MOD is currently undertaking a review of the strategic significance of the polar regions, both north and south, and that will be part of the evidence that informs the 2015 strategic defence and security review.
Mark Pritchard (The Wrekin) (Con)
One of the lessons from Libya showed that the European members of NATO lack sufficient ISTAR— intelligence, surveillance, target acquisition and reconnaissance—and air-to-air fuel capability. Will the Secretary of State update the House on what progress European allies are making in bringing forward that capability?
Mr Hammond
Both areas mentioned by my hon. Friend are identified gaps in European NATO capability. Once again, I made it clear at the NATO ministerial meeting that the UK will have surplus capacity in air-to-air refuelling once our new Voyager fleet is fully delivered, and that we are more than willing to share that capacity with other NATO allies in the spirit of pooling and sharing.
Mr Jim Murphy (East Renfrewshire) (Lab)
The Government and other NATO members have our support in difficult circumstances in trying to end the bloodshed in Syria. As the UK and some other NATO nations consider arming the rebels, will the Secretary of State say what successful precedent there is for the UK arming an opposition force and using a vetting process to ensure that weapons provided are quarantined so that they do not fall into the possession of those whose aims we do not share?
Mr Hammond
I think there is a hypothetical hidden premise in the right hon. Gentleman’s question. The UK has made no decision to arm the rebels in Syria and we maintain our focus on achieving a political solution, in particular at the Geneva II peace conference, and that will be a central theme of the discussions going on right now in Lough Erne. We must, of course, leave all options on the table while the terrible attrition of the Syrian population continues at the hands of the Assad regime.
Sir Edward Leigh (Gainsborough) (Con)
8. What plans he has for his Department’s facilities in Lincolnshire and the east midlands.
The Minister for the Armed Forces (Mr Andrew Robathan)
I believe I can be the first to congratulate my hon. Friend on his well-deserved knighthood.
As my right hon. Friend the Secretary of State set out in his army basing plan announcement on 5 March, Cottesmore and North Luffenham will be the focus of one of the seven areas in the UK around which the Army will become increasingly consolidated. The major site for development in the east midlands is Kendrew barracks at Cottesmore, which will be expanded to accommodate an additional unit. North Luffenham will see some minor development and a logistics unit will move into Grantham. The written ministerial statement on 25 March confirmed the vacation of RAF Kirton in Lindsey and the disposal of the former airfield and technical facilities at the site.
Sir Edward Leigh
It was an honour to sit behind the veterans of the Dambusters raid at its 70th anniversary at RAF Scampton in my constituency. Beside the courage of those men, hon. Members’ efforts in the House look very puny indeed. In the light of the glorious history of RAF Scampton, will the Minister reassure me that the base continues to have a bright operational future?
Mr Robathan
I am glad to say that I can reassure my hon. Friend. Both the Red Arrows, the RAF aerobatic team, and the air surveillance control system will be retained at the station until at least the end of the decade, although I cannot vouch for whatever happens afterwards, because I will probably have left this place. [Interruption.] It wasn’t that—I was just thinking that, by that time, I will be getting on a bit.
Julian Smith (Skipton and Ripon) (Con)
10. What steps his Department is taking to engage with those affected by the closure of Claro barracks, Ripon.
The Minister for the Armed Forces (Mr Andrew Robathan)
Following the Army basing plan announcement of the 5 March 2013, which confirmed the closure of Claro barracks, Ripon, a meeting was held on 28 March with my hon. Friend and officials from North Yorkshire county council, Harrogate district council and Ripon city council. A further meeting was held on 7 May, at which the Department undertook to maintain contact with local authorities and agencies to keep our key stakeholders informed of developments as closure plans proceed.
Julian Smith
I thank the Minister and civil servants for the sensitive way in which they are dealing with this serious issue in my constituency, but may I urge him to come to a quick decision on whether the Claro or the Deverell site will ultimately close?
Mr Robathan
My hon. Friend and I met and discussed that last month. As he knows, I am keen to see the site for myself. We have a use for a training camp in that area, and wish to retain the training area adjacent to both barracks. From what I understand, the Claro site is a better, more modern site, and the Deverell site might be more suitable for redevelopment. However, we will work through that with my hon. Friend and the local authority.
Nigel Adams (Selby and Ainsty) (Con)
As a fellow north Yorkshire MP, I share the concern of my hon. Friend the Member for Skipton and Ripon (Julian Smith) with regard to Ripon, but will the Minister shed light on the future of the RAF Church Fenton site, which is to close by the end of this year? Are there plans to sell the site off or to use it for other military purposes? If so, what is the likely time scale?
Mr Robathan
I am slightly uncertain of the exact details on Church Fenton. If I may, I will write to my hon. Friend with the detail, but I understand that we intend to dispose of the site when it is entirely vacated.
Mark Menzies (Fylde) (Con)
12. What reports he has received on future developments in the capability of the Typhoon aircraft.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
As my hon. Friend knows—he is a keen student of the Typhoon programme—there is great scope to enhance the capabilities of that already powerful aircraft, in particular when compared with mature platforms, which have less scope to enhance their capabilities. Tranche 3 aircraft are being delivered from the Warton plant near his constituency with improved multi-role, and ISTAR capabilities.
Mark Menzies
Does the Minister believe that the upgrades to Typhoon, which is built in my constituency, will not only provide the RAF with a world-class front-line aircraft, but ensure that Typhoons will be competitive in the highly competitive export market?
Mr Dunne
I believe the constituency boundary with Ribble Valley passes through the site, so I may have to stand corrected on which bit of the site they are made. The development upgrades and improved ISTAR to which my hon. Friend refers will provide the RAF, and the other six air forces that have already committed to the aircraft, with battle-winning performance, as was demonstrated in the Libya campaign. We are actively engaged with existing and potential partners and customers on the scope for collaborating on the development of further capability. We are also supporting industry in a number of export campaigns, and are hopeful that other allies and partner nations will join the family of users of this outstanding aircraft.
Damian Collins (Folkestone and Hythe) (Con)
13. What assessment he has made of the value of the European Defence Agency.
The Parliamentary Under-Secretary of State for Defence (Dr Andrew Murrison)
The European Defence Agency has achieved some initial success in delivering improvements to the capabilities of European nations, but we believe that it could do a great deal better. That is why the Ministry of Defence concluded earlier this year that although we should maintain our subscription to the agency, our continuing membership is to be reviewed again in late 2013 in the light of progress made during the year.
Damian Collins
Does my hon. Friend agree that continued UK membership must be based on detailed cost-benefit analysis of both UK defence needs and those of our European NATO allies?
Dr Murrison
The EDA spends €30.5 million a year, which is a great deal of money in the current circumstances. I think the House will agree that it would be perverse if we were forced to make cutbacks in defence at home while voting through increases at a European level. I am therefore pleased to say that in November last year I again vetoed the increase in the EDA budget. The UK was the only country to exercise its vote in that way. For as long as the EDA fails to cut the mustard, we will continue to do just that.
Mr James Gray (North Wiltshire) (Con)
14. What recent discussions he has had with the Chancellor of the Exchequer about his planned spending review.
The Secretary of State for Defence (Mr Philip Hammond)
I have frequent conversations with my Cabinet colleagues on a wide range of Government business. The current spending review will set departmental funding limits for financial year 2015-16 and is due to report on 26 June. My officials have been working closely and collaboratively with the Treasury and Cabinet Office colleagues to identify areas where further efficiencies in defence spending can be achieved.
Mr Gray
I am sure the whole House agrees that we live in dangerous and difficult times. Does the Secretary of State not agree with me, and, more importantly, the Chief of the General Staff over the weekend, that any further cuts in defence spending would seriously risk undermining our capability to defend our realm and to project power overseas?
Mr Hammond
As my hon. Friend will know, the Prime Minister and the Treasury have already confirmed that the equipment plan will increase in real terms plus 1% in the period from 2015 to 2020, and we are not looking at changes that will reduce military manpower. However, I have to say to him and to the House that efficiencies can always be found in any budget, and we will search for all the efficiencies that we can reasonably find and deliver.
Kate Green (Stretford and Urmston) (Lab)
I am pleased to hear the Secretary of State highlight the importance of efficiencies in considering the spending review. Will he meet me to discuss the deep concerns of Joseph Gleave & Son, which has been a long-standing supplier to the Ministry of Defence and employs approximately 80 people in my constituency, regarding inefficiencies in procurement following the shift to the Government Procurement Service and the establishment of Defence Equipment and Support operations?
Mr Hammond
I recognise that there may be a tension between our determination to drive more efficient procurement and some suppliers finding that to be a difficult experience, but I am sure that the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne), who has responsibility for defence equipment support and technology, would be delighted to meet the hon. Lady.
Sir Bob Russell (Colchester) (LD)
Has the Secretary of State thought of giving Treasury officials and Ministers an idiot’s guide to what Her Majesty’s armed forces are all about, because some of the comments over the weekend about army horses and tanks showed a degree of ignorance?
Mr Hammond
I will probably not share with my hon. Friend all the thoughts that I would like to offer to the Treasury and some of my colleagues, but I will say this: while it is easy to draw attention to such things as the number of horses in the army, the moral component of our armed forces—that which links it to the great tradition of military service in this country—is a very important part of delivering military capability and is money well spent.
Alison Seabeck (Plymouth, Moor View) (Lab)
Included in those discussions will be the projected savings from the proposed changes to Defence Equipment and Support announced in last week’s White Paper. For the benefit of the House, will the Secretary of State set out what specific flexibilities he has won from the Treasury—one assumes he got its agreement before publishing the White Paper—so that the DE&S-plus model can compete openly and fairly with the Government-owned, contractor-operated option during the assessment phase?
Mr Hammond
That is precisely the purpose of the assessment phase: to explore the boundaries of how far we can take a wholly public sector DE&S-plus model as a benchmark against which we can score the bids we receive for the alternative GoCo proposal.
Andrew Gwynne (Denton and Reddish) (Lab)
15. What support his Department provides for veterans’ travel.
The Minister of State, Ministry of Defence (Mr Mark Francois)
We try to be responsive and innovative in thinking about how we repay the debt we owe to our veterans. An example is the recently revamped defence discount service, which covers discounted holidays and travel. Other direct support includes reduced rate air travel, via the South Atlantic air bridge, for Falkland Islands veterans.
Andrew Gwynne
I am sure the whole House supports the need to do more to give our armed services personnel and veterans the ability to travel. It is commonplace in America for US personnel to get priority boarding at their airports. Would the Minister support a similar scheme here and encourage British airlines to offer Her Majesty’s armed services personnel priority boarding rights in British airports?
Mr Francois
As someone who flew Ryanair from Stansted over the bank holiday weekend recently, I am in favour in principle of just about anything that gets people on to aircraft more efficiently. The hon. Gentleman’s idea could be worth looking at, but he and the House might be interested to know that the MOD has been having much broader discussions with business and industry about how they can do a range of things for the armed forces community under the auspices of the armed forces covenant, and we hope to have something to say about that in the relatively near future.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
Last week, I visited the Department of Veterans Affairs in Washington DC and picked up a copy of a book, “Federal Benefits for Veterans, Dependants and Survivors”. Is my right hon. Friend willing to meet me to discuss producing a similar directory and potentially a website?
Mr Francois
I, too, have been to the States and met people in the Department of Veterans Affairs. It is important to remember that the Americans have a different way of doing it from us, because they do not have a national health service model. Nevertheless, the VA has a high profile in the United States—higher than the Service Personnel and Veterans Agency has in the United Kingdom. I would like to raise the latter’s profile so that more veterans and members of the public know what we do for the veterans’ community, and I am happy to meet my hon. Friend to talk about precisely that.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
16. What estimate he has made of the minimum number of submarines required to maintain a continuous-at-sea nuclear deterrent.
John Howell (Henley) (Con)
17. What assessment he has made of the potential effect that a reduced number of nuclear-armed submarines would have on the UK’s ability to maintain a continuous-at-sea deterrent.
The Secretary of State for Defence (Mr Philip Hammond)
The 2006 White Paper, “The Future of the United Kingdom’s Nuclear Deterrent”, stated that the minimum number of Vanguard class submarines required to maintain a continuous-at-sea nuclear deterrent was four. The number of submarines required to deliver CASD into the future will be determined in the main gate investment decision for the successor replacement for the Vanguard class, which is expected in 2016. This is a technical, rather than a policy, question.
Dr Thérèse Coffey
Has my right hon. Friend seen recent media reports that the Liberal Democrats might be proposing a reduction to just two nuclear submarines? Does he agree that it would be impossible to maintain a continuous-at-sea deterrent, which is the hallmark of national security?
Mr Hammond
I have learned not to read too much into newspaper reports. The main gate decision in 2016, which will define the number of submarines required to maintain CASD, will consider the case for four or three submarines, but I can say without equivocation that there is no possibility of maintaining CASD with two submarines.
John Howell
Does my right hon. Friend agree that any cost savings from a proposal to reduce the UK’s fleet of ballistic missile submarines to just two would need to take into account the requirement to maintain the UK’s sovereign submarine manufacturing capability?
Mr Hammond
My hon. Friend is absolutely right. Simply reducing the fleet, even if that were possible while maintaining CASD, would not generate proportionate savings. Many of the costs are fixed—the costs of development and maintaining industrial capability, not merely at Barrow-in-Furness for submarine building, but in the nuclear propulsion industry. No one in this House should ever forget either that these high-end, high-technology platforms support the very top end of British manufacturing industry—the high-precision, high-technology engineering industry on which the revival of manufacturing depends.
Diana Johnson (Kingston upon Hull North) (Lab)
Will the Trident alternative review be published as a Government document or a Liberal Democrat document?
Mr Hammond
An unclassified summary of the Trident alternative review will be prepared by the Cabinet Office and published as a Government document.
Mr Kevan Jones (North Durham) (Lab)
In January, the Chief Secretary to the Treasury told The Guardian newspaper that the coalition review of Trident would compile a “compelling” list of alternatives. It was suggested in the Financial Times recently that the review will come down on the side of a submarine-based ballistic missile system. In the light of that, will the Secretary of State tell the House when the review will be published, and if it comes down on the side of a submarine-based system, will the Government consider bringing forward the main gate decision into this Parliament?
Mr Hammond
I cannot comment on the findings of the review, which is not yet concluded and has not yet reported to the Prime Minister and the Deputy Prime Minister, but I can tell the hon. Gentleman that there is no need to bring forward the 2016 main gate decision point. That decision will be made in 2016, in order to deliver the new submarines into service from 2028, when they are required.
Tessa Munt (Wells) (LD)
I wonder whether the Secretary of State has responded to Rear-Admiral Patrick Middleton, who wrote in The Times on 7 May:
“With the latest developments in defence technology, the argument for Trident as a deterrent is rapidly becoming a losing one”.
Mr Hammond
I am afraid I do not agree with him. I suspect this is a retired rear admiral—well, I know it is; and if it isn’t, he soon will be—to whom the hon. Lady refers. We are clear that the retention of the continuous-at-sea deterrent is vital to ensure Britain’s national security and is the ultimate guarantee of our sovereignty.
John Woodcock (Barrow and Furness) (Lab/Co-op)
I very much look forward to welcoming the Minister for defence equipment, the Under-Secretary of State for Defence, the hon. Member for Ludlow (Mr Dunne), and the shadow Secretary of State to my parliamentary reception on 1 July about the high-end manufacturing jobs that the submarine supply chain produces. The durability of the submarine hulls is critical to the decisions and the timing of renewal. Will the Secretary of State give the House an update on his Department’s assessment of extending the hull life to 35 years, as is currently the case, and any possible decision to extend it further in future?
Mr Hammond
First, I will check my diary. I thank the hon. Gentleman for his kind invitation.
I am not sure whether the hon. Gentleman is asking if we have considered whether it is possible to extend further the life of the existing submarines or to design the successor class with a longer in-service life. On the first question, he will know that we have already extended the life of the Vanguard class once, and it is not judged possible or safe to extend it further. On the second question, we will of course be looking to design the successor class with the longest possible in-service life.
Dr Julian Lewis (New Forest East) (Con)
My right hon. Friend is clearly very robust on this issue, but may I urge him to consider deeply the suggestion of the shadow Armed Forces Minister, the hon. Member for North Durham (Mr Jones)? If those on both Front Benches agree on the need to renew Trident and to keep continuous-at-sea deterrence, why should they not agree before the general election to make this irreversible, so that Trident cannot again become a political football, as it unfortunately did between my party and the Liberal Democrats in 2010?
Mr Hammond
I have to say to my hon. Friend—who is a great expert on this subject and has been one for longer than I can remember—that the essence of our strategy for defence procurement, which is at the heart of our determination to maintain a balanced budget, is that we do not make contractual commitments until we need to for the delivery of equipment in a timely fashion, when we need it. Locking in decisions before they need to be made merely reduces flexibility and, as the previous Government found out, drives cost into the programme if changes have to be made.
Mr Speaker
The hon. Member for New Forest East (Dr Lewis) has spoken eloquently at me on the matter for 30 years.
Mr John Baron (Basildon and Billericay) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Defence (Mr Philip Hammond)
My priority remains the success of operations in Afghanistan. Beyond that, my priorities are to deliver the sustainable transformation of the Ministry of Defence, to maintain budgets in balance and to deliver equipment programmes so that our armed forces can be confident of being properly equipped and trained.
Mr Baron
A number of us on the Conservative Benches have reservations about the Government’s reservist policy, including its cost-effectiveness. Given that the MOD’s figures show that the Territorial Army’s mobilisation rate is 40%, which suggests we need 50,000 reservists not 30,000, and that rates of pay for ex-reservists will beat those of a serving brigadier, how confident is the Secretary of State that the £1.8 billion will cover the policy?
Mr Hammond
As in many areas, we have to work within the financial constraints presented to us, and we are currently tailoring a package of support for the reserve forces that can be accommodated within the £1.8 billion. I am quite confident that we can do so.
I would like to correct a possible misunderstanding. The top-up to rates of civilian pay has always been available in the system and our proposal is to limit that so that we make sure that we pay only people who have specialist skills what are sometimes very large amounts of money.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
Mesothelioma is a terrible disease, as far too many of my constituents know. Will the Government take the opportunity to back amendments to the Mesothelioma Bill—or indeed table their own amendments—so that veterans who were exposed to asbestos prior to 1987 while they were employed by the Ministry of Defence, and their families, are able to get compensation?
The Minister of State, Ministry of Defence (Mr Mark Francois)
As the hon. Lady knows, issues of Crown immunity relate to the period before 1987. As she also knows, it is not this Department that leads on this particular issue. I cannot guarantee her that there will be a change in the position, but her comments are noted and I will make sure that they are passed on to those who are dealing with Bill.
Neil Carmichael (Stroud) (Con)
T2. With the importance of engineering and technology in mind, what measures is the Secretary of State or the Minister taking to engage with defence industries in Gloucestershire?
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
As my hon. Friend knows, the Ministry of Defence places great emphasis on trying to improve access for small and medium-sized enterprises into the procurement chain. As far as Gloucester is concerned, my hon. Friend may not know that next week, at the invitation of my hon. Friend the Member for Gloucester (Richard Graham), I will attend a meeting of defence contractors for the whole of Gloucestershire.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
T6. Given that so many experts, leading generals and admirals think that we no longer have defence forces that are capable of defending this country, will the Secretary of State look at his Department’s spending over the last five years of £34 million on G4S, which did such a good job on the Olympics?
Mr Philip Hammond
We are looking at all areas of spending other than those that support military personnel numbers. Some of the hon. Gentleman’s examples and many others that people have quoted at me are, in fact, examples of the Department having historically made efficiencies by civilianising or contractorising parts of the service. We will continue to do that where it makes sense to do so.
Pauline Latham (Mid Derbyshire) (Con)
T3. What advice can my right hon. Friend give to small and medium-sized businesses such as Armadillo Merino in my Mid Derbyshire constituency, which wants to apply to the approved MOD procurement list? It has socks that stop trench foot and undergarments that will stop people burning, keeping their lives safer for longer.
Mr Dunne
The Ministry of Defence takes the clothing of our personnel exceptionally seriously. We have a dedicated defence clothing team in DE&S, which last year placed £80 million-worth of contracts. We have some 30 companies engaged in clothing contracts, 90% of which are UK based. My hon. Friend has written to me about the sock and undergarment manufacturer in her constituency, and I look forward to responding to her in writing very shortly.
Chris Bryant (Rhondda) (Lab)
Given that Russia’s latest statement of its military doctrine states that the greatest threat to Russian security is the existence of NATO, and given that Russia has significant naval and military investment in Syria, is it not the height of irresponsibility for the Government constantly to ramp up talk of putting more arms into Syria?
Mr Philip Hammond
As I have already said once today, the Government have made no decision to supply any arms to anyone in Syria. As for the hon. Gentleman’s substantive point about Russia, in the context of the debate that we have just had about the nuclear deterrent, it is important to note that the Russians are committed to spending $146 billion over the next 10 years on modernising their forces, including parts of their nuclear forces that had been mothballed over the last few years.
Jason McCartney (Colne Valley) (Con)
T4. Eighteen-year-old Private Thomas Wroe from Meltham, in my constituency, was serving in the 3rd Battalion the Yorkshire Regiment when he was killed by a rogue Afghan policeman last September. Next Thursday, Helme Hall care home will open the Tom Wroe complex care facility, a specialised unit for adults with complex care needs. Tom’s mother, Claire, is a manager at the home. Does my right hon. Friend agree that the initiative of dedicating care homes, parks and streets after our brave soldiers is a fitting tribute to those who have made the ultimate sacrifice for our country?
Mr Francois
I join my hon. Friend in paying tribute to Private Thomas Wroe of the 3rd Battalion the Yorkshire Regiment, who gave his life in the service of his country. I am very pleased to hear about the opening of the Tom Wroe complex care facility, which I am sure will serve as a fitting tribute to his memory.
There may indeed be merit in my hon. Friend’s proposal, but I think that such decisions are best made by local communities, in which, in a sense, these matters will resonate the most. On behalf of—I am sure—the whole House, I wish the new facility the best of luck in the future.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Government guidelines that were supposed to exempt the families of members of the armed forces from the bedroom tax require a letter to be sent by those in the chain of command to confirm the deployment of the soldiers in question on the front line in Afghanistan. Can the Minister tell me how many armed forces families are in rent arrears as a result—I have heard that it is a large number—and will he meet me to resolve the problem as soon as possible?
Mr Francois
The hon. Gentleman has raised this issue with me in the House before. He will be aware that my right hon. Friend the Secretary of State for Work and Pensions announced on 12 March that adults who were in the armed forces but continued to live with their parents would be treated as continuing to live at home, even when deployed on operations. I cannot give a specific answer to his numerical question off the top of my head, but I assure him that I will look into it and write to him promptly.
Jeremy Lefroy (Stafford) (Con)
T5. The Army’s Nanyuki base in Kenya is greatly appreciated by the armed forces because of the wide range of training that it offers. What plans has my right hon. Friend for further investment there?
The Minister for the Armed Forces (Mr Andrew Robathan)
We greatly value the training facilities in Kenya, and are determined to maintain them. We continue to have good relations with the Kenyan Government. I think that the country benefits from our presence, and we certainly benefit from the training. I cannot tell my hon. Friend exactly what plans we have for further investment, but I will let him know by letter.
Jim McGovern (Dundee West) (Lab)
May I return to the subject of protective clothing for our armed forces personnel? The Minister may recall that I wrote to him recently asking him to look sympathetically at Remploy in my constituency, which has successfully manufactured such clothing for many years. Why have we offered the contract to a firm in north Africa, thus pushing the Dundee factory nearer to closure? Is it right to save money at the cost of British jobs?
Mr Dunne
As the hon. Gentleman knows, the Government have adopted a policy of open competition when it comes to, in particular, commodity equipment such as clothing. I am afraid that if the business in his constituency was unable to bid competitively, that is the consequence.
Simon Hughes (Bermondsey and Old Southwark) (LD)
Figures produced two years ago showed that four out of 100 homeless people in London had spent some time in the armed services. The Government have taken welcome initiatives in regulation, legislation and policy, but can the Minister update us on what further progress is being made, given that there are likely to be more redundancies in the armed services, and given that Armed Forces day will be celebrated at the end of the month?
Mr Francois
I take a close personal interest in the issue of veterans’ housing. In March I met Hugh Milroy of Veterans Aid, and I subsequently visited New Belvedere house, a hostel for homeless veterans in Limehouse, east London. Last month I visited a community self-build project for veterans in Bedminster in Bristol. The Government have asked the community to show their commitment to the services and the veterans of our country, in some cases via local authorities, and I am pleased to say that 331 councils, including all those in Scotland, have signed a community covenant. I am sure that that will help our service personnel when they become veterans and seek housing in the future.
Julie Hilling (Bolton West) (Lab)
Was the Minister as shocked as I was to read of the families of service people who have been made redundant and who are being evicted from their service housing when they have nowhere else to go? What is he going to do about that?
Mr Francois
I am not sure from the hon. Lady’s question, but she might be referring to one case that has achieved prominence in the media this morning regarding a member of the Parachute Regiment. If she is referring to that case, my private office is already looking into the issue and I hope there might be some way in which we can help.
Peter Aldous (Waveney) (Con)
T8. My constituent Sergeant Andrew Askew is shortly to be discharged from the Army having completed 13 years’ service. Six months ago he was diagnosed as suffering from post-traumatic stress disorder, for which he is yet to receive any support or treatment. Can the Minister advise me on what steps have been taken to assess the effectiveness of the personnel recovery units and aftercare programmes that are in place to support soldiers, such as Andrew Askew, who have been diagnosed with PTSD?
Mr Francois
It is very important to me that every member of the armed forces needing medical care receives the very best treatment available. I am pleased that research by the King’s Centre for Military Health Research confirms a low incidence rate of PTSD for UK armed forces. For those who do require help, however, the NHS, in conjunction with the MOD and some superb charities, are providing excellent mental health care for both serving personnel and veterans. This includes wider awareness of the symptoms, early intervention on deployment, greater access to mental health care for up to six months after discharge, an increase in the number of veterans’ mental health professionals, a 24-hour helpline in partnership with Combat Stress, and an online mental health support and advice website provided by the Big White Wall—and I am due to meet my opposite number in the Department of Health, the Under-Secretary of State, my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter), very shortly, where we will discuss this matter further to see if there is even more that we can do.
Mrs Mary Glindon (North Tyneside) (Lab)
What message does the Secretary of State have for the 10,000 north-easterners who have signed a petition, that is now with Downing street, seeking to save 2nd Battalion the Royal Regiment of Fusiliers?
Mr Philip Hammond
I say to the hon. Lady that we have had to make some very difficult decisions in relation to the structure of the Army as we draw down its size to match our ambitions to our budgets. In doing that we have had to make sure we maximise the military capability. That means structuring the Army to deliver most efficiently the military capability that we need. I know that has meant painful decisions in a number of cases, but I am afraid we have to put the priority on delivering military effect.
Henry Smith (Crawley) (Con)
T10. I greatly welcome the recent contract signed by the Under-Secretary of State for Defence, my hon. Friend the Member for Ludlow (Mr Dunne) on behalf of the MOD for the sensor support optimisation project with my constituency company of Thales UK. Can he say a little more about how this sonar technology will help the resilience of our fleet?
Mr Dunne
I greatly enjoyed visiting my hon. Friend’s constituency at the end of last month to sign that contract. It is a £600 million contract, which will ensure that the very sophisticated sonar and avionics systems—I mean periscopes—in our fleets are supported for the next 10 years, and it should save the Exchequer some £140 million over that period.
Thomas Docherty (Dunfermline and West Fife) (Lab)
In the last Session of Parliament I introduced a private Member’s Bill which would have made attacks on members of the armed services a hate crime. In the light of tragic recent events, will the Minister meet me urgently to discuss how that issue can now be taken forward?
Mr Francois
The hon. Gentleman will remember that when we had what I thought was a very well-conducted and good-humoured debate on that serious subject, I undertook to him that we would keep this under review and would have more to say in the armed forces covenant report 2013. That remains the Department’s position, but perhaps we can have a discussion after questions today so I can update him if he needs further information.
Sarah Newton (Truro and Falmouth) (Con)
Falmouth is hosting Armed Forces day on Saturday. Will my right hon. Friend join me in thanking all those people from all walks of life who come together to make it such an exciting day that really pays tribute to our armed forces?
Mr Philip Hammond
I am happy to do that, and I look forward to attending the national Armed Forces day event in Nottingham.
Iran
(11 years, 6 months ago)
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Mr Jack Straw (Blackburn) (Lab)
(Urgent Question): To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the policy of Her Majesty’s Government towards Iran following the election of Dr Hassan Rouhani as its new President.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
I congratulate the people of Iran on their participation in Friday’s elections and Dr Rouhani on the result. He made some positive remarks during his election campaign about the need to improve economic and political conditions for the Iranian people and to resolve the nuclear issue. The Iranian people will, no doubt, look to their new President to make good on those promises.
The United Kingdom’s policy on Iran has been consistent under this Government and the last. We share international concern, documented by the International Atomic Energy Agency, that Iran’s nuclear programme is not for purely peaceful purposes, and we deplore Iran’s failure to co-operate fully with the IAEA, to uphold its responsibilities under the non-proliferation treaty and to meet the demands placed on it by UN Security Council resolutions. The Government hope that, following Dr Rouhani’s election, the Iranian Government will take up the opportunity of a new relationship with the international community by making every effort to reach a negotiated settlement on the nuclear issue. If Iran is prepared to make that choice, we are ready to respond in good faith; our commitment to seeking a peaceful diplomatic settlement of this dispute is sincere. So I urge Iran to engage seriously with the E3 plus 3 and urgently to take concrete steps to address international concerns. Iran should not doubt our resolve to prevent nuclear proliferation in the middle east and to increase the pressure, through international sanctions, should its leaders choose not to take this path.
Mr Straw
May I thank the Foreign Secretary for that statement and associate myself with the congratulations, in which we would all share, to the Iranian people and to Dr Rouhani on his election? May I tell the Foreign Secretary that in my many dealings with Dr Rouhani when he was head of the Iranian national security council under President Khatami, I found him courteous, engaged and straightforward to deal with?
Does the Foreign Secretary accept that although Dr Rouhani will seek strongly to represent his country’s interests and its faith, his Government could, if given the space, be a positive force in respect of its neighbours in Syria, Lebanon, Afghanistan, and Iraq? Does he also accept that Dr Rouhani has made it clear that he wants a fresh start on the nuclear file, but that negotiations that aim at stopping Iran’s entire civil nuclear programme, as Israel seems to want, are bound to fail, whereas negotiations aimed at ensuring that there are clear safeguards against a break-out to a military programme, with a phase-down of sanctions, do have a good chance of success? Does he agree that, as soon as possible, the E3 plus 3 should broker some confidence-building measures with the new Government?
Will the Foreign Secretary acknowledge that in aiming to improve relations with Iran, we should show an understanding of the hostile and humiliating way in which that ancient nation feels it has been treated in decades past by the west, especially by the United Kingdom? Will he also acknowledge that we should not expect too much, too soon from the new President, who will not be taking office for two months and will face his own challenges from within a complex, complicated governmental system?
Lastly, although I fully understand why the Foreign Secretary had to close our embassy in Tehran, may I ask what active steps he will now be taking to reopen it and to re-establish full diplomatic relations?
Mr Hague
I am grateful to the right hon. Gentleman for his remarks and questions, and indeed I pay tribute to the work he did, particularly between 2003 and 2005, seeking to improve relations with Iran and to address the nuclear issue, including working with Dr Rouhani.
On all the matters that the right hon. Gentleman has raised it will be important for us to have an open mind but to judge Iran on its actions. There have been positive words during the election campaign, but it will, of course, be the actions we judge, including on the potential to adopt a more constructive position when it comes to Syria, Iraq and Lebanon, which he mentioned. The opportunity is there through the E3 plus 3 negotiations to make constructive progress on the nuclear issue on the basis that he describes. The E3 plus 3 have made it clear since February that we are open about the long-term benefits to Iran of reaching a comprehensive agreement. We have been open to Iran that if it could react in a constructive way to the offer we have put on the table, that would open the door to the normalisation of political and economic relations with the international community. We have proposed a balanced and credible offer, to which Iran has not yet made a sufficiently constructive response. The opportunity is there.
We should always try to understand how other countries feel about events in history—that is part of good and effective diplomacy all over the world—just as they should appreciate our concerns. The right hon. Gentleman is right to point out that the President-elect does not immediately take office, but the IAEA has stressed the urgency of the nuclear issue and it is important that that is borne in mind.
Finally, we had no wish to close our embassy, as the right hon. Gentleman understands. Our embassy compounds were invaded in a way that could only have been state-sponsored in some way, at great danger to our staff and with the destruction of their personal possessions. It is not possible to operate an embassy in that environment, so although we maintain diplomatic relations with Iran and have no policy against opening an embassy, we would need to be sure about the safety of our staff and that the embassy could fulfil the normal functions of an embassy.
Nicholas Soames (Mid Sussex) (Con)
Everyone will hope that this election result will lead to better days for the Iranian people, but would my right hon. Friend agree that it is important not to go along with the lazy labelling of Dr Rouhani but to listen very carefully to what comes out of Iran and, as my right hon. Friend has said, to judge him entirely by what happens?
Mr Hague
Yes, absolutely. I think that that is a good phrase to remember: no lazy labelling. This is a very complex political system in which, we must remember, 678 candidates for the presidential election were disqualified, including all 30 of the women who attempted to stand; the political system is rather different from ours and is one in which human rights abuses are very serious. We should not have lazy labelling but should be open to improvements in relations and ready to reciprocate if the opportunity is there.
Ian Lucas (Wrexham) (Lab)
I thank my right hon. Friend the Member for Blackburn (Mr Straw) for securing this urgent question at a very important time, and for the time that he has spent discussing the important subject of Iran with me.
Hassan Rouhani has secured more than 50% of the popular vote in Iran. This is a time of great opportunity, but also uncertainty. Hopes are high among the Iranian people and we know that Hassan Rouhani has expressed a desire to end the international sanctions relating to Iran’s development of a nuclear programme.
This is an important time, but the power structures in Iran mean that the Supreme Leader Ayatollah Ali Khamenei is still in charge of many matters, including foreign policy. Iran is a significant actor throughout the middle east and has the capacity to change the situation on the ground for good or for ill, including for foreign policy matters. In the light of that, I want to ask the Foreign Secretary a number of specific questions.
First, has the Foreign Secretary had the opportunity yet to discuss matters with the EU commissioner for external relations, particularly the election results and their possible impact on talks? Will he meet those who have expressed continuing concern about Iran’s intentions on nuclear policy, even after the presidential election? It is very important that we continue to listen to those concerns and are cautious in our approach.
Given the present state of UK-Iran relations, what specific contacts has the Foreign Secretary had with the Iranian Government? He mentioned that we continue to have diplomatic relations. What discussions have taken place with the Iranian Government? In the months and years ahead, the Iranian people will judge the new President by his actions, not his words. It is vital, however, that at this important time we are open and receptive. I would be grateful if the Foreign Secretary could please indicate whether that has extended thus far to contact.
Mr Hague
I think the same message is coming from all parts of the House on this subject—that is, that it is good to have that unity in our message. The hon. Gentleman is right. Not only is the political spectrum in Iran complex to interpret from outside, but so is the power structure. We should not assume that the President has the absolute power by any means on the subjects about which we are most concerned. Most observers would consider that the presidency overall is perhaps a weaker institution than it was eight years ago when President Ahmadinejad first took office. The hon. Gentleman is right that Iran has an immense capacity to act for good or ill in the region, and on a very important global issue, the nuclear file.
On the hon. Gentleman’s specific questions about the E3 plus 3 negotiations and the role of the EU High Representative, our offer has been clear since February and that offer remains. That will continue to be the approach of the High Representative and of the E3 plus 3. We have regular meetings about all these issues. I regularly meet the director general of the IAEA to discuss in detail all the concerns about Iran’s nuclear programme.
