I beg to move amendment 6, page 10, line 12, at end add—
‘(5) A review of overseas residents’ uprating entitlement shall be conducted on a cross-departmental basis within six months of Royal Assent to this Act. It shall consider in particular whether the savings attributable to non-entitlement could be more effectively made in other areas of health and social care, and whether there are potential economic benefits to uprating the pensions entitlements of overseas residents in line with UK-resident pensioner’s entitlements. The review shall report to the Secretary of State for Work and Pensions, and a copy of the report shall be laid before Parliament.’
The issue is the uprating of pension benefits across the world for UK pensioners. One anticipates that the Minister’s initial response to the amendment will be along the lines of, “Not another review!”
We are not going to say anything about that. The issue is interesting for a couple of reasons. There is clearly a lack of uniformity in the uprating of the pensions of UK pensioners who move abroad. In many countries there is a reciprocal agreement, so that such pensions are uprated in line with changes in uprating made by the UK Government. In other countries, however —Australia and Canada being among the most prominent—there is no such agreement and pensioners who move abroad effectively have their UK state pension frozen. They go abroad and stay abroad, and it is never uprated.
We all know how important pensions uprating is generally. We spend a lot of time talking about it, and it is critical to ensuring that pensions maintain their buying power. I will not go too far into the triple lock, which the Minister commented on the other week, very honestly, in the Financial Times. Of course, that was about indexing and uprating, too.
When one first considers this issue, it seems rather odd. If a British pensioner moves to the USA, their pension is uprated, but if they move to Canada, it is not.
Does the hon. Gentleman recognise that, although uprating pensions is one issue, this is also about the exchange rate, inflation in the country the person has gone to and other things, and that their pension is merely part of meeting the cost of day-to-day life?
I agree absolutely with the hon. Gentleman. To develop his argument further, one would need to compare those factors in a country such as Canada with those in a country such as the US to see whether they neutralised the impact of an individual’s UK pension not being uprated. In general terms, however, he is entirely correct. One’s standard of living in retirement depends on factors other than uprating. The Opposition are not hostile to the Government’s position of continuing not to uprate pensions in countries where they are not currently uprated. The Minister has spoken about the cost of doing so, which I understand to be in the region of £600 million.
Is the hon. Gentleman aware that page 15 of the explanatory notes spells out:
“Regulations under this clause will be made taking into account provision under relevant treaties, such as those in respect of the European Union, and bi-lateral treaties providing for reciprocity…and which cover up-rating”?
Does that influence his approach to the clause?
I reassure the hon. Gentleman that I am aware of that. We are talking, however, about countries where there is no reciprocal agreement, rather than about those where there is. We can all unite in welcoming the fact that pensions in countries where there is a reciprocal agreement will be uprated in line with whatever is decided in the House.
I suppose the key question, therefore, is whether the Opposition really believe that providing automatic uprating in countries that are not covered is the best use of taxpayers’ money. Subject to confirmation from the Minister about the exact sums involved, will the hon. Gentleman confirm that his party would provide those funds by cutting different areas of Government expenditure, and if so, which areas?
I note that the hon. Gentleman has moved rapidly into his common register of: “What would you do?” As I had just started to say, we are not hostile to the Government’s position of not uprating overseas residents’ pension entitlement in countries where there are no reciprocal agreements, because the cost is important. As I develop my argument, I hope he will see that we want to reach a definitive judgment on the costs and benefits of such uprating rather than calling on the Government to undertake to do so. We are absolutely not doing the latter.
There is significant media interest in the matter, which hon. Members on both sides might have encountered. I have been clear that no such commitment can be made if the cost is as significant as the Government say it is. I suspect that hon. Members agree that the situation looks odd at first glance and might repay closer analysis. The Minister might say that such analysis has been undertaken, and I would be pleased to hear from him what sort of analysis the Government have done.
