HC Deb 07 February 2000 vol 344 cc24-82 3.39 pm
The Secretary of State for Social Security (Mr. Alistair Darling)

I beg to move, That the draft Social Security Benefits Up-rating Order 2000, which was laid before this House on 31st January, be approved.

Madam Speaker

I understand that with this it will be convenient to discuss the following motion: That the draft Guaranteed Minimum Pensions Increase Order 2000, which was laid before this House on 31st January, be approved.

Mr. Darling

The second order is largely technical. The House will be aware that employers are required to increase guaranteed minimum pensions by the retail prices index or 3 per cent., whichever is less. The order makes it clear that the requirement this year will be to increase guaranteed minimum pensions by 1.1 per cent. The first order covers all other benefits. I make that point because I understand that the Liberals said over the weekend that they would vote against it. If the Liberals vote against this order, they will be voting against all benefit increases in the United Kingdom. The order uprates all social security benefits in the usual way, as I announced in November. It uprates the amount of money that we pay for children in particular: child benefit will rise to £15 for the oldest child and £10 for subsequent children, and, as a result of the measures that we have taken to help families with children, families are already an average £740 a year better off.

If the Liberals vote against the order, they will be voting not only against increases in child benefit, but against the additional help that we are giving pensioners, particularly older and poorer pensioners. As well as raising the state pension to £67.50, we are increasing the minimum income guarantee for pensioners in line with earnings. Taken with the winter fuel payments, the changes to value-added tax and the introduction of free television licences, that increase will mean that the oldest and poorest pensioners will have gained £500 a year—nearly £10 a week—as a result of steps that we have taken. All that, we understand, is to be opposed by the Liberal party.

Mr. Andrew Mackinlay (Thurrock)

Will the order remedy the anomaly whereby—I believe—460,000 expatriate pensioners currently do not enjoy the uprating, while 390,000 do? It is not a blanket embargo; it is a case of "some do, some do not". We are the only country in the Organisation for Economic Co-operation and Development that has been treating pensioners in that way. Will the order remedy the unfairness? If not, why not?

Mr. Darling

The order will not change the position. If we spent money uprating the pensions of people living abroad, that money could not be spent on people in this country.

Mr. David Winnick (Walsall, North)

Will my right hon. Friend give way?

Mr. Darling

I will give way to as many hon. Members as I can, but let me finish this point first.

Over the lifetime of this Parliament, the Government will spend £5 billion on pensioners. I expect to show in today's debate that the money will be well spent and well targeted: it will tackle pensioner poverty, which is one of the many scandals that we inherited from the Conservative party. Let me say to the Liberals, as I said at Question Time, that not only do I fail to understand how on earth they can justify voting against the uprating of all benefits, but I fail to understand how on earth they can justify voting against what is in their own manifesto. Their manifesto stated that they would increase pensions in line with prices, and that they would introduce extra earnings-related help for the poorest pensioners, which is precisely what we propose.

No one should be in any doubt that the Liberals—who intend to vote against the orders—would, if successful, stop not just pension increases but increases for children, and all the other benefits that go to some of the poorest people in the country. It may be merely a gesture; perhaps people should be thankful that there do not appear to be enough Liberals present to make much of a difference. I believe, however, that any serious political party ought to be serious about its intentions, and should not vote against the Government unless it really wants to carry the day—which, in this instance, would deny many people benefits.

Mr. Steve Webb (Northavon)

Will the Secretary of State give way?

Mr. Darling


Mr. Webb

To save the right hon. Gentleman the trouble of misrepresenting us for the rest of the afternoon, let me assure him that, should his party be defeated in the Division, we, through the usual channels, will make time available at the earliest opportunity for the orders to be brought back to the House, amended only in respect of the 75p rise and the capital limits. We will then give them plain passage, and the business can be completed by the end of the week.

Mr. Darling

I am glad that the hon. Gentleman has a sense of humour, which we all appreciate. I shall continue to represent accurately what is in the Liberal party manifesto, to which I think we should all attach significant weight. Presumably, the hon. Gentleman would not have stood as a Liberal party candidate if he did not intend to support his party's manifesto—or so one might have thought.

Let us examine what the hon. Gentleman has done during the time that he has been the Liberals' pensions spokesman. Last year, he came up with a policy to pay more to those aged 80 and over. Part of that policy—in addition to the policy for scrapping the state earnings-related pension scheme, which would completely disrupt the pensions industry—he has repeated, saying that the basic pension would continue to be uprated in line with prices. What has happened between publication of the manifesto, the hon. Gentleman's last public policy utterance, and today's debate, seems to me opportunism at its worst.

Mr. Webb

Will the right hon. Gentleman be staying to hear the answer?

Mr. Darling

I shall certainly be staying, and I shall see what happens to the Liberal Democrats' policy.

Mr. Barry Jones (Alyn and Deeside)

My right hon. Friend made very welcome references to child benefit, and I certainly believe that mothers and their children would greatly benefit from such changes. However, is he not astonished at Liberal Democrat Members' irresponsible and childish attitude to those issues? Could he explain to me the type of mindset that is prepared to turn somersaults to make such ridiculous points?

Mr. Darling

The short answer is no, I cannot. I would never attempt to explain the Liberal Democrats' mindset. Moreover, I have always understood that one of the great virtues of the Liberal Democrat party was that it did not have a collective mindset—which is why it has been able to come up with so many policy contortions at the same time.

Mr. Winnick

My right hon. Friend mentioned winter fuel payments. Did he notice that, at Question Time, Opposition Front Benchers gave absolutely no commitment that they would continue such non-means-tested benefits? Was that not interesting? Should we not warn the electorate that, if the Tories were to win the next general election, winter fuel payments would almost certainly go?

Mr. Darling

As I understand it, Conservative policy is to oppose winter fuel payments, and, were they to get back to power, to remove them. However, it may be that the right hon. Member for Kensington and Chelsea (Mr. portillo) has already delivered a lecture to the hon. Member for Havant (Mr. Willetts) and told him that he will have to change his policy on that issue, too. We shall have to wait; perhaps the hon. Gentleman's speech will be more interesting than it otherwise might have been.

I should like to deal with two aspects of the uprating order. The first is pensions—which is a matter of particular interest to hon. Members—and the second is the payments that we make for children.

Mr. John Bercow (Buckingham)

Will the right hon. Gentleman give way?

Mr. Darling

I shall certainly give way in a moment.

I should like to return to a theme that we touched on a few moments ago, at Question Time—the problem that we inherited. The problem can be put quite simply: whereas pensioner incomes as a whole increased by about 64 per cent.—mainly because of occupational pensions that have been building up in the past few years, and the state earnings-related pension scheme, which is only just beginning to mature—the gap between the better-off pensioners and the poorest pensioners has widened. The figures show that the income of the bottom fifth of pensioner couples increased by only one third, whereas the income of the top fifth increased by almost 80 per cent.

The Government therefore believe that the right thing to do is to target most of the £5 billion extra on those pensioners who lost out. That is not all that we are doing, but that is what we wanted to do. The poorest 1 million single pensioners and the 1 million pensioner couples who have not kept up need to be supported. That is why we are targeting help on those people, as well as helping all pensioners across the board.

Miss Anne McIntosh (Vale of York)

Will the right hon. Gentleman give way?

Mr. Darling

May I give way first to the hon. Member for Buckingham (Mr. Bercow), and then to the hon. Lady?

Mr. Bercow

My hon. Friend may intervene first.

Mr. Darling

Despite the hon. Gentleman's uncharacteristic courtesy, I shall give way to him first.

Mr. Bercow

I am sorry; I was merely displaying my natural chivalry, which I should hope would command the assent of the House as a whole.

Will the right hon. Gentleman tell me why the Government are not prepared to apply the same principle to their payment of benefits as they apply to the payment of commercial debts? Given that the late-payment legislation requires businesses to pay interest on delayed commercial debts, why are the Government not prepared today to undertake that if, through their own incompetence they have caused misery and suffering to thousands of people by denying them their benefits, when those benefits eventually materialise, those individuals will receive interest on top of them?

Mr. Darling

People are receiving benefits. However, if the hon. Gentleman is referring to the national insurance recording system, just before he goes on about incompetence, he should remember who—in 1996—signed the contract for that system. If my memory serves me well, in 1996, the Secretary of State for Social Security was the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who, sadly, is no longer with us.

Mr. Bercow


Mr. Darling

The right hon. Gentleman is not with us physically in the Chamber, but I am sure that he is with us somewhere.

Miss McIntosh

I thank the right hon. Gentleman and my hon. Friend the Member for Buckingham (Mr. Bercow) for the chivalry shown on both sides of the House. Nevertheless, I should like to make a more mundane point, on which I have tried to press the right hon. Gentleman on several occasions. Will he take the opportunity of today's debate to dispense with the rule that annuities must be taken out at age 75? A groundswell of opinion, which I cannot believe is unique to the Vale of York, is in favour of dispensing with the rule. Will he satisfy our constituents and the House by stating today that he will lift the rule?

Mr. Darling

No. The hon. Lady will know that the Inland Revenue and Department of Social Security have been looking at annuities to see whether the system should be changed but, as my right hon. Friend the Minister of State, Department of Social Security has said, if there are people who have delayed taking their annuity until the age of 75, presumably, they must have been living on some other income or capital before getting to that point. I do not believe that a change to the annuity rules should be the No. 1 priority. If people are getting tax relief for a pension, they should use their money as a pension, not simply as another form of tax-privileged saving.

Let me set out what we are doing. I said that we wanted to help all pensioners, particularly the poorest. We knew this year's RPI increase would be low, which is why we increased winter fuel payments—so that each pensioner household would receive £100, a fivefold increase. For the first time last year, it was paid before Christmas. We hope that that will happen again this year. We are paying winter fuel payments to all households with someone over the age of 60. I shall announce the arrangements for doing that soon.

Later this year, those aged over 75 will get free television licences; the oldest pensioners tend to be among the poorest. On top of that, we have restored free eye tests, reduced VAT on fuel and provided help for pensioners that was not there in the past, taking 200,000 pensioners out of income tax altogether, so that nearly two thirds of pensioners pay no tax. The 10p starting rate of tax helps pensioners as well.

Clearly, our priority must be to ensure that those who have lost out over the past 20 years receive help. Although the winter fuel payments and free television licences disproportionately help pensioners on the lowest incomes, that is not enough.

The House will be aware that the basic pension, although the foundation of the pension system, has never been enough on its own. That is why, in the 1960s, the graduated pension scheme was introduced and, in 1978, SERPS was introduced, but even those measures did not do enough to help pensioners who were earning low incomes throughout their lives. That is one of the reasons why we are making changes to SERPS, so that the state second pension greatly increases the amount of money that goes to someone on low lifetime earnings.