We have some contacts and conversations with Iran. As I mentioned before, we have not broken off diplomatic relations. Our embassy became impossible to operate and as a result I required the closure of the Iranian embassy in London, but we have had conversations since that time. I have had conversations myself with the Foreign Minister of Iran, Mr Salehi, and we have conversations in the margins of the United Nations and other international forums. We have not, of course, had any contact yet with the President-elect, Mr Rouhani, who is some way from taking office. Decisions about that are for the future.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Does my right hon. Friend agree that although the best thing has happened that we could have hoped for—the Iranian people have once again reaffirmed their support for engagement with the western world and cynicism about the grabbing of nuclear capability—the worst thing the west could do is raise excessive expectations about how much could be achieved under the new leader in too short a time? Yet the urgency is on to contain the nuclear threat, with Iran possibly acquiring weapons-grade plutonium by the end of this year, and Iran is one of the powers fomenting the civil war in Syria. May I suggest urgent engagement on these matters, but as firmly and as diplomatically as possible?
Mr Hague
Yes, I absolutely agree with my hon. Friend. We should hesitate before trying to interpret the results of elections in other countries. Sometimes we have enough trouble interpreting election results in our own country, so we should not rush too excitedly into that, but we should take full note of what has happened and what Mr Rouhani said during the election campaign and be ready to respond in good faith in the way that I outlined in my initial statement, and we will stick to that over the coming weeks. My hon. Friend is right about the urgency of the issue. Iran is acting in defiance of six UN Security Council resolutions and of successive resolutions of the IAEA board, and addressing the nuclear issue has become very urgent indeed.
Mr Peter Hain (Neath) (Lab)
I welcome the general tone of the Foreign Secretary’s comments, but is it not time to stop treating Iran as a pariah state and to treat it instead as a proud nation which plays a key role, if a nefarious one, in so many middle east conflicts? Should he not press for direct engagement with Iran on Syria and on Israel-Palestine? Now that its people have voted directly to engage with the west on the basis of respect, even if their Government have policies with which we bitterly disagree, it is surely essential to press that engagement. Unless we do, I see no prospect of the middle east, which is in one of its most unstable and dangerous situations ever, stabilising. Iran holds the key to that.
Mr Hague
It has to be recognised that Iran has brought its isolation and economic sanctions upon itself, through its own actions. However, the British people have no quarrel with the people of Iran. Our dispute is over Iran’s nuclear programme. It will be difficult to create the atmosphere to address constructively with Iran all the other issues in the middle east that the right hon. Gentleman has quite legitimately mentioned without settling the nuclear issue. That is the central point. That is not just the view of the UK; we must remember that the E3 plus 3 include China and Russia, and our negotiating position is agreed with them. We are all agreed that the Iranian response has not been adequate or realistic so far. A change in that situation would unlock the opportunity for us to work together on other issues, and for Iran to be treated with the respect that the world would owe it as a major nation in its region. That is all there for the taking if we can resolve the nuclear issue.
Mr John Baron (Basildon and Billericay) (Con)
It is generally accepted that both sides have made mistakes in regard to this relationship, and that no one’s hands are clean. Given that the election of President Rouhani offers a chink of light, what confidence-building measures is the Foreign Secretary considering? For example, will the Foreign Office seek the necessary assurances in relation to our embassy, in the hope that one day we will be able to reopen it? If not, what other measures is he considering?
Mr Hague
We do have conversations with the Iranians, and we will of course be very much open to conversations with the new President and his team. As has been mentioned, they are still some way from taking office, and we do not know who the other Ministers in the new Government will be, but, yes, we will be open to conversations with them. Those conversations can and should include the circumstances in which embassies can be reopened, but after what happened last time, we would need to be very confident of any assurances before we were able to reopen our embassy in the short term. There is an offer on the table from the E3 plus 3 on the nuclear issue, and it will remain on the table over the coming weeks.
Mr David Winnick (Walsall North) (Lab)
Should we not bear in mind that the previous regime, the Shah’s regime, was put in place and maintained for a long time by Britain, the United States and other western powers? That has not been forgotten by the Iranian people, but if conditions can be normalised, as we all hope will be the case, will that not put pressure on the present regime to end the abuses of human rights in Iran?
Mr Hague
Yes, of course people have strong views about history, but as I have pointed out, the negotiations on the nuclear issue are not just with the UK. They involve all the other members of the E3 plus 3, including China and Russia. So historical feelings about the UK cannot be a barrier to resolving those issues. The hon. Gentleman is right to draw attention to human rights in Iran; its human rights record is truly appalling. There are more journalists in prison in Iran than in any other country in the world, 350 executions were carried out last year, opposition leaders have been detained for over two years, and there are continued arrests of human rights defenders and minorities. It is high time that that record was improved, and that the nuclear issue was resolved.
Dr Julian Lewis (New Forest East) (Con)
Let us hope that the new President of Iran is not a holocaust denier who wants to wipe a member state of the United Nations from the face of the map. Does the Foreign Secretary see any role for Iran in trying to bring about a ceasefire in Syria—I stress the word “ceasefire”—to stop the killing, whether or not it leads to a political transition?
Mr Hague
A constructive role for Iran in Syria would be very welcome, and there is the opportunity for that. Iran’s policy on Syria at the moment is the exact opposite, as there is an abundance of evidence of Iranian participation in the murder, torture and abuse committed by the Assad regime, so as things stand today Iran is a long way from playing a helpful diplomatic or restraining role, highly desirable though that would be.
Keith Vaz (Leicester East) (Lab)
May I press the Foreign Secretary on the issue of the embassy? Since it closed in November 2011, it has been very difficult for people to get visas to come here—it is a long and tortuous process. Given what has happened, he might not want to open an all-singing, all-dancing embassy, but at the very least giving people the opportunity to make applications to visit relatives in this country would be greatly appreciated.
Mr Hague
It is a great shame that the closure of embassies makes it more difficult for people to travel. That was not something we desired, and the reopening of embassies is not something to which we are on any principle opposed, but I am sure that the right hon. Gentleman will agree that, given what happened, which was against every provision of the Vienna convention and every principle of civilised behaviour regarding the treatment of diplomats anywhere in the world, we would have to be very confident of a change in the approach to our embassy before being able to reopen it.
Martin Horwood (Cheltenham) (LD)
Dr Rouhani himself has described his victory as a victory for moderation over extremism. Would it not be an early reward and encouragement to such moderation, in action as well as words, to include Iran in the planned talks on the future of Syria?
Mr Hague
Dr Rouhani has said good words about moderation. During his campaign he said:
“What I truly wish is for moderation to return to the country. This is my only wish. Extremism pains me greatly. We have suffered many blows as a result of extremism.”
Those are the sorts of positive remarks to which I referred during the election campaign. On the question of Iran’s participation in future talks on Syria, which of course we are trying to arrange and which the Prime Minister is discussing further today at the G8 summit, we will proceed on the basis that a second Geneva conference must proceed from what we agreed in Geneva last year: the creation of a transitional Government in Syria, formed from the regime and the opposition, with full executive authority, and by mutual consent. We have seen no evidence to date that the Iranians accept that basic premise of the Geneva conference and of holding another Geneva conference, which of course greatly complicates the question of their attendance.
Jeremy Corbyn (Islington North) (Lab)
The Foreign Secretary will recognise that, despite Iran’s appalling human rights record and very strange electoral system, there has nevertheless been huge participation in the election, which demonstrates a thirst to get away from the human rights abuses of the past and have a better engagement with the rest of the world. Iran is still a signatory to the nuclear non-proliferation treaty, and holding a conference on a middle east nuclear weapons-free zone is still on the table—it was not held in Helsinki last year but is still due to be held. Can the Foreign Secretary assure us that he is redoubling his efforts to ensure that that conference is held, at which Iran would be present, and that it could be part of an ongoing engagement and debate to try to bring about that dream?
Mr Hague
We support a middle east nuclear weapons conference, as we accepted at the review conference of the NPT in 2010. We have been trying to bring that about. There is a Finnish facilitator for the conference who has been doing good work, and we have been supporting him in that work, so the hon. Gentleman can be sure that the British Government are arguing in that direction.
Mr Philip Hollobone (Kettering) (Con)
Which is stronger among the Iranian public: support for the nuclear programme or dislike of economic sanctions?
Mr Hague
That would be a good thing to know. As I remarked earlier, we must be careful about how we interpret election results in other countries. There is no doubt that sanctions on Iran are having a major impact on the country, and that that is felt in the country, so I want to make it clear again that if we cannot resolve the nuclear issue, sanctions will be intensified. Iran faces a choice on this. I cannot divine the exact feelings of the Iranian people, but I know that they would be much better off if they resolved the nuclear issue.
Mike Gapes (Ilford South) (Lab/Co-op)
The Iranian people are overwhelmingly young and want to engage with the rest of the world. They are controlled by a conservative theocratic group. The President who has just been elected comes from that conservative group, but he has been chosen because the young people want change. How can we get across, to the young people of Iran in particular, that we are not the enemy and that we also want change in Iran?
Mr Hague
I very much agree with the hon. Gentleman. We have no quarrel with the people of Iran and we are not their enemy. We do try to get that message across.
Of course, it is not easy to broadcast into Iran but we make every effort to do so. The BBC makes very good efforts to do so; I have done a number of interviews on BBC Persian that directly address the issues, so that the people of Iran can hear what we say and how we argue about those issues.
It is possible, in a world much more connected and with so many social media, to convey the messages in many new ways. We are taking every opportunity to do that, and for private individuals to do that is extremely healthy. We can get the messages across. Perhaps—without, as I say, over-analysing the result—we are seeing a wish among the young people of Iran to have better relations with the rest of the world.
Mr Jonathan Djanogly (Huntingdon) (Con)
Further to the last question, Iran is a key regional player yet is intransigent on Syria, Iraq, Lebanon and nuclear capability. Is my right hon. Friend not concerned that, although the new President is perhaps a moderate, he will be dictated to by the religious establishment in Iran?
Mr Hague
As we were saying a few moments ago, the power structure in Iran is complex and enormous authority resides in the Supreme Leader—there is a big clue in the title—in particular over the nuclear issue. We cannot assume that a newly elected President, whatever his intentions—and we cannot yet be sure of those—would be able to execute all the policies that he would like to see.
We will take the issue step by step. We will respond in good faith to efforts to improve relations, but we will judge Iran on actions rather than words.
Chris Bryant (Rhondda) (Lab)
It is too early to bring out the bunting, although it is good that once the authorities had banned most of the candidates from standing, at least they did not rig the election this time, as they did last time.
May I impress on the Foreign Secretary two elements of the human rights record that he did not explicitly refer to, the first of which is the execution of children? Iran is a signatory to all the international treaties in relation to that, and it should stop. Secondly, there is the treatment of the Ahwazi Arabs, many of whom are still on hunger strike. They have been hideously oppressed and their peaceful activists have been thrown into prison without trial for far too long.
Mr Hague
I absolutely agree. We do our utmost to hold Iran to account on human rights issues. We have designated under EU sanctions more than 80 Iranians as responsible for human rights violations. We have helped to establish a UN special rapporteur on human rights and we will continue to raise those issues.
Mr James Clappison (Hertsmere) (Con)
I warmly welcome the approach that my right hon. Friend has taken and what he has just said about human rights abuses in Iran. To those can be added the question of the persecution of religious minorities, including Christians. Will he join me in expressing the hope that there will be a reduction in the amount of persecution? That was such a feature of the time in office of the outgoing President, about whose departure few tears can be shed.
Mr Hague
Yes, absolutely. In addition to my other remarks about the human rights record, I deplore the persecution of Christians and the long string of anti-Semitic remarks made by the incumbent President. I think that people across the world will be hoping that these things will change.
Paul Flynn (Newport West) (Lab)
Could we not prove our even-handedness and reduce tensions if we appealed to the only known nuclear state in the region to end its 20-year breach of international agreements and invite the inspectors in? Would it not be best for Israel to declare its own nuclear stockpile in order to persuade Iran to follow suit?
Mr Hague
We urge Israel to join the non-proliferation treaty—that is the long-established position of the United Kingdom. However, those who ask Israel to address nuclear issues have to recognise that one way that would make it impossible for it to ever do that would be for Iran to develop a nuclear capability. That would be the end of any hope for a middle east free of nuclear weapons. The settling of this Iranian nuclear issue is very important to going on to any other issues.
Mr Ben Wallace (Wyre and Preston North) (Con)
We never would have had a British empire if our diplomats had been worried about health and safety at work. Given that the new President-elect has said that he would like to reopen our embassy and that we have not broken off diplomatic relations, is it not perhaps time for us to try to reopen our embassy in Tehran and demonstrate that trust is built in small steps? Being absent from the discussion will not help us at all.
Mr Hague
First of all, we are not absent from the discussion; we are part of the E3 plus 3, so we have direct discussions with Iran on the nuclear issue. Nor have we broken diplomatic relations with Iran. I must say to my hon. Friend that the danger in which our staff were placed was sufficiently great and the destruction of their possessions and the invasion of the embassy sufficiently unacceptable that I find describing it as a health and safety issue inappropriate.
Mark Hendrick (Preston) (Lab/Co-op)
At the risk of lazy labelling, before the election we were told that six hardliners had been vetted to go on the ballot paper, but now we are told that a moderate slipped through the net and is President. What is the Foreign Secretary’s assessment of the new President, Dr Rouhani, and what are his hopes for improvements in UK-Iranian relations?
Mr Hague
Yes, this can demonstrate the dangers of vetting a list of candidates, a practice that might be well known to many political parties in this House, although I am not pointing in any particular direction. I do not want to give too detailed an assessment, because the politics of Iran are very complex, as hon. Members from all parties have pointed out. I also do not want to make our job in improving relations with Iran more difficult by giving an initial assessment that may turn out to be wrong. Nor do I want to make the new President’s job more difficult; it will be immensely difficult for him to govern Iran and do what he says he wants to do, namely improve the condition of his people. We will let our analysis take shape over time and judge by actions, not words.
James Morris (Halesowen and Rowley Regis) (Con)
Does the Foreign Secretary agree that, notwithstanding the outcome of the election, this is not the time for us to become dewy-eyed about the Iranian regime, which has a long track record of internal brutality, as well as of being prepared to arm its proxies in countries such as Lebanon in order to threaten Israel, and is complicit in the brutality of the Assad regime in Syria?
Mr Hague
My hon. Friend is right to remind the House of all those things. We have discussed the opportunity for Iran to play a constructive role. Let us be absolutely clear that it does not do so at the moment in regional relations or in many of the conflicts around the middle east, most spectacularly of all in the case of Syria, where Iran is actively fuelling the oppression of the Syrian people. My hon. Friend’s words are wise and should be heeded.
Hugh Bayley (York Central) (Lab)
Will the Foreign Secretary say a bit about Iran’s relationship with its eastern neighbour, Afghanistan? As our troops leave Afghanistan over the next 18 months or so, stability in that country will depend on its having good relations with all its neighbours. Both Iran and Afghanistan would gain from better bilateral relations. What can the UK do to make that happen?
Mr Hague
That is a very important point. There are reasonably good relations between the Governments of Afghanistan and Iran. I hope that any new Government in Iran would want to build on that. Those relations are important given their common border and their common interest in counter-narcotics. It is important that they are able to work together. The United Kingdom does nothing to obstruct that, despite all our difficulties with Iran. We will continue to believe that they ought to have good, constructive relations.
Kris Hopkins (Keighley) (Con)
Earlier today, Mr Rouhani vowed to ensure that there is greater transparency with respect to Iran’s nuclear programme. Given that Iran has been deemed a dangerous rogue nation for more than 30 years, does the Foreign Secretary agree that the new President must demonstrate positive deeds, not just words, if he is to be taken seriously?
Mr Hague
Yes, my hon. Friend is right. There are many ways in which greater transparency can be demonstrated. The International Atomic Energy Agency has pointed to Iran’s failure to provide design information on the heavy water research reactor at Arak and its failure to provide substantive answers to the agency’s detailed questions on the activities undertaken at Parchin. Iran needs urgently to provide the agency with access to all the sites, equipment, persons and documents requested by the agency. There is therefore a good deal of scope for increased transparency.
Mark Durkan (Foyle) (SDLP)
The flickering prospect delivered by this result comes from the Iranian people. Does the Foreign Secretary agree that they deserve to understand that our concern to safeguard their human rights is not merely secondary to our nuclear and regional concerns? Given the abuse of the opposition and religious minorities to which he has referred, will he provide an assurance that the current circumstances will not be used by this or any other Government as an excuse to return people who have escaped from Iran and sought refugee status to a place of risk?
Mr Hague
The last point is a matter for my right hon. Friend the Home Secretary, but clearly our policy can change only if the circumstances change. The fact that there has been a certain election result does not mean that we can judge immediately that everything has changed. The hon. Gentleman is right to refer to the importance of the human rights issues. The fact that we designate individuals for human rights violations under our sanctions legislation shows how seriously we take such matters. I stress that the main issue of contention in international relations between ourselves and Iran, and between most other countries in the world and Iran, is the nuclear issue. If we could solve that, there would be many new ways in which we could work together. That does not mean that we would stop deploring human rights violations in Iran or in any other country, but solving that issue would be a major diplomatic breakthrough.
Alec Shelbrooke (Elmet and Rothwell) (Con)
My right hon. Friend will have gathered that the mood of the House is one of hope and expectation at the election of President-elect Rouhani. I urge my right hon. Friend, through his good offices, to take the next couple of months until Mr Rouhani comes to power to assess all the offers to Iran that have been on the table. The Iranian people have voted for change and hope. It was notable in the election that no matter how hard-line a presidential candidate was, most of them were talking about the economic failure of the last eight years. The Iranian people obviously want to change that economic failure. That provides a glint of light and suggests a way in which we might be able to tempt the new President. I urge my right hon. Friend to spend the next two months considering whether there is a chink of light that we can exploit when Mr Rouhani comes to power.
Mr Hague
Yes, and that takes us back to the nuclear issue. We have made a clear offer to Iran that in return for its suspending enrichment above 5% and addressing concerns about its stockpile of uranium and its enrichment capacity, we would commit ourselves to lifting some sanctions. The opportunity to improve the economic situation is there.
Michael Fabricant (Lichfield) (Con)
We all welcome the election of a so-called moderate President-elect, but is my right hon. Friend aware that less than an hour ago in Tehran President Rouhani said that under no circumstances will the enrichment of uranium stop? Will he comment on reports emanating from the United States that Iran is preparing to send 4,000 troops to intervene in Syria?
Mr Hague
The President-elect gave a news conference today and said a number of things, including about improving relations with all countries Iran recognises— which includes the UK—and we are responding in the way we are today in this House. As well as commenting on the nuclear programme in the way my hon. Friend described, the President-elect also said that the primary objective of the next Government should be to build confidence and trust with the international community, and resolve the domestic, economic crisis. The only way to do that will be to address the nuclear issue successfully. I am not in a position to confirm any military movements by the United States.
Rehman Chishti (Gillingham and Rainham) (Con)
The Foreign Secretary will be aware of the positions taken by former Presidents Hathmi and Rafsanjani. They were both regarded as moderates, yet under their terms nuclear capabilities were increased in Iran. Despite the prospect of a moderate President, one must compare that with previous moderate Presidents in Iran and look at the policies implemented, whether in nuclear enrichment, Syria, Bahrain, or Lebanon and then linked to Syria. Does the Foreign Secretary share my concern about the latest statement made by the President-elect when he said that his position on Syria will be the same as that of Russia?
Mr Hague
Yes, all those things show that we are right to emphasise—I think this is common ground across the House—that actions and policies over time will either allow for an improvement in relations, or not. We will see what happens on all those things, but the opportunity is there. Let me say again that we will respond in good faith to changes in policies by Iran if they happen, but the cautionary note sounded by my hon. Friend is entirely valid.
Henry Smith (Crawley) (Con)
The hon. Member for York Central (Hugh Bayley) rightly pointed out the importance of Iran’s relationship to the east with Afghanistan, but we must also bear in mind the importance of Iran’s relationship with the west and south, and with Iraq and the Persian gulf states. May I seek assurances from my right hon. Friend that the British Government will continue closely to monitor that situation, which is crucial to peace in the middle east?
Mr Hague
Absolutely. My hon. Friend is right to draw attention to that and the relationship of Iran with those states is of huge importance to confidence in peace and security in the region, and we will watch closely. Iran’s relations with those countries, and how it approaches them, will be very much among the actions that we will judge over time.
Common Fisheries Policy
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
On 14 June EU member states signalled their agreement to a deal on reform of the common fisheries policy. After more than three years of difficult and protracted negotiations, the agreement confirms that EU member states can support the deal brokered among EU institutions. All that remains is for the European Parliament to give its approval, which we expect in the coming months, and then the new CFP will be put into law.
I am delighted to report that my fellow fisheries Ministers, and EU institutions, have risen to the challenge of agreeing an ambitious reform of this broken policy. The CFP has become a totemic example of failure at EU level. Centralised micro-management and fudged objectives have left us with fish stocks and fishing businesses that are nowhere near as healthy as they could be. The public are rightly disgusted by the spectacle of edible fish being thrown back into the sea.
I have reported back to the House several times on the progress we were making in addressing those failings through the reform negotiations, but despite support for a series of positive commitments, through some difficult Councils and late-night drafting discussions, the robustness of that reform could not be assured until we secured detailed text that addressed the UK’s priorities. Subject to those last processes to translate and ratify the regulation formally, we now have that text agreed.
Perhaps the most tangible leap forward comes through the agreement of provisions to eliminate discarding. The reformed CFP includes a discard ban starting in 2015 for pelagic fish, which will be rolled out to other fisheries from 2016. Importantly, that is supported by the practical provisions to make the ban operational. The provisions recognise the complex causes of discarding and address them, rather than simply ban the practice on paper and consider that sufficient.
I do not underestimate the challenges fishermen will face as we adapt to the new provisions, but we are already working with the industry in the UK to ensure we can make the system work effectively in practice. A key element of that will be working with the industry to develop effective management rules. It has always been a top priority for the UK to achieve a genuine regionalised process through reform to replace the centralised one-size-fits-all approach. The UK led the way on that, building support to move decision making closer to fisheries, with a process that works within the existing treaty framework. The provisions allow us to work together regionally, to agree the measures appropriate to our fisheries with other member states, and to give them legal effect through EU law or national measures.
I am pleased to report that we achieved provisions to put fishing on a sustainable footing. For the first time, we have a legally binding commitment to set fishing levels sustainably, eliminating over-fishing so that we can increase biomass in the sea and improve fishing yields in the long term. That could have a huge positive impact, not just on stock levels and the marine ecosystem, but on the bottom line for UK fishing businesses.
Other reforms will ensure that the same principles of sustainability apply to EU vessels fishing outside Europe. Fishing agreements with non-EU countries must be based on sound science and monitoring, with clauses on respect for human rights. Under the common market organisation of the CFP, we have secured sensible labelling rules and a strengthened role for producer organisations to support growth in the sector and add value. Reforms to the structural fund element of the CFP are being discussed on a slightly slower time scale, with further negotiations expected in the autumn.
We should not underestimate the significant opposition we have faced in achieving that momentous deal, or the rollercoaster of protracted and detailed institutional discussions involved. The UK has been in the vanguard of fundamental reform since the Commission published its green paper in 2009. We have drawn support from member states and MEPs across Europe, helped in no small part by grass-roots campaigns that have generated public enthusiasm for reform. Devolved Ministers have played a strong part in the UK delegation to help us to face down those who would prefer to keep the status quo, and to make the case for the practical detail needed to make the reform workable in the diverse fisheries that exist around the UK.
The result demonstrates the leadership role the UK has played in Europe, and the resulting text shows how European legislation can and should be drafted. It shifts responsibility away from Brussels to those who understand and manage specific sea basins. We have responded to the calls from European citizens to end the practice of discarding.
I should like to put on record my thanks to right hon. and hon. Members on both sides of the House for their support in our pursuit of fundamental reform. I was able to draw strength from that support during some of the darker moments of the negotiations. I also register my thanks to the fishing industry, which has actively and positively engaged in the process, and with which we will work to make the reform work in practice. Finally, I thank members of the Department for Environment, Food and Rural Affairs team for all their efforts. They have worked tirelessly over the past three years and have made a significant contribution to the shape of the final text.
There is still plenty of work ahead, but the agreement gives us the tools to turn a broken policy around. The agreement is good for the sustainability of the fish in our seas, good for the sustainability of our fishing industry, and good for the sustainability of our coastal communities. I am sure the whole House will welcome this significant development.
Mary Creagh (Wakefield) (Lab)
Before I begin, I am sure the whole House will wish to join me in congratulating the shadow environment Minister, my hon. Friend the Member for Luton South (Gavin Shuker), and his wife Lucy. He celebrated his first father’s day yesterday with the arrival of a beautiful baby daughter.
I thank the Minister for advance sight of his statement, and congratulate him on his real achievement in reforming the common fisheries policy, 2014 to 2020. The deal was the culmination of three years of difficult negotiation and I congratulate him on surviving what he calls the “darker moments” of that process. We on the Opposition Benches have consistently called for ambitious reform of the CFP. These reforms are a good start. They end the disgraceful practice of discards, they decentralise and regionalise the CFP and allow member states to support small-scale fisheries, such as those in Devon and Cornwall, Kent, Norfolk and Suffolk; and they take a scientific approach to setting sustainable fishing levels away from the discredited system of total allowable catch with a transfer to maximum sustainable yield by 2020.
We welcome the time scale for banning discards starting with pelagic fish on 1 January 2015, but the package still allows for exemptions to the discard ban of up to 5% in certain circumstances. How does the Minister see the discard ban working in practice? We also welcome a firm time scale to implement maximum sustainable yields by 2020 at the latest, and by 2015 “where possible”. Will he assure the House that the UK will adopt the earliest possible implementation date, and when will that be?
We welcome the requirement for the Commission to report annually to the Council of Ministers and European Parliament on progress towards delivery of maximum sustainable yield. Given past criticisms of the CFP, transparency is important.
The reforms acknowledge the need for further work on marine protected areas, particularly in biologically important areas. The final document states:
“In order to facilitate the designation process, Member States should identify suitable areas, including areas that form part of a coherent network, and, where appropriate, they should cooperate with one another, preparing and sending joint recommendations to the Commission.”
Has the Minister had any contact with any other EU member state on a joint marine conservation zone? If he has not, does he anticipate co-operation with any other member state on such a zone to ensure maximum ecological benefit for both countries from the designation? Will he tell the House what contact he or his officials have had with the Scientific, Technical and Economic Committee for Fisheries on the establishment of the UK’s marine conservation zones?
The reforms contain provisions to support small-scale and artisanal fisheries—a measure that he and my Labour colleagues in the European Parliament lobbied hard for. Small-scale fishing vessels make up 77% of boats in UK waters, but they have access to only 4% of the quota. What changes will the reforms bring to those small-scale fleets and their communities? Will they help to achieve smart, sustainable and inclusive growth, and contribute to direct and indirect job creation in our coastal areas?
In a Westminster Hall debate in December 2012, the Minister assured Members that he would publish the details of who owns the UK’s fishing quota. When will the list be published? What steps does he envisage the EU taking to combat illegal, unreported and unregulated fishing to ensure a level playing field between the EU and third countries?
This is a good day for Hugh Fearnley-Whittingstall, campaigning groups and the 860,000 people who signed up to Channel 4’s Fish Fight campaign. I again congratulate the Minister and his team, and devolved Ministers, on the long hours they put in. I congratulate the fishing industry on its co-operation. After three years of negotiation, we look forward to these good reforms being implemented at last.
Richard Benyon
I thank the hon. Lady for her congratulations. I would also like to pass on my congratulations, and those of everyone in the House, to the hon. Member for Luton South (Gavin Shuker) on his happy event.
On exemptions to the discard ban, we believe that the maximum 5% de minimis contains so many caveats that it will be used only in exceptional circumstances: where the discard plans are part of a multi-annual plan; where they are co-decided; and where there is scientific evidence to support them.
In certain fisheries, changes in behaviour can be driven only through a land-all policy, and we were absolutely determined about that: it is the right approach and one that has proved to be a driver for change in other areas. It should not take away, however, from the fact that the industry has made huge strides in reducing discards. Around the coast in all parts of the United Kingdom, there are wonderful stories of leadership from the industry. I want to build on that.
The hon. Lady asked about a maximum sustainable yield. We have committed to imposing one by 2015, where possible, and by 2020 in any event, and I will be very open with the House about our progress on that, but she will understand that it will have to be on an almost annual basis, as we announce our fishing opportunities each year. There is now a firm driver and legally binding commitment to achieve such a yield.
The hon. Lady also talked about marine conservation, which is an absolute priority for us. We have had conversations with France, through the Joint Nature Conservation Committee, because we do not want to look at this issue through the myopia of an English or UK solution; our approach has to be ecologically coherent, which means talking to countries such as France, Ireland and others. A provision in the text allows us to ensure that any conservation measures we introduce beyond the six-nautical-mile limit will have to be obeyed by fishermen from all countries in the EU. That is a big win.
The hon. Lady talked about the needs of the inshore fisheries sector. She will be aware that we have taken steps to improve the fishing opportunity for this sector, and we will continue to do so, although I am wary about this question of 96% and 4%, because the inshore fleet would not be able to access many of the 96% of quotas held by the larger fishing vessels. She is right that there is a disparity, however, and we are trying to address it. I can also provide confirmation about our plans to publish a register of who owns quota and has access to fishing opportunities in this country—I must correct that: they do not own the quota; the country owns the quota. This is a national resource. However, the register of who holds quota will be published by the end of the year.
I entirely agree about the importance of bearing down on illegal, unreported and unregistered fishing. It is vital that we use every tool in the box to stop people fishing illegally. They are stealing fish from legitimate, law-abiding fishermen. Technology is working in our favour, however: through vessel monitoring systems, e-logbooks and a range of other enforcement measures, we can protect honest fishermen and catch and prosecute those who break the law.
Miss Anne McIntosh (Thirsk and Malton) (Con)
I congratulate my hon. Friend on all he has achieved and on the news that the register of quota will be published by the end of the year, which will help under-10s and others in coastal areas. Alarm bells started ringing when he said that legal effect would be given through either European law or national measures. Can he assure the House that where a regional agreement is reached, the Commission will no longer intervene?
Richard Benyon
My hon. Friend raises a very good point about regionalisation—and one that detained us a long time as we tried to find a solution. Under the Commission’s original text, which could have had a centralising effect, if the countries around a sea basin—the North sea, for example—failed to agree, the power to decide on the technical measures would have been taken by the Commission. We thought that that was wrong, so we developed—under the leadership of my Department, I have to say—an idea that found its way into the text. Under this provision, a measure becomes law where there is agreement among all the countries fishing a particular sea basin, and where they cannot agree, the matter is determined by co-decision. That is a much better way forward. Throughout these discussions, I have always said, “I would never start from here”. We are trying to improve something that is very, very wrong. We are going to make it halfway right, however, and there is still much more work to do.
Mr William Bain (Glasgow North East) (Lab)
Can the Minister explain how the small-scale fishing fleet in Scotland and the rest of the United Kingdom will benefit from the adoption of this deal by the EU and by national Parliaments?
Richard Benyon
Things will improve on the wider scale because the commitment to maximum sustainable yield, fishing sustainably and more sensible management will lead to increased biomass in the sea, so there will be more fish for the small-scale fishing fleet to catch. However, the one thing I find as I go round the coast—the hon. Gentleman will know about this from when he was the shadow spokesman—is how remote the decision-making process is. I have sat up in the small hours of the morning discussing mesh sizes for fishing nets that will be used off the north-west coast of Scotland, 1,000 miles from where I was sitting. I am not an expert and nor was the Commission official who was having the discussion with me, but the fishermen who fish there are. They will now be part of that decision-making process. They will be able to drive those technical details in an effective way, not one that is so remote from how they fish.
Sheryll Murray (South East Cornwall) (Con)
With your permission, Mr Speaker, may I offer my condolences to the family of the skipper of the Sarah Jane, in view of the fact that the marine accident investigation branch report into the accident in which he lost his life was published last Thursday? I know exactly how they feel.
I congratulate my hon. Friend on the deal he has secured. On 30 May, Greenpeace issued a press release that said:
“An eleventh-hour compromise over new EU fishing laws reached early this morning by top decision-makers…could usher in a major shake-up in the way UK fishing quota is allocated, throwing a lifeline to thousands of small-scale British fishermen whose livelihoods are hanging by a thread.”
Will he confirm that that is correct, and will he expand on that statement please?
Richard Benyon
There is a commitment at EU level that we must protect small-scale fishermen. I entirely agree with that, because there is a social dimension to the policy that must never be forgotten. Part of the trio of awfulness of the common fisheries policy is that we not only have fewer fish and fewer fishermen, but damaged coastal communities, right through to the land-based jobs of those who support those industries, so I absolutely agree. However, national and devolved Governments have a responsibility to manage fishing opportunities to ensure that we recognise the social dimension and do what we seek to do, which is to transfer unused quota in particular from certain sectors to the inshore fisheries sector. We accept that the inshore fisheries sector is engaged in sustainable management of our fisheries, so we want to see more of that, as well as enhanced social conditions in coastal communities.
Mr Mike Weir (Angus) (SNP)
Obviously the deal reached in Brussels is very encouraging indeed and is a major step forward in obtaining true reform of the CFP, but our fishing industry is contending with steep overheads for quota and fuel, and the market conditions in recent months have been challenging. Does the Minister believe that the agreement reached and how it will be implemented in the UK will make enough of a difference to ensure that fishermen are kept in business?
Richard Benyon
There are two sides to this. First, we are busy getting round the fleet in all parts of the United Kingdom and having discussions on the quayside about what this means for each vessel owner on each trip they make. An enormous amount of work has been done, but more needs to be done to satisfy that. Let me also take this opportunity to say that one of the most important things for fishermen in Scotland is to remain part of one of 29 voting members of the European Union. Those fishermen are best represented by a country the size of the United Kingdom, because we were able to have negotiations with other large fishing countries, which we would not be able to do if they were independent.
Roger Williams (Brecon and Radnorshire) (LD)
We on the Liberal Democrat Benches also commend the Minister and his team for the marvellous work they have done and the results that have been achieved, as do the wildlife trusts throughout the length and breadth of this land that have campaigned on the same issues. They, too, will be pleased.
It has been suggested that the North sea cod fishery could soon be designated as sustainable, which would be a tremendous achievement. Would the Minister like to comment on that?
Richard Benyon
I entirely agree on the wildlife trusts and their firm commitment to marine conservation; I continue to work closely with them. It was very good news on cod stocks. In the Barents sea to the north of our waters, they are going to catch over 1 million tonnes of cod sustainably this year. Cod is increasing in quantity and biomass in UK waters, but it is not yet at the point where it is a sustainable fishery. Two of the three Marine Stewardship Council boxes are ticked—the healthy ecosystem and management—but the stock is not yet quite at that rate. It is on an upwards graph, however, which is to be rejoiced at, and the fishing industry is to be applauded for its role in achieving that, too.
Kerry McCarthy (Bristol East) (Lab)
I, too, welcome the Minister’s statement, but I was surprised that he did not mention marine protected areas and I was not entirely reassured by his response to my hon. Friend the Member for Wakefield (Mary Creagh) when she pressed him on the issue. Will he tell us how many marine conservation zones will have been designated in UK waters by the time these reforms come into effect next January? Does the Minister agree that, if we are to use these zones to implement some of the proposals in the reforms, we need to be moving towards the 127 end of the scale rather than the 31 that he talks about?
Richard Benyon
I think we need to understand what marine conservation zones are about. They are not principally about fish stocks. There are loads of different ways of conserving fisheries, but it has to be an integrated system in our marine environment. There are loads of marine conservation measures—marine protection areas, marine conservation agreements and 300 sites of special scientific interest in the inter-tidal region, for example—and we want to add to them through the excellent Marine and Coastal Access Act 2009 and the implementation of marine conservation zones. At the moment, we have gone out to consultation on 31 and we are about to report on the results of that consultation. We shall make an announcement in the autumn on the number that we are going to designate, and our ambition is to designate more in future years as we can afford them and as the scientific evidence supports them.
