Autumn Statement 2013: Nick Clegg defends George Osborne's pension age rise

Controversial changes will result in people having to work longer before they can collect their pensions

(GETTY IMAGES)

The Deputy Prime Minister has defended the changes, which will be set out in George Osborne's Autumn Statement later today, although he acknowledged it was not an "easy concept".

Mr Clegg told LBC 97.3 that the "rule of thumb" for a long period had been that people would be able to draw their pension for around a third of their life.

"If that's your rule of thumb, that sense of entitlement that around a third of your adult life is spent in retirement is to be retained, then of course it needs to keep up with the fact that people are living longer and longer and longer," he said.

"That, of course, clearly means that the point at which you retire shifts and that's what the Chancellor is confirming in the Autumn Statement today."

Mr Clegg added: "I'm not pretending it's an easy concept to accept but it's part of what happens as societies become more affluent and as people become healthier and live much, much longer.

"We need to make sure that the rules of retirement, which were first set decades ago, keep up with those demographic changes."

News of the move came after Mr Osborne announced a further £3 billion Whitehall spending squeeze over the next three years.

It came despite strong expectations that the Chancellor will announce a sharp upgrade in the Office for Budget Responsibility's (OBR) official forecast for economic growth.

A row broke out between Mr Clegg and the Conservative Education Secretary Michael Gove over the funding of a £150 million programme to upgrade school kitchens.

The scheme is a key element of the Lib Dems' plan - announced at their party conference in September - to offer free school meals to all five to seven-year-olds.

Furious Lib Dem sources accused Mr Gove's officials of "lying" and "talking b*****s" after they were reported to have briefed journalists that they might have to raid the Department for Education's basic needs budget - used to meet the demand for extra school places - to fund the scheme.

Mr Clegg used more measured language, but insisted it was "complete nonsense" to suggest the move would have an impact on school places.

He said £80 million of the money to upgrade kitchens was from the Treasury and £70 million from an underspend in the DfE's maintenance budget.

It was "entirely incorrect" to suggest that the move would result in a shortage of school places, he said.

"The Chancellor and myself have agreed and hammered out (the funding package) ... I don't want to sound too grand about this but I think when the Chancellor and the Deputy Prime Minister agree on something it will happen across government, whatever some unnamed source says in a particular department.

"We need this £150 million to provide schools with the kitchens they need to provide these free school meals to all infant school children, £80 million of it comes from the Treasury from general expenditure, £70 million from this underspend in the maintenance budget, not on basic need because that would be wrong to take the money away from the basic needs of other schools."

The improved economic outlook - with City analysts suggesting the OBR could more than double its previous projection of 0.6% growth at the time of the Budget in March - means the Government will have to borrow less than previously predicted.

But despite some well-trailed giveaways - including a tax break for married couples and a cap on business rates - ministers have been keen to stress they are determined to stick to their long-term plan to rebuild the public finances.

The delayed retirement dates will help save around £400 billion from the national bill for pensions over the next 50 years, on top of the more than £100 billion already banked from planned rises to 66 by 2020 and 67 by 2028, which are unchanged.

The Government said future changes in the pension age will be based on the principle that workers should expect to spend about a third of their adult lives, on average, in retirement.

The formula will be applied for the first time in a review shortly after the 2015 general election to fix the dates of the increases to 68 - which is likely to be brought forward from 2046 to the mid 2030s - and 69, which is expected to take place by the late 2040s.

The Treasury said Mr Osborne and Treasury Chief Secretary Danny Alexander had written to Cabinet colleagues informing them that central departmental spending is being cut by more than £1 billion a year between now and 2015/16.

It claimed that "strong financial management" by departments this year meant there were likely to be significant underspends in their budgets, allowing the Treasury to release £1 billion of its annual £3 billion reserve.

But in order to "lock in" this lower level of spending, 1.1 per cent reductions will be made across departmental resource budgets over the next two years.

The budgets for health, schools, aid, local government, Revenue and Customs and the intelligence and security services will be spared the further cuts while the Ministry of Defence has been given "exceptional flexibility" to keep its expected underspend of £800 million.

The exemptions will mean further pain for unprotected departments such as the Home Office, the Ministry of Justice and the Department for Work and Pensions.

There will be some relief, with Mr Osborne set to use his statement to announce details of the Conservatives' long-promised tax breaks for married couples - a move strongly resisted by their Liberal Democrat coalition partners.

He is expected to say there will be a transferable tax allowance worth £200 a year to an estimated four million couples from 2015, at a cost of £700 million.

He is also expected to confirm that rises in business rates will be limited to 2 per cent instead of being linked to inflation, after strong lobbying from a number of business organisations.

Labour leader Ed Miliband said families were still struggling with the rising cost of living.

He said: "While this Government is boasting that everything is fixed, families are battling with stagnant wages and rising prices. Families are £1,600 a year worse off under David Cameron.

"That's why in this Autumn Statement we need real action to tackle the cost of living crisis including help with the cost of childcare, action to tackle low wages and crucially an energy price freeze. I think Britain can do far better than this Government.

PA

Video: Miliband demands change

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