David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the 2019 general election.
It is my role, on these pages, to represent a form of centrist Conservatism. It falls to me to question whether it is quite so straight-forward to slash spending to fund an exciting tax cut, for example. I might even suggest that the Tories do not necessarily have to launch into a big fight with one part of society or another.
Then, now and again, there is news story that reawakens my inner small-state, hatchet-faced, ex-Treasury minister instincts with a determination to take an unpopular position to protect the interests of taxpayers. The re-emergence of the debate over the WASPI women is one of those moments.
The Parliamentary and Health Service Ombudsman (the PHSO) last week published its conclusions on the equalisation between men and women of the state pension age (SPA) that was initially announced and legislated for in 1995. This involved the SPA for women increasing from 60 to 65 over the period of 2010 to 2020. In 2011 the Coalition government subsequently announced an increase in the state pension age to 66 and the acceleration of the timetable.
The PHSO has found that the Department for Work and Pensions was guilty of maladministration in its failure to inform those affected by the changes. In 2005, survey evidence showed that only 43 per cent of those impacted were aware of the change in SPA. There was then a delay of 28 months before letters were sent out.
This, the PHSO concluded, constituted maladministration by DWP and an injustice inflicted on the women affected. The PHSO has recommended that compensation should be payable, although not at the levels demanded by Women Against State Pension Inequality (WASPI), the campaign group.
I should declare some personal history. The WASPI campaign to reverse the increase in the women’s SPA began in 2015. It was a campaign that was still in full flow during the brief period – June 2016 to January 2017 – that I was Secretary of State for Work and Pensions. I was not persuaded by their arguments to reverse the increase in SPA then and I am not persuaded now.
To start at first principles, there is no justification for women having a lower pension age than men (or, to put it another way, that men should have a higher pension age than women). If one wanted to be provocative, one could argue that the pension age for women should be higher than for men because women have a higher life expectancy.
I am not convinced by that argument either. The state pension should be equal. The misnamed WASPI campaign, however, is arguing for state pension inequality, not against.
Very well, some campaigners said, cut the SPA for men. That is unaffordable. Life expectancy since the 1940s has risen substantially. Without increasing the SPA people would spend an ever-growing proportion of their life in retirement with an ever greater burden being placed on the dwindling proportion still in work.
The SPA has to reflect life expectancy. We have generally been far too slow to reflect that. The action taken by the Major government in 1995 was an admirable case of long-term thinking but we should not have waited until 2011 to announce a further increase.
“Oh, but we’re entitled”, said the WASPI women. By this they mean that women had paid their National Insurance contributions on the understanding that this would entitle them to receive a state pension at the age of 60. The Government, in other words, was breaking a contract.
Governments should not go around breaking contracts and lots of people genuinely believe that National Insurance is an insurance premium that pays for their pension. But it is not true.
Yesterday’s NI contributions paid for yesterday’s pensions and today’s contributions pay for today’s pensions. And to make a point that rarely goes down well, the state pension is a benefit, not an entitlement. Its generosity must be determined by what taxpayers can afford today.
“OK, it was not a contract, but we had an expectation based on everything that had happened prior to 1995”. That, of course, cuts two ways. For a very long time, including in 1995, the state pension increased in line with inflation. Had we stuck to that policy rather than moving to the triple lock, the state pension would be substantially lower than it is today. Chris Giles of The Financial Times mischievously questioned whether “WASPI women will now offer to give up the unexpected real increase in the state pension they have received and are receiving”.
“But we didn’t have enough notice of the change”, is the complaint. Legislating for a change that only began to take effect 15 years later strikes me as more than reasonable a notice period. Not everyone, however, noticed and this is the crux of the issue where the PHSO found against DWP.
When WASPI campaigners sought judicial review of the SPA changes, the Court of Appeal upheld the High Court’s judgment that “there has been adequate and reasonable notification given by the publicity campaigns implemented by the Department over a number of years”. Nonetheless, the PHSO has concluded that, as a matter of administration rather than as a matter of law, the DWP’s actions in 2005-7 to inform the relevant women were inadequate and that compensation should follow.
It should be acknowledged that there are some hard cases here. Many women genuinely expected to receive a state pension at 60 and, in some cases, made life choices that were based on this erroneous assumption. In turn, in some of those cases, this caused hardship.
But I still feel uneasy about the award of compensation, albeit at levels much lower than demanded by campaigners.
First, it might cost up to £10.5 billion. That is a huge amount of money. Any Government and any Parliament should think very carefully before committing such a sum, especially given competing priorities.
Second, Governments must make tough choices – like increasing the SPA – to make the public finances sustainable. If every time there is a policy in which people lose out the losers are encouraged to believe that they entitled to be compensated – even when, as a matter of law, no right exists – the necessary decisions will not be taken.
Third, there is a point about personal responsibility. Yes, perhaps DWP should have done more. But there is also some responsibility on individuals to acquaint themselves with the relevant facts and plan their own finances accordingly. The increase was not a secret. We cannot sustainably have a situation where the cost of people failing to check their assumptions over a period of decades is socialised.
Fourth, this compensation will not be well-directed. It will go to those who were aware of the changes, to those who did not change their plans because of their lack of awareness of the changes, and those who have faced no hardship as a consequence of the changes. The poorest pensioners will lose a pound of pension credit for every pound of compensation. The biggest beneficiaries will be those who need it least.
And fifth, this has to be put into the wider context of intergenerational fairness. The compensation directed to baby boomers who had hoped to retire at 60 will be paid for by those of working age who do not expect to receive a state pension until they are at least 68 or 69.
All of this makes me think that the Government is justified in resisting the calls for compensation.
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Author: David Gauke
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