The Steve Webb interview: How I built a modern, inclusive, liberal State Pension system

steve webbAt the excellent Social Liberal Forum Conference on Saturday, a group of eight bloggers spent the lunch break interviewing Liberal Democrat Pensions Minister Steve Webb just before he delivered the second Beveridge Memorial Lecture.

The thing about Steve Webb is that he might have Professor in front of his name and MP after it, but he’s  in no way intimidating, though. He speaks with authority, but engagingly so,  has no airs and graces and has a knack of explaining some complex concepts in language that even I can understand. He was in the sort of company that was most likely to have difficulty with some of the policies his department had enacted, but he approached the issues we raised in a respectful manner, acknowledging the difficulties.

First up to ask a question was Maelo Manning. How, she wanted to know, would we regain the trust of young people when youth unemployment was so high and housing costs made it difficult for young people to live independently.

Nick’s Youth Contract gives all young people the chance to earn or learn and there will be updates to that shortly. Nick is the only party leader who has explicitly talked about the need to be fair to all generations. David Cameron and Ed Miliband are doing their best to appeal to pensioners, while Nick is thinking about all ages.

He added:

The Government has not yet done enough on house building. We must do more.

Iain Brodie-Brown of Birkdale Focus asked a question about friendly societies. Steve said that pensions weren’t a cottage industry. By their nature, providing them was a big scale operation. However, the Government had made provision for those the market didn’t provide for with NEST, the National Employment Savings Trust, a not for profit pension scheme.

He also dropped a hint of “radical ideas” to come on pension tax relief. Raising of the tax threshold means that you don’t get tax relief on your pension contributions if you earn under £10,000. However, you can get tax relief at 40% and then only pay 20% tax when you retire.

Louise Shaw’s question was also about pensions. She said that she needs to make decisions at her age about her retirement. Would the retirement age be put back in several decades’ time when she retires?

Steve explained that people would not find out less than a decade before they retire that they would have to work longer but he said he’d be lying if he could categorically tell her now when she’d retire. The age would be reviewed every Parliament but it was also important to take into consideration that even though people were living longer, they weren’t always in good health in their retirement.

The Bedroom Tax was always going to come up somewhere. Why, Mark Jewell asked, was it not possible to only penalise those who didn’t want to move to somewhere smaller, who had turned down an offer of a smaller property. Steve said that it wasn’t comfortable territory for us. However, councils have £25 million in Discretionary Housing Payments. He pointed out that £11 million in DHPs were returned last year because councils couldn’t use them. While there needs to be continuing effort to assess the scale of the need, properly resourcing local authorities to make decisions on individual cases was to him the best way of going about it.

I asked what benefit it brought to people looking for work to have to go to the job centre once a week, especially if there were no extra staff to make it a meaningful experience with proper support in job hunting.

Steve said that there was a key difference in approach between us and the Conservatives. Our coalition partners are very keen on conditionality. The language Liberal Democrats and Conservatives use to describe is different. Conservatives will talk about how claimants must learn English to get their money. Liberal Democrats would say that it gives someone a better chance in the job market if they can speak English, so in order to help themselves, people should go on the course. However, Liberal Democrats would never accept losing benefits if people weren’t able to reach the required standard.

He said that the “conditionality” measures all cost money. English classes and support to build CVs had to be provided.

Matthew Hulbert asked whether we communicated well enough the differences between us and the Tories. Steve said that leaflets, talking to people and the national media were all crucial tools. He said that a good thing about being a minister is that he might say something he thinks is ordinary and it’s deemed newsworthy.

He said that his priority was to have a the end of five years a list of positive changes we’d done. So far he has made sure everyone has a workplace pension ( and few opt out), and the State Pension had been reformed to give those the market was unable to help a decent retirement, as well as his “triple lock” on annual pension rises. His first priority was to sort out the State Pension, as he put it, to use the apparatus of the state to sort out the imbalances, the failure of the market to help people who had been out of the labour market for caring reasons, mostly women.

Grandstanding on issues wouldn’t have helped get these things through.

