Debate on the Address

Anne Begg Excerpts

Wednesday 8th May 2013 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

I am glad to be given the opportunity to speak in this debate.

There have been a few comments, particularly from Opposition Members, suggesting it is a rather thin Queen’s Speech, containing not many Bills, but one of its meatier measures is the pensions Bill, which will set up a single-tier state pension. I hope you do not mind, Mr Speaker, if I spend all my time talking about that Bill, partly because my Select Committee, the Work and Pensions Committee, was asked to carry out the pre-legislative scrutiny. It is the one Bill in the Queen’s Speech that is greatly relevant to my Committee’s work, and I understand it will be published tomorrow, so today is my last chance to record some of the Committee’s observations. I understand that the Government’s response to our report will be published as a Command Paper at the end of the week. I suspect that both the Bill and the Command Paper have already gone to the printer, so what I say this afternoon will probably not change the Government’s intention, but it is worth rehearsing some of the arguments that my Committee found important enough for the Government to take into account during the deliberations on the Bill in both Houses.

Why is the Bill so important? Anybody who is under state pension age as of April 2016 will be affected by it. The only people who will not be affected by the introduction of the single-tier state pension are those who will have already reached their pensionable age. The fact that 2016 is the year in question is a bit of a bone of contention, because when my Committee undertook its scrutiny and asked for evidence from a range of people, including the industry, individuals and anybody who wanted to have a say, we thought that the starting date would be April 2017. When we took oral evidence, including from the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), at the end of our inquiry, we still thought that the implementation date would be April 2017. It came as a bit of a shock, and was a wee bit to our annoyance, that the Chancellor announced in the Budget that the implementation date was to come forward a year to April 2016.

We interrogated the Minister thoroughly about whether even April 2017 was an achievable time scale or would slip, because we thought it was a pretty tight time scale in which to implement the changes. It therefore came as a bit of a shock to discover that the Government hoped to do it a year sooner. We had not been in a position to ask the industry and employers, in particular, whether they would be ready to implement the changes in 2016.

Notwithstanding the fact that we generally welcome the introduction of a single-tier state pension, it is inevitable and obvious that the Government have continued to roll out auto-enrolment, for which they should be commended. Given that more and more people will have their own second-tier occupational pension, some kind of reform of the first-tier basic state pension has become almost imperative. However, it will not be easy to get from the extremely complicated and convoluted pensions landscape of today, which has a second tier through the state earnings-related pension scheme or the state second pension as well as occupational pensions, to something straightforward and simple. That is what the Government are attempting to do in the pensions Bill.

As the Government have brought forward the implementation date by a year, the Committee thinks it is even more important—we thought it was important anyway—that a proper impact assessment of the changes is done sooner rather than later. We hope that when the Government publish their response to our report at the end of this week, there will be a promise to that effect.

Different sectors will be affected differently, and some groups will inevitably lose out. In any major change there are bound to be winners and losers, but it is not yet clear who they will be under these changes. I hope that a further impact assessment will be performed because we need to know how the changes will impact on individuals, the pensions industry, and particularly employers.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

May I record my appreciation of the work done by the Work and Pensions Committee in scrutinising our Bill on a compressed timetable? We will publish a new impact assessment on Friday alongside the Bill, and a response to the Committee. I assure the hon. Lady that the Bill will be amended in the light of her Committee’s recommendations.

[Dame Anne Begg]

I am delighted to hear that and perhaps we will come back to the Bill if it is not amended enough.

We welcome the single-tier pension because it will generally mean more state pension for those who have the least. Groups that have lost out in the past with regard to the state pension will benefit—they will generally be women, carers, people with broken work records, and those such as the self-employed who have been unable to build up any kind of second state pension. They will see the immediate benefits of the introduction of this system.

There will, however, be those who lose out, and one main change will affect those who have already made decisions about their retirement. At the moment, someone can qualify for a full state pension after 30 years of national insurance contributions. The Bill increases that to 35 years, but there is already a group of people who have decided to retire although they have not reached pensionable age. They will not necessarily be in a position to build up 35 years of national insurance contributions before they reach the new single-tier pension. The Committee makes recommendations about buying back national insurance years and contributions, but a huge communications job will be necessary to ensure that people are aware that the number of qualifying years has now changed. I will say more about communications in a minute.

It was interesting that the Minister went on the airwaves earlier this week with regard to one group of people who will definitely lose out—women who get only a pension derived from their husband’s contributions. I am not sure why the Minister spoke about that in terms of the wives of expats, but it was possibly because a large number of those who will be affected by this measure live abroad. The measure will, of course, also affect women in this country. That seems to have come as a complete surprise to many and perhaps explains why a lot of people think they will be better off under the new system when in fact they will not because their spouse will not qualify for any of the new derived rights. Basically, what used to be known as the married woman’s allowance is going for everyone.

The Committee has a recommendation for the Government:

“We welcome the Government’s sensible transitional solution to the potential adverse impact on employed women who chose to pay reduced NI contributions under the Reduced Rate Election—”.

That was often called the small stamp or the married woman’s stamp. It was a long-running sore that had never been cured, so good on the Government because it has now been solved. They have come up with a transitional arrangement that will allow women who paid the small stamp to get full credits and qualify for the single-tier extension.