To deal with pensioners who lost out, we introduced the minimum income guarantee, which sets a decent base for pensioner incomes. It is targeting our resources where they are most needed, making the worst off better off. For single pensioners, the pension is £78: an £8 increase since 1998–99. For couples, it is £121.95: a £12.60 increase since 1998–99. For the oldest—those over 80—it is £86 and £131. Those measures are a substantial help for pensioners who have lost out over the years. As has been made abundantly clear, not just today, but on previous occasions, the Conservative party is against the minimum income guarantee and will get rid of it. A total of 1.5 million pensioners would lose out as a result.

I know that some hon. Members advocate increasing the pension by the earnings link, but when we consider that restoring the link would cost about £18 billion by about 2020 and that the poorest pensioners would not see a single penny of that benefit, we realise that there are far better ways in which to deal with the immediate problem for far too many pensioners: they do not have enough money to live on. We introduced the minimum income guarantee to help them.

Mr. Patrick Hall (Bedford)

On the point about the poorest pensioners not benefiting from an increase in the basic state pension, presumably my right hon. Friend refers to pensioners on income support. Why cannot the thresholds be raised in line with that? Indeed, is that not one of the principal purposes of the minimum income guarantee?

Mr. Darling

The minimum income guarantee has the effect of ensuring that the poorest pensioners get more help. If we increased pensions across the board, the top fifth of pensioners, whose incomes have increased by some 80 per cent., would not appreciate or notice the difference. If we had not introduced the minimum income guarantee, those at the bottom would have lost out. I make no apology for the fact that the £5 billion that we are spending in this Parliament is concentrated on those pensioners who have lost out—the poorest pensioners, who are living in poverty. They are the sort of people who voted for our Government to help them out of the difficulties that the Tories had got them into. That is the right thing to do.

Mr. Vernon Coaker (Gedling)

Is not the problem with this debate that it takes place in a context where everyone sees pensioners as a homogenous group of poor pensioners, whereas the reality is that there are rich pensioners, middle-income pensioners and poor pensioners? Are not the Government targeting help at those who need it, rather than spreading it across a range of pensioners, many of whom do not need help?

Mr. Darling

My right hon. Friend the Minister of State said at Question Time that average pensioner net income is about £132. Like many other sections of the population, there are some pensioners who are well off and there are some who are appallingly badly off. The right thing to do is to help pensioners who have lost out, and to get those living in poverty out of poverty. That is the right approach for any reasonable and sensible Government to take. [Interruption.] From a sedentary position, the hon. Member for Northavon (Mr. Webb) mutters about the winter fuel payment, which was universal. However, it benefits disproportionately those on low incomes. Again, it is more help for pensioners on low incomes who would not otherwise have received help.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The hon. Member for Gedling (Mr. Coaker) made an important point, and it may benefit the House to know that the Select Committee on Social Security may soon be looking at pensioner poverty and where the real financial agony lies. That would help the debate.

It is perfectly valid for the Secretary of State to say that targeting poverty within available resources is sensible, but there is another aspect. The contributory principle has a wider social role, distributing income horizontally across people's lives. If there is so much of a surplus in the national insurance fund, surely there should be some balance, not just this obsession with targeting the poor.

Mr. Darling

I am glad that the Select Committee is to look at pensioner incomes, as I suspect that it is indeed commonly held that all pensioners are poor. That is not the case. Many have investment income or substantial occupational pensions, which have largely built up through the 1950s, 1960s and 1970s. At the same time, we have pensioners who have lost out badly.

I am glad that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) recognises that—so should his party's spokesman, the hon. Member for Northavon, who has researched this matter. That research has been helpful. Presumably, the hon. Gentleman helped to write the Liberal Democrat manifesto, which states that the party would increase pensions in line with prices and would have earnings-related help for the poorest pensioners. The hon. Gentleman has learned the lessons of his research—it is a pity that he has not followed through the logic of that position today.

The hon. Member for Roxburgh and Berwickshire has stated that the Government Actuary reports that the national insurance fund is in surplus. He will know that the fund has to retain a working balance, which accounts for more than half that surplus. The remaining surplus would be eaten up in two years if we were to adopt the policies that the hon. Gentleman and some others are advocating—increasing the basic state pension up to £75, or the minimum income guarantee. That policy might get the hon. Gentleman by for a couple of years, but it is no long-term pensions policy.

The Government actuary's report and the quinquennial review of the national insurance fund do not take account of the changes that we have made in policy since March 1999. To base a pensions policy on a surplus that is there today but that would be eaten up within a couple of years is not a sensible way of proceeding in the future.

The hon. Member for Roxburgh and Berwickshire referred to the contributory principle. Part of the problem is that pensions are contributory, but that far too many people have not contributed during their working lives to looking after themselves in their old age. That is why we want to build on the minimum income guarantee; why we have introduced stakeholder pensions; and why we have reformed the state second pension to increase the amount that the state gives, not only to low but to moderate earners, through the rebate structure.

I remind the House that someone earning £6,000 gets £14 a week under the state earnings-related pension scheme but will get £54 a week under the new state second pension. We are not only helping today's pensioners but ensuring that far more people will be able to build up pensions in the future.

Clearly, one cannot save if one does not have a wage. That is why we have attached so much importance to ensuring that people of working age stay in work, and to trying to prevent pensioner poverty in the future by going back to the root of the problem and giving children the best possible start, which will allow them to get good jobs and eventually retire on good incomes.

I want to touch on the measures in the orders to help to combat child poverty. We are the first Government ever to commit ourselves to eradicating child poverty in 20 years and to halving it in 10: another policy to which the Conservative party is opposed. When we published our poverty report in September, setting out the scale of the problem and what we intended to do about it, Conservatives simply laughed and wanted nothing to do with our efforts, despite the fact that, during the 20 or so years in which they were in power, child poverty trebled. That is a damning indictment of the previous Government.

As a result of our Budget measures, we have already taken nearly 1 million children out of poverty. We are also helping parents to get into work and increasing the amount spent on families and children. We are helping children to get a decent education in school. From April next year, the new child credit will be worth up to an extra £416 a year.

The orders increase child benefit beyond the retail prices index for the second year running, so the eldest child gets £15 a week, which is over £3.50 more than only two years ago. We have increased the amount that parents on income support get for the under-11 rate of personal allowances by more than £9 a week, or about £400 a year.

We are determined to ensure, through a variety of measures, including increasing income, that children have the best possible start in life and that there is enough money in people's homes for them to bring up their children properly.

The orders deserve support. They increase benefits across the board, in the normal way, but—crucially—they do far more for pensioners, and especially those who lost out during the Tory years. They also take us a further step along the way to the eradication of child poverty, which should be regarded as a blight on any society. I commend them to the House.

4.3 pm

Mr. David Willetts (Havant)

We will not vote against the orders, because we do not want to stop the uprating of benefits, but I want to ask the Secretary of State some questions about the value of the uprating: 1.1 per cent. on income-related benefits and 1.6 per cent. on the Rossi index.

The Secretary of State will be aware that his Department's spending plans, published in March, said that non-income-related benefits are assumed to be uprated by 1.3 per cent. in April 2000 and that income-related benefits and jobseeker's allowance are assumed to be uprated by 1.9 per cent. in April 2000. The orders save him £200 million compared with his own Department's expenditure plans for 2000–01. We want to know what has happened to that money. We are also concerned, and we understand pensioners' frustration, about the increase of 75p in the basic pension. The Conservative vision is one in which pensioners increasingly share in the rising affluence of our country, because they have genuine private savings.

Mr. John Cryer (Hornchurch)

Is the hon. Gentleman proud of the fact that the Government of which he was a member cut the earnings link with the state pension?

Mr. Willetts

Well, the figures that I was about to cite from the latest pensioners' income series give a good picture of what happened to pensioner incomes in our years in office. The figures show that The proportion of pensioner units with some income from investments was 68 per cent. in 1987–98. The average amount received by those units with some investment income was £40 per week in 1997–98, having grown by 80 per cent. between 1979 and 1996–97. We delivered increasing pensioner incomes because more and more pensioners had investments and occupational pensions.

The Government's figures also show that, by 1997–98, 60 per cent. of pensioner units had an income from occupational pensions and The average amount received by those units … was £92 a week in 1997–98. When I hear the Secretary of State and the Minister of State explain to their somewhat sceptical colleagues that that increase in pensioner incomes means that the basic pension is less and less well targeted at relieving pensioner poverty, I know that the Ministers are using the evidence of the success that we achieved. We encouraged more and more pensioners to have funded occupational pensions or private savings.

Mr. Coaker

Does not the hon. Gentleman's point confirm that the Government's policy is right? If a big group of pensioners are better off, why should they be given extra money that they do not need when we can target extra help at the poorest pensioners and make a difference to their lives? Why spread the jam across the whole group, many of whom do not need it?

Mr. Willetts

I accept and welcome the figures that I have given. More and more pensioners enjoy higher incomes because they have occupational pensions and private savings, and fewer and fewer depend on the basic state pension alone. We are happy to hear Ministers talk about that, because it is what we achieved. Our objection to what the Government are doing is that they are imposing a double whammy on pensioners. They will receive a measly 75p increase in the basic pension, but they are also suffering from all the attacks on occupational pensions and private savings, which mean that the boost in pensioner incomes that we have seen over the past 20 years is under threat.

The representatives of funded pensions—the people whom the Secretary of State is praying in aid to defend the tiny increase in the basic pension—have commented unfavourably on his policies. In a survey of 216 occupational pension schemes, more than half the participants felt that the thrust of the government's proposals was not helpful"— when it came to encouraging occupational pension provision. A story in Personnel Today was headed "Uncertainty brings pensions delay" and it stated: A survey by the National Association of Pension Funds shows under 3 per cent. of occupational pension schemes were improved in 1999. This compares with between 7 and 10 per cent. in each of the past five years. There is a planning blight, caused by uncertainty about what the Government will do to the occupational pension regime with their proposals for stakeholders.

Almost half of the participants in another survey by a leading fund of actuaries think that the introduction of stakeholder plans will make it less likely that employers will want to offer or continue to offer occupational pensions. The picture that is building up is of a measly increase in the basic pension as well as policies that are a threat to the alternatives that the Conservatives want to encourage—funded occupational pension provision and private saving.

Mr. Webb

The hon. Gentleman has twice described the rise in the state pension as "measly". For the avoidance of doubt, can he say what he would do were he to be Secretary of State for Social Security now? Would he have put the pension up by 75p, or more or less, this April?

