Intergenerational Fairness

Geoffrey Clifton-Brown Excerpts

1st reading: House of Commons
Tuesday 28th February 2017 Commons Chamber

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

It is a pleasure to speak in this important debate on behalf of the Opposition. I need to extend the apologies of my right hon. Friend the Member for Birkenhead (Frank Field), who I believe is doing media rounds following the news about BHS that we heard this afternoon.

I am a baby boomer, too. My girls are millennials. Many of the things that have been discussed today have been described up and down the country. How lucky I was to be able to go to university without the debt that my girls—and many other young people—are experiencing, and to be able to afford a mortgage in my late 20s, before we had our first daughter. My daughters simply do not have that opportunity. Their debt will be around their necks for a long while, and they are not in a position to buy their own homes, although they both work incredibly hard.

I absolutely agree with the premise of the Select Committee’s report—we do need to address the inter- generational inequality that is being experienced throughout the country—but I differ with it on the solutions. The report suggests that the state pension triple lock should be targeted for expenditure savings. According to the OECD, the basic state pension was one of the world’s lowest after the Thatcher Government broke the link between earnings and uprating in 1980. That led to a long decline in the value of pensions, which the last Labour Government strove to restore.

Although there have been positive efforts to ensure that the new single-tier state pension is fairer and of wider benefit to members of the current generation, there are problems with it. Over the course of their retirement, those in their 40s will be £13,000 worse off than otherwise, those in their 30s will be £17,000 worse off, and those in their 20s will be £20,000 worse off. A continued above-inflation rise will not only benefit those who are retiring now, but will be enjoyed by generations who are to retire. That is one of the central reasons for Labour’s commitment to maintaining the triple lock beyond 2020. I know that we differ from the Government in that regard, but underpinning our decision is the issue of inequalities within generations. We must not trade off the inequality of one generation against the poverty of another.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will the hon. Lady give way?

[Debbie Abrahams]

I hope that the hon. Gentleman will excuse me if I do not. I am incredibly pressed for time and I have already had to cut my speech considerably.

The Select Committee recognised that those who look solely at the intergenerational picture can lose sight of important inequalities within generations. It is important to protect the triple lock and universal pensioner benefits while making different choices to support other generations. The Labour Government made great strides—about 1 million pensioners were lifted out of poverty—but one in seven have remained in poverty since 2010. That level is still much too high, and it should worry us. That is not acceptable in one of the richest countries in the world, and we must do all that we can to ensure that the trend does not rise again. That extends to our commitment to the triple lock and universal pensioner benefits, and our commitment to act immediately on the fate of the 1950s WASPI campaigners. We are committed to ensuring that every older person has dignity and security in retirement.

What are the other choices that we believe should be made? Three specific policies could immediately help to address intergenerational imbalances in a way that would not deprive one generation while supporting another. First, we want to introduce a real living wage, based on what people actually need. After evaluating the effects of the national living wage that has been introduced, the Living Wage Commission said that it failed to meet the basic needs of low-income households. Analysis by the Institute for Fiscal Studies has shown that without significant policy change, real wages are likely to remain lower in 2021 than they were after the recession. Seven years of austerity have consistently failed to deliver pre-recession wages. The decline in the value of wages has been driven by what the Office for National Statistics has described as an unprecedented decline in productivity —unprecedented since world war two. At the same time, prices of basic household goods and services have risen dramatically.

That long squeeze has been coupled with repeated attacks by this Government and the coalition Government on income support provided through the social security system. Many Members have mentioned the issue of in-work poverty: 7.4 million people—one in eight—are living in poverty, including children. I beg to differ with the point that work is the route out of poverty. Four out of five people in low-paid work will still be in low-paid work 10 years later. Taken together, those dynamics have really impacted on standards of living.

Labour has therefore committed to intervene. At our party conference last year, the shadow Chancellor announced that he would introduce a real living wage of £10 an hour. That is what is anticipated will be needed in 2020. The second step is to invest in social and affordable housing. I mentioned my own experience and that of my daughters. It barely needs repeating that the rapid acceleration in house and rental prices, which is a direct result of the failure of all Governments, but especially this Government, to build social and affordable housing, is a key driver of the declining standard of living among those of working age. It might indeed be the fundamental dynamic driving intergenerational disparities.

