Baroness Drake
Main Page: Baroness Drake (Labour - Life peer)Department Debates - View all Baroness Drake's debates with the Department for Work and Pensions
(10 years, 11 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Drake (Lab)
I thank the Minister for taking the opportunity to address some of the issues we were concerned about—we ran out of time, in effect—in our previous Committee session. My major concern in this debate has been the sufficiency of protections when a statutory override is given or is exercised. It sets a precedent and I am sure that this will not be the last statutory override we are going to see in the pensions arena over the next three or four years, given some of the agenda items we know are coming our way.
I am genuinely concerned that what is proposed or what we can see is weak. The Minister said that he expected that the override would be used in exceptional circumstances. To an extent that is true, because if the sponsoring employer does not need, as a requirement of the scheme, to get trustee consent, there is no need for a statutory override. I had conceded that point in my opening comment. Of course, there will be a need for statutory overrides where the scheme’s rules do not allow what is being proposed on the recoup arrangements, or where trustee agreement is required and the trustees do not want to give their consent.
There are expressions of hope that somehow this consultation will take place and everybody will act appropriately and only in extremis—having gone through due process but finding barriers in the way—will the employer be able to invoke the statutory override. Of course, the Minister has no idea how employers will behave in practice in individual schemes. One hopes that they will all consult, but some may be in a hurry and some may simply see that they are not required to consult or gain trustee consent. A statutory override is being put in the Bill without, as far as I can see, an explicit requirement to consult—merely an expression of hope from the Government that it will take place. That worries me deeply.
The other area about which I remain concerned is the fact that the regulations will still be subject to a negative procedure. Again, we face key issues about the value of what the employer can recoup, and this would be setting a precedent on a significant issue. The Minister conceded that these are complex issues, and that is right. In multi-employer schemes, if the decision is taken to amend the protected order status for certain employees if there are shared cost arrangements, one can see the multiplicity and complexities that could arise. They would arise anyway, but they will arise.
We have no clear indication from the Government about how they will value what it is that can be recouped. As I asked when speaking the other day, is it the net or the gross loss? Will it be crystallised in terms of the 2016 value of the rebate? These are quite significant issues. On one level, setting out some actuarial assumptions in the regulations may be a good thing, although we would perhaps want to see the actuarial assumptions first. But we have no way of seeing them and when we do, the regulation will be subject to the negative procedure.
I know that the Minister said that there would be a full consultative exercise. Consultative exercises are important and I do not wish to detract from the importance of their taking place, but we all know that they can be dominated by organisations that have the capacity, the means and the interest to dominate them. I just hope that in the consultation exercise fair regard is given to the views of employees and trustees.
Baroness Drake
I was drawing to a close. I have a final point on the negative procedure. In response to my suggestion that there could possibly be time limits on consultation in order to meet the spirit of what I aspired to achieve before the constraint of April 2016, the Minister said that seemed too prescriptive and asked why one would want to put constraints on the consultative process. It seemed rather contradictory to say that one cannot go for negative procedures because affirmative procedures take too long and could push up against the efficient way in which employers could adjust in time for April 2016. If the balance were a trade-off between defined periods or timetabled periods of consultation with the employers and the opportunity to deal with the regulation by affirmative procedures, it would be fair.
Lord Browne of Ladyton (Lab)
Like my noble friends, I am grateful to the Minister for engaging more generally with the issues of statutory override in his remarks in support of Amendment 44. That has been of some assistance to the Committee. It is obvious from the engagement he has already had with my noble friends that they believe that to be the case. I, too, wish to be associated with the words of thanks to the Minister for the offers of further briefing and engagement. They will be taken up.
Before I take advantage of his generosity to ask him a few additional questions, one of the advantages of anticipating that he would do this—because he was gracious enough to indicate that he was prepared to do it—was that I was able to read the official record of the previous debate we had in Committee, and there are one or two things that occurred to me that he could expand upon.
