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| Gay marriage bill: will extending civil partnerships really cost £4bn? | Gay marriage bill: will extending civil partnerships really cost £4bn? |
| (35 minutes later) | |
| Almost 50 years ago the Beatles sang, "you can't buy me love". Half a century on love still isn't for sale but according to the government, the associated costs to the taxpayer are rising fast. | Almost 50 years ago the Beatles sang, "you can't buy me love". Half a century on love still isn't for sale but according to the government, the associated costs to the taxpayer are rising fast. |
| In the continued parliamentary ding-dong over permitting gay couples to get married, Tory backbenchers have introduced an amendment to the current bill to extend civil partnerships to heterosexual couples. | In the continued parliamentary ding-dong over permitting gay couples to get married, Tory backbenchers have introduced an amendment to the current bill to extend civil partnerships to heterosexual couples. |
| Taking the arguments (and politics) at face value, this move is about making sure that gay or straight, everyone gets equal treatment and equal choice under the law. | Taking the arguments (and politics) at face value, this move is about making sure that gay or straight, everyone gets equal treatment and equal choice under the law. |
| On Sunday night Labour said that it would support the amendment but DWP pensions minister Steve Webb has reported that this legislative addition is going to cost a lot of money - £4bn to be precise - in associated pension costs. | On Sunday night Labour said that it would support the amendment but DWP pensions minister Steve Webb has reported that this legislative addition is going to cost a lot of money - £4bn to be precise - in associated pension costs. |
| The figure first cropped up last week in the human rights committee hearing when Steve Webb was giving testimony. My colleague Caroline Davies was one of those to pick up on it whilst covering it last Tuesday" | The figure first cropped up last week in the human rights committee hearing when Steve Webb was giving testimony. My colleague Caroline Davies was one of those to pick up on it whilst covering it last Tuesday" |
| "We have costed that at roughly a £3bn-£4bn cost to public service pension schemes," Webb said. | "We have costed that at roughly a £3bn-£4bn cost to public service pension schemes," Webb said. |
In the world of pensions, £4bn isn't all that much money. We spend over | So if MP's want civil partnerships to be extended to all couples, the government has warned the whole bill will be unaffordable and will have to be shelved for the meantime. In the world of pensions, £4bn isn't all that much money. We spend over £60bn a year just on the basic state pension. However Labour sources noted how the size of the "price tag" had grown from £3bn to £4bn in five days. So is it realistic at all? |
| Last night former children's minister Tim Loughton who opposes gay marriage and tabled the amendment tweeted that the government were "scaremongering" by bandying around the £4bn "fag packet estimate" | Last night former children's minister Tim Loughton who opposes gay marriage and tabled the amendment tweeted that the government were "scaremongering" by bandying around the £4bn "fag packet estimate" |
| He then tweeted this: | He then tweeted this: |
| If Govt claim there is no demand for extending equal civil partnerships how can they calculate it would cost £4bn? #canthaveitbothways | If Govt claim there is no demand for extending equal civil partnerships how can they calculate it would cost £4bn? #canthaveitbothways |
| So if there is expected to be little demand for civil partnerships from straight couples why would the costs be that high? It's a good question especially given that one of the main reasons why gay rights campaigners want access to marriage is because it offers more generous pension entitlements. | So if there is expected to be little demand for civil partnerships from straight couples why would the costs be that high? It's a good question especially given that one of the main reasons why gay rights campaigners want access to marriage is because it offers more generous pension entitlements. |
| To quote from a gaystar news article by sometime Guardian contributor Ray Filar: | To quote from a gaystar news article by sometime Guardian contributor Ray Filar: |
| Civil partners do not have the same pension rights as married couples. If one civil partner dies, the pension share that the surviving partner receives is often lower and lasts for less time than with married couples. | Civil partners do not have the same pension rights as married couples. If one civil partner dies, the pension share that the surviving partner receives is often lower and lasts for less time than with married couples. |
