Pensions Bill

Debate between Liam Byrne and Richard Graham

Monday 17th June 2013 Commons Chamber

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

It is a great pleasure to follow the Secretary of State. I shall attempt to do justice to his succinct speech. As he will know, yesterday was a very difficult day in Birmingham, and I know that the whole House will join me in sending thanks and good wishes to PC Adam Koch, who was so badly hurt on Saturday night. His extraordinary courage, together with that of local residents, helped keep worshippers safe at one of our local mosques. He is doing well in hospital. I know that the whole House will want to wish him a speedy recovery.

I am grateful for the note of consensus that the Secretary of State sought to strike in his remarks. As is appropriate for a Second Reading debate, this afternoon I would like to set out the principles on which we agree with the Government and then get stuck into a few of the details of some important matters that we think are still to be settled. We genuinely hope that the Government will listen during this debate and in Committee, not least because many of the issues I wish to raise touch greatly on the need for a comfortable and well-earned retirement for millions of people in this country.

I think that it is fitting to start my remarks with a quick word about history and the road to this afternoon’s debate. One of the chief reasons why the Labour party will not stand in the Bill’s way today is that we recognise the genuine effort to build on the strong foundations that we left. Indeed, our only disappointment today is that we think the Secretary of State is proposing to build only a halfway house on those strong foundations. We think that the Bill is merely half a reform. Therefore, the Opposition’s job during the course of the Bill’s passage will be to ask him not simply to fix some of the deficiencies we can see, but to be bolder and more radical and to seize the moment that we think is there for the taking. I want to set out a number of areas where I think he can do more to seize that moment.

I am glad that we bequeathed the coalition Government a strong foundation—an inheritance very different from what we found in 1997. The link to earnings had been snapped back in 1980, there were pension holidays for employers and the state pension had fallen from 20% of earnings down to just 14%. The pensions Minister himself said:

“Pensioners, rightly, do not trust the Conservatives on pensions.”—[Official Report, 6 November 2000; Vol. 356, c. 34.]

I am glad that he is working so closely in the coalition Government with the Secretary of State on their difficult task.

I have described the legacy that we tried to sort out. We genuinely wanted to leave the Government a different state of affairs. There is no better summary of our work than the research published by Her Majesty’s Government confirming that pensioner poverty had fallen to the lowest level for 30 years.

[Richard Graham (Gloucester) (Con)]

The right hon. Gentleman talked about building on the strong foundations left by the previous Government. If my memory serves me correctly, the last increase in the basic state pension was 75p. The coalition Government’s new increase in the state pension was worth £234, building on a new foundation of a triple lock, which will increase pensions by a significant amount. Will he comment on the difference between my interpretation of a strong foundation and his?

[Mr Byrne]

The hon. Gentleman will be as familiar as I am with the research published by the Institute for Fiscal Studies showing that, under Labour, £11 billion more was spent than if we had pursued the policies that we inherited in 1997. We lifted gross income for pensioners by more than 40%; 2.4 million pensioners had been lifted out of absolute poverty and nearly 2 million out of relative poverty by 2010-11. It was the IFS that confirmed that both the absolute and relative measures of income poverty fell markedly among pensioners. We inherited a tragic and grotesque state of pensioner poverty in 1997 and we set about dealing with it with focus and alacrity. We are proud of the inheritance and legacy that we left the Government.

[Mr Byrne]

We are very proud of the reforms that we set in place. They tackled the grotesque pensioner poverty that we inherited in 1997. That is not simply my conclusion; when the pensions Minister spoke in the House back in 2000, he pretty much confirmed the same line of argument and the same thesis. The job we did on pensioner poverty was important and we made great progress. The foundations that we left are those that the Secretary of State has built on.

The purpose of the Bill is, in essence, to address one of the matters flagged by Lord Turner in his report and one for which we legislated in 2007. As the Secretary of State mentioned, the noble Lord recommended a new pension supplement for the 21st century—one that is universal and, crucially, one that reduces means-testing, an important part of the Secretary of State’s argument. As the Secretary of State also rehearsed, the noble Lord recommended a system that provides clear incentives to save.

