Pensions Bill

Hywel Williams Excerpts

Monday 17th June 2013 Commons Chamber

[Guto Bebb]

No, I will not take another intervention for the time being.

We need to send out the same message about pension saving. We need to ensure that people understand that they will be offered a basic level of state pension as a result of the changes, but—this is where the communication issue highlighted by so many Members needs to come into play—that that basic state entitlement will not be sufficient for most people to have the standard of living that they anticipate. People will understand that that basic state level of support will be there, regardless of any further savings they make towards their own retirement pots. Anything and everything above the basic level will be additional and that, in my view, will change people’s behaviour, simply because they will no longer feel that they will be punished for trying to do the right thing.

The shadow Secretary of State, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), gave some examples of where there would still be an element of means-testing in the system. We all regret that, but the truth is that we are moving significantly away from means-testing for pension provision. We should all applaud that because we want to ensure that people in work are encouraged to do the right thing, to do more for themselves and, at the same time, to save towards retirement. These are crucial changes that will change how the British public view the support offered by the state.

[Hywel Williams (Arfon) (PC)]

I agree entirely with the hon. Gentleman about the virtue of making the system less complex and more understandable and about the requirements for better information that have already been mentioned by Members on both sides of the House. Will he concede, however, that there is a regional element? As a Welsh Member, he will know of the long-term mass unemployment in parts of our country that means that some people will just not have had the opportunity to amass the national insurance contributions required to qualify for the pension. That is a regional effect.

[Guto Bebb]

That will need to be considered. As I am well aware, parts of north Wales have long-term unemployment issues that might have an impact on the changes. We need to consider the detail, but the changes should still be welcomed. As I conceded in my opening remarks, some issues will need to be considered in Committee, but the overall direction of travel should be warmly welcomed, whether one is a Member in Wales or in any other part of the United Kingdom. A key point that should be mentioned is that there has been no mention from Government Members of a regional level of state pension. Having heard some of the comments from Opposition Members in recent weeks, I shudder to think what the Labour party might propose in due course on a regional level of basic state pension.

--- Later in debate ---

[Hywel Williams (Arfon) (PC)]

First, I should declare an interest: I am a man born before 6 December 1953—just.

Like others, we in Plaid Cymru give a guarded welcome to the proposals for a single-tier pension. This will benefit key sectors of society who have been excluded in the past. Pensioner poverty is unfortunately an all too common feature of the society that I live in as well as across Wales and the UK. For us in Plaid, the hon. Member for Aberconwy (Guto Bebb) made a very pertinent point. We share his view of the potential advantage for people who are self-employed. I speak as someone who has been employed by one employer and then by another and who had a couple of pots going. I was then self-employed for many years before being elected to this place. I have some direct experience of the complexities and the disappointments that that might bring in pension provision. In my own area, small enterprises and companies are overwhelmingly the most common model, run by self-employed people working either as sole traders—one-man bands—or in partnerships. This is therefore an extremely pertinent issue for rural Wales. It has already been noted that there are questions about the level of contributions that will be required, but that is a matter for further debate.

We agree with the aim of introducing a fairer, simpler and more sustainable pension. Who would not, after all? For too long, pension provision and the system of income maintenance for older people in general has been seen as fiercely complicated, incomprehensible to the ordinary person, unpredictable and open to various legal but doubtful scams. Since at least 1980, the state pension has often been perceived as being of diminishing value. An adequate state pension is therefore critical for providing individuals whose ability to make private provision is limited with a decent income in retirement, and to give everyone certainty and clarity on what to expect from the state at that time of their life.

Such certainty should create a platform for saving while in work, but that can be something of dream for some people in my constituency, given the levels of income there. That was certainly the perception at the turn of the last century when my predecessor but three as Member for Caernarfon, Lloyd George, was undoubtedly influenced by his boyhood observations of his very poorest neighbours in Llanystumdwy. Alas, life for many pensioners today remains unfairly hard, and is a matter of just getting by, even if it does not quite involve the hand-to-mouth existence that so influenced Lloyd George.

Plaid Cymru supports the aim of a single-tier pension, particularly in respect of the simplicity involved. In general, those who will benefit will be people with low lifetime earnings and those who have taken time out of the labour market due to unemployment, caring or disability. I made this point in an earlier intervention and, as I said, the self-employed are a key group.

I am sorry to be predictable, but in the second half of my speech I must mention some of our concerns. Some are of a general character, and others are of particular importance to Wales. Most importantly, the crucial question is the level at which the new pension will be set and maintained so that it can fulfil the stated aim of providing people with a level of income that will keep them out of means-testing. That will be one of the best features of the Bill.