I suppose one of the issues at stake here—the hon. Gentleman is right to raise this—is that the anomalies for people who retire, and then go and live abroad and find that their pensions are paid at different rates, are considerable, even in countries with similar structures, climates or whatever. Therefore, there is a potential issue about how aware pensioners are of the difference it will make to their pension if they go and live in another country. Does he think there would be any way of tackling that issue of information?
The hon. Gentleman makes a very good point, and we have spoken already in this Committee about how individuals and families perceive their circumstances. Everything is relative. People’s notions of fairness and unfairness are based both on their perceptions and on the reality of how those around them, on their street and in their community, are being treated.
I shall give an example. If a pensioner moves to Canada, they are not uprated; if they move to America, they are. The hon. Gentleman’s point about information is an important one. Communication is always important. To be fair, I referred a moment ago to the significant press coverage of this in the last year or so. That is testament to the efforts of the International Consortium of British Pensioners, which is pushing that aspect of the issue. However, if the situation is not going to change, given that these anomalies have grown up over 50 years or more, there might be a case for the Government doing their best—if they are not already doing so—to get that information about the differences out there.
I am concerned about the issue of winter fuel payments. As we know, for people living in the United Kingdom the payments are subject to weather conditions here. What does the hon. Gentleman feel about the issue of winter fuel payments for people living abroad? If they lived somewhere such as Australia, which is nice and warm, those payments would not be made, but if they lived in Canada or, for that matter, America, which saw some very cold weather this year, how would that be sorted out? Does he have an idea?
I am delighted to see that so powerful is the spirit of co-operation in this Committee that the hon. Gentleman referred to me as his hon. Friend. I am very pleased at that. [Hon. Members: “We’re all friends here.”] I do not say that in any spirit of satire—I mean it sincerely. On the winter fuel allowance, it is hard to know where we have got to. I read in the newspapers that one part of the Government was very keen to have the winter fuel allowance only go to UK-resident pensioners, and then we heard that that was not possible. Again, I am going by the newspapers rather than anything I could take as being a matter of record.
Given our climate, that will not be very many countries, but I thank the Minister for that clarification, while probably not agreeing that the Chancellor is the best source of factual information. That would take us into a whole other debate, Mr Caton. [ Interruption. ] Again, my hearing is terrible. The hon. Member for Gloucester was suggesting something from a sedentary position that I could not pick up. I am happy to let him intervene, if he wishes.
That is a very kind invitation and not one I could possibly refuse. Returning to the Pensions Bill, which is the subject under discussion this morning, I suppose that the question of information to pensioners is one side of the equation, but the other side, which is much more difficult, is whether this Government—indeed any Government—would ever contemplate trying to rationalise some of the agreements, or lack of agreements, we have with other countries, so that the system was slightly more explainable. Does the hon. Gentleman have any thoughts on that issue? Perhaps he could remind us what the last Labour Government did in that respect.
I must say that is the first time I have seen an hon. Member pour a glass of water during an intervention. It showed a certain élan and style. I thought we were in for a longer intervention; indeed, I thought the hon. Gentleman was hunkering down for the long haul.
The hon. Gentleman raises the issue of rationalising these agreements. I am not quite sure what that would entail. Does he mean rationalising existing agreements? I assume that we cannot rationalise an agreement that does not exist, so it would have to be a rationalisation of existing agreements. I cannot imagine that the Government would be keen to do that, but the Minister might have more information than I do on that issue.
As the hon. Gentleman has argued previously, however —and argues again now—the current situation certainly strikes one as quite odd. He made a point about the previous Government. These anomalies existed under the previous Government; there is no doubt about that. I was not in Parliament before 2010, much to my disappointment, but certainly many of these reciprocal agreements are long-standing, as is the lack of reciprocity in some cases. It is legitimate to put that on the record.
I will return to trying to construct the argument for the amendment. The Opposition are not saying that the Government’s attitude is wrong on the uprating of overseas residents’ pension entitlement. To take up the hon. Gentleman’s point, the amendment asks for a cross-departmental study—I know that is asking for trouble in the first instance—on the implications of this policy for pensioners deciding to live abroad. However, this is not just about the side of the equation that says it will cost the Exchequer money to uprate the pensions of those who do not live in countries with reciprocal agreements. Is there also a benefit from encouraging pensioners who wish to live abroad and who then are not such a burden on state services or public services?
