Pensions Bill [Lords]

Malcolm Wicks Excerpts

Tuesday 18th October 2011 Commons Chamber

[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 Metcalfe]

Will the right hon. Gentleman give way?

[Malcolm Wicks]

Not at the moment, because I want to set out the three assumptions before I deal with the hon. Gentleman’s false—or possibly accurate—assumptions.

The second assumption is that British people live and work in similar ways. It is assumed that we start work and retire at more or less the same. The third assumption is that if we increase—as it appears we will—the pension age and the age of retirement, work will somehow be available. If people do not retire until 66 or 67, it is suggested that this Government’s extraordinarily brilliant economic and employment policies will deliver labour for the people. It is those three assumptions that I wish to question.

[Stephen Metcalfe]

Longevity and extended life expectancy are key to this argument. You point out that longevity is not necessarily equally spread across society. Are you saying that certain sectors of society have benefited from improved longevity more than others, and that for some, life expectancy has not risen at all?

[Malcolm Wicks]

Certainly for some people it has not, but broadly speaking it is my understanding that it has risen for all socio-economic groups. My assumption is that it will continue to increase, but it is the differences by social class that the hon. Gentleman’s question enables me to tease out—

[Stephen Metcalfe]

Will you give way on that point?

[Malcolm Wicks]

With respect, I think that what I have to say will be helpful to the hon. Gentleman, and I am sure that he will tell me where I get it wrong, if I do.

I want to analyse mortality by social class. I shall talk about men in particular, although there is a class difference among women too. People in social class 7 tend to be in routine occupations. For example, they might be labourers, van drivers, packers or cleaners; many women would be cleaners. We hear a lot about longevity and how we will all live to 100: the Minister keeps telling us—he issues a press notice every few months—that one fifth or one sixth of us will live to 100. It might surprise the House, therefore, that 19%—almost one fifth—of men from social class 7 die before the age of 65. Almost one fifth of these hard-working working-class people in tough jobs—no doubt they have had tough lives too—die before 65.

I put that point to the Minister and the House because, before glibly raising the pension age to 66 or 67, we need to recognise that many of our fellow citizens do not live to 65. Furthermore, 10% of women in social class 7 die before the age of 60, while among the professional classes, that figure is only 4%. I should have said earlier that, in contrast to the 19% figure, the proportion of men in the professional classes who die before the age of 65 is 7%. So there is a huge social class differential, and if we are not careful—we need to do the arithmetic very carefully—and if we glibly increase the pension age, we might rule out more and more people from ever getting their old age pension.

[Steve Webb]

The right hon. Gentleman raises some important issues. I do not think that he was Pensions Minister at the time, but he will be aware that it was the Pensions Act 2007 that ultimately raised the state pension age to 68. Why did he support that, given the points that he is making now?

[Malcolm Wicks]

I recognised the logic of demography and longevity and the need to raise pension ages, but since ceasing to be a Minister of any kind, I have had more opportunity to think about this and to study it—[Laughter.] The Minister might try thinking independently. It is not a bad idea. I would not giggle at the idea that we rethink our positions from time to time. I have rethought my position on this, not least because the Government are going helter-skelter towards raising the pension age in ways that the Labour Government never foresaw.

[Stephen Metcalfe]

I am grateful to you for giving way for a second time. You said that 19% of men in social class 7 die before they reach 65. Of those, how many were in work at the time? Is this a social problem relating to health, or is it caused by the nature of the work that they have done? I ask because I am concerned that we are saying that we cannot raise the pension age because of this particular group, when in fact everyone’s life expectancy, regardless of how tough a life you have, has increased over the past 20 or 50 years.

[Malcolm Wicks]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. May I help the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe)? I follow closely the question of women’s pension age and longevity, but he should not be addressing me—which is what he is doing when he says “you”—he should be addressing the rest of the Members in the Chamber. He has used that term several times now, and I gently ask him to observe the convention.

[Malcolm Wicks]

I cannot tell the hon. Gentleman how many of those people were still working when they died—although I want to say something later about the circumstances of that group of people.

