Savings (Government Contributions) Bill

Peter Dowd Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

We have had a number of contributions. The hon. Member for Newark (Robert Jenrick) told us about his grandparents getting to Blackpool courtesy of a jam-jar savings policy, which I thought was novel. The hon. Member for Ross, Skye and Lochaber (Ian Blackford) summed up the Government’s proposals as a missed opportunity, as undermining pension savings and as not tackling the real issue. The hon. Member for North West Hampshire (Kit Malthouse), who does not appear to be here, spoke of the diminution in the number of people with an asset base and said that, in his modest opinion, we should try to push on and get people to have a bigger asset base.

In an excellent contribution, my hon. Friend the Member for Harrow West (Mr Thomas) underlined the need for the Government to look afresh at the timescales in the Help to Save scheme and asked the Government to be more imaginative and reinforce the need to permit credit unions to participate in the scheme and the statutory right of payroll deductions of savings. The hon. Member for Gloucester (Richard Graham) gave us an enlightening exposition of his concerns that the proposal might be moving towards the death of the pension as we know it. I am not quite sure whether that was what he said, but that was the impression I got.

[Richard Graham]

Just to clarify, I said that the proposal risks undermining saving through a pension scheme and we do not want to do that.

[Peter Dowd]

I understand that clarification and I will touch on that topic in my speech.

Finally, the hon. Member for Morecambe and Lunesdale (David Morris), who supports the Government’s proposals, spoke about his experiences as a self-employed person and said that the proposal is not a supplementary pension but a means of saving.

Labour welcomes the sentiments expressed today on both sides of the House about the need to address savings overall. In general, anything that allows more people to save for the future is to be welcomed. Helping younger people and those on low incomes to save is a particularly legitimate and worthy objective, and the Government are right to consider policies to incentivise it. The majority of people on low incomes or in precarious work—categories sadly growing in Conservative Britain—are far from being in a position to save. Six years of Tory failures and austerity has led to many not knowing from where the next pound will come week in, week out. The Government’s clueless approach to exiting Europe simply compounds the problem on a macroeconomic level.

How is it possible for people to save when it is hardly possible for many to live properly on a weekly basis? How can a person save for the future when they can barely get through the day? The scandal of low retirement savings for the less well-off is an indictment on any notion of a cohesive society. One in seven pensioners lives in poverty and a further 1.2 million have incomes just above the poverty line. Distributional analysis by the Women’s Budget Group shows that single female pensioners will experience a whopping 20% drop in their living standards. It is unconscionable that people who have worked hard and contributed to society are forced to spend their final years in hardship and insecurity. We agree that there are problems that need to be solved urgently but the TUC states:

“Products such as… the forthcoming Lifetime ISA are disconnected from the world of work and prioritise goals other than retirement saving.”

As for the lifetime ISA, it is hard to see how its introduction even begins to tackle the problems to which I have just referred; not only does it represent a missed opportunity to build on the success of automatic enrolment, as those on the SNP Front Bench have said, but its introduction could serve as a distraction to tackling the real issues at hand. It misdirects valuable resources, as the money the Government are spending on this scheme is likely to benefit mostly those on higher incomes, as has been mentioned on a number of occasions. It also needlessly complicates the pensions and savings landscape—an arena already fraught with complexity. Perhaps most dangerously, it has the potential to undermine the emerging consensus that a pension ISA approach would be detrimental in the round. Indeed, it has the potential to introduce just such an approach through the back door. That is a concern and we are seeking assurances from the Government that it is not doing that.

In the months leading up to the Budget, the concept of replacing the existing systems of pensions tax relief with an ISA-style approach was widely debated and almost universally rejected as damaging to people’s retirement prospects. I wonder, as do many others, whether, after enduring an embarrassing rebuff, the Tories are back again with the same intent under the guise of this Bill. Many in the pensions industry have described the LISA as a “stealth” move towards pension ISAs. The Work and Pensions Committee has said that the Government are marketing the LISA as a pension product and there is a high risk that people will opt out of their workplace pension as a result. Let me be perfectly clear: people will not be better off saving into an ISA as opposed to a workplace pension. The Committee found that

“For most employees the decision to save in a LISA instead of through a workplace pension would be detrimental to their retirement savings.”

[Ian Blackford]

Can the hon. Gentleman shed some light on why he thinks the Government would introduce a Bill that would make people worse off as a result of investing in an ISA than they would be if they invested in a pension? Does he not think that that is an abdication of responsibility by the Government?

[Peter Dowd]

The answer to the first question is that I do not know and the answer to the second is yes.

I have to give credit where credit is due, because the Conservative party has a particular talent for conjuring up political smokescreens and opportunistic gimmicks: it has given us a national living wage, which, by any stretch of the imagination, is not a living wage; we were promised a “big society”, yet the Government set about systematically undermining the notion of a cohesive society; and we were cynically assured by the late, unlamented Chancellor that we were “all in it together”. One thing I do acknowledge is that post-Brexit, given the poor performance of the Ministers responsible for negotiating it, we will all be in it together—and it won’t smell very nice. In the meantime, the Government continue unfairly and unjustly to condemn working people and vulnerable groups to pay for the Government’s failed austerity obsession—and now it is time for the Government to mess up pensions. Do they never learn from their mistakes? Are they so ideologically driven that they simply cannot admit that they get things wrong? These are mistakes, I might add, that others pay for. Have the Government not done enough damage to the prospects of hundreds of thousands of WASPI—Women Against State Pension Inequality Campaign—pensions without thinking that through? Yet again, they have not thought about the potential for millions more to be affected.

When former Conservative pensions Ministers are referring to the LISA as a “Trojan horse” and warning that such “superficial attractions” will “destroy pensions”, alarm bells begin to ring on the Opposition Benches, if not on the other side of the House. Given this scenario, common sense demands ask that we ask this: are we now being presented with a savings Bill that will fundamentally undermine proper planning for pensions for the future? As many others have pointed out, the LISA is a sort of pension and not a sort of pension—it is both and not at the same time—and neither will it necessarily last for a lifetime. This seemingly opportunistically designed product risks even more pensioner poverty, which people can ill afford at any time, let alone in their later years. Moreover, the Tories’ approach of transferring responsibility and risk from the collective to individuals will not work, especially as the incomes of the poorest, the majority of whom are women, are being squeezed by public sector cuts and the roll-out of universal credit.

The Labour party is motivated and inspired by the real principle and value that we are all in it together—this is not a slogan and a soundbite, but a truism. We know that the majority of people are significantly disadvantaged by an individualised, dog-eat-dog approach, as opposed to a collective system that has fairness at its core. Today, people struggle with wages that are still lower than they were before the global financial crisis in 2008. There are now 800,000 people on zero-hours contracts and half a million people in bogus self-employment, and nearly 4 million of our children are living in poverty. Labour’s economic strategy is committed to tackling wage stagnation, particularly among those at the lower end, so that they are able and have the capacity to save for their future as well as living life now.

As the shadow Secretary of State for Work and Pensions has said:

“The pensions system that I want to see ensures dignity in retirement, and a proper reflection of the contribution that older people have made, and continue to make, to our society.”

Labour Members would like the Government categorically, unequivocally and clearly to assure the public that this Bill is not a veiled attack on pensions as we know them.