amendment of the law

Debate between Ann McKechin and Jonathan Evans

Monday 24th March 2014 Commons Chamber

[Ann McKechin (Glasgow North) (Lab)]

I welcome the comments made by my hon. Friend the Member for Blyth Valley (Mr Campbell), who recommended a precautionary approach to the proposed changes to pensions. They are huge changes with many unanswered questions. At the weekend, the Chief Secretary to the Treasury was quoted in the papers as saying that intuitively he did not foresee undue harm to the public purse. Rather than his personal rose-tinted view, we need hard facts and well researched analysis to allow Parliament to make an informed decision about the proposals.

Many questions arise, in particular about the level and quality of the financial advice that will be available to people to enable them to make proper decisions. How will pensioners be protected from the scams that my hon. Friend mentioned? If people choose not to take the annuity route, they will require active management of their investment over a prolonged period, at a time when many of them will experience increasing incapacity. It is vital that we have full consultation on the changes, and that any legislation is considered in draft format by the Work and Pensions Committee before it is presented to the House.

[Jonathan Evans]

As the hon. Lady will know, on Thursday the Government published a consultation paper and said that the consultation would be open until June. No doubt she will make her proposal as part of the consultation.

[Ann McKechin]

I welcome the fact that we will have a proper consultation. The depth of it, and the analysis that will be required before people can provide their opinion, will also be vital. I also expect draft legislation to be put before the Work and Pensions Committee to be considered line by line in close detail.

While the Budget focused on pensions, many significant challenges were either ignored completely or—at best—addressed only superficially. To name just a few, they include stagnating incomes; the lack of business investment compared with our international competitors, a matter addressed by the Civitas report published today; high personal debt levels; and a distorted housing market.

The Resolution Foundation’s annual report on living standards, “The State of Living Standards 2014”, points out that

“it has become harder to live a comfortable life on a modest or even typical income in modern Britain”.

The biggest increase in poverty is now among those already in work, trying to make ends meet with average wages consistently falling over the last five years. Before Conservative Members claim that the latest Office for Budget Responsibility figures show that we are coming to the end of that fall in income growth—even though the timeline keeps moving backwards—I should say that the situation is not as positive for a huge swathe of our population. The wage growth figures are based on the CPI index, which excludes housing costs. When the figures are recalibrated on an RPI-adjusted formula, as the Resolution Foundation report shows, the picture is much gloomier. For those on median earnings, there will have been barely any wage growth for more than a decade up to 2018.

Currently, the bounce we are witnessing is based primarily on increased consumer spending and greater levels of personal debt. Scottish Widows reported only last week that there are now 1 million more people than last year who have no savings at all—9 million people. Given the slow to negligible wage growth, that level of spending cannot continue forever. We risk returning to the problems that were at the root of the global collapse in 2008. Putting an extra 17p on the minimum wage rate and having approximately 1 million workers stuck on zero-hours contracts is not the way to increase incomes. That will simply push more people into a debt that will become increasingly unaffordable when interest rates start rising again.

The biggest omission in the Budget is the complete failure to tackle the causes of the housing crisis. Land prices are still far too high in comparison with average incomes and they take money away from our productive economy, yet the Government are perfectly happy to advertise in the Red Book, on page 107, that they forecast house prices to increase by 8.6% in the next year against an inflation rate of 1.8%. You would never guess, Madam Deputy Speaker, that an election was due.

Week after week, I hear from desperate young people, often with young children, about their fruitless search for stable and affordable housing. Last month, I met a young mother with two children who was looking for her fourth private tenancy in as many years. It was not that she wanted to move—either the landlords wanted their houses back to live in or to sell on, or, in the latest case, they had failed to pay their own mortgage. She is currently in overcrowded housing simply to ensure that her eldest child can remain in the same school. She faces a sector with perverse incentives, such as Help to Buy, which in its latest format is not even linked to house building. No attention has been given to reconstructing a rapidly growing but highly fragmented private rental market that could provide greater security of tenure and better service levels. The stubborn failure to boost house building, which is now at pre-war levels, is made worse by the slashing of investment in social housing, with the result that prices are kept high.

The right hon. Member for Mid Sussex (Nicholas Soames) made some very good comments on the rapid changes occurring in the manufacturing sector. If we make the right choices now, we can benefit from the revolution in manufacturing; I agree entirely with his comments. We need to invest in skills, not just for young people but for the existing work force. In too many factories across the land, we will find Jimmy and Johnny aged 69 or 70-plus, because companies have no one younger with the right skill sets. The Government continue to be complacent about the rise in inequality and about wasting talent.