Labour: Conservatives are holding back Steve Webb


The government was bequeathed a bi-partisan consensus on pensions by the last Labour government, formed around the report delivered by the Turner commission. In Steve Webb, the Liberal Democrat pensions minister, it has a widely liked and knowledgeable administrator. Yet, as pensions policy emerges, it is often half-baked. This is because the pensions minister is being over-ruled by a Conservative-dominated Treasury.

The way in which the state pension age was equalised for women demonstrates a shockingly casual approach. The Treasury required a certain level of savings and the easiest way of achieving this in drafting terms was to simply revise the age of retirement by up to two years for a specific cohort of women. But this narrowly technical approach is blind to the effect on the real lives of 500,000 women who now have only five to seven years to adjust their retirement plans when independent experts emphasise that people need 10-15 years to plan for such adjustments.

The Government backtracked at the last minute and capped the upward revision of pension age for these women at 18 months. We welcomed this concession but sought in the final reading of the Pensions Bill to ensure adequate notice and that no woman had more than 12 months extra added to their wait for a state pension. The Government’s change was still grossly unfair on these women – no man was required to adjust their retirement age by more than one year and were given proper notice.

Conservative backbenchers claimed at the third reading of the Pensions Bill that the adjustment was necessary to close the deficit. This is simply not true. The raising of the pension age takes effect after the date that the Government plans to have closed the structural deficit.

The raising of pension ages does need to take place to ensure that increased longevity does not make the financing of pensions an excessive burden. However, it does not require emergency measures and the burden could be shared equally between men and women.

The temptation to indulge in special interests can be seen in the current private dispute between the Department of Work and Pensions and the Treasury over auto-enrolment. Adrian Beecroft has provided an eponymous report to the Prime Minister. Apparently, it recommends that small firms be exempted from auto-enrolment. The DWP is resisting this. Currently, the Pensions Bill maintains the existing and bi-partisan timetable for auto-enrolment and the requirement that all firms participate. However, the word “currently” is important.

It was the word used by Lord Freud in the final reading of the Pensions Bill in the Lords to explain the Government’s plans on whether small firms will still be required to enrol their employees. Apparently, the Government “currently” intends this to be the case. In other words, this battle is one which the DWP are not sure they are going to win and they are preserving “wriggle” room.

The Treasury policy intervention on auto-enrolment is pandering to special interests. Beecroft was supposed to identify costs holding back the small business sector from driving the growth necessary to take us out of recession. Auto-enrolment for the employees of small businesses does not take place until 2015/2016. No forecasters expect the UK to be in recession at that point.

Clearly, there are some costs involved in auto-enrolment but they are very far from prohibitive. For those who would like to gauge the strengths or otherwise of the arguments of those seeking a small business exemption, I suggest that you take the opportunity to view the cross-examination of spokesmen of the British Chamber of Commerce and the Federation of Small Businesses undertaken by the work and pensions select committee. This took place on November 2 and can be found on the Hansard website.