Richard O'Donoghue criticises auto-enrolment, warns of cost rises
Richard O'Donoghue criticised the proposed auto-enrolment pension scheme and related budget measures, arguing they provide no extra pension benefit for older workers and will raise costs for employers and consumers. He detailed the scheme's 1.5% employer and 1.5% employee contributions, the six-month opt-out, and highlighted inflationary and tax impacts on households.
Auto-enrolment mechanics
He set out the basic design of the auto-enrolment pension scheme as presented: a 1.5% employer contribution and a 1.5% employee contribution, with employees able to opt out of the 1.5% after six months.
Impact on older workers' pensions
He argued that workers in their 40s, 50s and 60s would receive no extra pension benefit from joining now, saying those already near statutory pension age would get "nothing extra" at retirement and describing that outcome as unfair.
Inflationary pass-through to consumers
He warned that mandatory contributions will be passed through business cost models to consumers, noting that businesses add increased costs to prices and citing the rise in everyday prices as evidence of that mechanism.
Hospitality sector and wage pressures
He pointed to the hospitality sector as an example where multiple wage increases were passed on to consumers, and questioned when working people would see tangible rewards rather than higher prices.
Tax changes and budget critique
He criticised recent tax shifts cited in the speech, including a reduction in a VAT rate being delayed and an increase in "rent a room" taxation, and said the budget reductions in U.S.E. without changing the tax base meant workers and consumers were still being taxed overall.
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Thank you, Concurler. Minister, I'm going to start off on the auto-enrolment pension scheme. Listen, a pension scheme is a good scheme, if it's based at the right time. So auto-enrolment is, to put it into brass tacks for people that don't know, auto-enrolment means 1.5% for an employer and 1.5% for an employee. And after six months, the employee can opt out of the 1.5% if they don't want to do it. Okay. Now we take it into somebody that is in their 60s. Is there any extra benefit for somebody that's in their 50s, 40s, 50s, 60s, that are coming even up 64 and 5 and 6, is there any extra benefit for them in their pension if they pay into an auto-enrolment pension now? The answer I got was no. So if you want to pay a pension now, you'll get nothing extra when you get the pension age. So the auto-enrolment should be brought in at the low base for young people, 100%, and all the way up along the line. But if somebody has already been paying all their taxes and everything else, and they're due their statutory pension, and they're going to get the same money, and now they want them to pay into a pension out of their wages now, and they get nothing extra, that's wrong. So there has to be a carat. But you didn't allow for a carat. So the same people at the moment that are paying their taxes, the same people, the employers that are paying their taxes, agree that for the younger people coming in auto-enrolment is a good thing, and we had to start sometime. But for the people that have been up along the years, my own age and older, and there's a lot of them here in this chamber, colleagues that will be across the table are in the same situation, there will be no extra benefit for anyone like this when they get to the age of 66 or 7. So where is the carat for the hard-working people that are there at the moment? There is nothing extra going to be given to them. So that's the problem I have with auto-enrolment. And as an employer, I don't have an issue with it. And I'm an employer. But I have been talking to people that are employed, they have an issue. But also, anyone that's going to enter into auto-enrolment, it's also going to drive inflation. Because any business model that they have, they have a percentage rate that they have to make. And if the increases come, you've seen it in every food produce, every transport network, everything across this country, if that model changes, it's added on. Go to your cup of coffee, which was 150 three years ago, is now up in 4 euros and 4.20 in places. That's why all the inflationary costs are added on. On top of your business base. A business person understands that. And as I say, I'm a business person. So the consumer will now pay for this again. The employer pays, so they've got to put it on. The employee will say, we're not taking a wage cut, and that's what they're looking for. So a lot of employers will actually pay it to keep the employees in case they go somewhere else. So that's one side of it. The other side of it, if you look at the hospitality sector, had three wage increases, the lower earners, which is one of them is the hospitality sector, got three wage increases. Those three wage increases went on to the consumer again. Then we got the reduction from 13.5% back to 9%, which we said was great, which won't be introduced until June or July, which is six months down the road. But what did the government do, as a sneaky tax, rent a room now has gone from 13.5% up to 23%. So they added 10% tax on rent a room. So on one hand, they said we're going to reduce 4%. And then if you go down to conferences or anything like that, it's gone from 13.5% to 23%. Who ends up paying again? Consumer. So when are you actually going to give back to somebody that's actually working? When are you going to give something for people that are working? And the working person in this country has no problem for paying for the people that can't work. They have no problem for people from the disability sector. They have no problem with that. All they want is a reward. And your budget, by reducing the U.S.E. and not changing the tax base, you've already taxed them this year. So everything you're doing is on a tax base, and you're doing nothing for the employee, you're doing nothing for the employer, and you're doing nothing for the consumer, only raising the cost of living.
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