Before I turn to that, I shall deal somewhat formally with government Amendment 44, which I accept is a consequential amendment. I have to say—I do not expect the Minister to engage very fully with this—that reading the statutory provision which he seeks to amend, the section of the Pensions Act 2004, I am slightly at a loss to understand why the amendment is necessary. It makes the precise provision more elegant, but I am not sure that it changes much of the content. It is genuinely consequential. Section 258(2)(c)(ii) already contains these words, although they are further qualified.
In the more general debate I shall try to be complementary to the points already made and not go back over the issues that my noble friends have addressed, although I have some notes here which are similar to some of their observations. I turn first to the issue of whether it is appropriate to deal with the regulations anticipated by these provisions by affirmative procedure in your Lordships’ House and in the House of Commons, or by negative procedure, and consequently whether it would be appropriate to deal with the limited issue of the extension of the period by negative or affirmative procedure. It seems to me, first, that it is improbable in the extreme, given the way the Minister has described these regulations in terms of their comprehensive nature, their complexity, and the difficulty associated with understanding them, that they will not be debated in some form in both Houses. It is unlikely that there will not be a desire to engage with some aspects of them to—at the very least—achieve some further clarification.
My second point to the Minister is that it seems to be counterproductive to the argument that negative procedure is appropriate to go to such length to explain just how complicated the regulations are. It seems to me that the more complicated the regulations are, and the more the primary legislation has to be supplemented by complicated regulations, the weaker the argument for doing this by negative procedure becomes. I suspect that that is why, reflecting on the Minister’s words, he referred again to the issue of parliamentary time. With respect to the Minister, getting parliamentary time in our current Parliament is the weakest argument possible.
I am struck by the number of times the House of Commons rises before what I consider to be its normal rising time. I do not know whether that is a function of the fact that the coalition Government have run out of agreement about what they can legislate on —that may happen; it is a perfectly natural thing with coalition government—but I am also struck by how much time is spent in the House of Commons debating what is now called “Members’ Business”. As far as your Lordships’ House is concerned, I am struck by the fact that we are all expecting—and I think we will see—that an extraordinary amount of time will be found to debate a Private Member’s Bill over the coming weeks.
If regulations are debated in the normal way, it seems to indicate an expectation that there will be no great competition for parliamentary time between now and the general election. In fact, I go so far as to suggest that the business managers of the respective Houses may have difficulty in filling the time they already have, so I do not think the argument about parliamentary time is all that strong. If the Minister is to continue to promote the idea that these regulations—complicated, difficult, comprehensive and substantial as they are—are still best dealt with by negative procedure, then, with all due respect, I think he will need better arguments than those he has already deployed.
Secondly, perhaps I may take advantage of the opportunity to debate these issues and ask the Minister to give some clarification about information that he gave us when we last debated these issues about the effect that the abolition of contracting out will have on people’s expectations. Early on in his contribution to our last Grand Committee, he came to engage with the issue of trustees and pension funds and their responsibilities. I will quote him fully, not in short. He stated:
“Referring to those private sector employees who are contracted out immediately before implementation, who reach state pension age in the first decade of single tier, around 75% of them will receive enough extra state pension to offset both the increase in national insurance contributions that they will pay over the rest of their working lives and any potential adjustments to their occupational pension schemes”.—[Official Report, 8/1/24; cols. GC 430–431.]
That is an argument that was deployed by the Pensions Minister in the House of Commons, too, when addressing that issue. It is clearly designed to allay, and does allay, the concerns of a significant number of people about the denial of their expectations. However, in col. GC 433, when the Minister was discussing the issue of protected persons under statutory override, he deployed a similar but different argument. I shall quote it to him, because I am interested in the difference, and what it actually means. He said:
“We also have to factor in that the design of the single tier reforms means that those with a long history of contracting out will in most cases build up significantly more state pension. Around 75% of people in the private sector who pay higher national insurance contributions and reach state pension age during the first two decades following implementation will receive enough extra state pension over their retirement to counterbalance the increase in national insurance contributions”.
He went on to say:
“This is a very complicated issue with many different and conflicting interests”.—[Official Report, 8/1/14; col. GC 433.]
But we know that.
