Pensions Bill [Lords]

Jenny Willott Excerpts

Tuesday 18th October 2011 Commons Chamber

[Jenny Willott (Cardiff Central) (LD)]

This is slightly earlier in the debate than I expected to be called. I will speak briefly on the amendments tabled by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) and the Government amendments.

I know that we will have a fuller debate later, but much of the Bill has complete agreement across the House and is extremely welcome. The changes to the state pension age seem to have overshadowed many of the other issues in the Bill. As I said on Second Reading, I and many of my Liberal Democrat colleagues were deeply concerned about the effect of these changes on women who are being asked to work significantly longer at short notice.

The hon. Gentleman who has just spoken—I will not repeat his constituency name, as saying it once was an achievement—said that the state pension age has to rise, and I think that we all accept that. We are all living longer. The gains in life expectancy have been significant and are continuing. In 1970, someone reaching 60 could expect to live for 18 years. Last year, that had risen to 28 years. That puts a significant financial burden on the state. By the time I retire, I fully expect the retirement age to be somewhere north of 70. Goodness knows whether there will even be a state pension by that point.

When we are increasing the state pension age, we need to ensure that it is done as fairly as possible. I and my colleagues, a number of whom are present, have been vocal in our efforts to change the timetable. I know that the Minister and his colleagues in the Department for Work and Pensions have been actively working within Government to ensure that the timetable is fairer and that those who are worst affected by the changes are protected. In my view, the initial draft timetable was not fair to the women who were worst affected. I am pleased that the Government have listened to the concerns that were raised by many people and have tabled today’s amendments. I am sure that the Minister will tell us more about them in his summation.

[Lilian Greenwood]

I hear what the hon. Lady says, but will she explain to the 300,000 women who will have to wait longer than anybody else to receive their state pension—between a year and 18 months longer—why they should have to pay more of the burden than anyone else?

[Jenny Willott]

Later in my speech I will move on to comments that relate to the hon. Lady’s point.

Capping the state pension age increase to a maximum of 18 months will protect 250,000 women, as we have heard, and 250,000 men. Therefore, 500,000 people will be better off as a result of the Government amendments. As we have heard, that is costing more than £1 billion. I am grateful to the Secretary of State and the Minister for managing to get £1 billion out of the Treasury. That is no mean feat. A problem with any change to the state pension is that the costs are in the billions, not the millions.

[Fiona O’Donnell (East Lothian) (Lab)]

Will the hon. Lady give way?

[Jenny Willott]

I will make some progress first.

That problem makes it extremely difficult for small changes to be made. Given the financial circumstances, with the issues of debt and deficit that we have discussed, and the fact that other Departments are asking for money in the millions rather than the billions, convincing Treasury officials to be more generous cannot be easy. I hope that all hon. Members appreciate that the £1 billion going to these 500,000 people is a significant amount of money that has been found by the Government.

[Hywel Williams]

From the tenor of the hon. Lady’s remarks, it sounds as though she is satisfied with the concession that the Minister has achieved. I congratulate him on the distance that he has gone and I do not underestimate the difficulties. However, is the hon. Lady confident that the women in her constituency who will still be affected will be as easily persuaded as her?

[Jenny Willott]

I was just going to move on to the fact that, although I am delighted by the changes, in an ideal world I would have liked us to go further. I would have liked to see the cap closer to 12 months than 18 months, but we are not in an ideal world and the cost associated with that would have been significant. I understand that the cost of capping at 12 months would have been close to £3 billion, which would have been a significant amount of money to find. That would have been an uphill struggle. We have to appreciate the scale of the money that has been found to make things better for the women who are worst affected.

There has been a broad coalition campaigning on this subject, including Age UK, Saga and Members of all parties. Some have been extremely constructive in their campaigning and in the pressure that they have put on the Government, whereas others have been slightly less constructive at times. Some of what the Labour party has proposed today is, I think, unrealistic. It is unhelpful to the attempt to make as much progress as we would like towards helping the women who are most affected.