The commission proposed an approach different from that proposed by the coalition. It was in the interests of preserving the consensus that Lord Turner had so assiduously constructed that we chose to follow his approach rather than the one set out by the coalition today. Indeed, at the time Lord Turner flagged a number of risks in the strategy that the Government are now pursuing. The Government have taken an approach different from Lord Turner’s. That comes at the price of some big notional losses for state second pension members. The goalposts on the state pension age have now been moved three times in three years. However, there has been some improvement in means testing and potentially something about incentives to save. I want to touch on those.

Let us take means testing first, however, as it was an important part of the Secretary of State’s argument. Today, about 80% of people are free of the pension credit means test; that pension credit is now available for 20% of people. By 2020, that would have fallen to about 16% anyway. Under flat-rate pensions, there will be a further fall of about 8%. If we put savings credit to one side, the improvement is just 2%, and of course about 35% of pensioners will still be eligible to access council tax benefit, which is about 238,000 people, and 12% will be able to access housing benefit—84,000 people. We are still an awfully long way from the end of means testing, but none the less a small step forward has been taken and we welcome it.

The Secretary of State was anxious to stress the point about savings. The judgment of the IFS was that the effect of proposals on the incentive to save were complex and varied. As the Bill reduces the long-run generosity of the pension system—that is one reason why we support it—it should increase the incentive to save. However, although some will see lower effective marginal tax rates when pension credit and savings credit are withdrawn, some will see higher marginal tax rates. The IFS says, therefore, that the direction on the effect of savings is ambiguous.

Under the proposals, some pensioners who have saved absolutely nothing will be better off in real terms each week than those who have saved substantial sums. A pensioner who has saved nothing will enjoy the flat-rate pension of £144 a week and will be entitled to housing benefit and council tax benefit, which is another £94 a week. That is a total of £238 a week, which is considerably more than what someone who has saved £24,000 will receive. They might enjoy a notional income from savings of about 30 quid a week, plus the flat-rate pension, which is a total of £174 a week. That is much less—36% less—than what the pensioner who has saved nothing will get. In fact, the pensioner who saves nothing will be better off than someone who has put £50,000 away in the bank. So there are still problems and disincentives to save, but none the less, we think that, on balance, the Bill represents progress, which is why we support it in principle.

[Richard Graham]

Did I hear the right hon. Gentleman right when he said that the Bill’s move to axe the means-tested pension credit was a small step forward? This is a huge and significant step forward that recognises that the means-tested pension credit was deeply flawed and was not implemented for many of the people who were eligible for it. A single-tier pension will set our pensions on the right track. Will he confirm that the Labour party now accepts that this is the right way forward and that it is a huge step?

[Mr Byrne]

I will leave it to the hon. Gentleman to provide his own definition of the word “huge.” He will have read chapter 4 of “The single-tier pension: a simple foundation for saving”, published by the Department for Work and Pensions, which clearly says that under the current system, the number of people reaching state pension age after 2016 who will be eligible for means-tested benefits for pensioners will fall to 16%, and that the figure will fall to 11% by 2060. Under the single tier, eligibility for means-tested benefits will fall by 7.5%. The hon. Gentleman will also have read, as I have, Age UK’s evidence, which states, strikingly, that the great bulk of that change results from the elimination of savings credit, rather than from any increase in generosity. If we put savings credit to one side, we will see that the change in the percentage of pensioners eligible for means-tested benefit is just 1% or 2%. If he chooses to define that as huge, that is his right.

I want to flag concerns in three further areas and I hope this will provide us with material for debate and amendments—some probing and some to be voted on —in Committee.

Welfare Benefits Up-rating Bill

Debate between Liam Byrne and Richard Graham

Monday 21st January 2013 Commons Chamber

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

rose—

[Richard Graham]

On that note, I am happy to give way to my great friend, who was unable to recommend his proposals on tax credits to the Communist party of China last week.

[Mr Byrne]

I am grateful to the hon. Gentleman, who is giving way with characteristic generosity. He will accept that hitherto in this country, and for many years, the proposal to uprate benefits has been presented annually and much closer to the time at which uprating should take place, so that the Chancellor can take account of the latest economic circumstances and the latest level of inflation. It is only now that the House of Commons is being invited to set in stone a strategy that will stretch ahead for many years to come. That is the unusual situation.