| The reason for this is the pension a surviving partner is entitled to is measured differently depending on whether they have been civil partnered or married. | The reason for this is the pension a surviving partner is entitled to is measured differently depending on whether they have been civil partnered or married. |
| For civil partners, public sector schemes are dated back to 1988. For private sector schemes, it need only be backdated to the Civil Partnership Act 2004. | For civil partners, public sector schemes are dated back to 1988. For private sector schemes, it need only be backdated to the Civil Partnership Act 2004. |
| But for married couples, a surviving partner is entitled to a pension based on the number of years their spouse paid into the pension fund. | But for married couples, a surviving partner is entitled to a pension based on the number of years their spouse paid into the pension fund. |
| Here's the issue brilliantly explained with Lego: | Here's the issue brilliantly explained with Lego: |
| Now there is a real quandary. Why would extending a less generous pension scheme create a larger liability for the government? | Now there is a real quandary. Why would extending a less generous pension scheme create a larger liability for the government? |
| We're going to try and figure this out in the next few hours (and I'd stress 'try' because we don't have our own actuarial advisers to hand). But please do leave any helpful leads below. | We're going to try and figure this out in the next few hours (and I'd stress 'try' because we don't have our own actuarial advisers to hand). But please do leave any helpful leads below. |
| UPDATE 1: | UPDATE 1: |
| Steve Webb's full quote from last Tuesday's committee hearing starts to shed a little more light on it all: | Steve Webb's full quote from last Tuesday's committee hearing starts to shed a little more light on it all: |
| Just to think through...If you allow opposite sex couples to form civil partnerships, the question would be then do their pensions rights in respect of each other look like each other look like a married opposite sex couple? And there would be a strong argument for that - I don't know what the government would decide. | Just to think through...If you allow opposite sex couples to form civil partnerships, the question would be then do their pensions rights in respect of each other look like each other look like a married opposite sex couple? And there would be a strong argument for that - I don't know what the government would decide. |
| But if it decided then you'd have a whole set of people who at the moment have no set of survivor pension rights at all who would suddenly have survivor rights. | But if it decided then you'd have a whole set of people who at the moment have no set of survivor pension rights at all who would suddenly have survivor rights. |
| By survivor rights, Webb means the ability for people to claim the pension of their partner once they are deceased. But what he means by a "whole group of people" isn't entirely clear. It seems he is talking about gay couples currently in civil partnerships who don't have full survivor rights at the moment. | By survivor rights, Webb means the ability for people to claim the pension of their partner once they are deceased. But what he means by a "whole group of people" isn't entirely clear. It seems he is talking about gay couples currently in civil partnerships who don't have full survivor rights at the moment. |
| Webb goes on: | Webb goes on: |
And it's pretty clear that as soon as you'd gone down that route you might end up in the position of full equality for example widowers expecting the same rights as widows. And we've costed that as of the order to 3-4bn pound cost to public service pension schemes. So once you'd opened that up, that's one potential scale of impact. | And it's pretty clear that as soon as you'd gone down that route you might end up in the position of full equality for example widowers expecting the same rights as widows. And we've costed that as of the order to 3-4bn pound cost to public service pension schemes. So once you'd opened that up, that's one potential scale of impact. |
| UPDATE 2: | UPDATE 2: |
| My colleague Mona Chalabi has done some sterling work on the other non-pension costs associated with the bill. She writes: | My colleague Mona Chalabi has done some sterling work on the other non-pension costs associated with the bill. She writes: |
The government's official impact assessment, part of its 13 week consultation on the gay marriage bill last year suggested that the costs could be anywhere between £3.3m to £4.7m. | The government's official impact assessment, part of its 13 week consultation on the gay marriage bill last year suggested that the costs could be anywhere between £3.3m to £4.7m. |
| But this doesn't include the amendment in questions. There are two critical elements of that cost that aren't being highlighted: | But this doesn't include the amendment in questions. There are two critical elements of that cost that aren't being highlighted: |
