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UK book publishing is the largest in Europe, exporting more than 40 per cent of what it produces. Nobody will be surprised to learn that the sales of JK Rowling’s six Harry Potter books exceed 325 million copies. As we have heard, the UK is a world leader in computer games. Grand Theft Auto has sold more than 50 million copies worldwide, with a revenue of nearly £2 billion.
I could talk about many things but I do not have the time. I am particularly pleased that the noble Baroness, Lady Buscombe, talked about advertising, which is a very important creative industry, and that the noble Lord, Lord Patel, touched on design. I have not mentioned Brit art and Damien Hirst’s diamond skull. These are all extraordinary examples of the vitality and economic worth of this industry.
Many speakers asked about the Government’s role in this vital part of the economy. I have heard before the view expressed by the noble Lord, Lord Howard of Rising, and it is a perfectly reasonable position to take—that the Government have no role and should just let creative people get on with it. My view and that of the Government is that a benign framework should be provided within which the creative industries can flourish. The Government should also provide the statistics to monitor the growth of the creative economy. To go off message for a moment, my own view is that the creative economy is worth a good deal more than 7 per cent of our gross national product.
The Government must continue to fund the arts properly because the arts are the catalyst for much of what has happened and will happen in the creative economy. Like the noble Baroness, I was greatly heartened by the speech made by the next Prime Minister at Brighton, in which he recognised the contribution that government arts funding makes to the creative economy.
Education, which is so important at every level, was stressed by noble Lords. Some people in the popular music world whom I knew a few years ago had all been educated at art school. I refer to Pete Townsend, Brian Eno and Ray Davies of the Kinks. Perhaps that was the case with that whole generation. Are art schools still as creative now as they were then? Is there that same extraordinary creative activity that there was in the 1970s and the 1980s? As I say, education is hugely important.
The Government should prepare reports that focus on aspects of this economy that need careful thought. That was mentioned. I refer to the Cox review of creativity, the Roberts report on creativity in schools and the Gowers review of intellectual property. I add my voice firmly to those who praised the Culture, Media and Sport Select Committee report into the creative industries. It is an excellent report and I hope that everybody will heed it. The creative economy Green Paper, which is expected to be published shortly, will set out the Government’s vision for supporting our creative sector. This will be a significant step in the Government’s support for the creative industries and will build on the excellent work of the creative industries task force in 1998 and the 2001 mapping document.
My noble friends Lord Smith and Lady Morris, the noble Lord, Lord Clement-Jones, and others touched on an issue that in itself deserves a full debate; namely, the protection of intellectual property in the digital age. Grave problems need to be addressed but we are all at one in saying that, without protection from piracy in whatever form or guise, all aspects of the creative economy will be damaged, including its future growth and worth. It is extremely worrying that people are arguing rationally for copyright work to be available at the point of creation. We must resist that. People will create only if their work is protected. We must do everything that we can to discuss this, push back that boundary and make sure that anybody who steals creative work is dealt with appropriately.
Unfortunately, I do not have time to answer the specific questions asked by my noble friends Lord Giddens and Lady McIntosh, but I undertake to do so shortly. In the mean time, I thank all noble Lords for being so incredibly positive about this economy. We must all keep talking about it and do everything that we can to protect the people who create it for us. We should keep discussing it and keep stressing its vital importance not only to our way of life but to our children and our economy.
Lord Davies of Oldham: My Lords, I congratulate all who contributed to the debate and, somewhat embarrassedly, beg to move that the House do adjourn during pleasure until 8.30 pm.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 8.26 to 8.30 pm.]
Pensions Bill
Baroness Howe of Idlicote moved Amendment No. 81:
Notwithstanding any statutory provision or rule of law to the contrary, any compulsory annuity forming part of a private sector pension shall be payable at the same rate to men and women.”
The noble Baroness said: The purpose of the amendment is to draw attention to the fact that equal opportunities legislation is not effective in the area of annuities. It should apply there and I hope that I can persuade noble Lords of that. The amendment defines the area in which there should be no discrimination between annuities granted to a male and a female on the same terms in a private pension.
