The Secretary of State and I have no difference of opinion on the need regularly to review the state pension age. My point is that we have introduced a number of changes in the past three years and an environment of instability and risk has been created. The Opposition worry that reviewing it every five years will foster more uncertainty and risk. The Government and Opposition share the objective of increasing the level of savings. However, I am anxious to ensure that there are safeguards against, or fetters on, not only this Secretary of State, but future Secretaries of State, to constrain how they make decisions on accelerating or advancing the state pension age if they decide to do so in years to come.
The second Opposition challenge to the Bill during its passage will be a pressure test of the financial assumptions that underpin it. As I said a few moments ago, those who were contracted out are now contracted in, which is great news for the Chancellor—in fact, it is £5.4 billion-worth of good news. In theory, that will mean that the system will become more affordable over the long term, and that, over the very long term, the fraction of gross domestic product and national wealth that we spend on the pension system will come down.
The Opposition believe that that is wise, but we are worried about a number of short-term risks. First, how on earth will the national health service, local government, teachers and the police find £4 billion-worth of national insurance contributions from 2016 onwards? When the Chancellor presented his Budget, he was clear that there would not be an awful lot of help for those in public services, but two thirds of the money in the NICs bill comes from the NHS, teachers, the police and local government. The Secretary of State has not said much today, and we have not heard much from the Chancellor, on where on earth our hard-pressed public services, particularly the NHS, will find £4 billion from 2016 onwards.
During the Bill’s passage, the Opposition would like the Secretary of State to confirm the deal that is being offered in the Bill to the self-employed. Currently, the self-employed pay lower NICs than anybody else— 9% of profits in national insurance, whereas an employee’s contribution is 12% of earnings, and an employer’s contribution is 13.8% of earnings. However, under clause 2(4), the self-employed get 100% of the new pension. They therefore pay less, but get the same, which sounds too good to be true. Experience tells us that, when something sounds too good to be true, it often is. The self-employed deserve long-term certainty. Although there is nothing on the precise NICs number in the Bill, we hope the Secretary of State and the Chancellor will say more about the long-term plan for funding that measure in the spending review. I note in passing that the Institute for Fiscal Studies states:
“The current way of treating the self-employed…is a huge open invitation to tax avoidance, because it is so much lower than you pay as an employee.”
The Institute of Directors is not a hotbed of radical left-wingers and many of its members are self-employed, but even it says that the most reluctant would recognise that given the improvement we are about to get from the single-tier pension, it is only fair that everybody is asked to do their little extra bit. We hope that the Secretary of State can put beyond doubt the long-term bargain for the self-employed.