| Firstly, those cost figures refer to a 10 year transition period and secondly the impact assessment also considers the economic benefit (from things like "additional spending on ceremonies") - and they put this number at £0.1m at a low estimate and £15.7m at a high estimate. | Firstly, those cost figures refer to a 10 year transition period and secondly the impact assessment also considers the economic benefit (from things like "additional spending on ceremonies") - and they put this number at £0.1m at a low estimate and £15.7m at a high estimate. |
| So how can last year's impact assessment help us get to the bottom of the costs of the proposed amendment? Well it's likely that some of the transitional costs might also apply were opposite sex couples to be granted civil partnership rights. | So how can last year's impact assessment help us get to the bottom of the costs of the proposed amendment? Well it's likely that some of the transitional costs might also apply were opposite sex couples to be granted civil partnership rights. |
| For example the Office for National Statistics might again have to receive the £150,000 to £200,000 needed to reform their IT systems for recording marriage data. | For example the Office for National Statistics might again have to receive the £150,000 to £200,000 needed to reform their IT systems for recording marriage data. |
| Local authorities may also require anywhere between £190,000 and £670,000 that it was indicated would be needed to familiarise registrars to marriage procedures for same sex couples. | Local authorities may also require anywhere between £190,000 and £670,000 that it was indicated would be needed to familiarise registrars to marriage procedures for same sex couples. |
| That said, some of these processes could cost less if reforms relating to civil partnership for straight couples could be done at the same time as reforms resulting relating to marriage for same sex couples. | That said, some of these processes could cost less if reforms relating to civil partnership for straight couples could be done at the same time as reforms resulting relating to marriage for same sex couples. |
| Simply put, you might get a bit of two for the price of one legal reform on some administration costs. | Simply put, you might get a bit of two for the price of one legal reform on some administration costs. |
| But even if that weren't the case the upper estimate that we've totted up so far is of £870,000. | But even if that weren't the case the upper estimate that we've totted up so far is of £870,000. |
| UPDATE 3: | UPDATE 3: |
| We might be heading towards a conclusion here but the reason for the £3bn-4bn in costs is becoming clearer. Whether it is correct or not, may be beyond our scope to challenge. | We might be heading towards a conclusion here but the reason for the £3bn-4bn in costs is becoming clearer. Whether it is correct or not, may be beyond our scope to challenge. |
| Ostensibly what Webb is arguing is that if straight couples were allowed to enter civil partnerships, the government would in the end (but not inevitably) be forced to change the pension rules which currently discriminate against those in civil partnerships (see Lego video above). | Ostensibly what Webb is arguing is that if straight couples were allowed to enter civil partnerships, the government would in the end (but not inevitably) be forced to change the pension rules which currently discriminate against those in civil partnerships (see Lego video above). |
| This is because it would be untenable for some straight couples in civil partnerships to get different treatment from straight couples in marriages under pensions rules. | This is because it would be untenable for some straight couples in civil partnerships to get different treatment from straight couples in marriages under pensions rules. |
| (That gay couples in civil partnerships don't get the same treatment as married straight couples is currently stomached by Westminster). | (That gay couples in civil partnerships don't get the same treatment as married straight couples is currently stomached by Westminster). |
| If the law was changed, all those currently in civil partnerships - who the government is assuming won't convert their legal status to marriage - would also end up getting better pension settlements when their partners die. | If the law was changed, all those currently in civil partnerships - who the government is assuming won't convert their legal status to marriage - would also end up getting better pension settlements when their partners die. |
| Essentially - if Tory backbenchers want to make things more equal - then it really has to be totally equal and that's going to cost money. And they'd rather not open up that can of worms. | Essentially - if Tory backbenchers want to make things more equal - then it really has to be totally equal and that's going to cost money. And they'd rather not open up that can of worms. |
| Webb said as much last week: | Webb said as much last week: |