Peter Aldous (Waveney) (Con)
I congratulate the Minister on his efforts over the past three years in securing a fair deal for the British fleet. My concern is that these reforms come very much at the 59th minute of the 23rd hour for the Lowestoft fleet, which is very much a pale shadow of its former self. What Suffolk fishermen now need—urgently—is a fair share of quota for the inshore fleet. Will he outline the work that his Department is doing to secure this goal?
Richard Benyon
My hon. Friend should be congratulated on his tenacity in supporting what is left of his fishing industry. When we know the history of that great port, it is sad to reflect on what it is now. I want to see not only those fishermen keeping their jobs, but even more fishermen in places such as Lowestoft, bringing prosperity to the town. We are transferring modest amounts of quota from the over-10 metre fleet to the inshore under-10 metre fleet. It is not proving to be without difficulty—there is an ongoing court case taking place—but I am absolutely determined to look at this and a variety of other measures, building on the good work of the sustainable access to inshore fisheries project, which was started by the last Government, so that we can see further prosperity. The best way to help my hon. Friend’s fishermen is to have an increased biomass so that they are able to catch more fish, their children will want to become fishermen and the fishing industry will start to grow in a way that I know it can and contribute to the economy.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
I worked as a fisherman 18 years ago, and fishermen often tell me nowadays that they have to dump non-targeted dogfish or spurdog, particularly each winter, as they go into their nets and have no quota to land them. What will change for these dead fish and for those fishing boats on the back of this statement?
Richard Benyon
A lot of scientific work is happening to understand more about survivability. Many shark species and cetaceans have very good survivability rates. That will be built into the discard plan, and fish that will survive will be allowed to be returned to the water. That is an important point. We are clear that we need a minimal by-catch provision for a lot of these species because they are extremely rare and their stocks are deteriorating.
Laura Sandys (South Thanet) (Con)
The Minister is very self-effacing and really deserves the commendation of the fishermen of Ramsgate for his determination and persistence throughout some very difficult negotiations. My fishermen were very interested in what the localisation of the management of fisheries will mean in the long term. That means using the expertise of my fishermen to help manage their fisheries sustainably.
Richard Benyon
My hon. Friend will be coming to see me with a leading member of her local fishing community to discuss how we can introduce a better system of management for fishermen in her area. They will be closer to the decision-making process when they are part of that regionalised system of management, but I hope that they will also benefit from a rising biomass that will make them more prosperous. We are doing a great deal of work with stocks that they target in terms of survivability, and we are trying to ensure that the discards ban works not just for them, but for the marine environment.
Amber Rudd (Hastings and Rye) (Con)
I agree that the Minister has been heroic in his determined efforts to achieve a reform of the discredited common fisheries policy, but fishermen in my constituency will be asking me a very simple question: what will that reform mean for them? Will it mean an end, at last, to the annual reduction in their quota which has been so appalling up to now, so that they will benefit once more from sustainable fishing stocks as well as sustainable fishing fleets?
Richard Benyon
The most important element of the discard ban is the provision of incentives for fishermen in my hon. Friend’s constituency, who will be able to land a proportion of the fish that they are currently having to discard as extra quota. Changes in the arrangements governing where and how they fish will enable them to reduce the other proportion as well. They will have a direct incentive, because, as they have been telling me very clearly, there are plenty of fish in those waters. This reform is good news for them. However, I want the beach at Hastings—the last beach in the country where a fishing fleet lands—to see more of those boats in the future, and that will come as a result of an increased number of fish in the sea and the increased marketability of those they land.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
I, too, congratulate my hon. Friend on his work. What impact will the new policy have on fishermen and the fishing industry in Plymouth? Has he estimated the likely size of the fishing stock over the next five years, and the likely increase in that stock? If he has not had an opportunity to do that, would he like to talk to experts at the university in my constituency? I am sure they could help him.
Richard Benyon
I am grateful to my hon. Friend for showing me the wonderful marine science hub in his constituency. Amazing work is being done there, demonstrating what a mobile and fluid ecosystem the marine environment is, and important work is also being done on acidification and sea temperature changes. It is impossible to be precise about the number of fish stocks and the trajectory of the rise, but we are already hearing a lot of good news. There is much more work to be done, but I hope that the combination of top-quality science that is respected internationally and the experience of the fishing industry will lead inexorably to greater prosperity for the industry.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I join many other Members in all parts of the House in paying tribute to my hon. Friend for his tremendous efforts. Many people in Brightlingsea, Wivenhoe, West Mersea and Harwich are full of hope for the first time in a generation that they will be able to expand their industry—but is that not the test? Unless the under-10-metre industry expands on our coasts, the policy will have failed, and we shall have to think again. Will my hon. Friend undertake to persist in his efforts, and may I thank him for them?
Richard Benyon
I am grateful to my hon. Friend. He was keen to put me in touch with those in the fishing industry in his constituency, so that I could listen to them and observe at first hand the impact of the industry on the local community, and its intrinsic links with tourism and a community’s sense of place and worth. Nowhere is that more apparent than in my hon. Friend’s constituency.
There is a vibrant marine environment just off the coast of that part of Essex. A variety of stocks are fished in the same waters. The European Union, with its one-size-fits-all common fisheries policy, has never seemed to understand that complexity. Now we have a system that will enable us to try to introduce some common sense that will benefit the fishermen in my hon. Friend’s constituency. We want that to be at the heart of the detailed, technical management of an overarching policy.
Mr Philip Hollobone (Kettering) (Con)
When the history of the common fisheries policy comes to be written, I hope it will be acknowledged that it simply would not have been possible to end discards on this timetable without the leadership, determination and tenacity of the Minister, my hon. Friend the Member for Newbury (Richard Benyon). In his own words, he confesses that the CFP is still broken and flawed, however, so given his expertise, newly acquired, will he give serious consideration to continuing as fisheries Minister when the UK repatriates its fishing grounds and territorial waters after 2017?
Richard Benyon
I know where my hon. Friend is going with this. I am obsessed with an ecosystems management of our fisheries. Fish do not have passports; they do not understand lines on maps, and they may spawn in one country’s waters and mature in another’s. Therefore, whatever our status within the EU, we need to have a system, and that means we have to talk to all the countries who have responsibility for that ecosystem, and some of them in the North sea are not members of the EU, yet we talk to them and we work with them. That is the way to manage conservation properly.
Neil Carmichael (Stroud) (Con)
As a firm supporter of the Fish Fight campaign, I take great pleasure in the Minister’s statement and welcome it; I applaud him on his considerable achievement. Does he agree that his success demonstrates that the UK can work constructively with our European partners by seeking allies and making sure that we make a case for reform where necessary, and that that is how the reform of the CFP, first entered into by the UK in 1982, has been done?
Richard Benyon
My hon. Friend makes a good point. Interestingly, in these negotiations I was sometimes the first British Minister in Brussels and would follow a speech by someone from another country who was much higher up the pay grade than me. People in this country were saying, “The UK is going to be marginalised,” but that was absolutely not the case. We were front and centre in driving this reform. We built alliances, particularly, but not exclusively, with big-voting countries such as Germany and the other northern European countries. By being diplomatic and working hard with people, we can reform some of the worst policies the EU has come up with. That bodes well for the future.
Pensions Bill
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
I beg to move, That the Bill be now read a Second time.
We have discussed these matters in the House before, and I sense that there is general consensus that now is the time and this is the right area to address. As this is a coalition, I want to pay particular tribute on the key area, the single tier, to my hon. Friend—[Interruption.] I do not know why I looked to my left. I should be looking to my right—things are definitely moving now—which is where the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), is sitting. His persistence and work and application have been remarkable, and they have delivered a real reform. Huge credit is due to him, and to the coalition, because we have been able to work together and produce this measure as a coalition. I am enormously pleased that it enjoys some consensus in general terms across the House.
The Bill is about putting in place a welfare and pension system that both reflects the reality of our society now and puts us on a fair and, I hope, sustainable basis for the future. That principle underpins vital changes proposed in the Bill: long overdue reforms to modernise bereavement benefits; bringing forward the increase in the state pension age to 67; and putting in place a mechanism for a regular review of the state pension age, recognising the fact of our ageing population.
Between now and 2035 the number of people in the UK over state pension age is currently set to increase from 12.4 million to 15.6 million, a rise of 26%. With ever more pensioners, sustainable pension provision is ever more pressing, and will always be a priority for this Government—and, I would hope, for all Governments. To that end, the Bill provides for the most important reform for a generation: the introduction of the single-tier pension. This new pension system reflects the fact that working patterns and family life have changed over years, that people need to take personal responsibility for planning and saving for their retirement, and that people are living longer and drawing their state pension for longer than their ancestors would ever have done or, ironically, ever expected to do.
The Bill is a significant change for the future, but it builds on the foundations that we have already laid to ensure that pensioners get a decent income in retirement. We announced the triple lock at the beginning of this coalition—not just linking the state pension to earnings but giving a guarantee, in difficult times, that pensioner income would be predictable and would rise at a faster rate than it had risen before. The average person reaching state pension age in 2013 can expect to receive some £12,000 more in basic state pension over their retirement than under previous policies of uprating by prices. The basic state pension is now a higher share of average earnings than in any year since 1992.
Through our commitment to universal pensioner benefits in this Parliament, we have maintained support for older people. There were 12.6 million winter fuel payments to more than 9 million households in 2011-12. We have continued free eye tests, free prescriptions, free concessionary bus travel and free television licences for the over-75s, and that is worth hundreds of pounds to individuals each year. Yet, we are still left with an incredibly complex and confusing system—it is confusing for most people who would have to look at it.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
I am grateful to the Secretary of State for giving way so early in his speech, which we are following with great interest. Will he clarify—he may not want to at this stage—whether he plans to table any amendments to schedule 12(14), which says that the flat-rate pension will be uprated by earnings?
Mr Duncan Smith
No, that is not our plan, but our commitment is public and stated, and goes throughout the whole of this Parliament. This Bill brings that in, so any further changes would have be made later. I simply say that our commitment to the introduction of this Bill remains exactly as it stands.
The two tiers—the basic state pension and the additional state pension—together with other outdated add-ons, make for this complication, as does the mess and mass of means-testing known as the pension credit. With 11 million people now not saving enough for their retirement, we can and must do more to simplify the state pension system. The right hon. Member for Birkenhead (Mr Field), who is in his place, has gone on about this matter for long enough and there has been consensus across the Floor of the House. Getting more people to save, and to save more when they save, is critical.
The first step, which the previous Government had initiated, was auto-enrolment. We picked that up and are now successfully rolling it out to help up to 9 million people into a workplace pension scheme and to make savings the norm. That big change has, again, been smoothed through and taken through at rate, but we have taken care and consideration, because at this difficult time some companies would encounter difficulties. We have been careful to ensure that the roll-out allows time for people to plan. Significantly, more than 400 of the country’s largest employers have now met their auto-enrolment duties, and more than half a million eligible jobholders were newly enrolled by the end of April 2013. Once this is in a steady state we expect up to £11 billion more in pensions saving every year. That is a very big and significant reform. People from many other countries around the world have been to talk to my hon. Friend the Minister of State and have seen me about doing it themselves. We are not breaking absolutely new ground, but for us and for many others it is a real departure: getting people to save and save from the moment they move into work.
Measures in the Bill will ensure that automatic enrolment works as intended. We need to address some technical issues, clarify the existing powers and provide for the automatic transfer of small pension pots. The last of those is vital, because a quarter of people already lose track of at least one pension, and it is estimated that some 50 million dormant pots will exist by 2050 if we do nothing about this issue. It is confusing, and I say with the greatest respect to my hon. Friend the Minister of State that although plenty of people understand pensions, dine out on them, sleep on them and can work them very cleverly—the word “anorak” does not come into my lexicon at all—most people find this a complex and difficult area. People can be left with small pots as they move, and that is now the way of work; people move in and out of different companies, leaving behind these pots. It is vital to deal with that, and my hon. Friend has made a huge move to do just that.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
Perhaps I am an anorak, as the chairman of the pension fund for Members, but one of the issues is the question of contracting out. As I understand it, the Bill does not allow contracting out. Am I right to say that people like us and many others in the public sector will face an increase in national insurance contributions?
Mr Duncan Smith
I fully respect the hon. Gentleman’s knowledge of pensions, and that is the case. We have not shied away from that: there will be an increase in national insurance contributions for a number of people. Some 70% of employees will not pay any national insurance charges, although some 30% do, and overall most of our 10% will get a better pension that will be higher in total than that which they would have had according to their contributions. All, bar a smaller number, will be better off. It is never an easy pill to swallow, but the overall reform benefits the vast majority of people. I accept that there will be that charge, but the vast majority will benefit and even those with higher national insurance charges will benefit, too.
Mr Donohoe
In that case, it will mean a pay cut to a considerable number of people in the public sector.
Mr Duncan Smith
My point was that although, of course, the charge will add to the amount they pay, overall they will get a better state pension over the lifetime of that pension. It is a trade-off, in a sense: they get more, but they have to pay a bit more. Whichever way we cut it, it would be complex and difficult to avoid that. During the passage of the Bill, we will be happy to hear more from the hon. Gentleman and to hear any ideas he has, but our principal position at the moment is to reduce it to the smallest level that we can.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Another concern that has been raised about the potential problems with transferring small pots is that they could be moved from a well-managed, good-quality scheme into a lower-quality scheme. What assurances and protections will the Government put in place to ensure that that does not happen to people?
Mr Duncan Smith
We plan to head that off. We will have much more stringent quality standards, which will ensure that the process is properly managed. We will keep that constantly under review, to ensure that there is no opportunity for people to abuse the process. It is worth noting that we have already talked about areas where we want to ban and cap. For example, we announced our intention to ban consultancy charges in auto-enrolment schemes and we are considering how to do that. The Office of Fair Trading report is due in the summer, I think, and the Government will be consulting after that. We plan to publish our consultation, including on proposals to introduce a charge cap. Defined ambition pensions should also give us greater risk sharing and certainty. I hope that that answers the hon. Lady, and there will be more to come from my hon. Friend the Minister of State.
Nigel Mills (Amber Valley) (Con)
Small pots cannot currently be transferred to the National Employment Savings Trust. Will the Secretary of State update the House on the Government’s plans to change that? I cannot see any such plans in the Bill, so might they appear at a later stage?
Mr Duncan Smith
This is obviously Second Reading, but we will have further discussions on that subject. We know that it needs addressing and my hon. Friend the Minister of State is already aware of that. Although we will not cover it on Second Reading, we will, I suspect, tackle it during the passage of the Bill. If my hon. Friend the Member for Amber Valley (Nigel Mills) wants to be on the Committee, now is the time to volunteer. Volunteering in this place is always dangerous, but, none the less, I urge him to do that.
Even with auto-enrolment, it is critical that people understand what they get from the state and are able to save with some confidence. I recognise that that is the biggest area, and it is what the single-tier pension is all about. Auto-enrolment on its own without single tier would be difficult, but single tier underpins auto-enrolment, making it all the more important. The single tier will be all about setting a basic level of pension above the means test.
Let me give an illustrative example: 2012-13 prices would mean a single tier of £144 a week, a basic state pension of £107 and pension credit of £142. Under single tier, every individual would therefore qualify for a pension in their own right. The full rate payable for 35 years of national insurance contribution—the right hon. Member for Birkenhead has made the point about contributing to one’s future wealth—reflects that we are combining both the basic pension, based on contributions for more than 30 years, and the state second pension, based on 49 or 50 years of contributions. We are merging the two together. Yet even as we abolish the whole complicated system of the additional state pension on the one hand and contracting out on the other, we will still recognise people’s existing contributions. This is an important matter which has been raised with us a number of times. For example, someone who reaches state pension age in 2016 under single tier who is due £160 under the current system in whatever form will still get that pension of £160, so it is locked in.
Workers who were contracted out at implementation will start to pay full national insurance contributions, as 70% of those who are in work already do. In return, we believe they can build towards a pension at full single rate. Rather than today’s much lower basic state pension, they will get a reward for that effort to save, as I said earlier, referencing the already existing auto-enrolment. As a result, the vast majority, some 90% in the first two decades, will receive enough extra over their retirement through a single-tier pension to more than offset the higher contributions. Let us take a 40-year-old in 2016 contributing an extra £6,000 of national insurance before reaching state pension age in 2043. Over their retirement they would receive £24,000 more in state pension—a net gain of £18,000. That is the point that I was trying to illustrate earlier.
We must honour the past and deal with its complexity. That is the key. Going forward, whether previously contracted out or not, people will become entitled to the single-tier pension in the same way. This is an important feature.
Mr Byrne
I wanted to catch the right hon. Gentleman’s eye before he left that point. With reference to honouring the past, can he confirm to the House that going forward under the transitional arrangements, those rights that have been built up in STP will be uprated by the consumer prices index?
Mr Duncan Smith
Yes, I can confirm that to the right hon. Gentleman. Unless there is some reason why he disagrees with that and wants to come back at me, I will make progress.
Pamela Nash (Airdrie and Shotts) (Lab)
I thank the Secretary of State for giving way before he moves on. We are talking about winners and losers. Is it not the case that the average payment that a pensioner will receive per week under the single-tier pension is less than the current average payment?
Mr Duncan Smith
No. I am not sure how the hon. Lady arrived at that conclusion. It is not the case. The vast majority will get more in decades to come. We are happy to discuss that further if she has some information that she wants to share with us.
In 2020 three quarters of new pensioners will get the higher state pension, following the introduction of the single tier, particularly benefiting those who have historically had poorer state pension outcomes. There will be better provision for the low-paid, including 60% of the lowest income pensioners who will have higher incomes in retirement by 2040, compared with rolling forward the current system. There will be better provision also for the self-employed—this is a big plus—who for the first time in about 40 years will be treated the same as employees for the purpose of state pension entitlement. That is a genuine gain.
There will be better provision for those with broken contribution records, especially women and those with caring responsibilities. I hope that this will be seen in all parts of the House as part of a rolling process to try to include them in the process and reward them for doing a hugely responsible job in society. More than 700,000 women who reach state pension age in the first decade after single tier is introduced will receive on average £9 a week more. That is quite a significant change. By bringing forward implementation to 2016 rather than 2017, an additional 85,000 women will retire under the single tier. That was a debate that took place previously and I hope the measure will be welcomed in all parts of the House. However, this better provision will be sustainable only if we get to grips with the unprecedented demographic shifts reflecting and affecting our population.
Sir Peter Bottomley (Worthing West) (Con)
When my right hon. Friend gets on to that topic, the House will listen with interest. He has talked, rightly, about the anomaly of the self-employed, and the measure will be greatly welcomed, as will the attention to some of the women affected, but may I draw his attention to clause 20 which, if it is not passed, would unfreeze the pensions for people in the old dominions? Were I to be asked to serve on the Committee, I would do so with pleasure, with the intention of getting the Government to stop this historic immoral anomaly, to start negotiating bilateral treaties and to give people the prospect that they will not have to live on pensions of £6 a week when others are on £106 or £160 a week.
Mr Duncan Smith
I hear my hon. Friend, and I would simply say to him that that would cost a sum knocking on the door of between £650 million and £700 million a year. Other Governments have considered it. I would be happy to discuss the matter with him, however, and to reflect on it. I am sure that those sitting further down the Bench will have heard his desire to serve on the Committee, although whether my hon. Friend the Minister of State would want that is another matter altogether.
Dame Anne Begg (Aberdeen South) (Lab)
If the Secretary of State is not prepared to go as far as the hon. Member for Worthing West (Sir Peter Bottomley) requests, will he perhaps look again at the Select Committee’s recommendation that the anomaly could be changed for those who reach pension age after April 2016? I appreciate that it would be expensive to change the system for those who are historically already in payment, but that might not be the case if the change related only to new pensions.
Mr Duncan Smith
Whenever the hon. Lady speaks, I always want to help her, particularly as I am due to appear in front of her Committee shortly. I really want to be as nice as possible to her, but I am not sure how much hope I can give her. My hon. Friend the Minister of State and I are certainly always happy to look at these proposals, but I come back to the point that it is difficult to do anything about them at the moment, because these things cost significant amounts of money. I recognise the concerns that are being raised, but these are expensive items and, right now, I do not think that we could possibly schedule in such changes. I am happy to discuss the matter further with the hon. Lady, however, as is my hon. Friend.
The regular review of the state pension age will ensure that the issue is considered in every Parliament, which will avoid the necessity for future Governments to have to take emergency action, as we did earlier. Men and women retiring at 67 in 2028 can expect to receive a pension for roughly just as long as those retiring at 65 today. The review will work on the same principle—namely, that people should spend a given proportion of their lives drawing a state pension. By regularly considering the state pension age in the light of changing life expectancy, we can ensure that our pension system remains on firm foundations. That will ensure a continuing and fair social settlement between young and old.
Another long overdue element of reform in the Bill relates to bereavement benefits. As we bring our pension system into the 21st century, we must do the same with our bereavement benefits. They form an important part of our state safety net, but they have remained unchanged for too long. They now reflect a time gone by, in which the life of a widow was quite different from what it is today. The conclusion, after long discussion, is that we have an outmoded system of complicated payments and contributions that, at worst, can harm people’s long-term job prospects by distancing them from the labour market.
While protecting existing recipients, the Bill makes provision to simplify the system through a lump sum payment followed by 12 monthly instalments. The new system will help spouses and civil partners to deal with additional costs in the critical time immediately after a bereavement when that help is most needed, as well as giving them the space and time to settle and resolve most of the other issues that require financial support. Those with dependent children will receive a £5,000 lump sum and £400 a month for 12 months. Those without children will receive a £2,500 lump sum and £150 a month for 12 months. This is not a saving measure. I can absolutely guarantee that the money being applied to this will go back into it, although it will be more narrowly focused over a particular time scale.
I believe that the Bill has the general support of both sides of the House, by and large. It is a genuinely good example of coalition politics coming together to find a solution for people who are unable to change their circumstances following retirement and who want simplicity and the certainty of a commitment by whichever Government are in power that their income will remain at a level that allows them to sustain their position in life.
Jeremy Lefroy (Stafford) (Con)
I congratulate the Government on the Bill. Does my right hon. Friend agree that it is extremely important that pensions education is provided at a much earlier age? I cannot remember when I first started to learn about pensions, but I must have been about 40. Are the Government looking at introducing that much earlier in financial education in schools?
Mr Duncan Smith
I am interested that my hon. Friend raises that point, because I have been in discussions with my right hon. Friend the Secretary of State for Education on including financial literacy in the national curriculum—it is not completely settled at this point, but we are getting close to a settlement. We on the Government Front Bench today believe fundamentally that financial literacy should be part of the national curriculum. That way, people will be less in thrall to doorstep lenders and those who can bamboozle them with what interest rates and payments are, and when it comes to pensions they will better understand their needs and what they will actually get. That is vital, and I am sure that the coalition Government will bring forward a solution that allows it to go into the national curriculum.
In conclusion, I am really proud of the Bill, and I am particularly proud to be serving with the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate, who has brought it forward with his team. I am also proud of the work of the Department’s pensions section. I know that Opposition Front Benchers know just how good that section is and how hard it works. I want to thank them, from the Government side, for all their hard work and for overcoming—how shall I put it—the differences of opinion as we have headed towards this point, and in such a way that we are now all unified in one paean of praise for the wonderful single-tier pension that we are about to launch. I thank my hon. Friend for his support. The Bill represents a huge change, but one that has been a long time coming. I believe that it will bring our pensions system into the 21st century, allow security in old age and mean for the first time a firm foundation for the work force of today. I commend the Bill to the House.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
It is a great pleasure to follow the Secretary of State. I shall attempt to do justice to his succinct speech. As he will know, yesterday was a very difficult day in Birmingham, and I know that the whole House will join me in sending thanks and good wishes to PC Adam Koch, who was so badly hurt on Saturday night. His extraordinary courage, together with that of local residents, helped keep worshippers safe at one of our local mosques. He is doing well in hospital. I know that the whole House will want to wish him a speedy recovery.
I am grateful for the note of consensus that the Secretary of State sought to strike in his remarks. As is appropriate for a Second Reading debate, this afternoon I would like to set out the principles on which we agree with the Government and then get stuck into a few of the details of some important matters that we think are still to be settled. We genuinely hope that the Government will listen during this debate and in Committee, not least because many of the issues I wish to raise touch greatly on the need for a comfortable and well-earned retirement for millions of people in this country.
I think that it is fitting to start my remarks with a quick word about history and the road to this afternoon’s debate. One of the chief reasons why the Labour party will not stand in the Bill’s way today is that we recognise the genuine effort to build on the strong foundations that we left. Indeed, our only disappointment today is that we think the Secretary of State is proposing to build only a halfway house on those strong foundations. We think that the Bill is merely half a reform. Therefore, the Opposition’s job during the course of the Bill’s passage will be to ask him not simply to fix some of the deficiencies we can see, but to be bolder and more radical and to seize the moment that we think is there for the taking. I want to set out a number of areas where I think he can do more to seize that moment.
I am glad that we bequeathed the coalition Government a strong foundation—an inheritance very different from what we found in 1997. The link to earnings had been snapped back in 1980, there were pension holidays for employers and the state pension had fallen from 20% of earnings down to just 14%. The pensions Minister himself said:
“Pensioners, rightly, do not trust the Conservatives on pensions.”—[Official Report, 6 November 2000; Vol. 356, c. 34.]
I am glad that he is working so closely in the coalition Government with the Secretary of State on their difficult task.
I have described the legacy that we tried to sort out. We genuinely wanted to leave the Government a different state of affairs. There is no better summary of our work than the research published by Her Majesty’s Government confirming that pensioner poverty had fallen to the lowest level for 30 years.
Richard Graham (Gloucester) (Con)
The right hon. Gentleman talked about building on the strong foundations left by the previous Government. If my memory serves me correctly, the last increase in the basic state pension was 75p. The coalition Government’s new increase in the state pension was worth £234, building on a new foundation of a triple lock, which will increase pensions by a significant amount. Will he comment on the difference between my interpretation of a strong foundation and his?
Mr Byrne
The hon. Gentleman will be as familiar as I am with the research published by the Institute for Fiscal Studies showing that, under Labour, £11 billion more was spent than if we had pursued the policies that we inherited in 1997. We lifted gross income for pensioners by more than 40%; 2.4 million pensioners had been lifted out of absolute poverty and nearly 2 million out of relative poverty by 2010-11. It was the IFS that confirmed that both the absolute and relative measures of income poverty fell markedly among pensioners. We inherited a tragic and grotesque state of pensioner poverty in 1997 and we set about dealing with it with focus and alacrity. We are proud of the inheritance and legacy that we left the Government.
Guto Bebb (Aberconwy) (Con)
Does the shadow Minister accept that over the 13 years of the previous Administration, nothing whatever was done to improve the situation of the self-employed who depend on the state pension system?
Mr Byrne
We are very proud of the reforms that we set in place. They tackled the grotesque pensioner poverty that we inherited in 1997. That is not simply my conclusion; when the pensions Minister spoke in the House back in 2000, he pretty much confirmed the same line of argument and the same thesis. The job we did on pensioner poverty was important and we made great progress. The foundations that we left are those that the Secretary of State has built on.
The purpose of the Bill is, in essence, to address one of the matters flagged by Lord Turner in his report and one for which we legislated in 2007. As the Secretary of State mentioned, the noble Lord recommended a new pension supplement for the 21st century—one that is universal and, crucially, one that reduces means-testing, an important part of the Secretary of State’s argument. As the Secretary of State also rehearsed, the noble Lord recommended a system that provides clear incentives to save.
The commission proposed an approach different from that proposed by the coalition. It was in the interests of preserving the consensus that Lord Turner had so assiduously constructed that we chose to follow his approach rather than the one set out by the coalition today. Indeed, at the time Lord Turner flagged a number of risks in the strategy that the Government are now pursuing. The Government have taken an approach different from Lord Turner’s. That comes at the price of some big notional losses for state second pension members. The goalposts on the state pension age have now been moved three times in three years. However, there has been some improvement in means testing and potentially something about incentives to save. I want to touch on those.
Let us take means testing first, however, as it was an important part of the Secretary of State’s argument. Today, about 80% of people are free of the pension credit means test; that pension credit is now available for 20% of people. By 2020, that would have fallen to about 16% anyway. Under flat-rate pensions, there will be a further fall of about 8%. If we put savings credit to one side, the improvement is just 2%, and of course about 35% of pensioners will still be eligible to access council tax benefit, which is about 238,000 people, and 12% will be able to access housing benefit—84,000 people. We are still an awfully long way from the end of means testing, but none the less a small step forward has been taken and we welcome it.
The Secretary of State was anxious to stress the point about savings. The judgment of the IFS was that the effect of proposals on the incentive to save were complex and varied. As the Bill reduces the long-run generosity of the pension system—that is one reason why we support it—it should increase the incentive to save. However, although some will see lower effective marginal tax rates when pension credit and savings credit are withdrawn, some will see higher marginal tax rates. The IFS says, therefore, that the direction on the effect of savings is ambiguous.
Under the proposals, some pensioners who have saved absolutely nothing will be better off in real terms each week than those who have saved substantial sums. A pensioner who has saved nothing will enjoy the flat-rate pension of £144 a week and will be entitled to housing benefit and council tax benefit, which is another £94 a week. That is a total of £238 a week, which is considerably more than what someone who has saved £24,000 will receive. They might enjoy a notional income from savings of about 30 quid a week, plus the flat-rate pension, which is a total of £174 a week. That is much less—36% less—than what the pensioner who has saved nothing will get. In fact, the pensioner who saves nothing will be better off than someone who has put £50,000 away in the bank. So there are still problems and disincentives to save, but none the less, we think that, on balance, the Bill represents progress, which is why we support it in principle.
Richard Graham
Did I hear the right hon. Gentleman right when he said that the Bill’s move to axe the means-tested pension credit was a small step forward? This is a huge and significant step forward that recognises that the means-tested pension credit was deeply flawed and was not implemented for many of the people who were eligible for it. A single-tier pension will set our pensions on the right track. Will he confirm that the Labour party now accepts that this is the right way forward and that it is a huge step?
Mr Byrne
I will leave it to the hon. Gentleman to provide his own definition of the word “huge.” He will have read chapter 4 of “The single-tier pension: a simple foundation for saving”, published by the Department for Work and Pensions, which clearly says that under the current system, the number of people reaching state pension age after 2016 who will be eligible for means-tested benefits for pensioners will fall to 16%, and that the figure will fall to 11% by 2060. Under the single tier, eligibility for means-tested benefits will fall by 7.5%. The hon. Gentleman will also have read, as I have, Age UK’s evidence, which states, strikingly, that the great bulk of that change results from the elimination of savings credit, rather than from any increase in generosity. If we put savings credit to one side, we will see that the change in the percentage of pensioners eligible for means-tested benefit is just 1% or 2%. If he chooses to define that as huge, that is his right.
I want to flag concerns in three further areas and I hope this will provide us with material for debate and amendments—some probing and some to be voted on —in Committee.
Mr Duncan Smith
I had not meant to intervene, but the right hon. Gentleman has spent the first part of his speech extolling the virtues of what Labour did, and there has been a little bit of to and fro about that. Does he relate to what Ros Altmann said about the ending of the dividend tax credit and does Labour now accept that it made a major error? Ros Altmann was an adviser to the previous Prime Minister, Mr Blair, and she said that Labour “destroyed our pensions system”. Does the right hon. Gentleman regret that attack on the defined benefit system?
Mr Byrne
We were ambitious and wanted to focus our resources on tackling pensioner poverty. I am reluctant to take too many lessons from the Secretary of State. The 1986 cap introduced by Lord Lawson led to a huge drop in contributions to occupational schemes. In fact, the pensions Minister himself said:
“Pensioners have long memories. They remember the Conservatives’ record on pensions…That record is one of not believing in the state pension, of eroding the basic state pension…of attacking SERPS—the state earnings-related pension scheme—and of slashing entitlements.”—[Official Report, 6 November 2000; Vol. 356, c. 34.]
I am afraid, therefore, that I am reluctant to take lessons from the Secretary of State on the inheritance that he has been bequeathed. As I have said, the foundation was strong and that is why we are urging him to be a touch more radical. I think that, in his heart, the Secretary of State will share many of my concerns. I know that he has been trapped in difficult negotiations with the Chancellor and I have no doubt that he would otherwise have gone further than he has in the Bill.
My first question is about universalism. Every generation has to strike the right balance between universalism and targeted benefits. That was true of the post-war Government and it is true of this Government. The Opposition believe that there needs to be a different balance between universal and targeted benefits for older people in the future. We find ourselves in agreement on that not just with the pensions Minister in this morning’s Financial Times, but with the Deputy Prime Minister and possibly even the Secretary of State, although he will keep his own counsel.
Our biggest problem with the Bill is that if the flat-rate pension is so virtuous, its virtue should be enjoyed as widely as possible. It should be a universal pension, but it is not. In particular, we are very concerned about the 700,000 women who will reach the age of 65 in 2016 when the flat-rate pension starts but who, because they will have hit the state pension age of 63, will not enjoy the flat-rate pension, even though a man who was born on the same day will. There are many of those women in our constituencies. I know that this matter will be of concern to the Minister and the Secretary of State.
The Minister of State, Department for Work and Pensions (Steve Webb)
Will the right hon. Gentleman give way?
Mr Byrne
I will give way in a moment. I will just flag another issue that the pensions Minister might say a word about when he intervenes.
There is an uplift to 35 years-worth of contributions being required before 100% entitlement to the flat-rate pension is enjoyed. That was not the original plan that was presented to the House in the Green Paper. When the Minister gave evidence to the Work and Pensions Committee, he said that the change would save roughly £1 billion. Five years’ more contributions will now be needed before the full pension is enjoyed, so up to 100,000 fewer people will receive the full pension than if the current system had continued. For every year under 35 years, people will enjoy £4.11 less a week. Of course, someone with below about seven or 10 years of contributions will get nothing at all.
We recognise that the minimum income guarantee will remain in place, but we are concerned that the many people who fall short of 35 years and the women to whom I referred will be rather too close to the poverty line for the liking of everyone here.
Steve Webb
The right hon. Gentleman mentioned the position of women born between April ’51 and April ’53. Will he clarify whether the Opposition have a specific proposal? It has been suggested that his view and that of his colleagues is that such women should be allowed to opt into the single tier. Is he aware that the cumulative cost of that over 30 years would be about £4.5 billion? Is that an example of his laser-like focus on public spending control?
Mr Byrne
I suspected that the pensions Minister would want to play politics with this issue. However, I hope that we can engage on it constructively in Committee.
The DWP has published estimates that show that the cost of including those women will be about £220 million a year. I say gently to the Secretary of State that the change that he is taking through the House today will net the Chancellor £5.5 billion in extra national insurance contributions in 2016-17 and £5.4 billion in 2017-18. The Chancellor has obviously spent some of that money for the Secretary of State by funding the proposals for social care, which are scored at £1 billion in 2016-17, and by funding employment allowance, which is scored at £1.6 billion. There is therefore £2.9 billion left. The cost of remedying the position of these women would be about 7.5% of the remaining NICs windfall that the Secretary of State has kindly brought the Treasury and just 4% of the overall NICs windfall. We are looking forward to working with the pensions Minister in Committee to fix this injustice, which I suspect he also feels in his heart.
Pamela Nash
The pensions Minister gave the figure of £4.5 billion to put this group of women born between April ‘51 and ‘53 on equal terms with men. We have been hearing during the debate that this is about winners and losers, but does that not show that women born between ‘51 and ‘53 are losing out to the tune of £4.5 billion?
