Liberal Democrats

Steve Webb's speech to Autumn Conference 2014


Those of you who were paying attention to the news last week will have seen the story of the former Tory party donor who has now given a million pounds to UKIP. What you may have missed is that he has announced that he will be standing against me at the next General Election.

This sort of announcement certainly focuses your mind on the issue of fund-raising, and our next jumble sale will have to be a real corker! Indeed, if anyone in the hall would like to help us level the playing field in Thornbury and Yate, I will be available to receive donations, but nothing over £100,000 please..

Anyway, as well as being the MP for Thornbury & Yate, I have had the honour of being the Minister for Pensions for the last four-and-a-half years. They tell me that I’m the longest serving pensions minister since records began. Though I probably reached that landmark in about third week in office, such was the frequency with which my predecessors came and went.

And supporting me in Parliament have been my colleagues John Hemming and Mike German who jointly chair our Parliamentary DWP committee, Mike Thornton who serves on the DWP Select Committee, and Brian Paddick, Cathy Bakewell, Ben Stoneham and Celia Thomas, who have all worked hard to make sure that the Liberal Democrat voice is heard loud and clear in Parliamentary debates on these issues.

But you know, simply being in office though is not good enough – you have to achieve things. And I believe that as Liberal Democrats we can be proud of what we have helped to achieve over that four-and-a-half year period. And if we don’t shout about, nobody else will do it for us.

First and foremost, I’m talking about a fundamental re-modelling of the state pension, taking it back to the model devised by that great Liberal, William Beveridge – a decent pension, paid at a flat rate, without the need for means-testing, based on a record of contributions.

But we’ve brought it up to date, recognising that “contributing” isn’t only about having a job and paying national insurance. We’ve recognised that people who are bringing up children or caring for elderly or disabled people are contributing just as much to our society. So for the first time ever, all contributions will be valued equally, with a year spent in caring role earning you just as much state pension as a year running a FTSE 100 company. That’s Liberal Democrat values in action.

What is exciting for me is that the legislation to make this change has now gone through and we are planning for implementation in April 2016. People due to retire over the following five years are now contacting us in their thousands, asking how much pension they will receive and the early data we are gathering shows that the new system will be a real boost for women. For many men they will see little change to their expected pension in the early years of the new scheme. But around one in three women who have been in touch has been told that they will get more pension from their own NI contributions under the new rules than under the old rules. That is a concrete example of the Liberal Democrats taking action in Government to deliver what we promised in opposition, and we need to make sure people know about it.

And of course our focus is not just on tomorrow’s pensioners but on people who have already retired.

The strategy of successive Labour and Tory governments was simple. To let the basic state pension whither every year after Mrs Thatcher broke the earnings link in 1980 and then hope to catch poorer pensioners through a complex and deeply flawed means-test.

The strategy set out in our 2010 Manifesto was very different. We set out plans to reverse the decades-long decline in the value of the state pension by introducing the triple lock – increasing the pension each year by the highest of the growth in wages, prices and 2.5%. This is the policy contained in our manifesto, negotiated into the Coalition agreement and implemented in Government. As a result we now have a state pension which is a bigger share of the national average wage than at any time in more than two decades. And in the next Parliament we will secure the long-term future of the triple lock through placing it into legislation. With an average retirement of more than two decades, anything less leaves exposing the very elderly to substantially reduced living standards as inflation eats away at their income, year after year.

But a state pension will only ever be a start for most people. For most people who have been in work they will want a pension of their own on top, with contributions from their employer and topped up by tax relief.

That is where a second pensions revolution comes in – automatic enrolment into workplace pensions. When we took office, the proportion of people working in the private sector who had a pension of their own had been in more-or-less steady decline since the 1960s. Conference, I can tell you that we have now started to reverse that decline. No fewer than 4.5 million people have been automatically enrolled in the last two years, and nine out of ten have chosen freely to remain in a pension. That is over 4 million people in a pension now who were not in a pension two years ago. The programme will continue to roll out until 2018, by which time fully ten million people – nearly a quarter of the working age population of the country – will have been enrolled, an average of over 15,000 workers per constituency. These are people who would have missed out on a workplace pension who now have the chance to build a decent standard of living in retirement thanks to measures we have implemented.