| When we approached this, we recognised that we are building on a system that already has lots of differences in treatment, within the state scheme, within contracted-out occupational schemes and contracted-in occupational schemes. | When we approached this, we recognised that we are building on a system that already has lots of differences in treatment, within the state scheme, within contracted-out occupational schemes and contracted-in occupational schemes. |
| Each of the differences of treatment is different, and each of them has drawn the line in different places for different reasons. | Each of the differences of treatment is different, and each of them has drawn the line in different places for different reasons. |
| What we are trying to do through this Bill is, as it were, not reopen all of those decisions that were taken for good reason at the time, but try to find the fairest place to put same-sex married couples within that framework. | What we are trying to do through this Bill is, as it were, not reopen all of those decisions that were taken for good reason at the time, but try to find the fairest place to put same-sex married couples within that framework. |
| For example, take contracted-out occupational schemes, where there is this 10-year GMP [guaranteed minimum pension] issue; we have widows in one category, widowers and civil partners in another. The question is: where do you put members of same-sex couples? If we were to put members of same-sex couples in with the widows category, you would then have to put the widowers in, you would then have to put the civil partners in. | For example, take contracted-out occupational schemes, where there is this 10-year GMP [guaranteed minimum pension] issue; we have widows in one category, widowers and civil partners in another. The question is: where do you put members of same-sex couples? If we were to put members of same-sex couples in with the widows category, you would then have to put the widowers in, you would then have to put the civil partners in. |
| That is where the £3 billion to £4 billion number comes from, not because of the same-sex marriage, which is a very small number of people, but you open up a whole raft of issues, which at the time were decided on principle. | That is where the £3 billion to £4 billion number comes from, not because of the same-sex marriage, which is a very small number of people, but you open up a whole raft of issues, which at the time were decided on principle. |
| There is a very large cost and, in a sense, as the Secretary of State says, this is a Bill about a particular group of people who have been denied access to a right. It is not really a mechanism for reopening all of those other discussions. | There is a very large cost and, in a sense, as the Secretary of State says, this is a Bill about a particular group of people who have been denied access to a right. It is not really a mechanism for reopening all of those other discussions. |
| I'm still waiting for the Treasury to confirm this interpretation plus their details behind the £3-£4bn figure (which will be based on length of life forecasts amongst other things). Once I have that we'll all be far more informed. | I'm still waiting for the Treasury to confirm this interpretation plus their details behind the £3-£4bn figure (which will be based on length of life forecasts amongst other things). Once I have that we'll all be far more informed. |
| UPDATE 4: | UPDATE 4: |
| While we wait for the Treasury, let's check out my colleague Mona Chalabi's stonking feat of calculation in reaching an estimate which sits exactly between £3bn-4bn. | While we wait for the Treasury, let's check out my colleague Mona Chalabi's stonking feat of calculation in reaching an estimate which sits exactly between £3bn-4bn. |
| "To be able to accurately estimate the cost incurred to DWP from these changes," she says, "we would need the following information": | "To be able to accurately estimate the cost incurred to DWP from these changes," she says, "we would need the following information": |
1. How many individuals are in civil partnerships in the UK 2. How much less they are receiving in pensions than their married counterparts 3. The age at which they will die | 1. How many individuals are in civil partnerships in the UK 2. How much less they are receiving in pensions than their married counterparts 3. The age at which they will die |
| We could multiply point 1. by point 2. for every year that DWP would have to pay out and work out the difference between the UK pension bill for civil partnership couples and that of married couples. | We could multiply point 1. by point 2. for every year that DWP would have to pay out and work out the difference between the UK pension bill for civil partnership couples and that of married couples. |