Mr. Willetts

We would carry on increasing the basic pension in line with prices. We would also encourage and boost pensioner incomes by the policies that were so successful during the previous Government's years in office and that have resulted in the statistics that the Secretary of State is always so happy to quote. However, those policies are under threat, because of the changes in advance corporation tax, the changes in the tax regime that mean that pensioners with incomes so low that they do not even come within the scope of income tax are losing the full benefit from the income from their savings and, of course, because of the planning blight caused by the perpetual changes to the pensions regime that the Government are imposing on the pensions industry.

Mr. Winnick

The hon. Gentleman said that he would, in effect, do what the Government are doing on pensions. What about the winter fuel payment? Does he accept that the £100, which is not means-tested, should be paid? What is his policy on this important question?

Mr. Willetts

We will consider the winter fuel payment as part of our wider pensioner package. What perplexes me—here I have some sympathy with the view of the hon. Member for Northavon (Mr. Webb)—is how the Government jump between favouring universalism, saying that it is very important that everyone should get the winter fuel payment, and then the case for means testing. We have no plans to remove the winter fuel payment. However, we are also planning an increase in average pensioner incomes, to be achieved by policies that, above all, reward savings and funded pensions. Our central critique of the Government is that they rely on that success to justify what they are doing by way of the uprating for the basic pension but, at the same time, they are killing the goose that lays the golden eggs. They cannot carry on relying on the increases in occupational pensions and savings that are providing the statistics from which they quote.

The Minister of State, Department of Social Security (Mr. Jeff Rooker)

The hon. Gentleman is making a thoughtful speech. However, he must realise the position. If everything was so rosy in the past, why would the best part of 5 million people—moderate earners, making between £10,000 and £20,000 a year—be working with no second pension provision whatever? Surely there has to be a policy to get those people into a viable second pension operation. The previous system did not work—the pensions industry passed those people by on the other side of the road.

Mr. Willetts

Our concern is that the Government's stakeholder pension will not bring people in the income bracket that he describes into new pension provision that they would not otherwise have had. Instead, they will simply drive people out of existing occupational pension schemes into stakeholding. He will be able to announce to the House apparently large numbers of people taking out stakeholder pensions but, as my earlier quote from the pensions industry suggests, that will be churning out of existing occupational pensions.

Mr. Rooker

We will not count those.

Mr. Willetts

I will hold the right hon. Gentleman to that; one of the widespread beliefs of people who care about what he is doing is that he will end up simply churning existing provision.

The other issue is the interaction between the minimum income guarantee and pension planning. If the minimum income guarantee increases in line with earnings—I think that the figure is 4.9 per cent.—what is the sense of people on a very low income saving, possibly in extremely difficult financial circumstances, getting a stakeholder pension? It makes them no better off than they would have been if they had not saved before? I would welcome the Minister to the Dispatch Box a second time if he could offer us a figure for how much people have to have saved in a stakeholder pension during their working life to receive an income that will float them off means-tested benefits. If people cannot save that amount of money, they will be no better off as a result of having taken out the stakeholder pension. That is the $64,000 question. The minimum income guarantee is a further extension of means-testing.

Mr. Darling

I notice that the hon. Gentleman has not mentioned the state second pension, which is designed to help precisely those who are on low earnings throughout their lives because it enables them to accrue pensions at a substantially greater rate than at present, as well as helping moderate earners. What is his policy for the poorest pensioners? He has made it very clear that he would take away the minimum income guarantee, so that would reduce their income. What would he do for them?

Mr. Willetts

The minimum income guarantee is a mirage. It is merely what I still think of as the pensioner premium in income support. The Secretary of State, like so many new Labour Ministers, talks as if it were some extraordinary innovation in social policy. When I was in government, I believed that pensioners are entitled to something like the pensioner premium in income support, and I still support that now. However, the Secretary of State has merely renamed—misnamed—that premium as the minimum income guarantee, while keeping all the old income support rules. The old problem of low take-up remains, but there is also a problem with the capital rules.

Many pensioners who are not entitled to the minimum income guarantee have total incomes well below it. The Secretary of State doubtless receives the kind of letters that I receive from pensioners who are baffled when they see him popping up on television and radio to talk about the minimum income guarantee while they are struggling to make ends meet on incomes well below it. The main reason for that is the capital rule.

Arguably, a well-designed capital rule would enable people to receive an income from capital roughly equal to their putative entitlement to the benefit of which they are being deprived. I asked the House of Commons Library to calculate, at current interest rates, how much a pensioner would need in bank or building society savings to yield an income equalling the current average income support figure. How much would one need, given all that has happened to interest rates, to receive an income flow matching average income support?

In 1998, a pensioner would have required £49,100 in savings to receive an income matching average income support entitlement. Many pensioners have savings between £8,000—the upper limit for the capital rule—and £49,100. They are clearly worse off, living on incomes below the minimum income guarantee. Many are irritated and surprised by the Secretary of State's grandiose rhetoric about a minimum income guarantee when the treatment of capital is an enormous hole at the centre of it. Many pensioners fall below the minimum income guarantee, and that position has not changed since 1990. We expect Ministers, after promising for years to review the situation, to take some action.

Mr. Tony McWalter (Hemel Hempstead)

I am confused by the figures that the hon. Gentleman has offered. Clearly, anyone with that level of savings could more than make up the deficiency between the minimum income guarantee at £78.45 and the pension at £67.50. As the hon. Gentleman is clearly talking about a much larger deficit, will he clarify what additional income component he is describing?

Mr. Willetts

Pensioners live in many different circumstances. Much will depend on basic state pension entitlement. The hon. Gentleman is assuming full entitlement to the contributory pension, which all too often is not the case. I am glad that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and the Select Committee on Social Security are inquiring into a contributory principle problem that often strikes us in our constituency surgeries involving those whose incomes fall below full entitlement. My example relies on the average income support payment, and on how much someone would require in capital to achieve a matching income. That is the basis of the House of Commons Library figures.

I should like to remind the Secretary of State of what Ministers have promised in previous uprating debates, going right back to 1998—before he or I held our posts. In February 1998, the then Under-Secretary of State for Social Security, the hon. Member for Manchester, Withington (Mr. Bradley), said:

I do not dissent from the view that there are problems with capital and disregards. In our review of benefits and the general review of the welfare state, capital and disregards will have to be considered".—[Official Report, 18 February 1998; Vol. 306, c. 1148.] We heard a similar message in February 1999, when the right hon. Gentleman had become the Secretary of State:

All hon. Members will agree that, above any other source of complaints, pensioners tell us that they have saved all their lives but are penalised for it … I made it clear that the Government want to consider the matter."—[Official Report, 28 January 1999; Vol. 324, c. 486.] The Government have been considering the matter for a long time. It is about time that those capital disregards were properly reviewed and uprated, in order to match them more closely to current interest rates. Alternatively, the Government could do something straightforward and simple; they could stop calling the minimum income guarantee a minimum income guarantee, because plainly it is not one.

The Secretary of State briefly touched on tax benefit integration and child poverty. He knows that we shall watch closely the implementation of the working families tax credit. The Government claim to believe in evidence-based policy, but I have never heard evidence from any Minister or ministerial adviser that paying a benefit of given value through the tax system instead of through the benefits system has any effect whatever on incentives.

We shall be interested in whether the WFTC has any impact on the "wallet-purse" question—the distribution of income within the family. We shall also want to know what it means for the employers who are implementing the system. In Social Security questions, I was encouraged to hear from the Under-Secretary of State for Social Security, the hon. Member for City of York (Mr. Bayley), the cast-iron assurance that the WFTC will be paid through the pay packet in April, although that does not sit easily with increasing reports from employers' organisations of the enormous practical problems of implementing the measure.

I hope that Ministers will give also us their response to the Government's thinking on the subject as set out in the Treasury working paper, "Supporting Children through the Tax Benefit System", published in November 1999. Pages 39 and 40 of that document rather shoot Ministers' fox. They undermine the rhetoric about the essential importance of paying the WFTC through the pay packet.

The Treasury's latest idea is to put that policy into reverse, by reverting to what the Treasury refers to as an integrated child credit—not to be confused with the children's tax credit—which, lo and behold, will be paid as a benefit to the caring parent. Having painfully pushed through the House the controversial proposal that family credit has to be renamed the working families tax credit and paid through the pay packet, the Government's latest piece of thinking is the bold suggestion that they should make a U-turn and revert to paying it as a benefit.

The hon. Member for Colne Valley (Kali Mountford) looks baffled. I recommend that she read the Treasury document. The Treasury is working on the introduction of what it describes as an integrated child credit. However, I am not aware that we have heard any comment on that proposal from Social Security Ministers; we do not know whether they are also working on it, or whether they think that, having lost the WFTC to the Treasury and the tax system, they should regain the "integrated child credit".

If Social Security Ministers believe the analysis in the Treasury working document as to the case for paying the credit as a benefit to the caring parent, most of the rhetoric that they deployed when they were putting the WFTC through the House is shot to ribbons. This will be the next U-turn in social policy; we shall watch closely to see what the Government are up to.

We have heard some rather coy assurances from Ministers that the long-awaited Green Paper on housing and housing benefit will eventually appear. However, the trouble is that, while they are stonewalling in this place with those vague references to the Green Paper's publication, their spinners are busily spinning away. Last year, we were spun that there would be a radical change in housing benefit—another payment that was supposed to be made through the pay packet. We are now being told—I think in today's Daily Telegraph—that the Government are considering spreading housing benefit entitlement further up the earnings scale. We shall be interested to hear from Ministers the meaning of the spread of means-tested benefits further up the income scale.

The Secretary of State has been perpetrating a fraud in the complacency of his statements on benefit fraud. In his most recent press release, dated 28 January, which is headed, "Darling welcomes successes in fighting benefit fraud", he said: Today's figures show that our tougher anti-fraud measures are beginning to bite. He concluded: we are winning the fight against fraud. However, figures that came out on that very day, in a separate, accompanying press release, from the Government's own statistical service, show that the reduction in income support fraud and customer error—it is a tiny reduction—"is not statistically significant." There has also been a tiny change in jobseeker's allowance fraud and customer error, of which the statisticians say: This reduction is not statistically significant". Therefore, we have changes in the level of fraud that are not statistically significant, according to the Government's own statistical service, which the Secretary of State welcomes as successes in fighting benefit fraud. That is the gap between Ministers' rhetoric on benefit fraud and the reality.

The Secretary of State claimed—let me quote what he perhaps hopes will be his epitaph—

I do not want to be remembered as another Secretary of State who tinkered with the system. We are taking on vested interests. All the crucial and central questions in benefit reform are being ducked. The Secretary of State needs to address them, but conspicuously failed to so today. The central feature of this uprating is indeed more tinkering. We need something better than that. We need some progress and some vision, and we shall get neither until the right hon. Gentleman tackles the difficult questions about the future of pensions funding, the reality of tax credits and what is to be done about social security fraud—the questions which, I am afraid, he has ignored for far too long.