[Richard Graham]

The right hon. Gentleman has much experience in these matters. However, may I put it to him that the reason why he voted in 2007 for the increase in the pension age was simply that the statistics to which he referred had changed so much? In 1911, when the first pensions were introduced—to be paid at 65—the average life expectancy of a male in the United Kingdom was 66. He made the point that some people today still die before the age of 65. Back in 1911, the vast majority of males died before that age. Life expectancy today is now 87 for the average male. Does he not agree that the changes in the state pension age reflect a huge change in longevity, and that the pension age has actually risen very slowly?

[Malcolm Wicks]

I am bound to say that life expectancy is not 87. On average, a girl born in the UK will live to 82 and a boy to 77. Obviously, however, once they have survived to the age of 65 many people are likely to live into their 80s, so I understand the broad point being made.

I shall conclude later by talking about a sensitivity that we could introduce into the system that might meet some of those problems, although the Minister has so far resisted it. However, now I want to refer to the association between social class and location, which various colleagues are interested in and knowledgeable about. This is not just about the broad difference between living in Kensington and living in parts of Glasgow; even within many of our big cities there are huge class differences in mortality. Across Sheffield, for example, there is a difference in life expectancy of more than 14 years between different parts of the city, and even in Kensington and Chelsea—the borough with the highest life expectancy—there is a difference of eight years between the most and the least deprived wards—which, for those of us who know Kensington, is not so surprising. Those differences and unfairnesses are reflected in terms of where people live in our cities.

Before I mention the idea that I have been trying to persuade the Minister to accept, I want to apply some pressure elsewhere: where will the jobs come from? We are living through a period of rising unemployment, and many people, including graduates with good degrees, in their 20s, 30s and 40s, cannot get jobs. Are we confident that if we make these accelerated changes—as the Minister knows, the acceleration is the difference between what the Labour Government did and what the coalition Government are doing—the work will be available?

Now 39% of 62-year-old men and 52% of 64-year-old men are not working, which means that huge proportions of men approaching what is meant to be their retirement are effectively retired from the labour market already. Furthermore, 36% of 58-year-old women are not working. I fear that we will be extending a kind of benefit twilight zone, in which people who are ineligible for their state pension—because we are raising the pension age—will jog along on incapacity or other benefits, with no one in the jobcentre pretending that those folks will get work—even the Minister will not be able to pretend that they will—and a huge army of people living in a state of desperation in that twilight zone.

[Jim Shannon (Strangford) (DUP)]

I am sure that the right hon. Gentleman will share our concerns about last week’s unemployment figures, which showed an increase among young people and women. Is there not a concern that unemployment levels for women are rising, and does that concern not need to be expressed tonight in the House?

[Malcolm Wicks]

That is the concern. Ironically, we are having this debate while the spectre of mass unemployment—as Liberals will remember, William Beveridge called it the giant evil of idleness—rears its ugly head, yet we are accelerating the increase in the age at which people will get their retirement pension.

[Hywel Williams]

The geographical variation is extremely gross if one adds in people who are economically inactive. The proportion of people who are economically inactive varies from place to place. Merthyr Tydfil is an obvious example in Wales. Last time I looked, the constituency of Witney had three economically inactive people searching for each job, while in the Rhondda that number was 154. That is a gross variation, and is not something to be disregarded.

[Malcolm Wicks]

That is an extraordinary variation, and one of the implications is that in order to make good policy and ensure good practice in pensions and other areas, we in this Parliament—including those on the Government Benches—need to have some understanding of how people work, and not just think of our own circumstances.

[Sammy Wilson (East Antrim) (DUP)]

The right hon. Gentleman is making a powerful point given the current economic circumstances, but we do not know what the employment circumstances will be in 2016 or 2020. Does he agree that the more essential point is that because people see investing in their pensions as a long-term decision, it is the short-term way in which these changes are being introduced that is creating all the unfairness? People had certain expectations and had made contributions, but the benefit from those contributions is now being denied them.