Mr Byrne
It is hard to refute my hon. Friend’s argument. I suppose we must look at the position of those women together with the consequences of the reforms that the Secretary of State has authored to auto-enrolment—I know he will do that. One of the first decisions he took in the Pensions Act 2011 was to link the threshold for participation in auto-enrolment to the personal allowance. As the personal allowance has gone up, more and more low-paid people have fallen out of the auto-enrolment system. In 2011-12, 600,000 people fell out of auto-enrolment, and another 100,000 in 2012-12. In 2013-14, 420,000 people will fall out of the auto-enrolment system—1.1 million people have been carved out of that system.
This is an incredibly important part of the pensions saving architecture for the future, and I am extremely concerned that a number of low-paid people—more than 1 million, most of them women—have been shut out of the auto-enrolment system. To that mix we now say to 720,000 women who had the misfortune to be born between April 1951 and 1952, that they will not get the new system either.
Jane Ellison (Battersea) (Con)
Will the right hon. Gentleman look at the work of the Work and Pensions Committee and its pre-legislative scrutiny of the draft Bill? We found in our evidence sessions that the situation was a great deal more complex for that group of women. They are by no means a homogenous group and some of the comparisons with men born on the same day are quite misleading. That came through in the evidence sessions, and I caution the right hon. Gentleman to look at the Committee’s report on the draft Bill.
Mr Byrne
I very much hope that the hon. Lady will be on the Bill Committee to ensure that such arguments are fully rehearsed. I am worried that an injustice is being perpetrated on these women, which is why it is incumbent on us all to search every possible option to help ensure that they can be included and not excluded, particularly in the context of changes to auto-enrolment that have moved 1.1 million people out of that future.
Ian Swales (Redcar) (LD)
I declare an interest in that my partner was born in exactly this period. In this spirit of equality, is the right hon. Gentleman proposing that these women should have their retirement age equalised with that of men?
Mr Byrne
As the hon. Gentleman will know, many of these women have already been hit by the acceleration of the state pension age at very short notice, so no—we want to search during Committee stage for ways to include these women. I know there will be many women in such a position in his constituency, and I am sure he will want engage in that debate.
Mr Byrne
No—[Interruption.] I will certainly give way to the Minister in a moment, but I want to underline one final aspect of universalism and the increases in the state pension age to which the Secretary of State referred. The Opposition will not stand in the way of proposals in the Bill to move forward the state pension age, but we want to put it on the record that we are concerned about the proposal to review it every five years. The goalposts on state pension age have already been moved a number of times in this Parliament, which is not good for stability, certainty or long-term planning.
I represent one of the poorest communities in the country and there is a 16-year gap in life expectancy between my constituency and Lichfield, a little way up the road. The mortality figures published by the Library over the past few days show that 1.2 million citizens die between the age of 65 and 69, and 60% of those are in the bottom three income groups. Mortality rates for the poorest in our country are twice the level of the richest, and we must take great care, not just with projections about life expectancy, but also about healthy life expectancy. The Secretary of State is asking for the power—unfettered —to review the state pension age every five years, which we think will promote uncertainty and instability, and damage the pensions savings rate that he seeks to increase.
Steve Webb
I believe the shadow Secretary of State has inadvertently misspoken. Will he confirm that no women born between 1951 and 1953 have had their state pension age changed by this Government, that any changes to their state pension age were made under the Pensions Act 1995, and that they have not had their pension age changed at short notice?
Mr Byrne
The Minister is right. I was referring to the problem that the state pension age has been moved a number of times in the past three years. The Opposition believe that it is unwise of the Secretary of State to ask for the right to review the pension age every five years because it will promote instability.
Mr Byrne
I will move on, but I will give way in a moment.
A flat-rate pension is a good idea and its virtue should be widely enjoyed. It should be a universal system. During the passage of the Bill, the Opposition will look at how we can maximise its inclusivity and universal scope.
Mr Duncan Smith
I am grateful to the right hon. Gentleman for giving way—he is being generous, as ever. I want to confirm that we are not seeking to make the state pension age unstable—quite the contrary. We have talked about setting down a period in which people should expect to be in retirement. The Opposition also know that, after every review, we will require legislation to make changes. There are therefore plenty of locks. If we did not address the matter it would rationally put us out of step with everybody else. Ireland, Australia, Spain, USA and Germany are doing similar things. All Governments need to take such steps.
Mr Byrne
The Secretary of State and I have no difference of opinion on the need regularly to review the state pension age. My point is that we have introduced a number of changes in the past three years and an environment of instability and risk has been created. The Opposition worry that reviewing it every five years will foster more uncertainty and risk. The Government and Opposition share the objective of increasing the level of savings. However, I am anxious to ensure that there are safeguards against, or fetters on, not only this Secretary of State, but future Secretaries of State, to constrain how they make decisions on accelerating or advancing the state pension age if they decide to do so in years to come.
The second Opposition challenge to the Bill during its passage will be a pressure test of the financial assumptions that underpin it. As I said a few moments ago, those who were contracted out are now contracted in, which is great news for the Chancellor—in fact, it is £5.4 billion-worth of good news. In theory, that will mean that the system will become more affordable over the long term, and that, over the very long term, the fraction of gross domestic product and national wealth that we spend on the pension system will come down.
The Opposition believe that that is wise, but we are worried about a number of short-term risks. First, how on earth will the national health service, local government, teachers and the police find £4 billion-worth of national insurance contributions from 2016 onwards? When the Chancellor presented his Budget, he was clear that there would not be an awful lot of help for those in public services, but two thirds of the money in the NICs bill comes from the NHS, teachers, the police and local government. The Secretary of State has not said much today, and we have not heard much from the Chancellor, on where on earth our hard-pressed public services, particularly the NHS, will find £4 billion from 2016 onwards.
During the Bill’s passage, the Opposition would like the Secretary of State to confirm the deal that is being offered in the Bill to the self-employed. Currently, the self-employed pay lower NICs than anybody else— 9% of profits in national insurance, whereas an employee’s contribution is 12% of earnings, and an employer’s contribution is 13.8% of earnings. However, under clause 2(4), the self-employed get 100% of the new pension. They therefore pay less, but get the same, which sounds too good to be true. Experience tells us that, when something sounds too good to be true, it often is. The self-employed deserve long-term certainty. Although there is nothing on the precise NICs number in the Bill, we hope the Secretary of State and the Chancellor will say more about the long-term plan for funding that measure in the spending review. I note in passing that the Institute for Fiscal Studies states:
“The current way of treating the self-employed…is a huge open invitation to tax avoidance, because it is so much lower than you pay as an employee.”
The Institute of Directors is not a hotbed of radical left-wingers and many of its members are self-employed, but even it says that the most reluctant would recognise that given the improvement we are about to get from the single-tier pension, it is only fair that everybody is asked to do their little extra bit. We hope that the Secretary of State can put beyond doubt the long-term bargain for the self-employed.
Nigel Mills
I note the points the right hon. Gentleman is making, and I can see that they have some sense. Does he recognise that a low-earning, self-employed person on £10,000 a year would be paying more national insurance than an employed person who is being paid £10,000? The position is not quite as simple as he is making out.
Mr Byrne
The hon. Gentleman makes an excellent point. My chief concern in this debate on principles is for the long-term bargain to be put on a secure footing. It would be wrong to lead the self-employed up the proverbial garden path by offering a great deal, clapping everyone on the back and voting it through only to see it collapse because it is literally too good to be true.
The final point on which we will press the Secretary of State during the passage of the Bill is probably the most important issue that our constituents will put to us: will the new flat rate pension offer them a comfortable retirement after they have worked so hard for so long? We are concerned that parts of the Bill fail that basic comfort test. Let us be clear that the hard wind-up of the state second pension will create a notional loss for many people under the age of 59. For example, 190,000 people in their 50s could lose between £30 and £35 a week, compared with what they would have got if S2P stayed in place. Someone who has been contracted-in for all of their working life and is aged 55 when the pension is introduced, would in theory have been able to accrue additional state pension for the remaining 11 years of their working life, amounting to £24 a week in additional state pension. That will no longer be possible under the single tier. They will continue to contribute 12% NICs for the rest of their working life, but there will not be an additional S2P entitlement.
The situation is even more grave for those who are just starting work: those in their 20s who will not retire until after 2060. By the Department for Work and Pensions’ own calculations, the majority of them will have lower pensions under the single-tier system, as the income replacement rate will fall from 38% to just 30%—a big drop that points us to the gaping hole where reform of the private pension system should be.
The Government have been clear, as they rehearsed the arguments in the past year, that they want personal accounts to pick up some of the slack for the fall in income replacement rate. There was a degree of consensus on the auto-enrolment system that the Government are now taking forward. We are concerned that the measures to link membership of auto-enrolment to the personal allowance mean that too few people will be involved in the new personal accounts, and that not enough people will be saving for the future.
We are also concerned that the effective shut down of S2P means that workers now lack a state-backed, low-risk option in which to save, which is why we think that now is the time to remove many of the fetters and constraints that were initially constructed for the National Employment Savings Trust, the national pensions mutual created under the Pensions Act 2007. We need to allow transfers in from other schemes, end the upper ceilings on contributions—this is what employers are telling us—and legislate harder for transparency on costs and charges, which is why we have called for an investigation by the Office of Fair Trading into workplace pensions. We want to see a simple and comprehensive declaration of the costs of saving in a pension, so that savers can see precisely what is being taken away from them and the long-term impact on the size of their pension pot.
We are concerned that there is a structural problem that needs to be grasped: the fractured and small-scale nature of the offer for many pension savers. Too few funds have the scale to offer savers the best investment decisions or the lowest charges. The Government must look much harder at how to foster an industry of bigger, simpler and cheaper funds.
We can learn many lessons from countries such as Australia, particularly on the establishment of a low-cost default pension fund; trustee directors for every pension scheme with statutory duties to work in the interests of savers; and requirements to publish a detailed charging structure and past performance to ensure transparency. To deliver this kind of industry for the future, we should be considering a legal requirement that all pension schemes prioritise the interests of savers over those of shareholders. We should also be considering obligations on trustees to assess whether schemes have sufficient scale to deliver low costs, and if the assessment is that a scheme is too small to deliver this, trustees should be empowered to investigate merging with other schemes. Finally, we should consider whether regulators should be empowered to mandate small schemes to merge, as is done in Australia.
In conclusion, the Opposition have always believed that matters as serious as those in the Bill should be approached in a spirit of national consensus, and I say again that I am grateful to the Secretary of State for how he has approached the debate, but the House must ask whether the new pensions provision is sustainable, comfortable and genuinely universal. I am afraid that we believe the answers are no, no and no again. We agree on some of the principles, but now is not the time for a failure of nerve; this is half a Bill, half a reform, and as the Bill goes through the House, I urge him to be more radical, to build on his inheritance and to give us a long-term scheme that will deliver a better standard of living for pensioners who have worked so hard for so long.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to be called in this debate and to welcome this much-needed reform. I served on the Work and Pensions Select Committee when we conducted pre-legislative scrutiny of the Bill, so I have already gone through the detail once. The Secretary of State issued an open invitation to Members to serve on the Bill Committee, and I sense that I might be so honoured.
Nigel Mills
It is unusual for Ministers to welcome that, given my record of moving amendments, so the Minister might want to be a little careful, before he gets too excited. [Interruption.] Yes, it might spare me.
We all share the Government’s vision for pension reform. We want predictable, non-means-tested state pension provision, so we know roughly what we will receive when we retire; then we want to encourage private saving in high-quality, fair, low-cost schemes and to know what we will get for our money when we pay into such schemes and how that will convert into retirement income when we reach retirement age, whatever that might be—being 38, I dread to think what mine will be: I suspect it might begin with a 7, which seems an awfully long way off.
The Bill addresses some of those aspirations—it will make it much clearer what state pension some will get when they reach the happy age and it will improve the private pensions system—but will do nothing to improve the final part of the journey and make it clear what will happen when someone reaches that happy retirement age and is told they need to convert their pension pot into a pension income. There remains a big weakness in the system around how fair a deal someone gets when they default into the annuity their pension provider offers them—that was something the Select Committee raised in our pensions governance report. Action is needed. In my view, we should not allow a pension provider to provide an annuity to the same customer. That might be too radical a market restriction for most people, but there is a real problem if people, having saved for years, see their retirement income reduced because they do not know that they can shop around and choose their annuity.
The Bill is clear that people who will retire a good few years after 2016 will get £143 plus indexation, whatever that is, but it is less clear for those retiring in 2016 or the first few years thereafter. For them, there is a complicated calculation involving what they built up under the current scheme and how that is added to under the new one. We need to educate people about the pension they will get and what the change means. In my surgeries, I hear many concerns and fears from people who thought this was some kind of big bang—that if they retired on the new date, they would get a much bigger state pension than those retiring the day before—and did not want to miss the start date. I suspect that for many people the difference will not be huge, however, so those concerns should not be there.
Mrs Madeleine Moon (Bridgend) (Lab)
I appreciate that the hon. Gentleman has been honest in saying that his retirement is some way off, but many people—especially women—who thought they were approaching their retirement have now been told they must work extra years and pay more in, without feeling that they will get an awful lot extra out of it? We have to acknowledge that there will be losers. Does he agree?
Nigel Mills
I think we recognise that in any change some people will lose out—it was particularly difficult to explain that point to those women whose retirement age increased at the start of this Parliament—but sadly these things are necessary in our financial situation.
Ian Swales
I recognise the hon. Gentleman’s expertise on these issues. Does he agree that we have a big job to do on communication, not just around the new flat-rate pension, but around how various groups will be affected? For example, MPs are already getting representations from existing pensioners who feel that the new arrangements are unfair on them. Communication is key.
Nigel Mills
I agree wholeheartedly. I think we have all had people come to us with calculations saying, “What will I get under this new pension? What would I have got?” When trying to talk them through it, there is an especial problem with people who do not understand that those who have contracted out for most of their working life will not get the full £143. They think a bonus is coming—that they will be £35 a week better off—whereas they might just miss out. We need to write to people before the change, saying, “Here’s what you’ve accrued”, “Here’s what will happen after the change”, “It looks like you’ll get your full £143 a week”, “It look like you won’t get the full £143 a week”, “Here’s what you can do”, “Are you due any credits for periods spent caring for children or other things?”, “Have you missed any years’ contributions?” We have to communicate all that clearly so that people have the information in time to make those decisions.
Dame Anne Begg
Does the hon. Gentleman agree that a remarkable number of people do not know that they have been contracted out or qualify for credits through the home responsibilities protection and other things and that it will come as a surprise to them that they might have more credits than they had anticipated?
Nigel Mills
I absolutely agree. The system is so complicated that it is hard for any of us to know exactly what we are entitled to. It is scary when a constituent says to me, “You were on that Committee. Explain how this will work.” From my days as an accountant, I know how to write lots of caveats, so I e-mail them back saying “I think it might be this, but I’m not an adviser, I don’t know your actual circumstances,” and so on. Key to this reform being successful and retaining support, therefore, is how we tell people what they are entitled to, what they can do, what they need to do and when to do it by.
There are some useful things in the Bill, including the tweaks to auto-enrolment, which I think we all welcome. It is right to cap consultancy fees for auto-enrolled schemes, because if the state is, if not quite forcing people into a savings system, certainly encouraging them strongly to do so—through the opt-out—the auto-enrolled scheme must be a fair and decent one, and that means not being ripped off by excessive charges. We should be saying, “This is the most you can charge people. You cannot add unnecessary and expensive consultancy fees”. Therefore, the provisions in the Bill are a welcome change, even to a free-market, non-regulatory person such as me. It is the right direction to head in.
The provisions on the transfer of dormant pots are also a step in the right direction. When starting to think what retirement might bring, one wants to know how much pension income has been accrued, but that can be hard. If someone has changed jobs a few times, they will have lots of small pots, which means they will get those strange, complicated documents once a year that they do not understand. Even if they read them, they will not be able to work out the income it will equate to in retirement. If those pots were moved into a single pot, they would get only one statement. If we made that information clear, they might find out that they have accrued only a third of what they want and that they need to take action several years before retirement.
That is a welcome step. I asked the Secretary of State earlier whether we could use this Bill to make changes to the National Employment Savings Trust so that those who choose to use the scheme or their employers who use it can make those transfers. I am not quite sure what the situation will be for those who think they can transfer their pot but cannot, even though their employer might have chosen one of the best schemes out there. We need to get that clear in the system as soon as we can, so that people understand how that will happen. As the Bill proceeds in Committee and on Report, I hope those changes to NEST can be sneaked in, once the consultation ends. I suspect that some attempts to table amendments to that effect might be made in Committee, if the Government have not quite got there—not that I am saying I will draft them or am in any way qualified to achieve that, which I suspect is well outside my skills.
One issue leading on from auto-enrolment and NEST is the fact that the regulator responsible for auto-enrolment is the Pensions Regulator, yet most auto-enrolment is into contract-based defined contribution schemes, for which the Pensions Regulator has no responsibility. We are in a slightly strange situation. Everyone out there thinks, “There’s a Pensions Regulator,” yet most people’s pension schemes are probably not caught by it. They have no redress to that regulator and instead have to go to the Financial Services Authority, or the Financial Conduct Authority or whatever it is called now—the organisation that did such a good job with the banks that we entrusted it with pensions as well.
I am not entirely convinced that that is the right place, partly because when the FCA gave evidence to us, it did not seem to be giving pension schemes quite the focus that such an organisation ought to give them, as I suspect members of the Committee who were present would agree. There is real confusion out there about who does what in the pensions regulatory system. There is an attraction to having the role of supervising individual pension schemes all in one place—that place being the Pensions Regulator. I accept that the Minister recently replied to the Committee with some sensible reasons why he comes down on a different side of that line, but this issue is worth exploring, to ensure the right protections as more and more people move into contract-based defined contribution schemes, which is a hugely important sphere.
While we are on the Minister’s response to the Select Committee, may I welcome the fact that the start date for the change has made its way into the Bill? I questioned him quite strongly about that on the Committee, because this is a fundamental change to the pension that millions of people can expect, and to have the date slip by some accident or change of policy after the election would be hugely disadvantageous. If the date changes by even six months, that is six months’ worth for people who retired thinking they were getting £143, but who would then drop back into the old system. That would be disastrous, and all those women we have taken out would be dropped back in. I suspect that none of us would fancy that, so having the start date firmly in primary legislation in this Bill has to be right. I welcome the fact that the Minister listened, although I also hope that his power in the Bill to change the date by order is not one that he plans to use. I would have thought that the power should lapse—maybe in March 2015—so that it cannot be changed once we are a year from the start date. It would be awful if less than a year’s notice was given of a slip by six months or something like that.
We also welcome the fact that the Government listened and capped the minimum qualification period. We all accept that it is not right for our taxpayers to provide pensions to people who had a short stay here or to spouses who have never come here and who, by the time they retire, have had 40 years in a different state and have a pension there. It is not right to give them a small state pension that we have to administer. It is right to say, “If you haven’t paid in for this number of years, then you get nothing.” For that period to be more than 10 years would have been unfair—someone who has paid into a system for 10 years probably deserves something back out. It is right that the Bill has a cap at 10 years and we will see whether the Government choose seven years, 10 years or somewhere in between as the process continues.
I have had a gentle canter through what is in the Bill and some of the things I might have liked to see in it to improve things for people paying into private pensions. I am sure we can explore those as the Bill proceeds.
I am reluctantly content with the idea of increasing the state pension age—I suspect that future Governments might be grateful for this one. However, some kind of mechanism should be put in place to force a review every Parliament or every five or six years to see what the decision has to be. Increasing the state pension age by another year will never be politically popular, as a few hundred thousand people will then be retiring later than they wanted to. However, it would be right and fair to have a transparent mechanism—or transparent-ish: it would only force a review, not be a real power—so that we said to people, “As life expectancy increases, we have to accept that you retire later, and we have to try to keep a sensibly fixed proportion of your life that you can expect to be in receipt of a pension.” If people can understand that principle—“This is the proportion of your life for which you will receive a state pension”—or if it is at least there for them to try to understand, that will be powerfully clear. Rather than suddenly saying, “Actually, we’ve got a big financial problem again; let’s make a change that no one was expecting,” let us set that within some kind of trend.
I welcome the Bill and look forward to it passing through this House. There are some questions about the detail that I am sure we will all want to understand, such as how precisely the calculations will be made, how people will know when they have been contracted out and where people who have been contracted out for part of their working lives will fall between £108 and £143. That will be difficult to understand, but it is important that the Government make that clear. There is clearly a huge role to play outside this place in making people understand what pension they will receive and what they can do about it, which will probably be more important than the debates we have in this place or the agonising over commas and full stops that is to come. I welcome the Bill and look forward to the chance to serve on the Public Bill Committee.
Dame Anne Begg (Aberdeen South) (Lab)
It is important that any pension reform has support in all parties across the House, because the last thing we want is for pension reform to keep changing every time a new Government come in. Up to now, the reforms introduced by the Labour Government in 1997 and later have not been changed by the present Government—I will talk about pension credit later. The proposals we are discussing in this Bill build on a number of those reforms, particularly auto-enrolment and changes to the occupational or second-tier part of a pension.
It is right that we should support the principle of this Bill. It is crucial that people know what pension they can expect from the state; I am glad that they will be able to expect a state pension in future. There has been a lot of debate in various media and elsewhere about whether future Governments will be able to sustain the whole principle of a single-tier pension or even the first tier of a state pension. I pay tribute to the Government for nailing the fact that this is what the future will hold. There will be an element that is not quite universal, because people will have to pay in, but everybody who has lived, worked and cared in the UK for more than 10 years—and up to 35 years—can expect a basic pension from the state, and everybody will know how much it will be.
There is a huge mismatch between what people expect on their retirement and what they are saving. The Scottish Widows report published the other week showed that most people want an income of around £25,000 in retirement, yet less than 20% of the population are saving at a level that would take them even remotely close to that. Even with the reform of the state pension and the introduction of auto-enrolment, people’s income in retirement will still not come close to the £25,000 that they might expect or aspire to. However, it will come a bit closer as a result of these reforms, because establishing a single-tier pension—a flat-rate pension—will make it easier for those giving advice to people saving for their retirement to say that it will always pay to save.
My right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) provided an example of where savings might not necessarily give someone a larger income in retirement, but the measures in this Bill will generally make it easier for those kind of calculations to take place and will make it easier and more understandable for people to realise just how much they are going to have to contribute to get an income that comes close to what they desire.
The introduction of the single-tier pension will also reduce means-testing, but only if the flat-rate pension is set above pension credit level. One of the Select Committee’s recommendations in our pre-legislative scrutiny report was that there should be clear blue water between the level of the single-tier pension and the pension credit—a bit more than the £1 and something that is there now. We had hoped that that principle would be built into the Bill and we are disappointed that the Government did not see their way to doing that. The principle is important —that the single-tier pension will always lift someone out of the basic means test.
Pension credit has come in for some criticism today, but at the time, it was absolutely the right thing to do, because the biggest issue that needed addressing in 1997 was that of pensioner poverty. Thanks to a level of success, the pension credit has managed to lift 2 million pensioners out of poverty. It means, too, that pensioners are not generally living in poverty; being old no longer equates to being poor. There are still people who are old and poor, but not in any different proportion than can be found in the general or working-age population.
Ian Swales
Does the hon. Lady regret the fact that two out of every five people who qualify for pension credit do not claim it, and does she welcome the measures in the Bill that will reduce the number of people who have to face the issue of means-testing?
Dame Anne Begg
I welcome the reduction in means-testing, but the hon. Gentleman should be aware that there are two different types of pension credit. There is the savings credit, which the Bill is abolishing completely; that means that someone with savings but no other income might be worse off than someone who has no savings. The savings credit tended to be more complicated, and people found it difficult to judge whether or not they qualified for it. The people eligible for savings credit were generally those who had a little saved or were a bit above the minimum, but those people tended to believe that they did not qualify for anything because they had never qualified for anything before. The take-up among those who qualified for just the minimum income guarantee part of pension credit, on the other hand, was well over 90%. I do not want the hon. Gentleman to be confused over the fact that large numbers of people were not claiming what they were entitled to in pension credit. Very often, the savings credit might have qualified people for only about 50p a week, so they thought that it was not worth going through the bureaucracy. I know this from conversations I have had with my constituents.
The hon. Member for Amber Valley (Nigel Mills) mentioned that the Work and Pensions Committee undertook pre-legislative scrutiny, but we scrutinised only part 1 of the Bill. That was our remit. I shall say no more about the fact that the start date was accelerated, as I recall laying into the Minister for that when we last debated the issue on the Floor of the House. We took no evidence on the later parts of the Bill, the most controversial of which is probably the issue of raising the pension age. The many briefings I have received from various organisations have focused their criticisms mainly on that issue.
The impression has been created that, if there is to be a review every five years, the pension age will increase every five years, which has frightened quite a number of people, as it seems to underpin a never-ending increase in the pension age. That is why my hon. Friend the Member for Amber Valley—I call him my hon. Friend because he sits on our Select Committee—was wondering, given his present age, how old he will be before he receives any kind of state pension. I know how he might feel. I have said here before that as someone born in 1955, I have been hit by all the increases. I was of the generation of women who, under the Pensions Act 1995, would not receive a state pension until 65. I had accepted that and was planning for that, but the Government then introduced an acceleration up to 66 for 2020, so I can well understand why some women feel that they never seem able to reach their state pension age because the Government are continually moving the goalposts. That thinking may well be behind some of the anxieties expressed in many of the briefings I have received on the pension age provisions.
Other issues concerning not just the state pension but the pensions landscape are not covered in the Bill, even though the Select Committee produced reports on them. The hon. Member for Amber Valley mentioned that we published a report on the governance of pension schemes, in which we recommended that the Government should consider making a single regulator responsible for pensions. He has also set out some of the Select Committee’s concerns about the present regulatory framework, particularly regarding the gaps or confusion about exactly which body is responsible for which parts of the regulations.
Ultimately, pensions must be well regulated, because we have to rebuild trust in them so that people know that if they invest in a pension they will get a good income from it and not be ripped off by a pension company. They want to know that the charges they pay for their pensions are fair, that there are no hidden charges and that nothing pertaining to their pension has not been properly explained to them. It is really important for people to have that faith in the pensions industry and for the pensions industry to step up to the plate and ensure that it offers very good, well-regulated products that are not overly expensive.
We also produced a report about the lifting of restrictions on the National Employment Savings Trust. If the Government are to make sense of auto-enrolment and if indeed they are to get rid of what was the state second-tier pension in SERPS, or S2P, it is crucial that a state-backed second-tier pension is available, and that default option should always be NEST. In saying which restrictions should be lifted, we said only that the transfers in and out and the cap should be lifted; we did not say that the restriction on NEST always to have a public service duty should be lifted, as we thought that was absolutely right. There has to be a default scheme that cannot turn anyone away. If NEST is to undertake that important work, it will be unfair if some of the restrictions have not been lifted. I hope that, as the Bill goes through its stages here and in the other place, the Government will come up with some proposals to change the present restrictions that are hampering NEST’s ability to do business.
The Government have accepted some other elements of the Select Committee’s report. The implementation date is now in the Bill and it has also been specified that the minimum qualifying years should be no more than 10 years. It was the hon. Member for Amber Valley again who argued for exactly that, and we were happy to accept it as one of our recommendations.
During today’s debate, it has become clear that a good communications strategy is crucial. There is no doubt that when the single-tier pension was first mooted, everyone thought that those who were born on the day before the relevant date would receive £107 a week, while those who were born the day after would receive £144. I think that people still have that impression, and that it is still felt that the new system will be more generous to everyone. Well, it will be more generous to some—the self-employed will probably do slightly better out of it—but those who have assumed that all their second tier of pension will be covered by the state earnings-related pension scheme or by the state second pension may be worse off in the long term.
It is incumbent on the Government to try to deal with some of those misunderstandings. I assume that they have sent a letter to every woman who is within 10 years of pension age, because I received such a letter, but the letter that I received was very vague, and—as has already been pointed out today—not everyone knows how many years of credit they have in their state pension, because not everyone understands what work qualifies for credit and what work does not.
It is crucial for us to warn people who are close to retirement that they must have made national insurance contributions for 35 years rather than 30. Some have already retired under the misapprehension that they have contributed the full amount. It must be made clear to them that they can buy back national insurance years, they must be told how they can do that, and it must be ensured that they do not buy back years that will give them no extra income.
David Mowat (Warrington South) (Con)
I have been reflecting on what the hon. Lady said about the National Employment Savings Trust. It is clear that NEST is directionally right and that a passive, low-cost investment vehicle is needed, but there are a great many restrictions that will prevent it from competing fairly with the existing industry in the marketplace. Did the Select Committee give any thought to what could be done about some of those restrictions?
Dame Anne Begg
We did indeed. We did not consider it during our pre-legislative scrutiny, because the issue is not covered by the Bill—there is some regret about that—but we did consider it in our governance report. We also published a separate report recommending the lifting of the cap on NEST and the removal of restrictions on transfers in and out of it. If the Government’s “pot follows member” proposal—which is in the Bill—is to work, the restriction on transfers must go, because otherwise anyone who has or is about to have savings in NEST will not be able to be followed by their pension pot when they move from one employer to another.
David Mowat
The “pot follows member” proposal interests me as well. Did the Select Committee give any thought to the use of NEST as a vehicle for aggregation? That strikes me as a natural way of going down a different route.
Dame Anne Begg
We did indeed. In fact, that was the favoured option of many of our witnesses. The Government did not listen, and opted for “pot follows member”, but we, and a number of witnesses, thought that NEST would be ideal as the source of an aggregated fund.
The communications strategy must also make it clear that savings credit will end when the single-tier pension is introduced. However, one of the main issues dealt with by the Select Committee was the issue of women—for it is usually women who are affected—who currently depend on the pension contributions of a partner or husband and whose pensions are therefore based on derived rights, because that system will end. The Committee recommended that women within 10 years of pension age should continue to enjoy those rights, because in less than 10 years they would not have time to build up a contribution record that would enable them to receive any kind of state pension in their own right. That, we thought, was very unfair, given that all the household planning might depend on the assumption that the wife would receive 60% of the husband’s basic pension.
Jackie Doyle-Price (Thurrock) (Con)
I share the hon. Lady’s concern. In their retirement, a group of people who have depended entirely on a single income and have not imposed any burden on the taxpayer are now being robbed of what they had every legitimate expectation of receiving.
Dame Anne Begg
Indeed. We talk a great deal about how women’s lives have changed. Younger women may have built up contributions in their own right, either through caring responsibilities or through their own work, but there is a generation of women who may not have retired or reached pension age, who have stayed at home throughout their lives, and who expected at least to receive that 60%, although they did not expect more.
I accept that, ultimately, that system should probably end, but I think it unfair to take the 60% away from people who are too close to pension age to build up contributions in their own right. I also accept what the Government have said about people who do not live in the United Kingdom, but some of those affected will be living here, and that group may include a number of people who have been in work but have not qualified for national insurance credits, because their income has been too low to register, or because they have had a number of very small jobs and have therefore not made NI contributions that would have covered those years.
We have already discussed the group of women who were born between April 1951 and 1953. Some of their fears have been allayed—I think they initially believed that they would suffer a major change in their pension income—but some issues still need to be addressed, partly through the communications strategy. The Government must deal with that group first, and give them the information that they need.
There will be cliff edges, as there are bound to be when any change is made, and there may be some groups whose cliff edges will be worse than the one facing that group of women, although we have not spotted them yet. I hope that those who give evidence in Committee will make the Government aware of any other cliff edges, because the last thing we want is to discover in April 2016 that there are unexpected problems affecting certain groups. There will also be a great deal of complexity in the new system. Nothing will be simple, particularly the migration from the old system to the new system and the calculation of accrued rights. That was never going to be easy, which may be why it has taken the Government so long to come up with a solution.
We know that in the long term the Government will be spending less money. There obviously cannot be more winners than losers overall, because the pensions bill will be lower in 30 years’ time—which, I suspect, is why the Government managed to get the legislation past the Treasury. I hope that that will make the situation more sustainable, but I believe that this will be an election issue in years to come. The level at which the single-tier pension is set will be in the gift of Governments, and it will be up to them to decide whether to increase it or not.
However, overall the Bill is to be welcomed. It is the right step in the right direction, and it will build on the good work that is already being undertaken. It is also important that people realise that the subject of pensions affects not just those of pensionable age, but everyone, and especially those of working age, because if they do not start making provision for their pensionable age now, they will find that they do not have enough money to be able to have the quality of life they expect in retirement.
Greg Mulholland (Leeds North West) (LD)
It is a pleasure to follow the hon. Member for Aberdeen South (Dame Anne Begg), Chair of the Work and Pensions Committee. I had the pleasure to serve alongside her throughout the last Parliament when we were both members of the Committee. Together with our Committee colleagues, we wrestled with many issues, including pensions. I am delighted she is now in the elevated position of Committee Chair and is continuing to demonstrate to the House the importance of the Select Committee system. It brings expertise to bear on subjects, both through the members who take a particular interest in a set of issues and the staff who support Select Committees so well and provide them, and therefore the House, with real expertise and analysis. I hope that that continues throughout the passage of this Bill.
I am delighted to welcome the Second Reading of this hugely important Bill. It is hugely important for both now and the future, and also for the country as a whole, not just our older citizens. The state clearly has an obligation to our older citizens; that is something that, despite our political differences, each and every Member of this House strongly believes. I concur with the hon. Lady’s comments about the continuation of a state pension for all in this country, and I am delighted that, across the political spectrum, we continue to believe in that.
That is not only an obligation, however; it is also financially sensible. It makes financial sense to have a simple state pension that gives people not only a fair basic level of income in retirement provided by the state, but certainty as to what the state will provide in their retirement. That entails certainty about what they need to do in respect of their income throughout their working life, which will, of course, fluctuate, in order to add to the amount and get to the levels of pension income they would want. The simple reality is that the current system is not sustainable financially, is far from universal and in many ways is simply unfair.
I am delighted that Members on both sides of the House with an interest in pensions issues have welcomed the principles of this Bill, and that many have welcomed the practical details, too. I must say, however, that I am proud that my party, the Liberal Democrats, have championed this for a long time. The pensions Minister, my hon. Friend the Member for Thornbury and Yate (Steve Webb), has led us to this day and the publication of this Bill, and he knows, as I do, that the Liberal Democrat party as a whole passed our policy of a citizen’s pension back at our federal conference in 2006, and that that has become the blueprint for the single-tier pension presented in this Bill.
Such a pension was also at the heart of our manifesto in 2010 as one of the key things we would want to introduce if we were in government, as we now are. Our manifesto said we were committed to
“immediately restore the link between the basic state pension and earnings”,
as well as moving towards the kind of pension we have today.
I am glad other Members have paid tribute to my hon. Friend the Member for Thornbury and Yate, and I join in those congratulations. He has shown his dedication, remarkable intelligence and expertise throughout the introduction of this reform, and I hope he will continue to lead on it. It is notable that he is already by some margin the longest-serving pensions Minister we have ever had in this country, and I hope he manages to add to that record with at least another period of the best part of two years as we take this important reform through.
Why are the Government doing this? Indeed, why are Members on both sides of the House aware that we have to make changes, as the Committee Chair, the hon. Member for Aberdeen South, made clear? I shall tackle the controversial issue first: we have not grasped the simple reality that for some time there have had to be changes to the retirement age. That has been ducked, which is understandable, as it is never going to be easy or popular, but it can be ducked no longer. The state pension age has been 60 for women and 65 for men since the 1940s. There has also been a strange and institutionalised form of unfairness between the sexes, and it is right to tackle that, particularly as we have known for some time that men have a slightly lower average life expectancy than women.
The reality is that our population is rising most quickly in the oldest age groups. The pensioner population is projected to increase from 12.2 million in 2010 to 15.3 million in 2035 and 18.3 million by 2060. Cohort life expectancy at age 65 is projected to increase from 21.0 in 2010 to 24.0 in 2035 for men, and from 23.7 in 2010 to 26.6 in 2035 for women. The Government estimate that even now almost 11 million people in the current work force face inadequate retirement incomes. The number of people currently saving in an occupational pension scheme has fallen from a peak of just over 12 million active members in 1967 to 8.2 million in 2011.
