State Pension

David Linden Excerpts

Monday 12th December 2022 Westminster Hall

[David Linden (Glasgow East) (SNP)]

On a point of order, Sir Robert. I do not intend this to be an unnecessarily long point of order, but I am aware that the hon. Member for Battersea (Marsha De Cordova) has just arrived in Chamber and will probably take a moment or two to find her notes. I think she has done that now, so I will stop this pointless point of order.

[Sir Robert Syms (in the Chair)]

Thank you. There are still gentlemen in the House of Commons.

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[David Linden (Glasgow East) (SNP)]

As ever, it is a pleasure to serve under your chairmanship, Sir Robert, and to reply to a debate on behalf of the Scottish National party. I congratulate the hon. Member for Battersea (Marsha De Cordova) on opening the debate, and I commend the hon. Member for Cynon Valley (Beth Winter) on her speech.

Before I get into the substance of my speech, I want to note that my remarks today are my first since returning to the SNP Front Bench. I pay tribute to the hard work and dedication of my hon. Friend the Member for Aberdeen North (Kirsty Blackman), who as my party’s spokesperson on work and pensions repeatedly held the British Government to account, fought for the poorest in society and highlighted the sheer inadequacy of the UK’s social security system. She will be a tough act to follow, and I wish her well in her new position as Cabinet Office spokesperson—a role I am sure she will thrive in.

The petition that triggered this debate calls for an increase to the state pension and for us to reduce the state pension age to 60. I will come to the appalling financial inadequacies of the state pension in a moment, but I will first address the age at which people become eligible. We are by no means outliers among developed nations in having an ageing population, which presents the state with many problems to solve in terms of service provision and many fiscal challenges.

As we debate this issue, every one of us in this room should be mindful of the fact that not all jobs are the same. As we sit here in the luxurious comfort of a palace, people out there are carrying out manual labour jobs—indeed, some today in sub-zero conditions. Sir Robert, you and I may not think that we will be ready to retire at 60, but many others will, so I believe that a balance must be struck. Although, for practical reasons, the Scottish National party cannot support reducing the retirement age to 60, the notion that the pension age needs to go up and up, as a simple solution to the British Government’s problems, is both cruel and unrealistic.

It feels like little has changed at the Department for Work and Pensions since I last shadowed this brief. The British Government continue their heartless policies, the cost of living crisis ravages on, and it is the poorest and most vulnerable who bear the brunt of the hardship. As I was preparing for today’s debate, I found myself despairing, because for me, as a Scottish nationalist, Westminster often feels like groundhog day, and no more so than when we are looking at the policies of the Department for Work and Pensions.

I find myself today critiquing the same Tory policies that I criticised last year. It seems that the DWP’s strategy for addressing the cost of living crisis is largely to shove its fingers in its ears and just hope that inflation comes down. Despite that, the cost of living crisis continues to spiral out of control and inflation has risen to 11.1%—a 41-year high. The cost of essential family goods has risen sharply over the past year, and the Office for Budget Responsibility predicts that average household disposable incomes will fall by 7% this year and next.

Food banks, such as Glasgow NE Foodbank in my constituency, are struggling to keep up with the rising demand. Across the constituency, I have heard food bank volunteers say that many people are, sadly, using food banks for the very first time—I was surprised to hear from one volunteer that a family who had previously donated to the food bank were now forced to use it themselves.

One thing I reflected on when I previously held this brief was that we as politicians are used to talking regularly about child poverty, but some of us find it a lot less natural and a lot more embarrassing—we wince a lot more—to talk about pensioner poverty, which is something that we do not give enough focus. However, as Independent Age has emphasised, with

“more than 2 million pensioners already living in poverty and the cost-of-living crisis hitting hard, we know people are being forced to make impossible choices on how to cut back to be able to afford heating, electricity and food.”

As Christmas approaches, research by Age UK has shown how frightened older people are about surviving the next few months, with a significant number this year anticipating a more solitary and lonely Christmas period than usual. Age UK’s polling also found that more than one in five older people are already reducing or stopping their spending on medication or specialist foods, or expect to do so in the coming months, and that one in seven is skipping meals or expects to do so in the same period.

