Pensions Uprating (UK Pensioners Living Overseas)

Shailesh Vara Excerpts

Wednesday 11th May 2016 Commons Chamber

[The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara)]

I congratulate the hon. Member for Ross, Skye and Lochaber (Ian Blackford), and all those on the Order Paper who support the motion, on securing the debate on this very important subject. For the sake of clarity, I would like to point out a flaw in the motion. It seems to indicate that it is this Government who have introduced the measure, when it states

“will no longer be uprated”

and

“regrets that the Government has taken this action”.

I would simply point out to the hon. Gentleman that this policy has been consistent for 70 years. It is not something that this Government have done.

[Ian Blackford]

I made it clear in my speech that I recognise that this has been happening since the 1940s. I absolutely acknowledge that. This has happened under all Governments. None the less, we have the opportunity today to respond to it in the correct manner.

[Sir Peter Bottomley]

rose—

[Mr Vara]

I give way to my hon. Friend.

[Sir Peter Bottomley]

The House and the Minister will recall that each year a statutory instrument, or equivalent legislation, is brought before the House to continue the policy, so none of us can say we are blameless. The fact that a small minority of us have so far been voting against what the Government propose to Parliament is our fault for not recruiting more people. The best people to recruit would be the Chancellor and the Prime Minister, and then the Ministers at the Department for Work and Pensions who have to face up for the Government and will be able to pass the responsibility on to those who carry the responsibility—the most senior Ministers in Government.

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[Mr Vara]

I am grateful to both hon. Members for clarifying that point. I was simply pointing out an inconsistency on the Order Paper. For the sake of good order, I wanted to make clear that although yearly decisions have been taken by the Government, they are consistent with the policy undertaken by successive Governments from both sides of the House.

The UK state pension is exportable worldwide, regardless of recipients’ countries of residence or nationality. Successive Governments have taken the view that all those who have worked in the UK and built up an entitlement to state pension should be able to receive it. We have no plans to change this arrangement. However, the state pension is only increased, or uprated, each year where the recipient is resident in the European Economic Area or a country with which the UK has a reciprocal agreement that allows for uprating.

The policy on this issue has been consistent for 70 years, including under the Governments of Attlee, Wilson, Blair, Macmillan, Thatcher and Major. To uprate all state pension payments, regardless of a recipient’s country of residence, to the rate currently paid in the UK would cost in excess of an extra half a billion pounds a year. This amount would increase significantly over time. If arrears were to be included, the cost would be in the billions of pounds. Some have suggested partial uprating, but while this may cost tens of millions of pounds in the short term, the annual cost of the policy would converge to that of full uprating in the long term.

[Sir Peter Bottomley]

It might help if the Minister, either today or in the next Session, could tell us the last time the Government voluntarily negotiated a reciprocal agreement with another nation or territory. Secondly, since the last negotiation on a voluntary reciprocal agreement, how many other countries have been brought into the uprating for other reasons, such as accession to the EU?

[Mr Vara]

I can certainly partly address my hon. Friend’s question. No new commitments allowing for uprating have been made since the 1980s. As far as the other information he seeks, I am more than happy to write to him.

We have to recognise that resources are limited. The Government have to make judgments and take difficult decisions about how best to use limited resources. The majority of pensioners abroad live in countries such as Australia, Canada, New Zealand and South Africa. The rules in those countries vary. Some have largely means-tested pension systems, whereby a significant proportion of any increase in the amount of the UK state pension would go to the Treasuries of those countries, rather than the pensioner. I should add that many people who voluntarily move abroad do so before they have reached pensionable age. As such, many of them may well have been able to build up some pension provision in the countries they have emigrated to.

We should remember that the decision to move abroad is a voluntary one. It remains a personal choice dependent on the circumstances of the individual, which will differ from person to person. The implications for their state pension is just one factor in that decision. There is no evidence of a proven behavioural link between the uprating policy for the state pension and pensioner migration.

