Clause 1
Pensions Bill
11:00 am
David Laws (Shadow Secretary of State for Work and Pensions, Work & Pensions; Yeovil, Liberal Democrat)
Amendment No. 62 gives us an early opportunity to test the Government’s thinking on one of their most important Pensions Bill proposals—clause 1, which deals with the new qualifying conditions for the basic state pension. It is fair to say that this part of the Bill has been widely welcomed from different quarters because of the impact that it will have on the number of people able to secure a full basic state pension. The clause will replace the previous contributory requirement of 39 years for women and 44 for men with a lower 30-year requirement, which will begin after 6 April 2010.
The Liberal Democrats welcome this watering down of the contributory principle. We feel that the contributory principle has become something of a fiction compared with what Mr. Beveridge aspired for it to be, particularly when the basic state pension has ended up being set so far below the level of means-tested benefits, to which people are entitled even if they have not built up any contributions at all. We said earlier and in other places that we prefer a residency requirement, but this is the Bill that has been presented to us and we must deal with it, acknowledging that there is not enough Conservative and Government support for the move to a residency basis for state pensions.
We recognise that the way that the Government implement the change will make a big difference for the generation who will acquire their pensions after 2010. There will be something of a big bang as we pass6 April 2010, when many people who would not have acquired a full basic state pension before will be able to do so. We have all seen the Government figures indicating that among those retiring after April 2010, women in particular, who have been disadvantaged by the existing system, could end up with a much better deal.
It would be useful to hear from the Minister, however, what total of all women will still not have a full basic state pension after 2010. Most of the Government’s figures have focused solely on the portion of women retiring after 2010 who will get a full basic state pension, which risks creating the impression that the step change will be greater than it is. The Government will still be dealing with a stock of women, if I can put it in such unglamorous terms, who will be disadvantaged for some time by the existing system.
There has been a great deal of debate and discussion about the cliff-edge effect. The hon. Member for Weston-super-Mare will be aware that it was considered in some detail when the Select Committee took evidence from the Secretary of State and various organisations. The Committee recommended that the Government should consider mitigating the gap in entitlement between those born before April 1950 and those reaching the state pension age under the new rules. We have tabled other amendments on the matter, which I am keen not to pre-empt.
The Government have set themselves against retrospection under the proposal mainly on cost grounds. Given the existing pensioner population, if they allowed people to have a full basic state pension on the basis of 30 years, it would cost about £1 billion. The Government have said that that is too high a bill and that they are worried about the information about carers and other groups to credit them in and whether it would be reliable enough. They therefore accept that there is a cliff edge, but feel that nothing much can be done without imposing a large financial cost. The new clause that will be introduced by the hon. Member for Eastbourne will involve a discussion about some potential solutions to such problems and invite the Government to consider whether the cliff edge has to be as sharp as it is.
The purpose of amendment No. 62 is to test the Government’s thinking on why a more modest improvement could not be made. It would still involve a cliff edge, but one that fewer people would fall over. The amendment would bring forward the date for the lower number of qualifying years from 2010, the Government’s existing date for the start of the cliff edge, to 2008. In other words, fewer people would be affected by the measure and there would be a lesser sense of unfairness, because the problem is that the Bill will go through; there will be a general sense that women and others will receive a much better deal and then many women still under state pension age will find that they do not receive the benefit of the changes.