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Miss Anne Begg (Aberdeen, South) (Lab): I was interested to hear what the Secretary of State had to say about women and pensions, and I think that many women will be very happy about it. He mentioned a reduction in the time for which contributions must be made to 30 years. He also said that it might be easier
for some women, and carers, to accrue national insurance credits. Will he give us a little more detail about those changes?
Mr. Hutton: We will change the way in which carers contributions accrue for pension entitlement under both the basic state pension and the state second pension. We will make it easier for carers to earn a state second pension credit. The entitlement that currently applies to those looking after a child under six will be extended to those looking after a child under 12. As for carers credit, on which we intend to consult, we want to extend basic state pension credits to those caring for more than one person if the time spent on that combined caring totals 20 hours at week. At present, the total must be more than 30 hours a week.
Mark Pritchard (The Wrekin) (Con): Given that employers can opt out of the personal accounts, what projections has the Department made about those who might opt out, and what if the projections are wrong?
It is difficult to estimate the number of people who might opt out in the future. We think as many as a third of eligible employees might want to opt out of the low-cost personal accounts that we are introducing. We are making it clear today that that must be a personal choice. It would be wrongand Turner rejected the ideato compel every employee to participate in the new personal accounts, irrespective of personal circumstances. For that obvious reason, we decided not to do so.
Dr. Ashok Kumar (Middlesbrough, South and East Cleveland) (Lab): May I praise the Secretary of State for a courageous and forward-looking statement? How many of the Texon UK workers in my constituency will be able to benefit from the financial assistance scheme? I urge him to be proactive: a number of those workers may not be aware of the changes that he is introducing.
Mr. Hutton: I am grateful to my hon. Friend for what he has said. I do not know the precise figures relating to the financial assistance scheme, but I will find out. I can reassure him that it is our responsibility in the Department to ensure that scheme members who might be eligible for the additional support are notified. If he has any worries about how that is proceeding, he should come and see me.
Dr. Vincent Cable (Twickenham) (LD): Will the Secretary of State investigate an alarming practice involving occupational pensions? Overseas companies, such as Parsons Engineering and EMC Engineering in the United States, are effectively defrauding their British pensioners by contriving an arrangement whereby they temporarily liquidate a British subsidiary, expunge their pension liabilities, offload them on to the
British taxpayer and resume normal business, including the winning of large Government contracts.
Natascha Engel (North-East Derbyshire) (Lab): I know that means-testing pensioners has been unpopular with some, but the truth is that pension credit has lifted millions of older people out of poverty. What is the future of pension credit, and how will my right hon. Friends announcement today ensure that there is no pensioner poverty trap tomorrow?
Mr. Hutton: We are making it clear that there will be a continuing role for targeted financial support for the poorest pensioners. One obvious reason is that many women, in particular, have not accrued a full entitlement to the basic state pension. They will be in the pensions system for many decades, and we have no intention of withdrawing any of their financial support. I think it right, in the short, the medium and the long term, for us to adopt sensible measures to restrict the spread of means-testing. By definition, ours must always be a targeted approach, and I hope and believe that the measures we have announced today will go a long way towards dealing with my hon. Friends concerns.
Mr. Nigel Dodds (Belfast, North) (DUP): I, too, welcome the changes to the financial assistance scheme. Workers in my constituency at the Richardsons IFI plant have been treated shabbily and are devastated; I hope that these changes will help to improve the situation. Is the decision to uprate the pension credit in line with earnings from 2008 subject to an affordability test?
Mr. John McFall (West Dunbartonshire) (Lab/Co-op): I draw the Secretary of States attention to the Treasury Committee report on this issue, published this week, which was unanimous. May I remind him that the national pension savings scheme will be successful only if regulation is kept at a minimum? Simplicity is the key word and if we can achieve that, we will have a realistic chance of achieving the 30 basis-point annual management charge that Lord Turner envisaged. More money will thus go into the pension pots of workers, instead of the pockets of the financial institutions, enabling them to get the maximum amount at the end of their working life.
Mr. Hutton: I agree absolutely with my right hon. Friend and I congratulate him and his Committee on a very good report. The point to which he has drawn our attention is fundamental. If we can get anywhere near the 30, 40 or 50 basis points that Lord Turner has suggested might be possible under the personal account scheme, that will improve the value of peoples
savings by as much as 20 or 30 per cent., which will be a major boost to those on low and middle incomes in particular.
Hywel Williams (Caernarfon) (PC): Plaid Cymru and the Scottish National party welcome the improvements to the position of women and the restoration of the link with earnings, but we regret that that is at the cost of establishing a citizens pension, which is our favoured route. Will continuing with the means test not guarantee that a proportionalbeit smallof pensioners will remain in poverty, particularly in Scotland and Wales?
Mr. Hutton: I do not think so. For reasons that I have tried to spell out and that I do not want to repeat, it is absolutely essential to maintain additional targeted financial support for the poorest pensioners; to do anything else would be quite wrong. The hon. Gentlemans preferred solutionthe citizens pensionwould cost the taxpayer an immediate £10 billion in 2010. Unless and until he and his hon. Friends can come up with a way of financing that proposal, we should treat it with a very large dose of salt.