I do not think it is unfair, and I am surprised by the Minister. What I said was “a burden on state services”. We know that there is talk in all parties in the House about the need to ensure that public services are affordable. We need to think about the best way to use our public services, and it does not seem unfair to propose a cross-departmental study that would carry out a cost-benefit analysis of uprating these pensions on a reciprocal basis.
Because of this “burden” on the public services that the hon. Gentleman refers to, with the study that he is proposing is he potentially looking to encourage pensioners to move abroad to countries that would be more attractive if he were to ensure the uprating there? Is that his objective?
That is not my objective or intention. However, the Minister will be aware—and I suspect that other Members will also know from representations they have received—that the ICBP is keen, as I understand it, for the Government to carry out a cross-departmental study of the overall costs and benefits of UK pensioners living abroad. Its view is that the Government focus very much—perhaps understandably, from the Government’s point of view—on the cost of the uprating, without conducting any analysis of the fact that these pensioners are no longer drawing on UK services, and I take into account the Minister’s point about being A “burden” or otherwise. That is a question that is at least worth considering.
There is that sense that if a pensioner is in America they are uprated and if they are in Canada they are not, but this is not just about America and Canada. To put some numbers into this debate, about 565,000 pensioners living in 120 countries, including Australia, New Zealand and Canada, have their UK pensions frozen at the rate prevailing when they left the UK, despite their having paid years of national insurance contributions. That is a significant number of pensioners. It means, for example, that someone who started drawing a UK state pension while in Australia in 1983 would today still receive £34 a week, which is about £60 less than the current rate. I think we can all agree that that is a significant difference.
The Minister might be able to provide more information, but my understanding from what I read in the paper—I am not suggesting that it is a matter of record necessarily—is that the Australian Government are pushing quite hard on the issue. I imagine that it brings its own potential problems for Australia if pensioners receive so little from their state pension in their country of origin. As I said, if someone started drawing it in Australia in 1983, they would still be receiving £34 a week as opposed to around £95 a week if it had been uprated. That is a pretty significant difference, even before thinking about inflation and other issues that the hon. Member for Plymouth, Sutton and Devonport mentioned a moment ago.
More than 500,000 pensioners are affected in 120 countries where there is no reciprocal agreement and the UK state pension is not uprated. That contrasts with arrangements for hundreds of thousands of people who retire in 16 countries in the EU and the US where the state pension is uprated each year as though the recipients were still in the UK. As has been said, the anomaly has existed for a long time. The Government have reciprocal agreements with some countries, but have not signed any new agreements since 1981 according to my notes.
The Government estimated—I am sure the Minister will explain this in more detail—that in 2012 it would cost £655 million to uprate frozen pensions, and they do not intend to change a policy that has been in place for decades. Given the pretty poor job the Chancellor is making of the economy, I see why the Government would not be keen to think about spending £655 million to change this policy, and given how tight money is and how debt continues to grow, I see that point and do not contest it in itself, but it is a significant contribution to this debate to have the relevant facts and figures.
The ICBP has been pretty successful with this issue in some of our newspapers. It has been successful because it strikes one as odd that one can move to some countries and have an uprated UK pension, but that in other countries one cannot. To take the point made by the hon. Member for Gloucester, if one moved abroad unaware of that disparity in uprating arrangements, one could imagine it being a bit of a shock to find that one’s pension was not uprated.
On that very point, does the hon. Gentleman agree that it would be worth while for the Department for Work and Pensions to consider including in some communication about the details of a forthcoming pension when an individual is about to retire, a line saying, “Should you decide to go and live overseas, you should be aware that this may have an impact on your pension. Please see the website for further details”? The relevant website address could then be given.