This issue has a history and takes me back to my early days on the Equal Opportunities Commission. When the EOC was established, retirement age and pensions were firmly outside the scope of the Sex Discrimination Act 1975, and were not the concern of the EOC. In those days, we received complaints from men who thought it was unfair that they be required to work for five years longer than women before they could receive their pensions. We also received complaints from women because they were not allowed to work beyond the age of 60, and therefore earn the higher pension resulting from their retiring at 65. I accept that the situation has become more flexible since then. It was not long before pensions, following a legal case, were viewed as pay. Equal pay was firmly part of the EOC’s responsibility, because it was covered by the Sex Discrimination Act, both to encourage equal opportunities and to enforce the legal requirement for equal pay for work of equal value.
Today, there are other forms of discrimination, which were mentioned on the first day of Committee, and certain sections of the community are much worse off than others. For example, people who have been to university are likely to live longer. People who have been involved in heavy manual work may have a shorter life, and so on. One accepts that. I very much admire what the Government are doing to equalise, as much as is humanly possible, the role of women as carers who have looked after many aspects of family life. If the state had paid for that the cost would have been horrendous. As many resources as possible should go towards making our society more equal. We have seen, in the amendments that we have already discussed, how keen your Lordships are to ensure that those already generous areas can be extended further.
However, one is entitled to ask, as I did on Second Reading, for how long the responsible Minister will continue to defend what I and one or two other noble Lords regard as a grossly sex-based inequality. I am proud of our sex discrimination legislation and of the fact that it has set the pace for many other countries to follow. Perhaps I may quote figures given by the noble Baroness, Lady Hollis, who referred to the gender filter. She said that,
That is nine years. Another method of calculating further reduced that period. Equally, an earnings link benefits most of those who have a complete basic state pension. Surprise, surprise: 92 per cent are men and less than 30 per cent are women. I would argue that that is not just sex discrimination, but even indirect sex discrimination—an important legal concept that was first introduced by the Sex Discrimination Act. One may apply the same conditions to men and women, but maybe one is disadvantaging one sex more than the other.
I hope that I receive some encouragement from the Minister and that at some stage, as we advance towards the time when women and men retire at the same age, with the same level of responsibilities for caring and so on, this important principle of equal opportunities for men and women will not be left to the market—it would go wider than that if we had an equality Act—and we should consider whether the present situation can continue to be seen as fair and just. I beg to move.
Lord Skelmersdale: I suspect that the Minister will have some difficulty accepting this amendment; I cannot do so because life is unfair for women. Not only, as the noble Baroness said, do they live longer, but they also give birth, as my daughter-in-law is doing as we speak.
I appreciate how galling it must be as a woman to be offered a lower annuity than a man for the same amount of money, but that is a reflection of the longer life expectancy that a woman can expect to enjoy and is based on market-assessed risk, not prejudice or discrimination. If a car insurer, for example, can offer a preferential insurance rate to young women because of their statistical likelihood to be safer drivers than young men—I must admit that that statistic surprises me, but be that as it may—I do not see how we can avoid similar differentiation for the elderly. I also take heart, as the noble Baroness did, from evidence suggesting that life expectancies are slowly converging as male life expectancy rises. I am sure that the market will respond and that the difference in annuities will adjust to incorporate this; if not, I agree that the Government ought to keep a very close watching brief on this.
Before I sit down, I must say how nice it is that the noble and learned Lord, Lord Davidson, is joining us. Could it be that the Minister is suddenly in need of legal advice?
Lord Oakeshott of Seagrove Bay: I do not think that the noble Lord, Lord Skelmersdale, should be surprised to discover that women are safer drivers than men; if I were running a motor insurance company, I would be only too happy to have only women on my books.
I pay tribute to the great work that the noble Baroness, Lady Howe, did at the Equal Opportunities Commission; indeed, I was special adviser to Roy Jenkins when we set up its predecessor, the Sex Discrimination Board. However, I am sorry to say that this is not an appropriate area for legislation; it is reasonable to let the market decide. I am sorry that we cannot support her.
Lord Turner of Ecchinswell: Although I, too, am very sympathetic to the noble Baroness for her great work on behalf of women’s equality, I am not sympathetic to this amendment. It may appear to some people that it is unjust to women that they will receive at the age of, say, 65 a lower annuity rate than men but, if you switch it round and demand a unisex annuity, it will appear unjust to many men that they get the same annuity rate but, on average, for fewer years.
