State Pensions: UK Expatriates

Lord Harrington of Watford Excerpts

Thursday 20th April 2017 Commons Chamber

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I hope we would all agree—I know you have been in the Chair for only some of the debate, Madam Deputy Speaker—that we have had an interesting debate. Before I attempt to address the points that have been raised, I would like to thank those who have spoken. In particular, I thank my hon. Friend the Member for North Thanet (Sir Roger Gale) and the hon. Member for—I have been practising this for quite a long time—Ross, Skye and Lochaber (Ian Blackford) for securing the debate, which has been wide and varied. It concerns an important subject, which I do not take lightly.

The hon. Gentleman was very kind in the comments he made about me, and I would like to say something about the way he has conducted himself while I have been Pensions Minister. I have disagreed with him and the Labour party spokesman, the hon. Member for Stockton North (Alex Cunningham), on a lot of things, but we have also agreed on a lot of things. However, when we have disagreed, we have discussed things properly in this Chamber, in Committee and personally, and I wish all Government and Opposition relationships were like that.

On this particular subject, however, I have to say that I disagree with a lot of things that the hon. Member for Ross, Skye and Lochaber and my hon. Friend the Member for Worthing West (Sir Peter Bottomley) have said.

[Sir Peter Bottomley]

I know that that remark may have been addressed to just some of the things we said, but one of the things we said was that what is happening at the moment is not fair, not logical and not right. Is the Minister trying to say that it is fair, logical and right?

[Richard Harrington]

Well, it is about the subjectivity of those words, if I may say so. I will try to address some of the points he made, but I cannot successfully answer his cricket team question. However, given that our civil servants will probably have less to do over the next few weeks than they have had to do over the last few weeks, I will formally write to him. As a child, with “Wisden” and everything else, I would probably have been able to answer his question myself, but I am afraid I cannot do that now.

As I was about to say before I was hit for six by that intervention, the United Kingdom state pension is payable worldwide, regardless of the recipient’s country of residence or their nationality. I say that formally on the record because were I a member of the public watching the broadcast of this debate or reading it in Hansard, I could quite easily get the impression, when we talk about scandals and things like that, that people were leaving the country and not getting their pension at all. The state pension is paid to people who are entitled to it when they leave the country, but increased—“uprated” is the expression in this context—abroad every year only when the recipient is in certain areas: in the European economic area, Switzerland, or a country with which the UK has a specific reciprocal agreement that allows for uprating. This is a long-standing policy that has remained consistent for about 70 years, and, as has been said, it has been the policy of consecutive Governments of all persuasions.

I recognise that this subject arouses strong opinions, and some of the language used is very concerning. Please do not think, Madam Deputy Speaker, that I think that the language used has been improper in any way, but it is very strong language about people suffering hardship and so on.

[Ian Blackford]

Does the Minister appreciate that there is clear evidence that people who have gone to live abroad have come back because they do not feel they can manage on a frozen pension? There is clear evidence that people feel that they have been affected quite significantly by that situation.

[Richard Harrington]

I do not disagree with that, but people also return for many other reasons. When people decide to emigrate and live abroad, they do it for a number of reasons. They take into consideration the cost of living generally and the cost of property, or food, drink and entertainment—whatever it may be—and the pension is part of that. Similarly, when they decide to return, part of the reason might be whether their pension increases by the rate of inflation, but I suspect that there are many other reasons as well—for example, ill health, getting older, and family issues. I could not dispute what the hon. Gentleman said—in fact, I would never try to dispute what he says—but it is part of the picture and it is not right just to pick out that particular point.

I felt it my duty when taking on this portfolio to speak to as many people as possible. In November last year, I attended a meeting at Lancaster House—a very grand venue—where there were leaders from the overseas territories. It was a big Joint Ministerial Council. I met many of the people mentioned by my hon. Friend the Member for North Thanet, from Montserrat, the Falkland Islands and elsewhere. They were very impassioned people who gave a series of speeches that were basically saying the same thing. That has been reflected in what has been said today. Several hon. Members, including my hon. Friend, referred to people not having parliamentary representation. That point was made strongly by the hon. Member for Leeds North West (Greg Mulholland). I was born and brought up in that constituency, so I accept what he said about its minority communities; I was a descendant of one of them. I could only say to the people at the conference that I was there to listen. It seemed from what they told me that Ministers of all persuasions have politely declined such an invitation before. I know that this is a very impassioned debate. People do feel very strongly about it, and it is not something that I take lightly.