Were these different ways of saying the same thing, or were they different things—and, if so, what is the difference? Why does he say “two decades” in one case and one decade in the other, and why is there a reference only to counterbalancing the increase in national insurance contributions in one while there is a reference to eventual benefits in the other? It may not be easy for the Minister to answer that immediately, and I apologise if it is not, but I would be interested to know whether he intended those two things to mean the same—and, if not, why there is a difference.
On the issue of protected persons, in col. GC 433, the Minister addressed my question about the defeated expectation that the decision that the Government promised following the consultation would be made clear to Parliament. He told the Committee that a decision following the consultation about protected persons would be made as soon as possible, and that when it was made, Parliament would be informed. But what he did not say was important. The Pensions Minister in the other place said at one stage that it would be done in the summer of 2013—and we know that that is now long gone. No matter how generous one might be with Governments who use seasons to give an indication as to when something might be done—and having been a Minister myself I know how wise it is to do that sometimes—in no one’s view are we still in the summer of 2013.
The Pensions Minister gave both the Standing Committee and the whole House of Commons to believe that, at the very worst, a decision may be made when the Bill was still before Parliament. That is not a phrase the Minister used. Was that deliberate or can he repeat the phrase? It is important for the 60,000 people who consider themselves to be protected persons. Their expectation is that the decision and therefore some engagement with the consequences of that decision will still be a live issue while the Bill is still before Parliament.
Lord Freud
I am grateful to noble Lords for their observations. I shall first take the query from the noble Lord, Lord Browne, about whether Amendment 44 is needed. I am conscious of his forensic skills in looking at particular bits of legislation in this area, and I therefore take his warning seriously. What it does is to remove a defunct reference on which legislation is worded. The default test is to meet the statutory standard. Actually, the legislation could work without this particular amendment, but it is confusing to those applying legislation and would leave an out-of-date reference on the statute book. The noble Lord, as usual, has picked up something quite clever.
He also picked up another clever thing: that I mis-spoke about my decades. I should have said two decades in each case, so I am pleased to correct that, and impressed that I was picked up.
On the negative procedure issue that the noble Lords, Lord Whitty and Lord Browne, and the noble Baroness, Lady Drake, mentioned, at this stage I do not have anything to add except to say that we are genuinely concerned about timing if the affirmative procedure is used. But that may be something we have a chance to discuss in our briefing ahead of Report.
On the question from the noble Baroness, Lady Drake, about the override being net or gross, as I mentioned in my letter on Friday, the intention is that the current rebate rate of 3.4% will be used for these calculations. Without reform, this rebate would change over time, but it is impossible to predict what would happen, and therefore creating a net value for the rebate in future years would be impractical.
Baroness Drake
I shall desist from arguing that point, as we are going to have a meeting, but it is such a wrong approach because it is an unexpected premium for employers. You can have net at the employer level and at the aggregate level—what employers would have to pay taking into account taxation and tax relief—as well as how you set the figure for NI overall. Individual employers would have been able to set the cost of the additional NI against their tax liabilities.
Baroness Drake
We are going to have another meeting, but the effect of what the Minister has just said worries me. Employers will be allowed to recoup the value that is crystallised in 2016, but everyone knows that if there had not been changes the post-2016 value would have gone down. In addition, the employer’s NI charges are an expenditure that can be taken into account and set against tax. If those two elements are not built in, is that not a little unfair in term of the rules for recoupment—a little imbalanced?
Lord Freud
I do not think that I am in a position to say anything further, but we will pick this up later and if we cannot satisfy the noble Baroness at that stage, I will have to write very specifically on that matter and the tax implications.
Baroness Drake
It goes to my point about negative regulations. We just do not get the opportunity to address these issues because they are not drafted.
Lord Freud
I hear the point. Clearly we will be looking at it some more.
On the point made by the noble Lord, Lord Whitty, about whether the override can be used for retrospective changes, the answer is no. That is contained in paragraph 3 of Schedule 14, which prohibits changes that might adversely affect subsisting rights; that is, rights to benefits already accrued.
On the noble Lord’s point about whether this undermines schemes, the override has been introduced precisely so as not to undermine schemes. Employers have told us that without the override, they would close schemes; the override is there to help them find ways of avoiding that.