4.27 pm
Mr. Patrick Hall (Bedford)

I am one of those who signed early-day motion 73, expressing the point of view that the 75p increase in the state retirement pension is inadequate. To me, it is self-evident that it is inadequate, and that is certainly the strongly held opinion of every pensioner to whom I have spoken on the subject.

I have heard, and listened to, the arguments of pensioners in my constituency, and I have listened to the arguments of others on these matters. The Government prefer to focus on the whole package of measures that they have already introduced for pensioners. The Liberal Democrats have made it clear that they wish to focus only on the 75p issue. It is a little difficult to know exactly what the Conservatives are doing on that matter because, until today, they would not give their view on the 75p increase. Now, there is grudging acceptance of it—they said that they would introduce it themselves—but they reject much of the wider package that the Government have introduced for pensioners.

That package—the minimum income guarantee, the winter fuel payment, home energy efficiency grants and many other measures—is of benefit to pensioners. Indeed, I understand that the real cash value of those measures is greater than what it would have cost to restore the link between the basic state pension and average earnings. Not to recognise that whole package, not to recognise the Government's determination to tackle pensioner poverty, is to fail to engage constructively in the debate on pensions and pensioners; and to fail to engage in that debate is to do a disservice to pensioners.

It seems to me that, nowadays, that is exactly what the Liberal Democrats are doing on that matter. Their motion in the Opposition day debate on 17 January, which simply reproduced the wording of the early-day motion on the 75p increase, represented a lost opportunity to examine the subject of pensions and pensioners' life styles in the round, in greater depth—a lost opportunity to be positive about these matters.

As I have said, I wish to speak principally about the 75p increase. I am unhappy about that increase. I have said so publicly and in the context of considering the system as a whole—the wider package of where we are and where we are likely to go and whether there is a need to restore the link with earnings or, perhaps instead, create a prices index that is related to the reality of most pensioners' lives. That means, I suggest, looking at local authority charges for the sorts of services that many pensioners make use of more than other sections of the community. It means taking on board rent and council tax levels rather than mortgages, which form part of the retail prices index that is the basis of determining benefit increases. As I understand it, most pensioners do not have a mortgage—if they had one, they have paid it off. Such considerations should form part of the mature, rational debate on pensions, older people and how we value them that needs to develop.

I very much hope that the Liberal Democrats will engage constructively in that debate. I did not vote for their one-line motion on 17 January, because they were clearly playing politics with an issue that deserves and requires serious attention in depth and in the round. I felt that the Government amendment on that occasion at least addressed much of the wider agenda. Today, it seems that it has been confirmed that the Liberal Democrats are ever more determined to play foolish gesture politics with serious issues. Having wasted the opportunity last month to be serious about pensions and pensioners, they are now about to vote against any increase in statutory sick pay, maternity pay, child benefit and disability benefits, income support and housing and council tax benefits as well as voting for a zero pension increase. That is unhelpful gesture politics which will not be understood or supported outside the House.

Unlike the Liberal Democrats, I shall vote in support of those tens of thousands of people who are in receipt of the social security benefits to which they are entitled. However, in doing that, I ask my right hon. and hon. Friends in the Government to accept the sincerity of the views of the many pensioners in Bedford and Kempston to whom I have spoken, and whom I represent. They are aware that the recognition of pensioners is implicit in the minimum income guarantee, in the winter fuel payments and in the free television licences that are to come. However, I am convinced that they have a different conception of the role of the basic state pension from that which seems to come across from the Government. Those pensioners see the state pension as something which they have contributed to, worked for, and earned. According to them, its existence is the mark of a civilised society, of a social contract that binds people together and of a society in which human beings are not thrown on to the scrap heap once they reach retirement.

The Government say that the state retirement pension is the building block of pensioner income. Many people outside the House well understand that the state pension needs topping up by second pensions, occupational pensions and private pensions, too. It is well understood outside the House that the state pension does not—and probably never could—meet all the cash needs of people in retirement. However, it is understood that the state retirement pension is a crucial foundation stone and it must be a statutory foundation upon which the other elements of pensioner income can be securely constructed.

The state pension is political as well as financial. The message transmitted to pensioners by the previous Conservative Government when they broke the link with earnings—that message has been conveyed down the years since and again today with the meagre 75p increase—was that the importance of the state pension is diminishing. Its value is withering and its strength as a foundation stone is weakening. Too many pensioners feel that they do not matter, and they are clearly worried.

It is absolutely right that Members of the House articulate the views of those in the country and reflect on their concerns. I hope that my right hon. and hon. Friends in the Government, who have in the past two and a half years made such a good start on addressing pensioner issues, will soon introduce proposals to put new life into the state retirement pension.

4.35 pm
Mr. Steve Webb (Northavon)

The background to the debate is that, according to the Government Actuary's new report, the national insurance fund is in extremely good health. It has, to use a technical actuarial term, pots of money. It must be the healthiest bank account in Britain. At the end of next year, the fund will have £16 billion, which is double the amount that the law requires it to have to keep benefits going. There is £8 billion spare in the fund, and the Government can spare pensioners 75p a week. That is why we are opposing the uprating orders.

The Secretary of State paid his customary compliment to the Liberal Democrats when he started his speech by discussing our policy. Clearly, we are the only opposition in town. He asked various rhetorical questions, and we seem to have witnessed the quickest broken promise in new Labour history because, when he was asked whether he would be staying to hear the answers, he assured us that he would, but he has already disappeared. When faced with the possibility of serious argument, the Secretary of State finds that he has other engagements.

We heard in the Secretary of State's address that the Government are reforming the state earnings-related pension scheme, but their proposals mean that there will be no SERPS. There will be a state flat-rate pension scheme, called the state second pension. When present SERPS entitlements have been honoured, no new entitlements will accrue. Yet Labour Members, who are keen to quote the Liberal Democrat manifesto—I understand why they want to do so—said in their manifesto that they would retain SERPS for those who wanted to remain members of the scheme. That is a clear contradiction of a manifesto promise.

The Secretary of State also described the Government's measures for families with children and other groups. He suggested that, by voting against the motions, we are somehow seeking to scupper those measures. I shall make it absolutely clear: if we are successful in a Division tonight, we will assist the Government's business managers in bringing back motions before the end of this week to bring in all the necessary benefit increases, with improved increases for state pensions.

These motions, as hon. Members well know, are unamendable. Were it possible to amend only one element of them, we would do so, but the procedures of the House do not allow us to do that. The only way that we can register our objection is to vote against each motion and offer to assist to bring it aback amended.

The hon. Member for Bedford (Mr. Hall) made a thoughtful, brave contribution because he articulated the feelings of several of his hon. Friends and of many pensioners in his constituency, and mine. The hon. Gentleman called the 75p increase "meagre" and the hon. Member for Havant (Mr. Willetts) called it "measly". We are all agreed about its inadequacy. As a new Labour Back Bencher, the hon. Member for Bedford showed courage by making his remarks when the Secretary of State was in the Chamber, and I congratulate him on having the courage to do so.

The hon. Gentleman called on us to enter into debate constructively. I shall give him an example of an attempt by us to do that, which received no response from his Front-Bench colleagues. When we raised this issue three weeks ago, we said that the 1.1 per cent. benefits increase does not, as the hon. Gentleman said, reflect pensioner cost of living. We can argue whether we should use cost of living or earnings as a measure, and I shall come on to that. However, the figure does not even reflect the pensioner cost of living because of council services, which the hon. Member for Islington, North (Mr. Corbyn) mentioned then, or rent and council tax rises.

We suggested a pensioner price index that specifically includes all the things on which pensioners spend their money—a not unreasonable suggestion. Did we receive a constructive response from the Government? Did they mention or look at the idea? The answer is, not as far as we know.

When we make constructive suggestions that are not especially expensive or involve throwing billions of pounds at the problem—the proposal would favour pensioners some years but not others—we are ignored. That is the difficulty of trying to enter into a constructive debate on the issue.

I listened with interest to the hon. Member for Havant, who thinks deeply about these issues. Indeed, one could almost call him one of the godfathers of some of our thinking on raising pensions for older pensioners. I am sure that he is proud of his offspring. I have been thinking through the logic of what he says Conservative policy will become—I accept that he does not have a policy yet, but that he has a set of directions in which he wants to move. So far, Conservative policy is as follows: price indexation of the basic state pension—putting in the 75p that he said was measly—and more private provision.

More private provision is irrelevant to those who are already above pension age since they cannot save any more. Therefore, they will receive only the 75p rise. I presume that there would not be an earnings-indexed income support line, because the hon. Member for Havant has consistently condemned the growing gap between the pension and the income support line. If he is to keep the pension pegged to prices and condemn the growing gap, he must raise the poverty line in line with prices. Presumably, therefore, only retail prices inflation would apply to today's poorest pensioners, and that is not even as good as what is offered by the Government in the orders. Although I accept that, in the medium term, he wants to encourage private provision, as, to some extent, do we, I do not understand his policy for present pensioners. I would happily take an intervention if he would like to say what it is.

Why is there so much money in the national insurance fund; why is it overflowing? This year, national insurance receipts will exceed national insurance expenditure by £1.5 billion. Next year, according to the Government Actuary, the excess will be £2.9 billion. Those are extraordinarily large sums, taking the cumulative surplus to £16 billion by the end of next year, which is double the two months-worth of benefit payments required in statute. There needs to be a little money for a rainy day, but giving pensioners only 75p a week more when there is an extra £8 billion is inadequate.

As well as the point about the very healthy national insurance fund, there has been a catalogue of delay and dithering at the heart of the Government's pensions policy in four areas. I have a lot of respect for the Pensions Minister, the right hon. Member for Birmingham, Perry Barr (Mr. Rooker), who has had the decency to remain in the Chamber to listen to my speech, so I shall be as gentle with him as I can. We are waiting for action, and pensioners are asking what is going on yet, when we ask the Government, they say, "Something will be happening soon," or "There will be something this Parliament."

The first area, which the hon. Member for Havant mentioned, is capital limits. We have heard excerpts of previous Secretaries of State. At Question Time, I quoted the present Secretary of State who said 12 months ago in this very debate about capital limits and the problem of pensioners who have life savings of £8,000 or more who receive nothing under the minimum income guarantee, that reform is "long overdue." Heaven help us when the Government think that a reform is not urgent if this is what they do when they think that one is.

