Pensions Reform

I want to thank my right hon. Friend the Secretary of State on two counts. First, our life expectancy has risen by 30 minutes or more since the debate started. If his calculation is correct, it enables us to understand why there is such a crisis facing pensions funding. Secondly, I thank my right hon. Friend for reminding the House of the success of the pension credit scheme. This Government have redistributed more resources to the poorest pensioners than any Government since 1948, and the only sadness is that he has had to remind some Labour Members of the Government’s success in that regard. However, we know that the pension credit scheme, as currently constituted, cannot last in the longer term. That is why we need to debate the proposed reforms, and I want to raise three matters that will break up the consensus that has held sway since my life expectancy was extended by 30 minutes a short time ago. My first point has to do with the Government’s approach to consensus. A sort of Judy Garland approach has taken over the contributions to the debate so far. The feeling appears to be that, if we just hold hands, we can tiptoe more quickly to the end of the rainbow and the great prize that is a political consensus. I do not want to knock the importance of the House of Commons, but we do not play much of a part in the formation of consensus. That is formed by the people of this country—our voters. The last time that we thought we were so clever as to create a consensus was in respect of SERPS. It lasted all of five years, and I wonder whether the Government’s tax-financed pension proposals, as opposed to an investment-led approach, will last even that long. The choice being given to the electorate is to support the Government issuing some more IOUs for pension reform. They will not be paid now, but are to be redeemed by taxpayers in the future. However, Governments have issued such IOUs in the past, and we all know that they have not been so redeemed. The only consensus in this country since 1948 has been in favour of a modest basic state pension. In the early days, it was not linked to anything, although the subsequent link to prices has remained in place. So there is a sombre note for us. It is fine for us to talk in wonderful glowing terms about what we shall create and the consensus that will enforce it, but if we rely on a tax-financed model that consensus will not last long. My first disappointment in the Government is that given the success of pension credit, and that for the first time they have managed to buy time when they have not also had to deal with reforms to help today’s poor pensioners, we chose the old tax-financed approach instead of building up rafts of investments. If we had adopted the investment-led approach, no politician would advocate changing the consensus. If one of us did, our colleagues would quickly drag us to the political knacker’s yard where we could safely be put out of our misery and our constituents’ pension investments would be left intact. That is my first note of caution. Secondly, although the phrase ““auto-enrolment”” flows easily off the tongue, the Government are really introducing a toxic element in our occupational pension provision. There are already major changes because employers want to cut the costs of their pension commitments, and in the auto-enrolment proposals the Government’s natural wish to establish a floor will quickly become the ceiling. Employers who are paying between 15 and 40 per cent. of wages costs to occupational pension schemes could quickly decide to embrace the Government’s approach to auto-enrolment to reduce significantly their contributions to such schemes.