I have genuine respect for the Minister, and I know that she will say that the cost of living crisis has come about as a result of Vladimir Putin’s invasion of Ukraine, but it is not solely because of Putin’s invasion of Ukraine or, indeed, the economic hangover from the coronavirus pandemic. I would certainly argue, and I am sure others would as well, that the touchpaper was lit on the cost of living crisis 12 years ago, when a Government that Scotland did not vote for embarked on a brutal assault via Tory austerity. I am afraid that that has been exacerbated by Brexit—something else that people in Scotland did not consent to.

The UK has one of the lowest state pensions in north-western Europe, and after a decade of Tory austerity cuts, pensioner poverty is now on the rise. Some 85% of social security and the state pension itself is reserved to this institution and the British Government, so Scotland has little say in this hugely important policy area. SNP MPs have campaigned vehemently for the Tories to maintain the triple lock. Only after multiple U-turns and breaking their manifesto pledge last year—and after a very unhealthy dose of uncertainty for pensioners across these islands—did the British Government finally retain the triple lock.

However, the suspension of the triple lock in 2021 shows that Scotland does not have the powers to prevent Tory cuts for pensioners. The suspension ended up costing each pensioner £520 on average during the cost of living crisis. Additionally, the Scottish Government under the current devolved settlement have no power to raise the state pension, as Ministers know fine well, although some often like to pretend otherwise.

The SNP has continually implored Ministers to devote a larger percentage of GDP to state pensions and indeed to pensioner benefits. The British Government are allowing £1.7 billion of pension credit to go unclaimed during the cost of living crisis. We know that pension credit is a vital lifeline for many older people, but only seven in 10 of those eligible claim the money that they are fully entitled to. The British Government must introduce a full take-up strategy for reserved benefits, including pension credit, as the Scottish Government have done in respect of devolved benefits. I genuinely welcome the conversation I had with the Minister before the debate, when we said that we would discuss this issue offline.

The Conservative Government have a rather long track record in picking the pockets of our pensioners: from the WASPI women and the triple lock to the low take-up of pension credit, the frozen pensions of overseas pensioners, many of whom are veterans, and the scrapping of free TV licences for the over-75s, the list goes on and on. This Government have very much been found wanting in terms of their record on pensioners.

Only with full powers over pensions can the Scottish Government at least remedy these injustices. In an independent Scotland pensioners could be protected from Westminster austerity. We in the SNP want Scotland to be the best place to grow old—a place where retirement means dignity and fairness for all. I know that adhering to manifestos or, in some cases, leadership election pledges is a bit of a quaint novelty for the two biggest parties in this House. However, my party’s 2019 manifesto committed me and my colleagues to continue advocating for a fairer pensions system and to oppose plans to increase the state pension age beyond 66.

Alongside that, we will continue to call on the British Government to establish an independent saving and pension commission to ensure that pension policies are fit for purpose and genuinely reflect the demographic needs of the different parts of these islands. I am struck by the fact that the life expectancy in Kensington and Chelsea is very different from that in my own constituency.

Of course, all of this is predicated on Ministers in Whitehall listening to the voices of those that Scottish voters send to this House—something the Government have a poor track record on. Therefore, the only way to ensure that our pensioners grow old with dignity is for Scotland to become an independent country, with powers to protect pensioners and ensure that they live their final days in prosperity, not poverty.

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[The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)]

It is a pleasure to serve under your chairmanship, Sir Robert. I thank all hon. Members for their valuable contributions, and the hon. Member for Battersea (Marsha De Cordova) for opening the debate.

The Government disagree with the petition’s proposed approach. It makes two suggestions: to increase the state pension and to lower the retirement age. I will first address the proposal to increase the state pension to £380 a week. That would equate pensioner income with the national living wage in 2022-23. However, the national living wage and the state pension are two very different provisions, with distinct purposes. A direct comparison cannot be drawn between the levels of the two. The national living wage aims to protect low-income workers and to provide an incentive to work, by ensuring that workers benefit from being employed. However, most pensioners have already left the labour market. Comparisons made in the e-petition between headline state pension amounts and the national living wage do not consider the full package of state measures available to support people in retirement or the fact that pensioners do not pay national insurance or into a pension scheme through automatic enrolment.