On the protected persons question from the noble Lord, Lord Browne, I agree that it would be most unusual if the Government were not able to notify Parliament of their decision before the Bill completes its passage.
The noble Lord had a query about the rights of trustees to challenge. They could apply to the courts for direction, because amendments to the rules are not valid if they are beyond limits. Costs fall to the scheme, and ultimately the employer pays.
I hope that I have covered all the issues. Clearly this is an area of some interest and we will be spending more time on it.
Baroness Drake
My Lords, I shall speak to Amendments 52, 55 and 58. I acknowledge that increasing the state pension age consistent with increases in life expectancy is part of delivering a sustainable state pension system. For the regular reviews of the state pension age rules, however, we also need to ensure that a clear and wide range of relevant factors is considered and that there is clear and authoritative public presentation of the evidence to inform that debate, while recognising, of course, that the Government of the day will determine the policy that is brought to Parliament.
Intergenerational fairness requires that each generation should enjoy a roughly similar proportion of adult life in state-supported retirement, and we may well see newer and higher projections for life expectancy in the future which will bring huge challenges to how our society operates. For example, who knows where advances in modern medicine will take us in terms of life and health expectancy? State pension policy clearly has to be robust, in the face of not just increasing life expectancy but major uncertainty about how fast that increase could proceed. However, I am also concerned that increasing the state pension age should not be seen as the silver bullet for automatically delivering sustainability without considering some of the complexities and collateral consequences which need to be addressed at the same time.
This requires a range of factors to be considered in the periodic review of the state pension age. My noble friend Lady Hollis has clearly identified these factors, and I shall add arguments about why it is important that they are in the Bill. On average, life expectancy is increasing and yes, on average, ageing appears to be healthy, but averages do not tell the whole story. There are major inequalities, as has been articulated. Life expectancy varies significantly by socioeconomic class and while it has risen significantly in all social classes, there are widening absolute inequalities. Lower socioeconomic groups live for fewer years post-retirement, a smaller percentage of which appears to be free of sickness or disability, and they are far more likely to leave the workforce early for health reasons. In part, this reflects differences in key lifestyle predictors of future health.
The key implication is that there may be limits to the feasibility of across-the-board increases in the age of retirement from the workforce, particularly if the increases are more than proportionate to the increase in life expectancy of particular socioeconomic groups. Similarly, for those who are healthy, since the state pension accounts for a larger share of their total retirement income, this suggests that an increase in the state pension age would be most likely to induce lower income workers to work longer and less likely to induce higher income ones.
It is important to understand how trends in life expectancy and health by socioeconomic class will develop in the future. Certainly, figures indicate some significant differences in life expectancy and healthy life expectancy between regions. The recent figures, kindly provided, show that there is a widening gap between local authority areas with the lowest and highest life expectancies at age 65. Of course, one can speculate on the causes of these differences—major industrial shocks, unemployment rates, specific health problems and cultural and behavioural issues. However, if one looks below age 65, lower socioeconomic groups are also not participating equally in the significant reductions in death rates between the ages of 45 and 65.
An optimist could argue that the major occupational sources of ill health that played a large role in previous generations, such as coal mining or heavy industry, and whose impacts can still be seen in the regional incidence of unemployment, will decline in importance. Conversely, a pessimist would stress that the increasing divergence of some lifestyle factors, continuing differences in working conditions and new labour market features may offset some of these positive developments. The issue therefore is whether policy levers can be deployed to mitigate the disproportionate impact of a rising state pension age on lower socioeconomic groups.
Variable state pension ages may not be an appropriate response for addressing the significant differences in morbidity, life expectancy and early departure from the labour market. However, where differences exist a response is needed. Simply ignoring them is, in itself, a default public policy response with potentially negative consequences for many people. Measures need to target reducing health inequalities but the welfare system needs also to be sensitive, efficient and protective in supporting those for whom working longer is problematic because of their class and health. If these inequalities persist or widen should, for example, the age of eligibility for pension credit be lower than that for the state pension itself?