That is a sensible, even ingenious suggestion for getting the information out. It seems eminently sensible and something that the Government might want to consider. There may be some obstacles to that that I am not aware of, and the Minister might want to comment on that, but to me that seems to be an ingenious suggestion.
The Minister, in one of his earlier contributions, referred to how his view had changed on the lump sum for deferral. The International Consortium of British Pensioners thinks that he changed his mind on frozen pensions. It says that back in the footloose and fancy-free days of opposition he was a supporter of uprating frozen pensions and it provided me with information to that effect. To change one’s mind is not a crime, but if he once had a different view, that is probably because it is one of those issues that seems like it might demand attention when one looks at it outside the context of decisions on Government finances. Perhaps he will have more to say on that.
In fully assessing the impact of overseas pensioners on the public finances, consideration should be given to the benefit that the UK economy gets from the expatriate pensioners who reside outside the EU. The Minister cautioned against the use of the word “burden”, but, whatever word one uses, we are aware that we are in an ageing society and there is pressure on our public services. The International Consortium of British Pensioners would welcome a proper cost-benefit analysis on that.
This issue will not go away. There was pressure on the Backbench Business Committee to schedule a debate. Although I do not think that that happened, the issue certainly appears in the press and I have seen evidence of Government Back-Bench Members who take this seriously.
I am surprised and not sure whether the hon. Gentleman is wise to adopt the position of the International Consortium of British Pensioners as the Opposition’s own in the debate. In the study that he calls for, does he also want to look at the reciprocal costs of overseas pensioners moving here and possibly placing a “burden”—to use his word—on public services?
Yes. When one has a constituency with a name as long and difficult for hon. Members to pronounce as mine, I feel it is only right that I do my best to get the pronunciation of hon. Members’ constituencies right.
To take up the hon. Gentleman’s point, he suggested that the Opposition are adopting the position of the International Consortium of British Pensioners. We are not. This comes back to the point about the Opposition’s job being to probe legislation: I am trying to point out that that consortium takes a view on an issue that affects it. It has done a reasonable job in recent times of bringing this issue to the public’s attention and it is not unreasonable to put its view on the table and ask the Government to respond to that.
Even as uprating pensions went up the political agenda, I have been clear that the case for that in countries where there is no reciprocal agreement has not been made. I am not criticising the Government on that, but asking whether there is a case for a cross-departmental study that will, once and for all, assess the overall cost to the public purse, given that it strikes me as “odd”—I use that word carefully—that in some countries pensions are uprated and in others they are not. It is in that spirit that we propose the amendment. The campaign that has been run by the International Consortium of British Pensioners has some traction, so it does not seem unfair to ask the Minister his current view on the matter. He produced a number last year, and given his number-crunching background, I am sure that it is based on solid evidence. I invite him to say a little more about that if he wishes.
I think all of us, even before the introduction of the Bill, have encountered the considerable campaign being run by people who feel aggrieved because they have not benefited from uprating over a fairly lengthy period. It is easy to say, “They chose to go abroad, so on their own heads be it,” but the e-mails and letters that I have received have given me a sense that people feel particularly aggrieved about the anomalies in the system. If the rules were the same for everybody who drew their pensions abroad, I am sure that people would still feel sometimes that things were difficult but they would not perceive any unfairness between different groups.
Obviously, the issue is an historical one, and it is the result of reciprocal agreements made by previous Governments. I understand that it is a long time since any such agreements were entered into. Will the Minister explain why that is? Some of the countries with which agreements have been made come as quite a surprise, and there does not seem to be any pattern to them. I suspect that it depends on where the other countries are coming from. I imagine that some of the pensioners who are affected retired to what they probably saw as sister countries, or countries from the Commonwealth family, assuming that they would benefit from uprating, whereas in fact those who retired to other countries such as the United States are the ones who get the advantage of uprating.
Not all of those living in Britain who have made their contributions and retired will necessarily be paying tax, although some certainly will, while those who are overseas generally will not be. The payment of tax in this country is not necessarily a criterion that determines whether an individual’s pension is uprated. Whether it is uprated or not, or the extent to which it is uprated, depends on policy in this country.