Several contributors, including my hon. Friend, said that because all workers pay their national insurance contributions towards their state pension there is a moral right that they should receive an uprated state pension wherever they live. Moral rights are very subjective, but I know exactly what was meant. However, the rate of contribution paid has never earned entitlement to the indexation of pensions payable abroad. That reflects the fact that the scheme overall is primarily designed for those living in the UK, and it operates on a pay-as-you-go basis. Contributions paid into the fund in any one year contribute to the expenditure in that year. That is the way that public finance works. The contributions provide a foundation for calculating the benefits, but they do not pay for those benefits.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) mentioned the national insurance fund. It is convenient to bring this up in debates, but in reality there is no surplus in the national insurance fund because it is all used to pay contributory benefits. It is basically a system of public accounting. The £16 billion that was mentioned is two months’ expenditure. It is just an advisory level for the fund suggested by the Government Actuary because it is a prudent working balance. It is not like having a bank account where we can say, “Oh, we’ve got a surplus—let’s use it.”

[Ian Blackford]

We all understand and accept that it is a pay-as-you-go system, but that does not detract from the fact that when someone pays national insurance, it is on that basis that they are earning entitlement from that mechanism. As for the national insurance fund, the surplus is actually £30 billion, and it needs to have—the Minister is right—two months’ cashflow within it, which is £16 billion. So the point remains the same—the money is there to do this.

[Richard Harrington]

I think, as we do on many things, the hon. Gentleman and I will have to agree to disagree on that, but we both fully understand each other’s arguments, I am sure.

The point about cost has been made very coherently. The Government generally take the view, of course, that the first priority is to ensure that older people in this country have an adequate income in retirement. Uprating all state pension payments in full to the rate currently paid in the UK, regardless of the recipient’s country of residence, would cost about an extra £500 million a year, increasing significantly over time. While that may not have been specifically argued for in this debate, people in favour of the motion are talking about a moral argument, not a legal argument. Many of us are here because we believe in moral arguments generally in our political lives, and I hope in our personal lives as well. That is why many of us do the job, so please do not think that I am pooh-poohing the idea of a moral argument. However, both systems of calculating this could be seen as being based on a moral argument.

This debate has been predominantly about so-called partial uprating. I understand this to mean not to uprate fully but to uprate the current level of state pension that the person is receiving through the triple lock or equivalent from a future date, and only pay uprating going forward with no arrears. I had to look at that very carefully when I saw that we were having this debate, because partial uprating can mean different things in different contexts. It is superficially a very attractive argument to say, “We could do this because it’s a few million pounds a year—tens of millions, not hundreds or billions.” It is not like the cost involved in the case of the WASPI women; the hon. Member for Ross, Skye and Lochaber correctly mentioned that some independent research has been done on that, which I have read very carefully. That would cost billions of pounds, but this is about tens of millions of pounds, which, on the face of it, sounds like small change within the full scale of Government expenditure.

[Alex Cunningham]

Spend the money!

[Richard Harrington]

The hon. Gentleman rarely makes me speechless, but his plea from a sedentary position to spend the money has done so. Perhaps he thinks that I am already Chancellor of the Exchequer; it is nice of him to imply that.

[The Parliamentary Under-Secretary of State for International Development (James Wharton)]

It is only a matter of time.

[Richard Harrington]

Maybe not in this life.

To return to the serious point, on the face of it, tens of millions of pounds does not seem a lot, but the annual costs of the policy would converge with those of full uprating in the medium to long term. That compounds the situation, because if we changed the policy now to either full or partial uprating, in 25 or 30 years, the vast majority of pensioners—they would be new pensioners—would receive pension payments as if they had been uprated for the whole time. Everyone knows that, whichever Government are in power after the election—I think the hon. Member for Leeds North West suggested that they would be of a certain colour, although I may have misunderstood him—resources are scarce, and Governments have to make judgments about how best to use them. That is what government is about.

Although the proposed spend each year might appear to be small, it would soon add up to a much more significant £500 million extra each year on about 500,000 pensioners. That might look to others as though the Government were disproportionately favouring those who have gone abroad. Much of that spending would not in fact increase the money that a poorer pensioner living abroad would receive. In Australia, for example, the age pension is means-tested, with the Australian Exchequer in some cases keeping up to 50%. New Zealand, too, requires people with overseas pensions to claim them; they are then taken into account, and the New Zealand benefit or pension is reduced by the amount of UK pension. In addition, since most people who move abroad to those countries do so before they have reached pensionable age, most would have been able to build up decent pension provision in the country to which they emigrated, if they went when they are younger.

