Pensions Bill [Lords]

Iain Duncan Smith Excerpts

Tuesday 18th October 2011 Commons Chamber

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I welcome the hon. Gentleman to his place. I am wondering whether he taught my son, who is still at Oxford, as now I am really worried. Let me ask him a simple question. The simple fact is that he is getting confused. His argument was originally about the deficit and it has now drifted, rightly, into being about debt. However, debt is not some esoteric issue. If we do not pay off that debt and have a plan to pay it off, all our interest charges rise. The key thing is that it stacks up. Whether or not it is one 1,000th—or whatever he calculates—we have to make a start. We are making a major start on debt repayment. If, as he says, we are talking about only—as he says—£1 billion a year, he needs to tell us where he is going to find this sophisticated £1 billion to replace it?

[Gregg McClymont]

I thank the Secretary of State for his intervention. I am sure that his son is getting a better education than I could manage to provide, as he rather ungallantly suggested. The fact is that this is one 1,000th of the £1.3 trillion debt, and the issue is one of balance and proportion. Is £1 billion—

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[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—

[Mr Duncan Smith]

Eleven 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?

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[Mr Duncan Smith]

I beg to move, That the Bill be now read the Third time.

I welcome the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) to his place. Notwithstanding our earlier little exchanges, I unreservedly welcome him. I am sure that he will be a great asset to his party, and I look forward to other clashes and debates that we may have as time goes on. I thank the Members on both sides of the House who served with distinction on the Public Bill Committee for their help in scrutinising the Bill. They have had to hang around for quite a long time, but we are where we are now. I also thank the Opposition for their approach to many of the positive debates on the Bill’s clauses. May I also extend my appreciation to my hon. Friend the Member for Altrincham and Sale West (Mr Brady) and the hon. Member for North Ayrshire and Arran (Katy Clark) for chairing the Committee sittings through those longer moments?

It is also right that I pay tribute to my hon. Friend the Pensions Minister for his commitment to taking this important legislation through this House. If there is anybody in government who has championed the cause of the low-paid in pensions, it is him. It is a privilege and pleasure to work with him in this coalition—a very firm coalition in our case. On a departmental point, may I back him up on what he said about one of our civil servants, Evelyn Arnold, whom the right hon. Member for East Ham (Stephen Timms) knows? She is retiring after a long time and has seen so many of these things go through, and it is right for us to thank those who serve us without normal comment. So, without question, I thank her for the time she has spent, on behalf of all parties in government, getting this sort of legislation through.

Over the past few months, a number of amendments were made that I believe have improved the Bill, and I shall run through them. With the blessing of the House, I do not intend to spend much time on them because we have been through them a lot. Amendment 1 related to the consumer prices index underpin, where we have listened to concerns and responded by ensuring that schemes that use the retail prices index will not have to uprate by CPI in the years when it is higher. We have heard the issues raised on deferred member charges and, having listened, we have extended an existing reserve power to cap charges to also cover deferred members. That enables the Government to protect all scheme members from high charges regardless of what might come in the future, which is an important feature. Thirdly, we have also made an amendment to clarify the definition of money purchase benefits in light of the Supreme Court’s recent judgment in Houldsworth v. Bridge, ensuring that schemes and members continue to have adequate protection.

The House will be aware that we have listened and responded to concerns about the women most affected by the accelerated rise in the state pension age. Last week we announced that no women will see their state pension age increase by more than 18 months. We have always been clear that our policy will not change and we will still equalise the state pension age by 2018 and increase it to 66 by 2020. We have, however, honoured the commitment I gave on Second Reading to ease the transition process for those who are most affected. I listened with interest to the debate, but the point that is sometimes missed is that the adjustment means that nearly 250,000 women will have a lower state pension age as a result of the change, as will a similar number of men: 500,000 people at a cost of just over £1 billion in the next spending period. We should not sniff at that.