The consensus is that we need to be delivering 200,000 homes a year, 80,000 of which should be at affordable social rent levels, if we are to keep up with household formation and address poverty levels. Last year, unfortunately, the Government got nowhere near that. Rather than raiding the state pension, the Government should invest in socially rented housing, or allow councils to replace stock sold under the right to buy. That would have a huge impact on intergenerational unfairness, as the Work and Pensions Committee recognises.

The third policy intervention to address the inter- generational imbalance is widening access to auto-enrolment saving. It is a testament to the previous Labour Government that 10 million additional workers are estimated to be newly saving or saving more as a result of auto-enrolment. A total of £17 billion of pension savings has been put away by low-income workers. However, 37% of women workers, 33% of workers with a disability and 28% of black and minority ethnic workers are still not eligible for auto-enrolment. That must be addressed in the review that will be undertaken. We will be pushing hard for that, as the Pensions Minister would expect.

We respect the hard work that the Work and Pensions Committee has put into producing its report. We broadly agree with its analysis, but we believe that there should be a different emphasis and different policy solutions to address the intergenerational inequalities that exist.

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

Having learned a word from you earlier today, Mr Speaker, I can say that hope we have all learned from the sagaciousness of the right hon. Member for Birkenhead (Frank Field), the Chairman of the Select Committee, who started the debate. I am indebted to you, Mr Speaker. At least I have got that on the record—and many other words I have learned from you.

I seriously thank all Members, on both sides of the House, for their contributions, particularly the members of the Work and Pension Committee who spoke. I appreciate the comments that have been made about the Pensions Regulator securing the settlement with Philip Green. I am very pleased about that. It is good for scheme members, and it will bring peace of mind to the 19,000 BHS pensioners who have endured uncertainty following the company’s collapse. I commend both Select Committees for the work they have done on that issue. I also commend the Pensions Regulator and its staff, who have worked very hard and done everything we could have expected of them.

This has been an informative and timely debate. Recent evidence shows that pensioner poverty is at a near record low, which is a good thing for a Pensions Minister to be able to say. We have seen a dramatic fall in the percentage of pensioners living in poverty from 40% in the early 1970s to 14% in 2014-15, but I hope that I never give the impression of complacency. Poverty is poverty, and there are still far too many pensioners living in poverty.

Intergenerational fairness is an easy thing to say. My hon. Friend the Member for Peterborough (Mr Jackson) talked about his grandparents, and I also come from a generation whose parents knew poverty. They knew unemployment, they knew the war and they knew poverty—[Interruption.] I beg your pardon, Mr Speaker; I was trying to be sagacious in my comments. I was about to mention my mother, who has a photograph of you on her mantelpiece.

We were brought up hearing people say, “You don’t know you’re born, you lot. You’re so lucky.” And we were a lucky generation. One aspect of the luckiness of my generation, as was mentioned by many Members, including the shadow Secretary of State, the hon. Member for Oldham East and Saddleworth (Debbie Abrahams), is that we were often the first generation to go to university. I want to make it clear that the answer to intergenerational fairness is not to make pensioners poorer; it is to concentrate on building the economy, building extra houses, and having better quality education and apprenticeships. All those things have been described eloquently by many Members, in most cases in what the Americans would call a bipartisan manner. I am pleased to be part of that debate.

The labour market is the strongest that it has been for years. The employment rate is at a record high, and in the past year we have seen nearly 300,000 more disabled people, over 200,000 more women and over 150,000 more black and minority ethnic people in work, so the signs are pretty good. Rightly, there is cross-party consensus that achieving lower levels of pensioner poverty is a worthy objective. Who would say that it was not? I recognise the valuable work of the Work and Pensions Committee in promoting such issues. It almost goes without saying that we want to ensure that pensioners are treated with the dignity and respect that they deserve in retirement. Anyone in the House, and in the country, would say that.

