Pension Equality for Women

Debate between James Cartlidge and Patricia Gibson

Thursday 14th December 2017 Commons Chamber

[James Cartlidge]

Actually my point was going to be that everyone will end up paying the price. Of course this debate is about a specific cohort that has been hit quite directly and over a specific period, and there is also the whole issue of notification. However, although young people going into the workforce know about the change in the retirement age and have had notification, that does not mean they will be able to save adequately for a pension. It also does not mean that they will be able to afford one, or to get a foot on the housing ladder, and they probably will not have an occupational pension. We cannot look at this issue in isolation; we need to look at the whole system.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

Does the hon. Gentleman agree that we must get away from talking about women born in the 1950s as though they are some kind of burden on society? These women are asking only for what they were promised and what they themselves have paid for. They are not a burden; they are people looking for justice.

[James Cartlidge]

No one is saying that. My whole point is this: when the women say they have paid in, that does not exist. That is just a mathematical fact; it is not a nefarious thing. The system was not designed for this ageing population and the demographic changes that we are seeing. The duty on us in government and in this place is to be open and honest about that, and to try to come up with reforms that address it.

In my view—and this is a big deal—we should try to move to a funded pension system. Let us be honest: that is not a minor detail. If my hon. Friend the Minister asked his officials what they would think of that, they would say, “Sit down, put a cool, wet flannel on your head, have a cup of tea, and move on to the next issue.” What I suggest is not a minor deal. As I understand it, the only Government who ever moved from a pay-as-you-go system to a funded one was Pinochet’s in Chile—and he did not have to worry about Back-Bench rebellions and so on.

A funded pension would be extremely difficult to achieve because, of course, a generation would have to pay twice, but I believe that it could be done. We have had two proposals on this. During the April 1997 general election campaign, our party proposed basic pension plus. Peter Lilley came up with a system that would move us from the current state pension to a funded one. It would have been fully in place by 2040, so just 23 years from now, the liability for the state pension would have started to fall very dramatically. Instead, according to the Office for Budget Responsibility, the forecast for public spending 50 years from today, at current prices, is an extra £156 billion. That is mainly due to demographic change, higher costs of health care, more complex health needs and so on. That is an extraordinary position to be in and, as the OBR says, it is not remotely sustainable.

My hon. Friend the Member for Weston-super-Mare (John Penrose) has said that the other option is a sovereign wealth fund. Any funded state pension is effectively a sovereign wealth fund. It is a way of taking all the money that we pay into an unproductive, pay-as-you-go state pension system and investing it to meet our country’s needs, thereby boosting productivity and investment, and giving a greater return and greater ownership to people in an age when ownership in the capitalist system is under threat. There are huge benefits to be had. At the moment, the savings ratio is extremely low—that is one of the most worrying things in the Budget Red Book—but if the system forces people to save from a young age, it can be very effective. That is what we have with the new system.

There are specific issues, and we should look at the ladies who have been affected by this change, but if we really want to resolve it, we have to learn the long-term lessons. We owe it to those affected to ask how we can stop future generations being affected. If people own their pension—if it is theirs—the state cannot arbitrarily put in place this sort of change. It will take many years to establish a fully funded system, but there would be immediate short-term benefits as we moved to an economy on a more long-term keel. There would be more confidence in investment and we would move away from a more boom-and-bust, higher consumer debt model, which is why I think my hon. Friend has it spot on with a sovereign wealth fund. Either way, we need to start looking at the problem. We will need cross-party consensus, to be radical, and to look to the future rather than focusing on the short term.