Pensions Bill: Final Stage
Executive Committee Business
Mickey Brady (Sinn Féin)
Go raibh maith agat, a Cheann Comhairle. I thank the Minister for his comments. When the Committee was first presented with the Bill, it noted that the majority of clauses were extremely technical. I thank the departmental officials who attended every meeting of the Committee’s consideration of the Bill and explained, as far as possible, in plain English what those entailed. I would like to think that we will continue with that approach as and when we consider the Welfare Reform Bill.
It is fair to say that the entire Committee shared concerns about the Bill, as became evident during our pre-legislative scrutiny. During that time, it also became clear that there was significant pressure to take the Bill forward through accelerated passage. Indeed, the Minister came to the Committee to indicate that that was his intention.
The Committee subsequently discussed how it would approach scrutiny of the Bill. We acknowledged that pre-legislative scrutiny indicated, on the face of it, potential financial implications if parity with Great Britain was broken. However, the Bill’s provisions were so diverse that the Committee believed that it could not have a full and detailed understanding of the potential to amend unless it proceeded with full scrutiny, as is its statutory responsibility. That said, the Committee did not want further to reduce the time that women in particular would have to plan for retirement, even though, in the scheme of things, any additional delay would have been minimal. Keeping in mind the time pressures, we set out to achieve that within the statutory time frame of 30 working days and not to seek an extension. Therefore, we scheduled additional meetings, and I thank my colleagues on the Committee for their dedication in helping to meet that deadline.
How society pays for pensions — state, public and private — is a matter of huge debate and concern. The reasons for the concern relate to the fact that people, on average, are living longer, and we have an ageing population. We are told that the current state pension scheme was not structured to deal with such a scenario. The British Government have decided to address the costs associated with the state pension in two ways: first, by equalising the state pension age of women and men; and, secondly, by increasing the state pension age. Those were the two fundamental issues that particularly taxed the Committee. Therefore, although I do not intend to go into much detail, it is worthwhile to briefly mention those in the context of the Bill. It is fair to say that clause 1, which relates to the equalisation and increase in state pension age provided most concern. Indeed, the Committee agreed, having taken a vote, that it was not content with clause 1 or the corresponding schedule 1 as drafted.
One can argue that, in the interests of equality, the pension age of men and women should be the same, and the Committee recognises and accepts that. However, members’ concerns about that related to when it takes effect. The legislation will bring forward the date at which women will have the same state retirement age as men to November 2018 instead of April 2020. The upshot of that, and an issue on which the Committee and other Members expressed concerns, is that roughly 7,000 women who were born between 6 April 1953 and 5 December 1953 will experience a delay in getting their pension by between two and 16 months. The Committee questioned departmental officials on the costs associated with keeping to the original timetable, and the Department informed the Committee that, if that revised timetable was not enacted, the cost to the block grant was estimated to be around £57 million between 2016-17 and 2018-19. We were also informed that there would be additional costs associated with administration, possible additional claims from people living outside the North and issues with not being able to piggyback on the DWP computer system.
The Committee raised the possibility of further transitional arrangements to delay the equalisation of the state pension age, but was advised by the Department that it could not make the changes to increase the state pension age until the equalisation of the state pension age has occurred. The Department advised that, should the equalisation of the pension age be delayed until 2020, it could not begin to increase the pension age until after that. The Department advised the Committee that, under that scenario, it would cost around £155 million for the tax years between 2016-17 and 2019-2020.
I move now to the increase in state pension age. The current legislation also ensures that state pension age will increase to 66 for men and women by April 2026, to 67 by April 2036 and to 68 by April 2046. However, the Bill before us will mean that the increase to 66 will be brought forward to October 2020, which is six years earlier than was originally envisaged. The Department told the Committee that approximately 70,000 women and 69,000 men born between 6 December 1953 and 5 April 1960 would be affected by that change and would see their state pension age increase by up to 18 months. The reasons for those changes have been touched on and include increasing life expectancy and an ageing population. However, some members of the Committee were of the view that, although, on average, people may be living longer, they are not necessarily living healthier lives. That had not been taken into consideration in the development of the proposals. That was touched on by members at Consideration Stage, and the Minister responded to my party’s concerns at Further Consideration Stage by agreeing to provide a report on the impact of the changes every two years. That is an important development to ensure we know the effects of the legislation.