In respect of the single-tier pension, those with fewer than 35 qualifying years will receive a pro rata amount, subject to their having a minimum number of qualifying years. However, in Wales we have an appalling legacy of de-industrialisation and subsequent long-term worklessness. Thousands of people have suffered persistent unemployment since the early 1980s and have severely broken employment records. In some areas, people in their 50s, particularly men, have little prospect of any further employment before reaching the age of 65 or 66. We are concerned that there will be a disproportionate number of such people who might not qualify. In addition to that being a personal blow to them, it will sharpen the burden for communities as a whole. It is in no one’s interest to have whole communities in which old age, and particularly older old age, are characterised by poverty and by people just scraping by. Last winter, for example, people were having to choose between heating and eating.

The Bill will also raise the state pension age. People in general are living longer, but that is not true of all economic groups. The Minister might recall our late colleague Malcolm Wicks making this point in a moving speech that I think marked one of his last appearances in the House. He said that the better-off live longer than the worse-off, and that the worse-off work more years because they start earlier. Even when the state pension age is generalised, poorer people will still work longer before they can claim their pension, and they will still die earlier. The disparity will therefore be perpetuated, and they will continue to receive a pension for a shorter period of time. It was noted earlier that they could receive a pension for up to 16 fewer years than their better-off counterparts. That long-term inequality will still exist.

Wales has the lowest gross valued added of all the UK nations and regions, and life expectancy there is lower than in England. These effects will therefore be even more marked in Wales. I understand that the Government intend to review changes in life expectancy as frequently as every five years. I think that the figure of six years was also suggested. Some would argue that that will simply reinstate the very uncertainty that the Minister has been so anxious to quell. I am not sure whether that will be the case, but I would say that a period of five years is fairly short, in terms of pensions provision. Lord Turner recommended seven years, but even that seemed shortish. However, if life expectancy is thus to be reviewed, it is essential that those undertaking the review have the confidence of all involved, including those who start work earlier, work longer and have a shorter post-retirement life. I would therefore press the Minister to give an undertaking on the independence of any such review panel. That point has already been raised a number of times.

I referred to Malcolm Wicks a moment ago. He suggested that certain pensioners who had done years of manual work and whose life expectancy was therefore shorter should receive the pension after 49 years. He suggested that that particular group should work for that set period. The Minister replying to him put forward a number of counter-arguments, mainly involving practicality. He asked how such people could be identified, for example, and noted that the pre-1970 records were incomplete and unreliable. However, as the body reviews successive cohorts who began work after 1970, that will not be the case. Perhaps we can therefore hope that the review panel will also consider the plight of this particular group in due course.

In November 2012, pension credit was claimed by 2.5 million people. The Minister intends that the higher level of the single-tier pension will move many people out of that dependence, but for those who remain, the value of pensions credit is vital. I am glad that he has secured the triple lock on the value of the single-tier pension, but I understand that no such lock can be extended for those pensioners who do not qualify. This again is particularly important in Wales, given our lower average GVA and the number of people with broken contribution records.

I shall turn briefly to the funding implications of the proposals. Contracting-out is to be abolished and the Government are planning to increase national insurance contributions. It seems reasonable that those who get more out should pay more in, and I will be interested to see how that pans out. It was a matter of particular interest in Wales that, on 11 February this year, the Health Secretary announced that these revenues would help to meet the cost of the Government’s proposed changes to the funding of social care and support. He noted that the reforms would cost the Exchequer £1 billion a year by the end of the next Parliament, and that that would be met in part by freezing the inheritance tax threshold at £325,000 for a further three years from 2015-16. He also noted, however, that the Chancellor and the Chief Secretary to the Treasury had agreed that the remaining costs over the course of the next Parliament would be met from public and private sector employer national insurance contributions revenue associated with the end of contracting-out as part of the introduction of the single-tier pension. Aha! So that is where some of the money is actually going!

Freezing the inheritance tax threshold for three years from 2015-16, rather than uprating it in line with inflation, will yield some £20 million for the Exchequer in 2015-16, £80 million in 2016-17 and £170 million from 2017-18. That might not be an issue for this Minister, but people in Wales are asking what the Barnett consequentials from that will be for Wales. Inheritance tax and national insurance are levied on a UK-wide basis, but social care is a devolved issue. We would argue that pensions and care are two sides of the same coin. The issue here is the need for fair funding for Wales on the basis of need.