The Government have been telling us throughout the Parliament that such reform is long overdue, so perhaps something might be announced in the Budget. After all, and in case hon. Members missed it, the Financial Times said that it would be. I make a prediction on the record: there will be something in the Budget, but it will come into effect not in this April, but in April 2001. What is the significance of that date? First, it allows the Government to re-announce the policy seven times before next April and, secondly, it will come into effect just before the election.

Mr. Rooker

Twelve times.

Mr. Webb

The right hon. Gentleman generously admits that there will be a monthly reannouncement. Pensioners who have, say, £10,000 in the bank will be deprived of the so-called riches of the minimum income guarantee for another year while the Government spin their policy and get round to deciding what to do. Why should pensioners with life savings of just £8,000 be so deprived?

The point is not just the absolute cut-off at £8,000, but the extraordinary assumption that, for every £250 of savings, pensioners may receive £1 a week in income. The Minister has the grace to nod at the absurdity. That is £52 a year on £250—more than 20 per cent. net interest. If anyone knows where we can get that rate, please let me know.

Not only the capital thresholds, but the tariff income—the rate at which income is imputed—needs sorting out. I hope that the Government will not simply promise action in this Parliament, as the Minister did previously. I hope that they will not say that there will be an announcement in the Budget. I hope that the Minister will say that something can be done this April for those pensioners.

Because of the capital rules, 650,000 pensioners living below the income support poverty line are deprived of the minimum income guarantee. I asked the Government last week to update those figures, and they undertook to let me know the answer. They do not know the present figure. It could have gone up, because the gap keeps increasing.

There are so many pensioners living below the poverty line who would get the benefit of the pension rise. They are pensioners on less than £78 a week of current income, but they do not get the money because they have £10,000 in the bank.

Mr. Coaker

Will the hon. Gentleman clarify one point? If he has already covered it, I apologise. We are told that the Liberal Democrats would restore the link with earnings. How much would you raise the pension? Also, if you changed the capital limits and the tariff, how much would you—

Mr. Deputy Speaker (Mr. Michael Lord)

Order. The hon. Gentleman is straying away from the correct parliamentary language.

Mr. Webb

I shall deal with both questions in the course of my remarks, but I shall certainly give way again if the hon. Gentleman feels that I have not answered them.

The 650,000 people who miss out are the first group who would get the benefit in full if the pension rise were greater than 75p, as we believe it should be. They are not rich pensioners. They are not company directors who have just retired. They are poor pensioners who have a small nest egg. We are speaking of life savings of £8,000. That is not a sum with which any of us would be satisfied to reach our old age, yet that is the point at which we penalise pensioners.

What should be done? There is no logical reason for an arbitrary upper capital limit of £8,000. Instead, a realistic income should be imputed from people's capital. If they have huge amounts of capital, a huge amount of income would be imputed, and they would not quality on income grounds. The arbitrary upper limit of £8,000 is not needed. In any case, people with significant amounts of capital have weekly incomes from other sources that put them well beyond the range.

What is needed is a sensible lower limit, so that pensioners with rather pitiful amounts of life savings are not troubled by the complexities of declaring how much they have in the building society—which is probably the money put by for their funeral, as in a constituency case that I had recently. There should be a sensible lower limit for administrative convenience and a sensible imputation of realistic amounts of income from savings. That is not an unreasonable expectation.

Apart from the capital limits, on which there has been dither and delay, what about the SERPS entitlement of widows? That is another example of delay and dither. The parliamentary ombudsman is currently investigating whether maladministration occurred, in that people were not told of the cuts to widows' SERPS introduced by the previous Government, of which the present Government also failed to notify them.

I contacted the ombudsman's office last week to ask where the report was. A report was promised in advance of the cut in widows pension entitlements originally planned for April. The ombudsman is waiting for a Government decision, which would make the report more complete. It is months since the Welfare Reform and Pensions Act 1999 was amended, against the Government's will initially, to require them to do something about widows' SERPS.

We have heard nothing. We read in the press that there are rows between the DSS and the Treasury about how much that will cost. The Treasury proposal of compensation for those who can prove that they made a telephone call in 1987 is absurd. I hope that the Minister is fighting with all his vigour on that issue.

When will we hear? Pensioners in my constituency who feel that they were misled and mis-sold want to know what is happening. They have retired, some of them are in failing health, and they want security and certainty, but all we get is dither and delay. I hope that the Minister will tell us when an announcement will be made. The Government did not take the opportunity to do so during questions this afternoon. I hope that the right hon. Gentleman will do so later.

At the very least, people who have already retired, or those who are so close to retirement age that they cannot amend their plans, should be fully protected. It would be wrong to tell someone who had already retired, and made the wrong decision through dodgy advice, that the cuts would be delayed for five years, so that if that person expired in the next five years, it would be all right, but if not, it would be tough. Protection for those who have retired, or are about to retire, must be the minimum that is required.

The third example of dither and delay—

Mr. Rooker

I am counting because the hon. Gentleman said four, and I was not sure how far we had got.

I take the hon. Gentleman's point about SERPS. The legislative framework for the 50 per cent. cut from April is in place. It has been included in all the planning for public expenditure and is in the Government Actuary's report because we have not yet made the final decisions. Any changes will therefore change the national insurance fund figures dramatically. The hon. Gentleman has already spent that money earlier today when we considered pensions; he is now spending it for a second time. I am counting the number of times he spends the national insurance fund surplus.

Mr. Webb

The Minister points out that surpluses cannot be spent more than once. Many people make that mistake, and I would not dream of making it. However, recurring surpluses can be spent each year. This year, there was a surplus of £1.5 billion; next year, there will be a surplus of nearly £3 billion. I shall return to the subject later, but the measures that we propose for the basic state pension would initially cost perhaps £500 million a year. That leaves a significant annual surplus, in excess of £1 billion, for which widows' SERPS should be top priority. As the Minister knows, the savings from widows' SERPS build slowly, and it takes some years before they accumulate into a large sum. Husbands and wives are worried now about what is happening.

The third example of delay and dither is winter fuel payments for men aged between 60 and 64. I have some good news for the Minister. My research shows that, next year, he will be entitled to a payment from the social fund. He was born in June 1941 and, by winter 2001, he will be entitled to a social fund payment. Such is the Government's mastery of pensions strategy that the Minister is entitled to a social fund payment next year as a result of their policies. Yet the Government lecture us on targeting. Their fundamental inconsistency is obvious.

The Government pay an untargeted £100 across the board; we advocate age-related additions to the basic pension that are much better targeted, yet the Government claim that our policies are not sufficiently well targeted. They cannot have it both ways. Men aged 60 to 64 will receive a winter fuel payment because the Government lost a court case before Christmas. The best part of a couple of months has elapsed, and men aged 60 to 64 are asking me how to get the money. I have to tell them that they must wait for the Government to launch an advertising campaign. I get a hollow laugh when I say that. The money will constitute summer fuel payments at this rate. I hope that the Minister will tell us when he winds up that there will be an announcement soon on how my constituents will receive the money that the Government promised.

The hon. Member for Bedford made a fair point about the winter fuel payments and the whole package. When the Government had money to spend, they chose to do it through the winter fuel payment, not the basic state pension. The hon. Gentleman said that the basic state pension was withering and dying. I am not sure whether he used those words, but they sum up the spirit of his remarks.

The winter fuel money has no statutory protection. By law, the pension, as a national insurance payment, must be statutorily uprated every year, at least in line with prices. However, that does not apply to the winter fuel payment. It has increased substantially to £100 but, next year and the subsequent year, it will continue to be the nice round number of £100. Once it has been established, and people get used to it, it will start to be eroded. There is no statutory protection for it. We have not voted for a winter fuel payments Act; the provision has no statutory protection through primary legislation. It is a social fund payment. Governments can introduce and drop such payments at the drop of a hat. We have received assurances that the payments will be maintained for an indeterminate period. However, that is not the same as putting them on the same footing as the basic state pension.

We have considered three examples of dither: capital limits, widows' SERPS and winter fuel. The last one involves the minimum income guarantee take-up campaign. We have been promised action for pensioners, but what did we get on take-up of income support? The Government needed to be seen to be doing something in their first two years while they were sticking to the Tory spending plans and I assume that a civil servant at the Department had the bright idea of carrying out research.

I addressed the National Pensioners Convention a while ago and when I told 1,500 pensioners that the Government had commissioned research into why people do not take up income support they could not believe it. Do hon. Members know what that research found? That people find income support stigmatising and the forms off-putting and that entitlement is triggered by turning 75 or 80. We could have worked that out by reading the benefit rules. It took two years to reach those findings; we were promised a take-up campaign. It was due to start last April, unless I am very much mistaken, but the delay and dither of the Government's pension policy meant that nothing happened. We have had hints of an announcement today. Perhaps one will be made in the wind-up speech, but who knows? The Minister has so much else on his plate and so much else to dither about.

Mr. Coaker

Everyone agrees that take-up is a serious matter, but does the hon. Gentleman not acknowledge that it is a bit more complicated than that? He should consider attendance allowance, which is non-means-tested. There is a take-up problem with that benefit as well.

Mr. Webb

The hon. Gentleman is quite right that take-up of that benefit is a serious issue and there is no doubt that it is good that the Department has started to estimate and consider non-take-up, but the research—if I recall correctly—was almost exclusively into non-take-up of income support by pensioners. We did not need that research. As I used to make my living from social research, perhaps I should have said that it should have been undertaken alongside action.

Mr. Chris Pond (Gravesham)

The hon. Gentleman may be doing research again.

Mr. Webb

I thank the hon. Gentleman for that.

To give a concrete example of action, half the pensioners who do not take up income support even though they are entitled to it are housing benefit or council tax benefit claimants. In other words, we know where they live. Why should it take the Government three years to launch an advertising campaign or a strategy when we have their names and addresses?

Mr. Coaker

This is an interesting debate. Has the hon. Gentleman given any thought to why pensioners do not seem to have a problem claiming housing benefit and council tax benefit, which are means-tested, but seem to have a problem claiming income support?

Mr. Webb

Indeed. One of the main reasons is that most are council tenants. They have contact with officials from the public authorities, who have an incentive to get them their entitlement as then the councils will have their rent paid. Local government has such an incentive, but central Government do not as they save hundreds of millions of pounds by not getting those people their money. I do not believe that that is deliberate and genuinely do not believe that the Government keep quiet, but they could do much more. They dither.

What will happen eventually? I hope that there will be linkage between local authority data and income support and that pensioners who fill in housing benefit forms and are told that they are entitled to a full rent rebate will automatically receive letters telling them that they are entitled to income support. They would have provided the authorities with every bit of information needed to calculate their income support. So much more could have been done years ago, but the Government amble along.