The submission received from Age NI stated that, generally, women in Great Britain can expect to have 65·2 years of disability-free life, but women in the North can expect to have only 62·5 years, and the disability-free life expectancy for men in Great Britain is 63·2 years, but it is only 60·5 in the North. Therefore, people in lower socio-economic groups may be forced to work longer or spend more years on working age benefits, but then have fewer years of life and healthy life after reaching state pension age.
There were some knock-on effects, which I will address briefly, Cheann Comhairle. Although they are not in the Bill, the Committee questioned the Department on the associated impacts of the changes. There will be knock-on effects for winter fuel payments, for example. Members may be aware that the qualifying age for the winter fuel payments was originally established as 60 for women and 65 for men, in line with the state pension age, and as long as they were in receipt of a qualifying benefit, but, following a European Court decision, entitlement was established for persons aged 60 and over, regardless of a qualifying benefit. With the proposed equalisation of pension age for women, I am sure Members can see that that will result in payment of the winter fuel payment being delayed. Indeed, the Department estimates that around 124,000 would qualify one year later than they would under current rules, and around 15,000 would qualify two years later than they would under current rules.
The fuel poverty rates in the North are well known. It is estimated that over 44% of households here are in fuel poverty, and that rises to just over 60% for older people, according to the NI house conditions survey in 2009. The Committee was, therefore, very concerned that the proposed changes would exacerbate the situation and increase the number of pensioners in fuel poverty. The Department informed us that, where one member of a household has reached a qualifying age, the household will receive the full amount of the award. However, because the Department was unable to provide data on the age profiles of couples in households here, that did not provide a great deal of reassurance to the Committee.
The Committee was also concerned that eligibility for pension credit will also increase in line with the state pension age. The Committee heard from stakeholders that that could contribute to pensioner poverty. The recent Budget announced by George Osborne made a number of changes to the state pension and to tax arrangements for pensioners, and it could be argued whether or not those are positive. However, with regard to the benefits to which pensioners are entitled, we know that unclaimed pension credit is estimated to be between £1·2 million and £2·3 million a week, according to research commissioned by A2B and benefit uptake and presented in evidence during the Committee Stage of the Bill. I am sure that all Members would like to hear a commitment from the Minister that his Department will redouble its efforts to ensure that all those who are entitled to claim pension credit do so. The Committee raised a number of other concerns during its consideration of the Bill, which are detailed in the report. However, I have confined myself to the key issues.
I thank officials from the Department and from our Committee who supported the Committee throughout the process.
I want to make a couple of comments as an MLA for Newry and Armagh. Obviously, the change in age is equalisation, but bringing the date forward to 2018 and then to 2020 is predicated on the notion that it gives people time to save. However, I argue strongly that if people are on state benefit or on subsistence level by the Government’s own admission, it becomes increasingly difficult for them to save. It is predicated on the notion that you live in an area in which you had reasonable employment and the ability and opportunity to save. In the case of the vast majority of people in the North who will be affected by the Bill, that is simply not the case.
Paula Bradley (DUP)
As a member of the Committee for Social Development, I welcome the opportunity to make a few comments at the Bill’s Final Stage. Over the past few weeks, Members have had the opportunity to debate amendments and examine the practicalities and principles of the Bill.
The Bill will primarily do two things. First, it will equalise the pension age in line with the European directive. That aspect was not at all controversial, except for the desire that we could afford to equalise the age down to 60 rather than up to 65, as some members wished. Secondly, the Bill proposes to accelerate the timetable for the increase in pension age, which caused concern for many Members. We examined and debated the prospect of breaking parity, the cost to us economically, the changes that it would mean to our IT system and the legal implications for our region. The Minister made it clear that parity was not a pick-and-mix situation in which we could choose the best and leave out the less desirable. It was discovered that breaking parity was not a viable option. The amendment to review the effects of the Bill will go some way to ensure that the most vulnerable are protected.
We also examined closely the issue of later years poverty and what the Bill would mean for people who are at risk of that. It will ensure that benefits that are pension benefits will continue to be so and that, economically, we can afford to keep supporting the most vulnerable in our society. The provision for raising the age of benefits, such as the winter fuel allowance, will ensure that, when people access their state pension, they are not worse off. The extension of working life benefits will ensure that, although people will continue to work for longer, they will not be worse off.
