Pensions Bill [Lords]

Eilidh Whiteford Excerpts

Monday 20th June 2011 Commons Chamber

[Mr Duncan Smith]

I have given way a lot and I am not sure that we are going anywhere new on this. I have repeated myself several times. I will give way once more and leave it at that.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I want to emphasise the point that the hon. Member for Aberdeen South (Dame Anne Begg) made about people who have already retired. The latest health statistics show that healthy life expectancy for women and men does not necessarily keep pace with actual life expectancy. Many women in their 60s are trying to wind down their working hours because they are in poor health. The key point is not equalisation, but that people have not had time to plan for it. It is a great burden on people in the latter stages of their career who suffer ill health.

[Mr Duncan Smith]

I fully recognise the hon. Lady’s point. It applies to the whole debate. One could argue that even an extra year’s planning does not allow people time if they are not well. People living longer but being more ill is an issue for the health service—it is already having an impact on the health service. It is a reality—and a good thing—that people are living longer and are able to enjoy their retirement properly. For the most part, they can do that in good health, but I recognise that there are problems for those in poor health.

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

It is a pleasure to follow the hon. Member for Cardiff North (Jonathan Evans), but I will disagree with quite a bit of what he said.

I am disappointed about the change in the financial assistance scheme from the retail prices index to the consumer prices index, particularly in relation to Richards Textile factory in Aberdeen, which went bust with the collapse of its pension scheme. Although the very hard work of many Labour Back Benchers ensured that those pensioners did not lose all their money, they still feel aggrieved that they do not have the same cover as those who subsequently entered the pension protection fund and that they do not get quite as much as those covered by it.

Let me start by saying which parts of the Bill I agree with to show that not everything in it is bad, although quite a lot is. I agree wholeheartedly with the lifting of the default retirement age and I only wish that my Government had done that. I have a friend who has been told by his employer that he has to retire at 65 and he does not want to, but unfortunately his birthday falls on the wrong side of the divide.

I am also very glad that the Government are going ahead with the national employment savings trust. There was a bit of worry at the time of the election that some people in business who were not too keen on it, particularly on auto-enrolment, might put pressure on the coalition Government, who I am glad resisted. NEST is certainly the way forward for occupational pensions, to ensure that there is pension cover for everyone and that most people will not have to depend on the basic state pension as their sole income in retirement. That is very important.

I also agree with the proposal to bring auto-enrolment forward to July 2012 for large companies. If they are ready to go, the sooner the scheme gets up and running the better and the sooner it is tested the better, because part of the reason for rolling out auto-enrolment is to test how it works in practice.

So those things are all good, but that is as far as that goes and there are issues of concern. Like my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne), I am concerned about the lifting of the auto-enrolment earnings threshold by £2,500. I tried to intervene about this early in the Secretary of State’s speech, but lots of other people were jumping up and down at the time. The problem is that low earners might not always be low earners. Auto-enrolment is important in getting people into the scheme as soon as possible and in ensuring that even low earners are enrolled in a pension scheme. If those people continue to earn similar amounts for the rest of their working life, the scheme might not have the returns that they would expect, but no one knows, at the start of their working life, what their eventual earnings will be and we should always err on the side of caution in ensuring that people enrol. The raising of the threshold could result in about 600,000 people not being enrolled who otherwise would have been. It has been said that those people could opt in, but it is highly unlikely that many people on such low incomes would do so. If the Government introduced a foundation pension or a pension for the state, which the Secretary of State put into context, the scheme would make a difference for people making such low contributions. Even someone earning just over £5,000 a year could make a valuable contribution to their eventual occupational pension.

I worry about that issue and I worry when I hear that the threshold might go up to £10,000 or more in future, because the whole point of auto-enrolment and of NEST was to make things easy, to make belonging to an occupational pension fund a no-brainer and to ensure that everyone who was in work would automatically pay into an occupational fund. People who are not auto-enrolled and who are not in the pension fund will lose out on the employers’ contributions as well, so they will lose out not only on their potential pension earnings towards the end of their life but on what we often think of as deferred wages in the employers’ contribution.