Derek Wyatt (Sittingbourne and Sheppey) (Lab): I thank my right hon. Friend for the courtesy that he and his predecessors have extended in the past four years regarding the financial assistance scheme, and for increasing it from £400 million to £2 billionan astonishing sum. He has said today that he will look again at those who do not yet qualify who will be aged under 50. Can he tell us what percentages of people above and below the age of 50 will qualify for the FAS?
Mr. Hutton: That will depend largely on whether such people meet the FAS eligibility conditions, which we are not changing today, so I cannot give my hon. Friend an exact figure. However, he has played a very significant role in getting Ministers to look again at this issue, and I thank him for his encouragement and support.
Justine Greening (Putney) (Con): Given that one of the main drivers for reform is the decline in the dependency ratio over forthcoming decades, why did the Government opt for the tax-funded proposal outlined today, rather than an investment-funded one? Was such a proposal considered, and, if so, why was it thought less preferable than the one outlined today?
Ms Diana R. Johnson (Kingston upon Hull, North) (Lab): I congratulate my right hon. Friend on the White Paper. I was particularly interested to hear about provisions dealing with the inequality experienced by women and carers, but I have a remaining concern: the need to persuade young people to save for their future and to provide them with information on saving. How can we prevent them from opting out of a national pension savings scheme?
Mr. Hutton: This is a very interesting area on which, if I am being honest with my hon. Friend, we need to
do more work. The Government take seriously the question of improving knowledge of pension and financial issues generally. Now that we have the road map for the future on pension reform, we need to explore every potential avenue. I spent part of the morning at Merrill Lynchan example of a very large City financial institution that is collaborating with local schools to improve financial capability and knowledge. We need more of that, and we would be happy to support it.
Mr. John Greenway (Ryedale) (Con): Who will be responsible for the clarity of the explanatory leaflets for personal accounts, given that no advice is to be provided, because of the low cost to which the right hon. Member for West Dunbartonshire (Mr. McFall) referred? Indeed, I greatly share his concern about that issue. What will the Secretary of States strategy be to ensure that employers, who currently contribute rather more than 4 per cent. to their employees pensions, will not use this as an opportunity to reduce their costs and, therefore, provision?
Mr. Hutton: I agree with the hon. Gentleman on that latter point, and we will have to look very carefully at this issue as we introduce the reforms. When he has a chance to look at the White PaperI realise that copies have only just been placed in the Vote Officehe will see that we want to continue to talk to people about these matters in more detail, given that we now have a longer time in front of us to prepare the legislation. Indeed, I suspect that the proposal will come before the House later than the second Session. If the hon. Gentleman is willing to work with us on this issue, I would welcome that. The question of leaflets will have to be considered in greater detail over the next few years, but my current thinking is that such a responsibility will rest with the national pension savings scheme, which will oversee such arrangements. But it is obviously very important, in the light of everything that has happened recently, that we learn the lessons of the last few years and do not repeat the mistakes.
Ian Lucas (Wrexham) (Lab): I warmly welcome the restoration by a Labour Government of the earnings link, which was so cruelly taken away by the Conservatives. Will transitional arrangements be put in place for women such as my mother, who are not eligible for the full state pension and would like to have the benefits of the proposed improved scheme?
Mr. Hutton: I am grateful to my hon. Friend for that question. I obviously do not know the details of his mothers circumstances, but I very much hope that she will benefit from the restoration of the earnings link and from the other reforms that we are making. Reforms to the contributory principle will take effect from 2010, and I am afraid that if my hon. Friends mother has reached retirement age by thenI suspect that she might haveshe will not benefit, sadly, from that proposal.
Bob Spink (Castle Point) (Con): Will the Treasury consider ways of assisting small and medium-sized enterprises, in particular, in meeting their 3 per cent.
contribution to the new pensions; and how can we ensure that that contribution will not be increased in future, as another stealth tax?
Mr. Hutton: I agree with the hon. Gentleman on that point. We have made it clear today that, as the White Paper spells out, the 3 per cent. employer contribution will be fixed in the legislation that we will introduce in the next Session. It will be up to subsequent Governments to change that, if they want to, but to do so they would have to come to this House to seek primary legislation. The White Paper makes it clear that we intend to consult soon on a series of transitional support measures that might be necessary to help employers with the introduction of the employer contribution. We hope to get that document out soon.
Kelvin Hopkins (Luton, North) (Lab): I very much welcome my right hon. Friends statement today, representing as it does the breaking of a logjam in pensions policy. But will he not go a little further in doing something to help todays pensioners now? May I suggest that he give serious consideration to raising the basic state pension fairly rapidly toward the point that it would have reached had the Tories not broken the earnings link? If it is a question of affordability, I should point out that, if we can afford to subsidise the savings of the rich to the tune of tens of billions of pounds every year, surely this is affordable.
Mr. Hutton: I am grateful to my hon. Friend for his support, which is important to me. It is worth pointing out one fact. We are spending £11 billion more this year on pensioners compared with 1997, which is£8 billion more than an earnings link would have delivered. The Government have delivered on a very positive agenda for pensioners. This statement, however, is about long-term pension reform. Such reforms will start in 2010 and accelerate in the following decade. The decisions that we take today on improving pensioners standards of living are matters for my right hon. Friend the Chancellor.