The right hon. Member for Birkenhead acknowledged that pensioner poverty had been hugely reduced over the past decade, but he and his Committee are right to look at the long-term alternatives. He said that budgetary matters are important. We cannot talk about the triple lock or any other system without considering the amount of public expenditure involved. I am sure everyone would agree that the Government’s commitment to the triple lock is an invaluable element in addressing the issue of pensioners living on a low income. As a result of the triple lock, the value of the full basic state pension as a proportion of average earnings is at its highest since the 1980s. Since 2010, the triple lock has given current pensioners, more than 1 million of whom rely solely on the state for their income, up to £570 a year more than if their pension were just uprated by earnings. As I and others have stated, that was why we introduced the triple lock in 2011, and it is why we have committed to continuing it over this Parliament. It has protected the income of millions of people.

[Geoffrey Clifton-Brown]

Will my hon. Friend give way?

[Richard Harrington]

I am sorry, but I do not have time. Normally I would be happy to give way.

As my hon. Friend the Member for Weston-super-Mare (John Penrose) eloquently pointed out, we have to be careful about creating a burden for future generations by spending money today. He made an interesting, eloquent speech, and I hope to discuss his moral prism with him on many other occasions, within the Chamber and without. Achieving for the pensioners of today does not preclude us from ensuring a good deal for the pensioners of tomorrow. The Government are determined to build a country that works for everyone. The coalition Government took some difficult decisions to put the welfare system on a sustainable footing while still protecting the most vulnerable. It is important to remember that, since 2010, the Government have focused on reducing the deficit and getting public spending under control in order to protect future generations from unpayable public debt. It is important that that is recognised, and it fits in with what my hon. and right hon. Friends have been saying.

There are clear signs that we are prioritising the sustainability of this country’s pension provision. In the limited time available, the best example that I can provide, which was mentioned by the hon. Member for Oldham East and Saddleworth, is the success of auto-enrolment, which the Department is currently reviewing. I am pleased that more than 7 million people have come under auto-enrolment which, I should say—the hon. Lady will jump up to say it otherwise—was introduced by a Labour Government. It was started through a cross-party arrangement and it has received cross-party support, but the hon. Lady is right to question the Government about the review, which we have been open about, because many categories of people have not been included. As for intergenerational fairness, the early success of auto-enrolment is a good sign for people who will be retiring in many years to come. They will be able to calculate their state pension plus their auto-enrolment workplace pension and get a clear idea of what they need to retire on. I am also pleased to say that the level of opting out is low at the moment, but that is not a cause for complacency.

While several hon. Members made this point, I want to highlight what my hon. Friend the Member for North Swindon (Justin Tomlinson) said about apprenticeships and UTCs, which are crucial for the future. As the Prime Minister’s apprenticeship adviser when the pledge for 3 million apprenticeships was made, I am pleased to say that the Government are on course to meet that target. We have all seen in our constituencies how important that is. Prosperity often comes from skills, but skills come from not only university but the alternatives to university. I am pleased that that is becoming something real, not just a political promise.

The Government’s approach to intergenerational fairness is based on ensuring that there is economic prosperity and security for working people at every stage of their life, including in retirement. The hon. Member for Motherwell and Wishaw (Marion Fellows), who I respectfully say is from my generation—[Interruption.] Okay, I know that I look a lot older than her, but I think that we are from roughly the same generation. She eloquently made the point that our generation has not had a one-way bet. I, too, remember when interest rates shot up—I was also driving and thinking about my mortgage—so I understand her point perfectly. I agree that we cannot say, “It is all right for us lot but it is not good for the next lot,” because life goes up and down. The Government have to take all that into consideration.

The Government are committed to improving productivity and innovation, which we all agree is to the benefit of everyone in society. We are acting to boost productivity, which is crucial to raising living standards, by investing in infrastructure, supporting job creation and reforming the markets.

I conclude by emphasising that Governments have to look at the whole picture. State pensioners and private pensioners are part of that picture, but achieving real intergenerational fairness for everybody—that is what we all want and it is why most of us stood for election—involves ensuring that people have long working lives, get prosperity from working, enjoy their work, and save for their future. It is for the Government to guide them, from the day they start work until the day they retire, on saving for their prosperity in the future.

Question deferred (Standing Order No. 54).