That does not apply, however, to those who will get nothing as a result of the abolition of their derived rights. The Committee report states:

“We believe that it should also be possible to find a solution for another small group of women: those who did not build up their own NI record because they had a legitimate expectation that they would be able to rely on their husband’s contributions to give them entitlement to a Basic State Pension. One option might be that women in this position who are within 15 years of State Pension Age should be able to retain this right. We recommend that the Government assesses and publishes the cost of providing this option for the relatively small number of women affected. We believe that, for those further from retirement, there is sufficient time for them to plan on the basis of the new rules.”

One reason we chose the period of 15 years from retirement was that it had to be more than 10 years. The Bill says seven or 10 years, but the Committee recommends that it should state anything up to 10 years, because people will probably need to have 10 years’ worth of contributions before they get any state pension—they will get nothing for less than 10 years’ worth of contributions. The Committee believes that people within 15 years of retirement with no national insurance contribution, who would have expected to get their pension through their spouse, should be protected, and that there should be transitional arrangements for them. Anyone further away can make up some of the shortfall—not all of it—in the intervening time.

[David T. C. Davies (Monmouth) (Con)]

I am grateful to the hon. Lady for giving way and for the reasonable way in which she makes her points. Without trying to jump ahead, what does she make of suggestions that the Government will prevent spouses who have never set foot in the UK from receiving a state pension? I suspect most Government Members fully support those proposals, but does she support them?

[Dame Anne Begg]

The Committee did not say that we were against the abolition of derived rights in principle for future pensioners. We accept the Government’s argument that people should have a state pension in their own right, and that they should accrue their own credits to get it. The consequence is that there will be no married woman’s allowance in future. The problem I have addressed is how we get from the current position to that one without being unfair on the group of women who are within 15 years of reaching their pensionable age. As the Bill stands—we hope it might change by tomorrow—that group of women will get nothing from April 2016. The Committee believes that that is a particularly harsh cliff edge. We have no problems with what happens in future. Because women work or because of changes made by the previous Government in how national insurance can be credited for caring—not only for children, but for disabled adults or elderly relatives—women are more likely to have credits towards their own pension, which previous generations did not have. We accept that the world and society have changed and that, as a result, women who have not been in this country and who have not been in a position to build up credits will not get a pension in the long run.

The Government face a problem in getting over to people exactly what the pensions Bill means. They have concentrated on saying that the new arrangements are much simpler and easier to understand, which is understandable. They have said, “The new single-tier pension will be £144, and that’s it. That’s all you need to know.” However, as a result of that simplification of the message, people have got the wrong end of the stick with regard to what it means in their individual cases. That is why it is crucial that the Government think again on a clear communication strategy. That should start as soon as possible, and not wait until the Bill has become an Act of Parliament. In anything to do with pensions, planning is so long term that people have to be sure about what they may expect. If things are going to change, people have to know they are going to change. That is especially true of the group of women born in 1952 and 1953, as they have suffered a double whammy with the increase in the state pension age. Many of them are worried that they will lose out, but they may not. The point is that they do not know, and the Government have not been able to give them enough information or explain what will happen.

This week I got a letter from a lady who was convinced that she will get only £144 a week because she will reach pension age after April 2016. She has paid SERPS all her life and she is convinced that the Government will steal her SERPS from her. She does not know that she will get whichever is higher—SERPS or the single-tier pension. One gentleman thinks that it is really unfair that he has paid SERPS all his life, but will get only £144, whereas his next-door neighbour, who was contracted out and gets an occupational pension—and has been paying less national insurance—will also get £144, but of course that is not true. The person who has been contracted out will lose out, depending how the calculation goes. The calculation is a complicated one and the headline message has continued to be that everyone will get £144 for their state pension, so many people think that the introduction of the new scheme is unfair.

I have to say that initially some people who had already reached pension age were keen to get on to the new system until they realised that they would not necessarily be much better off. They are not quite so keen now to get on to the single-tier pension. It is worth pointing out that the Govt are doing this only because it is cost-neutral. The Treasury does not have huge extra wads of money sitting around somewhere to pay to people who reach pension age after April 2016. The worry of many women born in 1952 and 1953 is that they would have qualified for pension credit anyway.

The Committee was concerned that the single-tier pension was being set only £1 above pension credit levels. We thought that the Bill should include a provision that would always ensure that the single-tier pension would be above the level of pension credit. We were disappointed that the gap between pension credit and the single-tier pension was so narrow. It would help to allay some of the fears if there was a guarantee that the single-tier pension would always be above the basic level.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

My hon. Friend has always been a great champion of ordinary working people. Will she join me in urging Ministers in the Department for Business, Innovation and Skills to investigate why Tesco proposes to reduce the terms and conditions of staff by a third, in transferring them from distribution centres that are closing in Harlow and Weybridge and moving them to new sites in Barking and Dagenham at wages lower by £7,000 to £12,000? Surely Ministers should use their considerable influence to urge Tesco to think again.

[Dame Anne Begg]

I am sure the Minister heard my hon. Friend’s plea with regard to Tesco. There is still a concern that some employers might take the introduction of auto-enrolment as an opportunity to top-slice what they would be paying into a pension fund, as part of auto-enrolment, off the salary they are already paying. There does not seem to be any evidence of that, but perhaps some of what my hon. Friend talked about is the restructuring by some big companies with high employee turnover that are maybe looking to find a way of cutting what they pay. There is no doubt that, with the introduction of auto-enrolment and the pension, the single-tier pension was inevitable. It is the right thing to do, but, as with anything this complex that affects so many people, the Government have to ensure that they get it right. If they get it wrong, there will be an awful lot of angry people out there. I am sure the Minister is listening.