The classic case is the Secretary of State's ritual nonsense about the state second pension and the mythical person who receives £14 a year under SERPS and will receive £50 a year when the state second pension is introduced. When? In 2047. That is the pace of Government pension reform. I am not asking for the earth, just a bit of speed.

Mr. Willetts

Like me, the hon. Gentleman follows Ministers' written answers on this subject very carefully. Does he agree that we need citizens charter standards to interpret the various ministerial statements? Widows' SERPS was to have been dealt with "shortly" back in October 1999 and there was to be an announcement on the winter fuel payments mechanisms "early next year" in December 1999. It would be nice to know what "early next year" and "shortly" mean in the Department of Social Security.

Mr. Webb

I thank the hon. Gentleman.[Interruption] That is an interesting sedentary comment from the Minister: those words mean 7 February. That is intriguing.

Mr. Rooker

I said that it is only 7 February.

Mr. Webb

I apologise. In a moment of revelation, I thought that we were to have an announcement, but no.

While we are on the theme of delay and dither, let me say that housing benefit reform is a classic example. I have lost track of when it was originally supposed to take place, but we now read in The Daily Telegraph that it will take place in July. Even then, it will not be a wholesale reform; it may take three Budgets to introduce it. For goodness sake, what do we pay officials in the Department to do? Surely the Government could tackle some of the issues rather than deferring them for another Parliament, which appears to be their strategy.

Mr. Rooker

I did not want to say this publicly, but it is the second time the hon. Gentleman has had a go at the officials in my Department. The last time he did so during a debate he called them a bunch of bureaucratic anoraks. These are the people whom I personally asked, at the hon. Gentleman's request, to do a bit of extra work by answering some of his unofficial questions—questions that he could not get on to the Order Paper. I shall think twice about co-operating in that way in future.

Mr. Webb

I am sure the right hon. Gentleman would not afford me any privilege that he would not afford another Member; but I withdraw the attack on the officials, and restore the attack on the politicians who are responsible for the policy. The question is, "Why has this taken so long?" We have not had a serious answer to that question.

At root, this is a debate about next April's benefits, of which the basic state pension is far the largest component. What should be done, given that the Government have an excess of billions of pounds in the national insurance fund? We think that the Government should do two things, as we made clear when the matter was debated a few weeks ago. First, all pensioners should receive an increase that reflects their true cost of living. That is a serious, constructive and relatively inexpensive suggestion, which we have made before but which the Minister has ignored. I hope that he will respond today.

Mr. McWalter

Is the hon. Gentleman saying that we should uprate in line with the pensioner index rather than the standard index? It seems that he is. If the pensioner index was lower than the standard index, would he give pensioners less than 75p?

Mr. Webb

That is a perfectly fair point. Each year, the Government would have to decide whether to use the pensioner price index or the all-items retail prices index. When I am Secretary of State for Social Security, I will opt for the higher figure.

As I have said, the increase should reflect pensioners' true cost of living. We all know of pensioner costs that are not fully reflected in the retail prices index: local authority costs such as council tax and rent, for instance. The classic example, however, is the mortgage rate, which was falling in the year to September. Such a fall hits pensioners twice. First, it depresses the retail prices index without helping with pensioners' living costs, as most have no significant mortgage, if any mortgage at all. Secondly, it depresses pensioner incomes, which, to a greater or lesser extent, depend on interest rates. If interest rates fall, pensioners' savings incomes fall. Then the Government kick them in the teeth by saying, "As inflation has been low, we shall not give you a pension increase of any note."

It is all very well to say that next year it will be different—that, as mortgage rates will rise next year, pensioners may receive a bit more. Pensioners must live on the 75p increase for a year; if the council tax eats all that up, what are they expected to live on? They will just have to wait: that is the Government's message to pensioners.

As for the second thing that should happen, it is not a restoration of the earnings link. I want to make it clear that we are not saying that. We propose across-the-board increases in line with the true cost of living for all pensioners, and a "bigger than earnings link" increase for those over 75. We suggest that the across-the-board increase for older pensioners should be £3 for the over-75s and £5 for the over-80s, and that we should build on that increase.

The Minister mentioned the help that I had received from his officials in the past. I have been uncharitable, and I withdraw what I said. Over the summer, along with the Secretary of State's assistant, those officials helped me to estimate the effects of some of our policies. We were grateful for the opportunity to use the Government's simulation model to cost the policy of increasing the age addition to a serious amount that would grow over time, rather than retaining the pathetic 25p which is frozen in the orders. For the same cost as the state second pension that the Government propose to introduce, we could do vastly more for poorer pensioners, and less for the best off. I am not suggesting any more spending overall. This is not "tax and spend", but—I hate to use the "r" word—redistribution. It is about helping poorer pensioners.

The problem with all the Government's plans is that they will take years to be implemented and will benefit only the newly retired—who, on average, are the best-off pensioners. Therefore, it will be even more decades before the money reaches the folk who are the poorest. By that time, probably three different parties will have entered and left government and either ripped up or changed the policy, so that we shall never achieve the objective of the policy. We need action that will have an impact now, and that action should be an across-the-board age addition.

On average, older pensioners are the poorest—but we would not have to means test them to discover whether they are. For reasons that we know, older pensioners are more likely to be women. Older pensioners are also more likely to have retired longer ago, so that their savings will be more depleted and inflation will have eroded more of the real value of any assets. Additionally, lump-sum purchase on a house will have come out of their savings. Widows' entitlement, which many older pensioners receive, is also very poor. The list is endless. However, for those specific reasons, poverty is concentrated among older pensioners.

Non-take-up of income support is another phenomenon that is concentrated among older pensioners. Two thirds of pensioners who do not claim income support are over 75. By paying across-the-board increases to older pensioners, we shall be getting money to the real poorest pensioners.

The poorest pensioners are not the ones who claim income support, but the ones who could but do not. Although Liberal Democrat Members support putting money into income support—we do not have a problem with that as a way of helping those who receive it—we believe that that is not sufficient. Action on income support would target some of the poor, but not all of them.

Our age addition strategy is costed. The cost of our proposals is £500 million, which is only a third of this year's current surplus in the national insurance fund and is barely a fifth of next year's surplus in the fund. Our proposals are not a matter of reckless tax and spend, but costed and measured, to reach the poorest pensioners.

We need an end to dither and delay. We need action now for pensioners, and the 75p increase does not deliver that action.

5.7 pm

Mr. Chris Pond (Gravesham)

I am puzzled, having heard the comments of the hon. Member for Northavon (Mr. Webb), about where the Liberal Democrats stand on social security issues. We have heard not only that they will vote against all the upratings, but that they will subsequently and generously co-operate with business managers to reintroduce all the bits of the motions of which they approve. It is a bit like saying that they will run over the school crossing patrol, but will be the first to pick up and dust off the lollipop lady and call for an ambulance. That does not seem to be a terribly responsible approach to really rather serious issues. It also seems to be an example—as my hon. Friend the Member for Bedford (Mr. Hall) said—of playing politics with the living standards of people who are often in very serious straits.

Before this debate, at Social Security Question Time, we had a discussion on progress towards meeting the Government's target of halving child poverty within 10 years and eliminating it within 20 years. We should recognise the significance of the establishment of that target—no previous Government have even acknowledged the existence of poverty in such a manner. Indeed, Secretaries of State in the previous Government told us that poverty did not exist at all. They turned a blind eye not only to those individuals' plight, but to their very existence. The previous Government refused to accept responsibility for tackling the problem.

As the House well knows, during the Thatcher and Major years, a consequence of turning a blind eye to poverty was that the number of people living in poverty increased from 5 million to 14 million. One quarter of the population were living in poverty. Opposition spokesmen would undoubtedly deny those figures. Indeed—I am saying this slowly, just in case the hon. Member for Havant (Mr. Willetts) wishes to deny it—when the Government were elected, 14 million of our citizens were living in poverty and 4 million of those citizens were children.

The Government have set themselves the challenge of dealing with that problem. I assume that Conservative Members' approach to the issue of poverty has changed and that they accept the figures that I have given. However, I shall give way willingly if the hon. Member for Havant wishes to intervene.

Mr. Willetts

I am sorry, but by increasingly caricaturing the Conservatives' view, the hon. Gentleman has driven me to intervene. The figures that he cites are from the households below average income statistics, which, as he knows, are a relative measure of poverty and were rightly described by a Minister in the Government whom he supports as one picture of many that can be taken of poverty—one snapshot at one moment in time. If people care about poverty, they will want to look at a variety of indicators. That particular one is a dangerous basis for policy. I do not believe that even his Ministers want to use such a basis.

Mr. Pond

That was the intervention that I was expecting and, indeed, hoping for—the hon. Gentleman ducks behind the suggestion that the measures are wrong and that we need to take a range of different measures before we can address the issues. The fact is that, whatever the measure chosen, the party that he represented refused to accept that poverty existed. If we take a consistent measure, whichever it is, from the huge range from which we could choose, it will be clear that poverty increased dramatically.

We know that it is not only the poor who suffered through that process. Poverty is not only socially divisive but economically wasteful: it destroys people's ability to use their energies and talents for the common good. That is why the Government's target of halving child poverty in 10 years and eliminating it in 20 is significant not only as a social policy objective but as an economic policy objective.

That is why I welcome the proposed upratings, especially the focus on help to families with children and to the poorest pensioners. The ability of the Secretary of State and his team to pursue that target with any great success simply through benefit upratings has to be limited, however. The upratings can make a real contribution towards that target but will not in themselves enable us to reach the target.

If spending extra on social security were a means of eliminating or reducing poverty, the Conservative party when in government would have had rather more success than it did, although that was not one of its objectives. We know that spending on social security increased dramatically under previous Governments, but that the number of people in poverty trebled under the Thatcher and Major Administrations. That is why we need to consider the discussions on benefit upratings in the context of the other Government policies to tackle poverty: most important, the creation of jobs—800,000 new jobs have been created since the Government took office—the impact of the new deal, especially on lone parents, people with disabilities, the younger and the long-term unemployed; and the national minimum wage.

We heard last week that the Conservative party now supports the national minimum wage. For those of us who served on the Standing Committee that considered the National Minimum Wage Bill—which made parliamentary history, I understand, sitting for the longest period ever—and who listened to the Conservative party filibuster and try to kill the national minimum wage, hearing the shadow Chancellor tell us that it was all right now and that the Conservative party would keep it was pleasing in one sense—especially for the 2 million who had the threat hanging over them that, if there were a change of government, they would lose the wage—but irritating in another.