The UK state pension system, even with these reforms, will not be particularly generous in relative terms. Its focus is poverty prevention rather than an income replacement system. The value of the single tier will be only a little above the guaranteed credit. Yes, it will be the foundation for private saving to enable people to achieve a reasonable level of replacement income but it will be some years before auto-enrolment delivers the necessary savings levels. We are still only staging and phasing its introduction. Meanwhile, lower socioeconomic groups will still be facing a greater likelihood of ill health and earlier exit from the labour market as they get older.
Understanding the extent to which increases in life expectancy are accompanied by increases in healthy life expectancy, monitoring inequalities between socioeconomic classes and regions and identifying the implications for policies associated with the evolving policy for state pension ages will remain an important part of any review. The key responses should include a strong focus on health service and occupational health policies and on the measures to reduce the life expectancy gaps and to compress morbidity. The long-term aim must be to narrow health inequalities rather than treating them as permanent barriers. We should aspire, for example, for the men in Glasgow and Liverpool to have as good an average life expectancy as the men in Kensington and Chelsea, or even those in East Dunbartonshire. Policy needs to be designed to be both equitable and affordable in the face of whatever rise in life expectancy actually occurs. Higher pension ages are essential but are not in themselves a sufficient response.
Increasing labour market participation by older workers is, equally, an integral part of sustainability. Analysis of trends in average age of retiring from the labour market and in employment rates among older people by gender, region, occupation and socioeconomic class is required to understand the extent to which increases in state pension age are accompanied by increases in employment. Unless increases in state pension age are accompanied by higher labour market participation by older workers, then the effective contribution of those pension ages to public expenditure pressures will be weakened, GDP will be lower and other benefit expenditure could well increase. However, major inequalities in life expectancy and health may make across-the-board increases in retirement ages unfeasible unless these differences disappear over time.
The policy of raising the state pension age needs to be accompanied by measures that facilitate higher labour market participation by older workers, because barriers certainly exist. Take, for example, the position of some women. Although women have a higher average life expectancy than men, the figures also reveal that the gap between them is narrowing. The gap between women in higher and lower socioeconomic classes is increasing and women’s participation in the labour market has reached a plateau, partly because of care requirements and the cost of care provision, particularly childcare. Older women are increasingly looking after their elderly parents or grandchildren. An older woman’s earlier age of retirement from the labour force may, for example, be the price paid so that her younger daughter or son can be economically active.
The cultural biases against older workers are often embedded in personnel practices and employers’ assumptions. Take training as an exemplar. The evidence suggests that employer-provided training is skewed towards younger workers, with an assumption that some workers are too old to train. Yet the experience of workers in their 50s plays an important role because beyond the age of 65, participation in the labour market is driven by participation up to the age of 65. Once older people exit the workforce, they are much less likely to work again. The challenges facing business in embracing older workers will be very real. I recall quite vividly 10 years ago the CBI, anxious about that challenge, simultaneously arguing for an increase in the state pension age to 70 but a default retirement age under discrimination law of nearer 65. I described it at the time as a five-year gap between loss of employment rights and receipt of pension. The debate has moved on but that indicates what tensions will be there as industry responds to increased longevity and increased state pension age.
The extent to which increases in state pension age are accompanied by increases in labour market participation will inform government of what initiatives they need to take, be it tackling discriminatory cultures, financial incentives for later retirement, incentives to employers to employ and train older workers, flexible employment practices, cultural attitudes and health policies and changes to welfare policy and welfare payments themselves. Whatever decisions are made in response to the periodic reviews of state pension age, and however much desirable continuity in policy can be achieved, delivering both a fair and sustainable pension policy and level of public expenditure will and should be subject to fully informed debate continuing over time, in the light of new information on a series of relevant factors becoming clearly available and systematically considered.
Baroness Drake
Baroness Drake
My Lords, I shall speak also to Amendment 54. Amendments 53 and 54 are tabled in my name and that of my noble friend Lady Hollis. They provide for a report on the periodic review of the rules about pensionable age, having regard to life expectancy and other factors, to be prepared by an independent commission.