On unfairness, under the current pension system, the self-employed cannot get any more than £107.45 in basic state pension, despite the means-tested threshold being set at £142.70. More significantly perhaps, as this applies to everyone, at present some people—130,000 people in fact—get as little as £7 a week or less in basic state pension, while the same number of people get £230 or more a week. It is complex, it is not fair and it is not sustainable.
Let us look at the key groups and the need for reform. The first and most obvious change, and in many ways the most welcome, is what the reform will do for women. The single-tier pension will give a better pension to women, and it will clarify for them—as it clarifies for all pensioners—what they will receive from the state. The terrible reality is that under the current complex state pension system, on average women receive £40 less per week than men. The single-tier pension is, at its heart, devised to address that inequality, and also to count fully time spent out of work caring for children, which applies predominantly to women.
Secondly, I have mentioned the self-employed; across the political spectrum, we pride ourselves on recognising the importance of our self-employed and applauding the contribution they make to our country. They drive the local economy, contribute to the national economy and pay tax, yet they are so disgracefully discriminated against in the current pensions system. I warmly welcome the fact that that is being rightly recognised.
One healthy thing about the broad consensus on the need for reform and on the principles of that reform is that we can—I hope—have more thorough, positive and helpful scrutiny of the Bill. I echo the Select Committee Chair’s comments about the need for support from across the House to enact changes of this nature. At the same time, we should rightly ask the difficult questions and challenge every clause. The hon. Lady and her Committee have started that process, doing so at the pre-legislative stage, and it needs to happen throughout the passage of the Bill, with expertise and dedication coming from all who serve on that Committee.
Constituents have come to me to discuss the issue affecting women born between 1952 and 1953, which has been mentioned by hon. Members. I have spoken to the Minister about it, and I know that he and colleagues have examined it. I urge for much better communication on the issue so that we can ensure the Bill is as fair as possible. Perhaps the most telling thing that the Chair of the Select Committee said is that this matter will continue to be complicated; it will be all the way from now until we get to the stage at which citizens of this country know, from now, “I will have this pension when I retire.” All the other people in between will, by definition, have to go through the transitory arrangements.
I warmly welcome the work that the Minister, his colleagues and the civil servants have done to tackle the enormous complexities of dealing with the different systems and the transitional arrangements to make sure that what we have is fair, so that people who have contributed in different ways and have certain reasonable expectations of income will not be penalised. This will get simple in the end, when we reach the stage at which every citizen in this country knows precisely what the state will provide for them in old age, so they know exactly what they have to do. They need to be signposted to the correct advice on how they build up other forms of pension. I warmly welcome the work on auto-enrolment.
Ian Swales
My hon. Friend is making a powerful and persuasive speech. Does he recognise the point I made earlier about communication? Does he also recognise that certain cohorts need to be given clear information very quickly, as there are women born in 1952 who will be pensioners by the end of this year?
Greg Mulholland
My hon. Friend was right to raise that point, which was echoed by the Chair of the Select Committee. I am slightly worried that the letter she received sounds not to have been as clear as we would hope—that might be a euphemism. Given that all this good work has been done by civil servants and Ministers, we need to ensure that the communication to citizens of this country is better than it sometimes can be; things can be let down at that stage. There must be proper communication with all the different cohorts of people in their different situations, and that needs to take place as soon and as clearly as possible.
In conclusion, this is a historic day. I warmly welcome the principles of and measures in the Bill, and the way in which it has been handled. I look forward to contributing throughout the passage of this historic Bill, which will give people in this country the certainty, simplicity and fairness that all in this House would demand of a state pension system.
Mr Frank Field (Birkenhead) (Lab)
I am immensely pleased to be able to contribute to this debate, and I shall do so briefly.
The Bill marks a decisive change in the policies of Governments since the 1950s. It is a change I hoped the previous Labour Government would make, but they did not. This Government have made it, under the careful stewardship of the Minister of State, the hon. Member for Thornbury and Yate (Steve Webb), in particular. I congratulate him unreservedly on this success. The objective of having an insurance-based minimum pension that attempts to take people off means-testing is something that voters have long asked for but that Governments have long denied them. On that score alone, I congratulate him.
I also congratulate the pensions Minister on this being the one single move the Government could have made to make an honest man, woman or person out of the National Employment Savings Trust, as we were in real danger of having an auto-enrolment scheme that would automatically enrol people and mis-sell to them the pensions that they would thereby be buying. On those two scores, the Government are to be congratulated.
Let me now enter some caveats. Clearly, objectives are immensely important for any Government, as they give us the direction of travel, but they do not necessarily mean we will reach the desired destination. I wish to discuss those who will regard this scheme as unfair and the costs. First, it is clearly unfair to the group of women in respect of whom the pensions Minister was actively defending his stance: those born between 1951 and 1953. He said that they will not be worse off than they would have been, but of course they feel that they will be worse off than they would have been because the Secretary of State and the pensions Minister are changing the pensions that males born during that period will get. I seriously question whether the Government will be able to maintain their line on that issue. It was a good debating point in this House, but I do not think we can take an annual cost—the shadow Work and Pensions Secretary was talking of that—and equate it with the cost over decades. The annual saving the Government will get from cancelling the contracted-out rebate is £5 billion to £6 billion, and that comes in every year—the cost of doing justice to this group of women is a very small proportion of that.
The second area where injustice has been created is between the employers and employees of public and private pensions. Why have the Government allowed employers in the private sector to have the right to adjust the pension of their employees, given that less money will be going into those schemes and given that they will get a better state pension, but not allowed that for the public sector as a whole? If there are real problems in the health service—leaving aside other public services—the near £1 billion the NHS would have to pay in additional pension contributions will play its part. Unless one wants another period of contracting out of state schemes, what is the Government’s game plan behind the inequity they are creating?
Thirdly, I wish to congratulate the pensions Minister, because I have rarely seen such pork barrel politics in my 30-odd years here in Parliament. We know that at the cornerstone of the Liberal vote are the self-employed, and they will be cheering all the way to the bank because of what he has delivered them. He dresses it up in this language about putting aside unfairnesses, but the rest of the population will not think much of his definition of “fairness” because this is an unbelievable, God-given gift to the self-employed. [Interruption.] Conservative Members are saying, “Hear, hear”, but they have not realised what the electoral ploy is vis-à-vis the Tory vote and Lib Dem candidates. The pensions Minister is still blindly leading the coalition on this issue, even when what he is up to has been spelt out, and I congratulate him on that. I do not believe the settlement he proposes for the self-employed—as opposed to that for the employed, with their contributions and their employers’ contributions, which are part of the wages settlement after all—is sustainable.
My last point was touched on by the Chairman of the Select Committee, my hon. Friend the Member for Aberdeen South (Dame Anne Begg), and concerns the losers from the Bill. One might have thought that the Bill offered milk and honey for everyone and, indeed, when the Secretary of State was introducing it I could not but think that it was almost like Moses was leading us into the promised land of milk and honey for everybody. During that journey, however, quite a few people will drop out. We know that the Government’s own data show that 22% of contributors will be worse off and that the average income replacement ratio will be lower. It all comes back to the key point of the £5 billion to £6 billion that the Government are taking out of the scheme and the price that the pensions Minister paid to get this important reform past the Chancellor.
I give the Government credit for having the nerve to get up and criticise the previous Government for taking £5 million to £6 million out of the pension scheme every year and saying that that does not lead to better pensions when this Bill proposes to do exactly the same. This is the second whammy for pension schemes in this country and if people outside think they will get a better, sustainable deal with that sort of financing, they have another think coming.
Guto Bebb (Aberconwy) (Con)
It is a pleasure to follow the right hon. Member for Birkenhead (Mr Field). I welcome the Bill as warmly as he did in his initial comments, but I suspect that my comments will carry on being positive throughout.
It is important to put the changes in context, because the truth is that we have a coalition Government, without a majority in this House unless the two parties work together, making significant proposals on the welfare state and changes to the state pension system. Every Opposition speaker so far has welcomed those changes before moving on to criticise various specific individual points that will, I suspect, be addressed in Committee. The important point is that, despite the terrible financial background, these changes have been taken on by the coalition Government after three years, whereas for 13 years under the previous Government we saw precious little change that would have allowed people to save for their own well-being in retirement.
Sheila Gilmore (Edinburgh East) (Lab)
I am, perhaps, risking making the debate more political than it needs to be, but cannot this reform be introduced now only because a lot of the platform is in place thanks to steps taken by the previous Government and, to a lesser extent, the Government before that?
Guto Bebb
That is a very interesting comment. As I saw it, the previous Government dealt with the worst circumstances faced by some pensioners, but only by creating the view that the only way to deal with people in retirement was to ensure that the state could provide through a means-tested system. The worst thing about the previous Labour Government was that those individuals in pension schemes within businesses who were saving up for retirement were punished for trying to do the right thing by ensuring that they provided for themselves in retirement. Yes, the previous Administration offered some benefits in dealing with the worst aspects of poverty for pensioners, but at the expense of the concept of self-reliance.
Sheila Gilmore
The platform I was trying to describe did not simply include the introduction of things such as pension credit, which has helped to finance the Bill by a considerable amount. The Labour Government introduced the state earnings-related pension scheme; a Labour Government introduced S2P. Those elements were part of the platform that makes it possible to move forward.
Guto Bebb
They were certainly part of the platform that created the degree of confusion and complexity that has resulted in people not saving up for their retirement. Yes, there was a state system imposed on the British public by the previous Administration but in many ways that was at the expense, I would argue, of the simple concept of a basic state pension that meant that anything and everything that a person saved above it would be beneficial to them. It should be noted that the only people who suffered significantly as a result of the changes introduced by the previous Administration were many of the self-employed and many of those in schemes operated by companies that stopped operating because of the tax charges that resulted from those changes.
The context is that this is an important and significant change. These changes to the pension provisions go hand in hand with what we are trying to do as a Government with the welfare state. All our welfare reforms are trying to ensure that work pays. In the current circumstances, it is not easy to make the changes as radical as we would like, but their implication is clear: the more someone works, the more they will benefit from that work. If they take on added hours, they will be better off. If they manage to get a promotion, they will be better off. That message is key to our proposed changes.
Guto Bebb
No, I will not take another intervention for the time being.
We need to send out the same message about pension saving. We need to ensure that people understand that they will be offered a basic level of state pension as a result of the changes, but—this is where the communication issue highlighted by so many Members needs to come into play—that that basic state entitlement will not be sufficient for most people to have the standard of living that they anticipate. People will understand that that basic state level of support will be there, regardless of any further savings they make towards their own retirement pots. Anything and everything above the basic level will be additional and that, in my view, will change people’s behaviour, simply because they will no longer feel that they will be punished for trying to do the right thing.
The shadow Secretary of State, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), gave some examples of where there would still be an element of means-testing in the system. We all regret that, but the truth is that we are moving significantly away from means-testing for pension provision. We should all applaud that because we want to ensure that people in work are encouraged to do the right thing, to do more for themselves and, at the same time, to save towards retirement. These are crucial changes that will change how the British public view the support offered by the state.
Hywel Williams (Arfon) (PC)
I agree entirely with the hon. Gentleman about the virtue of making the system less complex and more understandable and about the requirements for better information that have already been mentioned by Members on both sides of the House. Will he concede, however, that there is a regional element? As a Welsh Member, he will know of the long-term mass unemployment in parts of our country that means that some people will just not have had the opportunity to amass the national insurance contributions required to qualify for the pension. That is a regional effect.
Guto Bebb
That will need to be considered. As I am well aware, parts of north Wales have long-term unemployment issues that might have an impact on the changes. We need to consider the detail, but the changes should still be welcomed. As I conceded in my opening remarks, some issues will need to be considered in Committee, but the overall direction of travel should be warmly welcomed, whether one is a Member in Wales or in any other part of the United Kingdom. A key point that should be mentioned is that there has been no mention from Government Members of a regional level of state pension. Having heard some of the comments from Opposition Members in recent weeks, I shudder to think what the Labour party might propose in due course on a regional level of basic state pension.
Mark Durkan (Foyle) (SDLP)
The hon. Gentleman has made the point that he wants work to pay and for people to know that doing the right thing will not cost them. Does he accept that we must take care with the transitional arrangements in that regard? People could find that they lose out in the tight transition, not least because of the costs that could be imposed on schemes that might force their closure—for example, those schemes that were contracted out would now have to be contracted in. The opportunity to simplify those schemes does not really exist, as such direct benefit schemes are notoriously complicated and some people could find that their schemes close as a result of the costs imposed.
Guto Bebb
I will come back to some of the important points about the transitional changes, but I suspect that I will have to allow the hon. Gentleman’s specific points to be debated in Committee.
In introducing pension changes, this Government have tried to deal with the excessive level of support offered to public sector workers. At the time we were constantly accused of wanting to level down pension provision in this country, but it is clear that with auto-enrolment being brought forward by this Administration and with the single-tier state pension, we are trying to ensure a more level playing field between those people who are doing extremely important work in the public services and those who are earning a living differently. We are trying to make sure that there is a more equitable system for both.
It is interesting to note that the vast majority of people whose employers might need to pay more in national insurance contributions as a result of these changes are in the public sector. Only today I received a briefing on the issue from the National Union of Teachers. For the National Union of Teachers to state that it has no real concerns about the impact of these proposed changes on its members says a lot about the fact that the changes are very beneficial. I had not previously seen a single press release from the National Union of Teachers that had not attacked this Administration. Despite the 1.4% average increase in national insurance contributions that would have to be made by those who are currently contracted out of the system, there is an acknowledgement that a higher level of pension will then be enjoyed. That comment was made clearly by a union.
I want to emphasise how extremely welcome this change is for the self-employed, and express my amazement at the comments from the right hon. Member for Birkenhead (Mr Field). If it is said that the pensions Minister is introducing these changes for the self-employed because he believes there are votes in it for Liberals, long may he continue to bring in changes that will benefit the Liberal vote. In my constituency of Aberconwy and in many parts of rural Wales, a significant percentage of the population are self-employed, and a significant percentage of the population were paying their 9% class 4 contribution and did not know what they were getting for their money. The class 2 contributions made by the self-employed ensured that they got the basic level state pension. Anything that they paid into class 4 was deemed to be on top. That could amount to a significant sum and there was no feeling that anybody was getting anything for that contribution.
In an area such as mine, where about 27% of the population are self-employed, it is imperative that they feel that the state is treating them fairly. It is not their fault that they have had to create their own job in order to stay employed in their own community, and it is unreasonable to argue that because there is no employer making a contribution on their behalf they should be treated worse than other employees. If the self-employed are contributing on a par with or at a similar level to the employed, we should not bring into the equation the employer contribution, because the employee, the worker, the person making an effort to pay their way, support their family and ensure a future for themselves should have the confidence that when they come to retire, they will be treated by this Government in the same way as any employee.
Mark Reckless (Rochester and Strood) (Con)
My hon. Friend is right to note that some people who are self-employed might prefer to be in employment. Others do it because they are entrepreneurial and it is what they want to do, but the problem at present is the complexity of the system. One great benefit for those who are sometimes self-employed, then employed and then go back to being self-employed is that they will now have clarity.
Guto Bebb
I agree with that point. It is an important consideration, especially for people who, because of family connections and so forth, after a period of unemployment decide to take the option of self-employment as a means of staying within their community. They will value greatly the certainty that there will be a basic level of support in the future. A divide exists between those working in the public sector in parts of rural Wales and those working in a self-employed capacity. The change will not make it a level playing field, but it will reduce the inequalities.
There are a few other points that I would like to make. There has been some comment about the increase from 30 to 35 in the number of years of contributions required. That must be seen in the context of the significant increase in the state retirement age that has been accepted reluctantly by hon. Members on both sides of the House. Somebody starting work at 21 would be expected to work for the next 44, 45 or 46 years, depending on their age. Therefore to expect 35 years of contribution is not unreasonable and should be considered.
Another issue that I would like to touch on is the fact that, despite the changes being comparatively cost-neutral, the savings implied may not be as significant as stated by the right hon. Member for Birkenhead. We are moving from 8.5% to 8.1%. It is a reduction, but not a huge one. In that context, to come up with a system that is better for the worse-off or the less well paid in society, and which is better for women and carers than the current system, is not a bad record for the Government. The Bill is moving in the right direction. It tries to protect and enhance the support for those who are less well treated by the system, and that should be welcomed.
On the subject of transition, there has been some discussion about the issue of women born between 6 April 1951 and 5 April 1953. When I started receiving e-mails on the issue—I have now received a couple of dozen—it appeared on the face of it to be a very unfair situation. But we need to bear it in mind that this could be an issue of communication rather than of the change in the legislation. Making a comparison between a woman born between those two dates and a man born between those two dates takes out of the equation the fact that they will be retiring at different times.
If women born between those two dates decided to defer their retirement, about 85% of the women affected should be able to retire with a level of pension support equivalent to that enjoyed by a man born during the same period. There is therefore a message to be conveyed. Does somebody retire before the age of 65, which is the relevant age for men at that point, or do they opt to retire a couple of years earlier and accept a slight reduction in their pension? We need to ensure that the DWP takes that type of communication into account so that when people see what they perceive to be an unfairness, they see the issue in context rather than on the basis of a campaigning e-mail.
The Bill is a huge step forward in ensuring that people understand that the state is there to support them, not to be responsible for them. That is a crucial difference. People need to be aware that the state will ensure that they have the basic level of protection. More importantly, the state should make sure that it provides the focus for an individual to make decisions that will allow them to help themselves. That is what we are doing throughout our welfare changes, and I am glad to say that it is what the Bill does. Yes, there are some details that need to be looked at in due course, but in general the House should welcome this brave and ambitious proposal to make sure that the state’s pension system is fair to the vast majority of the people who pay their national insurance contributions.
Hywel Williams (Arfon) (PC)
First, I should declare an interest: I am a man born before 6 December 1953—just.
Like others, we in Plaid Cymru give a guarded welcome to the proposals for a single-tier pension. This will benefit key sectors of society who have been excluded in the past. Pensioner poverty is unfortunately an all too common feature of the society that I live in as well as across Wales and the UK. For us in Plaid, the hon. Member for Aberconwy (Guto Bebb) made a very pertinent point. We share his view of the potential advantage for people who are self-employed. I speak as someone who has been employed by one employer and then by another and who had a couple of pots going. I was then self-employed for many years before being elected to this place. I have some direct experience of the complexities and the disappointments that that might bring in pension provision. In my own area, small enterprises and companies are overwhelmingly the most common model, run by self-employed people working either as sole traders—one-man bands—or in partnerships. This is therefore an extremely pertinent issue for rural Wales. It has already been noted that there are questions about the level of contributions that will be required, but that is a matter for further debate.
We agree with the aim of introducing a fairer, simpler and more sustainable pension. Who would not, after all? For too long, pension provision and the system of income maintenance for older people in general has been seen as fiercely complicated, incomprehensible to the ordinary person, unpredictable and open to various legal but doubtful scams. Since at least 1980, the state pension has often been perceived as being of diminishing value. An adequate state pension is therefore critical for providing individuals whose ability to make private provision is limited with a decent income in retirement, and to give everyone certainty and clarity on what to expect from the state at that time of their life.
Such certainty should create a platform for saving while in work, but that can be something of dream for some people in my constituency, given the levels of income there. That was certainly the perception at the turn of the last century when my predecessor but three as Member for Caernarfon, Lloyd George, was undoubtedly influenced by his boyhood observations of his very poorest neighbours in Llanystumdwy. Alas, life for many pensioners today remains unfairly hard, and is a matter of just getting by, even if it does not quite involve the hand-to-mouth existence that so influenced Lloyd George.
Plaid Cymru supports the aim of a single-tier pension, particularly in respect of the simplicity involved. In general, those who will benefit will be people with low lifetime earnings and those who have taken time out of the labour market due to unemployment, caring or disability. I made this point in an earlier intervention and, as I said, the self-employed are a key group.
I am sorry to be predictable, but in the second half of my speech I must mention some of our concerns. Some are of a general character, and others are of particular importance to Wales. Most importantly, the crucial question is the level at which the new pension will be set and maintained so that it can fulfil the stated aim of providing people with a level of income that will keep them out of means-testing. That will be one of the best features of the Bill.
In respect of the single-tier pension, those with fewer than 35 qualifying years will receive a pro rata amount, subject to their having a minimum number of qualifying years. However, in Wales we have an appalling legacy of de-industrialisation and subsequent long-term worklessness. Thousands of people have suffered persistent unemployment since the early 1980s and have severely broken employment records. In some areas, people in their 50s, particularly men, have little prospect of any further employment before reaching the age of 65 or 66. We are concerned that there will be a disproportionate number of such people who might not qualify. In addition to that being a personal blow to them, it will sharpen the burden for communities as a whole. It is in no one’s interest to have whole communities in which old age, and particularly older old age, are characterised by poverty and by people just scraping by. Last winter, for example, people were having to choose between heating and eating.
The Bill will also raise the state pension age. People in general are living longer, but that is not true of all economic groups. The Minister might recall our late colleague Malcolm Wicks making this point in a moving speech that I think marked one of his last appearances in the House. He said that the better-off live longer than the worse-off, and that the worse-off work more years because they start earlier. Even when the state pension age is generalised, poorer people will still work longer before they can claim their pension, and they will still die earlier. The disparity will therefore be perpetuated, and they will continue to receive a pension for a shorter period of time. It was noted earlier that they could receive a pension for up to 16 fewer years than their better-off counterparts. That long-term inequality will still exist.
Wales has the lowest gross valued added of all the UK nations and regions, and life expectancy there is lower than in England. These effects will therefore be even more marked in Wales. I understand that the Government intend to review changes in life expectancy as frequently as every five years. I think that the figure of six years was also suggested. Some would argue that that will simply reinstate the very uncertainty that the Minister has been so anxious to quell. I am not sure whether that will be the case, but I would say that a period of five years is fairly short, in terms of pensions provision. Lord Turner recommended seven years, but even that seemed shortish. However, if life expectancy is thus to be reviewed, it is essential that those undertaking the review have the confidence of all involved, including those who start work earlier, work longer and have a shorter post-retirement life. I would therefore press the Minister to give an undertaking on the independence of any such review panel. That point has already been raised a number of times.
I referred to Malcolm Wicks a moment ago. He suggested that certain pensioners who had done years of manual work and whose life expectancy was therefore shorter should receive the pension after 49 years. He suggested that that particular group should work for that set period. The Minister replying to him put forward a number of counter-arguments, mainly involving practicality. He asked how such people could be identified, for example, and noted that the pre-1970 records were incomplete and unreliable. However, as the body reviews successive cohorts who began work after 1970, that will not be the case. Perhaps we can therefore hope that the review panel will also consider the plight of this particular group in due course.
In November 2012, pension credit was claimed by 2.5 million people. The Minister intends that the higher level of the single-tier pension will move many people out of that dependence, but for those who remain, the value of pensions credit is vital. I am glad that he has secured the triple lock on the value of the single-tier pension, but I understand that no such lock can be extended for those pensioners who do not qualify. This again is particularly important in Wales, given our lower average GVA and the number of people with broken contribution records.
I shall turn briefly to the funding implications of the proposals. Contracting-out is to be abolished and the Government are planning to increase national insurance contributions. It seems reasonable that those who get more out should pay more in, and I will be interested to see how that pans out. It was a matter of particular interest in Wales that, on 11 February this year, the Health Secretary announced that these revenues would help to meet the cost of the Government’s proposed changes to the funding of social care and support. He noted that the reforms would cost the Exchequer £1 billion a year by the end of the next Parliament, and that that would be met in part by freezing the inheritance tax threshold at £325,000 for a further three years from 2015-16. He also noted, however, that the Chancellor and the Chief Secretary to the Treasury had agreed that the remaining costs over the course of the next Parliament would be met from public and private sector employer national insurance contributions revenue associated with the end of contracting-out as part of the introduction of the single-tier pension. Aha! So that is where some of the money is actually going!
Freezing the inheritance tax threshold for three years from 2015-16, rather than uprating it in line with inflation, will yield some £20 million for the Exchequer in 2015-16, £80 million in 2016-17 and £170 million from 2017-18. That might not be an issue for this Minister, but people in Wales are asking what the Barnett consequentials from that will be for Wales. Inheritance tax and national insurance are levied on a UK-wide basis, but social care is a devolved issue. We would argue that pensions and care are two sides of the same coin. The issue here is the need for fair funding for Wales on the basis of need.
Richard Graham (Gloucester) (Con)
It is a great pleasure to speak in this debate. The Bill is a major piece of legislation that is ready to make us more fit to face the challenges facing pensioners in the 21st century. Of course, the complexity of the subject is responsible for the reduction in the normally large number of Members in the Chamber—it also baffles most of our constituents. Therefore, the major goals of this Bill must surely be to make pensions simpler and clearer, to reduce the amount of means-testing, which is responsible for much of the complexity, and, above all, to implement the pledge that it always pays to save. That mirrors the other important work of the Department for Work and Pensions: implementing the promise that it will always pay to work. Those two pledges, I believe, are the two most important things the Government are trying to achieve. It is a great shame that the Labour party, which was in power for so long, contributed to a system in which it certainly did not always pay either to work or to save. Surely the major goal of this Bill is to put that dire situation right.
I welcome the entirely new state pension system outlined by the Secretary of State, which has a single state pension that is much easier to understand, and the contracting out of defined-benefit pensions, which takes away one area of complexity that is potentially open to abuse. I also welcome the new state pension age, which incidentally is lower than those of four other European Union countries and a great deal closer to the reality of life expectancy, which is that we all need and expect to work longer.
That raises the interesting issue of intergenerational fairness, which has not yet been mentioned in the debate. As many of us here draw closer to retirement age, and access to a pension, than to our time at school, college or university, it is vital that we do not inadvertently preside over a system that is grossly unfair to our children and to the next generation. It is also valid to remember Age UK’s response when the new state pension age was first raised in the House, which was to focus on the opportunities available to older people as well as the reassurance needed by those who feared that they would have to work longer in demanding occupations.
Another aspect of the Bill that I think deserves a brief comment is the new framework on the retirement age for the state pension, which gives clarity. Some Members have asked whether that inadvertently raises an expectation that the retirement age will be increased every five years at the reviews, but I am sure that that is not the intention of the provision. Perhaps the Minister will clarify that.
The Bill also covers bereavement, focusing more on short-term support and the 40,000 recipients—those with children—who will benefit from a one-off payment of £5,000, following an injection of £120 million. There is a longer-term issue in that regard that I will return to later when I will refer to a letter from a constituent.
On the consolidation of the so-called small pots—the defined-contribution pots—I think that many people will welcome the auto-transfer proposed in the Bill. Clearly some of the bodies representing pension schemes fear that some of their members might lose out as a result of being transferred into weaker schemes, but it seems to me that, in general, that provision, which is broadly welcomed by the National Association of Pension Funds, the Association of Consulting Actuaries, the Association of British Insurers and the CBI, will benefit many of our constituents, because at the moment there are too many pots that are unlooked at and unknown. The provision will make it easier for our constituents to engage with the whole business of saving and to have a greater understanding of what their savings really are.
The Bill also provides for the abolition of refunds for short-service membership of defined-contribution funds, which means that someone who has been in a scheme for less than two years will not be able to demand that the employer refunds their contributions. I think that that will be welcomed, because it reduces complexity for future pensioners and ties in with the consolidation of the small pots that I mentioned earlier.
The details of the Bill’s provisions complement the earlier introduction of the auto-enrolment scheme, which in itself should be responsible for introducing an additional £11 billion in savings and between 6 million and 9 million new savers. The object of the exercise is clearly to widen the pool of those constituents who are saving and make it easier for them to have savings that they can later draw on in their retirement. The Bill complements that earlier work in helping to meet the challenges of a century in which we will all live significantly longer than our parents, let alone our grandparents.
An important point that I would like to highlight, in particular, is the improved situation for many women. The right hon. Member for Birkenhead (Mr Field) suggested that those born between April ’51 and April ’53 appear to be disadvantaged. I would be grateful if the Minister could confirm some of the figures, because they are complex and, as several Members have mentioned, need to be communicated. My understanding is that there are currently 2.8 million women receiving less than £80 a week in pension—the comparable figure for men is 474,000—so there are huge numbers of women on low pensions. My understanding is that 750,000 women who will reach pension age in the decade after the introduction of the Bill—after 2016—will get an extra £9 a week. Over a lifetime, that is a significant amount of money. I would be grateful if the Minister could confirm that.
Will the Minister also confirm that 90% of the women born between April ’51 and April ’53 will actually get more than the “men’s deal”—men at the moment reaching retirement age later—and up to £26,000 more over the average retirement period? Those are quite difficult figures, but I would be grateful for confirmation. I think that the point made by right hon. Member for Birkenhead was that a group of women appear to be worse off, but actually they are being considerately treated, not least as a result of the coalition Government’s earlier amendments, and that needs to be communicated, particularly through bodies such as Age UK.
Today we have heard what I would describe as a “glass half full” response from the Opposition, and about an issue on which it should surely have been possible to achieve consensus.
Mark Reckless
Does my hon. Friend not mean that we have heard a “glass half empty” response?
Richard Graham
My hon. Friend is probably right, in the sense that the overwhelming response from the Opposition was one of ambiguity. It was ambiguous because they would neither oppose, nor strongly support. It was ambiguous because the shadow pensions Minister, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), who is in his place, said in February 2013 that the triple lock
“was a triumph of rhetoric over reality”
and that, three years into its operation,
“the increase in the state pension is less than it would have been if the uprating method used by the previous Government was still in place.”—[Official Report, 13 February 2013; Vol. 558, c. 1002.]
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
The hon. Gentleman has enticed me from my sedentary position. Can he confirm what his colleague the pensions Minister, the hon. Member for Thornbury and Yate (Steve Webb), said in the Financial Times this morning—that the triple lock is guaranteed only for the lifetime of this Parliament and that neither the Conservative party nor the Liberal Democrat party is committed to it beyond 2015?
Richard Graham
Alas, I was not at the pensions Minister’s meeting with the Financial Times. However, the hon. Gentleman has raised a rather different question from the one I asked; I had mentioned his description of the current triple lock as a triumph of rhetoric over reality. Most of my pensioner constituents would describe it as a triumph of financial reality for their pensions.
Sheila Gilmore
The hon. Gentleman’s history appears to be slightly at odds with reality. The infamous 75p increase—nobody would say that it was particularly happy—was based on certain rules. It happened, I think, in 2000, so it was not the last time that the previous Labour Government raised pensions. The arrangement applied in every year of the Conservative Government after the earnings link had been broken. If inflation had provided for a 75p increase in 1996, doubtless that increase would have been given. Nothing was particularly different from what had been in place during the 18 years of Conservative Governments.
Richard Graham
I read modern history, not ancient history, at university. My clear recollection of recent and modern history is that the hon. Lady’s party contributed three things to the evolution of pensions. First, there was the abolition of the advance corporation tax on dividends, which has been estimated to have cost occupational pension schemes about £100 billion. Secondly, although the hon. Lady’s Government made great play of criticising the breaking of the link between pensions and earnings by an earlier Conservative Government, over 13 years her Governments failed to do anything at all about it.
Thirdly, the contrast between the 75p increase and the £234 that I have just described represents, by any standards, a pretty compellingly disappointing story for the Labour party. I will not dwell on the Labour party’s shame on the matter of pensions, because it is well known to the House. However, the shadow Minister, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, recently described his Government’s approach over 13 years as “evolutionary”. Evolving an approach towards a single state pension over 13 years is different from putting forward a Bill and implementing a single state pension, which is what this coalition Government are doing today.
Richard Graham
The shadow Minister rises again from his place. I welcome him.
Gregg McClymont
I thank the hon. Gentleman. I note that he did not clarify whether the pensions Minister had indeed said in the Financial Times this morning that neither party is committed to the triple lock beyond 2015.
Let me take the hon. Gentleman up on a specific point. He is a reasonable man, so does he not accept that the breaking of the link with earnings meant that by 1997, when Labour came into office, there was a genuine crisis of pensioner poverty for a significant section of the pensioner population? Pension credit was a significant and substantial response targeted on those most in need. Given the hon. Gentleman’s comments today, that would seem to fit his own approach to pensions more generally.
Richard Graham
The hon. Gentleman is correct. The break between pensions and earnings caused considerable upset across the country and was the reason why the Gloucestershire Pensioners Forum was founded some 30 years ago during that earlier Conservative Government. However, let us imagine the forum’s disappointment that nothing at all was done about the matter in 13 years of Labour Governments. The Gloucestershire Pensioners Forum had to continue into a coalition Government to see the wrong righted. The hon. Gentleman’s party had a great opportunity to resolve that disappointment from ancient history, but, as with so much, it has been left to us.
I move on to other aspects of the Opposition’s response today. Many of us will recall that the shadow Secretary of State has promised us a laser-like approach to public expenditure, but it was not clear today whether he was advocating that the 700,000 women born between April ’51 and ’53 should be given the additional £4.5 billion that it would cost to put them on precisely the same footing as those born later. Perhaps in his winding-up speech the shadow Minister will confirm whether the laser-like approach to public expenditure will revert to the “Sorry, there’s no money left” approach for which the shadow Secretary of State is so renowned.
What we have heard from Members across the House today is an extraordinary amount of unanimity and consensus on the fact that, although means-tested pension credit was well intentioned, it is not the solution and should be replaced. Many Members, including the distinguished Chair of the Work and Pensions Committee, have welcomed the approach of a single state pension and the doing away with the means-tested pension. For many of us, the means-tested pension has caused sad arguments between neighbours, some of whom have small amounts of savings. Someone needs only more than £10,000 not to qualify for the means-tested pension credit; the income generated from £10,000 is tiny in a low-interest-rate environment. The consensus has been encouraging, but some things have clearly not been covered in the Bill today. It is worth touching on those; perhaps the Minister will address some of them in his summing up.
I start in no particular order. In the creation of a new single-tier state pension, it is clear, as always, that there will be losers as well as winners. Some members with private sector pension funds will be affected and it would be interesting to hear more from the Minister on who those losers will be. Then there is the question of the defined ambition pension, which the pensions Minister has advocated. We are promised a Government paper on that soon. Will the Minister confirm when it will come? Sometimes “summer” is taken to extend all the way through to November; it would be helpful to have an idea of what stage of the summer is meant.
I understand from some of the professional associations that the business of contracting out requires a statutory override, so there is a question of when that will come in secondary legislation. Will the Minister say something on that? One or two Opposition Members rightly raised the National Employment Savings Trust, the restrictions on it and its competitiveness against other products in the marketplace. None of us would wish NEST to be penalised as the Post Office was inadvertently by the previous Government in respect of private sector competition. NEST must not be prevented from succeeding as we all wish it will.
On the small pots, there is an issue about a cost assessment of bundling them all together. What sort of safeguards might there be in moving from a strong scheme into a weaker one?
On the issue of bereavement, I would like to read a small part of a letter I have received from a constituent. She raises the question of whether the regular income available to widows from the widowed parents allowance, which will be replaced by a bigger but shorter-term amount, could
“leave future widows and widowers worse off than most other single parents who can claim child maintenance from the other parent in the case of a relationship breakdown.”
She goes on:
“It seems so unfair that in future someone like my husband who has worked for 20 years will never claim a state pension but the government would not support his children either.”
Perhaps that issue can be raised in Committee and a discussion had on the potential unintended consequences of the changes for those affected by bereavement.
Lastly, there is the new objective laid down for the pensions regulator
“to minimise any adverse impact on the sustainable growth of an employer”.
That raises the question of the definition of an employer. Charities and non-governmental organisations with pension schemes, for example, do not necessarily focus on growth. Perhaps some clarity on precisely what changes are implied by the new objective for the pensions regulator could be discussed in more detail.