There is a wider issue here: whether we want to encourage within the insurance industry greater or less discrimination of classes or pools of insurance. There are some dangers in going to the extreme end of discrimination—there are some complicated issues that will eventually face us involving genetic testing and the ability to predict whether someone has a predilection to a particular condition—but, on the whole, greater discrimination is likely better to serve the social ends that we might want. For example, it is the case that lower-income people have lower life expectancy than higher-income people. The existing annuity market involves a cross-subsidy from poor people to rich people. The insurance industry is increasingly looking at whether it can undo that cross-subsidy by having annuities based on the postcode, income or some other indirect indicator of likely life expectancy. If the result of that is that the working-class man from Glasgow ends up with a better annuity rate than the professional person from London, that would be a thoroughly useful form of discrimination, which will help to offset some of the problems of inequality in life expectancy.
As I say, although we will face some extreme issues decades down the line about how we deal with genetic testing and so on, social purposes, at least for now, are better served by a better degree of discrimination between different, more narrowly defined categories of insurance risk than by trying to demand unisex, “uniclass” or other categories of intervention in the annuity market.
8.45 pm
Baroness Hollis of Heigham: I am sure that my noble friend will reflect on the amendment, because the world has changed since we had these debates—even those that we had in 2004, let alone earlier ones.
First, the retirement age for women will gradually rise, as I think is right and proper. Secondly, and more to the point, the current discrepancy in longevity between men and women has fallen sharply over the past 10 or 15 years. There is now a difference of about two and a bit years, whereas the gap by social class—which, to the best of my knowledge, is not reflected in annuities unless impaired life is involved—is now something like four and a half years. We take account of one but not the other. I do not understand why we should do that, except that gender is an easily recognised flag in the system in a way that social class may not be, but that is unfair to women compared with other determinants of life expectancy.
The point made by the noble Lord, Lord Turner, about whether we want to go into sub-group specification or whether we want something more general is entirely valid. But if the market is to move in that direction, it should put a far lower premium and weight on gender, which may be a minor factor now coming into play, and far more on social class, of which the best predictor of longevity is further and higher education and a degree. To say that the current arrangement applies for the benefit of women in other areas of life, such as car insurance, is a very old-fashioned perspective on the part of insurance companies. I believe that we should be offering unisex insurance to young men and young women alike. Then, if the young man proves to be an erratic or dangerous driver because, for example, he is involved in a car crash, his premium should be increased. However, it would not be right to make predictions. It would not have been right to say, for example, that when my younger son, who is an extremely careful and cautious driver, was 21 or 22, he should have carried an extra weight compared with the young daughter at the house next door, who, for all the insurers knew, might have been far more of a flibbertigibbet—as my mother or grandmother would have called her—in her driving. That would seem to be an absurd example of post hoc, propter hoc, which should have no place in the insurance industry.
The Government recognise that argument. As far as I am aware, there is no gender distinction in the basic state pension, the state second pension and, above all, GMPs—goodness knows, we have enough amendments on guaranteed minimum pensions coming up. In other words, so far as concerns the state—quite properly in my view—people receive the same pension, irrespective of gender. The privileged marital status should get a 60 per cent dependency element but men and women get the same basic state pension, whether it is collected at the age of 60 or 65, and the same applies to GMPs. Conventionally, GMPs are part of the core of occupational pensions—unless the noble Baroness, Lady Noakes, persuades the Committee to change its views on that.
If, as a society and a state, we believe that it is right to have unisex cores in the state-element provision provided by contracting out, and in the state second pension or the basic state pension, why do we think that it is okay for the private sector to do things differently? I do not understand that. I accept that gender may remain a modest and diminishing marker, but other markers are far more important. If we insist on having a segmented insurance industry, we should re-examine this matter. I think that the day has come to say that this situation will not do for much longer.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): This has been a brief but fascinating debate, and I thank everyone who has participated. I shall touch on some of the points that were made earlier about annuity policies. I shall not dwell on those too much but shall focus on the specifics of the amendment. Perhaps I should congratulate the noble Lord, Lord Skelmersdale, on becoming, or being about to become, a grandfather. That is good news.