There is an important role for an independent commission, while recognising that the Government of the day would determine the policy that is brought to Parliament. The demographic challenge poses unavoidable choices, which are partly for society to make and partly for individuals. However, for those choices to be rational and sustainable, they have to be informed, barriers have to be removed and a broad consensus has to be achieved. One of the useful roles of an independent commission is to present society with those difficult but unavoidable choices. It can spell out the facts and choices clearly and starkly. It can identify the complexities. That process will also assist the parties in reaching a political consensus.
Public debate on policy changes will be better focused and more likely to arrive at consensus if there is a permanent independent body charged with presenting to society the evidence and the issues. A commission can provide the public with a clear and comprehensive narrative about what is happening and what it means. Delivering a sustainable state and private pension system and responding to the demographic challenge are long-term projects that cannot be delivered in the lifetime of any one Government.
A consensus needs to be held over a long policy framework, because optimal outcomes take decades to come through. However, securing and maintaining a consensus will not be easy, because deciding the way forward involves important political judgments, and successive Governments have focused very often on immediate challenges. Trade-offs are the essence of political debate, but achieving some degree of consensus on core principles will be easier to achieve if there is an independent commission supporting that consensus. We know that the long-term management of public finances requires intensive debate now about the state pension age—but, notwithstanding the desirability of continuity in policy being achieved, the detail of pension and associated policies will and should be subject to continuing debate over time, in the light of new information becoming available.
Life expectancy and healthy life expectancy may change significantly from current forecasts, trends in voluntary private pension savings could turn out to be more or less favourable, and the participation rate of older workers in the labour force may prove problematic. As the information available changes, so the precise public policy direction can be refined, even if the overall framework of the system maintains as much continuity as possible. It is important that an independent commission should consider the sort of issues and complexities that we all referred to in the previous debate.
As to the type of commission, it should be small, so that the quality of engagement between commissioners is dynamic and qualitative, but sufficient in number to allow for wider input and for the stimulation of considerations that an individual by definition could not achieve. The commission could become a source of authoritative and independent presentation of the facts, and of the estimates of public expenditure consequences and of what future rises in the state pension age might be implied by the principle of pension ages rising in proportion to life expectancy increases. A commission could maintain a clear and steady focus.
The report could capture the key trends in life expectancy and the differences in morbidity, employment and retirement patterns among older people, by gender, region, occupation and socio-economic classes. This analysis would also allow early and regular identification of whether increases in state pension age are accompanied by increases in productive employment and/or a greater reliance on means-tested benefits and whether major inequalities in healthy life expectancy can make across-the-board increases in retirement ages feasible or unfeasible.
For example, if state pension ages rise and average retirement ages rise, state pension expenditure as a percentage of GDP will be reduced, not only by a pension expenditure reduction but by a rise in GDP. However, if pension ages rise and average retirement ages do not, the reduction in pension expenditure will be offset by other non-pension benefit expenditure and lower GDP. These issues are matters of some moment when we are looking to achieve sustainability in the light of what is a major demographic challenge.
Engaging the public is important. Individuals consistently underestimate their own life expectancy. Research confirms that. Individuals on average are unaware of, or do not believe, the projected increases in life expectancy—in some instances, even when the evidence is presented to them. Such attitudes make it difficult for people, particularly young people, to think rationally about the savings rate/retirement age/pension level trade-off that they personally and society face. An independent commission would assist in changing those attitudes and getting those key messages across in a way that very often government and political parties cannot do successfully.
The commission’s analysis could also identify the latest trends in private pension provision on average and across different gender, socio-economic and ethnic groups, and thus of the overall coverage and adequacy of pension provision. This analysis coming from an independent commission could assist in future debates about appropriate adjustments in employee or employer default contribution rates. This is a not insignificant matter and a key debate—one that people are probably feeling tentative about in view of other, wider considerations, but one which certainly an independent commission would help address, as well as helping the formation of a political consensus.
In the debates on previous amendments we heard much reference to data—the quality of the data, what they show, their integrity, whether they are sufficient and so forth. The quality of choices made and policy decisions taken is directly influenced by the quality, quantity and type of data that are available. An independent commission would be well placed to interrogate the quality of the data available and to make recommendations on the gaps or omissions in the data collected, and on the data needed to inform debate.
