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Pensions Bill [Lords]

The salient fact of this debate is that by the time it finishes at 10 o'clock, the average age to which we and our constituents might expect to live will have increased by an hour and a half. If I were to speak for 10 minutes or a quarter of an hour, which I will not, then merely in the course of my speech average life expectancy would have increased by four minutes. I hope that that is compensation for what hon. Members are about to endure. The simple fact of demography that for every hour that passes 15 minutes is added to the age to which we, as a population, can expect to live forces us to revisit the state retirement age—the age at which people stop paying taxes and start depending largely on the fruits of others' labours. It is a fact that is unlikely to change in the half century to come. In fact, if the experience of the past few years is anything to go by, the acceleration of our expected mortality rates will only increase, rendering irrelevant and insufficient all the predictions on which we currently rely. There is near consensus that maintaining the existing pension age is unaffordable and that we should correct that by ratcheting up the state pension age year by year to reflect increasing life expectancy. However, I am worried by the idea that by the mid part of this century, asking people to retire at 70—incidentally, the age intended by Lloyd George in his great Act of 1908—will be seen as the way to fix this problem, because we may not correct everything that we hope to correct just by increasing the state pension age and doing everything contained in this excellent Bill. Although I support the intention of the Bill and the immediate steps that it takes, the Government need rapidly to revisit the conventions and means by which successive Governments address the central problem of increasing life expectancy and the effect of that on the Exchequer and those working to fund it. Otherwise, we will again end up in a situation that is unsatisfactory and inadequate. It is unsatisfactory because with every increase in the state pension age, we inflict another set of injustices and unfairnesses on those who are approaching that moment in their lives. The predicament of the relatively small group of women we have been debating is a sure indication of far greater problems to come for Governments in future years. Because we are facing this cross-generational challenge, it is incumbent on us to try to forge a consensus between the parties about the rules by which we deal with pensions policy. One of those rules is suggested by the example of the women who are particularly affected by the Government's proposed changes. When times are normal—these are not normal times—there might be a rule whereby people are given at least 10 years' notice before we change their pension entitlements or the age at which they can claim them. Perhaps the case of the class of '53, as they call themselves, is the test by which the Government will be measured in this respect. Although I understand why the Government might fairly ask that people work an additional year to deal with the horrendous deficit and national debt we have been left, to ask a relatively small group of people to work an additional two years with six years' notice is a very big ask, not least because it calls into question other excellent parts of the Bill that are designed to encourage saving. We cannot ask people to save and then give them no time in which to do so. I hope that in considering a way to smooth the edge of this part of the legislation, the Government will not only fashion a compromise for the women who are being asked to work an additional 13 to 24 months, but thereby establish the first set of conventions by which successive Governments can deal with this issue. Another unfairness in the Bill, which was not intended by the Government, results from the change from RPI to CPI for uprating. Many of my constituents who are on occupational schemes, mostly from British Telecom, have found that their pensions have been changed only two years after they were renegotiated between the trustee and the pensioners. The trustee claims that it has been forced to do that by the rules of the scheme. My constituents and I would be interested to know the degree of consideration the Minister gave to the effect that his changes to the uprating regulations would have on the occupational schemes of previously nationalised industries, because they have had a very adverse effect on people who thought that they had funded schemes. Those are the unfair and unsatisfactory parts of the Bill, which I consider to be largely good. I understand that the Opposition supported the change from RPI to CPI, but on a temporary basis. With characteristic innumeracy, they therefore lack the central challenge that confronts us, which is not just the deficit that we must deal with between now and 2016, but the period after that. There is an idea that in 2016 the deficit will somehow come to an end, we will be finished with our problems, and we can then extract the cheque book from our pocket and go on another splurge. That will sadden people, because if we did that, we would find ourselves with one of the highest debt to GDP ratios in the developed world—higher than most of our developed competitors and significantly larger than almost all of our developing competitors, just at the point at which they move up the value chain to meet us on high-end manufacturing, learning-based skills and value-added services. At that point, we will be faced with a demographic scene that is not much altered from the one the Government look at now. We need only look at the support ratio to tell us that. It currently sits at about four workers per pensioner—the lowest in the history of the state pension. Under the Pensions Act 2007, it would decrease by 2023 to 3.11 workers per pensioner. That figure will improve under the Bill to 3.35—a difference of 6%. At that point we will still be slipping down, and none of this changes the central projection to 2058—150 years after the introduction of the state pension—when there will be 2.74 workers per pensioner. There will then be fewer than three workers for every pensioner they must support. Pensions are a double-sided promise. On the one hand, we, as parties engaging in government or opposition, must give people the security to know what they will receive in their retirement. That is why I urge the Government to look carefully at the women who will be particularly affected by this change, and at those who are coming to the end of their working life in the public sector. As many of their accrued rights as possible must be respected, because that is what was promised to them, whether or not it was prudent to do so at the time. In understanding that, we have to be far more brutal with the younger generation, which has many more years to work. Frankly, younger people will not be able to have a pension of the size that their parents and grandparents have come to expect, because of the horrendous deficit and the enormous debt that we have been left by the previous Government—larger than those of almost all our competitors around the world. As a result of that debt, we will have less to spend on education, training and infrastructure improvement. [Interruption.] The hon. Member for Glasgow North East (Mr Bain) smiles, but it is true that as a result of the actions of his Government, we have less to spend on things that will grow the economy and there will be fewer tax receipts to pay for the welfare state that we have come to expect as a nation.