[Malcolm Wicks]

Yes, hence my introduction, when I argued that pensions policy in this country has always been at its best when it goes with the grain of how people live and makes long-term decisions that individuals can plan around. It is the acceleration of the process that we are now discussing. It is extraordinary that, having taken so much money out of the pensions system, the Conservatives—and, I suppose I have to say, the Liberals—now want credit for putting some of it back. That is a bit of Tory arithmetic that I am not terribly impressed by.

[Harriett Baldwin]

Does the right hon. Gentleman not welcome, as I do, the additional £25 billion going into the triple lock of the state pension, which, as of today, will protect pensioners from the rise in inflation?

[Malcolm Wicks]

That issue—how the shift from the retail prices index to the consumer prices index will affect the real value of pensions in future—is a subject for another day, although colleagues might want to touch on it today. My guess is that that shift, which seems quite dry and technical, will become the big pensions swindle of the 21st century. I am therefore not quite as impressed by the triple lock as the loyalist hon. Lady is.

[Harriett Baldwin]

rose—

[Malcolm Wicks]

However, I will give her another chance.

[Harriett Baldwin]

Does the right hon. Gentleman not acknowledge that whereas his proposal was to uprate the state pension in line with average earnings, which would mean an increase of 1.8%, the triple lock chooses the best of the three? That is an incredibly important reinforcement of our state pension.

[Malcolm Wicks]

Yes, but I hope that the hon. Lady will consider my point about CPI and RPI, because we are talking about billions of pounds that could be lost to British pensioners when that change is implemented over coming decades.

Let me reach my conclusion. We suffer from over-generalisations in this field. I am fed up with macho commentators, often from the political, professional and business class, who somehow assume that everyone will live to a ripe old age and that those in their 60s will have portfolios full of all sorts of opportunities—a directorship here, writing a book or doing a television programme there. Many people, not least those on the Government Benches, talk about a world of that kind—I do not want to get the hon. Lady over-excited: she has had many chances to respond, but she knows who I am talking about. Given the typical life cycles for the late 20th and early 21st centuries, more and more of our children and grandchildren will effectively not get started in their careers until their early 20s or even their mid-20s. With the rise of university education, the pattern of many people’s working lives will be like that.

However, that pattern is not at all typical of everyone in our society. When we recall the question that the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe) asked about the mortality of those people, let us remember that there are still many working people coming up to retirement who started their working lives as 15 or 16-year-olds. They are the packers, the cleaners, the van drivers, the heavy manual workers and the care workers. By the time they reach retirement they are worn out. They are physically knackered, if I am allowed to use those words. They are tired, they are exhausted and what they need, in an old-fashioned sense, is a rest. They need to retire. They are not people like the hon. Gentleman, who I suspect will still be sprightly in his late 60s and 70s, with his portfolios and all the rest of it; they are physically worn out. They have been working since they were children, and they need a rest.

[Stephen Metcalfe]

I am grateful to the right hon. Gentleman for giving way. He is making a powerful argument and some interesting points, but they relate to increasing the state pension age, full stop. This is not an argument about the escalation of that process; it is an argument about whether we should change the age at which people can claim their state pensions, which is separate from the debate that we are currently having.

--- Later in debate ---

[Malcolm Wicks]

My argument is that it is wrong to treat someone who starts work at 15 or 16 equally to someone who starts their first proper job at 21 or, with post-graduate qualifications, 23, 24 or 25. People who start earlier have often been in the labour market doing tough manual work—tougher work than any of us have ever done—for 10 more years than the likes of us. My argument is that we should reconstitute our national insurance system to recognise the contributions that they have made, so that anyone in work for, say, 49 years and paying contributions throughout that time should at the very least be able to take not an early pension, but a pension at a more reasonable age. If that brings about a difference between when they take their pension and when their grandchildren who went to university take theirs, that would be fair.

If we do not start to understand some of these social, employment and class sensitivities as we helter-skelter towards higher state pension ages, we will make mistakes and, with great unfairness and injustice, and leave people behind. Many of those people will never get their pensions, because they will be dead before they qualify for them. That is not a sign of a decent British pensions system that understands how our society is evolving.