Mr. Desmond Swayne (New Forest, West) (Con): What comfort can APW workers take from this statement, who were excluded from the terms of the financial assistance scheme because of the responsible decisions that properly had to be taken by their trustees?
Mr. Hutton: I am very familiar with that scheme; indeed, some of my right hon. and hon. Friends have also raised this issue with me. Today, we are confirming an extension of the financial assistance scheme for eligible employees, but of course, in order for them to qualify for it, the employer needs to have been insolvent. We have not found a way to resolve the issues that the hon. Gentleman raises, but we stand ready to continue to consider them in the weeks and months ahead.
Mr. Edward Leigh (Gainsborough) (Con): It is easy for politicians to make promises today that have to be paid for by electors tomorrow. Does the Secretary of State think that it is important that the younger generation be reminded about how much these proposals will cost? Assuming that they are introduced in 2012, what will be the cumulative cost of the restoration of the earnings link in its first 50 years of operation?
Mr. Hutton: That figure is buried in the White Paper somewhere. I know that there is a table with that information because I was doing my homework on it last night, but of course I cannot find it nowthat is the way of the world. I agree with the hon. Gentleman on one point: we have always made it clear that we will make proposals only if they are affordable. I am convinced that these reforms are and will be affordable, and will not involve taxes having to go up to meet the commitments. That is important.
Mr. Ian Davidson (Glasgow, South-West) (Lab/Co-op): I question the fairness of raising the retirement age. The average life expectancy for a man in my constituency is 69. If we raise the retirement age to 68, the average male in my constituency will have the equivalent of a gap year between retirement and death, whereas in other parts of the country the gap is a decade or more. Will my right hon. Friend assure me that steps will be taken, in parallel with raising the retirement age, to ensure that efforts are made to raise life expectancy in constituencies such as mine?
Mr. Hutton: We are aware of the issue to which my hon. Friend draws attention. The state pension age will reach 68 in 40 years time and I am confident that his constituency and others will have a matching rise in longevity to meet that. The Turner commission suggested that we consider the issue of when pension credit becomes available, and the White Paper makes it clear that we are doing so, because that proposal might go some way towards addressing the concerns of my hon. Friend and others.
Dr. Julian Lewis (New Forest, East) (Con): The Secretary of State reiterated today what he said on16 March, which is that he still proposes to consider the case of APW Electronics and others, on which there is a three-party consensusled by the right hon. Member for Southampton, Itchen (Mr. Denham)that something must be done. Can the Secretary of State tell us how many firms are in the position of having been forced to give up 80 per cent. of their pensions under duress before the scheme came into effect? Will he use his best endeavours to save the futures of only a small number of people?
Mr. Hutton: I do not know the exact figure, but only a few employers fall into that category. My right hon. Friend the Member for Southampton, Itchen has been at the forefront of the campaign for people in that position. If it would be helpful, I would be happy to meet the hon. Gentleman and others to discuss the problem and try to find a sensible way forward. Unfortunately, I am not announcing today a way forward on that problem, but I am happy to receive a delegation to go through the arguments and seek a sensible solution.
Kitty Ussher (Burnley) (Lab): Does my right hon. Friend agree that the proposal to finance the restoration of the earnings link in the long term merely through so-called efficiency savings, as proposed by the Opposition at the last election, was never credible?
Mr. Hutton: Unfortunately, on a day of consensus, I have to agree with my hon. Friend. At least there is a consensus on this side of the House, which is always pleasant. We have a responsibilityas the hon. Member for Runnymede and Weybridge (Mr. Hammond) saidto set out how we will fund such reforms over the long term. That was completely absent during the last election and we have now proposed a sensible package of proposals that will allow us to sustain our reforms for the long term.
Mr. Henry Bellingham (North-West Norfolk) (Con): The Secretary of State will be aware that hundreds of former Albert Fisher employees in my constituency have had their lives turned upside down. They will welcome the announcement of the widening of the criteria, but after so much heartache can they really trust the Government to come up with the extra funds of £2 billion without strings attached? If there are problems, will he agree to receive a delegation of former Albert Fisher employees?
Mr. Hutton: I am always happy to talk to the hon. Gentleman about any problem in his constituency and to meet him and his constituents to cover that ground. We are making a commitment to improve the financial assistance scheme and the money will be there to support the extension. I sense today that people have warmly welcomed our proposals. We are trying to put right an injustice and todays announcement will go a long way to resolving the issue.
Mr. John Denham (Southampton, Itchen) (Lab): I thank my right hon. Friend for his promise to meet members of the APW scheme, because theyand wewill not go away. Having said that, as a former pensions Minister I think that today should be seen as an historic occasion. My right hon. Friend has produced the best opportunity for a lasting cross-party consensus on pensions policy that we have seen in the past 30 years. It is a truly remarkable achievement and he should be congratulated, and Lord Turner should be congratulated on laying the groundwork. I hope that today will be seen as the most significant day in pension policy for many years.
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