The Chair of the Select Committee and the right hon. Member for Birkenhead—both of whom have huge experience of this sector and the world of pensions—welcome the Bill and I welcome it, too. I think that there should be consensus on pensions and that this is a great opportunity for the Opposition to say, as my hon. Friend the Member for Rochester and Strood (Mark Reckless) has said, that the glass is not half empty, as I mistakenly suggested, but half full. They should be enthusiastically supportive of the fact that there is a lot in the glass and we want more: we want a single state pension and we want it to succeed.
I am delighted that Opposition Front Benchers are wriggling—some more comfortably than others—towards a recognition that this coalition Government are taking the right steps to simplify and clarify pensions and, above all, to enable all our constituents to believe that it will always pay to save. The value of that is enormous and it is this Government’s duty to return us to that principle and remind the whole House of why we should endorse this Bill and its objectives.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
I have followed this debate closely and it is important to say from the outset that simplification of the state pension system is an entirely laudable aim and that I think there is a great deal of consensus throughout the House on the move towards a more inclusive pension system.
It is also important to appreciate, however, that our starting point is one of the lowest levels of state pension provision anywhere in Europe. We have relatively high levels of pensioner poverty and pensions have consistently fallen behind and failed to keep pace with earnings over a number of decades. We also still have deep and persistent inequality not just between women and men, as has been mentioned, but between those who have occupational pensions and those who have not. Far too many people who worked very hard throughout their working lives still end up living on the breadline in later life. Meanwhile, the challenges of an ageing population and increasing life expectancy drive the need for reform.
I have talked in the House a number of times about the dramatic social and geographic disparities in life expectancy and healthy life expectancy, and I do not plan to rehearse those arguments again this evening. The bottom line, of course, is that we need pensions that are affordable and sustainable and fair to pensioners. Our pension system also has to provide us with long-term stability and security. When people look decades ahead, they need to know what they are likely to get back and that the sands will not shift every time we play musical chairs in the House of Commons.
In his opening remarks the Secretary of State made much of his so-called triple lock, but those of us who saw the Financial Times this morning could be forgiven for thinking that the pensions Minister has let the cat out of the bag by acknowledging that the triple lock is a short-term fix and that there is no certainty that it will continue beyond the life of this Parliament or that the value of the single-tier pension will keep pace in the longer term, given that all the modelling that has been done is predicated on the triple-lock guarantee.
Although today’s debate has focused heavily on those people who will gain in the short term—some certainly will gain in the short term, particularly, as has been said, the self-employed and those receiving a pension for the first time—there will be losers as well as winners in the transition. It is extremely difficult to work out which are which, because the side of the line on which an individual will fall depends on a wide range of factors, including how long they live after retirement, which few are able to predict.
We have heard a lot less this afternoon about the longer-term impact of the scheme, yet most commentators agree that it is less generous than that which it replaces and that many people, including most of those born since 1970, will lose out. The most positive claim that has been made for the single-tier pension is that it is undoubtedly less complex than the scheme it replaces, but if the new scheme has the virtue of simplicity, the transition process certainly does not.
Last week, the Association of Consulting Actuaries, the National Association of Pension Funds and the Association of Pension Lawyers briefed the all-party group on pensions at a meeting chaired by the hon. Member for Gloucester (Richard Graham). One of their chief concerns was the complexity of the transition process and, in particular, the extremely tight time scales within which the Government are seeking to enact the Bill and its attendant regulations. Establishing the foundational amount for everyone with a national insurance contribution record who has not retired by 6 April 2016 will be a huge and challenging project in itself, and there are real concerns about how the end of contracting out will be managed within the proposed time scale.
Dame Anne Begg
I am interested in the hon. Lady’s comments on the complexity of the transition. Will she clarify for those us who live in Scotland what that complexity would mean for the SNP’s plans for the state pension, should there be a vote for independence?
Dr Whiteford
The most important point I can make in response to the hon. Lady is that Scotland is spending a lower proportion of its GDP on social protection than the UK as a whole, and that has been the case for every one of the past five years. Moreover—I have made this point several times in the House—Scotland has lower life expectancy by almost two years, and that is not simply a geographical disparity; it goes across every social class. To my mind that means that we have to look at tailored solutions for Scotland and understand that the scheme will not result in equal benefits for people who are likely to live two years less than the average in the UK.
Dame Anne Begg
The hon. Lady said that it would be complex to find out people’s national insurance contributions in the UK, but surely it would be even more complex for Scotland to negotiate that as an independent country. Does she envisage that happening easily?
Dr Whiteford
I do not think that that is beyond the wit of Members in this Chamber or those in Holyrood. We have a lot of able people who will be able to do that. In fact, as we move into a new system, actuaries and pension fund managers are raising pragmatic questions about how the change will be managed. A new, simpler system will be significantly easier to unravel and manage than the current one, which is why I have said that I welcome the general direction of travel.
On the fundamental issue of uncertainty, the key thing arising from the pensions Minister’s intervention in this morning’s Financial Times is that there is no certainty. We do not know how the modelling will play out or what our decisions will mean for the future.
Dr Whiteford
I will not for the moment, because I have been carried off track from the debate about single-tier pensions and am keen to discuss the consequences of the administrative hold-ups, particularly for defined benefit pension schemes.
About 6,000 defined benefit schemes are still operational in the UK, but half of them are now closed to new members. Even given the proposed employer override, there is a pressing need for the regulations to be introduced for consultation at a very early stage. The ACA estimated the time scale required and it has already brought it forward by a year. It says that it will need time to do actuarial work and consult properly with scheme members. Will the Minister outline the time scale for the introduction of the draft regulations, and will he confirm that the Government remain committed to meaningful consultation with the key stakeholders and those who will have to deal with these issues in practice?
The Government argue that the proposals will incentivise saving. Certainly, it will become easier to save for retirement, but it would be more accurate to say that the proposals remove disincentives for savings. We should scrutinise the claim that there will be significantly better incentives to save and temper our expectations.
On the face of it, the single-tier pension should, in theory, encourage people to save for retirement, but I have a few reservations about how that will work in practice, simply because we have had a succession of pension reforms in 1998, 2002 and 2006, all of which have shifted the goalposts for certain cohorts. The reforms have had a cumulative effect, in that they have eroded some people’s confidence in the value of saving for retirement. That has been compounded in the past few years since the financial crash by extremely poor annuity rates and poor terms for draw-down pensions, while older people trying to derive an income from their savings have been hit on all sides by historically low interest rates and the value of their capital being reduced by quantitative easing. People who thought that they were doing the right by saving are seeing little reward for their efforts. From speaking to people of working age, I know that many are looking at their parents’ experiences and thinking twice about how to save for the future and, indeed, whether it is worth doing so.
I hope the Government are right that people will be encouraged to save for retirement, but we must be wary because my sense is that public trust in state pension provision is at a low ebb. That uncertainty will continue to play out with people who are set to retire many years from now, but who are looking at this reform thinking that there is not an awful lot in it for them.
A number of people have talked about the single-tier pension extending the state pension to more women. It is true that most women will be entitled to the state pension in their own right, but the Bill is far from a panacea for the historical problem of women facing an impoverished old age. Even under the new arrangements, women will be less likely than men to receive the full pension. If the main drawbacks of the proposed scheme are that in the long term, the majority of people will have reduced pensions, the fact that the state pension will constitute a lower proportion of people’s income, will be lower as a proportion of average earnings and will be less money in real terms than pensioners have now means that we risk inscribing existing inequalities into the single-tier pension.
The Government hope that a lower state pension will encourage a greater reliance on occupational pensions. Although there is protection in the Bill to allow those who take time out to look after young children or frail elderly relatives to get credit for the single-tier pension, there is no equivalent protection for full-time parents and carers in private pensions. As the value of the state pension erodes and people become more reliant on what they have saved in their occupational pension to maintain a decent standard of living, disproportionate numbers of women are once again likely to be poorer because it is predominantly women who punctuate their working lives with breaks to care for others.
Many women take low-paid jobs so that they can juggle family and work responsibilities. There is also a persistent gender pay gap, so even women who have not taken breaks find that their pay, on average, is lower than that of their male counterparts. That is by no means a new problem, but much of the income inequality between men and women in later life can be attributed to more men having private and occupational pensions. I am far from convinced that the introduction of NEST and auto-enrolment will make much difference to the gender gap in private pension provision or do enough to help women secure a comfortable lifestyle in old age, given that they will be more dependent on what they have saved.
I also have concerns about people who do so-called mini-jobs. Many women with young children work two or three low-paid part-time jobs to support themselves and their family. The Government have encouraged such patterns of work. There is a danger that somebody who works only a few hours a week for a number of employers will miss out on both the threshold for national insurance contributions and auto-enrolment. Again, in the long term, women are likely to be disproportionately affected.
I want to ask the Minister about one last point. Under the current legislation, one way in which full-time stay-at-home parents earn state pension entitlement is by being in receipt of child benefit for a child under 12. When child benefit was a universal benefit, that was a good way of ensuring that mums and dads who took a break from work to care for children did not lose out. Now that child benefit has been withdrawn from higher-income families—often it is higher-income families who have a stay-at-home parent—what mechanism will the Minister use to ensure that a stay-at-home parent in a high-income household does not miss out? With single-tier pensions being unique to the individual and not transferable between spouses, it is more important than ever that such parents are not disadvantaged and are not pushed into total dependence on a high-earning partner.
It is clear that we cannot look at the single-tier pension outwith the context of other changes to the tax and benefits system. The changes will potentially impact on other forms of pension provision. I am aware that many of these matters will be covered in Committee and in regulations that are still to be brought forward. I seek assurance from Ministers that they will heed the concerns of the professional bodies that will have to put the legislation into practice and keep the unresolved issues on their radar.
Dr Whiteford
I will not give way because I am just finishing.
Every round of pension reform over the past few decades has been touted as the last for a generation. I am not persuaded that what is being proposed today is the final chapter in the pension reform on which we are embarking. I wonder how it will stand the test of time. I fear that in a few years’ time, the goalposts may shift yet again, notwithstanding the reviews that the Government have built into the system. I hope that the Government will look carefully at the equality issues in the Bill and do more to ensure that pensioner poverty for women, as well as men, becomes a thing of the past.
Jackie Doyle-Price (Thurrock) (Con)
It is a great pleasure to speak in support of the Bill and the introduction of the single-tier pension. The simple truth is that our pension arrangements have not kept pace with changes in lifestyles. I commend Members from all parts of the House for their constructive contributions. I hope that the Minister will address their concerns. This is a measure that he can be proud of because it will entrench the welfare state for the 21st century and make it sustainable, but there are some tweaks around the edges that we need to get right.
I commend the Bill for maintaining the principle of national insurance. In recent years, much of our welfare bill has become means-tested or universal, rather than contributions-based, which, as we all know, is not what Beveridge intended. The Bill will entrench the contributory principle, not least by recognising the contribution of self-employed workers and by improving the treatment of women who take time out to raise families.
On the whole, the Bill is very good for women, but I do have concerns that I hope the Minister will reflect on in Committee. The Chair of the Work and Pensions Committee raised the concern about women who will be disadvantaged because they have stayed at home to be homemakers, but have not had children. That group of people has been identified by Age Concern. They are people who have never worked, but who had expected to inherit pension rights on the basis of their husbands’ contributions. It is easy for women of my generation to be sniffy about women who have never worked, but we need to look at what society was like. That was a legitimate lifestyle choice. Those people were homemakers, and we should not diminish that role. Now that we are in the era of the ready meal, encouraging more homemaking might address the rise in obesity and diabetes, but I digress.
We are retrospectively trying to change people’s expectations of how they will provide for their retirement—a fundamental unfairness. People will be affected by this problem if the husband retires under the current system and the wife under the reformed single-tier pension. We are changing the deal that such people have anticipated for many years, and at a time in their lives when they can do precious little to deal with it.
I will illustrate the problem with an example. I have been lobbied by a constituent who is extremely anxious about the changes. Her husband will retire in three years and she in five. She fully anticipated inheriting derived rights from her husband’s pension. She has never worked, has never had children and has struggled with illness all her life. She will therefore not be covered by the transitional arrangements for women with lower contributions. The couple have dealt with the challenges that life has thrown at them with considerable stoicism and with no help from the state. This is the one period in their lives when they have expected the state to honour the deal. They have planned for their retirement on the one national insurance record and they now find that the goalposts have been moved.
I firmly believe that putting such people at a disadvantage is not the intention of the Government, but one of the unintended consequences of this significant and positive reform for women generally. Will the Minister look at that group of people?
It has been estimated that 30,000 women will be affected. I notice the Work and Pensions Committee has recommended looking at women who are within 10 years of retirement and at where the current inherited rights could be retained. As I understand it, one reason the Government are not minded to alter the system is that some 70% of women who would benefit from that provision live overseas. I completely endorse their position in not wanting to pay pensions to widows living overseas—particularly those who may never have had any real relationship with this country—but we could look at protecting widowed ladies who are expecting a pension if they are resident in this country. I doubt whether such a provision would be particularly costly because, as we have said, it is a small and diminishing group.
Although lifestyles have changed over time and women tend to work more than stay at home, we should not discriminate against those whose lifestyles do not fit that profile, particularly when we are effectively retrospectively changing their plans for retirement. I make a wider point that much action in public policy is sending out a sign that society does not value women who do not work full time. I consider that regrettable, and I speak as someone who is as much of a feminist as anyone else. We must recognise that running a home is every bit as valuable as anything else a woman might do.
On a more positive note, I give an enthusiastic welcome to the improved provisions for the self-employed, and I was disappointed to hear the comments of the right hon. Member for Birkenhead (Mr Field). I do not know what it is about those on the Opposition Benches, but they are so negative about the self-employed.
Jackie Doyle-Price
I will give way to the right hon. Gentleman because he has been critical in the past of the self-employed.
Mr Byrne
The hon. Lady makes an important argument that I am following with great interest. The Opposition are trying to say that this is an extraordinary deal for the self-employed, who are paying half the national insurance contributions of everybody else but still enjoying 100% of the pension. The key assurance we are looking for from the Government is that this is a deal for the long term. It is not clear that this deal will stick; it is generous and sounds good for the self-employed, but is it there for the long term? We think the self-employed demand certainty.
Jackie Doyle-Price
I agree that the self-employed demand certainty, and one reason the deal needs to be generous is that the self-employed do not have access to occupational pension schemes. At a time when self-employment is increasing, the role of the self-employed is growing, not least because people have different work patterns throughout their life. Some will go from employment to self-employment and so on, and we must allow them to make sufficient contributions.
Let us reward and celebrate entrepreneurism in our economy. It is playing a significant role in creating jobs and growth and should be welcomed—I gather it is now 40.2% of the economy, and I can only see that growing. We must do our bit to nurture and support entrepreneurship, not get in its way. The mealy-mouthed and churlish comments about pork-barrel politics for a group of people who are working hard and doing their best do those on the Opposition Benches no credit whatsoever.
Finally, I congratulate the Government on their determination to continue supporting pensioners more generally, and the Minister on the triple lock. As my hon. Friend the Member for Gloucester (Richard Graham) reminded us, the days of the 75p rise are long gone, and I hope pensioners realise that Government Members are on their side. If people work hard and do the right thing, we will support them. That means that we owe our pensioners who have worked hard and contributed. I hope the protections that we have given them will be recognised, and that we can lay a good foundation for our pension system in the future.
Mr Iain McKenzie (Inverclyde) (Lab)
I will focus my comments on issues raised with me by women from my constituency who were born in the early 1950s and who perceive an injustice in the changes proposed for state pensions. We are all well aware—especially at this time—of the great importance the public place on pensions, as evidenced by the reactions we have seen to any proposed changes. Perhaps we need a requirement that any changes to pensions should give as much notice as possible to those affected, so that they can plan for and address those changes. We can, therefore, appreciate the apprehension displayed by people up and down the country when further changes to pensions were announced, including the intention to introduce a single-tier state pension for future pensioners from April 2017. I support the single-tier pension, but seek to highlight what I believe is an unfair outcome for one group of our constituents.
The problem with implementing the single-tier pension on 6 April 2017 is that a group of women born in the early 1950s will not be eligible for it. Around 700,000 women born between April 1951 and July 1953 will miss out. They will be deprived of many hundreds of pounds a year on average—money they could well do with in these austere times. Women born in this period are, quite rightly, angry at what they see as a dual adverse impact of the increase in their pension age and their non-eligibility for the single-tier pension. They will be forced to wait longer to retire, and will miss out on the new £144 pension. Instead, they will receive around £127 a week. Even the DWP’s own research concluded that that
“could have a significant impact on the state pension received over the course of a lifetime, in comparison to a man with an identical national insurance contributions”.
It is so obviously unfair that women born between 6 April and 5 July 1953 have been particularly disadvantaged by the changes to the state pension. Not only have they had a second increase in state pension age imposed on them—this time at very short notice—they will now not receive the improved pension.
The campaigner Louise Fox, born on 23 June 1953, says:
“In principle, I welcome the move to a flat-rate pension because it will bring to an end the poor state pension deal that most women get, but we have been left on the sidelines.”
She goes on to say that the Government could do a number of things such as allow women in that group who retire before April 2017 either to switch to the new single-tier pension after that date, or to delay taking their pension until 6 April 2017 and then enrol in the new single-tier pension scheme.
Steve Webb
I understand the confusion because we did originally propose to introduce these measures in 2017. Since then, however, we have brought forward the start date to 2016, meaning that the constituent to whom the hon. Gentleman refers will get the single-tier pension if she was born in June 1953.
Mr McKenzie
I thank the Minister for that information. Louise Fox is not my constituent, but she will find that intervention very welcome.
One further worry is that April 2017 is still not set in stone as the date for the start of the new system, and we have been told that it has now changed. Women in this disadvantaged group want to know why they have to wait until age 66 to claim their pension, and some cite losses of £30,000. They ask, “Can this really be true? Why have we been so penalised? Why are the Government treating us so badly? What have we done to deserve this?”
The Government claim that they must be “absolutely transparent” about who will lose out, yet they failed to make clear the full consequences of the planned reforms. The Work and Pensions Committee undertook pre-legislative scrutiny of the Government’s proposals, and heard from many women born between 1951 and 1953 who believed that they would suffer. There was concern about some 85,000 women born between 6 April and 5 July 1953 whose state pension age increased a second time under the Pensions Act 2011, and who will just miss out on eligibility for the single-tier pension if implemented in April 2017, although that has now changed.
In evidence to the Committee, Professor Jay Ginn argued that because women in that group were having their state pension age increased and were typically heading for relatively low state pensions, it would not be unreasonable for them to receive the single-tier pension when it is introduced.
Those women must pay national insurance for several extra years and will receive their state pension later than women for whom the state pension age was 60 and they will receive a lower pension than men and women whose state pension age is a few years later. That is a double-whammy for women born at the wrong time. The stated intention of single-tier pension proposals was to reduce gender inequality in state pensions, but it will be magnified.
As men were allowed to receive winter fuel payments at women’s state pension age, it would not be unreasonable for that relatively small group of women to receive the single-tier pension when it is introduced. Age UK has suggested that that they could be given the option of being treated equally with men of the same date of birth. My hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee, was in favour of ensuring that women caught in the transitional group are protected.
Department for Work and Pensions analysis has shown that most women in the group—85%—would receive more in lifetime state pension and other benefits under the current system than they would receive if their state pension age was 65 and they received the single-tier pension. Obviously, its argument was centred on a long life expectancy, and it ignored the fact that the situation would be different for those who died relatively shortly after retirement. Life expectancy can vary by 10 years from one side of my constituency to the other. We can realistically assume that many of those who die early are among those who were least well paid during their working lives.
A group of women in Inverclyde who are affected by the changes come to see me regularly. They are angry that they will lose out because they will reach pensionable age prior to the proposed date. One such constituent, Mrs Christine Houston of Port Glasgow, told me she was made redundant and experienced economic hardship as demand for her company fell. She managed to find a part-time job but works unsocial hours. Her benefits, which act as a safety net to allow her to live, have been cut, and now she will be unfairly affected by the Government’s pension reforms. Despite having started work at 16 and having paid her share of taxes ever since, she has no idea how she will plan for her retirement as a direct result of the Government’s actions. Another lady, Mrs McKay, also of Port Glasgow, will lose out when the single-tier pension is introduced. She believes the Government are discriminating against her. At least 600 women in my constituency will be affected by that double-whammy. Two wrongs do not make a right.
My opinion has always been that the measures are unfair for two reasons. First, they give no chance for those people to prepare for their retirement and adjust to changes in the state pension age. As I have said, as much warning as possible should be given before any change in pension age. Secondly, the measures disproportionately affect a group of people—women in their late 50s—who are among the least well equipped to bear the brunt of the Government’s failed economic policy. A woman in her mid-50s will have average pensions earnings of just over £9,000, but, on average, a 56-year-old man has more than £52,000.
The women hit by the changes are the backbone of the UK. They are mums who took time off work to bring up children, daughters who helped their parents as they got older, and grans who help their children to have a work and family life by providing child care for grandchildren. Frankly, the measure is a disgrace, and the Government should have regard to that group of women, who have done nothing wrong except to be born in the early ’50s. I call on the Government to play fairly and reasonably with those women. I hope that there is a consensus in Committee and that we can find a way of righting that injustice for those women.
Mark Reckless (Rochester and Strood) (Con)
Before I come to the substance of the Bill, I want to make one point in response to the Opposition on the supposed break in the link from earnings to prices. History is mis-remembered. Labour would like it to be considered that, in 1979, the Conservatives broke a long-established link that had been part of a golden age, but that is not the case. The 1974 to 1979 Labour Government changed the link from prices to wages when wages were not keeping up with prices. In addition, they had a four-month transitional period between July and November 1975 when pensions were not linked to anything. Four months might not sound like much, but in 1975, inflation hit a peak of 27%, so not linking pensions to anything for a four-month period significantly hit pensioners, who did much worse under that Government than they did either in the 18 years of the following Conservative Government, or in the 13 years of the Labour Government, who did nothing to change the system they liked to attack.
I initially approached the Bill from a position of significant scepticism. I am not, in all matters of Government policy, naturally a cheerleader. I was concerned that the Bill was a big redistributive Government policy, and was worried that it might take away from those who had paid in most over their working lives. I have been convinced in part by the knowledge of my hon. Friend the pensions Minister—if I may call him my hon. Friend—and how he has presented the case, and in part by the Work and Pensions Committee pre-legislative scrutiny. In addition, the more I have worked to understand the Bill and as my understanding has increased, so has my enthusiasm. I would like to put on record my thanks to Djuna Thurley of the House of Commons Library, who has answered many of my technical questions, allowing me to respond to constituents’ cases in a bespoke manner, which in most instances satisfied the individual concerned. Her work has helped them and me to understand what is proposed in the Bill.
I wondered whether the Bill would take money away from people who have paid a lot in. Yes, such people are better off, but they have contributed a lot through national insurance, and I questioned whether they would suffer to pay for others and whether there would be a big redistribution from those who have contributed. The answer to those questions must be no, because existing accruals are protected—that is the key protection. It is a pleasure to follow the hon. Member for Inverclyde (Mr McKenzie), but when he mentioned a lady from Port Glasgow, he did not make one important point. Her accruals—whatever she has built up under the existing system, which I understand might not be that great because of the difficulties he described—will be the same under the new system and are protected. It is important to understand that the Bill does not take away from those who have contributed and give it to others.
Another key reason I am in favour of the Bill is that it seems to reverse the usual distributive trend and burden of Government tax and spend initiatives. The losers are always much noisier about their losses than the gainers are publicly grateful for their gains—I cannot be certain that there will not be a reversal of that or a degree of change as the Bill passes. Those who benefit from the existing system do not much appreciate it and very often are not aware whether they will gain or get any pension above the basic state pension, despite contributing under the current state second pension and, previously, the state earnings-related pension.
On the other side of the equation, it is obvious to those who will gain that the single-tier pension will be higher than the existing one, and that, although it will be taxed, they will be able to keep everything they put aside on top of it, which is a great benefit of the Bill. My concern, if anything, is that there might have been a degree of communications failure, because quite a lot of people believe that, when the transition happens—it will happen in 2016 rather than 2017—they will suddenly get the great benefit of the single-tier state pension and do a lot better than they would have done had they retired a little earlier.
So far—this plays into the usual way of gainers and losers in such things—I have largely had complaints from people who think that they will just miss out on the benefits of the single-tier state pension and that it will benefit those who are a little younger than them. I have been able to explain that that will not be the case—there will not be a cliff edge. When I explain that all it will mean is that the person who is a little younger than them will have the opportunity gradually to build up entitlement under the new single-tier pension over time—for instance, gaining £4 or £5 of accrual per extra year of working—they understand that and think it is perfectly reasonable.
I caution the Minister about the other side of that coin. I wonder whether a lot of constituents think that they will receive a big gain in 2016 and so have not come to us to complain. They may well come to us if, come 2016, they have expected a big gain and it suddenly does not materialise. It would be helpful if Members of all parties, commentators and reporters made that point clearer.
I have one technical question for the Minister, and I have worked hard to understand it. The White Paper was clear, as far as White Papers go; there were a lot of great examples with lovely diagrams so that, by the time I got to the end, at least I thought that I understood. On the transition, for people who currently decide to put off retirement and earn a greater state pension—I am not sure whether every 10 weeks equals 1% or whether the rules have changed, but it is something like that; my impression is that it is a reasonable deal and a good thing to take advantage of, particularly for women with higher average life expectancy. I understand that the opportunity to buy extra pension will still exist, but that there will be a less generous, different system. In his concluding remarks, will he wrap up one point for me? If someone is taking advantage of that system before the transition and is receiving extra pension and wants to continue doing so after the transition date, will the old rules or the new rules apply to that individual?
The right hon. Member for Birkenhead (Mr Field) is not in his place, but I would like to turn to his remarks. I was quite taken aback by them. There was the glass half empty issue, which we have discussed. I think he agreed that the proposals were better for women, but he raised concerns—as others have—about women born between 1951 and 1953. That issue is the product of the equalisation of the pension age, not of the Bill. In addition, as I understand it, the women concerned have lost out most compared with what they may have previously expected—although the coalition Government have mitigated some of the worst of that. However, I believe it is still the case that they will retire earlier than men of the same age, and, on average, they will have longer life expectancy. They are losing out relative to expectation, but there are those two positives—one by virtue of nature and medicine, the other by virtue of policy.
The right hon. Member for Birkenhead launched a great attack on our proposals for the self-employed. He seemed to think that it was some kind of—I will not use the word scam—initiative by the Minister to shovel benefits to all self-employed people who, according to the right hon. Gentleman, are almost entirely Liberal Democrat supporters. I am sure that those on the Liberal Democrat Benches would be delighted were that so. In Thornbury and Yate and in Leeds North West they may have MPs who have told us about people who work in that sector. Overall, I strongly welcome what the provisions will do, because of their simplicity for the self-employed. In a sense, a self-employed person runs their own company, yet still pays national insurance through two classes as if they were an employee, albeit at a somewhat reduced rate. The self-employed were not receiving the benefit from the state second pension, which seems inequitable and it is good to reform that in this way.
Greg Mulholland
The hon. Gentleman is making a powerful and informed speech. Does he agree that the right hon. Member for Birkenhead cannot have his cake and eat it? Either we believe in a fair pension for all—including carers, women and the self-employed—or we do not, and he is fudging the situation. Surely, we want a citizen’s pension for all.
Mark Reckless
I agree broadly with my hon. Friend. I am not sure that it is fair to accuse the right hon. Member for Birkenhead of fudging, as he is not in his place to defend himself. Certainly, on some issues he has said things that for many are unpalatable, and he has not been shy of spelling out the consequences in some scenarios. I just disagree with what he said about the Bill and women—the Bill will improve matters; it is not the Bill that is creating the difficulty for those in the 1951 to 1953 group—and with what he said about the self-employed. Mostly, I took exception to what he was saying on the latter.
I was astonished that—I assume that he does not speak on behalf of the Labour party on this issue, but perhaps he is doing so—the right hon. Gentleman seemed to suggest that the Bill was terribly unfair because it would not cut pensions further for those in the public sector, compared with those in the private sector. That is a courageous thing for a Labour Member to say. It may be that the National Union of Teachers, from which we have heard, will be writing to him about the policy he is urging for his party.
The Government have undertaken significant reforms to the various state pension schemes which were chronically insufficient under the previous Government. We have taken significant action on a number of different schemes. Like many other MPs, I have met a lot of policemen and policewomen at my surgeries who are very upset about the reforms, but I try to explain to them that their pensions are still far better than those for the vast majority of people who live in my constituency.
The cost of state pension schemes, in particular the extra paid in versus what is coming out to the Exchequer, will continue to increase strongly. Whether that has put those schemes in a sustainable position might remain a subject for debate, but people with such pensions have had significant increases in contribution rates. I am not sure that I agree with the right hon. Member for Birkenhead when he complains that the private sector will be able to reduce benefits because of the reduced amount going in, but that the public sector will not, when so much has already been done in the public sector. We have taken the issue of the various public sector schemes separately and we should continue to address it on its merits, rather than through the Bill.
Mark Reckless
I was just about to come on to that point. That is an extraordinary challenge. Public sector workers will have to pay more, as they will not receive the contracted out national insurance reduction. I think that is fair, because they will benefit from the state second pension, and even the NUT realises that they are getting a good deal. In perhaps eight or nine years, they could build up to the whole single-tier pension, despite having a number of decades in their working life when they had benefited from being contracted out. That is a good deal for many of those employees. It will be a significant challenge for employers, however, and will imply a significant further reduction in public spending in these areas early in the next Parliament. I would be interested to know whether the shadow Secretary of State has worked out his proposals for dealing with that if—God forbid!—Labour were in office at the time. Further changes might need to be made, but we can use separate legislation for that, whereas the private sector cannot, so it is right that the Bill provides the opportunity to make adjustments because public sector workers will no longer benefit from contracting-out provisions.
The huge attraction of the Bill is that it will greatly simplify our pension arrangements. The Minister has done well to make even the transitional arrangements, which inevitably add complexity, as simple as possible, although there remains the job of explaining to our constituents how they will work. Overall, however, the Bill will provide for a pension that accrues on a straight-line basis over 35 years of contributions. People will know what their pension is going to be, and it will be above the limit at which people got top-ups under what used to be the minimum income guarantee and pension credit—the system that Labour introduced and which, however well intentioned, effectively punished people who saved and so did not benefit from the measures in place. It dulled, if not destroyed, incentives to save, and that was a terrible mistake. Now we will have a single-tier pension and people will know what they are going to get. It will be taxed, but not withdrawn if people do the right thing and save. That will benefit our constituents, who will know where they stand, and we will have a better pensions system.
Mr William Bain (Glasgow North East) (Lab)
Increasing dignity in retirement, respecting the contributory principle in our social security system and reducing poverty among the elderly are all marks of a good society. In our consideration of the Bill tonight, some of those principles, which were also followed by previous Governments, have been referenced. The previous Labour Government, whom I supported, began the process of auto-enrolment for work-based pension schemes, which will eventually encourage 11 million people to save for a secure second pension. That Government also made substantial progress in halving rates of relative pensioner poverty, with as many as one in six of my constituents seeing significant increases in their living standards as a result of expanding pension credit.
Nevertheless, a great and growing number of our constituents who are approaching the state pension age or are just above it want to continue working. If we are to see an increase in the UK’s employment rate, providing work incentives through the tax and benefit system for this group of people will be essential too. If the current working-age population are not to experience a triple whammy—facing continued weakness in the value of real wages for the foreseeable future while taking most of the burden of fiscal consolidation now and much lower levels of retirement income than they would aspire to—it is vital that we reform the state pension and encourage pensions saving through occupational and other similar schemes.
As the Institute for Fiscal Studies established last Friday in its analysis of the DWP’s data on households below average income, there has been a large improvement since the 1970s in levels of relative and absolute pensioner poverty, with the number of pensioners with incomes in the lowest quintile down from 47% in that decade to just 21% in 2011-12. Most of that improvement came with the changes introduced by the previous Labour Government, which made the reduction of pensioner poverty such a priority. Four decades ago, levels of pensioner poverty were between six and eight times higher than those for working-age adults without children, while 40 to 50 years ago, nearly two in five poor people were pensioners. By 2011-12, the latter figure had fallen to just one in five before housing costs and one in eight after housing costs.
Last week’s IFS research also shows why it is right that the Bill should build on the work of the previous Government by encouraging workplace and other second pension saving. Across the income spread for pensioners, income from second pensions has had a big impact on raising overall incomes. Over the past three decades, it has risen from 18% to 36% as a share of total net pensioner income for the richest fifth of pensioners and increased almost sixfold for the poorest pensioners to 15% as a share of total income in 2011-12. That, alongside the increase in the value of pensioner benefits and relatively lower housing costs in retirement as a result of a large increase in the proportion of pensioners owning their homes outright—now as many as three in four—has driven the major decline in relative pensioner poverty. There is also a large group of pensioners over 75, however, who are still the group most likely to be on the brink of falling into poverty. They must not be forgotten in this debate either.
As was said earlier by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), who is no longer in her place, the recent Scottish Widows annual pensions report shows adequate provision for retirement at an all-time low, with just 45% of people able to save enough for their retirement and a fifth unable to make any savings at all for it. That is driven by the unprecedented drop in recent years in real wages and therefore disposable incomes. There is also a gender gap, with women at a bigger disadvantage in pension saving than men. The average worker in the UK wants to retire at 66 ideally, on an income of £25,000 a year, which means savings of £1,000 a month from the age 30—a truly daunting prospect.
In principle, a higher flat-rate state pension set at £144 a week for future pensioners from 2016 is a good idea and reflects the contributory principle. Making some changes to the state pensionable age is sensible, given changing demographics and life expectancy, as well as the changing patterns of people’s working lives, to which I referred earlier. However, the power in the Bill potentially to revise the state pension age upwards every five years is problematic. It has the potential disproportionately to affect poorer communities, which experience lower life expectancy on average, in constituencies such as mine, where there are larger numbers of workers in manual occupations, which are more physically demanding.
There are also problems with how the Bill affects women. Many of my right hon. and hon. Friends, as well as other hon. Members, have referred to the 700,000 women born between 6 April 1951 and 5 April 1953, including around 600 in my constituency, who, under these proposals, will potentially receive a state pension worth £6 a week less on average than that of a man born on the same day. The Government have also been unduly silent about the 100,000 people who will have to work five years extra to be eligible for the full flat-rate state pension, on the back of 35 years of NICs rather than 30 years as at present.
That is an issue for people working part time in more than one job—they are mainly women—who might be earning below the national insurance threshold in each job and therefore not building up sufficient pension rights. There are 8,000 women working part time in my constituency, with the median wage for this group of workers at just above the living wage. They deserve a guarantee from the Government that they will not lose out disproportionately as a result of these changes. The employment rate among women aged between 50 and 64 has increased by 3.5% in the last few years. I welcome that, but it would be remarkably unjust if they ended up with weaker pension rights as a result, having done the right thing and got back into part-time employment.
Future stages of this Bill’s consideration, should it receive its Second Reading this evening, should deal with how we can help women affected by the abolition of derived rights in April 2016, which will mean that women who have been unable to build up sufficient national insurance credits will lose the right to receive 60% of their husband’s pension—or all of it—should their husband die. By 2020 as many as 30,000 women could be affected by this change alone.
Similarly, the Government should address what will happen for people in their 20s, many of whom will face a lower state pension under this Bill. The Government should face up to what the closure of the state second pension scheme will mean for people, who no longer have a state-backed low-cost option for pension savings. It is inexplicable that the Government have set their face against asking the EU to remove further restrictions on people being able to save through the National Employment Savings Trust. What will the Government do about individuals who would have built up high entitlements under the state second pension, and how will they look after individuals who have only between seven and 10 qualifying years of national insurance contributions?
What arrangements will there be for passported benefits, currently paid under the guarantee credit? This also involves housing benefit and council tax benefit. Can the Government clarify what the system proclaiming these passported benefits will be should the Bill pass? The Government should also clarify a point in the impact assessment, which makes it clear that rather than the Green Paper’s aspiration that these proposals on the state pension age would be cost-neutral, a key driver now is making savings for the Exchequer.
