Pensions Bill

I should like to start on three points of consensus, and I shall try to be brief as other Members still want to speak. First, I echo the Minister’s comments in passing on our thanks to those people who have been involved in supporting the Bill through its various stages: the officials in his Department, those who advise us and the lobby groups who sometimes see their ideas and even their words taken up in the debates. We are grateful for all of that. We would also like to thank the Minister for the very reasonable way in which he conducted himself throughout the Committee stage and for the fact that he tried, on the whole, to answer our questions. We can only wonder what future there is for a person who displays such qualities in the Government that we are about to get. We wish him all the best with that. Perhaps more importantly, we add our congratulations to those of the Minister on the work of the Pensions Commission. It is worth bearing in mind that none of the big measures in the Bill was included in its entirety in the manifesto of any of the four main parties before the last general election. To succeed within a very limited period in proposing a coherent package of reforms and persuading not only the Government, but both main Opposition parties and some of the other groups represented in the House, to accept it is a major achievement. I hope that many of those reforms will last and influence the shape of the pensions system for many years to come. I think in particular of the restoration of the earnings link, the increase in the state pension age, auto-enrolment and the other changes to the pensions contributory system. There is a great deal of consensus on those measures and on the direction of travel, which is why we, too, do not intend to divide the House on Third Reading. Earlier, the hon. Member for Eastbourne (Mr. Waterson) teased me about whether there was a parallel consensus, which only the Liberal Democrats were part of and which could exist alongside the apparent universal consensus on the Pensions Commission’s proposals. In fact, there is. I put it to him that if he went to every saloon bar and village hall in the country and held a public meeting on pensions, he would find that there is indeed a parallel consensus on three points. It is perfectly possible to hold both the existing consensus and the parallel consensus in one’s mind at the same time. The hon. Member for Birmingham, Selly Oak described the elements of the parallel consensus in her comments. As the hon. Member for Eastbourne will recognise as I describe them, the elements of that consensus are threefold. First, the Government have said that there is a great degree of certainty about the reforms. In their response to the Committee on Work and Pensions, they said:"““There is no ambiguity around this commitment?—" for example, in respect of the earnings link. However, that comes as news to many people in this country and in this House who feel that there is a great degree of uncertainty, not least about the arbitrary way in which the earnings link is to be restored, which has created uncertainty and will increase the amount of means-testing in the meantime. There is no guarantee that the state pension will be uprated by the greater of the increases in prices and earnings—the Labour party has dropped its commitment to that. More seriously, there is not even a commitment in the Bill to uprate pensions by a measurable and defined index, which the Engineering Employers Federation has said gives the Secretary of State almost carte blanche to determine the way in which the uprating takes place. That is worrying for all of us, because none of us knows which party will be in government in the future or how they might decide to reinterpret some of the changes made though the Bill. In a nutshell, if one goes to any pensioners’ group in the country, one will find a parallel consensus on dissatisfaction with the uncertainty and the long time before the changes take effect. That is why although all of us here may be pleased about the pensions consensus, people in the rest of the country are not. Secondly, because the restoration of the earnings link is being delayed and because, as the hon. Member for Birmingham, Selly Oak said, we are building on such a low foundation of the basic state pension—because the Chancellor has insisted that pensions reform takes place in an environment where for 10 years we will not increase the share of GDP that goes to state pensions—we have an enormous amount of means-testing. In the short time left I shall not repeat the entire debate, but today I was interested to hear even the Minister start to moderate his claims about the number of people who will benefit from personal accounts. On Second Reading, the Secretary of State said that the vast majority of people would gain more than £2 for every £1 invested, but today we have been told that a good majority of people will be net gainers—in other words, the claims are being scaled back. The Government have not yet been able to answer the point, so I continue to believe that half the target audience for the personal account—people on lower incomes, whose risk of becoming subject to means-testing is greater than it is for the rest of the population—could be subject to means-testing in 2020, 2030 or 2040. A large number of people might find either that the £2 for £1 no-brainer offer that Adair Turner and his commission tried to deliver is not realised for them, or that—worse still—they fall into the small but not negligible category of people who will actually lose by investing in a personal account because of the effect of means-testing not only on the pension credit, but on housing benefit. The Government’s problem is that the more they deal with the mis-selling problem by not auto-enrolling various groups for personal accounts, or by not making sure that those groups get generic advice, the more they displace the mis-selling problem and make it a take-up problem, in which lots of people who should have personal accounts do not. The Government have yet really to deal with that problem. Some of us have concerns that the Government are building on an unsound foundation. If we are right about those concerns, the personal account part of the package, which we will hear about later this year, could be a failure, and if it is it will pull the rug from under a lot of the reforms, and that will affect what is delivered. The final point on the parallel consensus is that people recognise that there are some huge issues with which the Government have not yet dealt. The hon. Member for Eastbourne touched on our disappointment today about pension compensation, but there are bigger issues with which the Government have not yet dealt, including the reform of public sector pensions, and the reform of tax relief in ways that are strongly hinted at in the Pensions Commission report and the Select Committee report. The direction of travel is right, but the hon. Member for Cannock Chase (Dr. Wright) said earlier, on pension compensation, that he feels that the Government have half-built a house. Similarly, on pensions reform, we feel that the house is not yet complete. Given the degree of consensus, we hope that we will not have to advocate knocking down any of the walls in future, but there is a long way to go before the house is completely built, so that we can deliver the pension system that the country really needs for the future.