As the Minister conceded in an earlier discussion, there is a need to take a long-term view on these issues. In considering those long-term issues, long-term projections also need to focus on the uncertainty inherent in such analysis and on important sensitivity analysis. These are issues that a standing commission could focus on. It could assist in helping the debate and in helping the quality of government and individual decisions.
To repeat what I said at the beginning, one of the useful roles of an independent commission is to present society with difficult but unavoidable choices. It can spell out the facts and choices clearly, and it can identify the complexities and assist government and political parties in making the type and quality of decisions that are necessary in the light of the challenges that we face. I beg to move.
Baroness Sherlock
My Lords, I rise to speak to Amendments 55 and 57A in my name and that of my noble friend Lord Browne of Ladyton. I shall speak also to Amendments 53 and 54 in the names of my noble friends Lady Hollis and Lady Drake.
As we heard in the very clear speech from my noble friend Lady Drake, Amendments 55 and 57A provide that the periodic review of rules on pension age should be prepared by an independent commission. I can think of no one better to suggest how a pensions commission might work than my noble friend Lady Drake, who was such a distinguished member of the Turner commission.
As I indicated previously, we agreed that there should be periodic reviews of the state pension age to reflect changes in longevity and the need for people to fund their retirement and also to achieve a fair balance between generations. The question is how to achieve that, and we have grave concerns about the way in which the Government are approaching this matter.
As it stands, the Bill simply says that the Secretary of State shall review the rules about pensionable age. That leaves us with some significant gaps. There is insufficient information about the kind of review mechanism that there might be. There is also insufficient detail about who will conduct a review or how it is to be done, and there seems, on the face of it, to be insufficient scrutiny by Parliament of any recommendations that emerge. Perhaps the Minister will clarify that for us when he replies.
At the heart of this lies a very important question: how do we enable people to have confidence in the system? If we want to encourage people to save for their retirement and we need them to save more, they need to trust the Government, to trust Parliament and to believe that their pensions are safe in our hands. The public need to know that they will not be at the mercy of political expediency and will be protected from any adjustments that might otherwise be made too quickly. After all, they may be nervous about this. There has been a succession of changes to pensions legislation, pensions levels and the state pension age. To suggest just one example, under the previous Labour Government the number of years of contributions required to get a basic state pension—
Lord Freud
The Low Pay Commission reports on a much more regular basis than the five years envisaged here. To pick up the timings that we have experienced, there is the example of Independent Public Service Pensions Commission. The noble Lord, Lord Hutton, was appointed in June 2010 and reported some nine months later, in March 2011. In the intervening period the noble Lord held two calls for evidence, undertook a research event, published an interim report and published his final report. It is clear that a lot can be done in the space of a year, and that is the kind of period that we imagine is about the right length of time required for a review.
NDPBs also tend to look at a wide variety of regularly changing data in the areas of longevity, healthy life expectancy, socioeconomic variations, trends in the labour market and so on, and they tend to be published on a much less regular basis than this. I want to be clear, though, that the groups indicated in Amendment 57A and many others should all be encouraged to participate and contribute in the process. Indeed, the review has been designed to ensure that both Parliament and stakeholders will have ample opportunity to participate in the process and shape the outcomes. Furthermore, because the reviews will be regular, stakeholders may indeed be able to better prepare and contribute than they are now.
Of course, if the Government decide to bring forward changes to the pension age, then those changes must be secured through primary legislation and subjected to the full scrutiny and approval of both Houses, as now. However, to have such extensive and political input at the data-gathering and analysis stage risks stymieing the process before information can even be provided to the Secretary of State. Indeed, the House of Commons Disqualification Act 1975 prevents MPs sitting on many public bodies, precisely in order to avoid politics influencing their work.
Regarding the publication of this report, subsection (6) of this clause requires all reports prepared under the clause to be published. This means that both the Government Actuary and the report from the independently led review, including any recommendations that that component of the review makes, will be published, so all the evidence that has been taken will be made available. Every report will be laid in Parliament and published, including the report from the Secretary of State. As I said before, any proposed changes will require primary legislation.