[Pat Glass (North West Durham) (Lab)]

I rise to speak on behalf of the hundreds and possibly thousands of women who have contacted me on this matter. I also speak as a woman who is directly and personally affected by the Government’s changes, so I am in a position to tell the Government what is happening to women of a certain age when it comes to pensions.

The women who have contacted me have told me that they expected changes in the pension age. They know that we are all living longer—or rather, that some of us are—that we need to plan for our retirement better and over a longer period, that we need to pay more for our pensions and that there needs to be some equalisation between when men and women access their pensions. They understand and recognise all that. However, it is the speed at which the changes are being implemented that is causing anxiety and fear among women who no longer have time to plan and save for their future.

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[Malcolm Wicks]

I am interested in the arithmetic that the Minister has just presented on how his savings have been adjusted, because some people will not be in work. Given that many people in the year or two before retirement are not in work, will he publish the detailed figures so that the House can scrutinise them?

[Steve Webb]

As a former Minister, the right hon. Gentleman will know that the figures were published with the Bill in May: they are from the impact assessment.

We have had a number of contributions, and in the short time available to me I shall refer to some of the points that have been made. As I have said, the hon. Member for Cumbernauld stated that his £11 billion should be spent and regarded it as a small sum, because he took the annual equivalent, divided that by the national debt and came up with a small fraction, as though somehow one can make £11 billion disappear. Well, the Labour party did make £11 billion disappear regularly, so he is keeping up that tradition, I suppose.

My hon. Friend the Member for Cardiff Central (Jenny Willott) asked where state pension reform fits into the measures before us, and I am pleased to tell her that we remain entirely committed to such reform, but one irony of all this is that the very group of women whom we are most concerned about, and whom we have heard most about in this debate, are probably the single group who will most benefit from our ideas on state pension reform.

In particular, many women who spent time bringing up children, before either home responsibilities protection came in or the state second pension introduced crediting, would benefit substantially from such reform. So, yes, their pension age will rise, but as our reforms take hold such women will benefit substantially, and my long-term commitment to pensions justice for women will be delivered. That is certainly my goal.

The right hon. Member for Croydon North (Malcolm Wicks) made the point that he has made before about differences in life expectancy and about people who leave school earlier, but his proposal for starting the national insurance clock running at different ages would create different anomalies. He says that somebody who leaves school and goes into a manual job could get their pension earlier, but someone who leaves school and goes to a desk job would also get their pension earlier, and people would then say, “Is that fair?” There are anomalies whichever way we do it.

The right hon. Gentleman did, however, raise the issue of people in the lowest socio-economic groups, but I remind him that over a 20-year period to 2002 men in the routine class, the lowest—as it were—socio-economic group, saw life expectancy at 65 years old increase by 2.5 years, and, given that the Bill increases the state pension age for men by only one year, the improvement in life expectancy for men, even in the group whom he is most concerned about, is running ahead of our proposed increase in the state pension age.

I repeat to the right hon. Gentleman that his points about the differences between groups are an argument for doing nothing. He supported the Pensions Act 2007, which will raise the state pension age to 68 years old, and we need to address health and occupational inequalities, rather than do nothing while we wait. That is the Opposition’s counsel—let us wait another decade—but the trouble is that we have already waited a century to move the state pensions ages, so how long is long enough?

My hon. Friend the Member for Gloucester (Richard Graham) quite properly raised the important issue of notifying people of any changes, so I shall share with the House our plans. I very much welcome the fact that, subject to the House approving the Bill tonight and their lordships approving it in due course, we will be able to write directly to those affected to tell them exactly how they stand, thereby ending a period of uncertainty.

We will write to those women born between April and December 1953, just over 250,000 of them, early in the new year; to those born between December 1953 and April 1954, another 250,000 people, in February; and to another 250,000, born between April 1954 and April 1955, in March. The last group covers all women who would have been affected by the original equalisation timetable.