Oral Answers to Questions

Steve Webb Excerpts

Monday 23rd April 2012 Commons Chamber

[George Hollingbery (Meon Valley) (Con)]

1. When he plans to bring forward his proposals for a single-tier state pension.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

With permission, Mr Speaker, I will answer this question together with Questions 6 and 20.

I can confirm that, as was announced by the Chancellor in his Budget, we will present further details about the single-tier state pension in a White Paper later in the spring. Final decisions on the detailed implementation of the policy will be made in the next spending review.

[George Hollingbery]

A number of my constituents have contacted me expressing concern about the transition between the old and new systems—in particular, a Mr Theo Stellakis, whose questions the Minister has answered on a number of occasions. Can the Minister tell us how the transition will affect two people, one reaching the age of 65—or reaching pensionable age—on the day before the changes are implemented, and the other doing so the day after?

[Steve Webb]

I recall corresponding with Mr Stellakis on a number of occasions. What concerns him is the idea of a cliff edge before and after 2016. Let me clarify the position. When people receive state pensions of less than the full amount because they were contracted out, as I believe the hon. Gentleman’s constituent was, we will continue to take account of that after 2016, so there will not be the cliff edge that he envisages. We will have to phase out the arrangement over time, but in 2016 we will continue to take account of past contracting out.

[Mr Speaker]

Mr Simon Hughes? Not here. Jo Swinson? Not here.

The Department kindly informed me of the intended grouping at approximately 9.10 this morning. I hope, and say with some confidence that I trust, that it also informed the hon. Members in question. Neither of them is present, however, so I call Mr Julian Brazier.

[Mr Julian Brazier (Canterbury) (Con)]

Does my hon. Friend agree that the great advantage of his proposal is that it will help to restore incentives to save? Many people feel today that there are few such incentives in the benefits system.

[Steve Webb]

My hon. Friend is right. At present, the level of the basic state pension is so far below that of the means test that the first slice of savings is largely offset by means-tested benefits. My right hon. Friend the Chancellor has confirmed that whatever detailed proposition we present, the level of the single-tier pension will be clear of basic means-testing, and will therefore reward those who have saved rather than penalising them.

[Mr Frank Field (Birkenhead) (Lab)]

How long does the Minister think he will get away with these proposals? If a private company decided to do what he proposes to do—take contributions away from people who have paid over the years and give additional pensions to people who have not paid anything—the House would be jumping around with anger. Why does he think he can do that to people who have paid for a second state pension?

[Steve Webb]

If we were doing what the right hon. Gentleman says we are doing, I should be as outraged as he is. However, we are not doing that. Part of our proposition is that all contributions paid to date will be recognised in the new system. At the point of transition, if someone was heading for a pension of £150, £160 or £170 a week, that is what we would pay that person. [Interruption.] The right hon. Gentleman asks, from a sedentary position, where the money is coming from. We will present our costings in the White Paper, and he will see then that we will find it through less means-testing, among other things.

As for bringing people into the system, successive Governments have, for example, credited women who have spent a period at home with children. Although they have not paid cash, they have contributed, and that should be recognised. I think that that is right, and we are doing the same.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

In his Budget statement, the Chancellor told the House that moving to a single state pension would not cost more in any year than the current pension system. Further to the question from my right hon. Friend the Member for Birkenhead (Mr Field), may I ask whether the costs of the move will be borne partly by the more than 7 million workers in the private and public sectors who contribute to defined-benefit schemes and are currently contracted out?

[Steve Webb]

As the hon. Gentleman knows, when we introduce a single state pension there will be no more contracting out, so clearly those who were in contracted-out schemes will be contracted back in. However, the annually managed expenditure costs of the scheme are being met by the reduction in means-testing and paying of savings credit to new claimants only, and by an increase in de minimis provision, so that people who have spent only a few years in the country do not build up a state pension as they would currently do. Those are the two main ways of meeting the costs, but they will also be met through the non-accrual of additional second state pensions after 2016.

[Julie Elliott (Sunderland Central) (Lab)]

2. What assessment he has made of the effect of changes in funding for childcare support on unemployment among women.

--- Later in debate ---

[Dr Julian Huppert (Cambridge) (LD)]

15. What steps he is taking to ensure that pension funds adopt ethical and infrastructure investments.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

If I may refer briefly to the grouping of earlier questions, Mr Speaker, I understand that we failed to notify my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) and my hon. Friend the Member for East Dunbartonshire (Jo Swinson) of the grouping and so apologise to them and to you.

Pension scheme trustees can consider companies’ environmental, social and governance practices. I am clear that trustees’ duties do not require them simply to maximise short-term investment returns. On infrastructure, the autumn statement set out details of a memorandum of understanding signed by the Government with two groups of UK pension funds to support additional investment in UK infrastructure.

[Dr Huppert]

I thank the Minister for his comments. He will be aware of the whole range of investments that give more than just short-term financial returns. For example, the Cambridge Retrofit programme, which was launched last week, will try to retrofit every building in Cambridge by 2050. However, how will he communicate with trustees and ensure that they are aware that their fiduciary duties do not prevent them from doing this, because many of them seem to be unaware of it?