I am also concerned about the introduction of the three-month wait, for many of the same reasons I have just given. The shadow Secretary of State has already made the arguments, which are important to remember.

All those issues could probably have been swallowed if they had been the only things we were concerned about, but the big sticking point in the Bill, which I suspect most Members will be talking about this afternoon, is the acceleration of the state pension age, particularly the anomaly that hits the 500,000 women who at very short notice will have to wait more than a year for their pension. I wonder whether the Government have analysed exactly who will lose out as a result of the measures and which women will not be in work at the age of 66, when they get their state pension. The figure of £10 billion has been bandied around for how much it would cost not to go ahead with the proposal, but I suspect that is a gross figure. I do not know whether the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), has any idea how much the welfare bill will go up as a result of people’s falling out of work before they reach the age of 66.

I agree that it is right that the state pension age should rise and indeed inevitable that it will rise, and I accept that there are issues to do with longevity, but I am concerned that we are potentially creating not the pensioner poor but a group of people who become the new poor because they have fallen out of work in the last years of their working life and are struggling to get by on benefits. It is not good enough for the pensions Minister to say that for anyone who falls out of work before reaching the state pension age and who does not have a pension they can draw early, there is always jobseeker’s allowance or employment and support allowance. The contributory element of JSA lasts only six months and the Government propose that the contributory element of ESA will last only a year. Nowadays, women expect to have their own wages, but their qualifying for income-related JSA or ESA will depend on the household income and whether they have a working partner. For many women, that misses the point. Quite a few women in my constituency say, “I’ve only got a pension of £1 a week.” What they mean is that they have 60% of their husband’s pension and £1 a week on top of that, but they still see that £1 a week as their pension and they feel very aggrieved about that.

[Dr Whiteford]

Does the hon. Lady share my concern that the healthy life expectancy for men in Scotland is currently 60 years and for women is 62 years? In that context, a dramatic increase in the pension age for those people is simply displacing on to the benefit system the burden that will have to be met.

[Dame Anne Begg]

Indeed. The hon. Lady says more eloquently what I was trying to say about displacing people out of pension age into the working age poor. There is nothing to be gained for those people if all we are doing is delaying when they get their state pension. There will be the odd situation that when people retire, their income will go up, rather than people being able to work until they reach retirement age.

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[Nick Boles]

I thank the hon. Gentleman, but I fear he misunderstands me: I am not accusing him and his colleagues of being ideological, and that, in a sense, is my point. Actually, the Opposition are perpetrating a grand deceit on the British people, which is that there is anything fair about protecting all these things that we can no longer afford; that there is anything fair about arguing to the British people that we—

[Dr Whiteford]

Will the hon. Gentleman give way?

[Nick Boles]

No, I will not give way for the moment; I am in the middle of replying to the previous intervention. The Opposition are perpetrating the grand deceit that there is anything fair about pretending to the British people that this country is not poorer than it was; that it is not permanently poorer than we thought we would be in each of the next 20 years.

The point about what happened in the past three years is that the economy suffered a permanent drop. We can grow again from that drop—we can again achieve higher living standards—but we will never have back the growth that we lost in the past 10 years, and it is not fair to anyone to argue that this or any Government can proceed as if no sacrifices need to be made, no losses need to be felt and there can be an entirely victimless process of recovering from the terrible economic situation that the Government of the hon. Member for Stockton North (Alex Cunningham) helped to create.

[Nick Boles]

I thank the hon. Lady, but I fear that this man is a lot more substantial than just straw—even if the Leader of the Opposition sometimes appears to be exactly the straw man she refers to. The entire membership of the Labour party is signed up to the deceitful argument that we can correct this budget deficit, restore sustainability to our public finances and rescue this country from decline without taking painful decisions that cause people loss. That very same argument has been made in every single one of these debates—in the debates about education maintenance allowance, about tuition fees and about all the other benefit changes. We are hearing that argument here again tonight. This is not really an argument about pensions, but one about the future of this country, and the argument used by the Opposition is always exactly the same.