His collaborative approach extends to Tory Special Advisers. He gave them the heads up on what he was going to say in his Beveridge Lecture.

With that, he went off to deliver his Beveridge Lecture, where he talked in more detail about his Pensions reforms and the thinking behind them. “Liberal Democrat through them like a stick of rock,” he said.

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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  • Oh I see that’s it is it ? Introduce a harmful, economically illiterate, piece of illiberal nonsense like the Bedroom Tax and try to pass the blame to underfunded local authorities. Disgraceful.

  • Eddie Sammon 16th Jul '13 - 3:00pm

    I don’t like the way Steve Webb is making out that this new state pension is miles better than the old one. His reforms make some people worse off and he should be frank about this. Below is a list of negatives of his state pension reforms.

    1. National Insurance contributions/credits required for 35 years to get the full basic / single tier pension, rather than 30 previously.
    2. New minimum National Insurance contribution/credit history of seven to 10 years required to get any state pension at all, one year previously (transitional protections apply).
    3. People will no longer be able to claim a partial state pension based on their spouse’s National Insurance history, or inherit any when their spouse dies.
    4. Higher earners and savers previously could have earned a state pension of up to £250 per week.
    5. National Insurance contributions will rise for employees and businesses who have final or average salary pension schemes, due to the abolition of contracting out.
    6. Increases in state pension age being brought forward.
    7. State pension will rise by 2.5% even if inflation and average earnings fall because of the Triple Lock, so potentially inefficient.

    I’m not saying the reform is a bad one, I am just saying he should be more honest about its downfalls. Perhaps it bothers me more because the same consumer protection standards that MPs make businesses follow, don’t seem to apply to themselves.

  • Gavin Hamilton 16th Jul '13 - 5:14pm

    I have some concerns that the new workplace pensions with their low contributions, while giving some workers v small pensions for the first time,will see a leveling down effect for workplace pensions for workers who already have them and the retreat of employers from good staff benefits (like pensions) accelerated. The triple lock and the reform of the basic state pension to a high level rate are good reforms. More needs to be done to allow companies to adjust to the economics of pension provision based on the life expectancy of the current workforce, but ensure they provide decent benefits and don’t all but retreat from employee benefits altogether.

  • Jane Davies 17th Jul '13 - 5:59am

    After working hard and paying taxes for more than 40 years for some retiring to join loved ones has become a nightmare because those loved ones unwittingly settled in a “wrong country”. To have spent a lifetime making contributions to the NI fund for a state pension it was a shock to find if one retires to a “wrong” country ones state pension is frozen…no cost of living increases. Not only is this theft but discrimination as only 4% are affected, some countries are frozen some are not, yet all state pensioners have paid into the NI fund under the same terms. No wonder for years this disgraceful treatment of British seniors was kept a secret because it is a shameful stain on all the government ministers who have seen fit to ignore the plight of these vulnerable members of society. Shame on you Mr Webb, you proclaimed the injustice of this discriminatory policy whilst you were in opposition and you have let the frozen 4% down in doing nothing to end this illogical unfair treatment,shame on you.
    As for your recent comment on this scandalous policy and I quote “As for those who are abroad, it is important to understand that two countries dominate: I understand that just short of three in four of the people we are talking about are in Canada or Australia. It was suggested that the Canadian and Australian Governments would like us to increase pensions in such cases, and indeed they would. That is because they have means-tested state pension systems. If we were to increase state pensions in Canada and Australia—for nearly three quarters of the people we are talking about—that would be a saving to the Canadian and Australian Exchequers at the cost of the British taxpayer, not necessarily to the benefit of the British citizen living abroad.” This outrageous comment has now been forwarded to the relevant ministers and Prime Minister Stephen Harper of Canada. Quite right that Canadian and Australian taxpayers would incur savings, why should those taxpayers prop up the UK government to the tune of millions of dollars because you refuse to honour your obligations to those who are being denied their right to an up-rated pension. Does the British government have no shame?