The Labour amendments tabled in Committee and today on Report that would delay the entire increase by two years are not sensible or realistic. Regardless of what the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East says, £10 billion would be a huge black hole in the public finances, and it would be a significant amount that the Government would have to find. [Interruption.] I am told that it would be closer to £11 billion. I am not going to start the debt versus deficit debate again, but there would be a huge black hole if we accepted a Labour party proposal that would require an unfunded promise of £11 billion.

[Gregg McClymont]

I have a very simple question for the hon. Lady. Why take that money from these women?

[Jenny Willott]

I would be grateful if the hon. Gentleman could clarify to us where the money that he proposes spending would come from. Unless we tackle the financial crisis in this country and the financial circumstances that we face, my child and all our children and grandchildren will be paying off the debt. We have to tackle the debt—it is real money that needs to be found, and a £10 billion black hole would be a significant one to fill.

[Dame Anne Begg]

Can the hon. Lady explain where the Government are finding the £1 billion that is needed to make the change that is being announced today?

[Jenny Willott]

I am really sorry, but I cannot tell the hon. Lady where the Minister has found the money. I am sure that if she asks him the same question later, he will respond.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I am sure we all have great sympathy with the women who have been most adversely affected by the changes, but do you not agree that the Labour party’s argument would be far more credible if it were able to tell us where it would make up the difference? Then we would be able to decide on the matter, as opposed to being told, “It is only £11 billion, we should find it from somewhere else.”

[Jenny Willott]

I completely agree. There is strong feeling throughout the House that in an ideal world, none of us would want to see the problem exist. We all accept that the state pension age will have to increase, because we are living longer and there is a black hole in the finances. I have said that in an ideal world, I would like to see the increase capped at 12 months, but we are not in an ideal world and we have to find a compromise that is workable and affordable. I appreciate that there are women who will be negatively affected by today’s proposals, and I am sure that we all have huge sympathy for them. However, I am glad that the Government have found the resources needed to mitigate the difficulties faced by those who are most severely affected.

[Sheila Gilmore (Edinburgh East) (Lab)]

Does the hon. Lady not agree that in politics, choices are constantly made, and that there are a number of choices that could be made in this case? There are those, for example, who argue that the 50% tax rate should be reduced at an early date, and there are those who argue that the generous tax reliefs given to people on higher rate tax who contribute to pension schemes could be ended, giving substantial savings. Does she agree that there are always choices, and it is not just a question of asking where a particular sum of money will be found?

[Jenny Willott]

I completely accept that political decisions are a matter of priorities and choices—all hon. Members understand that, because we are all involved in political debates and decisions. As I have said, in an ideal world, I would like the cap to be reduced. However, given the financial circumstances, the Government’s proposal is a compromise that I can accept. I understand that some will be negatively affected, but we have made significant progress. Half a million women and half a million men will benefit from the proposals, which I accept as a positive compromise.

[Alok Sharma]

My hon. Friend makes the point that we are not in an ideal world. A large part of the reason why we are not in the world that we would like to be in is that the previous Labour Government left us with a record deficit. Labour Members are now talking about another £10 billion. Does she agree that it is ludicrous for them to talk about unfunded commitments, and that they should instead apologise for the mess that they left the country in?

[Jenny Willott]

We need to focus on what is realistic and affordable. The Bill will affect people’s lives, and we need to ensure that the state pension is affordable and sustainable long into the future. I want to receive the state pension that I have paid into when I come to retire, and I am sure all hon. Members and people out there in the country would want the same thing.

I welcome the fact that Labour Front Benchers are now more positive toward to today’s proposals, and that they are prepared to accept that the Government have moved to the significant benefit of a large number of women, even if a realistic approach is somewhat lacking in their proposed amendments.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does not the hand-wringing between 12 months and 18 months, and billions here and there, show the utter vanity of the UK spending billions on Trident nuclear weapons, when we are finding difficulty in paying money to old age pensioners?

[Jenny Willott]

The hon. Gentleman tempts me into an area into which I will not follow him. That is an issue for another day, although my position is probably not too dissimilar from his.

