CPI/RPI Pensions Uprating

Debate between Harriett Baldwin and Gregg McClymont

Thursday 1st March 2012 Commons Chamber

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

The debate has been interesting so far, with the temperature raised a little at the end by the hon. Member for Aberconwy (Guto Bebb). [Interruption.] My pronunciation of the hon. Gentleman’s constituency is almost as good as the attempt by the hon. Member for Gloucester (Richard Graham) to pronounce Kirkcaldy and Cowdenbeath.

I pay tribute to my hon. Friend the Member for Hayes and Harlington (John McDonnell) for securing the debate, which has covered several matters. I want to touch on four in particular. The first is the notion of a broken promise, which was mentioned by my hon. Friend, as well as by my hon. Friends the Members for Easington (Grahame M. Morris) and for Bolton North East (Mr Crausby).

Before the general election, the then shadow Chief Secretary to the Treasury, the right hon. Member for Runnymede and Weybridge (Mr Hammond), stated in a letter on 27 April 2010 that the Conservative party

“has no plans to change the current index-linking of public sector pensions in payment. We agree with the view that the right to indexation of pensions already accrued is part of the accrued pension rights and those rights will be protected.”

That is at the heart of the debate and of the legal challenge by the trade unions. My hon. Friend the Member for Hayes and Harlington emphasised that point and also the cost to 16 million pensioners—12 million in the public sector and 4 million in the private sector. He rightly paid tribute to Mr Jim Singer, who played such a big part in pushing the e-petition. I note that Mr Singer’s pensions booklet referred to indexing by RPI and that, according to my hon. Friend, he is likely over the course of a normal retirement to lose up to £23,000. Clearly, that is a lot of money, and it shows why there is such interest in the matter.

Much of the debate revolves around whether CPI is an accurate measure of inflation for pensioners. The subject was debated as recently as last week and the Minister made it clear that the Government view CPI as the most appropriate measure of price inflation for the purpose.

[Harriett Baldwin]

Will the hon. Gentleman confirm my understanding that it is not the Opposition’s current policy to restore the link to RPI?

--- Later in debate ---

[Gregg McClymont]

Alas, the hon. Gentleman must wait for the next Labour party manifesto to satisfy his curiosity.

Clearly, the issue is whether CPI is an accurate measure of inflation. The Government and the Minister are clear that it is, but some important authorities, including the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face, especially housing costs, which were mentioned by some of my hon. Friends. The UK Statistics Authority has indicated that it does not believe that CPI should become the primary measure of data inflation until housing costs are included.

I know from our previous discussions that the Minister will look closely at the consumer prices advisory committee proposals on adding housing costs to CPI. We await that with great interest. Heating, which was also mentioned by a number of my hon. Friends, is also important in that context. Heating costs have been rising fast, which could mean that pensioners face higher inflation on average than other groups in society, which is significant given the removal of £100 from the winter fuel allowance.

In the end, this is a political decision. The UK Statistics Authority observed last year:

“Questions about compensation, who to compensate and what for, are straightforwardly political questions, not for statisticians.”

We cannot support adopting that approach in the long term. In just five of the last 20 years has RPI been lower than CPI. As was mentioned by my hon. Friend the Member for Hayes and Harlington, the Office for Budget Responsibility November economic and fiscal outlook states that the long-run difference between RPI and CPI is likely to be 1.4% rather than the current 0.7%.

[Harriett Baldwin]

On the hon. Gentleman’s last point, can I therefore clarify that it is a 2015 Labour manifesto pledge to restore the link to RPI?

[Gregg McClymont]

The hon. Lady’s desire to write the Labour party manifesto three years before a likely general election is admirable, but I cannot advance on the answer I gave to the hon. Member for Gloucester.

Whether CPI is an accurate measure of inflation is an issue—the hon. Lady made important points on heating and housing—but in the few minutes remaining, I want to raise some broader questions. We can talk about CPI or RPI pensions uprating in isolation. The uprating of the state pension using CPI, which happened for the first time this year, is one thing, but as was indicated in the debate, the flat-rate, single-tier state pension, to which the Minister is committed, is important to the debate, as is the future of NEST.

I do not want to misquote the hon. Member for West Worcestershire (Harriett Baldwin), but I believe she said that she was looking forward in the Queen’s Speech to legislation on a single-tier, flat-rate state pension. The Opposition are hopeful that the Minister can move in that direction quickly. I wonder whether the Treasury has a significant role in that. Perhaps negotiations must continue before we can get there. The Opposition will be keen to consider very closely such proposals when they come to the House.

NEST, which has been mentioned throughout the debate, has a huge role to play in moving towards a more sustainable pension system. The Opposition are disappointed at the delay in the staging dates for the move to auto-enrolment. It is not just a question of the companies: contributions from both the Treasury and employers will be lost for those saving into a pension for the first time.

Finally, the hon. Member for Aberconwy emphasised the private pension system. Both he and the hon. Member for West Worcestershire suggested that all the difficulties in the private pensions world have arrived since 1997.

Pensions Bill [Lords]

Debate between Harriett Baldwin and Gregg McClymont

Tuesday 18th October 2011 Commons Chamber

[Gregg McClymont]

After the hon. Gentleman’s previous intervention, he did not listen to the answer; given that intervention, he did not listen to the answer I gave the hon. Member for East Dunbartonshire. He just does not seem to get it.

[Harriett Baldwin (West Worcestershire) (Con)]

Will the hon. Gentleman give way?

[Gregg McClymont]

I am happy to give way to the hon. Lady, who I know is an expert on these issues.

[Harriett Baldwin]

I thank the hon. Gentleman for giving way, welcome him to his post and declare an interest also as a woman whose state pension age was increased to 66 under the previous Government. Given the £10 billion—

[Harriett Baldwin]

Eleven billion, that’s right.

Given the £11 billion commitment that the hon. Gentleman is making, and the £12.5 billion commitment that the shadow Chancellor has made, at what point do these billions of pounds add up to real money in the minds of Labour Front Benchers?

[Gregg McClymont]

The hon. Lady talks about real money, but the situation is clear: we are proposing £20 billion of savings starting in 2016; her Government are proposing £30 billion of savings. This measure would involve £1 billion a year over 10 years.

I understand that the hon. Lady has some actuarial experience, so she must understand that no sensible Opposition or, indeed, Government would put down in law that five years down the line they will still be committed to the same proposal. That is just common sense.