  • Andy Robertson-Fox 17th Jul '13 - 6:20am

    I notice that it appears nobody at the forum raised with the Minister the subject of frozen pensions or the disgraceful inclusion in the Pensions Reform Bill of Clause 20.

    Anybody who followed the discussions in the Scrutiny Committee following the Second Reading of the Bill and who is familiar with the frozen pension policy will be well aware of the basic errors and misconceptions paraded by the government side and which served only to display either remarkable ignorance on the issue or a willful attempt at diverting justice.

    None of the red herrings floated by the MP’s in general and the Minister in particular (and there were many) can justify this policy whereby 4% of UK citizen pensioners are denied the annual uprating of their pension. There is no legal, moral, financial or administrative justification for this discrimination against them and is simply imposed because of where they live.

    The Minister’s only argument – and I stress the only – is that it is “non affordable”.

    The Advocate General at the European Courts of Justice, Juliane Kokott, stated that “It must be realised that budgetary considerations cannot justify discrimination”. This formed the bases of a UK Supreme Court judgement which upheld the claim of part time judges that they should have pension parity with their full time colleagues (“cost can never objectively justify discrimination”).

    Where is your argument now, Minister?

    Despite this overwhelming condemnation of the policy Webb persists not only discriminating against pensioners now but, through Clause 20, perpetuating it against future ones who would wish to emigrate – to be with family in so many cases. His intransigence is shown in the face of undeniable evidence provided, for example, by the Oxford Economics and Runnymede Reports that it would be to the economic advantage of the UK to immediately implement universal uprating , His naive rejection of these facts is, I suggest, far more revealing about the man and his ministerial abilities than planted questions in a forum.

  • No one is forced to live abroad. State pension is paid by current employees. Cost of living relates to the UK and bears down on UK domiciled pensioners. I would be interested to learn how many pensioners living abroad rely on their State pension only.

  • George Morley 17th Jul '13 - 2:43pm

    Brian D. You are right to say that no one is forced to live abroad but that is a typical politicians answer. Everyone had to pay their NI contributions and everyone deserves to have the indexed pension on retirement. Where and how you wish to spend your pension is up to the pensioner and not the politicians. 96% of pensioners get their full pension so it appears that you support discrimination as well.Cost of living affects everyone worldwide. Whether a pensioner relies on his pension is irrelevant. He has paid like the rest who enjoy their full pension. You obviously do not understand the way the pension system works and have not mentioned the fact that all of the EU ,the USA, Macedonia and the Phillipines to name some, all get the uprated pension !

  • Jonathan Brown 18th Jul '13 - 8:36pm

    Was not at all aware of the issue of emigres’ pensions not being uprated, and that does sound unfair (and also fairly pointless), but overall I’m very impressed with Steve Webb. He seems to have kept his head down, got on with the job and brought in some pretty expensive – and long overdue – reforms to a part of the economy that is boring and gets no attention and yet is incredibly important.

    @Eddie Sammon – some of the negatives you site, are to me big advantages. Raising the pension age and ‘forcing’ employees and employers to pay more are both good things. Retirees live so much longer on average than they used to, and the working age population is shrinking in proportion to them. As a country we desperately needed government to grasp the nettle and get on with reforming the system to take these facts in to account.

    At the same time, we’re getting a system that will be of huge help to carers – most of whom are women. It may not be perfect, but it seems to me to be on balance a tremendous reform. On so many issues it seems to me that the country has been simply fiddling for decades while vast problems got worse and worse. The de-industrialisation of the north, the desperate housing shortage, the acceptance that huge numbers of kids would leave school with barely any qualifications or useful experience… Given how difficult it has been to deal with, and how easy it has been to put off doing, pension reform to me is something we can be really proud of.

  • Eddie Sammon 20th Jul '13 - 11:46am

    Jonathan Brown you say that forcing employers to provide pensions for employees is a good thing but what people don’t realise is that this kind of legislation kills off small businesses first and therefore acts as a form of protectionism for the rich. The legislation applies even if you have only one employee.

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