Pensions Bill
Debate between Gregg McClymont and Mark Reckless(11 years, 5 months ago)
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Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)
I endorse almost everything that the hon. Member for Warrington South (David Mowat) has just said. In fact, I do not think it would be unfair to suggest that he has thrown a grenade into this debate, because for all the Bill’s positive aspects, he has hit the nail on the head. In order for a single flat-rate state pension and auto-enrolment to work, we must have a private pensions industry that delivers value for money for every saver.
This speaks directly to the general thrust of the contributions of other Government Members. The hon. Members for Gloucester (Richard Graham), for Aberconwy (Guto Bebb), for Thurrock (Jackie Doyle-Price) and for Rochester and Strood (Mark Reckless) were right to focus on the Bill’s importance in encouraging incentives to save, but the question that went unasked until the powerful contribution of the hon. Member for Warrington South was: save into what? That is why we have been telling the pensions Minister for 18 months, as we will continue to tell him in Committee and further stages, that although there are very good things in the Bill, the danger is that it will represent only half a reform unless the Government take on the series of reforms referred to by the hon. Member for Warrington South. Let us be clear: this is not just a state pension Bill; it is also a Bill for auto-enrolment and private pensions.
Pensions are an issue where the devil is in the detail, and the detail in this Bill demands analysis. In principle, the introduction of a flat-rate state pension is a positive move that, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) has made clear, builds on a Labour platform. In order for auto-enrolment and the new workplace pensions—as the Secretary of State has generously stated, these build on Labour’s work—to work, we must have a private pensions industry that delivers value for money for every saver.
Much of the debate centred on the pensions legacy with which we all grapple, in opposition and in government. I do not think that it is possible to understand this Bill unless we consider two consequences of the Thatcher revolution for pensions. The first is the breaking of the link with earnings, which led to enormous growth in pensioner poverty, to which pension credit was the Labour answer. [Interruption.] The pensions Minister speaks from a sedentary position. I am sure he would agree that pension credit attacked a significant and real problem with pensioner poverty in 1997. He is now building the flat-rate state pension a pound above pension credit, which is why this is a Labour platform.
More or just as importantly, we continue to grapple with the legacy of the Thatcher Government’s policy on occupational pensions. Simply put, in order to promote a brave new world of personal private pensions the Thatcher Government did things—not deliberately; I am sure they were unintended consequences—that undermined the UK occupational pension system, which was at that time the envy of the world. The result was the mis-selling scandals of the 1980s and 1990s, the collapse of confidence in all non-state pensions and the flight from high-quality workplace pension schemes. That is the context in which we proceed.
Gregg McClymont
I am sorry, but much time has been taken up by the important contributions of other Members and I know that the pensions Minister wants, rightly, a reasonable amount of time to wind up this debate on a Bill of which he is the architect.
I have described the Bill’s context, but what is the detail? Even on its own terms, the Government’s case demands testing. First, the Government claim that the Bill will simplify pensions, thus encouraging individuals to save privately on top of their flat-rate state pension. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) and the hon. Member for Banff and Buchan (Dr Whiteford) have noted the complexity of pension reforms generally and of the transition process in particular. Put simply, we will have two systems running in parallel for the next 30 years. That is not a case against the reform, but it is worth considering when we are thinking about the simplicity of this pension proposal.
Secondly, the Government claim that the Bill will substantially reduce means-testing, but the DWP’s own impact assessment reveals that means-testing will be reduced by just 4%. Any reduction in means-testing is welcome. There is no debate about that. Government Members must recognise that pension credit was a necessary and significant reform to reduce pensioner poverty and Opposition Members must accept that reducing means-testing is a good thing. The question is by how much means-testing is being reduced.
Thirdly, the Government claim that the Bill is cost-neutral, but we know that billions of pounds will fall into the Treasury coffers every year because of the increased national insurance contributions in both public and private sector defined contribution schemes. That point was made eloquently by my hon. Friend the Member for Glasgow North East (Mr Bain).
Most importantly, the Government claim that the Bill will encourage saving. I can only refer Government Members to the analysis of the hon. Member for Warrington South on the failings of the private pensions industry. The incentive to save is important, but I say again that we must look at what people are saving into. [Interruption.] There is no point in Government Members laughing at me. They should speak to their colleague, who set out clearly the problems with the private pensions industry.
More widely, the Government claim that the Bill is fair. However, we have to be aware that the fast-tracking of the single-tier state pension has created steep cliff edges and inequities, to which a number of my hon. Friends and other hon. Members have referred. The Government’s pension changes have consistently hit working women. They have denied more than 1 million women the ability to build retirement savings via auto-enrolment. Now, their flat-rate pension will short-change 700,000 women. My hon. Friend the Member for Inverclyde (Mr McKenzie), who is not in his place, referred to 600 women in his constituency who will not get the new state pension, while a man of precisely the same age will.
I will give the Minister a case study. Catherine Kirby is nearly 61 and was born on 1 October 1952. She has worked for 41 years that qualify for national insurance contributions. At today’s rate, her basic state pension is £110 per week. She receives £20 in SERPS and S2P, so the total amount that she gets each week is £130. That is £15 less than the single-tier amount will be. Catherine had to leave school at 16 because her parents could not support her any longer. She had caring responsibilities and in later years, due to health constraints, had to reduce her hours of work and her already low income. She is unable to afford a private or other pension arrangement and is unable to defer taking her state pension as she has no other income. She has chronic, deteriorating health conditions. Every pound is important to her, as it is to many women close to retirement.
