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Last Updated: Sunday, 21 May 2006, 10:23 GMT 11:23 UK
Pension proposals
On Sunday 21 May 2006, Andrew Marr interviewed John Hutton MP, Minister for Work and Pensions

Please note "BBC Sunday AM" must be credited if any part of this transcript is used.

John Hutton MP
John Hutton MP, Minister for Work and Pensions

ANDREW MARR: Mr Hutton, first of all, can I ask you ... there've been a lot of leaks and debates and discussion about the Blair / Brown agreement and so on, and are we looking at a package which is essentially what Adair Turner ... Lord Turner has proposed but introduced slightly more gently or later?

JOHN HUTTON: Yes, we always said, Andrew, that we thought Lord Turner's analysis was broadly right and broadly that the recommendations that he was making to us about how we sort the pension system out in the UK for the long-term were about right too.

Now we've always, however, made it absolutely clear, and this is the responsibility of government and it can never ever be ducked, that it's got to be affordable for not just the short-term because pensions policy by definition is all about the long-term, you can't chop and change and expect to change for example the pensions savings culture which is I think probably one of the biggest things that we've got to fix in the white paper.

I mean the real problem I think in the UK pensions system right now is that people aren't saving enough for their own retirement and that is really right at the heart of the policy measures that we will be announcing later next week.

ANDREW MARR: So that means that there are people working now who will actually expect to work until they're 68.

JOHN HUTTON: Well I think we've got to separate out two things there. I mean there's people's private savings, their occupational pensions, whatever it might be, and then there's a variety of different ages at which those policies might mature. And then there's the state pension package which is of course the other big chunk of policy that's got to be addressed in the White Paper.

And I think when it comes to the basic state pension, I mean look, I think the basic deal has got to be this, that if the number one problem is encouraging more people to save - because we know probably maybe around ten million people are not saving enough for their retirement - then I think when it comes to the state pension system, what we've really got to try and engineer is a situation where the state pension system can provide a new, proper solid foundation on which you will always make it clear to people that it will be worth their while to save for their own retirement, they'll always be better off if they save. Now that's the bit of engineering that we've got to get right.

ANDREW MARR: But what does that mean for retirement age?

JOHN HUTTON: Well I've said before, and I think this is spelt out in more detail in the White Paper Andrew, and tempting though it is to share all the details with you this morning ... (laugh)

ANDREW MARR: You're more than welcome.

JOHN HUTTON: Yeah, I think I'd get into trouble if I did that. But I think it is inevitable that the state pension age is going to have to rise. It's rising in most other European countries, in North America too, and all we're trying to do with that, you know, is to address two problems: one is the long-term affordability of the state reforms that we'd like to make, and we do want to restore the link to earnings, and that's got to be properly afforded for the long-term, so we've got to get that right.

But we've also got, I think in the future, to address one other issue, which is that if you look at how long people can expect to live in retirement now, it's rising incredibly quickly, and that, in turn, presents a problem for both occupational pension schemes and the state pension scheme. So I think it's going to have to rise, but I don't want it to eat into some years of retirement that people can look forward to. So even if it does start to go up over the next 30, 40 years it will be gradual and it won't eat into the length of time that people can expect to enjoy in retirement ...

ANDREW MARR: Can I ...

JOHN HUTTON: ... when you just track that with longevity.

ANDREW MARR: Sure. Can I ask you something which.. I don't want to sound offensive. Is this a real announcement? And what I mean by that is, the move to the earnings link is not likely to happen till about 2012. We don't know what government is going to be in power in 2012. And when it comes to raising the age fully to 68, you and I, if we discuss this, we'll be in our mid 90s by then. It's so far ahead ... so far ahead that a lot of people will say well it's actually just.. you know.. it's not a real announcement.

JOHN HUTTON: Well let's hope we're both in a position to be discussing that in our 90s, that would be very nice. No, it is a real announcement and remember, if you go back and read the Turner Report, published at the end of last year, he gave a sort of time frame within which he recommended that government made these reforms, both on tackling the under savings problem, and also reforming the state pension so that it supports a new savings culture, and he said you should do those changes between 2010 and 2012.

There isn't a pensions crisis now and I agree with him there isn't, but there will be one if we don't take action within broadly that time frame. So it is a real announcement about signalling a policy intention, and by the way, when the White Paper is published, you know, it wont necessarily be just that time frame, that will catch the headlines, because the other problem I think, Andrew, we've got to address as well, particularly on the state pension side, is another problem - women, and particularly people who've been looking after sick relatives and loved ones, are discriminated against very unfairly in the current state pension system, and I want my reforms to address that problem too, in a very radical and direct way.

ANDREW MARR: And you want to do that quickly.

JOHN HUTTON: Yes I do, I want to do that as quickly as we possibly can. So it is a real announcement. I think this is probably going to be the biggest shake up of UK pension system since the post war Atlee Government made its reforms to the welfare state. It's certainly of that scale and magnitude and it's got to be because you know.. there's nothing more important, I think, for the cohesion of our society than making sure that when you come to retirement you've got the confidence and the security of knowing that you've got a decent retirement income to look forward to, and that is the challenge that the White Paper is going to address.

ANDREW MARR: Now you've talked about affordability, with the pension age rising, is that going to take up all the slack? We spend, I think, about 6% of our GDP at the moment. A lot of people say we've got to spend 8% of our GDP on pensions, which implies that apart from the pension age rising, we're going to have to pay more in tax.

JOHN HUTTON: No, I don't think there's any suggestion that the White Paper will mean tax rises, absolutely not. We've worked very hard to make sure that this is an affordable package for the longer term. But look, there's a demographic sort of challenge facing us as well too, which we'd be stupid to ignore. By the time we get to the mid 2040s, the late 2040s, the numbers of pensioners will have increased by about 50%. But the proportion of people in work who are essentially paying for the state pension of those people who are then in retirement is going to halve.

Now we've got to address that issue, and I think that the difficult choice for government, and it's always got to be tackled head on, because as I said at the beginning, you can never duck these things when you're in government - in opposition it's very, very easy to do that. We've got to be able to show to people, look this is an affordable package for the long term, because what I don't want to happen is that having announced these changes, then someone comes in and starts hacking around, and the increase of the state pension age, Andrew, is actually a fundamental part of securing the affordability of these reforms.

ANDREW MARR: A lot of people are outraged by the deal that we've done between the government and the public sector which allows huge numbers of people still to retire at 60 and implies that everybody working in the private sector is going to be paying for their gold plated pensions, or their better plated pensions while at the same time having to work longer and pay more for their own pensions.

JOHN HUTTON: Well the deal that we struck in October with the public sector trade unions was actually a good deal for the taxpayer. It saved the taxpayer I think something like 15 billion pounds over the lifetime of that deal.

ANDREW MARR: The papers are saying it's going to cost us 6 million pounds more.

JOHN HUTTON: Yes, well they would and it's certain newspapers that are saying that and they always make those kind of allegations but we have increased the occupational retirement age for civil servants, for people in the National Health Service and the schools and so on to 65. Now that is a very significant change and it's one for example, just remind ourselves, that the unions said that they wouldn't be prepared to reach an agreement with us on. They did. It was a compromise. It saves money for the taxpayer.

ANDREW MARR: So it's not going to be reopened anyway.

JOHN HUTTON: No.

ANDREW MARR: Alright. John Hutton, thank you very much indeed for joining us.

INTERVIEW ENDS


NB: this transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy


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