The Bill will ensure that people will continue to have access to a state pension for many years to come, even though it is at a later age than those who have access to it now. With that in mind, and given our ageing population and what it will mean for the future, I support the Bill.
Michael Copeland (UUP)
I acknowledge and accept the progress of the Bill. I thank the Minister for his concise dissection and explanation, which makes a subject that is, in many ways, complex considerably easier to understand, albeit from his point of view. I also pay acknowledgement to Mickey Kelly on behalf of the Chair of the Committee for Social Development and welcome Mr Brady’s assertion that, on this occasion, the use of plain English was of some use in addressing the issues raised.
It became clear early on in the process that we could not meet an even remotely similar timescale. There was an inevitable lag in enacting the equivalent legislation, and a breach of parity, therefore, occurred to a degree during that time.
Even though Northern Ireland has the youngest population, it has the fastest growing total population of any region in the United Kingdom. However, that population growth has not been evenly spread, and, combined with a decline in mortality rates, the age profile of our population has gradually become older. Overall, it is estimated that changes to the state pension age will affect some 77,000 women and 69,000 men — a not inconsequential number of people. The Department estimates that equalising the state pension age by November 2018 could affect some 7,000 women living in Northern Ireland. It is a matter of regret for us all that they will now have less than the 15 years’ preparation time recommended by the Turner commission before the changes take place. It is true to say that approximately £1·6 billion was spent on state pensions in Northern Ireland last year, and, just like many welfare payments, that money goes directly into the local economy.
A number of amendments were tabled: some were wise, in my view, and some were not. I pay particular tribute to the Minister for accepting, albeit at the second bite, an amendment that will, I feel, provide us with some sort of useful socially-based information for future consideration.
The origins of welfare — the notion that the state has an obligation to its citizens and that, in some ways, citizens have a reciprocal obligation to the state — has its roots in the early part of the last century. At that time within living memory, children were put up chimneys and sent down coal mines, and women, who in some cases were the main breadwinners in certain cities in Northern Ireland, laboured long and hard in wet spinning rooms, destroying their feet, and in dry spinning rooms, destroying their lungs, only to go home to houses that were bereft of hot and cold running water, washing machines or any of the conveniences that now, thankfully, we can call upon. The change, when it took place, was based on a sense of social justice and economic affordability. We now have a situation where as a nation — I mean the United Kingdom — there are things that we would like to do and things that we acknowledge need to be done but that we cannot afford in the short term. This, in many ways, is a response to the changing age profile and the changing ability of the state to discharge such obligations.
I am somewhat minded to comment on the fact that were the Government a bank and had the citizens who will now be affected by this entered into a contract with them to pay so much for so many years so that they got a dividend in the form of a pension at the end of the period, they might consider that the policy had, in some ways, been mis-sold. As people are very well aware, there is a good deal of mis-selling coming home to roost with banks that sold employment protection.
As the Minister said, the issue is simple: is it or is it not a breach of parity? In the round, I accept the argument that we cannot expect our citizens to benefit disproportionately from citizens elsewhere, no matter how much we would wish it to be the case. As I said, we, therefore, acknowledge and accept the Bill’s passage.
I echo the gratitude of the Minister and other Members to the departmental officials and, indeed, to the Committee for their endeavours through what has been an arduous and — dare I say it — complicated process. However, it is with a degree of regret that I oppose the passing of the Pensions Bill today. The regret stems from my belief that the Assembly, in rejecting amendments brought forward at earlier stages of the Bill, has missed an opportunity not only to reduce the negative impact that the legislation will have on so many of our citizens and, indeed, on society as a whole but to show that it is capable of challenging the shackles of parity in a mature and progressive fashion. We have failed to grasp that we, as legislators, have the ability but, more importantly, the duty to deliver for the citizens of the North, and, as a result, the Bill that we debate today barely differs from the Westminster Bill.
Throughout the process, the SDLP has challenged different clauses of the Bill — those that I believe will have a detrimental impact on our older people and, in particular, on women. Not only have we challenged, but I believe that we have put forward realistic, workable alternatives, and it is disappointing that some other parties have channelled their energies into dismissing such progressive arguments rather than into exploring those options. The Minister and others would have us and the public believe that there are no other options for the Assembly and ignore the idea that we can create those options. The fact that the Minister sought accelerated passage for the Bill was a reaffirmation of his reluctance to even consider challenging draconian measures being pushed across from London before imposing them on people here.