[Richard Graham]

My friend—for he is my friend— the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) would make a valid point if it was not for the fact that this provision is set for only three years and it is set in the context of what he and his colleagues achieved during the extraordinary runaway period between 2003 and 2010, when they unleashed £170 billion of tax credits and raised welfare spending by 60%, so that, as we know, it is now a third of all Government expenditure. That is the bill that all our constituents are having to pay today.

It is not surprising that the Government are having to take the risk—I accept that there is an element of risk—of pre-setting the uprating of these benefits without knowing what the level of inflation will be. That is why my right hon. Friend the Member for Wokingham (Mr Redwood) was right. Hon. Members on both sides of the Committee gave him credit for flagging up the two crucial ingredients—control of inflation and energy—so that some of the less well-off in our constituencies do not suffer from the effective freeze over the next three years.

[Mr Byrne]

The hon. Gentleman is incredibly generous in giving way. Does he think the Bill is unconnected to the OBR’s decision to uprate the claimant count by a third of a million over the next few years, lifting its forecast for spending on unemployment and other out-of-work benefits by £6 billion? The Bill is needed to pay the price of economic failure. Surely that is the arithmetic.

[Richard Graham]

The right hon. Gentleman, with his great experience of these matters, asks a technical question which I am fully confident the Minister will answer in detail in due course.

I promised I would be brief, Mr Amess, so let me come to the point. In effect, tonight we have debated in practical terms the benefits of tax credits against the benefits of tax allowances. I argue that tax credits, the chosen policy of the previous Government, were flawed by their cynicism, having been increased by 58% just before the 2005 election and by 20% just before the 2010 election. I am sorry to say that those were giant electoral bribes that led directly to the greatest bust of all times. The hon. Member for Glasgow North East spoke about moral divisions, and to hear that from a Member whose Government created pension credits, which divided pensioner from pensioner, discouraged saving, enabled arguments between—

Welfare Reform Bill

Debate between Liam Byrne and Richard Graham

Wednesday 1st February 2012 Commons Chamber

[Richard Graham]

My right hon. Friend makes an important point. I have heard from many charities, whose work I deeply respect in many ways and who are active in my constituency, and the strength of their words on some of these issues does amount to scaremongering. I hope that, as on housing benefit, they are proved entirely wrong.

I hugely congratulate the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) on the ingenuity of his argument. I have no doubt that were he to go more deeply into the private sector, as I believe he is starting to do, he would be a fantastic salesman of unsellable products. Today, we have heard from him an extraordinary, last-minute and uncosted proposal that leaves us none the wiser about what the Opposition really believe. I sympathise with the right hon. Gentleman. He said that if we left matters to politicians, they would make a pig’s ear of it. He is right: he did. From the man who was in charge of the spending of taxpayers’ money and realised that he had spent it all, that was a hugely motivational factor for many Government Members, who realised that politicians had made a pig’s ear of it and perhaps it was time for people from outside politics to come in and try to do something to help.

[Mr Byrne]

The hon. Gentleman is very generous and I am grateful for his compliments. But he must accept that Ministers have so badly thought this policy through that they have had to face the indignity of coming to this House and promising to spend £130 million solving a problem that they have told us for the last year would never present itself.

[Richard Graham]

As the right hon. Gentleman will have just heard, I came into this House from outside politics, with a background in the public sector, the charity sector and business, where making concessions and being flexible in achieving goals was generally considered to be a merit. Perhaps if he had shown more flexibility in his approach to the handling of taxpayers’ funds, we would not be in quite the situation that we are today. I am sorry, because I enjoy his company, but I came to the conclusion that his approach today does not remotely add up to a policy. It is simply the continuation of a welfare culture by his party that amounts to gross irresponsibility, married to a something for nothing culture.

In summary, the Bill achieves the following goals. It protects the weak, the disadvantaged and the disabled. There are transitional arrangements in place to help families who are unintentional victims of the Bill in places with high housing costs such as London. It does ensure that workers who are paying the tax that goes to support an enormous benefits bill can see that the Government are taking steps to cap the amounts that are paid out. It is the right thing for Gloucester and for this country, and the amendment is a clumsy, last-minute fudge rather than any solution. I have no hesitation in rejecting it and supporting the Government’s proposal.

