Autumn Statement 2023

Lord Davies of Brixton Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, when I first put my name down for this debate, I did so in order to get extremely angry about the announcement in the Autumn Statement on the end of free prescriptions for certain benefit claimants. However, thanks to the right reverend Prelate the Bishop of London, I can save my anger for tomorrow’s debate—save to say that it is a cruel and outrageous proposal that reflects so badly on a Government who have already lost much credibility and honour. Instead, I turn to the proposals in the Autumn Statement relating to pensions, which do not incur my anger; indeed, there are certain aspects that I positively welcome. But I do have some questions.

I welcome the Government’s continued commitment to the triple lock for increases in state pensions. Newspaper columnists and other commentators might speculate about the unpopularity of the cost of the triple lock but, in truth, there is overwhelming support for protecting state pensions, including with the triple lock, which is of particular help to those on low to middle incomes. In truth, the Government did not have any choice. This year’s increases are simply in line with the legislation and did not actually involve the triple lock.

It is worth mentioning here that everyone says pensions were increased by 8.5%, but they were not. No one’s pension was increased by 8.5%. Part of everyone’s pension was increased by 8.5%, but part of their pension was increased by 6.7%, because the triple lock applies only to the basic state pension and the new state pension.

Of course, it was not for want of trying that the Government complied with the triple lock—or the existing law, I should say. A series of kites were flown, clearly in line with government thinking. They might have fiddled with the index, although they did that two years ago and promised never to do it again. Another idea was to fiddle with the time period, but that would have been wide open to legal challenge. So, in the end, they made the right decision and complied with the law—admirable and a true reflection of public sentiment.

Turning to pensions, I welcome the new Minister to her post. I am sure that she will enjoy our future discussions on pensions, because the Autumn Statement included a whole series of proposals relating to pensions; we will have to wait and see whether anything substantial emerges from the proposals. The key of course was the Chancellor returning to his much-touted Mansion House reforms as the basis for

“a comprehensive package of pension reform that will provide better outcomes for savers, drive a more consolidated pensions market and enable pension funds to invest in a diverse portfolio”.

He oversold it a bit, I think; hope is a fine thing. However, I welcome some of the thinking behind these proposals, as they affect pension fund investment. Some of us have been arguing for years that pension funds should be invested in the productive economy and that this should be reflected in the bases used to estimate the contributions required to pay for the benefits promised.

Defined benefit schemes have had a tough time of late, but they still hold substantial funds available for investment, which should be used to grow our economy. Instead, for the past 25 years, they have been increasingly forced by regulatory errors and false concepts of what constitutes safety to invest in what the new City Minister has just called the “safest graveyard”. There was a de facto race to the graveyard for such schemes, with wind-ups seen as the preferred option.

Now, the Government have reversed their approach, with measures being promoted that they say are intended to encourage them to run on, to continue in operation, to continue in active life and to continue to pay benefits. The idea, it is argued, is that larger funds—involving some consolidation—will be able to take advantage of the expertise that is available to invest successfully and, hence, to increase growth in our economy. Can the Minister help us by indicating some sort of timetable for the implementation of these proposals?

A second key theme, looking at defined contribution schemes, is consolidation and the elimination of uneconomic “small pots”. There is also the idea of building on the success of Labour’s policy of automatic enrolment, or, to put it less charitably, “let’s learn from our mistakes so far”. The move here is to what is termed in the Statement as the “lifetime provider” model. How committed are the Government to early implementation of change in this area? I was present at a meeting yesterday with the new Pensions Minister and gathered the impression that the Government were only at an early stage of their thinking.

Finally, I want a commitment on the changes mentioned in the Statement to the rules on when surpluses can be repaid. The use of “repaid” is slightly misleading. The Statement says that this will include

“new mechanisms to protect members”.

The starting point is that the money in a pension scheme is the members’ money and should be used only where there is a benefit to the member. However, where discretionary benefits require the consent of the employer, it is possible that there is a deal to be done that can suit the employer and the members. But such a deal should be done only with the fullest disclosure to those who matter—the members—and only after consultation with them and the unions that represent them. This is obviously all subject to consultation, but I hope the noble Baroness will reaffirm the commitment in the Statement to protect members.