Hansard - United Kingdom Parliament

77 Pensions Bill [Lords]
20 JUNE 2011
Pensions Bill [Lords]
78
the past few years is anything to go by, the acceleration
of our expected mortality rates will only increase, rendering
irrelevant and insufficient all the predictions on which
we currently rely. There is near consensus that maintaining
the existing pension age is unaffordable and that we
should correct that by ratcheting up the state pension
age year by year to reflect increasing life expectancy.
However, I am worried by the idea that by the mid
part of this century, asking people to retire at
70—incidentally, the age intended by Lloyd George in
his great Act of 1908—will be seen as the way to fix this
problem, because we may not correct everything that we
hope to correct just by increasing the state pension age
and doing everything contained in this excellent Bill.
Although I support the intention of the Bill and the
immediate steps that it takes, the Government need
rapidly to revisit the conventions and means by which
successive Governments address the central problem of
increasing life expectancy and the effect of that on the
Exchequer and those working to fund it. Otherwise, we
will again end up in a situation that is unsatisfactory
and inadequate. It is unsatisfactory because with every
increase in the state pension age, we inflict another set
of injustices and unfairnesses on those who are approaching
that moment in their lives. The predicament of the
relatively small group of women we have been debating
is a sure indication of far greater problems to come for
Governments in future years.
Because we are facing this cross-generational challenge,
it is incumbent on us to try to forge a consensus
between the parties about the rules by which we deal
with pensions policy. One of those rules is suggested by
the example of the women who are particularly affected
by the Government’s proposed changes. When times are
normal—these are not normal times—there might be a
rule whereby people are given at least 10 years’ notice
before we change their pension entitlements or the age
at which they can claim them. Perhaps the case of the
class of ’53, as they call themselves, is the test by which
the Government will be measured in this respect.
Although I understand why the Government might
fairly ask that people work an additional year to deal
with the horrendous deficit and national debt we have
been left, to ask a relatively small group of people to
work an additional two years with six years’ notice is a
very big ask, not least because it calls into question
other excellent parts of the Bill that are designed to
encourage saving. We cannot ask people to save and
then give them no time in which to do so. I hope that in
considering a way to smooth the edge of this part of the
legislation, the Government will not only fashion a
compromise for the women who are being asked to
work an additional 13 to 24 months, but thereby establish
the first set of conventions by which successive Governments
can deal with this issue.
Another unfairness in the Bill, which was not intended
by the Government, results from the change from RPI
to CPI for uprating. Many of my constituents who are
on occupational schemes, mostly from British Telecom,
have found that their pensions have been changed only
two years after they were renegotiated between the
trustee and the pensioners. The trustee claims that it has
been forced to do that by the rules of the scheme. My
constituents and I would be interested to know the
degree of consideration the Minister gave to the effect
that his changes to the uprating regulations would have
on the occupational schemes of previously nationalised
industries, because they have had a very adverse effect
on people who thought that they had funded schemes.
Those are the unfair and unsatisfactory parts of the
Bill, which I consider to be largely good. I understand
that the Opposition supported the change from RPI to
CPI, but on a temporary basis. With characteristic
innumeracy, they therefore lack the central challenge
that confronts us, which is not just the deficit that we
must deal with between now and 2016, but the period
after that. There is an idea that in 2016 the deficit will
somehow come to an end, we will be finished with our
problems, and we can then extract the cheque book
from our pocket and go on another splurge. That will
sadden people, because if we did that, we would find
ourselves with one of the highest debt to GDP ratios in
the developed world—higher than most of our developed
competitors and significantly larger than almost all of
our developing competitors, just at the point at which
they move up the value chain to meet us on high-end
manufacturing, learning-based skills and value-added
services.
At that point, we will be faced with a demographic
scene that is not much altered from the one the Government
look at now. We need only look at the support ratio to
tell us that. It currently sits at about four workers per
pensioner—the lowest in the history of the state pension.
Under the Pensions Act 2007, it would decrease by 2023
to 3.11 workers per pensioner. That figure will improve
under the Bill to 3.35—a difference of 6%. At that point
we will still be slipping down, and none of this changes
the central projection to 2058—150 years after the
introduction of the state pension—when there will be
2.74 workers per pensioner. There will then be fewer
than three workers for every pensioner they must support.
Pensions are a double-sided promise. On the one
hand, we, as parties engaging in government or opposition,
must give people the security to know what they will
receive in their retirement. That is why I urge the
Government to look carefully at the women who will be
particularly affected by this change, and at those who
are coming to the end of their working life in the public
sector. As many of their accrued rights as possible must
be respected, because that is what was promised to
them, whether or not it was prudent to do so at the time.
In understanding that, we have to be far more brutal
with the younger generation, which has many more
years to work. Frankly, younger people will not be able
to have a pension of the size that their parents and
grandparents have come to expect, because of the
horrendous deficit and the enormous debt that we have
been left by the previous Government—larger than
those of almost all our competitors around the world.
As a result of that debt, we will have less to spend on
education, training and infrastructure improvement.
[Interruption.] The hon. Member for Glasgow North
East (Mr Bain) smiles, but it is true that as a result of
the actions of his Government, we have less to spend on
things that will grow the economy and there will be
fewer tax receipts to pay for the welfare state that we
have come to expect as a nation.
Jonathan Evans: I wonder whether my hon. Friend
picked up on the remark from the right hon. Member
for Birmingham, Hodge Hill (Mr Byrne), when challenged
on the cost of his proposal, that money could be raised