Pensions Bill

Debate between Mark Reckless and Greg Mulholland

Monday 17th June 2013 Commons Chamber

[Mark Reckless (Rochester and Strood) (Con)]

Before I come to the substance of the Bill, I want to make one point in response to the Opposition on the supposed break in the link from earnings to prices. History is mis-remembered. Labour would like it to be considered that, in 1979, the Conservatives broke a long-established link that had been part of a golden age, but that is not the case. The 1974 to 1979 Labour Government changed the link from prices to wages when wages were not keeping up with prices. In addition, they had a four-month transitional period between July and November 1975 when pensions were not linked to anything. Four months might not sound like much, but in 1975, inflation hit a peak of 27%, so not linking pensions to anything for a four-month period significantly hit pensioners, who did much worse under that Government than they did either in the 18 years of the following Conservative Government, or in the 13 years of the Labour Government, who did nothing to change the system they liked to attack.

I initially approached the Bill from a position of significant scepticism. I am not, in all matters of Government policy, naturally a cheerleader. I was concerned that the Bill was a big redistributive Government policy, and was worried that it might take away from those who had paid in most over their working lives. I have been convinced in part by the knowledge of my hon. Friend the pensions Minister—if I may call him my hon. Friend—and how he has presented the case, and in part by the Work and Pensions Committee pre-legislative scrutiny. In addition, the more I have worked to understand the Bill and as my understanding has increased, so has my enthusiasm. I would like to put on record my thanks to Djuna Thurley of the House of Commons Library, who has answered many of my technical questions, allowing me to respond to constituents’ cases in a bespoke manner, which in most instances satisfied the individual concerned. Her work has helped them and me to understand what is proposed in the Bill.

I wondered whether the Bill would take money away from people who have paid a lot in. Yes, such people are better off, but they have contributed a lot through national insurance, and I questioned whether they would suffer to pay for others and whether there would be a big redistribution from those who have contributed. The answer to those questions must be no, because existing accruals are protected—that is the key protection. It is a pleasure to follow the hon. Member for Inverclyde (Mr McKenzie), but when he mentioned a lady from Port Glasgow, he did not make one important point. Her accruals—whatever she has built up under the existing system, which I understand might not be that great because of the difficulties he described—will be the same under the new system and are protected. It is important to understand that the Bill does not take away from those who have contributed and give it to others.

Another key reason I am in favour of the Bill is that it seems to reverse the usual distributive trend and burden of Government tax and spend initiatives. The losers are always much noisier about their losses than the gainers are publicly grateful for their gains—I cannot be certain that there will not be a reversal of that or a degree of change as the Bill passes. Those who benefit from the existing system do not much appreciate it and very often are not aware whether they will gain or get any pension above the basic state pension, despite contributing under the current state second pension and, previously, the state earnings-related pension.

On the other side of the equation, it is obvious to those who will gain that the single-tier pension will be higher than the existing one, and that, although it will be taxed, they will be able to keep everything they put aside on top of it, which is a great benefit of the Bill. My concern, if anything, is that there might have been a degree of communications failure, because quite a lot of people believe that, when the transition happens—it will happen in 2016 rather than 2017—they will suddenly get the great benefit of the single-tier state pension and do a lot better than they would have done had they retired a little earlier.

So far—this plays into the usual way of gainers and losers in such things—I have largely had complaints from people who think that they will just miss out on the benefits of the single-tier state pension and that it will benefit those who are a little younger than them. I have been able to explain that that will not be the case—there will not be a cliff edge. When I explain that all it will mean is that the person who is a little younger than them will have the opportunity gradually to build up entitlement under the new single-tier pension over time—for instance, gaining £4 or £5 of accrual per extra year of working—they understand that and think it is perfectly reasonable.

I caution the Minister about the other side of that coin. I wonder whether a lot of constituents think that they will receive a big gain in 2016 and so have not come to us to complain. They may well come to us if, come 2016, they have expected a big gain and it suddenly does not materialise. It would be helpful if Members of all parties, commentators and reporters made that point clearer.

