CPI/RPI Pensions Uprating

Bob Stewart Excerpts

Thursday 1st March 2012 Commons Chamber

[Richard Graham]

I am grateful to the hon. Gentleman for his intervention and for confirming his position on the previous Government’s stance, which is what I had assumed it to be.

I have covered in some detail the question of why this change is being made and will now touch briefly on what the consequences will be before concluding with whether the motion is the right way forward. The hon. Gentleman referred to three consequences that cause him concern: first, pensioners will lose out; secondly, workers might leave the schemes; and thirdly, the fact that both those consequences would have a negative impact on social service expenditure.

It is of course true that those pensioners and future pensioners, such as myself, who would benefit from the retention of RPI as the index of inflation will lose out absolutely, but I do not believe that anyone involved will lose out relatively. It is important to realise that very few countries in Europe have defined benefit pension schemes at all. Most of us who will benefit as a result of being members of a public sector defined benefit scheme, such as myself, even if for only a few years, will still be much better off than most workers in the UK and Europe.

Above all, it is important to realise that the people who suffer the most in retirement are those who are not members of any pension scheme at all, those for whom the new pension scheme—the national employment savings trust—is intended to be of great use, and those who depend entirely on the basic state pension. In that context, it is relevant that the Government have done a considerable amount to help those who survive on the basic state pension partly through the triple-lock guarantee: the reversion to the link with earnings, a basic absolute increase of 2.5%, and the link to inflation. That is important and was referred to by Members who spoke earlier, including my hon. Friend the Member for West Worcestershire (Harriett Baldwin) and the hon. Member for Eastbourne (Stephen Lloyd).

It is important that the change to the basic state pension envisaged by the Government will also be of great benefit to workers and to almost all women who work part time in order to bring up their children and will save considerably on the administrative costs of having two current basic state pension schemes, one of which, the means-tested one, has in my view had a discriminatory impact on those people whom the hon. Member for Bolton North East rightly referred to when he said that some of his constituents with a small amount of savings might be no better off than those with no savings at all. It is important that the Government remove that difference so that we can establish once and for all the principle that those who save will always be better off. I know that that is what the Minister is driving towards and very much hope that we will be able to achieve that goal, that we can state it with confidence and that our constituents will be able to believe it before the end of this Parliament.

I do not believe that the consequences of the changes will be as drastic as the hon. Member for Hayes and Harlington claimed they would be. I reject the argument that the change is principally about contributing to the Government’s efforts to bring down the budget deficit. In fact, I do not think that it will make any difference to the budget deficit in the short term. I also reject the idea that our most vulnerable workers will suffer, because the most vulnerable workers are those who are not on defined benefit schemes and survive purely on the basic state pension. I applaud the fact that the Government have been generous to those of my constituents who are on that scheme. Instead, I believe that the long-term savings to be had from the change will hugely benefit all our constituents. First, they will reduce the amount of interest currently paid on our vast mountain of debt—£120 million a day—which is money that could much better be spent on education, health and other good causes.

Secondly, if those businesses that have defined benefit schemes are able to change the index from RPI to CPI, they will increase their chances of surviving, growing and providing jobs for our constituents, and that is important, because many smaller businesses that have been going for about 100 years in my constituency are engineering companies that do not have great, specific investment skills, and the money that they are spending to top up their defined benefit pension scheme is being spent often at the cost of growing their business, of establishing more investment in their factories and of providing more jobs for my constituents.

[Bob Stewart (Beckenham) (Con)]

Will my hon. Friend give way?

[Richard Graham]

Of course I will give way to my distinguished and gallant hon. Friend.

[Bob Stewart]

My hon. Friend is very kind. For me the most important thing that we can do for the future is to look after the people who now do not have a pension. We have a basic state pension, but we want to encourage as many people as possible to get on to a supplementary pension, and I hope very much that the Government’s scheme will do so. I am thinking of the poorest people in the country, and about them having not just a state pension, but an add-on, so that we can lift them out of poverty in retirement.