My hon. Friend on the Front Bench was treated to a degree of lecturing from the Minister about the perils of responding to lobbying groups and outside agencies and giving them the impression of being supportive. The Minister must agree that others have been prone to that in the past. Indeed, I understand—he may correct me if I am wrong—that he took a rather different view when he was in opposition, during which time he was quite supportive towards the lobbying groups, which may have made them anticipate even more strongly a potential breakthrough in their campaign. I understand that the Minister told some of the campaigners:
“I agree that pensioners who earned their pensions by paying national insurance contributions have a strong case for the value of that pension being maintained in line with inflation, and I am actively seeking such a change. As you may be aware, there is currently a Pension Bill”— this is in 2004—
“passing through Parliament. I will take this opportunity to table an amendment, seeking to uprate the ‘frozen pensions’ of expatriates.”
If that was the Minister’s view then, he has clearly changed his mind. The experience of office—of being in the Administration—can certainly lead one to realise that these things are not as simple as one thought. I make that point—the Minister himself mentioned the positions previously taken by the Opposition—to show that this is a trap into which one can fall.
Latterly, some people have tried to argue that their lack of residence and, therefore, their lack of a claim to services that they might otherwise be claiming should be taken into account and offset against the cost of increasing their pensions. Without figures, it is difficult to judge whether there is something to that argument. I have certainly received e-mails from individuals saying, “If we all came back, there would be additional costs. You should take that into account.” I am not sure whether people would necessarily come back, and there are probably strong reasons for people wanting to live out their retirement abroad. Those might include family reasons, and people might have moved to be closer to their children or to other members of their families. They may be sun-chasers—people who feel they will have a more pleasant style of living, given Britain’s relatively temperate climate.
Does the hon. Lady not recognise that one reason why people may decide to come back is that we have a free national health service? Indeed, a number of my friends have decided to come back specifically for that reason. All of a sudden, they found themselves having to meet costs, which they do not have to do on the national health service.
I can understand that some people might well do that. They might also come back for other reasons; as they get older they might decide there are advantages to coming back, depending to some extent on where their families are.
This issue is going to run and run. It has obviously run for many years. Successive Governments have looked at the cost of the increase and have baulked at it; they have not felt it was a top priority at a time when they had other issues, relating to people in retirement here, to deal with.
If some of these questions and arguments could be answered with some clear information, however, the issue could be put to bed, although perhaps not entirely. We would be better able to say, “We have looked at the issues you have raised. We have still concluded”—if this is the Government’s view, which I suspect it is—“that your arguments are not as powerful as you think.” That would be a stronger basis on which to resist what will be the constant iteration of this issue by people who feel fairly aggrieved at the position they find themselves in.
As my hon. Friend develops her argument, it strikes me that one of the powerful points she might be making is that a cross-departmental review would be a way to get clarity on this issue once and for all. Is that the argument she is making?
Yes, indeed. It seems clear that the matter comes up successively, and not necessarily even when pension measures are going through Parliament, although clearly at those times there is a more powerful incentive for campaigners to make yet another push.
It is a continuing issue, which has been raised by many people who do not feel that they should have lost out by going abroad. They certainly cannot understand why things differ so much from one country to another—that has nothing to do with their circumstances or their choice. They do not have a say in such things as reciprocal arrangements; they are outwith their control.
Does my hon. Friend agree that views on the issue in the House are not a question of party? I recall that early-day motions on it have had a significant number of signatures from Government Back Benchers, so it appears that the anomaly is quite striking.
That is right, and I suspect that the sense that parliamentarians of all parties support the claims is a source of constant encouragement to people in believing that if they could get a proper hearing the matter could be dealt with. That is why new measures going through Parliament, or Committee scrutiny, lead to a renewed push.
If there is sympathy within Parliament for the case that is made, as there appears to be, perhaps it is appropriate now to consider the question in the round, deal with the arguments, and come to a conclusion. That is the reason for the amendment.