We are also making sure that these pensions offer decent value for money. The last Labour government thought it was fine for pension providers to charge up to 1.5% a year for running a pension. We disagree. So from next April we are imposing a charge cap of 0.75% on automatic enrolment pensions, making sure that your hard-earned cash turns into a retirement income for you, rather than lining the pockets of the pensions industry.

But there was still a gap in these reforms. We’ve sorted out the simple decent state pension as a foundation for future retirement savings. We’ve made sure millions more people have a pension of their own and that we tackle rip-off pension charges. But having built up a pension pot people still had very little choice what to do with it. The wealthy had options, as they always do, and the people with tiny pension pots could take cash. But most people in the middle had little option but to buy an annuity, often generating a very poor income in these days of low interest rates and increasing life expectancies. Something had to be done.

I have been demanding annuity reform for many years. As long ago as 1999 I stood up in a rather less-than-packed House of Commons to call for the then Labour government to relax the rules which forced people to buy an annuity at the age of 75. Naturally, Labour rejected my arguments just as they still don’t really buy in to our reforms today.

But earlier this year this Coalition government brought forward a genuinely Liberal reform. It started from the principle that individuals, not the Government, are the best judge of how to use their own money. Yes, pensions can be complicated. Yes, people may need help to guide them through the implications of their different options. But as liberals we are prepared to put our trust in people to make the best choices for themselves and their families.

And if that does involve buying a flash sports car, then I can live with that. (Actually, the day after I made my now notorious comment about people buying Lamborghinis with their pension pots, Boris Johnson wrote in the Telegraph that when he heard me say this it made him “want to stand on his chair and cheer” as it was such a Liberal thing to say. I’m not sure whether that adds to my credibility or not, but I thought I’d just mention it!). Indeed, one of my constituents contacted me the day afterwards and said: “Steve, these Lamborghinis are all very well, but at my age I struggle to get in and out of mine”!

In Government now we are working hard on delivering that new freedom next April. There will be a legal right to impartial guidance on your options, whether online, over the phone or face-to-face, helping thousands more people to make informed choices. And we will need to make sure that as the financial services industry creates new products and options to meet these new freedoms, we put the consumer front and centre of our approach. Whilst it is difficult to regulate products that don’t yet exist, I am clear as a Liberal Democrat that we must watch the industry like a hawk and step in if necessary to make sure we do not have a repeat of some of the past horror stories for which the pensions industry has unfortunately become all too well known.

This is a proud list of major reforms, but inevitably there is still much more to do.

Having got millions of people in to workplace saving we need to get them saving more than the bare statutory minimum of 8%. I am quite attracted to the idea that when you start a job the norm is that each time you get a pay rise a part of the extra cash goes into your pension, building up gradually to a worthwhile sum. You could opt out of this ‘automatic escalation’ but unless you actively chose to opt out, you would gradually contribute more.

We also need to tackle the inequity – or should I say iniquity – of the current system of tax relief on pensions.

If I want to put £1 into my pension it only costs me 60p – the taxpayer contributes the other 40p through higher rate tax relief. But if someone on an average wage wants to put £1 into their pension it costs then 80p – the taxpayer only contributes 20p. That cannot be right. We spend something like £37 billion a year on tax relief for pensions and yet overwhelmingly the money goes to those who are already well off and who will end up with decent pensions in any case. We could probably spend less on pension tax relief overall – helping to contribute to deficit reduction – but also rebalance the money so that everyone, rich or poor, got help at the same rate. We need to work through the details, but in my view the next Government will need to address this longstanding unfairness.

WELFARE

As well as pensions, I want to say a few words about the other half of the Department in which I serve. What about ‘welfare’, or what I still touchingly think of as ‘social security’. What do the Liberal Democrats have to contribute to this vital debate?

For me, a definition of a Liberal society is where the information on your birth certificate does not determine your future. Whether you grow up in a family with one parent or two. Whether you are a boy or a girl, black or white, able-bodied or disabled. These things should not define the course of your life. Instead we should enable people to make the most of their potential, irrespective of their background. That should be the guiding principle of a Liberal Democrat approach to welfare.

Very often that will mean helping people to get a job and keep a job. We’ve already legislated to ban age discrimination and forced retirement in the workplace. But we also need to ensure that Government programmes to get people back to work are focused on the individual, not forcing square pegs into round holes. And we also need to make sure that we are making the most of local expertise, whether through local government, local enterprise partnerships or anyone else who is best placed to help unemployed people get back to work.

