So in this Spending Review, while the HM Revenue and Customs budget will be expected to find resource savings of 15% through the better use of new technology, greater efficiency and better IT contracts – we will be spending £900 million more on targeting tax evasion and fraud.

This additional £900 million is expected to help us collect a missing £7 billion in tax revenues.

Nor will fraud in the welfare system be tolerated anymore.

We estimate that £5 billion is being lost this way each year.

£5 billion that others have to work long hours to pay in their taxes.

This week we published our plans to step up the fight to catch benefit cheats, and to deploy uncompromising penalties when they are.

That brings me to the wider welfare budget.

A civilised country provides for families, protects the most vulnerable, helps those who look for work, and supports those in retirement.

That is why one of the first acts of this coalition government was to re-link the basic state pension to earnings, and guarantee a rise each year by earnings, inflation or 2.5% – whichever was higher.

Never again will those who worked hard all their lives be insulted with a state pension increase of just 75 pence.

But this guarantee of a decent income in retirement has to be paid for at a time when people are living much longer than anyone predicted.

We should celebrate that fact, but also confront it.

Lord Turner’s Report on pensions, commissioned by the last government, acknowledged that a more generous state pension had to be funded by an increase in the pension age.

Even since its publication, life expectancy has risen further than it predicted.

Before the summer we launched a review on increasing the state pension age, and that has now concluded.

As a result, I can today announce that the state pension age for men and women will reach 66 by the year 2020.

This will involve a gradual increase in the State Pension Age from 65 to 66, starting in 2018.

And it will mean an acceleration of the increase in the female pension age already underway since this April.

From 2016 the rate of increase will be three months in every four rather than the current plan of one month in every two.

Raising the State Pension Age is what many countries are now doing, and will by the end of the next Parliament save over £5 billion a year – money which will be used to provide a more generous basic state pension as we manage demographic pressures.

Earlier this month, we also received the interim report from John Hutton’s Public Service Pension Commission.

I am sure the whole House will want to thank John for this excellent and independent piece of work.

I welcome his findings – and I hope it will form the basis of a new deal, that balances the legitimate expectations of hard working public servants for a decent income in retirement with the equally legitimate demands of hard-working taxpayers that they do not pay unfairly for it.

The elements of this new pension deal are clear.

We should accept that public service pensions continue to provide a form of defined benefit, and that there is no race to bottom of pension provision.

We want public service pensions to be a gold standard.

At the same time, we should accept that they must be affordable.

When these public service pension schemes were established in the 1950s, taxpayers made half the contributions.

Today they make up two-thirds of contributions, and the unfunded bill is set to rise to £33 billion by 2015-16.

So I think we should accept, as John Hutton does, that there has to be an increase in employee contributions, although I also agree with John that this should be staggered and progressive.

That means the lower paid – and those in the armed forces – are protected and the highest paid public servants, who get the largest benefits, pay the highest contributions.

The full speech is here.

Posted by James Bartholomew • Indexed in Pensions • Welfare benefits

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