We are hoping for an announcement—perhaps we will get it during the debate—that a similar U-turn has taken place on the working families tax credit and the child tax credit because the many people who depend on that—1,700 of them in my constituency—the families who are, on average, £24 a week better off, are suffering uncertainty about whether, if there were ever to be a change of government, that help would be removed, too. We need to view the debate in the context of the wider tax and national insurance contribution changes and the provision of affordable child care.

One important element of the debate concerns capital limits. The hon. Member for Northavon argued that what may be most important about the limits is not the limits themselves, but the assumed income from the capital. I was pleased to receive a fairly positive response from my right hon. Friend the Minister—who did not give much away—and I know that the Government are looking at that matter seriously, as the assumed income is the most dangerous element.

I am optimistic that the Government's target of achieving the reduction in child poverty, and in poverty generally, can be reached. It is a major challenge, as everyone knows, but we can meet it. The Government have made significant progress in that direction and the uprating statement will help us further, as will the other policies to which I have referred. It is a moral, social and economic imperative that we should achieve that objective. Only one thing can stand in the way of our achievement of the objective of halving child poverty in 10 years and eliminating it in 20 years—a change of Government.

5.16 pm
Miss Anne McIntosh (Vale of York)

One thing that is emerging this evening is that the Secretary of State clearly is not living up to his name—he is not the darling of the pensioners. I wish to express my personal and deep regret at the derisory increase of 75p per week for pensioners, for the reasons given by many hon. Members today.

I am delighted that at least one successful amendment was passed during the debates on the Welfare Reform and Pensions Bill—to abolish the dreaded 75-year rule on annuities for people who take out a stakeholder pension. I invite the Government this evening to extend that exemption to all pensioners: it would give tremendous satisfaction to many of my constituents if the Government would rule out the 75-year age limit once and for all.

Mr. Rooker

I will take advice if what I am about to say is wrong, but it is my understanding that what the hon. Lady has said is quite wrong. The amendment was passed in the Lords, but was reversed in this House.

Miss McIntosh

Am I right in understanding that the Government remain unsympathetic to abolishing the rule that all pensioners must take out annuities at 75, regardless of whether they are taking out a stakeholder pension or whether they are existing pensioners?

Mr. Rooker

The hon. Lady heard what my right hon. Friend the Secretary of State said earlier. The Inland Revenue is leading a review of the issue, to which the Department has input. However, the hon. Lady stated as a matter of fact that the Bill contained an amendment which the Welfare Reform and Pensions Act 1999 does not contain.

Miss McIntosh

I stand corrected, but at least we managed to get the proposal into the Bill. We will have to try harder next time round.

The Government must accept that, as long as the rule remains in place, the income of 75-year-olds will be reduced from the level for which they had planned. Surely that runs counter to what the Government have said today. The Secretary of State has said that the Government wish to encourage people to save. That alone would provide conclusive evidence that the 75-year rule on annuities should be abolished, as it is hampering people who are planning for their retirement.

On the vexed question of winter fuel payments, the Minister of State—in answer to me on 10 January—said categorically that everyone who is ordinarily resident in Great Britain and aged over 60 is eligible"—[Official Report, 10 January 2000; Vol. 342, c. 12.] and that that applied whether they worked or not. Some of my constituents find it embarrassing to apply, because officials discourage them from applying until the notice has been sent out, and there is unnecessary bureaucracy.

The Department's press release of 17 December says that help through winter fuel payments will be extended to everyone aged 60 or over, regardless of whether they are claiming a pension, but it appears on closer examination that not everyone of that age is so entitled. For example, not everyone in a residential care or nursing home is covered.

Mr. Rooker

Or in prison.

Miss McIntosh

I am coming to that.

Those in homes are partly covered—280,000 claim some help through income support—but they would not be deemed eligible. The remainder, perhaps another 220,000, should get the payment at a reduced rate on the basis that they are sharing accommodation with other over-60-year-olds.

Not everyone who has been in hospital for more than 12 months is included, regardless of whether they have maintained their own accommodation to which they would expect to return home, and for which they will presumably have to pay for heating in the cold months even if they are not living there at the time. Those people are excluded from winter fuel payments.

Pensioners living abroad are certainly not included, as they are deemed not to be ordinarily resident in the United Kingdom, which is perhaps fair. The estimated 1,000 people over 60 in prison are most definitely not included; they are not entitled to any social security benefits.

The payments do not apply to everyone over 60. The catch is that people had to be over 60 on a certain date to qualify. The Benefits Agency is considering precisely what that date should be, but it will probably be about 20 September 1999. Does everyone get £100? No. The payment is supposed to be for a household containing a pensioner, so a one-pensioner household gets £100 and if there are two pensioners they are deemed to receive £50 each, but if there are more than two pensioners in a household, they all get £50. Married men who become eligible will get £50, but some couples could earn £150: if the wife was aged 60 or more and claiming a pension on 20 September last year but the husband was under 65, she will have got her £100.

Mr. Michael Jabez Foster (Hastings and Rye)

The hon. Lady's concern for pensioners living at home with their parents and for expats on the Costa Brava is extremely touching, but do not she and her party oppose the very fact of the £100 bonus in any event?

Miss McIntosh

We would like to be in keeping with the law of the land and, where that law pertains to the European Union, we would probably have introduced the legislation sooner and caused much less concern to the constituents who are caught by it.

The hon. Member for Gravesham (Mr. Pond) mentioned comments made by our newly appointed shadow Chancellor, my right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo), who also said last week that we face a serious brain drain. One category being directly affected by the rules at this time of year includes those people who are caught by another press release: IR35. My advice to constituents would be to subscribe to every single press release from every single Department to find out exactly how they will be covered by tax or social security provisions.

IR35 covers those who are by definition self-employed and do not have one permanent employer, but who—by the admission of the Paymaster General—will have slammed on to them for the first time a massive national insurance contribution. It would be deeply regrettable if that category of people were to up sticks and leave the United Kingdom because of IR35. Perhaps the Government will see fit to reverse their provisions this evening or in next month's Budget.

Valerie Davey (Bristol, West)

Will the hon. Lady give way on that point?

Miss McIntosh

I am moving on now. The Secretary of State clearly stated this evening that it was the Government's wish to reduce child poverty, but only 30,000 of those lone parents who responded successfully to the Government's new deal for lone parents—only 5.9 per cent. of single parents invited to join the scheme—actually got jobs in the first full year, which ran from October 1998 to October 1999. Some 104,000 attended interviews, half of whom were mothers whose children were still too young but who had volunteered to join the scheme. That means that some 470,000 single parents on benefits with children over five are still eligible to join. I have heard no suggestions from the Government this evening that would reduce that figure, and the scheme has been singularly unsuccessful in achieving its aims.

Mr. Pond

The latest figures suggest that 112,000 went for interview from October 1998, and that 89 per cent. decided to take up one of the options available and to participate in the new deal for lone parents. Does that not suggest that lone parents have a more generous approach to the new deal than does the hon. Lady?

Miss McIntosh

My understanding is that I have given the most recent figures. As I mentioned earlier, more than 50,000 of those single parents whose children are still too young are desperate to get on the scheme, but they do not actually qualify.

The Government have failed to address the problem of child poverty. The new deal has proved a failure at removing a category of people from welfare dependency and that is to be regretted. The orders laid before us this evening are unsatisfactory and do not go far enough.

5.27 pm
Mr. Vernon Coaker (Gedling)

I was interested to note that the hon. Member for Vale of York (Miss McIntosh) said in her opening remarks that she opposed the increase of 75p in the basic state pension, because she disagrees with her Front-Bench colleagues on that point. They reaffirmed only a few minutes ago that that was not the policy of the Conservative party. I hope that the hon. Lady will point out that difference in any literature she sends to the pensioners in her constituency.

As always, the hon. Member for Northavon (Mr. Webb) made an interesting speech, but I was disappointed that he homed in on pensions and ignored some of the other uprating measures in the orders. The debate tonight has shown that the debate about social security is becoming more mature. The social security orders show the determination of the Government to move away from a welfare state that encourages dependency to one that is more proactive and starts to tackle some of the problems of social exclusion.

My hon. Friend the Member for Gravesham (Mr. Pond) made the important point that it is argued that the way to tackle poverty is to put £5 on this benefit or £8 on that benefit, which may give rise to significant short-term popularity. We cannot take people out of poverty simply by paying them more in benefits. In many respects, the payment of benefits is seen to be everything in the culture of the welfare state, and other policies have not been considered in the round. I realise that the amounts of benefit are important, but it is misguided to argue that they are the way to tackle poverty. We need a greater debate about welfare reform in general, and it is in that context that the uprating orders should be considered.

Mr. Webb

The hon. Gentleman makes a thoughtful and intelligent comment. For people of working age, what he says is obviously true. But for 80-year-old pensioners, welfare-to-work is irrelevant, and so are most things apart from cash income. The basic state income is not a handout but an entitlement. Does the hon. Gentleman not agree that it is a good mechanism for helping such people?

Mr. Coaker

The hon. Gentleman makes a fair comment. My point is that the Government's policy of targeting the poorest pensioners for help is the right way forward, and addresses the issue of raising the income of people who need it. As the hon. Gentleman is no doubt aware, there are age-related additions to the minimum income guarantee. It is not a flat rate that is paid to people at the age of 65 and then remains the same—it rises. In my view, that answers the hon. Gentleman's point about the need to provide more income for today's pensioners.

My general point is that the debate is about not just pensions but a whole range of other issues. We should not consider the social security uprating orders in isolation; the Government are introducing a range of reforms and measures to attack the issue. I refer to the new deal, the minimum wage, the working families tax credit and a whole range of other measures to tackle social exclusion, reduce dependency and drive home the attack on poverty that is so important.

This is a difficult debate to engage in, and no doubt many hon. Members who meet pensioners in their constituencies, as I do in mine, will agree. I believe that the Government's policy to target resources on the poorest pensioners is absolutely right. The problem with this debate is that it regards pensioners as a homogenous group of people. That is the myth that drives social policy in this area, and it is not true. Pensioners are not a homogenous group; they are not even, as was the case a few years ago, the poorest group in society. Some pensioners are rich and prosperous, there is a middle group and there are poor pensioners. We must ensure that we do something to address the needs of different groups of pensioners. The Government are attempting to do that, and this debate is starting to do it.

For the more prosperous pensioners, the Government's attempts to help by providing tax cuts on their income and on much of their savings will produce a real increase in income. I remind the House that people who have large occupational pensions, or who have occupational pensions at all, have them at cost to the state. While they have been accruing their occupational rights, they have paid lower rates of national insurance than other people, and so have their employers. That is quite right, because it has been part of an attempt to encourage people to have occupational pensions. We have made concessions for richer pensioners.