Given the financial circumstances and the constraints that the Government face, the deal proposed today is a good one. The Government’s amendments substantially mitigate the worst problems, and we should bear it in mind that £1 billion is a huge amount of money.

I hope the Minister can now concentrate on introducing a flat-rate pension for those whose retirement age is increased. That would make a massive difference to the amount that people get from their basic state pension when they retire, and it will benefit women in particular. Will he confirm that he still plans to introduce a flat-rate pension for 2016, so that women who are affected by the state pension age increase that we are discussing will be the first, or among the first, beneficiaries? In that way, although they retire later, they will do so on a significantly enhanced state pension, which would mitigate some of the financial implications of the Bill.

I commend the Minister and his colleagues in the Department for Work and Pensions for their efforts, and for their achievement of parting £1 billion from the Treasury to make the changes better, so that the effects are mitigated for those who are hardest hit. I hope that he continues to work to improve retirement income for both men and women.

[Malcolm Wicks (Croydon North) (Lab)]

It is a pleasure to follow the hon. Member for Cardiff Central (Jenny Willott). I may touch on some of her themes as I make progress.

The Minister will forgive me for repeating some of the issues that I have raised before, not least in Committee. My main point is this: pension policy in Britain has always been at its best when it goes with the grain of how our society works and of how our people work and live. It is also at its best when we have the courage for long-term planning, with time scales and periods of notice that enable men and women to plan their lives and their retirement properly.

This Parliament first legislated for old age pensions more than 100 years ago, because it started to understand the extraordinary fact that, for the first time in broad numbers, working people were outliving their working lives: hence the need for an income in old age. We then had the great national insurance reforms, which the Liberal party should have much credit for introducing, including particularly those in the great report by the Liberal reformer, William Beveridge.

--- Later in debate ---

[Stephen Timms]

The Bill certainly has some welcome features, as well as some very regrettable, unwelcome features. I shall touch on both aspects in my contribution.

The recommendations of the Pensions Commission chaired by Lord Turner were broadly accepted across the House. As Pensions Minister at the time, I was extremely impressed by the energy and commitment brought to their task by Lord Turner and his fellow commissioners, John Hills and the now Baroness Jeannie Drake. They were successful in putting together an all-party consensus, which has endured. We will continue to work consensually with the Government as far as we can for the strategy that was developed in the review.

The first element of that was auto-enrolment into a low-cost national scheme. I agree with the Secretary of State about the significance of that change and I welcome his confirmation that the Government will not move away from their commitment to auto-enrolment. The second element was an increase in the state pension age, and re-linking the level of the state pension with earnings was the third.

But it is not fair for the costs of this trinity of measures to be borne disproportionately by any one group in society, whether that group is defined by age, occupation or gender. The Bill would unfortunately affect some groups far more than others. We have just had a debate touching on the fact that young people and agency workers, who move jobs more frequently than average, are likely to lose many months of employers’ contributions because of the changes, as well as the chance of building up a savings habit, because of the introduction of a waiting period in auto-enrolment. Up to a million people on low wages would be left out of auto-enrolment owing to the increase in the level of the earnings threshold. But most significantly of all, and this is what gives us a real problem with the Bill, half a million women aged 56 and 57 will find themselves waiting up to 18 months longer for their state pension, and a third of a million will be waiting a full 18 months extra, with too little time to plan for the change. That is a serious problem.

We welcome the Government’s recognition that the original Bill was wrong, and what we have now is certainly a welcome change. I make no bones about welcoming the change that has been made, the concession in response to the big and entirely proper campaign that took place, but the Bill still leaves half a million women in the lurch. My hon. Friend the Member for Leeds West (Rachel Reeves) led the argument against the original ill thought-out plans, and I welcome the change that has occurred, but, with so many women still affected, Ministers cannot claim that they have solved the problem.

We understand why the state pension age is being increased by one year for many people, because the Secretary of State set out why and our amendments did not oppose the increase, but what has struck me about tonight’s debate is that no Government Member supporting the Bill has provided any justification why it is being increased by more than one year for half a million women—and not for a single man. What is the justification for picking out that group of half a million women and treating them more harshly than everybody else?