I have one technical question for the Minister, and I have worked hard to understand it. The White Paper was clear, as far as White Papers go; there were a lot of great examples with lovely diagrams so that, by the time I got to the end, at least I thought that I understood. On the transition, for people who currently decide to put off retirement and earn a greater state pension—I am not sure whether every 10 weeks equals 1% or whether the rules have changed, but it is something like that; my impression is that it is a reasonable deal and a good thing to take advantage of, particularly for women with higher average life expectancy. I understand that the opportunity to buy extra pension will still exist, but that there will be a less generous, different system. In his concluding remarks, will he wrap up one point for me? If someone is taking advantage of that system before the transition and is receiving extra pension and wants to continue doing so after the transition date, will the old rules or the new rules apply to that individual?

The right hon. Member for Birkenhead (Mr Field) is not in his place, but I would like to turn to his remarks. I was quite taken aback by them. There was the glass half empty issue, which we have discussed. I think he agreed that the proposals were better for women, but he raised concerns—as others have—about women born between 1951 and 1953. That issue is the product of the equalisation of the pension age, not of the Bill. In addition, as I understand it, the women concerned have lost out most compared with what they may have previously expected—although the coalition Government have mitigated some of the worst of that. However, I believe it is still the case that they will retire earlier than men of the same age, and, on average, they will have longer life expectancy. They are losing out relative to expectation, but there are those two positives—one by virtue of nature and medicine, the other by virtue of policy.

The right hon. Member for Birkenhead launched a great attack on our proposals for the self-employed. He seemed to think that it was some kind of—I will not use the word scam—initiative by the Minister to shovel benefits to all self-employed people who, according to the right hon. Gentleman, are almost entirely Liberal Democrat supporters. I am sure that those on the Liberal Democrat Benches would be delighted were that so. In Thornbury and Yate and in Leeds North West they may have MPs who have told us about people who work in that sector. Overall, I strongly welcome what the provisions will do, because of their simplicity for the self-employed. In a sense, a self-employed person runs their own company, yet still pays national insurance through two classes as if they were an employee, albeit at a somewhat reduced rate. The self-employed were not receiving the benefit from the state second pension, which seems inequitable and it is good to reform that in this way.

[Greg Mulholland]

The hon. Gentleman is making a powerful and informed speech. Does he agree that the right hon. Member for Birkenhead cannot have his cake and eat it? Either we believe in a fair pension for all—including carers, women and the self-employed—or we do not, and he is fudging the situation. Surely, we want a citizen’s pension for all.

[Mark Reckless]

I agree broadly with my hon. Friend. I am not sure that it is fair to accuse the right hon. Member for Birkenhead of fudging, as he is not in his place to defend himself. Certainly, on some issues he has said things that for many are unpalatable, and he has not been shy of spelling out the consequences in some scenarios. I just disagree with what he said about the Bill and women—the Bill will improve matters; it is not the Bill that is creating the difficulty for those in the 1951 to 1953 group—and with what he said about the self-employed. Mostly, I took exception to what he was saying on the latter.

I was astonished that—I assume that he does not speak on behalf of the Labour party on this issue, but perhaps he is doing so—the right hon. Gentleman seemed to suggest that the Bill was terribly unfair because it would not cut pensions further for those in the public sector, compared with those in the private sector. That is a courageous thing for a Labour Member to say. It may be that the National Union of Teachers, from which we have heard, will be writing to him about the policy he is urging for his party.

The Government have undertaken significant reforms to the various state pension schemes which were chronically insufficient under the previous Government. We have taken significant action on a number of different schemes. Like many other MPs, I have met a lot of policemen and policewomen at my surgeries who are very upset about the reforms, but I try to explain to them that their pensions are still far better than those for the vast majority of people who live in my constituency.

The cost of state pension schemes, in particular the extra paid in versus what is coming out to the Exchequer, will continue to increase strongly. Whether that has put those schemes in a sustainable position might remain a subject for debate, but people with such pensions have had significant increases in contribution rates. I am not sure that I agree with the right hon. Member for Birkenhead when he complains that the private sector will be able to reduce benefits because of the reduced amount going in, but that the public sector will not, when so much has already been done in the public sector. We have taken the issue of the various public sector schemes separately and we should continue to address it on its merits, rather than through the Bill.