Budget Resolutions and Economic Situation

John Bercow Excerpts

Friday 22nd March 2013 Commons Chamber

[Mr Duncan Smith]

I will make a little progress and give way in a minute.

[Mr Speaker]

Order. I gently remind the House that the Secretary of State is in order. He has been generous in taking interventions, but 30 hon. Members wish to speak in the debate. I know that both the Secretary of State and his shadow will factor that into their calculations.

[Mr Duncan Smith]

Rather than advice, I will take that to be an instruction, gently and eloquently given. I can crawl with the best of them—I hope better than my opposite number, but he will make his own attempt. I will make progress and try to be quicker.

I will talk briefly about the single-tier changes for which we are legislating. They are not just about improving the prospects of workers today, but about securing their position as they enter retirement. I am enormously pleased that the Chancellor confirmed that the single-tier pension will start in April 2016, which is in keeping with our original timetable. That means that after 60 years of modifications and tinkering, we will deliver a vital overhaul of the pensions system as soon as possible. I pay tribute to the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), who has been instrumental in driving that forward. If anyone is able to say at the end of this Parliament, “I made a difference,” it will be him. I will ensure that his name is remembered for that.

We are successfully rolling out auto-enrolment, which will help up to 9 million people get into a workplace pension scheme. That is important as it will make saving the norm. However, auto-enrolment will not work unless it pays to save. That is the key problem that the Minister and I have been discussing endlessly. What is the incentive to save? Too many people in Britain have been spending rather than saving.

The single-tier pension is all about solving that problem. We are replacing the complicated two-tier system of the basic state pension, additional state pension and the other outdated add-ons with a single flat-rate payment. That means that people will know what they are entitled to and will be able to project forward so that they know what they need to save. They will know that what they save will go above the line and that they will be able to use every pound; it will not be means-tested away so that they cannot use it. At £144 a week, the new state pension will be set above the level of the means test.

We are ending the unfairness whereby many people reach state pension age, having scrimped and saved all their life, only to find that others, who did not make any effort, get the same income through the pension credit. That is unfair. This change is about fairness and making saving pay. Michelle Mitchell, the charity director general of Age UK, said:

“The government’s proposals for a single tier state pension could help transform retirement for future pensioners, bringing clarity and stability to a system which is currently opaque and unfair.”

In 2020, three quarters of new pensioners will get a higher state pension following the introduction of single tier. That will benefit those who have historically had poorer state pension outcomes in particular. There will be better provision for the low-paid. Some 60% of low-income pensioners will see their income in retirement increase by 2040, compared with the current system.

Critically, there will be better provision for the self-employed, who, for the first time in about 40 years, will be treated the same as employees for the purposes of state pension retirement. There will be better provision for those with broken contributions, such as women and those with caring responsibilities. Some 700,000 women who reach state pension age in the 10 years after the single tier is introduced will receive £9 per week more on average. Implementing it in 2016 will benefit an additional 85,000 women who will now retire under single tier.

The single-tier pension is one of the big reforms, alongside universal credit, that will transform the landscape. It pays to work and it will now pay to save.

--- Later in debate ---

[Mr Byrne]

I will happily give way to the hon. Gentleman. Will he admit that unemployment rose—

[Mr Speaker]

Order. The hon. Member for Rochford and Southend East (James Duddridge) will resume his seat. [Interruption.] Order. Do not argue with the Chair, Mr Duddridge. The hon. Gentleman would not have the foggiest idea when to start or where. He will intervene when permission has been granted, and not before. If he does not like it, he can lump it and he might not speak at all.

[Mr Byrne]

I am grateful to you, Mr Speaker, but I am happy to give way.