It also means treating people with disabilities fairly, and not forcing them to jump through endless hoops simply to access what they are entitled to. So we should be looking to see whether the needs of disabled people could be assessed in one go for their different disability benefits and social care needs, rather than having constant assessments and reassessments for different benefits and separately again by local authorities.

In similar vein, the system has to be designed to serve individuals in all of their diversity, not making rigid distinctions which don’t fit the complex modern labour market. So the current system which classifies you either as in work or out of work, fit for work or unfit for work, full time or part time, needs to change. We need a system which can cope with hours that vary from week to week, with people whose health condition means they can do some work but not a full-time job. And we need a system which gets it right there-and-then, rather than relying – as the tax credits system does – on an endless process of annual reassessments, underpayments, overpayments and clawbacks.

That is why Nick and I have been more than happy to support the principle of the universal credit which rolls six different means-tested payments into a single system. Of course there have been teething problems, but in my view the sooner we can move people onto this new and more streamlined system, the better it will be for people who depend most on the benefits system.

A Liberal Democrat approach to welfare also means enabling people to get out and about to travel for work or social life, which is why we are making no changes to the pensioners bus pass and want to expand discounted bus travel to young people. But it also means recognising that some groups don’t need extra help from the state, such as the small minority of pensioners who pay tax at the higher rate, and therefore withdrawing winter fuel payments and free TV licences from this group.

We also need to do more to make sure that people understand what is expected of them when they claim benefit and do not have their benefits withdrawn unexpectedly or without proper explanation. That is why we suggest a ‘yellow card’ system whereby someone receives a clear warning in the event of a breach of benefit conditions and is told what they need to do to put things right, only being sanctioned in the event of a knowing and deliberate further breach of the rules.

In summary, our vision is about tackling the causes of poverty, not just relieving the symptoms. And it is about creating a fair society with opportunities for all, not stigmatising those who happen to be on benefit. Looking at why people are having trouble getting work or finding affordable housing. Tackling low wages and high childcare costs. Fighting discrimination in the workplace and the jobs market, whether against older workers or people with disabilities.

But what we will not do is put the most deprived at the front of the queue when it comes to making savings.

Sometimes people ask us what difference we have made by being in government in the area of welfare. In some cases we can point to damaging policies that were announced and that we got reversed, such as the plan to cut people’s housing benefit by 10% after they had been unemployed for a year. In some cases there are things that the Conservatives wanted to do which we blocked before they happened. Of course, because they never happened, people don’t know how hard we had to work to stop them.

So it is fortunate – in a way – that we no longer have to tell people what the Tories might have done without us to moderate some of their more extreme voices. Because they’ve told everyone last week from a conference platform in Birmingham. We heard of plans to deprive young people of the ability to live independently of their parents. We heard of plans to cut the welfare cap to a level which will make more areas of London no-go areaas for poor families unless they can get a Council house.
And most of all we heard that whilst the Tories can find money to cut the income tax bills of people on double the national average wage, their first port of call for savings was a two-year freeze on the incomes of the poorest people in the land.

Colleagues, I can tell you that this is not the Liberal Democrat way.

Yes, we have had to make difficult decisions during this Parliament to reduce the rate of growth of benefits spending. But as we go forward with deficit reduction we are clear that it is time now for those with the broadest shoulders to bear the biggest burden.

Two years ago, George Osborne told the Conservative party conference that we should “never balance the budget on the backs of the poor”.

Well, I agree with George!

That’s to say, I agree with what the Chancellor said in 2012, not with what he plans to do in the next Parliament.

Our starting point for further deficit reduction has to be those who have done best as the economy recovers, not those who have missed out. It may be that further difficult choices will have to be made in the area of benefits spending as with spending on other departments. But this should be the last resort, not the first place to look.

CONCLUSION

So colleagues, I believe we have a strong story to tell and a real vision to share with the British people.

We can tell them about promises kept, delivering a fairer state pension for women and bringing millions of people into workplace pensions for the first time.

We can tell them about reining in the extremes of the Tory party, making sure that where cuts had to be made we protected the most vulnerable, and supported a positive vision of reform that would simplify life for claimants and enable more to return to work.

And we can tell them about a Liberal Democrat vision of a society built around opportunity, where the life you lead isn’t shaped by what it says on your birth certificate.

These are the values that we will take forward over the coming months and years, and I thank you for your part in getting us this far and taking the message out to our nation.

Thank you.

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