For most people, the decision to move abroad is voluntary; it remains a personal choice dependent on the individual’s circumstances. The Scottish National party spokesperson, the hon. Member for Rutherglen and Hamilton West, said in her summing up that people may not have been aware that they were moving to a country with different pension arrangements. Others have mentioned the line and short distance between Canada and America. However, people who move abroad find out about so many things, including visas; they have to.

[Sir Gerald Howarth (Aldershot) (Con)]

I apologise to you, Madam Deputy Speaker, and to the Minister for not having attended this debate. I had intended to do so, but I had other commitments. As I shall shortly be leaving the House, perhaps I could put on the record my support for our overseas pensioners, who have been badly treated. Many of them have almost been obliged to move abroad for family reasons, so it is not the case that they all made a voluntary choice. In many cases they felt obliged to move to support their families and they feel trapped. They also feel a sense of betrayal.

[Richard Harrington]

I perfectly accept that in some cases people have no practical choice, but many who emigrate decide to do so for a number of reasons, including personal ones. When people move away, pensions are, by and large, part of their calculations, as is the cost of living.

The hon. Member for Ross, Skye and Lochaber was eloquent, as usual, in making his point about uprating the state pensions of people residing in the European economic area and Switzerland. It is a requirement of UK law that those payments be the same as those made in the UK. However, as everyone is aware, the article 50 process is under way, and in accordance with what happened in the referendum and everything that has been discussed in this House, the UK is leaving the European Union. The Prime Minister has made clear that securing reciprocal rights is one of the top priorities. The rights and entitlements that will apply following the UK’s exit, such as those relating to the UK state pension paid to individuals living in member states, are subject to the wider negotiation on our future relationship with the EU. The Government have made it clear that we plan to strike an early agreement on the rights of EU citizens living in the UK and, obviously, vice versa. As the Prime Minister has said, it is in no one’s interests for there to be a cliff edge when we leave the EU, so the current laws and rules will, wherever practicable, continue to apply, to give certainty to individuals and businesses.

[Sir Peter Bottomley]

We understand the limitations on the Minister, and I hope that anything we think will not be taken personally by him or anyone else. I remind him of the Old Age Pensions Bill debate on 10 May 1907, when the Member moving the Bill’s Second Reading said that Chancellors always want to stop people getting “Money! money! money!” My hon. Friend has said that we are now likely to make decisions that will affect hundreds of millions of people, so surely now is the time make a small change for fewer than 500,000 people. I ask him to commit to revisiting the issue after the election and to looking at it properly.

[Richard Harrington]

I thank my hon. Friend for his intervention. Perhaps he was present during that debate in 1907; I was not, but I look forward to reading about it.

Those who are eligible for a UK state pension can have their pension paid wherever they choose to live. The rules governing the uprating of pensions are straightforward, widely publicised and have been the same for many years. The Government’s position remains consistent with that of every Government for the past 70 years. The annual costs of changing the long-standing policy will soon be an extra £500 million, which the Government believe cannot be justified.

--- Later in debate ---

[Madam Deputy Speaker (Natascha Engel)]

If the Minister would like to respond, he is welcome to do so.

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I will have a go at responding to the hon. Gentleman’s question. I do not know the answer to it, but I will find out straight away and communicate it to him. I suspect that this is a matter that is decided by the civil service based on previous protocols about purdah and so on, but I do not feel experienced enough to give him the answer that he wants and deserves.

[Sir Peter Bottomley (Worthing West) (Con)]

Further to that point of order, Madam Deputy Speaker. The Minister has been very clear and helpful. If the practice is for such helplines, which are for our constituents rather than for us, to be closed down before Parliament has stopped sitting—before we stop being Members of Parliament—may I suggest, through you, that those who are listening should change the practice and make sure that that happens when Parliament is dissolved, and not simply because an election has been called?

[Madam Deputy Speaker]

If the Minister would like to respond to that, it would be very helpful.

[Richard Harrington]

I have taken on board the hon. Lady’s point.

[Madam Deputy Speaker]

I thank all hon. Members for their points of order, and I thank the hon. Member for Stockton North (Alex Cunningham) for raising this point. It is important, and I am grateful to the Minister for having responded so positively to it. We will leave it there for now.