We in the SDLP do not exist in a bubble. We realise and accept the need for pension reform. We are not, however, satisfied with the revised time frame set out in the Bill or the apparent permanency of the change to indexation therein. I am also cognisant of the arguments in relation to parity and what a breach may constitute, but we need to test those arguments and test how far we can go. I do, however, agree with the Minister on the importance of fighting those battles in Westminster too.
There have been instances when this Government and those of Scotland and Wales have breached parity with Westminster. That is what devolution means — having the power to legislate for our citizens in the context in which we operate. If this Assembly is to actually give meaning to devolution and, indeed, to democracy, we must engage in this debate and not simply roll over when a Minister tells us that it is not our fault and we cannot breach parity.
William Humphrey (DUP)
I am grateful to the Member for giving way, and I welcome his agreeing with the Minister’s assertion that the battleground is at our national Parliament at Westminster. As he mentions parity, does the Member agree with the comments that his former leader, Margaret Ritchie, made to the House in February 2009, when she said that to break with parity would be a disaster for Northern Ireland?
I some circumstances, the breach of parity could be disastrous, but we have to test where and how that would be the case. We have to see what flexibility exists, if any. If it does not exist, I will happily concede that it does not, but my party and I are not satisfied that we have channelled enough effort into exploring those alternative options.
Furthermore, it is unfair and misleading for some sections of the House to scaremonger that any breach of parity will ultimately result in hospital closures etc, because the money must be found elsewhere from the block grant. The option of a breach has not been explored, let alone negotiated on. It is, I suspect, too late in this case, as I presume that the Bill will pass, but it is not too late for this debate. It is actually timely. With the Welfare Reform Bill looming, the Assembly needs to up its game and establish what we can make work here, economically and socially.
As I have said before, the SDLP supports the rationale behind the Bill. The equalisation of pension age is right and just. It is also commonsensical that an increase in life expectancy is reflected in an increase in pensionable age. However, we do have issues with the Bill and the impact it will have on so many people here due to the inability of some to work longer and the dearth of jobs for people of all ages. For a piece of legislation that hangs its hat on equality, it is remarkable that it contains such blatant inequalities. The SDLP has a core and fundamental principle of equality and agrees with the equalisation of pension age for men and women. However, forcing an expectant group of women of a certain age to change their lives, plans and futures without considering the challenges that that will create for them is a far cry from equality.
The time frame within which the pension expectations of those 7,000 women will be disrupted is purely a Tory money-saving exercise. It is designed to take more money from people and to give less out, and it is certainly not based on the needs of the individual. It is also harsh to force women to undergo two accelerations when men will face only one.
The Bill will throw the retirement plans of many into disarray. Previously stated timescales had indicated that there would be no changes until 2020. Therefore, women who have left their jobs in the belief that they could rely on receiving their pension on their sixty-fifth birthday may not have enough savings or resources on which to live for a year to 16 months. We have no guarantees that the goalposts will not be moved again, and moved often, and we have serious concerns about that.
Although some amendments were accepted in Westminster that mitigated some of the burden facing women, they do not go far enough, specifically for women who will affected by the changes come 2018. The upper age limit for benefits has been extended to assist older people who cannot get work, but we must consider the wider impact that that has and the impression that it creates. Many older people who have worked their entire lives and paid into pension schemes simply do not want to go on benefits; they want what they are entitled to and what they have worked for. To force them to accept the changes without sufficient time to make adequate provision is unfair and illogical.
Using the extended benefit qualification as an option flies in the face of what the Assembly is professing to do, which is to cut down on welfare dependency. It would be contradictory of us to accept such a move, as it would leave us going backwards and offers benefits as a lifestyle choice rather than as a short-term lifesaver.
Keeping older people trapped in a job when they may wish to retire will also have serious ramifications. Some people may no longer be able physically to do important jobs, whereas others may become disenchanted and demotivated through having to stay in work reluctantly, and that will undoubtedly affect their output. Furthermore, the longer that people have to stay in work, the fewer opportunities will exist for young, fresh, newly qualified people to enter the world of employment, and that will lead to an increase in the number of young people who have to leave these shores to seek work elsewhere. Instead of stabilising the economy, the measures could create a stagnant and disenfranchised workforce that will feel aggrieved at a Government who have once again put the working-class person at the bottom of their list of priorities.
