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1.23 pm
Mr. Steve Webb (Northavon): It is always a pleasure to follow the hon. Member for Buckingham (Mr. Bercow). Indeed, I spent most of the past 34 minutes looking forward to the moment when I would follow him. I suspect that we agree on almost nothing, but I enjoy the way in which he presents his case.
I had thought to remark that a debate such as this gives us an opportunity for a more measured exchange of views, and the possibility of trying to influence Government policy, away from the fevered atmosphere that
surrounded, for example, the passage of the Welfare Reform and Pensions Bill. I was tempted to remark that it was a chance to make my observations when no one else was listening. I had not realised that that would be quite so nearly literally true.
With reference to the social security legislation in the Queen's Speech, I shall deal with each aspect, concentrating first on the state second pension proposals. I believe that the Government's heart is in the right place, but that the delivery mechanism will not deliver. I want to probe the extent to which the Secretary of State is willing to reflect on the detail of what he is proposing.
The hon. Member for Plymouth, Sutton (Mrs. Gilroy) mentioned the total eclipse that took place over her constituency. My fear about the state second pension is that there will probably be another total eclipse before it has any impact, such is the slowness of the pace at which it is to be implemented.
As I understand it, even if the legislation is passed quickly, it will be some years before the first year of entitlement is credited or achieved, some years more before the state second pension reaches its final form, and decades before it starts to make its mark. Towards the end of the previous Session, the Secretary of State answered a question about the impact of his policies--not mine, which he kindly describes as "mad". Indeed, I received a response to the right hon. Gentleman's comments, from a gentlemen who is not a constituent of mine, which read, "Dear Mr. Webb, I understand that you have some mad pension proposals. Please can I have details?" However, I shall leave aside my proposals for the time being.
The Secretary of State says that by 2025--a quarter of a century hence--his policy of replacing SERPS with the state second pension will add £1.30 a week to the incomes of the poorest fifth of pensioners. Those are his figures, not mine, based on his assumptions, not mine. My back of the envelope calculations tell me that £1.30 achieved over 25 years accrues at 5p a year. I realise that the Government are taking other measures, but let us consider only the Bill to replace SERPS with the state second pension. Given that the Secretary of State and I want to help the same people--carers and those in low-paid employment--does he not accept that that pace of progress is too slow? I put it no more strongly than that: a reasonable man should be able to accept that 25 years at 5p a year is too slow.
Let us consider what can be done. Even if the Secretary of State is reluctant to accept any change in the principle of his proposals, it should be possible to implement them more quickly. In Committee, I shall table amendments to ensure that we do not have to wait an entire working lifetime before people receive their full entitlement under the state second pension. Is there any way in which people can be brought faster into the new scheme? If the scheme is designed to help those who are carers or low paid now, why do they have to wait 20 or 30 years before they derive meaningful sums from the scheme?
The Secretary of State will tell the House that those earning £4,000 or £5,000 a year get next to nothing out of SERPS. He is right, but why do they have to wait decades before getting something out of the new scheme? I hope the Secretary of State will accept that that criticism is intended to be constructive. If we accept the
Government's policy that there must be state involvement in second-tier pension provision, we should ask them to implement it more quickly so as to help the very people whom they intend to target.
I understand that the proposal is to be introduced in two stages and that, when it is fully implemented, it will provide a relatively bad deal to those on, say, £15,000 a year. The scheme is targeted on low earners, so those on higher earnings will be discouraged from remaining in it and encouraged to take out a stakeholder pension, but they will not be compelled to do so. There is a real risk that people on, say, £15,000 will have had their state second pension entitlement devalued by the emphasis on the low paid, and will end up with a grotty pension if they do not opt out.
If those people are well advised or understand the system, they will probably not fall into that trap, but what if they are not or do not? In the absence of compulsion, what will make people earning three quarters of average earnings opt out? If they fail to opt out, they will be penalised. Is that really what we want to happen? If the idea is to force people to take out stakeholder pensions, is not some element of compulsion necessary in respect of people earning that sort of income?
The Secretary of State might say that people will not make the wrong choice because it should be obvious when they should take out a stakeholder pension; he might even set up sweeteners to encourage them to do so. However, only yesterday, I received an e-mail from a pensioner in my constituency who has only just learned of the widows SERPS issue. The House has been discussing that issue for months, it has featured in press articles for the past year or more and the relevant provisions have been on the statute book for 14 years, yet one of my constituents has only just found out about it.
Against that backdrop of the public's lack of understanding of pensions, leaving people on modest earnings to understand what a grotty deal the second state pension is designed to give them and hoping that they will take out a stakeholder pension but not requiring them to do so is a dangerous step. I hope that the Secretary of State will consider whether some form of compulsion is necessary--albeit not to cover the entire income scale, because I understand the arguments in respect of the very low paid. Is it enough simply to leave people at certain income levels to make the right decision and to hope that they do so?
Mr. Willetts:
Does the hon. Gentleman suspect that many in the industry believe that the Government intend to make the stakeholder scheme compulsory? That is the only logical interpretation to place on the policy that has been announced over the past few months.
Mr. Webb:
I believe that that is what will eventually happen, although the Government are hoping against hope that they will not have to do it. I think that they hope that the scheme will prove to be a popular product--a mass product--and that the number of marginal cases will be too small to warrant compulsion. I do not believe that they will get away with it, however, and I think that the self-employed will present a real problem.
I offer those comments when "no one is listening", in the hope that the Secretary of State will feel able to amend the Bill before we see it--before we know that there has been a U-turn--in the interests of good government and good pensions policy.
I approve of the Government's intentions in regard to the Child Support Agency. I think that their heart is in the right place. As I said earlier, however, I am not convinced that their proposals will work in practice. The short history of the CSA demonstrates that the first formula did not respond sufficiently to individual circumstances. Having been introduced, it was found to create many rough justices, and people could legitimately claim that it was providing the wrong answer. As a result, the Government of the day had to introduce another Act to allow, for example, departures from the formula to cope with individual circumstances. The precedent is that an approximate formula creates rough justice. The proposed Bill, however, features a formula that is far more rough and ready than anything envisaged before, and I fear that it will create even more rough justice.
The Government have promised to keep the matter under review, and that is welcome; but I do not believe that we can go on and on reforming the Child Support Agency. We must get it right this time, or all credibility will be lost.
Mr. Dismore:
I am sure that the hon. Gentleman has had an opportunity to look at the report of the Select Committee on Social Security, in which the Children's Society states:
Mr. Webb:
Yes, I do. I am aware that opposition to the legislation is not common, but that should ring bells in the minds of all Members in view of the history of the CSA. Everyone agreed that it was a good thing, and no one dared stand up and say that it was not; then we all realised--all parties were partly responsible for this--that it was a blunder. I hope that the Secretary of State will appreciate that a nagging voice raising genuine concerns about the possible consequences needs to be heard now, before it is too late.
"Although it has an element of rough justice, it appears to be the best compromise between clarity and fairness".
Does the hon. Gentleman disagree with the Children's Society?
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