We share concerns about the need to bolster people’s income in retirement and, in particular, to address the position of women, who currently often do less well than men. The Government have introduced a number of measures to help to tackle this, many of which we have already debated.
The Bill includes measures to improve women’s state pension coverage by reducing the number of years needed to qualify for the full basic state pension from 39 to 30 years. The new weekly credits for relevant carers will make the scheme fair and more transparent and will significantly improve state pension outcomes for women. The new credit will reward parenting and caring equally with paid contributions.
The new scheme of personal accounts will provide a straightforward opportunity to contribute to a high-quality, low-cost saving vehicle, making private savings truly accessible. These portable, flexible accounts will be available to people active in the labour market. People with caring responsibilities who take a break from the labour market will be able to continue to make their own payments into their personal account. Together with changes in society, which mean that more women now work and have more opportunity to build up both state and private pensions in their own right, these changes will help to improve women’s income in retirement.
As we discussed, annuities provide a regular and secure income for life, no matter how long that life turns out to be. Although not always well understood, annuities are at heart an insurance product. Like all insurance products, they work by pooling risk—that is the nature of the product that we are dealing with here—and risk is taken account of in setting the premium. The older you are when you annuitise, the higher the rate you will get in exchange for your pension pot. That reflects the fact that the older you are, the fewer years the insurance company will expect to have to pay for your annuity, so it can afford to pay you more per year.
Similarly, it is an actuarial fact that currently, on average, women live longer than men—the time span might be narrowing—so women can expect to be paid an annuity for longer than men of the same age. Over their lifetimes they will, on average, receive equivalent value in exchange for the same-sized pension pot. I do not see that as discrimination. If one looks at the net present values of those two situations, one would expect them to come to the same amount. This amendment would change that to a situation in which women are given a more actuarially fair rate subsidised by men who would get a less actuarially fair rate. Such a move would also undermine the price-per-risk principle behind insurance products. Motor insurance has already been mentioned.
The noble Lord, Lord Turner, raised interesting points, as did my noble friend Lady Hollis about the size of the cohort and whether one further segments the market there. We see that happening already with impaired life annuities. We have also seen some of those developments in the annuities market. Indeed, the Government encourage that. How fast it might go down the route to which the noble Lord, Lord Turner, referred remains to be seen.
The EOC has recognised many of those difficulties and in 2004 it commissioned some research from the PPI on that issue. The PPI concluded that the introduction of unisex annuities was unlikely to be of widespread and significant benefit. The PPI work informed the EOC’s input into the EU draft directive on equal treatment between women and men in access to goods and services, when that was considered by the House of Lords Select Committee on the European Union in the spring of 2004. The EOC has said that the Sex Discrimination Act currently allows insurers to set different rates for women and men. However, a draft directive being debated in Europe originally included a proposal to change that by banning insurers from using data based on gender when calculating insurance and annuity rates. The EOC has called for the draft directive instead to be amended so that insurers can still set different rates for women and men, but with strict limits on how data based on gender could be used.
Baroness Hollis of Heigham: One of the things that informed the EOC’s position at the time was that a lot of married women did not have an annuity in their own right, but depended on their husband's annuity and, therefore, those married women would have lost out were their husband’s rate depressed in order for the rate of other women—single women, women with annuities—to rise. I have reason to believe that that may have influenced the thinking at the time. I believe that everyone's mindset has moved on since then and one should not assume that one should protect dependent women at the expense of those who try to protect themselves. My noble friend is relying quite heavily on the EOC’s arguments and material. If, since 2004-05, the EOC were to change its position on that, would that help to move the Government’s thinking forward?
Lord McKenzie of Luton: If the EOC were to change its position, I am sure that the Government would reflect on that and on the reasons why. These are serious issues and we should have continuing focus on them. I know that the noble Baroness, Lady Howe, has a long association with the EOC, which accepted the case for different annuity rates for men and women being allowed to continue, partly for the reason that my noble friend has outlined.
Under Article 5 of the directive, special provision is made to allow member states, when implementing the directive, to maintain the use of sex as a determining factor in the assessment of risk based on relevant and accurate actuarial and statistical data. At present, the Government intend to apply those provisions to maintain the current position in the UK. A consultation document on the proposed implementation, which has to be completed by 21 December 2007, is being prepared.
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