It is accepted, but it should not be accepted by us, that we have a lower standard of living in Northern Ireland than that in other regions on these islands. We have higher rates of poverty and disability. The Bill will automatically impact on a person’s eligibility for the winter fuel payment and counteract out fight to eradicate fuel poverty. I acknowledge an amendment tabled by Mr Kelly — sorry, Mr Brady — on that, and we were glad to support it. People are being told to save for retirement, but the sad reality is that so many people here live from hand to mouth that saving is beyond them.
Although there is no dispute that people are living longer, we need to ensure that they have a quality of life to match that quantity of years. At Further Consideration Stage, I proposed an amendment that would have enabled us to have the option of reviewing the move to index pensions by CPI rather than by RPI so that we are not bound to it in perpetuity. That move will ultimately devalue many pensions, including those of public sector workers, by up to 15%.
Although we will oppose the Bill’s Final Stage, I ask the Assembly and the Minister to note that we do so not without having offered suggestions or alternatives. The SDLP’s amendments would have ensured a fairer and more balanced Bill. They would have enabled the Assembly to demonstrate real understanding and sympathy for the hardship faced by so many of our citizens. We have an opportunity only to mitigate slightly that hardship, but the Assembly has failed, or rather, neglected to do so. The Bill does not reflect the needs of the people of the North and the lack of creativity and commitment from the Assembly has inevitably resulted in us letting down our constituents.
We could have reached a compromise between the aims of the coalition Westminster Government and the needs of our people. So, it is more in sorrow than in regret that I concede that we have not done so. The SDLP opposes the passing of the Bill.
Judith Cochrane (Alliance)
I welcome the opportunity to speak on the Bill as it comes to the House for the final time. Much of the technical detail has already been raised by others, so I will keep my comments brief.
During the various stages of the Bill, the Alliance Party has made its position fairly clear. Due to an equality law ruling in the EU, the state pension age must be equalised for men and women. Also, with an ageing population, we need to ensure that the pension system is structured in a way that ensures that promised incomes can be delivered in the future. We acknowledge that the Bill will raise the state pension age for both men and women at a faster rate than that originally planned and that some changes were made at Westminster to ameliorate the situation for some men and women. Although those changes were positive, we are sympathetic to those who now find themselves with less time to prepare financially. My colleague Naomi Long MP fought against such aspects of the Bill at Westminster. I agree with a number of the points which Mark Durkan has made, but we need to be realistic with this issue. On the information that I have, Northern Ireland simply cannot afford to break parity on this and, therefore, I support the Bill.
Nelson McCausland (DUP)
I want to take the opportunity to comment on a number of the issues that have been raised by Members during the discussion, which I thought was extremely constructive.
A number of points were raised by Mickey Brady. One was in regard to accelerated passage. I listened carefully to what he said. It is fair to say that the Committee acknowledged that the arguments for and against accelerated passage are finely balanced. I simply raised the issue at that point because accelerated passage would have had the benefit of giving people more time to prepare. On the other hand, the detrimental side to that is that accelerated passage does not give the opportunity to scrutinise the Bill as fully. There are pros and cons to that.
I turn to the issue of fuel poverty which was mentioned, the change in the qualifying age for winter fuel payments and the impact of that on fuel poverty. The increase in the qualifying age for the winter fuel payment is simply a direct consequence of the increase in the state pension age. It is something that we are faced with and we can simply acknowledge that that is the fact of the matter.
My Department will continue to do all it can to ensure that people get the maximum benefit to which they are entitled. Members are aware that the Social Security Agency has a comprehensive approach to benefit uptake consisting of initiatives such as targeted exercises, mailshots and outreach. The purpose of the uptake programme is to encourage people to find out whether they are missing out on any benefits and to provide assistance. Since 2005, around 112,000 invitations have been issued to older people offering a benefit reassessment that looks at what they can gain in a range of other allowances and services. So, there are a number of things that we are doing in that regard to help older folk. If one member of a couple has reached the qualifying age for the winter fuel payment, that household will receive the full award. In April 2011, the Department launched the new fuel poverty strategy, entitled Warmer Healthier Homes, which takes forward energy brokering and the boiler replacement scheme and calls for action on the price of oil imports and on developing a range of initiatives to tackle fuel poverty. In a range of ways, we are seeking to do all that we can to address the issue of fuel poverty. We recognise that it is one of the most significant problems that people face in Northern Ireland.
