Examination of Witnesses (Questions 180
WEDNESDAY 6 MARCH 2002
180. What assumptions have you made about uprating
in your calculations? Obviously MIG at the moment, certainly for
this Parliament, is guaranteed against earnings.
(Mr Hawksworth) We have made the same assumptions
as in policy scenario one.
181. You have assumed that it would all be uprated
(Mr Robinson) Yes.
(Mr Hawksworth) Yes.
182. The Chairman said earlier that he wanted
to return to the incentives for savings which we touched on. Could
we very briefly do that? Presumably quite a major plus of what
you are outlining would be you would expect people to start saving
much more and that you would do something to close the £27
billion saving gap that we heard about last week. Could you add
a few concluding remarks on that?
(Mr Robinson) I think I answered that earlier when
I said that the overall impact of saving is ambiguous in our reform
package, as it is in any reform package because there is a range
of offsetting effects. It is difficult to make confident predictions
about how people's behaviour would change but we do not see it
as a first order priority that we need to increase the overall
level of savings.
183. Peter, I was slightly teasing you about
the timing of all of this and I was interested in your answer.
Certainly ideas are always valuable and welcome. We are seeing
the Minister in a week's time to look at State Pension Credit.
Do any of you have particular things that you think would be valuable,
urgent short-term improvements you could make, which would be
worth having that we could put to him next week?
(Mr Brooks) The way to get from where we are to our
proposed solution is to raise the Basic State Pension by more
than the rate of increase in earnings. If you simply did that
at the right rate for 10 years you would get to what we are proposing.
In a way there is an incremental solution which gets you to the
(Mr Robinson) And the Pension Credit effectively then
would phase itself out over that decade.
(Mr Hawksworth) I would say that the fundamental question
to ask him is: what is the long-term vision that the Government
has for the State Pension system? For example, we have three policy
scenarios here which are utterly different. I would also like
to make one point about what Andrew Dilnot said when he said that
under the Government's scheme total State Pension spend was broadly
unchanged. Andrew has not done any modelling on this because he
thinks it is not worth looking beyond ten years at pensions policy;
maybe he is right. We have and the answer is that it is not broadly
unchanged on the basis of scenario one; it does go up from 5 per
cent to around 6 per cent and that is the same on our figures
or on the Government's figures as demonstrated in the annex to
the paper we sent you three weeks ago. Maybe 5 to 6 per cent is
"broadly unchanged" but it compares with a regime where
it was going from 5 per cent to less than 4 per cent. There has
been a big shift if you accept policy scenario one and that big
shift relaxes the affordability constraint and allows in all the
other options we have looked at. Testing him on what his long-term
vision is, is the key thing.
(Mr Robinson) And a more specific question relating
to that: what do you expect to happen to the Basic State Pension?
Do you really think it will continue to be price-indexed and will
decline and decline and decline?
Chairman: That has been very thought provoking,
thank you very much. I am very grateful to you. We certainly look
forward to reading the papers you have sent us and thank you very
much for your appearance this morning.