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Shadow Minister for Work & Pensions

Nigel Waterson MP, Shadow Minister for Work and Pensions

PEOPLE MANAGEMENT
As Shadow Minister for Work and Pensions, I appreciate how crucial it is for government, employers and employees to work together for effective, supportive and dynamic people management. This article considers two key policy areas in the Work and Pensions portfolio: pensions and staff sickness. It looks at how progress on them can contribute towards better employee relations.

Occupational pensions
When people have secure and adequately funded pension provision, they feel secure in their jobs and this promotes good employer-employee relations. Unfortunately, however, Britain is now facing a pensions crisis. Two-thirds of final salary schemes have closed to new members. Pension scheme wind-ups have left 65,000 people with significantly reduced pensions. And the government's stakeholder schemes have not reached their target market.

Responding to the pensions crisis - and managing people's expectations as to what they can expect to receive when they retire - is one of the most pressing issues we now face. This is not just a problem for politicians, it is a problem for businesses and workers up and down the country.  

The government's mistake in this area is a very simple one - instead of supporting people who try to do the right thing by saving for retirement, it has penalised them. Straight after the 1997 general election, the Chancellor decided to impose a £5bn a year tax on British pension funds by abolishing the dividend tax credits they used to receive. This has meant that over the past seven years, tens of billions of pounds that would have been going into pension pots have instead been diverted into Treasury coffers. Next, he decided to extend the means-tested benefits, which penalise saving. Together, these two policy decisions have sent out a message that it doesn't pay to save.

I don't claim to have all the answers to the pension crisis. But an essential part of any solution must be to send out the opposite message. That's why there is now a widespread consensus that, one way or another, we need to reverse the spread of means-tested benefits by increasing the value of the basic state pension. Doing that would take us towards a position where people can know that the money they save during their working lives would be theirs to spend in retirement, thereby removing some of the disincentives to save inherent in the current system. My party proposes to achieve this by increasing the basic state pension in line with earnings.

Reforming state benefits is a necessary part of any solution to the pensions crisis, but it is not on its own sufficient. To remove another disincentive to saving, we would reform the rule which tells people they must use their savings to buy an annuity by the time they reach the age of 75. As long as people can ensure that they do not end up reliant on means-tested welfare, they should be able to buy an annuity if and when it suits them best.

There are further problems with annuities on the supply side, caused by uncertainty about life expectancy. This uncertainty is impacting heavily on the risks companies offering insurance or defined benefit pensions face - risks that will be reflected in the value of annuities on offer. That is why the Conservatives recently announced a consultation with the savings industry as to whether the government should issue bonds linked to longevity as a means of reducing the risk that these companies have to bear. The Governor of the Bank of England has responded positively to this idea.

For occupational pensions, comparatively modest reforms could make a real difference. The government could align the interests of senior executives with those of their workers by saying there would be no cap on the size of an individual's pension pot - on the strict condition that every employee at the company has access to the scheme on similar terms. Many employees underestimate how beneficial their company pension schemes are, so a Conservative government would ease FSA regulation on financial advice to make it easier for companies to communicate the benefits of these schemes to their staff. Many people who do not belong to a company pension scheme have simply not got round to joining, so the default position should be that employees automatically belong to a company pension scheme unless they actively opt-out.

Stress and ill-health
One of the issues that concerns me most is the sharp increase, since Labour came to power, in the number of people claiming benefits as a result of mental health problems. Figures released by the Department for Work and Pensions show that there are hundreds of thousands of people claiming incapacity benefit on the grounds of mental health issues, such as stress and depression.

Of course, many of these cases are work-related. One of the striking features of today's workplaces is the extent to which employees are prepared to sacrifice their own time - and, sadly, all too often their health - to get the job done. This seems an especially prevalent issue in the public sector, where many thousands of dedicated public servants are willing to 'go the extra mile'.

How employers and employees, as well as policy-makers, respond to the challenges created by today's high-stress work environments is a crucial test. We all need to work together to find imaginative solutions to easing the burdens on today's hard-pressed workers. Making childcare provision more flexible so that parents find it easier to balance work with family life is an essential part of that.

Increasingly, employees and employers feel Britain is heading in the wrong direction. People feel let down by Labour, as they are all talk. It is the job of policymakers to make employers and employees feel secure in the workplace and, as pensioners, secure after they have left work. This is vital for Britain's economy and society in the coming years.
I congratulate Blakes on another excellent issue of the Parliamentary Yearbook, which I am sure will continue to be a vital resource to those both inside and outside the Palace of Westminster.