National Insurance Contributions Bill

Part of Orders of the Day – in the House of Commons at 7:24 pm on 17th December 2007.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 7:24 pm, 17th December 2007

My hon. Friend, whom I admire and respect, should have a close look at what the distributional effects of flat-rating the state second pension are. Such an approach ensures that those paying over the upper earnings limit will not receive earnings-related extra accruals after 2030. Flat-rating the state second pension is a progressive thing. It appears that the Conservative party, after being in a consensus, has decided that it does not want something as progressive as that.

Interestingly, when the state second pension consensus, which the Bill puts into effect, was being forged, the Conservative spokesperson in Committee, Mr. Waterson, said that

"abolition of the S2P and state earnings-related pension scheme rules would result in marginal reductions in second pensions for some older workers, but that is more than made up for by the earnings-uprated basic state pension." ——[Official Report, Pensions Public Bill Committee, 30 January 2007; c. 199. ]

By that argument, he blew out of the water all today's claims about the Bill being a stealth tax, because he explained precisely the balance of the personal tax package that the Bill helps put into effect. Although the upper earnings limit increases cost money, that money is recycled and given back to people by the later changes in pensions uprating and the earnings relation.

Yet, a few weeks later—we have seen more of this again today—the shadow Work and Pensions Secretary said that the provision was

"a new stealth tax on retirement".

He said that despite the fact that his party supported flat-rating the state second pension when the Pensions Act 2007 was going through Parliament. The Conservatives are now voting against it, so what are we to make of the opportunism demonstrated by the position that the main Opposition party has taken today? We can conclude that the Conservatives are searching for press releases and headlines. They are giving one impression one minute and the opposite impression when they are in front of audiences. They say what they think a particular audience wants to hear, hoping that nobody will put two and two together and realise that they are saying one thing to one audience and completely the opposite to another.

Where will that approach get the Conservatives? It will mean that few people will take seriously their pronouncements on cross-party consensus and on their approach to these policy matters. If they are in favour of flat-rating the state second pension, why have they been so hostile today to the measure that implements it? If they were so against it in the first place, why did they not even bother to vote against it when it was debated during consideration of the Pensions Act 2007?

The hon. Members for South-West Hertfordshire and for Putney (Justine Greening) asked whether we knew at the time of the Budget that there was an issue about aligning the state second pension flat-rating the, upper earnings limit, and the changes that the Bill brings into effect to prevent unintended windfalls for those who earn above the higher earnings limit. We knew that that was the case, so this is not, as has been alleged, incompetence; in fact, the figures featured in the Red Book as part of the national insurance contributions calculations. We were aware of the issues involved, but we had to work up the policy options in detail to come to a workable solution in this complex area of public policy.

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