Pensions and Social Security

I apologise for not being in the Chamber at the start of the Minister's speech. I always find his comments most informative, as he is very knowledgeable about the issues under discussion—although I do not agree with many aspects of Government policy in this area. I had not intended to speak in the debate, but have been spurred to do so by the assertion that these proposals are uncontroversial, particularly in relation to the retail prices index and consumer prices index change. That is certainly not uncontroversial. I shall restrict what I say to the issue of RPI and CPI. We have already had the biggest public sector strikes—indeed, the biggest strikes—for generations because of the change from RPI to CPI. I believe the Minister is shaking his head, but union members are very concerned about the cumulative impact of this change over many years. Today's debate has focused more on pensioners than on social security benefits. It is unfortunate that the Chair of the Work and Pensions Committee, my hon. Friend the Member for Aberdeen South (Dame Anne Begg), is unable to be present as she had a fall earlier this week. She has a huge amount of expertise in these subjects and her contribution will be greatly missed. I am sure all Members will want to send her best wishes for a speedy recovery. The social security ramifications of these changes are less spoken about because there is less lobbying on social security issues. Although those in receipt of benefits contact their MPs about the issues affecting them, there are not many well-funded organisations representing them and lobbying MPs. There are more pensioner organisations and the National Pensioners Convention has been mentioned. It and other organisations, including Age UK, have contacted MPs about the issues under discussion today. They are calling on Members to vote against the proposals and, in particular, against the social security benefits uprating order, especially because of the RPI and CPI change. That highlights how controversial this issue is, and we will return to it again next Thursday when we debate the petition. There is much controversy because the change will result in pensioners and those in receipt of social security benefits receiving smaller increases in most years. The switch from RPI to CPI will greatly affect the living standards of both pensioners and those in receipt of benefits cumulatively over a long period of time. CPI inflation is usually about 0.7% lower than RPI inflation. That is because of how the rates are calculated. As a result, the increase in public sector pensions this year will be 5.2%, whereas under RPI it would have been 5.6%. I am sure the Minister will challenge that finding if he disputes it. The Labour party does not necessarily oppose the change in the short term—over a period of four years. However, I do not support that position. This change is dangerous because of the impact it will have year on year. Organisations including Age UK say that someone who retired on 1 April 2009 with a £10,000 state pension or public service pension will now have a pension of £10,846, whereas if the RPI link had been retained the sum would have been £11,046. The cumulative loss to such people is already £350, therefore. The real concern is the cumulative effect that this change will have over a long period of time, particularly for someone who is retired for a lengthy period, and that is why I am speaking today. For example, someone who had a 25-year pension—of course not everybody will be lucky enough to have one of those—would lose £35,000 over the lifetime of that pension. The cumulative effect is substantial. Indeed, the Office for Budget Responsibility has recently spoken about the long-term difference between the two measures, and the significant change and reduction in living standards that will take place over time. In the short term, this is the wrong measure. I say to Government Members that their policies of austerity are not working.