That is the personal story behind the rather abstract 700,000 women to whom Ministers refer. Catherine simply asks to receive the improved pension that a man of the same age will receive. We accept that there are many significant advances in the Bill, so in that spirit of co-operation, I ask the Minister to look again at the issue of women such as Catherine.
The Work and Pensions Committee raised the issue of those who are close to retirement and who had planned to retire based on their partners’ contributions. Those people face a difficult transitional situation. We believe that the Government should consider offering those individuals something along the lines of the 15 years’ transitional protection that the Select Committee suggested.
Another issue is the rise in the national insurance contributions required to get the full state pension from 30 years’ contributions to 35 years’ contributions. One of the many excellent things that the previous Labour Government did was bring down the years of contribution to ensure that there was greater eligibility for the full state pension. We ask the Government to make up the difference, especially for those who are close to retirement and who have had letters saying that they need only 30 years’ contributions. From the look on the Minister’s face, he is not keen on that idea, but I ask him in a spirit of constructive engagement to look at that matter.
Another critical aspect of the Bill that has not received enough attention this evening concerns what the abolition of the second state pension will mean. The hon. Member for Rochester and Strood explained that he is now convinced of the merits of the Bill because it is not redistributive, but it would be worth his looking at who are the losers from the abolition of the second state pension. For many people in private sector employment, on both low and higher earnings, the abolition of the second state pension means losses. More generally, Government Members might consider that one way of looking at the new pension scheme is that it puts a cap on state pension savings because no one can get more than £144 a week. Previously, under the second state pension one could get significantly more than that.
Gregg McClymont
As I said earlier to the hon. Gentleman, it is important to give the Minister enough time to wind up on his Bill. I am happy to oblige on that, so it is important that I proceed. If the hon. Gentleman wants to try again in a couple of minutes I may be more amenable.
Let me return to the heart of the Bill and the laser focus placed on that issue by the hon. Member for Warrington South. The Bill is predicated on the Government’s assumption that it increases the incentive to save. It is about what people will be saving into under the new workplace pensions and private pensions more widely. Public confidence could be finally restored if the Minister grasped the nettle with the Bill, and did not what I am telling him to do, but what his Back Benchers are saying. Auto-enrolment is under way. We give credit to the Government for continuing with Labour’s auto-enrolment policy, but the success of the revolution is not ensured. [Interruption.] The hon. Member for Bedford (Richard Fuller) laughs, but the Secretary of State generously put that matter on the record in his earlier contribution. Getting auto-enrolment right is crucial.
Mark Reckless
I am grateful. Could the shadow Minister not perhaps recognise some fault in Labour’s past, particularly with the £5 billion-a-year tax rate through the removal of the dividend tax credit, and will he listen to himself building up into a great rhetoric of peroration? Does he support the Bill, or is he about to lead his troops into the Opposition Lobby against us?
Gregg McClymont
I do not think the hon. Gentleman has been listening to what I said. To recap: the flat-rate state pension is a good idea in principle, and I refer him to his hon. Friend the Member for Warrington South, who is sitting behind him and who explained—even more clearly than I managed—that for the Bill to work, the private pensions industry must deliver value for money for every saver. As the hon. Gentleman and Opposition Members have said, that must be the other half of this Bill. I cannot be any clearer than that.
Let me return to what the Minister should do, bearing in mind that I want to give him time to wind up —[Interruption.] He is telling me how long I have now, but I will be the judge of that while also being fair to him. The opportunity is there for the Minister. The stated aim of the Bill is to ensure that people have confidence in saving for their future and in putting money aside for their retirement. Members have made the point repeatedly, but simply reducing state pension provision—that is what the Bill does in the long term—and hoping that will act as an incentive for people to save into private pensions is not enough. The Opposition have set a direction of travel, which the Government have finally begun to follow, to ensure that saving pays into private pensions. We set out the way to ensure value for money for every saver in the UK occupational system, and we called for the Office of Fair Trading investigation into costs and charges that is now taking place. We called for the Government to deal with consultancy charges and auto-enrolment practices, and we welcome moves in the Bill to give the Secretary of State the power to do that. He could go yet further in the Bill and clarify precisely what he will do.
Why is the Minister asking the House to agree to the abolition of the second state pension before imposing quality requirements of the kind outlined by the hon. Member for Warrington South on auto-enrolment pensions? Why does the Bill contain a clause—clause 34 —drafted so widely that it would allow the Secretary of State to exempt employers from auto-enrolment on the Beecroft model, which no one else would applaud? Why, unlike the proposals on savers, do regulations to exempt employers from auto-enrolment not have to be passed by a resolution of both Houses? I could go on.
Pot follows member, which the hon. Member for Gloucester mentioned, will be discussed in great detail in Committee. Most of the industry takes a different view to the Minister, so I look forward to discussing it with him. He can do no better than listen to the hon. Member for Warrington South on a swathe of policy issues on private pensions.
The Opposition believe that the principle of the flat-rate state pension is a good one. We will not stand in the way of the Bill today, but unless the Minister grasps the nettle on the private pensions industry, the Bill will remain half a reform.