| There are obviously some minor issues to us performing that calculation - we've no idea what age those civil partnership couples will die at, nor can we accurately tally up the pension for every one of those individuals from their varying professional backgrounds. But we can take one specific example and (using a calculation that truly is 'back of the fag packet') apply it on a national scale. | There are obviously some minor issues to us performing that calculation - we've no idea what age those civil partnership couples will die at, nor can we accurately tally up the pension for every one of those individuals from their varying professional backgrounds. But we can take one specific example and (using a calculation that truly is 'back of the fag packet') apply it on a national scale. |
| Lets take Lego Tony from this video example | Lets take Lego Tony from this video example |
| Lets assume that he regularly paid in to his teachers' pension scheme since he began work in 1973, earns an average teacher pay of £28,000, that he will retire at the age of 63 and live to 78 (based on the average life expectancy for men in the UK). | Lets assume that he regularly paid in to his teachers' pension scheme since he began work in 1973, earns an average teacher pay of £28,000, that he will retire at the age of 63 and live to 78 (based on the average life expectancy for men in the UK). |
| His pension, according to the teachers' pensions calculator would be around £12,250 per year. If Tony were to die this year, his surviving partner could expect to receive 15% of that for every year since 1988. His partner, if in a civil partnership, would therefore receive £45,938 | His pension, according to the teachers' pensions calculator would be around £12,250 per year. If Tony were to die this year, his surviving partner could expect to receive 15% of that for every year since 1988. His partner, if in a civil partnership, would therefore receive £45,938 |
| Now, were Tony to be married, his surviving partner could expect to receive 22% of Tony's teacher pension for every year since 1973. His partner, if in marriage, would therefore receive £107,800. | Now, were Tony to be married, his surviving partner could expect to receive 22% of Tony's teacher pension for every year since 1973. His partner, if in marriage, would therefore receive £107,800. |
| Applied on a national scale, to the 53,417 couples in civil partnerships (minus the 1,768 who have since had these dissolved) the difference between pensions 51,649 Tonys in civil partnerships (£2.4bn) and 51,649 Tonys in marriages (£5.6bn) is £3.2bn. Not far off the official estimate. | Applied on a national scale, to the 53,417 couples in civil partnerships (minus the 1,768 who have since had these dissolved) the difference between pensions 51,649 Tonys in civil partnerships (£2.4bn) and 51,649 Tonys in marriages (£5.6bn) is £3.2bn. Not far off the official estimate. |
| Clearly, not everyone is a Tony, but while we're waiting for the Treasury to brief us on their own figures, 51,649 Tonys are a better indication of the reliability of the £3-4bn estimate than nothing at all. | Clearly, not everyone is a Tony, but while we're waiting for the Treasury to brief us on their own figures, 51,649 Tonys are a better indication of the reliability of the £3-4bn estimate than nothing at all. |
| FINAL UPDATE: | FINAL UPDATE: |
| I know, like me, you've been waiting all day for this but we have an answer: the £3bn-£4bn figure is in fact nothing to do with any actual estimation of costs. Although our understanding of how the liabilities could arise is correct, a Treasury spokesperson has now told me that their numbers come from a completely different study and are only "illustrative". | I know, like me, you've been waiting all day for this but we have an answer: the £3bn-£4bn figure is in fact nothing to do with any actual estimation of costs. Although our understanding of how the liabilities could arise is correct, a Treasury spokesperson has now told me that their numbers come from a completely different study and are only "illustrative". |
| The number came up in this legal case from 2011 which had nothing to do with gay marriage but everything to do with pensions, surviving spouses, and equal treatment. | The number came up in this legal case from 2011 which had nothing to do with gay marriage but everything to do with pensions, surviving spouses, and equal treatment. |
| "[It] is a figurative example that the minister uses to exemplify what happens when you start to run into equalising rights for people; there are costs to that," a Treasury spokesperson said. | "[It] is a figurative example that the minister uses to exemplify what happens when you start to run into equalising rights for people; there are costs to that," a Treasury spokesperson said. |
| Well there you go: Webb's fear inducing total was derived from a completely different case but one, which according to our own back-of-a-fag packet calculation, might just be on the money. | Well there you go: Webb's fear inducing total was derived from a completely different case but one, which according to our own back-of-a-fag packet calculation, might just be on the money. |