Pensions Bill [Lords]

Debate between Liam Byrne and Richard Graham

Monday 20th June 2011 Commons Chamber

[Mr Byrne]

The Minister gave an interesting answer, because those costings say that if, for example, we increased the retirement age to 67 by 2035—that is, if we accelerated the reform by one year—that would save £6.9 billion. However, if the retirement age was increased to 67 by 2034, by accelerating the increase by two years, that would save £13.7 billion. Therefore, the question for us this afternoon is: how much will be saved by accelerating the reform for those women who are now having to retire later, and who therefore confront trying to find all that money magically, in the space of just four or five years? Has that been traded off against other options, such as introducing advances in the retirement age later on? That is the question that we have to get to the bottom of in this Second Reading debate.

[Richard Graham (Gloucester) (Con)]

rose—

--- Later in debate ---

[Mr Byrne]

In a moment.

We are talking about women in the age group that was asked by a Conservative Government in 1995 to set in train the equalisation of the state pension, a reform that we accepted, because it came with time to plan. However, that cannot be said of today’s proposal. This morning, Age UK warned that

“a sizeable minority are not even aware of the 1995 changes with nearly a fifth expecting to receive their State Pension at the age of 60.”

The Secretary of State’s proposals will now make that worse.

[Richard Graham]

rose—

--- Later in debate ---

[Mr Byrne]

My hon. Friend makes an extremely good point, because I think that that was news to the House. We would certainly expect that legal guidance to be published before we get to the Minister’s winding-up speech. That guidance is a material point in a debate that is important to many people, as well as many right hon. and hon. Members, because this Bill has such a poor effect on women in this country—the people we represent.

[Richard Graham]

rose—

[Harriett Baldwin]

rose—

--- Later in debate ---

[Mr Byrne]

Of course. The hon. Lady makes an extremely fair point, and that is why, after the Turner commission met and the Pensions Act 2007 went through this House, a clear timetable was set for how the state pension age should increase. [Interruption.] The Secretary of State is muttering from a sedentary position about how the longevity assumptions have now been increased. That is perfectly fair, and we should have a national debate about how the state pension age should be brought forward; indeed, the Pensions Minister has issued a consultation. It is just a shame that it closes on Friday, after this debate is concluded.

[Richard Graham]

The right hon. Gentleman made two comments about how the Bill treats women. He estimated that the cost of the changes to some women would be £10,000. Does he not recognise, however, that the change in the value of the basic state pension as a result of this Government’s commitment to linking it back to earnings will be worth more than £15,000? Will he also acknowledge that, as a result of the new flat-rate basic state pension being applied, a lot of women who would previously have lost out because of their caring responsibilities will now benefit hugely? Does he not agree that women will benefit from the changes in the basic state pension in those two ways?

[Mr Byrne]

Let us take the hon. Gentleman’s second point first. I understand that the proposal for a flat-rate pension is included in a Green Paper. It is therefore an early statement of the direction of Government policy. Given what the Government have managed to do to commitments in their coalition agreement, I am not sure how much water that proposal holds. The hon. Gentleman’s first point was more interesting, because he was comparing the benefit for someone on a pension under the lock introduced by the Government with a pension that is linked to prices. Going into the election, no party proposed to keep the pension linked to prices, so his calculation is purely fanciful. Indeed, the Pensions Commission said that we should re-link pensions to earnings in 2012. That was in our manifesto, and that is what we would have done if and when we were returned to office. I am afraid that the hon. Gentleman cannot make up fantasy numbers comparing the reality—

[Richard Graham]

The right hon. Gentleman is generous to give way again but, with all due respect to him, I am comparing the fact of what was delivered by one Government over 13 years with the fact of what has been delivered by this new Government within one year. The Gloucestershire Pensioners Forum, which was created by members of his own party precisely to campaign against the de-linkage made by the late Mrs Thatcher when she was Prime Minister—[Hon. Members: “She is still alive.”] Indeed she is. I meant to say “the former Prime Minister”. The Gloucestershire Pensioners Forum has now fully recognised the value of re-linkage, which this Government will introduce. It is a shame that the right hon. Gentleman does not recognise these facts.