Social Security

Jack Dromey Excerpts

Monday 4th February 2019 Commons Chamber

[Jack Dromey (Birmingham, Erdington) (Lab)]

First, in relation to the Guaranteed Minimum Pensions Increase Order 2019, we note it. Secondly, in relation to the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019, I would like to speak to it briefly.

I am the first to accept that, as the Minister has said, there has been cross-party support over the past 10 years for auto-enrolment, but he will forgive me a commercial for the last Labour Government. It was the last Labour Government who commissioned the 2006 Adair Turner review—I actually chaired some of the policy discussions that led to that decision. The review produced an excellent report, and I was one of those who was pleased indeed that our Government acted on it. However, the success of auto-enrolment subsequently could not have been achieved had it not been for the cross-party approach to which the Minister referred.

There is no question but that auto-enrolment has led to a significantly better workplace pensions landscape, with an additional 10 million workers estimated to be newly saving or saving more as a result of auto-enrolment into master trusts. That has led now to almost £20 billion of pension saving, mostly by low-income workers. The Opposition also welcomed the moves by the Government to reduce the age of eligibility, which was an important step in the right direction.

However, for all the immense benefits attached to auto-enrolment, it is not a perfect system, and there are many issues that need to be acted on at the next stage if we are to make the pensions landscape better. First, the threshold at which workers are automatically enrolled is too high. According to the latest figures from the Department for Work and Pensions, 37% of female workers, 33% of workers with a disability and 28% of black and minority ethnic workers are not eligible for master trust saving through auto-enrolment.

Secondly, auto-enrolment does not cover the self-employed or workers in the gig economy. It is welcome that the Government are now taking steps in relation to pilot projects to seek to identify the problems and overcome them. It is particularly welcome that, as part of that, they are including at least one or maybe two joint initiatives with trade unions representing workers in sectors where there are large numbers of self-employed.

Thirdly, 8% cannot be the summit of our ambitions—of that there is no doubt. Labour commenced down this path when in government, and this Government have done things subsequently, so of course we have moved step by step. The Minister was right to say that, as we reach 8%, we need to take stock of where we go from there. We will need to build on that at the next stages, and, commensurate with getting the balance right, we will need, dare I say it, more of an emphasis on employer contribution, although employee contributions will of course continue to be crucial as well.

I have just one final point. I was grateful that the hon. Member for East Renfrewshire (Paul Masterton) raised the matter of CDC. A wider point in relation to auto-enrolment is that it has been a positive move towards many more workers saving. We have always said that we do not want, in any way, to threaten good DB schemes, and we always defend good DB schemes first and foremost, but I am afraid that the direction of travel on that has been depressing in recent years. If one falls back on a defined contribution arrangement, however, the problem is, all too often, the inadequacy of such arrangements. The hon. Gentleman was therefore right that the agreement reached by Royal Mail and the Communication Workers Union was a significant breakthrough. I pay tribute to them, because it is a groundbreaking agreement, which covers in excess of 140,000 workers.

I also welcome the Government’s preparedness, having consulted, to legislate. The Opposition will certainly work with the Government—on other issues, we may have differences, but on this we will work with them—to give effect to this groundbreaking agreement as soon as possible. That is not least because it will offer significantly better savings and a significantly better standard of living in retirement than would be the case if the workers concerned fell back on simple DC schemes. That, for us, is a particular landmark. I confirm that the Opposition stand ready, whenever the Government are ready, to bring forward the necessary legislation in this House. Some 143,000 workers will benefit, so the sooner we can introduce the legislation, the better.