Workers (Economic Affairs Committee Report) - Motion to Take Note

Part of the debate – in the House of Lords at 1:33 pm on 8 February 2024.

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Photo of Lord Davies of Brixton Lord Davies of Brixton Labour 1:33, 8 February 2024

My Lords, it is an honour and a pleasure to take part in this debate, with its stellar cast of speakers. The report was introduced extremely well by the noble Lord, Lord Bridges of Headley. I should mention that I am currently a member of the Economic Affairs Committee, but I was not when it produced this report. Indeed, when I saw that this was down for debate, I thought that I was going to have to stand up and make a whole series of criticisms, but then I took the precaution of reading the report, rather than just the press.

The report itself is measured in what it says. It does not attempt to make moral judgments about the situation, but identifies that we need to know more and that there is a shortage of data—the intervening period since its publication has strongly reinforced that point. I agree with the remarks of the noble Baroness, Lady Noakes. The Government’s failure to get to grips with understanding the situation is the most concerning point that we need to discuss today.

I will direct my remarks, not surprisingly, to what the report says about pensions and retirement, but I think that the most important part is where it talks about sickness and ill health. I strongly endorse the remarks of my noble friend Lord Layard in relation to mental health.

We should recognise that economic inactivity is quite a difficult concept to pin down. It appears in some official statistics, so we are very much subject to the way in which those statistics are drawn up. One issue that has not been addressed in this debate is how useful people classified as economically inactive are to the overall standard of living and quality of life: how they are contributing. It is doubtless that many are making a massive contribution that is simply not reflected in the economic statistics. Having said that, it is clearly a matter of importance that we take an interest in the reduction that we have seen in the size of the workforce, as measured by the statistics.

It is important to understand that the report does not provide us with policy solutions, and it certainly does not tell us what the long-term implications are, how significant the reduction of the workforce is, or even whether it is a good or bad thing. Certain speakers have claimed generally that it is a bad thing that we have seen this reduction in the workforce, but the report itself does not do that—unlike, as I suggested earlier, much of the commentary on the report.

Chapter 1 identifies the impacts of the reduction of the workforce. It identified inflation, but went on to say that inflation was because of the implications that the reduction in the workforce has for people’s wages. I want to be absolutely clear that I think that pressure to increase wages is a good thing, both economically and for the individuals concerned. Business needs people to spend money, and they will spend money only if they have good wages. The report also said that it limited economic growth and, as an associated point, would worsen public finances. As we know, GDP is a pretty bad measure; it is the only one we have, which is why we use it, but, as a measure of quality of life it is a pretty poor proxy. I suggest that—I need to say this the right way round—men and women were not made for the GDP. You cannot assess the quality of people’s lives by the level of GDP, because they are doing other things that are not reflected in the GDP figures themselves.

It is right that the report focuses on retirement and the changes that have taken place in retirement. We should try to understand figure 16, and what it tells us about the reasons people are taking retirement. The report is a bit thin on this; it raises lots of questions and provides some speculation, but it does not really tell us why people are taking retirement.

Looking at figure 16, what it suggests to me—and here I am entering into speculation, along with everyone else—is a considerable class divide. People on higher incomes are not retiring as much; people on very low incomes are not retiring as much; but people in the middle are. At the risk of making very broad generalisations, people on higher incomes have the resources to retire but they probably also have more fulfilling, more interesting, more rewarding jobs—by definition they are more rewarding—so they keep working. People on low incomes cannot afford to retire, so they stay at work. It is people in the middle income bands who have some agency here and who actually take retirement. That is obviously influenced by factors such as home ownership and what the report describes as financial resilience, which I assume means a bit of money in the bank. The report suggests that people who retire are the well-resourced group. Well, yes, I am sure that is true.

Amazingly, I have gone well over my time. I shall finish, skipping a lot of what I wanted to say, with a remark about retirement age. I always worry when people who are well off, in well-paid, interesting jobs, say that other people should be retiring later than they want to. The whole issue of the retirement age is going to come back to us, I am sure, but I want to add a dissenting note: you cannot solve the productivity problem by forcing people to stay at work.