Why are those women being picked out for worse treatment? We have been given no justification at all, except that it will save a lot of money. No doubt it will, but the Secretary of State has a responsibility to develop a policy that can be defended, that has some rationale to it, not simply telling us, “Well, this is going to save us a lot of money.” There needs to be some justification for the change that is being made, and no justification—at least none that I can understand—has been made at all for picking out that group of half a million women.

The Pensions Policy Institute recommends that 10 years’ notice be given for people to plan for a change in their pension age, and the Turner report recommended a longer period, but the plans in the Bill still give some women as little as five years, and that is simply not enough. It is just not fair to those affected to impose on them such a big change with so little notice.

Those women have relied on an implicit contract of reasonableness and fairness between government and citizens when planning their retirement, and, if the truth is that government cannot be trusted to keep its side of the bargain, how are people expected to plan for pensions saving at all? Pension saving is inherently long-term in character, but it simply will not happen if the Government make a habit of sudden policy lurches that undermine the assumptions on which people have been encouraged to build in the past, so it is no wonder so many women feel so badly let down by what the Government have done.

We are talking about a 10-year period beginning in 2016. Under the coalition’s plans, unless they are to continue the current effectively zero-growth policy indefinitely, those savings are about the long-term sustainability of the pensions system, and we support, as our amendments tonight supported, the proposal to find further savings, if necessary, by bringing forward the date at which the rise to 67 years old occurs, as long as people have time to organise their affairs and to plan accordingly. The sudden unpredictable lurch, not mentioned by either coalition party in the general election campaign or in the coalition agreement, has caused the problem.

As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) stated on Report, our objection to this part of the Bill is that it achieves these very large savings solely at the expense of one age cohort of women, apparently on a wholly arbitrary basis. The data are very clear. Women have substantially lower savings than men, yet a group of women—older women who have the least time to plan for the change—are being asked to bear the cost. The Bill simply fails the fairness test, and for that reason, in particular, we cannot support its Third Reading. We understand that Ministers are worried about rapidly plunging popularity among women voters and we are told that they are puzzled about why that is happening. They should just take a careful look at the unfairness in this Bill, and they will find a ready explanation there. We will not support that unfairness in the Lobby tonight, and no one else who values fairness should do so either.

The third of a million women with a wait of an extra 18 months will lose, just in state pension, pension payments averaging £7,800, and if one allows for pension credit and other passported benefits, we are talking about significantly greater sums still. Those women, if they are not working at the moment, will find it hard to find new jobs in the current labour market. Given that 37% of them are currently not in work, how are they supposed to make up that shortfall? We have been given no answers to that question.

As I think we would all agree, the design of the future pensions system should maintain inter-generational fairness. Imposing such large costs on one group of women means that the Bill fails to meet that fairness test. What became of the Burkean compact between generations to which Conservatives once subscribed?

[Jenny Willott]

rose—

[Stephen Timms]

I will gladly give way to a non-Conservative.

[Jenny Willott]

Is the right hon. Gentleman able to answer the question that was posed by several hon. Members earlier in the debate, and then again by the Secretary of State, about whether he and his party would plan to repeal the proposals on women’s pensions and pension age if they were to come into government after the next election, given that the changes would not have taken place by that time and they would have the opportunity to do that were they so minded?

[Stephen Timms]

My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East answered that question earlier in the debate. Our view is that there have been too many changes and we would not propose yet another. The hon. Lady needs to explain the justification for picking out this particular group of half a million women and treating them more harshly than everyone else whose state pension age is being raised only by one year. For a third of a million women, it is being raised by a year and a half, and for half a million, it is being raised by more than a year. We have had no explanation and no attempt at a justification. Is it an accident or some kind of mishap? It certainly should be put right, and sadly it has not been put right in the changes that the Government have made.

