Pensions Bill [Lords]

Debate between Liam Byrne and Ben Gummer

Monday 20th June 2011 Commons Chamber

[Mr Byrne]

Perhaps the hon. Lady would like to reflect on why, just over 12 months ago, the Government whom she is so proud to support set out a policy in direct contradiction to the one proposed in the Bill. I look forward to seeing which way she votes and how she justifies that to her constituents.

This afternoon, we must try to bring some order to that confusion, and establish which clauses we agree on, and which clauses the Government—and, I might say, the Treasury—need to rethink. The Secretary of State began with automatic entitlement, on which there is a measure of agreement—it is a rock that we should hang on to in that regard. The proposal for automatic enrolment of workers into workplace pensions is to be retained, which is important, because as a country, we under-save for pensions. In fact, 7 million could be under-saving for their retirements. Bringing those people into a pension system and creating a national pension scheme into which they might opt could lead to a step-change in savings in this country.

The previous Government were very careful to build that consensus, which we did patiently, beginning with the noble Lord Turner’s commission. I am grateful that the Government have not junked that proposal, but it is deeply regrettable that they are increasing the salary threshold to entitle an individual to auto-enrolment. It is also regrettable that they are introducing a three-month waiting period before people opt in.

I understand the trade-offs that the Secretary of State is trying to make, but frankly, he has made the wrong call. Why? The first reason is that the salary at which someone is automatically enrolled will be raised from £5,000 to nearly £7,500. The impact of that will hit 600,000 people—they will be much less likely to opt in to long-term savings. If the Government raise that threshold in line with the coalition’s ambition to increase the income tax threshold to £10,000, nearly 1 million people will be excluded, three quarters of whom will be women. Their loss, potentially, is £40 million of employer pension contributions.

The Government are proceeding in full knowledge of that. There is no defence of ignorance. Their review states:

“Many or most very low earners are women, who live in households with others with higher earnings and/or receive working tax credits. These may well be exactly the people who should be automatically enrolled.”

Yet the House has been presented today with proposals that could exclude more than 1 million people. We think, therefore, that the earnings threshold should be looked at again. And if that idea was not bad enough, the idea of a three-month waiting period makes it worse and in itself could mean 500,000 fewer people enrolling automatically in a pension scheme. The loss to them could be £150 million in employer pension contributions. Put those two things together and the average man or woman could lose nearly three years of pension saving—a 7% reduction in an individual’s fund. I am afraid that we simply cannot support that measure.

That takes me to the most audacious broken promise of the lot—the proposal to single out a group of 500,000 of our fellow citizens, all of them women, and say to them, “You know your plans for the future? Well, you can put them in the bin.” The Secretary of State might think it a relatively small and trivial number, but the Opposition do not.

[Ben Gummer (Ipswich) (Con)]

Will the hon. Gentleman give way?

[Mr Byrne]

I will in a moment.

This unfolding chaos has been impressive even for a Government who have presided over U-turns on forests, sentencing reform and the reorganisation of the NHS, because we thought we knew where we were. The coalition Government made a wise move in appointing the Pensions Minister to his brief—he is a man who knows a thing or two about pensions. Indeed, in one of his first major speeches, he told his audience:

“I have become known as something of a bore at pensions conferences.”

We have no problem with that. Then we had the coalition agreement. I do not know whether anyone remembers the coalition agreement—it was important once. Page 26 reads:

“We will phase out the default retirement age and hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.”

For good measure, the Pensions Minister got to his feet a month or so later and said that the Government were committed to any change not being sooner than 2020 for women. Then, 118 days later, the Chancellor arrives on the scene. He stands at the Dispatch Box and says that

“the state pension age for men and women will reach 66 by 2020.”—[Official Report, 20 October 2010; Vol. 516, c. 956.]

Yet buried in the fine print, we learnt the truth—not the Pensions Minister, the Secretary of State or the Chancellor could bring themselves to that Dispatch Box and actually tell people straight that that policy set out in the coalition agreement was absolutely worthless. The truth was set out in the depths of the spending review, page 69 of which read:

“The State Pension Age will then increase to 66 for both men and women from December 2018 to April 2020.”

That is a promise well and truly broken. At least when the Lib Dems changed their minds about increasing tuition fees, they could pretend that they were just making things up to get elected, but this was a promise they made and broke in government. Just last summer, the Pensions Minister boasted of reforms in the system that he said included

“those who the system has always missed out such as women and the lower paid.”

In his own Department’s review, he said that he wanted to look at the “particular challenge” for

“women pensioners. A group I have long worked for, and who are so often the poor relations in regard to pensions.”

I will let the House draw its own conclusions. One moment the Pensions Minister is offering to protect women pensioners, the next he is presenting proposals that will punish half a million women with a bill for up to £16,000.

--- Later in debate ---

[Mr Byrne]

I am glad to hear that correction about Baroness Thatcher. I think that the hon. Gentleman would also accept his Government’s own figures, which show that pensioner poverty is now at its lowest level for 30 years. I am sure that he would accept that pensioner incomes increased faster than gross domestic product and faster than earnings over the past 13 years. That is why we are proud of our record of delivering on pensions.

[Ben Gummer]

In response to an intervention by the hon. Member for Slough (Fiona Mactaggart), the right hon. Gentleman said that the legal advice was news to him. It was not news to the House of Lords, however, as it was debated there on 15 February, at which point this matter was raised. Surely the real news appeared in the weekend’s newspapers, which have provided yet another bandwagon for the right hon. Member to jump on.

[Mr Byrne]

I do not know how much attention the hon. Gentleman has been paying to this debate, but we championed this issue before it came to the House of Lords and as it went through the other place. We will champion it through the House of Commons as well, until this bad Bill has been thrown out.

Finance Bill

Debate between Liam Byrne and Ben Gummer

Tuesday 6th July 2010 Commons Chamber

[Mr Byrne]

I note that the hon. Gentleman was so eager to participate in this debate that he missed the beginning of it. The words I used were not my words, but the words from a wide section of the British business community. [Hon. Members: “Who?”] Well, Goldman Sachs, the Chartered Institute of Purchasing and Supply, and the judgment of the stock market. This is not a perspective held by a narrow corner of the business community. The judgment on this Budget is widely shared across this country.

[Ben Gummer]

Will the right hon. Gentleman confirm whether it was Goldman Sachs or the chief economist at Goldman Sachs who made those comments? It is an important distinction.

[Mr Byrne]

Absolutely. Jim O’Neill is a very respected economist, he is chief economist at Goldman Sachs, and his opinion was echoed by the chief economist at the British Chambers of Commerce. So this is not a narrow perspective from any one particular corner of the business community. This view is widely shared.