It is for the Government of the day to put forward proposals resulting from the reports and to present any legislation to Parliament. Responsibility for publishing any overall report on the outcome of the review therefore has to remain with the Secretary of State. I hope that I have been able to provide some reassurance about how we envisage the review working and why. In this case, less is more. I urge the noble Baroness to withdraw the amendment.
Baroness Drake
I thank the Minister for his comments. I certainly was not trying to overleverage my experience on the Pensions Commission; that was not necessarily the main driver for my amendment. I shall respond to some of the points that he made. In Clause 26 the periodic review on the state pension age is a standing arrangement, which is why it provides an opportunity to create an independent commission in support of that arrangement. It is not a case of a one-off job and then it finishes, otherwise it would not be in the Bill. It is obviously intended as a standing arrangement, which is meritorious; I do not disagree with that. However, that is materially different from a one-off commissioning of something. It says that if you are going to have this standing arrangement and periodic reviews and assess whether the current rules on state pension age are fit for purpose, that lends itself to being supported by a commission on a standing basis.
Again, on reading Clause 26 it is not simply dealing with the narrow issue of the state pension age rules, it is also quite clearly saying it will review other factors relevant to the review. The implication in that must be that the Government recognise that complexities would arise around the demographic challenge. That would need to be understood in order to influence policy decisions across a range of issues. Again, a standing commission would be able to assist in looking at that wider range of factors that would inform the review.
I also repeat the point I made in moving the amendment because it is really important. The long-term management of public finances, particularly in respect of responses to the demographic challenge, would be really helped by having a standing commission. The fact that so much progress was able to be made on a political consensus that we are still getting the reward from was because there was a commission. It was able to present the issues and the case to Governments and political parties, as well as the country as a whole, in such a compelling way that it drives, almost from a sense of political responsibility, a consensus on the long-term management of public finances on that issue. It would be a shame to lose that.
Sustainability is a long-term project. Secretaries of State change, Governments change, but as a society we want a political system that delivers rational policies that give us good long-term outcomes. The one thing that characterised pensions in the last 20 years of the previous century was the incremental decisions that Government after Government made about both the private and public pension system. When you stood back you could see the complexity and the dysfunctionality of what the political system, motivated as it might have been in each instance in a very positive way, created. Certainly, when employers started to withdraw from the private pension system it started to show the weaknesses of our political system.
If we are looking for long-term effective management of public finances, the sustainability of the private pension system and the demographic response over the long term this strikes me as a way to go forward. To take an anecdotal example, I remember telling my husband that I was about to go and tell the whole country that they had to work significantly longer and we could not even promise that even the first forecast of how much longer they would have to work would not be increased further in the light of experience. He thought that I was committing career suicide and could not believe that I could possibly do that. I explained to him that the evidence was so compelling and if one cared desperately about a pension system and the interests of the people in this country you had to have the courage to take that debate out to people.
I can remember the CBI being horrified at the thought of having to retain older workers. I can remember trade unions being mortified at the prospect of the default retirement age being raised or abolished because it was a stalking horse for raising the state pension age. However, because you had a commission you could have a much more positive influence on that debate. I remember, as I am sure the Minister will experience, lots of people from around the world, particularly in Europe, asking how the UK managed to get such a consensus from the country about the reforms that needed to be made to the pensions system and the state pension age in particular. I genuinely think that one of the reasons that was possible, compared with some of the problems that are being experienced in other countries, is because the analysis and the narrative that were taken out to people were not just the product of party politics. They were the product of a commission that sought to identify the issues and the choices on the basis that even if you did not make a choice, that by definition was a choice because you would be inevitably moving along a certain line.
I think that that is right. There are 60 million people in this country who have an investment over the very long term, either for themselves, their children or their grandchildren, so we must get this right. What is there to fear in trying to sustain the political consensus by having a group of independent people who assist that process by being able to assist with the narrative and identify the issues? It is that passion that makes me move the amendment, not just that I happened to be on a commission at a point in time. I beg leave to withdraw the amendment.