There are other problems in the Bill. It dilutes the plan for auto-enrolment that was supported across the House. The proposals will leave many low-paid and agency workers outside auto-enrolment, and we think that they should not be left behind. Moreover, the gains from these exclusions, in lower costs for employers, will be small. It would be quite wrong to exclude people just because they work for small companies, as the Conservative party donor Adrian Beecroft is apparently arguing. I greatly appreciate the assurances that we have had about that during the debate, and I hope that Ministers will continue stoutly to resist any such moves if they are promoted from elsewhere in the coalition. The Pensions Commission made it clear that extending the benefits of pensions saving to more people who work for small firms is one of the prizes from this reform, and we must not throw it away.

The Secretary of State is absolutely right to argue that this is a pro-growth, not an anti-growth, change in making it possible for more people to save for a decent retirement. Of course it is right to be concerned about the plight of small firms in the zero-growth economy that we seem to have. I commend to the Government the national insurance holiday for small firms that take on additional workers that is proposed by my right hon. Friend the shadow Chancellor. We remain strongly supportive of the policy of auto-enrolment. We are disappointed, however, that the Government are seeking to water down the proposals around which the all-party consensus was hard won.

We welcome the consensus on the basic building blocks for a more sustainable pensions system, but the Government are quite wrong to load the cost of change so disproportionately on one group of half a million women. For a long time, they did not listen to those women at all. When they did, they came forward with a half measure. The sense of grievance that they have instilled in the women affected will not be readily dispelled. We are pleased to have won a concession, but many people will still be deeply disappointed. For that reason in particular, I urge Members to decline to give the Bill a Third Reading.

--- Later in debate ---

[Jenny Willott]

It will not surprise hon. Members to learn that I welcome the Bill. The issue of women’s state pension age has been discussed in full already today, but there is much else in the Bill to be welcomed. Many of the measures have broad support across the House, as we have already heard this evening. Auto-enrolment is, as the hon. Member for Hampstead and Kilburn (Glenda Jackson) said, critical to many people who up to now have had no pension savings and have not been in a position to save for their retirement. It is fundamental, and I support it now as I supported it when it was proposed by the previous Government.

We have to get more people saving for their retirement. Far too many people have no savings at all, and when they retire they depend entirely on the basic state pension. It was not designed to provide an adequate living; it was designed as a safety net. But for an awful lot of people it is their sole retirement income, and that is something that we need to change. For years we have been grappling with how to get more people to save, especially those on the lowest incomes. Auto-enrolment is critical, because we need to make it as easy as possible for people to save. We need to make it as easy as possible for businesses to administer, so that it becomes a no-brainer: people will automatically save for retirement without thinking twice about it, and so put themselves in a better position for their retirement.

Pensions are such an important issue to get right. It is not glamorous, people do not understand it, and it is very complicated. Even when I have conversations with other hon. Members about it, their eyes often glaze over. It is not an issue that people want to discuss, but it is our duty to try to make it as simple as possible for people so that as many as possible have some savings put away for their retirement and can retire in more comfort. That ties in with what my hon. Friend the Minister said earlier about the need to get means-testing out of the system, so that people know that whatever they save while they are working will benefit them in their retirement. We need to ensure that a flat-rate pension is introduced as soon as possible so that people who work, on however low an income, know that whatever they put aside during their working lives will benefit them when they retire, that they will have adequate retirement pensions, and that they will not have to rely on just the basic state pension.

I am saddened that many hon. Members feel unable to support the Bill—

[Ian Murray (Edinburgh South) (Lab)]

I am grateful to the hon. Lady for giving way at this late hour on Third Reading. She is making a very impassioned speech about women who should save for their retirement, and that is right—but what would she say to the 500,000 women who have made savings and thought about what will happen when they retire, but who will now have to wait 18 months longer for the state pension?

[Jenny Willott]

I am sorry that the hon. Gentleman was not able to be in his place earlier when I explained all that. We had a long debate on exactly that point earlier. The whole point of Third Reading is to be able to expand on the issues, and I wish to put on record the fact that I am very supportive of auto-enrolment, as are many other hon. Members, and on the capping of fees, as well as other measures in the Bill that are crucial but have not had as much attention as women’s pensions have. I hope that hon. Members will reconsider and feel able to support the Bill this evening, so that we can ensure that more people save for their retirement and do not have to live in poverty.