[Stephen Timms]

rose—

[Mr Duncan Smith]

Before I give way to the right hon. Gentleman, let me make a small point. I understand why the Opposition want to trumpet a great deal about this. Having sat in opposition, I understand that getting self-righteous about such things in defence of others who raise them is exactly what Opposition Members do. As some of my hon. Friends said earlier, however, unless the Opposition can guarantee that they will reverse the measure if and when they come into government, in essence they are doing something quite cynical by raising the hopes of women outside, knowing only too well secretly that they will never make the change. If I give way, I would like to hear that the Opposition absolutely plan to reverse this measure and change it in government.

[Stephen Timms]

One thing the Opposition are entitled to do is ask the Government to explain why they are doing what they are doing. At a time when the Government are increasing the state pension age by one year for many people, what is the justification for picking out 500,000 women and treating them more harshly than everybody else?

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[Mr Duncan Smith]

I think the right hon. Gentleman knows the answer to that question. It is wholly part of the process of equalisation and of moving everybody on at the same time for the extra year’s increase. That answers his point, but, as he knows in his heart of hearts—I consider him a reasonable man in his dealings most of all—the real point is that had Labour been in government, I suspect that they would have done almost exactly the same things.

The generation below my generation is likely to retire on a lower income in retirement, the first generation to do so, as a result of all the problems we have had with the economy—which the previous Government left for us and for which we never get an apology—and the reality that not enough people have been saving. We are about to condemn a generation of people who will struggle to save for their pensions and who will have to pay off elements of the debt that we—this generation going through Parliament—have overseen while at the same time paying for those who are already in retirement, and we must do something to help them rid us of that debt so that they do not pick up such a large proportion of it and are not saddled with it as they attempt to bring up their children and earn a living at the same time.

[Stephen Timms]

The Secretary of State is explaining why the state pension age needs to be raised and our amendments did not oppose the increase of one year. We are still waiting, however, for some justification why this particular group of 500,000 women must wait more than a year—longer than everyone else—to reach their state pension age.

[Mr Duncan Smith]

I think I have explained that. As I said earlier and as the right hon. Gentleman knows well, the acceleration is about reaching equalisation in time to move the age to 66. We can bandy this subject about, but the point remains that the Opposition must come to terms with something quite important. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, who opened the debate on Report, suggested that £11 billion—he insisted on saying £10 billion, but I must tell him that the figure is £11 billion—was no great problem and not an issue in the great scheme of things. That is, in a sense, the problem. I remind him that to save £5 billion in real terms today straight off, we would have to cut the education budget by 10%. That is the nature of how we would have to find the money.

I simply say to the Opposition that I understand the rules of opposition—goodness gracious, we spent enough time in opposition ourselves—and the temptations that come with opposition, but realistically they should be saying to all those women that we have made a major move. We are prepared to spend an extra £1 billion to make sure that those who were excessively caught in that trap are not any more. I think that is fair and reasonable and that the Opposition need to explain to women up and down the land why they are making a big fuss about this when they know, cynically, that they would not overturn this if they came to government. That is a very cynical position to be in—to whip up this emotion outside and then calmly and quietly say, “Of course, we can’t change it.” I am afraid that is bad politics and bad decision making.

[Glenda Jackson]

Perhaps the Secretary of State would like to hear what some of the women in my constituency think about the Government’s changes regarding their pension age. Their view is that the Government have made this very small change—it is a very small movement—which has nothing whatever to do with a concern for those women in their old age, because they are losing the women’s vote––and my constituents are not by nature cynical.

[Mr Duncan Smith]

After listening to the Opposition tonight, they ought to be. One thing I will be certain to tell them whenever I encounter them is that at least I am being honest about what we are trying to do. We inherited a major economic problem, with a deficit that was out of control and burgeoning debt—the two are linked just in case the Opposition do not remember that. The reality is that, on both counts, we are charged with reducing the amounts. That is not something that is given to just a few Ministers—it is ultimately about taxpayers and about those who get pensions.