[Steve Webb]

The Pensions Regulator communicates regularly with trustees and provides a trustee toolkit on its website that sets out their duties, but I think that auto-enrolment provides an opportunity for ethical investment. For example, the National Employment Savings Trust will specifically have an ethical fund for those who wish to invest in that way, and I hope that the schemes my hon. Friend refers to will seek to find investment through that sort of route.

[Kerry McCarthy (Bristol East) (Lab)]

16. What recent estimate he has made of the level of unemployment in Bristol.

--- Later in debate ---

[Jo Swinson (East Dunbartonshire) (LD)]

20. When he plans to bring forward his proposals for a single-tier state pension.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I apologise to my hon. Friend for not giving her a chance to ask her question earlier on.

We will shortly bring forward a White Paper on the single-tier pension, as my right hon. Friend the Chancellor of the Exchequer announced.

[Jo Swinson]

I thank my hon. Friend for that reply. He and I have long campaigned for a citizen’s pension, to be paid at a decent level to all pensioners, without the need for bureaucratic means-testing and, of course, the problems that that creates, with many pensioners losing out. I welcome the plans for a single-tier pension from 2016. Will my hon. Friend confirm that, although the current proposals apply only to new pensions, there is nothing to stop a future extension to all pensioners if the money can be found?

[Steve Webb]

Obviously, we will not write the law in a way that prevents all pensioners from being brought within its scope, and I am sure my hon. Friend will press for that. We are aware that, under our proposals, getting on for more than 80%, and eventually 90%, of pensioners will qualify for the pension, so it will have many of the features of a citizen’s pension but be based on 30 years of contributions or credits.

[Mr Speaker]

Well, that exchange was worth waiting for, I am sure the House will agree. I thank both Members.

Topical Questions

--- Later in debate ---

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Following earlier questions on pensions, will the Minister put on record the fact that the Budget and the Government’s decisions are the best news ever for pensioners now, as well as for pensioners in the future? The press and the Opposition appear to have somewhat missed the point.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

My right hon. Friend is aware that, as Pensions Minister, I am responsible for people who are currently pensioners and for everyone who will be a pensioner, which is everybody, and we have good news for today’s pensioners: not only the highest-ever cash increase but, more than that, year-on-year above-inflation increases whenever earnings grow more rapidly—and, incidentally, an increase in the age-related personal allowance this April of more than £500.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

May I associate myself with the words of tribute to Lord Ashley, who was a formidable champion of the people whom we came into politics to serve? He will be sorely missed in both Houses, but his inspiration will live on.

Two years before the election, the Prime Minister gave the pensioners’ pledge:

“The Government I lead will make sure that older and retired people are treated with dignity and given the quality of life they deserve.”

Will the Secretary of State therefore confirm, as the Institute for Fiscal Studies has said, that pensioners will be £315 a year worse off, thanks to the granny tax?

[Steve Webb]

The changes announced by the Chancellor in the Budget will increase the age-related personal allowance this April by more than £500 and leave it at £10,500 for 65 to 74-year-olds while the allowance for those of working age is levelled up to that figure, at which point all people will have a substantial tax-free allowance that will be increased thereafter.

[Mr Byrne]

This is why pensioners on the doorstep are so cross—they know that they have been hoodwinked by the Government. This measure was dressed up in the Budget as a simplification. I think the Secretary of State detains his barbers for about as long as I do. Does he go along and ask for his hair to be “simplified”? I do not think so. A cut is a cut. On top of granny tax 1, we now learn of granny tax 2. Will the Minister admit that from 2014 pensioners will face a further cut of £900, and apologise for trying to keep it secret?

[Steve Webb]

I do not recognise the figures that the right hon. Gentleman quotes, but I assure him that what matters most to the pensioners to whom I speak is a decent state pension. After 30 years of the pension declining in value relative to earnings, from now on it will rise every year by whatever is the highest of earnings, prices or 2.5%. There will be a guaranteed increase every year that matches inflation or is above inflation. That is something that pensioners value.

[Mr Mark Spencer (Sherwood) (Con)]

T4. Does the Minister recognise that traditionally the Child Support Agency has targeted fathers who contribute willingly, rather than chase the more challenging maintenance evaders?

--- Later in debate ---

[Jessica Lee (Erewash) (Con)]

Will my hon. Friend join me in congratulating Erewash credit union on its participation in the back to work scheme? A young person I met on Friday who is participating in the scheme is extremely enthusiastic about their prospects and future and now feels ready for the next step back to work.

[Steve Webb]

I pay tribute to the credit union in my hon. Friend’s constituency. As she knows, the Department has given credit unions significant financial support. We have recently received a report on their future development and expansion, and we hope to bring forward proposals shortly to give them a greater role and an extended way of helping people on low incomes, through both finance and initiatives such as she describes.