Given the higher national insurance contributions that both employers and employees will have to make to pay for the new flat-rate pension, I hope that the Minister will be able to share with the House in his response what the long-term projections for pension spending as a share of Government and national income will be, to spell out what the Government’s long-term forecast for national insurance contributions receipts will be, and to provide reassurance to the country that the extra contributions people will be expected to make will not simply result in a long-term windfall for the Treasury and long-term pain for local government.
Clause 46, which deals with the Bill’s territorial extent, is important. The Bill applies throughout Great Britain. In other discussions taking place about the future of the United Kingdom, the future of pensions provision is a central issue. My constituents are deeply concerned that plans for Scotland to separate from the rest of the United Kingdom would lead to instability and insecurity in their incomes on retirement. Occupational and second pension schemes have to be fully funded if they operate over state borders within the EU. The level of shortfall in 5,000 UK occupational schemes running a deficit at the moment is, according to the recent Institute of Chartered Accountants in Scotland report, in the order of £265 billion. More than 11,000 separate occupational schemes are regulated jointly across the United Kingdom and are saved in by millions of people across the UK. People in Scotland deserve answers about the long-term future of pensions.
Mark Reckless
Can the hon. Gentleman be certain that, if Scotland were to become independent, his constituents would receive the pensions they expect, or might they be in a situation that we have seen in the Republic of Ireland, where pensions, including those being paid, have been significantly cut, at least in the public sector?
Mr Bain
Very sadly, I cannot be sure on that point. As I shall come on to say in a moment, further doubt has been cast on the future of pensions by utterances from the Scottish Government today, and the answers that people in Scotland are receiving from them are precious few. With their public face the Scottish Government are promising people more generous social security, while they are planning the precise opposite behind closed doors at the Scottish Cabinet table in Bute House. Despite their panel of advisers last week producing reasons in favour of a UK-wide social security system to share risk even after separation, the Scottish Government said, as reported in The Herald this morning, that should Scotland no longer be part of the UK, they could not guarantee to match the flat-rate state pension at £144 a week and that this Bill’s provisions would no longer apply in Scotland from 2016. What further evidence could there be for people in Scotland that if we want to guarantee the pound in our pocket, our deposits in the bank and now the security of our accrued pension entitlements, the only way to be sure of doing so is to vote to remain within the United Kingdom?
The general principles of the Bill are sensible, but it requires a good deal of further scrutiny to ensure that the losers do not outnumber the winners and that young people, women on low incomes in part-time employment and those in low-paid work do not pay a disproportionate cost for a flat-rate state pension. The Bill could go much further in extending the principle of auto-enrolment to those who earn enough to pay national insurance and in capping pension costs levied by providers. I hope that the Government will be generous enough to consider those points in Committee and on Report. People want long-term pension reform that works. There are good ideas from all parts of the House on strengthening this Bill. The Government should be prepared to listen and act on them, should the Bill receive its Second Reading tonight.
Sheila Gilmore (Edinburgh East) (Lab)
I am pleased to have the opportunity to speak in a debate on what is clearly a complex subject. Some of those who spoke earlier suggested that its complexity had reduced the number of Members wishing to contribute, but it is nevertheless hugely important. When we get pensions policy wrong, there are consequences for many years to follow. It is therefore necessary not simply to welcome a Bill such as this, but to make what I hope are constructive comments.
One problem, which may be partly of the Government’s own making—the hon. Member for Rochester and Strood (Mark Reckless) alluded to it—is that the Bill has been sold on the basis of it being a great leap forward. I would describe it as a step forward, but not necessarily as great a leap as others may think.
Many of our constituents have expressed, in their correspondence, the fear that they will miss out substantially, and that they face a cliff edge. The other side of the coin is that once the new system has been introduced, Members of all parties will be approached by people saying “Hang on a minute! I thought that we were all going to receive £144 and keep all the pension that we had built up in the meantime, but now you are telling me that that will not be the case.” Of course it will not be the case.
Anyone who observes that all this will be contained in the existing cash envelope—and, possibly, in an envelope containing a diminishing amount of cash in years to come—will conclude that there must be some explanation. The explanation is that many of the building blocks that allowed this step forward to be taken are already there, in terms of Government expenditure. I would argue, and indeed did argue in an intervention earlier, that much of this Bill has been built on an existing platform, consisting partly of the development of an additional state pension over the years.
It is many years since the only provision available from the state was the state pension. Initially there was the state earnings-related pension scheme, which has been described as one of the great legislative achievements of the 1974-79 Labour Government. I am a great fan of SERPS, which was pushed through by Barbara Castle. If it had been allowed to mature, it would have had very beneficial effects. It offered the prospect of greatly improved pensions—not far short of half pay—for those who were not in an employer’s scheme. The aim was to close a gap that had existed previously and that, sadly, has existed subsequently.
Mark Reckless
I am puzzled by the hon. Lady’s suggestion that the Government are building on some great platform left by Labour. Surely we can either have a system with a single decent pension, or we can have the system developed by Labour, involving separate types of pension and complex arrangements whereby people pay in various sums and possibly receive more. I do not see how the former can be building on the latter; it is clearly moving in an entirely different direction.
Sheila Gilmore
In financial terms, it is clearly building on that platform. Had the previous system not been in place, if any Government had come along and said “We will create a flat rate pension for everyone”, the expenditure involved would have been huge. It would not have been possible to achieve this if all the other bits and pieces had not been there already. That is why many people will find that the amount they receive is not hugely different from the amount that they might have received before.
Mark Reckless
Surely we would otherwise have had a single state pension that would already have been a great deal higher, and nearer to the level for which we are aiming now.
Sheila Gilmore
I think the hon. Gentleman is suggesting that all parties—and I am not sure this had come from his party any more recently than quite recently—suggested that should be the case. What then happened was that the state earnings-related pension scheme was dismantled under a previous Conservative Government. In my view at least, the worst thing that happened was that people were given the freedom to opt out of SERPS and go into personal pension provision. In many respects, that has proved to be a disaster for a lot of people. It was an illusory freedom. I suspect that a lot of people who took that path now regret that they were ever given the freedom to do so. Although SERPS was a very good scheme and will have left people in a much better position than anything suggested since, it was dismantled.
That was one of the changes in pension provision that the then Government made, but it was not the only one. From 1995, the state scheme stopped underwriting contracted-out schemes, for example, whereas previously it had provided preservation and inflation-proofing of the guaranteed minimum pension. There are lots of ways in which pensions have been interfered with and changed, therefore. I do not think any Government have a monopoly in being able to say they have got this right or the changes they have made have been helpful.
The much-maligned—by certain people, certainly—pension credit system is another relevant measure. A considerable amount of Government expenditure has been laid out on that. The debate at the time and subsequently on pension credit was not for the most part—there were exceptions—about saying, “Everyone should get a flat-rate pension credit level.” The big debate was about the link to earnings being restored. The incoming Labour Government in 1997, faced with very severe pensioner poverty, took the route of concentrating on those in most need, and they succeeded in quickly alleviating pensioner poverty. That would not have happened if there had simply been restoration of the earnings link, as that would have taken many years to alleviate that level of pensioner poverty, nor would it have happened even in relation to the introduction of a flat-rate pension, because the pension credit system applied to all pensioners whenever they had retired, which a lot of the prospective reforms, including this one, do not do. That is why a lot of people will still be receiving means-tested top-ups for many years to come.
The last Government also introduced the revised additional state pension through the state second pension, which was particularly beneficial to low earners, and which did build in credits for people with caring responsibilities, as, indeed, did SERPS, as it was based— or would have been, if it had ever gone through to maturity—on the best 20 years of people’s earnings, which would have been particularly beneficial not just for those with caring responsibilities, but for other people with interrupted work patterns, perhaps through illness or unemployment. That issue has not been resolved by any other proposal.
I would argue, therefore, that much of what has made this step forward possible has been done already, and that this would not be financially viable otherwise. That is not to say that a means-tested top-up is the best system to go forward with for ever. When I was campaigning for election prior to 2010, there were complaints and issues about pension credit, with people feeling that those who had saved or contributed to a pension scheme were relatively disadvantaged, even if they were not actually disadvantaged. That and the work capability assessment were two issues I picked up strongly from constituents, and I came here determined to argue for change, whoever won the election. I, for one, would certainly have been seeking to move us towards a system that was not so dependent on means-testing. We have to accept, however, when we look at all the impact assessments carried out by the Government, that there will still be a substantial element of means-testing even with the changes that are proposed. That will go on for many years and we have to take it into account.
Reference has been made to some, but not all, of the issues of detail in the Bill, which are important and we have to get them right. Constituents have contacted me about the changes to bereavement benefit. I know they were flagged up some time ago, in a White Paper and so on, but it is often only when these things get close that people realise they are really about to happen. The concern is that 90% of claimants of this new bereavement benefit would be worse off under the reforms and, in particular, that parents who have the misfortune to lose their partner while their children are young will be particularly badly affected. The feeling is that the current system gives parents an opportunity to be there for their children, who have already been through the trauma of losing a parent, and to resettle them without the stress of having to go back to full-time work quickly or to enter the labour market, where previously they had not been there. Although people will be able to get universal credit in that situation if their income is particularly low, it has been pointed out that the conditionality requirements could be difficult for families going through a trauma.
One thing that I had not picked up on—perhaps the Minister will say this is wrong—is that kinship carers have been promised a relaxation of the conditionality requirements for a year after taking on the care of their grandchildren, whereas widows or widowers would have only six months’ relaxation of the conditionality. If that is the case, why are widows and widowers not being dealt with in the same way as kinship carers? That is a good question to ask.
There are also issues to deal with in relation to the changes being made to contracting out, some of which have been referred to—I am not sure this one has, although it has been brought to the attention of the Select Committee. Some people who were previously in the public sector but now work in industries no longer in that sector had been told that there would be protection for their position, and they are concerned that that will change. Private sector employers have the ability, through the override provisions that are part of the Government’s proposals, to make changes, either to contributions or to benefits, to counteract the impact of having to pay higher national insurance contributions. This particular group of former public sector workers are concerned about promises made to them previously—indeed, until fairly recently—that their protections under the protected persons regulations would never be interfered with. They fear that those may now be interfered with because of this change and they are asking for clarification from the Government.
There are other worries about the change from the contracted-out situation and the national insurance contributions. Some people have referred to the issue of public sector employers—including the NHS—facing these higher levels of national insurance contributions and the promise the Government have made that there will be no ability to change the benefits or contributions. How that will be paid for? What effect will that have on public spending in general? Are we, perhaps, simply robbing Peter to pay Paul? Will it have an impact on services in the future?
The other issue is the speed at which some private sector employers have to make changes to take all the provisions into account. I am not sure whether the Government changed the date from 2017 to 2016 simply, as has been suggested by some speakers, to allow them to understand the needs of some of the women affected by the changes or whether it was something that the Treasury wanted. The Select Committee had previously been assured by the Minister that it would not be possible to make the changes until 2017 and that it would not be practical to have an earlier start date, but suddenly an earlier start date has been put in place. The more cynical take the view that that might have had as much to do with generating additional income for the Treasury as it had to do with compassion for the women affected by the changes to their pension.
The matter is serious because the one thing that nobody wants to see is any further diminution in the provision of defined benefit pension schemes in the private sector. There are concerns that some employers, rather than going through the changes that would have to be made even with the benefit of the override, might simply decide that the time has come to close their defined benefit schemes entirely. That would mean that even fewer people would benefit from such provision and we must be clear that that should not happen. The industry is looking for some reassurance—including through early sight of regulations and of how all this will be organised—that we will not look back on these provisions, as we sometimes do on others, as another nail in the coffin of defined benefit schemes.
On the subject of concerns about raising the pension age, the hon. Member for Arfon (Hywel Williams) mentioned the contributions made to previous debates by the late Malcolm Wicks, who paid considerable attention to the problems of people who had had to leave work early and who were not always able to build up their pension contributions. The Joseph Rowntree Foundation has pointed out in some of its most recent work on poverty among different groups that one group in which poverty remains unchanged is those aged between 55 and 64. Pensioner poverty among the over-65s is down from 25% 10 years ago to 15%, but in the 55-to- 64 age group the figure has stayed static at 20%. The report from the foundation states:
“For some older working-age adults, the best hope of escaping poverty is to wait for state retirement age, an age which is set to rise steadily.”
One in three people between 50 and 64 is economically inactive and a fair number either have poor health or are caring for somebody with poor health or a disability. Those people are already out of the labour market, are not contributing towards pensions and might not have the opportunity to contribute. We must consider their problems, especially as the pension age is going up. The assumption that everybody will be fit and able to work, not just to 65 but to 66, 67 and potentially beyond that, is belied by reality. A substantial group of people are already unable to remain in the work force up to that point. Provision must be made for them and thought must be given to them. They should not be left in a limbo land, as they often are at present.
The hon. Member for Aberconwy (Guto Bebb), who is not in his place at present, viewed the measure as a companion to welfare reform and suggested that it would ensure that people benefited from savings made through their lifetime contributions to pensions in the same way as universal credit would make work pay, but the irony is that at the same time as saying how good it is that means-testing will be reduced for older people, the Government have been pursuing a path that increases means-testing for those of working age. The taper in universal credit is set much higher than the current taper for tax credits, which means that people lose benefit much more quickly. One of the groups who will not benefit at all from universal credit are those who work full time but are not necessarily on high incomes and who, because of the taper change, will lose benefit much more quickly.
Working households with some capital will be subject to a test. This is again a change from tax credits. People who have relatively low incomes but have some savings will not be eligible for benefits. That is means-testing. The restriction of employment support allowance to one year for those in the work-related activity group also exposes a group of people to means-testing who were not previously exposed to it. Somebody in that situation who loses their contributory ESA after a year, who has savings, who has a working partner or who has an early retirement pension is subjected to means-testing in a way that did not happen previously. So we need to look at the different ways in which people are treated, and we should not take comfort by saying, “We’re dealing with means-testing here”, when in fact means-testing has been expanded for other groups.
Some of those people are the same people that I have already described as being in limbo when they reach the age of 55 or 60 and are unfit and unable to work. They are precisely the people—the Secretary of State seems to think this is extremely amusing—who are likely to find themselves hit by the loss of contributory benefit and the means test that is applied. Those are the sort of households who may find that they have to use up their savings in order to get to retirement age, and they will require a means-tested pension in due course. [Interruption.] It is relevant because these are the same people, and they may still end up in retirement dependent in a way that the Government say they are trying to prevent.
Will the new system help people to save and stop them feeling that it is not worth saving? The issues associated with saving for retirement are wider than simply means-testing. I am not entirely convinced that people now in their 30s and 40s are sitting at home and thinking, “If I don’t save, I’ll get pension credit so I’ll be fine. That’s why I’m not going to save.” There are many other factors involved in pension saving or the lack of it. One of those is a lack of trust in the financial services industry and concerns that saving in pension schemes in particular has not been well rewarded in recent years.
People see the low product of many of the private pensions that people join, and the defined contribution schemes that many people are in do not yield particularly good results. People are aware of that and they are not particularly trusting of the financial services industry after its recent history. Some parts of the Bill—I would argue not enough—ensure that if people are saving into private pensions, they are well protected and get a good result at the end. That means that the Government consider putting a cap on pension charging. There is still an opportunity to amend the Bill to include that. The Government have indicated recently that they are coming round to looking further at the issue. We must ensure that people are not paying into schemes where too much of what they contribute is taken out by way of fees and charges, and they end up with much less than they thought they were going to get.
There are also issues about the annuity market, and about what happens when people get their defined contribution pot and go out into the market to get an annuity. Do they know enough about where to get an annuity from? Do they have enough information to make comparisons? Is there enough control over the level of annuities that people are getting? These have been major factors for people who get their private pension pot and try to create an income from it on which they can live. That is the other side of the coin. If people are going to have enough faith and trust to save towards a pension, we must ensure that that pension will protect their interests.
I hope that the Government will take the opportunity of having the Bill before the House to expand that part of it and to put in further elements to improve the situation for many people. People would then be more willing and able to save for their retirement, which is what we all want them to do.
David Mowat (Warrington South) (Con)
Like many other Government Members, I strongly support the Bill. My hon. Friend the Member for Aberconwy (Guto Bebb) described it as bringing simplicity and fairness. He also described it as a “brave” Bill, although I assume that he did not mean that in the “Yes, Minister” sense. It will reduce complexity and regularise the treatment of women, but I want to talk about the way in which it will interact with the private sector pensions industry. I also want to build on some of the comments made by the hon. Member for Edinburgh East (Sheila Gilmore).
There is an elephant in the room when we talk about pensions provision in this country. The fact is that, even when the Bill has increased the basic state pension, that provision will not be enough for most people unless it is supplemented by the private pensions industry. Broadly speaking, pension provision in this country can be divided into thirds: one third of people are in public sector pensions, one third are in the private sector, and a third have no pension provision at all. For that middle third who are in the private sector, it is almost certain that their pension pot will not be large enough.
We have heard Members talking about the comparison between private and public sector pensions, and Parliament has debated public sector pensions endlessly. We have probably ended up in a good place in that regard. Someone cashing in an inflation-proofed pension of £15,000 a year—a self-invested personal pension, for example—at the age of 65, would have a pot of £400,000. For most people in the public sector, the value of their pension is likely to be higher than the value of their house.
The size of the median pot in the private sector is about £10,000. That is partly due to poor savings ratios. This matters, because our country has chosen to go with a pension system that is different from those in most of Europe, where there is higher basic state provision and no assumption that, by paying out tax relief, the private sector will somehow come through. The fact that the private sector has failed in this country represents a time bomb, and I shall analyse why that is the case. We need to look at that time bomb, even though there are some good things in the Bill.
One reason that people are not saving is that there is massive distrust of the industry. I have many colleagues in the private sector who would almost cut their arms off than invest in the pensions market. They would do anything to avoid doing that. They would buy houses to rent, for example. Perhaps that is a rational response to a market that has failed. I am a free marketeer. I sit on this side of the Chamber and I believe in markets. If they work, they get rid of supernormal profits and unfair advantages, and all that goes with that. However, they will not do that when there is an asymmetry of information in the market, and when that market has failed. I would contend that the market for private sector pensions falls into that category.
We have the highest pension charges in the world, according to Cass business school’s pensions institute. I know that we are coming out of a period of relatively low returns and that the numbers are therefore suspect, but someone could be spending 50% of their pension pot on charges, and 2.5% compounded over a few years does that to someone unless things are going up. There is absolutely no evidence of economies of scale in our larger funds, which is completely unlike the situation in the United States, where charges come down as the size of funds goes up.
We have too many pension funds. When I open the Financial Times, I see that there are more funds than there are equities, which is extraordinary. That is indicative of a market that has not had to consolidate because it has not been put under pressure by market forces. We also have exploitative techniques. I will not go into that in great detail, but the fact that active member discount has gone on for so long—there are now proposals to get rid of it—is extraordinary.
The way to make a market work better is to make it transparent. I have spoken with the Minister about the industry and I know that he is trying to make it move in that direction, and I respect that. The industry—I used to work in business, and in fact in the same business as the shadow Secretary of State—in my opinion is doing what we sometimes did: playing it long. It knows that it is making unacceptable profits and that that will have to change, because eventually this place will get around to fixing it. In such a situation, it plays it long. It is beginning to regularise charges and to talk about annual management charges, but of course that is different from total expense ratios. There are entrance fees, exit fees, churn fees and trailing commissions. I have a double maths A-level, an engineering degree and I am a chartered accountant, and I can just about understand this stuff. The idea that most people who are having to buy pensions could be educated to such a degree that they could make the market work is ridiculous. The market knows that and the result is a median pension pot of £10,000. It is a crisis, even with the welcome response that Government Front Benchers are putting forward tonight.
Auto-enrolment is clearly the right thing to do, but it makes it even more important to fix this issue, because we are now semi-making people invest their money in a market, and if the market is not working because we cannot be bothered to fix it, that is a moral issue. I talked earlier about NEST. I think that a low-cost passive tracker is exactly what is needed. I do not have a particular liking of state-based solutions, but I return to the fact that the market has failed. I understand that the Office of Fair Trading is conducting an inquiry into fund charges—the Minister nods his head—which I welcome. By my remarks I am not implying that we are doing nothing; I am implying that this remains an issue. The words I used—I would like them to be remembered—is that the industry is playing it long and that this is now a moral issue.
There is new stuff coming out, and I think that the Association of British Insurers has said that the charge is 0.54%, and that that is reasonable. It would be reasonable if it were not for the fact that so many people are being auto-enrolled into old funds that have much higher profit ratios. I really wonder what that 0.54% even means. Is it a total expense ratio or an annual management charge? How many of the other millions of charges that generally are not included are counted within that figure? The whole thing needs to be fixed.
What would I like the Government to do? Well, we should strengthen NEST. As I have said, I would prefer the private sector to come up with solutions to make the market work, but it has failed to do so and the time has come to act. Denmark has very low charges on pensionable assets, and it has achieved that through something very similar to NEST, and other countries are moving in that direction.
I have not yet talked about the portability of pensions. I read the Select Committee report on the issue. I am surprised that we have gone for the solution of having the pension follow the employee into their next job. I have not done the analysis, and the issue requires a lot of that, but that does not feel to me to be the optimum solution for the employee.
I do not often agree with the TUC, but I believe that its representatives have said that, based on their analysis, an aggregator would appear to have been a better solution. If we have done what we have done because of the survey cited in the Select Committee report and other sources, that is not a good reason. If we ask 100 people, 98 of whom might understand the fundamentals, whether they would like to take their pension to the next job or to an aggregator, I really doubt that they would understand.
If the survey is the basis of the analysis that has been done, it is a cop-out. That said, if there is analysis out there that says that what has been chosen is the right way, so be it.
David Mowat
The Minister is nodding, so I will not push the point. However, we are in the new world of portfolio careers, where people change jobs eight, nine or 10 times, with entrance and exit charges every time. I find the point hard to see, but okay.
I have four suggestions for the Bill Committee; if any Whips are listening, I should say that I will not be a part of it. I think there is a case for a cap. The industry sometimes says that a cap would drive down innovation, but we do not need more innovation—we need solid, passive investments that we leave and let go for a long time.
I would like there to be more enforced simplicity. We should look at what the Department of Energy and Climate Change has done with electricity and gas charges. It has insisted that bands should be brought in so that there is comparability and consumers can say, “I’ll go with them” rather than being swamped in a myriad of complexity. Pensions are massively more material to the well-being of most people than utility bills, yet they are massively more complex. Perhaps we could consider standard charges and standard comparisons of the annuity market, so that when people choose an annuity they are much more able to make a reasoned decision. The Cooper reforms in Australia are an example of that, and I would like us to move down that route.
I have given annuity transfers a great deal of thought. I know that the market is saying that people will be sent letters to ensure that they have checked out the market before they go with their base supplier. Personally, I think there is a case for saying that the base supplier should not be allowed to provide an annuity. If we really want to force the market to work, we should do something such as that. If we are going to leave the matter with the base supplier or the organisation that the person has saved with, we could ensure that they register so that we know that people have properly considered the option of going elsewhere.
Finally, I turn to tax relief. I said at the start that our pension system has a structure different from that of a lot of countries in Europe. We have smaller basic provision; we then give a lot of tax relief and hope that the private market will take care of the situation. We spend about £30 billion a year on tax relief.
David Mowat
I am told that the figure is £44 billion: a lot of money. It behoves us—it behoved the last Government, as well—to ensure that that money is spent effectively in a targeted way. My concern is that that money is part of the reason why the charge rates in our market are higher than in other countries and that effectively, our tax relief, whether £30 billion or £44 billion, is going into property prices in Kensington and Chelsea and not into people’s annuities and pension value.
Before I sit down, I want to reiterate that auto-enrolment, which I have been going on about for the past couple of years, has made it even more important for us to fix the situation. The industry cannot be left to play it long and hope that we take a long time to do something about the abuses.
Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
I endorse almost everything that the hon. Member for Warrington South (David Mowat) has just said. In fact, I do not think it would be unfair to suggest that he has thrown a grenade into this debate, because for all the Bill’s positive aspects, he has hit the nail on the head. In order for a single flat-rate state pension and auto-enrolment to work, we must have a private pensions industry that delivers value for money for every saver.
This speaks directly to the general thrust of the contributions of other Government Members. The hon. Members for Gloucester (Richard Graham), for Aberconwy (Guto Bebb), for Thurrock (Jackie Doyle-Price) and for Rochester and Strood (Mark Reckless) were right to focus on the Bill’s importance in encouraging incentives to save, but the question that went unasked until the powerful contribution of the hon. Member for Warrington South was: save into what? That is why we have been telling the pensions Minister for 18 months, as we will continue to tell him in Committee and further stages, that although there are very good things in the Bill, the danger is that it will represent only half a reform unless the Government take on the series of reforms referred to by the hon. Member for Warrington South. Let us be clear: this is not just a state pension Bill; it is also a Bill for auto-enrolment and private pensions.
Pensions are an issue where the devil is in the detail, and the detail in this Bill demands analysis. In principle, the introduction of a flat-rate state pension is a positive move that, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) has made clear, builds on a Labour platform. In order for auto-enrolment and the new workplace pensions—as the Secretary of State has generously stated, these build on Labour’s work—to work, we must have a private pensions industry that delivers value for money for every saver.
Much of the debate centred on the pensions legacy with which we all grapple, in opposition and in government. I do not think that it is possible to understand this Bill unless we consider two consequences of the Thatcher revolution for pensions. The first is the breaking of the link with earnings, which led to enormous growth in pensioner poverty, to which pension credit was the Labour answer. [Interruption.] The pensions Minister speaks from a sedentary position. I am sure he would agree that pension credit attacked a significant and real problem with pensioner poverty in 1997. He is now building the flat-rate state pension a pound above pension credit, which is why this is a Labour platform.
More or just as importantly, we continue to grapple with the legacy of the Thatcher Government’s policy on occupational pensions. Simply put, in order to promote a brave new world of personal private pensions the Thatcher Government did things—not deliberately; I am sure they were unintended consequences—that undermined the UK occupational pension system, which was at that time the envy of the world. The result was the mis-selling scandals of the 1980s and 1990s, the collapse of confidence in all non-state pensions and the flight from high-quality workplace pension schemes. That is the context in which we proceed.
Gregg McClymont
I am sorry, but much time has been taken up by the important contributions of other Members and I know that the pensions Minister wants, rightly, a reasonable amount of time to wind up this debate on a Bill of which he is the architect.
I have described the Bill’s context, but what is the detail? Even on its own terms, the Government’s case demands testing. First, the Government claim that the Bill will simplify pensions, thus encouraging individuals to save privately on top of their flat-rate state pension. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) and the hon. Member for Banff and Buchan (Dr Whiteford) have noted the complexity of pension reforms generally and of the transition process in particular. Put simply, we will have two systems running in parallel for the next 30 years. That is not a case against the reform, but it is worth considering when we are thinking about the simplicity of this pension proposal.
Secondly, the Government claim that the Bill will substantially reduce means-testing, but the DWP’s own impact assessment reveals that means-testing will be reduced by just 4%. Any reduction in means-testing is welcome. There is no debate about that. Government Members must recognise that pension credit was a necessary and significant reform to reduce pensioner poverty and Opposition Members must accept that reducing means-testing is a good thing. The question is by how much means-testing is being reduced.
Thirdly, the Government claim that the Bill is cost-neutral, but we know that billions of pounds will fall into the Treasury coffers every year because of the increased national insurance contributions in both public and private sector defined contribution schemes. That point was made eloquently by my hon. Friend the Member for Glasgow North East (Mr Bain).
Most importantly, the Government claim that the Bill will encourage saving. I can only refer Government Members to the analysis of the hon. Member for Warrington South on the failings of the private pensions industry. The incentive to save is important, but I say again that we must look at what people are saving into. [Interruption.] There is no point in Government Members laughing at me. They should speak to their colleague, who set out clearly the problems with the private pensions industry.
More widely, the Government claim that the Bill is fair. However, we have to be aware that the fast-tracking of the single-tier state pension has created steep cliff edges and inequities, to which a number of my hon. Friends and other hon. Members have referred. The Government’s pension changes have consistently hit working women. They have denied more than 1 million women the ability to build retirement savings via auto-enrolment. Now, their flat-rate pension will short-change 700,000 women. My hon. Friend the Member for Inverclyde (Mr McKenzie), who is not in his place, referred to 600 women in his constituency who will not get the new state pension, while a man of precisely the same age will.
I will give the Minister a case study. Catherine Kirby is nearly 61 and was born on 1 October 1952. She has worked for 41 years that qualify for national insurance contributions. At today’s rate, her basic state pension is £110 per week. She receives £20 in SERPS and S2P, so the total amount that she gets each week is £130. That is £15 less than the single-tier amount will be. Catherine had to leave school at 16 because her parents could not support her any longer. She had caring responsibilities and in later years, due to health constraints, had to reduce her hours of work and her already low income. She is unable to afford a private or other pension arrangement and is unable to defer taking her state pension as she has no other income. She has chronic, deteriorating health conditions. Every pound is important to her, as it is to many women close to retirement.
That is the personal story behind the rather abstract 700,000 women to whom Ministers refer. Catherine simply asks to receive the improved pension that a man of the same age will receive. We accept that there are many significant advances in the Bill, so in that spirit of co-operation, I ask the Minister to look again at the issue of women such as Catherine.
The Work and Pensions Committee raised the issue of those who are close to retirement and who had planned to retire based on their partners’ contributions. Those people face a difficult transitional situation. We believe that the Government should consider offering those individuals something along the lines of the 15 years’ transitional protection that the Select Committee suggested.
Another issue is the rise in the national insurance contributions required to get the full state pension from 30 years’ contributions to 35 years’ contributions. One of the many excellent things that the previous Labour Government did was bring down the years of contribution to ensure that there was greater eligibility for the full state pension. We ask the Government to make up the difference, especially for those who are close to retirement and who have had letters saying that they need only 30 years’ contributions. From the look on the Minister’s face, he is not keen on that idea, but I ask him in a spirit of constructive engagement to look at that matter.
Another critical aspect of the Bill that has not received enough attention this evening concerns what the abolition of the second state pension will mean. The hon. Member for Rochester and Strood explained that he is now convinced of the merits of the Bill because it is not redistributive, but it would be worth his looking at who are the losers from the abolition of the second state pension. For many people in private sector employment, on both low and higher earnings, the abolition of the second state pension means losses. More generally, Government Members might consider that one way of looking at the new pension scheme is that it puts a cap on state pension savings because no one can get more than £144 a week. Previously, under the second state pension one could get significantly more than that.
Gregg McClymont
As I said earlier to the hon. Gentleman, it is important to give the Minister enough time to wind up on his Bill. I am happy to oblige on that, so it is important that I proceed. If the hon. Gentleman wants to try again in a couple of minutes I may be more amenable.
Let me return to the heart of the Bill and the laser focus placed on that issue by the hon. Member for Warrington South. The Bill is predicated on the Government’s assumption that it increases the incentive to save. It is about what people will be saving into under the new workplace pensions and private pensions more widely. Public confidence could be finally restored if the Minister grasped the nettle with the Bill, and did not what I am telling him to do, but what his Back Benchers are saying. Auto-enrolment is under way. We give credit to the Government for continuing with Labour’s auto-enrolment policy, but the success of the revolution is not ensured. [Interruption.] The hon. Member for Bedford (Richard Fuller) laughs, but the Secretary of State generously put that matter on the record in his earlier contribution. Getting auto-enrolment right is crucial.
Gregg McClymont
Given the hon. Gentleman’s persistence, I will happily give way.
Mark Reckless
I am grateful. Could the shadow Minister not perhaps recognise some fault in Labour’s past, particularly with the £5 billion-a-year tax rate through the removal of the dividend tax credit, and will he listen to himself building up into a great rhetoric of peroration? Does he support the Bill, or is he about to lead his troops into the Opposition Lobby against us?
Gregg McClymont
I do not think the hon. Gentleman has been listening to what I said. To recap: the flat-rate state pension is a good idea in principle, and I refer him to his hon. Friend the Member for Warrington South, who is sitting behind him and who explained—even more clearly than I managed—that for the Bill to work, the private pensions industry must deliver value for money for every saver. As the hon. Gentleman and Opposition Members have said, that must be the other half of this Bill. I cannot be any clearer than that.
Let me return to what the Minister should do, bearing in mind that I want to give him time to wind up —[Interruption.] He is telling me how long I have now, but I will be the judge of that while also being fair to him. The opportunity is there for the Minister. The stated aim of the Bill is to ensure that people have confidence in saving for their future and in putting money aside for their retirement. Members have made the point repeatedly, but simply reducing state pension provision—that is what the Bill does in the long term—and hoping that will act as an incentive for people to save into private pensions is not enough. The Opposition have set a direction of travel, which the Government have finally begun to follow, to ensure that saving pays into private pensions. We set out the way to ensure value for money for every saver in the UK occupational system, and we called for the Office of Fair Trading investigation into costs and charges that is now taking place. We called for the Government to deal with consultancy charges and auto-enrolment practices, and we welcome moves in the Bill to give the Secretary of State the power to do that. He could go yet further in the Bill and clarify precisely what he will do.
Why is the Minister asking the House to agree to the abolition of the second state pension before imposing quality requirements of the kind outlined by the hon. Member for Warrington South on auto-enrolment pensions? Why does the Bill contain a clause—clause 34 —drafted so widely that it would allow the Secretary of State to exempt employers from auto-enrolment on the Beecroft model, which no one else would applaud? Why, unlike the proposals on savers, do regulations to exempt employers from auto-enrolment not have to be passed by a resolution of both Houses? I could go on.
Pot follows member, which the hon. Member for Gloucester mentioned, will be discussed in great detail in Committee. Most of the industry takes a different view to the Minister, so I look forward to discussing it with him. He can do no better than listen to the hon. Member for Warrington South on a swathe of policy issues on private pensions.
The Opposition believe that the principle of the flat-rate state pension is a good one. We will not stand in the way of the Bill today, but unless the Minister grasps the nettle on the private pensions industry, the Bill will remain half a reform.
The Minister of State, Department for Work and Pensions (Steve Webb)
We have had five hours to talk about pensions—what could be better? The debate has been unusual in the sense that the Government have had support for the Bill and its principles from Members on both sides of the House. That is vital, as the Chair of Work and Pensions Committee and others have said. Pensions reform that will last and that will not be blown about by changes of Government—in the long term, obviously—is a good thing. I welcome the fact that hon. Members on both sides of the House have welcomed the Bill and its central measure, the single-tier pension.
My right hon. Friend the Secretary of State began the debate in characteristically statesman-like fashion and in a non-partisan way. Unfortunately, that was not immediately followed. This reform deals with fairness, gives decent pensions to women, and tackles the poor pension position of the self-employed, which is vital. The right hon. Member for Birkenhead (Mr Field), who is no longer in his place, set hares running. He seemed to believe that assisting the self-employed is pork-barrel politics because, apparently, the massed ranks of the self-employed are all Liberal Democrats, which I was pleased to hear.
I am pleased that my coalition colleagues and my hon. Friend the Member for Leeds North West (Greg Mulholland) welcomed the measures on the self-employed, who for many years have been excluded from the full state pension. The previous Government recognised that there was a problem and did a research report. I am not sure whether the right hon. Member for East Ham (Stephen Timms) was the Minister with responsibility for pensions at the time or which of my 10 predecessors was, but I found the report on the top shelf when I moved in. It had been put in the “too difficult” box, which was overflowing. This Government have grasped the nettle and provided for the self-employed to be full members of the state pension system. I have never heard a Government measure described as too good to be true, as that measure was described today, but I can assure the House that the deal is that the self-employed are full members. Low-earning self-employed people pay more national insurance than their low-waged counterparts. It therefore is not a freebie—the self-employed pay national insurance, and they should be part of the system.