We need to be clear with the public that a state pension of £380 per week for every UK pensioner would be unaffordable. It would mean an annual cost of up to £251 billion if it was applied for 2022-23. That compares to the £110 billion we are currently forecast to spend on the state pension. In the UK we have a system of state and private pensions, which jointly provide an income for people in retirement. Most people will have a private or occupational pension on top of the state pension. In the 2021 financial year, the average net income of all pensioners was £361 per week, after housing costs. Crucially, the Government also provide around £67 billion each year in tax relief to boost private retirement savings. It is important to consider all aspects of Government support for retirement, rather than solely the state pension amount.

The Government are committed to ensuring that the state pension continues to provide the foundations for people’s retirement income, and we are proud of the assistance we have given pensioners since 2010. Since 2010, the full yearly amount of the basic state pension has risen by over £2,300 in cash terms. That is £720 more than if it had been uprated by prices, and £570 more than if it had been uprated by earnings.

As all hon. Members here today recognise, the Government have announced plans to apply the triple lock this year. It was announced, according to the normal parliamentary timetable, that from April the state pension will be over £3,000 per year higher in cash terms, which is double what it was in 2010, £790 more than if it had been uprated by prices, and £945 more than if it had been uprated by earnings.

Pension credit has come up a lot today, as it should. Pension credit provides vital additional financial support by topping up the state pension and other retirement incomes. The hon. Member for Battersea referred to the minimum income guarantee, which is what we put in place to ensure that pensioners do not fall below a certain base. It also acts as a gateway to other help, including assistance with rent, council tax, NHS prescriptions and heating bills. Of immediate importance, it is a gateway to the additional cost of living payments we are paying to those on qualifying means-tested benefits. There is more that we need to do to link that up with other information that the Government have. I will be pleased to work with Opposition Members, as well as the hon. Member for Glasgow East (David Linden), in order to try to make that happen.

We have taken direct action when pensioners have needed it, both through the pandemic and now with the rising cost of living. That includes the £650 cost of living payment, paid in two instalments, to help those on pension credit with the rising cost of living. As we all know—and I would like to emphasise this again—it is not too late for pensioners who are not already getting pension credit to qualify for the second instalment. That is because a claim for pension credit can be backdated for up to three months, provided the entitlement conditions are met throughout that time. To ensure that a successful backdated claim falls within the qualifying period for the second cost of living payment, we are urging people to claim pension credit as soon as possible, and by no later than 18 December.

[David Linden]

I appreciate that the Minister will not necessarily have the figures to hand, but would she be willing to write to me with information on how much the Government are spending on, for example, billboard campaigns and radio advertising to encourage pensioners to take part—in the same way they do with the levelling-up campaign?

[Laura Trott]

I would be more than happy to do so. I know that we spent £1.2 million over the summer. I have signed off a campaign for this winter, with more coming after Christmas, but I will write to the hon. Gentleman with the exact amounts.

That leads me nicely on to the hon. Member for Battersea, who referred to the take-up campaign. We have had a huge take-up campaign over the summer, and we have done one recently as well. We have further communication planned. It is something I am very focused on, and I would like to work with all hon. Members who are interested to ensure that it happens.

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[Laura Trott]

I am very happy to do so. If there are any specific approaches the hon. Gentleman thinks the Government should be taking, I am very open to any ideas he may have and would happily take them forward.

The £650 cost of living payment is one of a number of measures in the Government’s £37 billion cost of living support package, which will ensure that the most vulnerable households will receive at least £1,200 this year. The package also includes a £400 reduction on energy bills for all domestic electricity customers over the coming months, plus a £150 council tax rebate for 85% of all UK households.

In addition to the steps we have taken to address the cost of living for pensioners, we have also made long-term reforms to the state pension and introduced automatic enrolment to boost private saving. In 2016, the Government introduced the new state pension, which forms a clear foundation for individuals’ private savings to provide the retirement they want. At the heart of its design, we sought to correct some historic unfairness in the previous system, in particular for women, self-employed people and lower-paid workers. More than 3 million women are set to receive an average of £550 more a year by 2030. State pension outcomes are also expected to equalise for men and women by the early 2040s—more than a decade earlier than they would have aligned under the old system.