[Dr Whiteford]

The hon. Gentleman has been using a lot of rhetorical questions in this debate. For me, the key question, if we accept the premise of his argument, is: why should women born in 1953 and 1954 take a disproportionate amount of the pain and take all that pressure for everyone else?

[Nick Boles]

The hon. Lady is eloquent, as so many people have been, on behalf of a particular group, and I would accept and understand that were they not equally eloquent on behalf of every single other group that is being affected by the process of getting our public finances on to a stable footing. I would have some respect if an Opposition Member said to me, “I voted for EMA, I voted for tuition fees and I am voting for the benefits cap, but this one I cannot bear because it is egregious, outrageous and singles out this group in a way that no other group is being treated.” But we do not hear that. All we hear is the same cry—“It isn’t fair”—applied every day, every week, to a different group of people. Opposition Members need to understand that it is not fair to pretend to people that we can do this without pain or loss. It is not fair to perpetrate on the British people the deceit that we can somehow grow our way out of this deficit without cutting off some things that everybody appreciates.

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[Dr Whiteford]

Will the Minister give way?

[Steve Webb]

In a little while; I want to make some progress first.

The Bill’s third key element—which, again, voting it down would stop—is making judges put some money into their pensions. I think that Members were rather shocked when they discovered that the taxpayer put 32% of a judge’s salary into a judge’s pension, and that the judge in respect of their own pension entitlements puts a big fat juicy zero. This Bill will correct that. If the Opposition succeed in voting it down, they will stop us doing so. We need to make progress with the Bill, therefore. Second Reading is about the principles, and we stand firmly behind them.

In the debate, the shadow Secretary of State, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne)—who has rejoined us now—glossed over the auto-enrolment provisions and said the Labour party will vote against the Bill. That would leave £30 billion to be found, as that is what the Bill would put into the Exchequer. When asked where the money would come from, he replied, “Well, we’d move a bit faster on age 67” and then added, in brackets as it were, “in the 2030s.” For a former Chief Secretary to the Treasury to tell us that the way to find money for a problem in the next Parliament is to look to somewhere in the 2030s sounds vaguely familiar. The answer is always, “Tomorrow, and tomorrow, and tomorrow”—

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[Steve Webb]

Interestingly, the right hon. Gentleman and his colleague the shadow Minister are saying two different things. The right hon. Gentleman knows that the sum for the changes up to 2020 is £10 billion. His shadow Minister, the hon. Member for Leeds West (Rachel Reeves), says we should delay to 2020 and find £10 billion while he wants to vote against the Bill and find £30 billion at some time in the 2030s. I think the House knows where we stand on that.

I am grateful to those Members who took the trouble to address auto-enrolment, but the shadow Secretary of State glossed over that issue. He said we ought to enrol at £5,000, which is not the right figure, but let us accept it for the sake of argument. He then said we should not put up the threshold. Therefore, under his scheme with the threshold at £5,000, someone who earned £5,100 would be auto-enrolled on that £100, and as we start at 1%, they would have to put in £1—not £1 a week, but £1 a year, or 2p a week. That is what will happen if we do not let this Bill make progress. We will be requiring employers and employees to put 2p per week into the employee’s pension. Does the right hon. Gentleman think that might in any sense undermine the credibility of our proposals?

[Dr Whiteford]

I agree with the Minister that this issue has been glossed over in today’s debate, but in our debate on welfare reform last week great store was set by so-called mini-jobs. It seems to me that those are exactly the jobs that will not be included in auto-enrolment. Can the Minister understand why that fuels concern that a mini-job is simply a euphemism for a low-paid, low-skilled job that keeps women trapped in poverty?

[Steve Webb]

The hon. Lady will be aware of the national insurance floor of roughly £100 a week. Many of these mini-jobs, as she describes them, will be below that and would not be covered by auto-enrolment anyway, but once such people are above the threshold for national insurance, they will be able to opt in should they want to. Moreover, if a mini-job occurs later in life and they have some track record of a connection with pensions, they might well have a conversation with their employer about opting in and triggering the employer contribution.