I shall try to address the specific issues that arose during the debate. Several members of the Work and Pensions Committee spoke. I am grateful to the Chair of the Committee, the hon. Member for Aberdeen South (Dame Anne Begg), my hon. Friend the Member for Amber Valley (Nigel Mills), the hon. Member for Edinburgh East (Sheila Gilmore) and their Committee colleagues for their pre-legislative scrutiny of clause 1. They suggested a number of amendments, including putting the start date of 2016 in the Bill, which we have done, and making 10 years the maximum minimum for a pension, which was welcomed by my hon. Friend. He pressed me mercilessly when I gave evidence, and we were pleased to give him what he wanted. I was keen on having him on the Public Bill Committee, but went a bit cool on the suggestion when he said he likes to table amendments.
I will address a number of the substantive issues raised in the debate in turn, the first of which is the move from 30 to 35 years. To be clear, 30 years currently gets people a basic state pension of £110 a week, and 35 years gets people a full single-tier pension of £144 a week. We are therefore not comparing like with like. As my right hon. Friend the Secretary of State has said, the Government are merging a basic pension for which people work for 30 years with a second pension, for which people might work for 50 years. Thirty-five for the merged pension is therefore hardly ungenerous. If people who have already retired on the expectation of 30 years would have got more under the old rules than they will get under the new rules, they will get what they would have got under the old rules, so nobody in that situation will get less than they were expecting.
That brings me on to women born between 1951 and 1953. To be clear, they will receive their state pension on the day they would have got it if Labour had continued in office. We have not changed their state pension age. They will receive the pension they would have got had Labour continued in office. We have changed, with one exception, neither their pension age nor their pension amount. To hear Opposition Members talk about this group of women, one would think we have ripped them off, taken money off them and created losers. They are getting the pension they were going to get on the day they were going to get it.
There is one exception to that. We have changed something for this group: we have given them a bigger pension, because of the triple lock. If the Labour Government had continued in office, their pension would have been price indexed. We introduced the triple lock, so each one of those women born between 1951 and 1953 will receive a bigger pension under this Government’s policy than under the continuation of the previous Government’s policy.
Steve Webb
Let me be absolutely clear: the triple lock, as a concept, was in the 2010 Liberal Democrat manifesto. It was agreed and implemented by the coalition, and I want it to carry on after the next election. There is no question about it. I should add that all the figures in the coalition’s impact assessment on the Bill are premised on the assumption of the continuation of the triple lock.
Steve Webb
Just to be clear, the single tier comes in in 2016, which is not within the scope of the spending review, as the right hon. Gentleman probably knows. I was interested in what he had to say about pension spending, because apparently pensions will be included in the cap on welfare. As I understand it, if a Labour Government had a bad year on housing benefit, they would take some money off pensions. How would they do that? We were told this week that they would not undermine the triple lock, so what is left? They are in favour of raising the state pension age. As I understand it, if they have a bad year on housing benefit they will jack up the state pension age in the next year to make up the shortfall—that does not make any sense.
Steve Webb
I have given way to the right hon. Gentleman twice already, so I will make some progress.
A number of hon. Members raised matters of detail. I thank my hon. Friend the Member for Rochester and Strood (Mark Reckless), who said that he had approached the Bill in a spirit of scepticism. He is right to have done so. We should approach all new pension reforms in a spirit of scepticism, because there have been so many of them. One of the nicest things anyone has ever said to me is that the more he found out about the Bill the more he liked it. I am grateful to him for that.
My hon. Friend the Member for Rochester and Strood asked a specific question on whether someone who defers under the current system past 2016 will continue to receive the current generous terms after 2016. He also paid tribute to the staff in the House of Commons Library—he mentioned Djuna Thurley specifically—who have to wrestle with complex legislation. I echo that tribute. A lot of legislation is complex and difficult, and I think all of us accept that the Library provides us with great support.
My hon. Friend the Member for Thurrock (Jackie Doyle-Price) asked about another group and the whole issue of derived rights. The single-tier pension is designed for the future, whereas the current state pension system is rooted in the 1940s when men had jobs and women had husbands. We cannot go on like that. We have introduced a lot of transitional protection. For example, there was an option for women to pay something quaintly called the married woman’s stamp. If they did that at any point in the 35 years up to their pension age, we would protect them and pay them the pension they would have got. There is extensive transitional protection.
My hon. Friend raised the question of what she described as homemakers. People who are not in the paid labour force can still receive protection for their pension rights in a number of circumstances. If they are at home with children, caring for an elderly or disabled relative, or are unemployed and looking for a job, they receive credits. If they are too sick to work, they receive national insurance benefits credits. So a whole raft of circumstances are covered.
My hon. Friend mentioned a specific and narrow group of people—childless homemakers. Interestingly, at the start of her speech, she said how important the contributory principle was—I agree with that—and she was right that in many ways the Bill reasserts that principle. To reassert it, however, and then say that someone who has paid no national insurance, not been a carer, not been looking for work and not been too sick to work should none the less get a significant pension creates a tension. I can reveal to the House that she and I discussed this issue in the Tea Room before we got here, and she said, “But aren’t you changing the rules late in the day?”, as she also said in her speech. We have to strike a balance between moving to a new system and protecting people as we move, and not setting in aspic every single corner of the old system.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, “You can’t go on running two separate systems”, and then demanded that we keep various bits of the old system going for another 15 years while running two separate systems. I would say to my hon. Friend the Member for Thurrock, then, that there is extensive protection. If the lady in question were widowed, for example, there would be pension credit of £145, so if she had nothing else she would be brought up more or less to the same level. Extensive protections are in place. I cannot promise that every single person will be protected in every single respect, and nor should I, but there is extensive protection.
Gregg McClymont
I want to correct the Minister. I did not suggest that we could not run two systems in parallel; I was merely pointing out that when we talk about the simplicity of this new pension, we have to take it into account that two systems will be running in parallel. I did not say it was an argument against the Bill in toto, but it is a point that we must all bear in mind when considering a simple pension system.
Steve Webb
The hon. Gentleman raised a lot of questions, which it is his job to do obviously, but did not offer any solutions. He gave a case study of someone born between 1951 and 1953 and said how unfair the system was. I want to stress that the person he gave an example of will get exactly the pension she was expecting on exactly the day she was going to get it, so we have not changed anything about that person’s pension. We have, however, triple locked her pension, which is better than she might have expected under the last Government, so I think we have done the right thing.
Opposition Members drew a comparison between women in that age group and men born on the same day. Let us try a thought experiment: if we were to impose a sex change on all 700,000 women in this group, 95% of them would not thank us—financially at least, although perhaps for other reasons as well. Getting on for 95% of them would say, “Why did you do this to me? Yes, I might get another six quid a week, but I’ll have to wait two or three years longer for it.” That is not a good deal. We have worked out that it would take many of these women 30 years of retirement to recover what they lost through waiting longer for their pension.
The hon. Member for Glasgow North East (Mr Bain) mentioned people with short life expectancies, as did the hon. Member for Inverclyde (Mr McKenzie). People who do not live long after pension age want to have their pension as early as possible, and again the last thing these women want is to get their pension when men do, because if they are not going to live long past the pension age, they will want their pension straight away, not later. The comparison with men born on the same day, therefore, is a false one. Overwhelmingly, these women will do better than a man born on the same day.
The hon. Member for Banff and Buchan (Dr Whiteford) made a thoughtful speech. I was impressed with almost all of it, expect the bit when she was pressed by Scottish colleagues about independence, at which point she became shifty and evasive. [Laughter.] I think that is just about parliamentary. It is clearly that independence would mess up pensions big time. The whole debate today has been about simplification and people knowing where they stand. How on earth would we splice together different countries’ national insurance records, cross-border deficits—
Steve Webb
Just a minute. I am enjoying this too much.
How would we splice together different countries’ national insurance records and cross-border deficits? It would suddenly be an international scheme, so we would have to fund it immediately. This is a classic case of where we are better together. It is a simpler system and one where people know where they stand. Reinventing another system north of the border and then trying to splice it back together, particularly when so many people work north and south of the border, would create a great deal of disruption for people. We have spent the last five hours saying how we need to make things simpler.
Dr Whiteford
Does the Minister accept that Scotland is currently spending a smaller proportion of its GDP and revenues on pensions and social protections than the rest of the UK, so there is no question of the affordability of pensions? Does he also accept that on average people in Scotland live two years less than those in the rest of the UK?
Steve Webb
The hon. Lady raises the issue of pension spending in Scotland. She will know that Scotland is ageing at a faster rate than the rest of the UK, so the long-term spending pressures there are greater, and that would need to be addressed.
On the important issue of differences in life expectancy across different areas, clearly there are differences. I accept that, but across the board we are seeing a rising tide that is lifting all boats. For example, over the last quarter of a century, life expectancy at 65 has risen for men in the least privileged class by 21% and for those in the most privileged by 22%. In other words, we have seen significant increases across the board. Therefore, although we absolutely have to tackle the causes of differences in life expectancy, that cannot be a reason for paying pensions at a rate that was set a century ago.
My hon. Friend the Member for Warrington South (David Mowat) got great praise from those on the Opposition Front Bench, which I hope will trouble him. He asked whether there is any analysis that underlies our decision; I can assure him that there is. He asked why we do not shunt all those with small pots to NEST—that was the proposition. We are talking about a pot limit of £10,000, so if all the small pots in a single year went to NEST, it would be become enormous and unbalance the market. Unless we wanted NEST to become huge, we would have to have a low pot size limit to make it work, with NEST becoming the home of small lost pots. However, if we did that, we would end up with significant fragmentation. In other words, with a low pot size limit, people might have something in NEST, a few thousand pounds they can do nothing with in another provider, their current pension—[Interruption.] What I can suggest to my hon. Friend, if I may—I have only a few minutes—is that he looks at our Command Paper, Cm 8402, which provides the analysis that underlies this, and if he is not satisfied after that, I am happy to have a coffee with him.
A number of other issues were raised in this debate. The hon. Member for Edinburgh East made an exhausting—sorry, exhaustive—speech. To be fair to her, she made some quite important points. She said that the single tier was not a windfall or a great leap forward. When she quizzed me in the Work and Pensions Committee, she said—and I quote—that it is not exactly “fandabbydosey”. She is right: it is not fandabbydosey; it is a simplification. It is about spending the money that we were going to spend, but better. She also said that SERPS was great and asked whether it would not have been better to continue with it. However, the fundamental problem is an unfunded pension promise. We already have a very large unfunded basic state pension, which will represent a rising share of national income even with these reforms. If we had added a massive unfunded SERPS to that, those promises would not have been kept. It is nice to think they would have been, but they would not. Future generations of working taxpayers would have had to pay so much tax to meet all those unfunded promises that the system would not have survived.
What we are doing in this Bill is being responsible for the long term. This system will cost more as a share of GDP than we spend now—significantly more—but the rate of growth will be slower. Crucially, given the long-term health, social and pension costs in the decades to come, a Government who are acting now—taking difficult decisions about things such as the state pension age, but giving people time to plan—are doing the right thing for the long term.
On the private pension side of things, automatic enrolment has started incredibly well. For example, McDonald’s—just one employer—has found that the opt-out rate among some of its low-paid employees is as low as 3%. From memory, that means that 10,000 lowly paid employees at McDonald’s are now in pensions, with fewer than three in 100 opting out. That is a real achievement. One of the reasons for that is the communications work we have done—the “I’m in” adverts that we see on the tube, on television and so on.
Communications was a key issue. We absolutely have to communicate this change effectively. We are doing fieldwork over the summer on how best to communicate it and to whom. We are working with partners such as Age UK, the Money Advice Service and the Pensions Advisory Service. The one constraint we have is that we cannot presume exactly what the scheme will look like, because the House will consider it. We cannot write to people now telling them what will happen, because it might not happen—it might be changed by the House. That is a frustration for us, but as soon as this is determined and settled, we will be out there.
I have long looked forward to the moment when I can say with pleasure, along with my right hon. Friend the Secretary of State, that I commend this Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Pensions Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7))
That the following provisions shall apply to the Pensions Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 11 July 2013.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Consideration and Third Reading
(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.
Other proceedings
(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mr Syms.)
Question agreed to.
Pensions Bill (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Pensions Bill, it is expedient to authorise the payment out of money provided by Parliament of:
(1) any expenditure incurred under or by virtue of the Act by the Secretary of State; and
(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Mr Syms.)
Question agreed to.
Pensions Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Pensions Bill, it is expedient to authorise:
(1) the imposition of charges to income tax in respect of benefits payable under or by virtue of the Act;
(2) the levying of charges under the Pension Schemes Act 1993 for the purpose of meeting expenditure of the Secretary of State under or by virtue of the Act;
(3) the imposition of levies under or by virtue of the Pensions Act 2004 in respect of past periods;
(4) the imposition of levies under or by virtue of the Companies (Audit, Investigations and Community Enterprise) Act 2004 towards the expenses of grant-aided bodies concerned with preparing guidance for pensions illustrations; and
(5) the payment of sums into the Consolidated Fund.— (Mr Syms.)
Question agreed to.
Business without Debate
Delegated Legislation
Mr Speaker
With the leave of the House, we shall take motions 5 to 9 together.
Motion made, and Question put forthwith (Standing Order No. 118(6)),
Representation of the People
That the draft Elections (Fresh Signatures for Absent Voters) Regulations 2013, which were laid before this House on 25 April 2013, in the last Session of Parliament, be approved.
That the draft National Assembly for Wales (Representation of the People) (Fresh Signatures for Absent Voters) Order 2013, which was laid before this House on 8 May, be approved.
International Development
That the draft Asian Development Bank (Tenth Replenishment of the Asian Development Fund) Order 2013, which was laid before this House on 8 May, be approved.
Immigration
That the draft Police and Criminal Evidence Act 1984 (Application to immigration officers and designated customs officials in England and Wales) Order 2013, which was laid before this House on 25 April 2013, in the last Session of Parliament, be approved.
Financial Assistance to Industry
That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, sums exceeding £10 million and up to a cumulative total of £300 million in respect of investments to support lending to small and medium sized enterprises.—(Mr Syms.)
Question agreed to.
European Union Documents
Motion made, and Question put forthwith (Standing Order No. 119(11)),
2012 Salary Adjustment for EU Staff
That this House takes note of European Union Documents No. 17322/12 and Addenda 1 and 2, a draft Regulation adjusting with effect from 1 July 2012 the remuneration and pensions of the officials and other servants of the European Union and the correction coefficients applied thereto, and No. 17360/12 and Addendum, a draft Regulation adjusting from 1 July 2012 the rate of contribution to the pension scheme of officials and other servants of the European Union, together with European Union Documents No. 11964/12, Opinion No. 5/2012 of the European Court of Auditors on the draft Regulation amending the Staff Regulations of Officials and the Conditions of Employment of Other Servants of the European Union, No. 13327/12, Commission Report on the Exception Clause (Article 10 of Annex XI of the Staff Regulations), and No. 13270/12, Special Report No. 10/2012 of the European Court of Auditors: The effectiveness of staff development in the European Commission; questions the European Commission’s conclusion that recent and challenging economic conditions do not warrant the application of the Exception Clause; regrets that the Commission has not modified the salary adjustment method this year; stresses that consequent increases in EU staff pay, proposed by the Commission, are completely unacceptable; welcomes the findings and recommendation of the two reports from the European Court of Auditors; encourages the Commission to act upon these reports; rejects the Commission’s proposals on salary and pension adjustments and pension contribution rates; and emphasises the continuing need for genuine reform both to the Salary Adjustment Method and to the Staff Regulations in general in the context of the UK’s overarching goal to achieve real budgetary restraint in the EU institutions.—(Mr Syms.)
Question agreed to.
Written Statements by Members who Answer on Behalf of Statutory bodies
Resolved,
That:
(1) this House approves the recommendation of the Procedure Committee contained in paragraph 6 of its Fifth Report, Statements by Members who answer on behalf of statutory bodies (HC 1017), that the ability to make written statements should be extended to Members answering on behalf of statutory bodies.
Ordered,
That:
(2) Standing Order No. 22A be amended accordingly as follows:
(a) in the title, leave out ‘by Ministers’;
(b) in line 2, after ‘House,’, add ‘or other Member of the House to whom written questions may be addressed’;
(c) in line 2, leave out ‘his’ and insert ‘an’;
(d) in line 2, leave out ‘ministerial’.—(Mr Syms.)
COMMITTEES
European Scrutiny
Ordered,
That Jim Dobbin be discharged from the European Scrutiny Committee and Mr Joe Benton be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)
Health
Ordered,
That Chris Skidmore be discharged from the Health Committee and Charlotte Leslie be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)
Lethal Autonomous Robotics
(11 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Nia Griffith (Llanelli) (Lab)
I should like to thank you, Mr Speaker, for allowing me this debate to bring to the House’s attention the issue of lethal autonomous robotics, or LARs, which are sometimes referred to as “killer robots”. I have the privilege of being the vice-chair of the all-party parliamentary group on weapons and the protection of civilians, and I wish to raise the issue of what plans the Government have to engage in international talks to try to limit, through means such as international regulation, the development and proliferation of such weapons. I believe that the UK has a key role to play in international talks and that without concerted international agreement and pressure it is unrealistic to anticipate that many individual states will pause in their drive for ever-increasing technological advantage.
This debate is timely because just over a fortnight ago, on 29 May, Christof Heyns, the UN special rapporteur on extrajudicial, summary or arbitrary executions, presented a report on lethal autonomous robotics to the UN Human Rights Council in Geneva. The following day, 24 states took part in discussions on the report, and with the exception of the UK, they all agreed on the need for further debate. Germany and the United States were among those who expressed a particular willingness for further international discussions. Brazil and France urged the need for an arms control forum, and suggested using the convention on certain conventional weapons. That is a framework convention with protocols on specific issues. It is the mechanism that was used to make an international legal agreement to ban the use of blinding lasers before they were ever deployed.
Before returning to the need for international dialogue, I want briefly to explain what we mean by lethal autonomous robotics and why we need to take action now. I also want to highlight some of the concerns raised in the UN special rapporteur’s report. The term LARs refers to
“robotic weapons systems that, once activated, can select and engage targets without further intervention by a human operator”.
The key element is that the robot has the power to “choose” a target independently and to “decide” to use lethal force against that target. That element of full autonomy means that LARs represent more than just a game-changing development in weapons technology. They represent a revolution.
LARs have sometimes been grouped with modern unstaffed weapons systems, such as remotely piloted aircraft systems, sometimes called unmanned aerial vehicles but most are more commonly known as drones. However, they go a considerable step further than drones. LARs are fully autonomous weapons systems which, once activated, can select and use lethal force against targets without further human intervention. The key departure from existing military technology—the factor that differentiates LARs from unmanned weapons systems such as drones—is the absence of human intervention once a fully autonomous weapons system has been activated. A robot would be able to make the decision to kill a human being, which has never been the case before. For that reason, LARs would constitute not an upgrade of the weapons that are currently in our arsenals, but a fundamental change in the nature of war. LARs explode our legal and moral codes that assume that the decision-making power of life and death will be the responsibility of a human being, never a machine.
It is the natural horror of a scenario in which a robot could decide to kill a human that has led to the description of LARs as “killer robots”. They are also sometimes described as “fully autonomous weapons”. Whatever the label, no lethal, fully autonomous weapons system has yet been deployed, but we need urgent action now, before further technological development and investment make a race toward killer robots impossible to stop. Make no mistake: technological know-how is widespread, and it is estimated that more than 70 countries have military robotics programmes. The United Kingdom is a leader in the field of sophisticated high-tech military industries, and is therefore at the forefront of development of the types of technology that could be used in LARs.
Inevitably, much of the development of LARs worldwide is shrouded in secrecy, including development in the UK. What we do know is that weapons technology is developing at an ever-increasing pace, and it is therefore very difficult to determine how close we are to the production of LARs that are ready to be used. Weapons systems with various degrees of autonomy and lethality are already being developed. One is the UK’s Taranis system, a jet-propelled combat drone prototype that can search for, identify and locate enemies autonomously, and can defend itself against enemy aircraft without human intervention. It is clear that LARs are not a fantasy of science fiction, or a technology belonging to the distant future; they are a real possibility for our time.
The considered, comprehensive and balanced report by Christof Heyns, which was published on 9 April, raised a plethora of concerns about LARs. First, it drew attention to the moral dilemmas presented by them.
Paul Flynn (Newport West) (Lab)
Does my hon. Friend agree that the gravest danger posed by these weapons is their perpetuation of the philosophy that might is right? Is it not the case that, while the use of sophisticated technology in certain countries against other, unsophisticated countries may secure victories in the short term, huge resentments will be built up because of that difference in technology, and will leave a legacy of continuing conflict?
Nia Griffith
My hon. Friend is right. There will be a huge imbalance between countries that have these technologies and the potential to use them, and countries that do not.
LARs increase the distance, physical and emotional, between weapons users and the lethal force that they inflict. Drones already offer the states that deploy them the military advantage of being able to carry out operations without endangering their own military personnel, and thus distance the operators from the action. LARs would take that a crucial step further by lessening the weight of responsibility felt by humans when they make the decision to kill. They could lead to a vacuum of moral responsibility for such decisions.
Secondly, LARs give rise to legal issues. Given that they would be activated by a human being but no human being would make the specific decision to deploy lethal force, it is fundamentally unclear who would bear legal responsibility for the actions performed by them. If the legal issues are not tackled, an accountability vacuum could be created, granting impunity for all LARs users. Furthermore, robots may never be able to meet the requirements of international humanitarian law, as its rules of distinction and proportionality require the distinctively human ability to understand context and to make subjective estimates of value. The open-endedness of the rule of proportionality in particular, combined with complex circumstances on a battlefield, could result in undesired and unexpected behaviour by LARs. It is clear that existing law was not written to deal with LARs.
Thirdly comes a multitude of terrifying practical concerns. The lowered human cost of war to states with LARs, as my hon. Friend the Member for Newport West (Paul Flynn) pointed out, could lead to the “normalisation” of armed conflict. A state with LARs could choose to pit deadly robots against human soldiers on foot, presenting the ultimate asymmetrical situation. States could be faced with the temptation of using LARs outside of armed conflict, finding themselves able to eliminate perceived “troublemakers” anywhere in the world at the touch of a button. LARs could be hacked or appropriated, possibly for use against the state, and they could malfunction, with deadly consequences.
This report corroborates the revolutionary difference between LARs and any previous weapons system, and proves the following: that our current understanding of the nature of war cannot support them; that our existing legislation cannot regulate them; and that we cannot predict the effects that they may have on our future world.
What is called for worldwide in response is both an urgent course of action, and a mutual commitment to inaction: immediate action to ensure transparency, accountability and the rule of law are maintained; and agreement to inaction in the form of a global moratorium on the testing, production, assembly, transfer, acquisition, deployment and use of LARs until an international consensus on appropriate regulations can be reached.
Will the Minister explain the Government’s position on the recommendations in the UN report. It calls on all states to do the following: put in place a national moratorium on lethal autonomous robotics; participate in international debate on lethal autonomous robotics, and in particular to co-operate with a proposed high level panel to be convened by the UN High Commissioner for Human Rights; commit to being transparent about internal weapons review processes; and declare a commitment to abide by international humanitarian law and international human rights law in all activities surrounding robotic weapons.
At the UN Human Rights Council in Geneva, a large number of states expressed the need to ensure legal accountability for LARs and pledged support for a moratorium. The UK was the only state to oppose a moratorium. Did the UK really consider existing law to be sufficient to deal with fully autonomous weapons, and was it completely dismissing the idea of national moratoriums on the development and deployment of LARs? What evaluation of the recommendations for an international moratorium, for transparency over weapons review processes, for discussion of the limits of international humanitarian law and international human rights law, and for engagement in international dialogue did the Government carry out in advance of the debate in Geneva two weeks ago? I believe the UK should take a leading role in limiting the use of LARs, and use our considerable standing on the world stage to bring nations together to negotiate.
The UN report recommended a “collective pause”—time to reflect and examine the situation with open eyes, before the demands of an arms race, and of heavy investment in the technology, make such a pause impossible. Only with multilateral co-operation can an effective moratorium be achieved. As Christof Heyns observes, if nothing is done,
“the matter will, quite literally, be taken out of human hands.”
Turning to the UK’s own policy, in answers given by Lord Astor in the other place and a Ministry of Defence note, the UK has stated that
“the operation of weapons systems will always—always—be under human control”—[Official Report, House of Lords, 26 March 2013; Vol. 744, c. 960.]
and that
“no planned offensive systems are to have the capability to prosecute targets without involving a human.”—[Official Report, House of Lords, 7 March 2013; Vol. 743, c. WA411.]
This could form the positive basis of a strong policy, but further clarification and explanation are urgently required, and there has been no mention of a moratorium.
In November 2012 the USA outlined its policy and committed itself to a five-year moratorium. In a Department of Defence directive, the United States embarked on an important process of self-regulation regarding LARs, recognising the need for domestic control of their production and deployment, and imposing a form of moratorium. The directive provides that autonomous weapons
“shall be designed to allow commanders and operators to exercise appropriate levels of human judgement over the use of force.”
Specific levels of official approval for the development and fielding of different forms of robots are identified. In particular, the directive bans the development and fielding of LARs unless certain procedures are followed. The UN report notes that this important initiative by a major potential LARs producer should be commended and that it may open up opportunities for mobilising international support for national moratoriums.
During a Westminster Hall debate on l1 December 2012, my hon. Friend the Member for North Durham (Mr Jones), the Opposition Defence spokesman, expressed support for the move by the United States to codify the use of UAVs. He suggested that the UK examines whether it should, in addition to existing law, have a code covering: the contexts and limitations of usage; the process for internal Government oversight of deployments; command and control structures; and acceptable levels of automation. The Minister who responded to the debate rejected that suggestion on the grounds of operational security—this may be one of the big stumbling blocks.
However, now that we are talking about the development of LARs, we do need greater clarity, both in respect of UK policy and on the international stage. Existing international humanitarian law and international human rights law never envisaged weapons making autonomous decisions to kill. Deciding what to do about LARs is not like simply banning a chemical agent—it is far more complex than that. We are talking about technological know-how that can be used in so many different ways, so we need to sit down with other countries to look at the limitations of international humanitarian law and international human rights law.
Tessa Munt (Wells) (LD)
I have listened to what the hon. Lady has said. Does she agree that the only way forward is an explicit ban, because international humanitarian law was, as she said, written before anyone could contemplate fully autonomous weapons? Does she agree that the most important thing is for human beings to make morally based decisions to stay within the law and the only way forward is a full ban?
Nia Griffith
The hon. Lady makes a very valid point, which shows why the negotiations are so crucial. We need to define exactly what is meant by LARs and examine that international law to see what we can do to regulate all the appropriate weapons. If we are to make progress on banning LARs, nations need to be clear about exactly what we mean.
We then need to look at what mechanisms could be used. One suggestion would be to use the convention on certain conventional weapons, the mechanism used to make an international legal agreement on a pre-emptive ban on blinding lasers. Another option would be to use the process that led to 107 states adopting the convention on cluster munitions, five years ago last month. That treaty was groundbreaking for three main reasons: first, it banned an entire category of weapons; secondly, it brought a ban into existence before the use of cluster munitions had become widespread; and, thirdly, the treaty process was multilateral, shaped through the initiative and sustained leadership of the Norwegian Government, with a strong partnership between states and organisations working together towards a clear common goal.
The UK needs to be at the forefront of the debate on LARs. Now is the time for further international discussion. Now is the time to encourage a wide range of states to adopt a moratorium on the development and deployment of LARs until a new international legal framework has been developed that takes account of the potential of LARs and lays the basis for discussion on their future regulation or prohibition. I very much hope that we will see the UK taking a lead on this matter.
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)
I thank the hon. Member for Llanelli (Nia Griffith), not only for bringing a very serious matter to the House and explaining it clearly, but for her immense courtesy this afternoon in sending us a copy of her speech, which enabled me to discuss it with officials and therefore answer the four key questions that she has raised.
I thank the hon. Lady for bringing the issue of lethal autonomous robotics before Parliament. It is clear from this debate and the one recently at the UN Human Rights Council in Geneva that this is an important subject which will inevitably become ever more so as technology develops. Let me clarify the scope of today’s debate. I agree with her that LARs are weapon systems which, once activated, can select and engage targets without any further human intervention. Her definition was correct and it is clearly one step on from drones, which have a human component—I will come back to discuss that in a moment.
Let me be very clear and back up the comments made by my noble Friend Lord Astor in the other place and quoted by the hon. Lady. He stated that
“the operation of weapons systems will always…be under human control”—[Official Report, House of Lords, 26 March 2013; Vol. 744, c. 960.]
and that
“no planned offensive systems are to have the capability to prosecute targets without involving a human”.—[Official Report, House of Lords, 7 March 2013; Vol. 743, c. WA411.]
Let me reiterate that the Government of the United Kingdom do not possess fully autonomous weapon systems and have no intention of developing them. Such systems are not yet in existence and are not likely to be for many years, if at all. Although a limited number of defensive systems can currently operate in automatic mode, there is always a person involved in setting the parameters of any such mode. As a matter of policy, Her Majesty’s Government are clear that the operation of our weapons will always be under human control as an absolute guarantee of human oversight and authority and of accountability for weapons usage.
By putting that information on the record I hope to make it clear that we share the concern that the hon. Lady has brought before the House, which others share, about possible technological developments. My argument is that the UK believes that the basis of international law governing weapons systems would prevent the development of weapons in the way that she suggests, but whether or not that is the case, the UK’s position on wishing to develop such weapons is absolutely clear.
The United Kingdom always acts fully in accordance with international humanitarian law and international standards. We are committed to upholding the Geneva conventions and their additional protocols and encourage others to do the same. We always ensure that our military equipment is used appropriately and is subject to stringent rules of engagement. I shall discuss that in more detail later.
I thank the hon. Lady for her summary of the report presented by Christof Heyns, the special rapporteur on extrajudicial, summary or arbitrary executions, which was discussed in Geneva on 30 May. Let me summarise the report. Mr Heyns highlighted that the “possible” use of lethal autonomous robotics raises far-reaching concerns about the protection of life during war and peace. In his findings, he recommended that states establish national moratoriums on aspects of lethal autonomous robotics and called for the establishment of a high-level panel to produce a policy for the international community on the issue.
The hon. Lady asked whether the Government were willing to accept the four recommendations made in the report. I believe the point she particularly wanted to discuss was the question of why, as she said, the UK was the only state that did not support a moratorium. Let me make things a little clearer, if I may. The UK has unilaterally decided to put in place a restrictive policy whereby we have no plans at present to develop lethal autonomous robotics, but we do not intend to formalise that in a national moratorium. We believe that any system, regardless of its level of autonomy, should only ever be developed or used in accordance with international humanitarian law. We think the Geneva conventions and additional protocols provide a sufficiently robust framework to regulate the development and use of these weapon systems.
As I had the chance to read the hon. Lady’s speech before the debate, I noticed that she used the phrase “Furthermore, robots may never be able to meet the requirements of international humanitarian law”. She is absolutely correct; they will not. We cannot develop systems that would breach international humanitarian law, which is why we are not engaged in the development of such systems and why we believe that the existing systems of international law should prevent their development.
Tessa Munt
What is in place to protect against the development of such weapons systems by UK or UK-based companies, whether that is for export or to be taken to another destination, not to be used by us?
Alistair Burt
The basis of the Government’s argument, made by me and by my noble Friend in the other place, is that the system of law and conventions that govern the development of weapons would prevent anyone from developing the weapon in such a manner as the hon. Member for Llanelli has suggested. It would not fit export criteria, so I do not think that we are at odds on that. The issue is whether the legal framework is sufficiently robust to prevent that. The United Kingdom, having made its own decision that it is not developing these weapons, believes that the basis of the legal system on weaponry is such as to prevent that development.
Paul Flynn
Will the Minister explain the distinction that he makes? In a meeting held in this place, one of the noble Lords with great experience in the Navy gave an example of a weapon that is used now which, once the parameters have been set, would work entirely automatically without any human intervention. What is the difference between that and the prospect of fully autonomous weapons?
Alistair Burt
My understanding, having discussed this with officials, is that it is the setting of the parameters that is the human element. For example, once the parameters were set of some existing weapons system that would seek to identify and defend itself against missiles coming at one of our ships in a situation of conflict, plainly an operator would not be needed to press the button each second to fire off the missiles—the system will do that automatically. That is an automatic system where the parameters have been set. What is envisaged through lethal autonomous robotics is a step beyond that, which no one has reached. To use the definition that the hon. Member for Llanelli gave right at the beginning and which I cited, that would be weapons systems which, once activated, could select and engage targets without any further human intervention. Those are not drones; it is a step beyond.
The hon. Lady has rightly observed that this is a complicated area, where further international discussion would help to clarify the legal and political implications of the possible future development of this technology. Like others, we think that the Human Rights Council is not the right forum for the discussion, but we stand ready to participate in the international debate and we agree that the convention on certain conventional weapons seems the right place for this important issue.
The hon. Lady asked why the UK was the only country to resist the call for a moratorium. I have set out our willingness to adopt a more restrictive policy than the legal freedom afforded, and our commitment to uphold international humanitarian law and to encourage others to do the same. I do not believe that our approach is so different from that of the United States and our European allies.
We did not interpret the discussion in Geneva in quite the same way as the hon. Lady. We believe that French and US attitudes are very similar to our own. Although some states spoke in favour of some sort of regulation or control, many did not, and we should not take that as universal support for a moratorium, given the number of states that did not express a view. Our sense is that support for a moratorium is far less than indicated by the hon. Lady. That does not in any way negate the concerns, but we are not quite sure that people are where she suggests they are in relation to a moratorium.
The law of armed conflict already addresses the ethical and moral aspects of these weapons systems to ensure adherence to principles of discrimination, proportionality, military necessity and humanity to protect people from unnecessary suffering. The selection and prosecution of all targets is always based on rigorous scrutiny which complies with international humanitarian law, UK rules of engagement and targeting policy.
The hon. Lady also asked me to elaborate on what the Government mean by human control and what level of human control they believe is sufficient, which is also the point behind the question asked by the hon. Member for Newport West (Paul Flynn). Targets will always be positively identified as legitimate military objectives with an appropriate level of command authority and control in their selection and prosecution. The UK is legally obliged to ensure that all weapons and associated equipment that it obtains or plans to acquire or develop comply with the UK’s treaty and other obligations in accordance with international humanitarian law. We do this through legal weapons review. For equipment to be procured, it must satisfy those key legal principles. The policy on the necessity, responsibility and conduct of article 36 reviews will be placed in the Library of the House.
International humanitarian law was designed to withstand future changes in technology. Although we have been discussing matters that are still far beyond the present technology, we believe that the legal system has in mind such future developments. We encourage all states to meet their obligations under international humanitarian law. We believe that the development and use of weapons should always be fully compliant with international law, including the Geneva conventions. We are working closely with the Government of Switzerland and the International Committee of the Red Cross on an initiative to strengthen compliance with international humanitarian law, and one of our primary objectives for the arms trade treaty was that it should put compliance with international humanitarian law at the heart of Governments’ decisions about the legitimate arms trade. We have voiced, and will continue to voice, our concerns with those states that do not live up to their obligations.
As I mentioned earlier, the United Kingdom does not have fully autonomous weapon systems, and the Ministry of Defence’s science and technology programme does not fund research into fully autonomous weapons. No planned offensive systems are to have the capability to prosecute targets without involving a human in the decision-making process.
There are a number of areas where United Kingdom policy is currently more restrictive than the legal freedoms allowed. We consider that to be entirely prudent. However, we cannot predict the future; we cannot know now how this technology will develop. Given the challenging situations in which we expect our armed forces personnel to operate now and in the future, it would be wrong to deny them legitimate and effective capabilities that can help them to achieve their objectives as quickly and safely as possible. We have a responsibility to the people who protect us, and must therefore reserve the right to develop and use technology as it evolves in accordance with established international law. Our current position on the development of these weapons is very clear, and I thank the hon. Member for Llanelli for giving me this opportunity to explain that to the House.
Question put and agreed to.