Mrs Cochrane’s comments were extremely constructive and helpful. I said earlier that it is an issue that is difficult for all of us. We need to be responsible in our approach, and the comments that she made were very responsible.
The comments from Mark Durkan show that we are back very much on the same ground as we were before with the SDLP. I cannot get my head round it. The SDLP constantly says that we could do more and that it has great ideas of what could be done and how it should all be done differently. It seems that it is a desperate attempt by the SDLP to make itself different and relevant. Mark Durkan talked about the change from RPI to CPI. That was signed off in 2010 by an SDLP Minister. His party signed it off. If he wants to blame anybody, he should blame his colleagues — his party members — instead of pointing the finger of blame at everybody else. They missed the point. They missed the boat. They are the ones who signed it off. Put the blame where it lies: fairly and squarely with your former party leader Margaret Ritchie. She signed it off. There are only four words in that sentence. Even Mark Durkan can surely understand a sentence with four words in it. It is a very simple sentence: she signed it off. I hope that that will settle the whole issue of RPI and CPI. Perhaps Mark Durkan will understand the simplicity of the issue: his party did it.
We will move on and look at some of the points that were made by Michael Copeland. He very rightly raised the issue of the complexity of parity. I fully acknowledge, as he said, that many of the provisions are highly technical and very complex. I certainly do not underestimate the challenge that the Committee had in examining the detail of some of the provisions. The Member rightly honed in on the fact that the central point in the Bill is parity. We have to face reality. I think that the majority of Members recognise not only the reality but the benefits of parity. We gain; we benefit. We are entitled to the same benefits as every other part of the United Kingdom, but we are also bound by the same conditions.
All in all, we have had a useful discussion this morning. We have dealt with many difficult issues around the Bill. However, if we are responsible, sensible and honest about it, we will face up to the fact that we have no alternative but to pass the Bill today. I commend the Bill to the House.
Mr Allister, Mr S Anderson, Mr Beggs, Mr Bell, Mr Boylan, Ms Boyle, Ms P Bradley, Mr Brady, Ms Brown, Mr Buchanan, Mr Campbell, Mr Clarke, Mrs Cochrane, Mr Copeland, Mr Cree, Mr Dickson, Mrs Dobson, Mr Doherty, Mr Douglas, Mr Dunne, Mr Easton, Mr Elliott, Dr Farry, Mr Flanagan, Mr Ford, Mrs Foster, Mr Frew, Mr Gardiner, Ms Gildernew, Mr Givan, Mrs Hale, Mr Hamilton, Mr Hazzard, Mr Hilditch, Mr Humphrey, Mr Hussey, Mr Irwin, Mr Kennedy, Mr Kinahan, Ms Lo, Mr Lynch, Mr Lyttle, Mr McCallister, Mr F McCann, Ms J McCann, Mr McCarthy, Mr McCartney, Mr McCausland, Mr McClarty, Mr B McCrea, Mr I McCrea, Mr McElduff, Mr McGimpsey, Mr D McIlveen, Miss M McIlveen, Mr McKay, Mr McLaughlin, Mr McMullan, Mr McNarry, Mr McQuillan, Mr P Maskey, Mr Molloy, Lord Morrow, Mr Moutray, Mr Murphy, Mr Nesbitt, Mr Ó hOisín, Mrs Overend, Mr Poots, Ms S Ramsey, Mr G Robinson, Mr P Robinson, Mr Ross, Mr Sheehan, Mr Swann, Mr Weir, Mr Wilson.
Tellers for the Ayes: Mr McQuillan and Mr G Robinson.
Mr Agnew, Mr D Bradley, Mr Byrne, Mr Durkan, Mr Eastwood, Mrs D Kelly, Mr McDevitt, Dr McDonnell, Mr McGlone, Mrs McKevitt, Mr A Maginness, Mr P Ramsey, Mr Rogers.
Tellers for the Noes: Mr Durkan and Mr P Ramsey.
Question accordingly agreed to.
That the Pensions Bill [NIA 3/11-15] do now pass.