Hutton: Pensions scheme must be affordable
Any long-term pensions settlement in Britain must be affordable, the new work and pensions secretary said today.
John Hutton was speaking amid reports that the chancellor has major reservations about the findings of the Turner commission on pensions, due to report next week.
Lord Turner is expected to recommend an increase in the basic state pension, to be paid for in part by raising the retirement age to 67, but fears are growing that Gordon Brown is already planning to reject some of its key elements as unaffordable.
Speaking on Today, the pensions secretary insisted there would be a “grown-up debate” on the commission’s findings.
But Mr Hutton said that any long-term pensions settlement “has got to be affordable to the taxpayers”, saying that the chancellor had already made clear that the government “will take absolutely no risks with the public finances of this country”.
He declined to comment on reports in today’s Financial Times that the link between earnings and the pensions credit would be broken after 2008, which could increase the cost of offering a more generous basic state pension.
It was a “matter for the chancellor”, Mr Hutton said, adding: “Our commitments are to increase the pensions credit in line with earnings until 2008. We have made no commitments past 2008.”
Giving his first major speech since taking over the pensions brief from David Blunkett three weeks ago, however, Mr Hutton admitted that Britain could not afford to put off taking a decision on pensions.
“Future governments must not be left to face the kinds of problems we had to face when we came to government – we as a society, I believe, cannot afford to put off today laying foundations for future retirement policy,” he said.
Britain is undergoing significant social and economic changes, he said, which have seen people living longer, having several different jobs and saving less.
The Labour government had already taken steps towards dealing with this change, Mr Hutton said, such as cutting pensioner poverty through winter fuel payments and free TV licenses, increasing the basic state pension, and pension credits.
“We have begun to change what it means to be old in our society – we now have the unprecedented situation where pensioners are no more likely to be poor than other group in society,” he said.
There had also been efforts to restore confidence in private pensions, he said, to encourage people to take responsibility for their own retirement, while efforts to raise the percentage of people in employment were also having an effect.
“Having put these reforms in place, we must act now to build on this and form the basis for the long-term pensions strategy,” he said.
“Turner was very clear that there is not a pensions crisis to date, and I agree with him. But the commission identifies ten million people who are not saving enough – the failure to deal with would lead to crisis in future.”
Age Concern welcomed Mr Hutton’s assertion that the government must take urgent action on pensions but said it was “long overdue”.
“Pensions reform is one of the biggest challenges facing the government and a prompt and bold response to the Turner report is needed,” said director general Gordon Lishman.
