State Pension Age (Women)

Debate between Alison McGovern and Steve Webb

Wednesday 11th May 2011 Westminster Hall

[Steve Webb]

I suspect that the hon. Lady will not benefit from our proposals, as I imagine that she would have received a full basic state pension anyway, whereas the proposals will help some women who would not have received it. By being employed here, she is also contracted out of SERPS, resulting in a deduction from the £140. I do not actually think that she would benefit.

I do not dispute for a second that that set of women will be affected by the changes, but the pension that they will get under our proposals will be significantly better on average than that received, for example, by women who retired a few years earlier. We can do all sorts of comparisons between this group and that group. Some things will be better for some and some will be worse. What I am saying is that several hon. Members have said, “You used to campaign for women’s pensions, but you don’t care any more,” but I have spent all my time as a Minister working on proposals that will benefit women pensioners specifically.

[Alison McGovern]

Will the Minister answer a specific point? He made it clear that the reason why he felt compelled to introduce further changes was that what he inherited did not meet the terms of the Turner review. The Turner review advised allowing people 15 years to plan for changes, but women in our constituencies have had much less time than that—barely five years—to plan. That is not fair. Will he explain why his Government are doing that to women in our constituencies?

[Steve Webb]

The things that Turner recommended are not consistent with each other. We cannot, for example, have a consistent percentage of income during life in retirement and give 15 years’ notice at the same time, because longevity is increasing much faster than that. Something somewhere has to give.

One point that has been missing during this debate—the only time that it was mentioned was when an hon. Member quoted me from last week’s debate—is that if we delay till 2020, as the hon. Member for Leeds West (Rachel Reeves) proposed, we will have to find £10 billion. My hon. Friend the Member for Argyll and Bute (Mr Reid) raised an important point, and he is analytically correct: that does not help us in the comprehensive spending review period or help the long-term structural deficit, because the age would have been 66 anyway. However, it does do one thing: it takes £30 billion—or rather, £10 billion; the whole change amounts to £30 billion, but the difference between the two of us is £10 billion—off the national debt. As he knows, servicing the national debt is one of the most crippling things that this Government must do. That is why such difficult decisions must be made.

Our changes will take £30 billion off the national debt. I do not know what the interest rate on the national debt is, but let us say 5% for the sake of round numbers. That is just to make the numbers add up; I do not suppose for a minute that it is 5%. That is £1.5 billion extra every year to spend on services or whatever rather than on the national debt. I think that that would be the hon. Lady’s preferred solution.

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[Steve Webb]

That is not what the previous Government did. We would love to be able to say to people who are 40 or 45 years old, “This will be your pension age.” However, if we said that to 45-year-olds, who have another 20 years or more before they retire, and another 20 to 25 years of life in retirement, we would be locking in what we know about longevity now for pensions that we will still be paying in 50 years’ time. That is just not viable.

[Alison McGovern]

Will the Minister give way?

[Steve Webb]

In a moment. The pace of improvement in longevity is breathtaking. Between 2004 and 2008—the longevity projections of 2004 are, I think, what the previous Government’s legislation was based on, and those of 2008 are what we have now—life expectancy at pension age increased by well over a year in just four years. It is almost like a runaway train. We can always say, “Let’s wait another decade,” but one of the problems is that there is a trade-off, because, as I have said, what has been missing from this debate is the people who have to pay.

Delaying for 10 years, which is what I think the hon. Member for Leeds West is suggesting, does not mean a free lunch. It would mean a £10 billion national insurance hit on today’s workers and today’s firms. If she were wearing another hat, the hon. Lady would be saying, “The recovery is fragile and we need to do more for jobs and to boost the economy,” but what she is saying is that we should levy another £10 billion of national insurance on today’s workers, including low-paid women who do not have much pension, and today’s firms, which may have to lay off people who will not then be able to build up decent pensions. There will be no free lunch if we delay.

[Steve Webb]

There is a queue. I shall give way to the hon. Member for Wirral South first.

[Alison McGovern]

If, as figures last week suggested, the Government fail to meet their own target to balance the books over the course of this Parliament and we still have a deficit for which the Government have not planned in 2015-16, will we have more pensions Bills to push people’s pensions further back in order to incorporate what the Minister has said about being fair to those who are paying now?

[Steve Webb]

We have made it clear that the age-66 changes are in the present Pensions Bill, which will be legislated for long before the end of this Parliament. We are also consulting in the Green Paper on a systematic mechanism for going beyond 66 that takes account of all the factors that we have talked about. That will try to strike a balance between notice, which is important, and fairness for those who bear the cost of increased longevity. The intention—this is something that no previous Government have done—is for the further changes to do it in a more systematic way. The 60 to 65 equalisation was a response to a legal case. The previous Government’s plans for 66, 67 and 68 were not ad hoc exactly, but there was no mechanism in place to respond to subsequent improvement in longevity. What we are trying to do as part of our reforms, which we are consulting on at the moment, is give people the certainty that future Governments will not just pass a law and change things, but that there will be a structure in place and that they will know how it is going to be.