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Pensions Bill

I want to endorse the comments that several colleagues made about the welcome improvements in state pension provision for women in this legislation. It is also good that there has been such consensus on measures in the Bill, particularly those on the restoration of the link to earnings. However, I have some concerns about the lengthy delay before that improvement will be brought about. We will still see the value of the state pension reduce and means-testing increase until 2012 or even 2015. As has been pointed out, that means that today’s basic pension will be eroded in value from about £85 to £70, and potentially even to £67, a week. That is not good enough for a Labour Government. The Pensions Commission pointed out in its earlier reports that, based on the Government’s own figures, spending on pensions and pensioner benefits was set to increase by 2050 to about 7.6 per cent. of gross domestic product from the current figure of 6.2 per cent., after an initial fall between 2010 and 2020 as the state retirement age for women increases. The commission proposed a trade-off between improved benefits and a rise in the state retirement age. For example, its proposed restoration of the link from 2010-11 at the latest could be accommodated if the state retirement age were increased to 69 by 2050 and spending increased to 7.5 per cent. of GDP, which is slightly less than the Chancellor’s prediction if there is no change. The Turner report reckoned that if the state retirement age were increased to only 67 by 2050, spending would increase to about 8 per cent. of GDP. The Government have accepted that we should try to reduce means-testing by the restoration of the link to earnings, but they say that doing so to an earlier time scale cannot be afforded. Yet according to their figures, we are talking about a cost of some £3 billion, at today’s prices, by 2050. Adopting the 2010-11 proposal would mean an increase to £50 billion, compared with £47 billion, if adopted, in 2012 and £42 billion, if introduced, in 2015. Those are fairly small sums in terms of the growth in GDP that we might expect by 2050. None the less, there is a small, affordable gap and, as I said in an earlier intervention, it could be bridged simply by switching priorities. I do not agree with the proposal of the hon. Member for Yeovil (Mr. Laws) that savings should be made from public sector pensions. That is far too vague and probably not deliverable, and I do not particularly wish to advocate a reduction in the benefits of people working in the public sector, who generally receive lower remuneration than those in the private sector.