I want to pause here to mention pensioner poverty, which was brought up by a number of hon. Members. I know it is something we all care deeply about. The Government are committed to action that helps to alleviate the levels of pensioner poverty. We are forecast to spend more than £134 billion on benefits for pensioners in 2022-23, which amounts to 5.4% of GDP and includes spending on the state pension that is forecast to be over £110 billion in 2022-23. Thankfully, there are 400,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10, but there is, of course, always more to do.

Automatic enrolment, as mentioned by the hon. Member for Cynon Valley (Beth Winter), is transforming private saving. More than 10.7 million people have been automatically enrolled into a workplace pension and more than 2 million employers have complied with their duties to date. This has helped to supply around an additional £33 billion into pensions savings in real terms in 2021 compared to 2012. I want to bring up the findings of the 2017 review of measures for automatic enrolment, as the hon. Member for Battersea mentioned her support for the lower earnings limit. The 2017 review of automatic enrolment set out the ambition to enable people to save more and to start saving earlier by abolishing the lower earnings limit and reducing the qualifying age for automatic enrolment to 18 by the mid-2020s. We have always been clear that changes would be made in a way and at a time that are affordable, balancing the needs of savers, employers and taxpayers, and the Government are absolutely still committed to that.

Together, the new state pension, automatic enrolment to workplace pensions and the safety net of pension credit will provide a robust system for pensioners for decades to come. A number of Members talked about international comparisons; OECD rankings show that, thanks to this Government’s reforms, the UK pensions systems will provide future workers with income replacement rates comparable to the OECD average and higher than countries such as Switzerland, Norway and Germany.

Let me turn to the second suggestion: decreasing the state pension age to 60. The Government have no plans to reverse changes to the state pension age. Previous reforms have focused on maintaining the right balance between affordability, the sustainability of the state pension and fairness between generations. Changes to state pension age were made through a series of Acts, and by successive Governments, from 1995 onwards. Those reforms followed public consultations and extensive debates in both Houses of Parliament. The state pension is funded through the national insurance and tax contributions of the current working-age population. Like increasing the state pension, reducing the state pension age to 60 would massively increase the tax burden on the current working-age population and carry significant cost.

[David Linden]

I wonder whether the Minister might put on record the point that she just confirmed. In the debate on Scottish independence, Unionist campaigners often talk about how the UK somehow furnishes pensions. However, as the Minister just pointed out, the state pension is funded by ongoing national insurance contributions each and every day, which rather bursts the myth that is made by the Better Together campaign in Scotland.

[Laura Trott]

State pension entitlement is obviously built up through contributions over a period of time, but equally there is a huge burden on the state, and that has to be met at a given point. As we have discussed, pension pots are funded widely by both the working-age population and people later in life.

The Government previously estimated that, had we not increased the state pension age for both men and women, the total additional cost to taxpayers—in 2018-19 prices—would have been around £215 billion for the period from 2010-11 to 2025-26. Lowering the state pension age is clearly unaffordable, and would place an ever-increasing and unfair burden on taxpayers. That would not be right, particularly as life expectancy continues to rise.

A number of hon. Members mentioned the Parliamentary and Health Service Ombudsman. The PHSO is undertaking a multi-stage process, and it has not given its final findings on the overall investigation. If the PHSO finds injustice, it will move on to stage 3 and consider any recommendations. The DWP will wait before taking any further steps.

The UK has an ageing population and workforce. The proportion of people aged 50 years and over compared to those aged 16 and over is projected to increase from 42% in 2010 to nearly 50% by 2035. That is nearly 29 million more people. Older workers will bring a wealth of skills and experience to the workplace, and they are vital to the economy. By working for longer, older people have the opportunity to improve their retirement income and benefit from the social engagement that employment brings. The hon. Member for Battersea was absolutely right that we need to support workers in later life, and BEIS is working on exactly that.

In conclusion, I welcome today’s debate and acknowledge the proposals set out in the e-petition. As I have mentioned, the Government provide wide-ranging measures to support people in retirement. Our recent announcement of plans to apply the triple lock this year demonstrates our commitment to providing a strong foundation of support for pensioners.