[Ian Blackford]

I am grateful to the Minister for giving way. He is being very generous with his time. Will he not accept that every other OECD country allows their pensioners who live abroad to collect their pension? Why are we standing against this? We are not talking about people getting something they are not entitled to, whether they have moved abroad before they have retired. We are talking about them getting something they are entitled to because they have made national insurance contributions. That is what we are denying them.

[Mr Vara]

It is important that we do not just look at this from one narrow perspective. The hon. Gentleman says that people have paid national insurance and are therefore entitled to this. As I say, there are other aspects involved. For example, there is the element of individual choice. When people think about going abroad, it is not purely this issue that will determine whether they will live here or abroad.

Over the years, the UK has entered into a number of reciprocal agreements with other countries. Although most provide for payment of upratings, that is not the primary purpose of reciprocal social security agreements. They are intended mainly to provide a measure of co-ordination between social security schemes to protect the social security of workers moving between the two countries during their working lives. They prevent employees, their employers and the self-employed from needing to pay social security contributions to both the home state and the state of employment at the same time to get access to social security benefits. Of course, social security agreements vary to some extent from country to country, depending on the nature and scope of the other country’s social security scheme. It should also be noted that the UK is not alone in applying restrictions on payment of state pensions abroad. In some respects, the UK arrangements are less restrictive than those that apply in other countries.

The crux of the issue is individual choice. Those who have contributed to the UK state pension scheme are free to draw their entitlement from wherever they choose to live. The rules governing the uprating of pensions are straightforward and widely publicised. If a person chooses to live in country A their pension will be uprated, but if the choice is to live in country B their pension will not be uprated. In the final analysis, it is for the individual to weigh the benefits of living in country B, where her or his pension will not be uprated, against the benefits afforded by country A—or, indeed, remaining in the UK.

I am mindful that there are a number of hon. Members in the Chamber who wish to speak in the debate. It is a Backbench Business debate and I am mindful to give Back Benchers the freedom and opportunity to speak for a longer time than those on the Front Benches. So I congratulate again the hon. Member for Ross, Skye and Lochaber, and those who have supported him, on securing the debate. I am very pleased to have been able to set out the Government’s position, which remains unchanged.

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[Mr Vara]

With leave of the House I would like to make some brief comments. I am mindful that this is a Backbench Business Committee debate, and that it is not normal for Front Benchers to have a second go. I do not want to set a precedent, so I will just make one or two concluding comments about issues that have been raised.

Bilateral agreements were mentioned, and those are normally negotiated on the basis of compatibility of systems. That reciprocity is achieved between the two nations, and respective costs are broadly balanced. Canada has more than 150,000 recipients of the UK state pension, but any new bilateral agreement would not achieve reciprocity and would be disadvantageous to the UK taxpayer.

I pay tribute to my hon. Friend the Member for North Thanet (Sir Roger Gale) for all the work that he has done consistently over a number of years on this issue.

[Sir Peter Bottomley]

rose—

[Mr Vara]

I will not take any interventions, but I pay tribute to my hon. Friends the Members for Worthing West (Sir Peter Bottomley) and for Broxbourne (Mr Walker), and to the hon. Member for Vauxhall (Kate Hoey).

[Sir Peter Bottomley]

rose—

[Mr Vara]

I will not give way.

[Sir Peter Bottomley]

On a point of order, Madam Deputy Speaker. The logic, I think, is that if a reciprocal agreement may be done at no cost, there would be no reciprocal agreements anywhere.

[Madam Deputy Speaker]

The hon. Gentleman knows that I cannot answer that because it is not a point of order. It is a point of debate, and the Minister is being brief because he has the leave of the House to speak again.

[Mr Vara]

Thank you, Madam Deputy Speaker—I do not wish to abuse the leave of the House.

I simply conclude by referring to the issue raised by the International Consortium of British Pensioners, which my hon. Friend the Member for North Thanet mentioned. He was right to say that it has come up with proposals, but it was felt that they were not sufficiently developed. The ICBP is working on more proposals and we look forward to having sight of them.

I once again congratulate the hon. Member for Ross, Skye and Lochaber on securing the debate.