We have listened and we have done something quite significant—not small—to give way. To cap this at 18 months and spend £1 billion is, as my hon. Friends have recognised, a big step. Of course, in a perfect world, as the hon. Member for Cardiff Central (Jenny Willott) said, if all things were equal we would have loved to be able to do more, but the reality that we face is that this country has to get its debt under control. As I said earlier, the real burden is not going to fall on the shoulders of the hon. Member for Hampstead and Kilburn (Glenda Jackson) or on mine but on those of our children and grandchildren if we do not do something about that debt. I am not prepared to think to myself, “I must charge around and say that I am worried about this group or that group.” I have to say to them honestly, “All of us, together, recognise that we must do the best for the next generation coming through,” as well as doing our best, as the Pensions Minister said, for those who are due to retire.

With the amendments in place, I believe that the Bill has reached Third Reading with its fundamental principles firmly intact. I have repeatedly said that the Bill is, in large part, about the next generation—a generation who will have to pay for their parents’ retirement while footing the bill for their own savings and also for the debt.

I want to discuss auto-enrolment which, as the right hon. Member for East Ham rightly said, was started by his Government. We committed to continue it and I like to think that we have done that in the best spirit possible, taking into account the difficult financial considerations. The key will be getting many more people into saving. As he knows, some 9 million to 10 million people will be eligible under the new system. That is why we are taking forward plans for automatic enrolment into pension schemes—plans that were debated and widely supported across the House.

The Bill refines some of the parameters of automatic enrolment legislation and ensures that we take forward a model that will work for the individual, I hope, as well as for the employers who will be our key partners in delivering these reforms. There was a question about the three-month point and I wanted to make a point about those who are in work for three months in these firms and then move on—90% will move on, so the issue we are dealing with concerns a much smaller group than people have been leading us to believe. I do not agree with those who say categorically that this is a problem for growth. Auto-enrolment is good for the country, good for people who save and, ultimately, good for growth because it puts the economy on a firm footing, based on savings. I stand here today categorically prepared to take on anybody on that basis, and I will continue to do so, as will the Pensions Minister and, indeed, all of us. Others who support us on this include the TUC, the CBI and the National Association of Pension Funds. I hope that, as a consideration, we will move forward on this together.

Finally, I want to touch briefly on the consumer prices index uprating and judicial pensions. I know that everybody in the House is worried about the judicial pension scheme that is going through in the Bill, but none the less we will press on. As I made clear on Second Reading, the Bill makes a few relatively minor changes to the legislation governing the uprating of occupational pensions. It amends references to the retail prices index to read instead the “general level of prices” to ensure consistency with the rest of the legislation. It does not specify the measure for the general level of prices. I am pleased to see that the Opposition support us in all of this, although after talking to some Opposition Back Benchers, I do not think they were aware that the Government and the Opposition are apparently as one on CPI.

On judicial pensions, I will simply say that this is a key part of building a more responsible pension system, and I am pleased that the provisions have received the widespread support of the House.

I shall conclude, as others may want to speak. When we introduced the Bill, we were clear about the principle behind it: a desire to secure a better deal for our children through incentivising saving and sharing the costs of retirement more evenly between the generations. I hope there are more changes to come, with the other pension reforms that my hon. Friend the Minister spoke about, which will incentivise saving and give people a base income in retirement that they can understand and calculate. These changes should be seen in the light of all those wider reforms. We are currently working on that state pension design and consulting on the option of a single tier. All this will, I hope, provide a better deal for many women and self-employed people who have historically tended to suffer poorer pension outcomes. The changes that we are making to our retirement system are designed to put it back on firm foundations, establishing a new and fairer settlement between young and old.

I return to one point. It is a challenge to any Opposition, I guess, to have been in government and created something of which they are justifiably proud—auto-enrolment. We wanted to continue with it and we have done our level best to do that. That is the most important and powerful part of this Bill of reform. Given the importance of auto-enrolment, and notwithstanding all the heat and light generated by the Opposition’s arguments today about the level and the speed at which the state pension retirement age has moved, when they sit down and consider what is in the Bill that we are about to pass—automatic enrolment to improve the savings and outcomes for people in future years—I hope the Opposition will do the right thing and support the Bill. On that basis I commend the Bill to the House.