PENSIONS WHITE PAPER

Yesterday the Government published its Pensions White Paper, setting out proposals for reform of the UK's pensions system following the publication of Lord Turner's recommendations last November.

The Government's Proposals

State Pension Reform·

• The Basic State Pension (BSP) will be re-linked to earnings during the next Parliament. The Government's target date is 2012, but this is subject to affordability and the fiscal position. A statement on the precise date will not be made until the beginning of the next Parliament.
• From 2010, the number of National Insurance contribution years required for a full Basic State Pension will be reduced to 30, from today's 44 for men and 39 for women. Home Responsibilities Protection will be replaced by a new weekly credit for those caring for children.
• The State Pension Age will be increased in line with life expectancy increases from 2024, reaching 68 by 2046.

Private Pension Saving

• A system of low-cost personal accounts will be introduced from 2012, into which individuals will be automatically enrolled.
• Employers will make a minimum matching contribution of 3 per cent of employee earnings in a band between around £5,000 and £33,000. Employees will contribute 4 per cent on the same band of earnings and a further 1 per cent will be contributed in tax relief.
• Employer contributions will be phased in over at least 3 years.

Robert Key says:

• We welcome the broad thrust of the package. We support the intention to restore the earnings link to the Basic State Pension and so curb the growth of means-testing. We also welcome the package of measures that will address the unfairness suffered by women in the present system. And we will now engage in the debate around the detailed arrangements for the National Pensions Saving Scheme.
• But the proposals do not deliver certainty. It is bad news that a degree of uncertainty has now been inserted into the equation by the Chancellor's 'get out of jail free card': the caveat that the restoration of the earnings link in 2012 is 'subject to affordability'. We do not know who will assess this affordability, nor the criteria for its assessment. This means that in these proposals there is guaranteed pain, in the form of increased state pension age, but without the guaranteed gain.
• Almost 5 million women left behind. As Labour's proposed overhaul of the National Insurance contribution system will not be introduced until an arbitrary date in 2010, millions of women retiring, or already retired, will be left behind. Over a million women will retire between now and 2010 without a full contribution record and therefore will not get a full Basic State Pension. Add to them the 3.8 million women already retired on a partial State Pension, and we have nearly 5 million women being bypassed altogether by these changes.
• No action on public sector pensions. The White Paper makes no mention of public sector pensions. Public sector workers deserve fair treatment, the same as everyone else but they, too, must share in shouldering the burden of adjustment. In the interests of fairness the Government must re-open the public sector pensions deal that it made with the unions last autumn. If it fails to do so, a future Conservative Government will not consider itself bound by it.
• No attempt to form a consensus. It is disappointing that these proposals are not being delivered on the back of a pre-constructed cross-party consensus. We believe that it is essential that lasting pension reform is built upon consensus around a settlement that can last for fifty or sixty years, surviving the vagaries of political fortune. Whatever our separate party political motivations, the duty of all elected representatives is to do what is right for the long-term interest of Britain. The Conservative Party is willing to engage in this process if the Government shows - at last - that it is willing and able to do the same.

THE EDUCATION BILL

The Education and Inspections Bill passed its Third Reading in the House of Commons this week, and now moves to the House of Lords. The Bill, which implements the proposals for new 'trust schools', is opposed by many Labour MPs. The vote last night was the largest rebellion Labour have suffered on the Third Reading of a Bill since they first formed a Government in 1924. The Bill was only passed because of Conservative support.

Robert Key says:

• The Education Bill is timid, but a step in the right direction, and will give schools some degree of greater freedom. Conservatives have consistently argued that we can raise the quality of education by giving schools more freedom and welcoming new providers. That is why David Cameron and his colleagues backed the Bill.
• Last night's unprecedented Labour rebellion on the Third Reading shows that they are divided and paralysed. The Conservatives are united and are the only party that can deliver real reforms in our schools.
• We worked constructively during the Bill's Committee stage to try to improve it so it lives up to the ambitions Tony Blair set out just a few months ago. We tabled other amendments during Report stage this week, hoping that the Government would back them. We will continue to press our amendments in the House of Lords. Parents and teachers will now be clear that real public service improvement will fall to a future Conservative government