The minimum income guarantee is about trying to help those who are particularly poor, many of whom are pensioners. I am sick of seeing poverty among pensioners. I passionately believe that it is not necessarily right to give an across-the-board increase to all pensioners, because I want more money that would go to rich pensioners to go instead to the poor. That argument is not popular, and many of us have been attacked for defending that principle. However, the new Labour Government were elected to help the poorest, and we do not deny our roots by arguing that case. It is fully consistent with the values of the Labour party to say that we must give more income to those who struggle desperately to make ends meet.

My right hon. Friend the Secretary of State discussed the huge increases of, for single pensioners, £8, and, for couples, £12.60. If that represents for poorer pensioners a bigger increase than they would have received from an across-the-board rise, I am in favour of it. That is absolutely right. I do not want to be seen as a sycophant, but I should add that we cannot do everything at once. The changes before us are part of a package, and I am convinced that the Government's forthcoming policy announcements will address justifiable concerns affecting the middle group of pensioners over the coming year.

The hon. Member for Northavon and my hon. Friend the Member for Gravesham said that we need to examine capital allowances. I am confident that the Government will produce proposals to do something about allowances which have not been changed since 1998. In addition, I am sure that the Government will consider disregards relating to small occupational pensions and their effects on the minimum income guarantee.

It is surely right to target money on those in the most desperate poverty. I do not believe it wrong for a Labour Government to tell prosperous people who have benefited from occupational pensions and well-paid jobs that our priority is the poorest pensioner. We must get extra money to those who are trying desperately to make ends meet. If that means targeting help, that is what we must do.

We should remind all pensioners of exactly what the Government have done. We have reduced value added tax on fuel; introduced winter fuel payments; restored free eye tests; and granted free television licences for those aged over 75. We must move away from the "Yes, but" culture that says, "Yes, you have done this, but what about that?" The Government are making real progress with pension reforms. They are trying to get more money to the poorest pensioners and to achieve a fairer deal for pensioners across the board.

Over the year to come, we shall see real reductions in the prices that pensioners pay for gas, electricity and water, and they will make a real difference.

The Government have a good story to tell on pensions; it may be a difficult one in some respects, but it is one of which we can be proud. There is nothing wrong with a Labour Government saying that they stand up for the poorest people and that they are trying to target resources on them. That is true to the principles and values that the Labour party has held since it was formed.

Mr. Patrick Hall

Will my hon. Friend comment on the situation facing those pensioners whose income is not far above income support rates and who have a small occupational pension? I am sure that my hon. Friend, like me, will have met such people; they are not the wealthy pensioners to whom he has referred. How should their concerns be addressed in the long term? Of course, they sometimes do not have a long time.

Mr. Coaker

My hon. Friend makes a reasonable point, although I thought that I had addressed the fact that there is a middle group of pensioners for whom we need to consider such issues as capital allowances. We need to consider those matters because small occupational pensions take people just above income support, thus excluding them from entitlement to benefit. However, if we raise the point at which an occupational pension allows people to claim an income support top-up, another group of people will fall into that category. Nevertheless, the point is too low at present and the Government should consider the matter.

I am confident that the Government will consider capital allowances and occupational pensions as part of their reform package. The fundamental thrust of my remarks is that, if the choice is whether or not a Labour Government should direct resources to the poorest pensioners—even if that means difficult decisions—it is right to give those resources. I do not support a flat-rate increase for every pensioner irrespective of wealth, property or income; I support ensuring that those at the bottom, who are desperately poor, have resources poured towards them so that we make a real difference to the poverty in which they have lived for years. As a Labour Government, remaining true to Labour principles, we can make a real difference to them.

Other points relate to the radical nature of social security reform in its wider context. The Government Actuary's report is not a document that I usually read on Sunday nights, although I did so yesterday evening, which says a lot about me. The report is interesting; it describes many of the Government's reforms. For example: Entitlement to Maternity Allowance has been extended to include employed pregnant women who earn between the maternity threshold … and the lower earnings limit. They were previously excluded from claiming the allowance.

The document notes that maternity benefit for self-employed women will be increased by 15 per cent. to bring their benefit in line with employed women. Such changes are being made throughout the social security system; they seem small, but they affect the quality of life for many people. They show what the Government have been doing.

Under the uprating order, child benefit will be uprated from £14.40 to £15 for the first child, with an uprating of £10 for second and subsequent children. Is it not a sign of a radical Government, who are determined to do something for children, that the main benefit to support families, which is paid to mothers, has increased by 36 per cent. since we took power? That is a huge increase for families with children.

As my right hon. Friend the Secretary of State pointed out, if we add that increase to all the other changes and reforms that the Government are making, they show that the Government are ensuring that child poverty is attacked and that they are doing their utmost to eradicate it.

It must be desperately disheartening for us all when we see children living in poverty and lacking the opportunities that we would want for all children. The child benefit reforms and the child care tax reforms will be made in April 2001. The sure start schemes and a variety of other things make an important statement about the way that we intend to attack child poverty and rid our society of that stigma.

The hon. Member for Vale of York said that the new deal—another part of our welfare reform programme—was a failure. I do not think that it is a failure at all. I am proud to say that it is one of the most fundamental and radical reforms that any Government have made: to declare that, instead of abandoning people on the dole and forgetting all about them, we shall attack the problems that they face and engage with some of the people who have the most difficult problems, to bring them back into the work force.

If we want people to be brought out of poverty, we must get people back into work, and tucked away in the document by the Government Actuary's Department are reforms to the national insurance scheme and the lower earnings limit to try to make work pay. If those reforms are placed alongside some of the other measures—such as the new 10p starting rate of income tax—they show that the Government are making real efforts to align the national insurance rates and national insurance thresholds with the rates at which people start to pay income tax. That is real radical reform—real change—to ensure that work pays and that the people who, for so long, have been socially excluded are brought back into the workplace.

I remind my right hon. Friend the Minister of State—as did the hon. Member for Vale of York and others—that the issue of SERPS remains. I hope that the Government will make an announcement on it in the near future, although I noted the contents of paragraph 7 on page 4 of the report by the Government Actuary's Department, which I was reading on Sunday night.

I shall finish with a couple of other points. The first concerns the Conservative party position, which is incredible; I am sure that local Conservatives in my constituency and elsewhere are not aware that the official Conservative position on the basic state pension is exactly the same as ours. Indeed, the hon. Member for Vale of York is not even aware of the official position of the Conservative Front-Bench team. I am pleased that the Conservative position on the uprating of the basic state pension is exactly the same as the Labour Government's position. I hope that the fact is widely reported.

Secondly, I refer to page 8 of the report by the Government Actuary's Department, to show how complex these issues are. It is all very well for people to say, "We will attack social security spending and reduce it." I appreciate that the document deals with national insurance benefit payments, but the vast majority of national insurance benefit payments and the vast majority of social security payments are to do with pensions; and anyone who talks about reducing social security spending is, by implication, attacking social security spending on pensioners and on pensions. It makes a good soundbite, but the reality is that the vast majority of social security spending is spent on pensioners, and the bar graph on page 8 of the report shows that, although it sounds good as a piece of rhetoric, it is a ridiculous thing to say, given the economics of benefit payments and welfare reform.

I conclude by repeating that today's debate is crucial, because there is a growing feeling—almost a consensus—that the welfare state as it exists is failing. It is failing because, if it is not reformed, the people who are poor today will be poor in another 10 years, their children will be poor and their grandchildren will be poor. If it is unpopular to say some of the things that my right hon. Friends the Secretary of State and the Minister of State are saying—if it is unpopular to say some of the things that are needed to bring about reform—that unpopularity is a price worth paying to know that, in 10 or 20 years' time, some of those people who would have been poor will not be poor, as a result of the difficult decisions that we are taking today.

5.49 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I am pleased to follow the hon. Member for Gedling (Mr. Coaker); I know him well. He has made a good speech and his commitment on this subject is not in question. He spoke passionately about the need for the Government—in fact, all of us—to try to do better for people beyond retirement age who are on a low income; I support him in that. However, he faces a dilemma when he meets pension groups, and I understand and sympathise with him. They do not necessarily disagree with the need to target resources but pensioners tell me that they have paid national insurances contributions all their lives and that they were given an undertaking that they would be looked after. I do not wish to make a party political point—whom they blame is a matter for them—but they believe that the state undertaking has been broken. That is the nub of their argument.

It is all very well for the hon. Gentleman to be passionate about attacking the problems faced by those on low incomes, but the only discernable direction in which the Government are going is towards more means-testing of benefits. Means-tested benefits certainly include an aspect of targeting, but the hon. Gentleman knows enough about the subject to understand that all sorts of disadvantages—some covert and some blindingly obvious—are attached to a policy that is rooted in means-testing. In the long term, they are a massive disincentive to saving. If the hon. Gentleman is anything like me, he will have been made aware of that problem in the meetings that he has had with pensioners. Such benefits also have a negative effect on work incentives, they create poverty traps and, worst of all, take-up and eligibility are massive problems.

The hon. Gentleman is right to be passionate about helping those who need help most. However, if the Government use the one-club strategy of means-tested benefits, they will come across real difficulties that, sooner or later, will have to be addressed. Nevertheless, I concede that he made a powerful contribution to the debate.

I am very nervous about the fact that we do not spend enough time considering the national insurance contributory system. I know that that makes me sound a bit like old Labour, and I am sorry about that. The Social Security Committee is considering the contributory system, and I know that it is not easy to modernise it. I do not underestimate the importance of the £100 winter payment for pensioners, because it is an important universal payment. However, the Government appear to be heading to more and more means-tested benefits and, by default, the House seems to be content to follow them. We must make sure that we do not do that without thinking about the issues carefully.

Mr. Jeremy Corbyn (Islington, North)

I am pleased that the Social Security Committee is examining the role of national insurance, but, while it is doing that, could it not examine the employment patterns that are emerging in this country? Very few people remain with a single employer for long and many women change employers frequently and often do not build up an occupational pension, a stakeholder pension or even sufficient national insurance contributions. The pensioners who retire today are, in some ways, the best-off that there have ever been, whereas some people in their 30s and 40s will, in 20 years time, be among the worst-off that there have ever been.

Mr. Kirkwood

That is a fair point. Indeed, earlier, the Secretary of State said that changing work patterns, part-time work and stints of employment sometimes make it more difficult to build up a contributions record. It is not as easy now as it used to be. However, the Select Committee will consider all these issues and will try to come up with ideas on how to modernise the contributory system.

Mr. Pond

I thank the hon. Gentleman for giving way, especially as I had to nip out for a couple of moments to make a telephone call. When I came back, I heard him make a point about the direction of Government policy, which he believes is almost wholly in the direction of means-testing. However, I ask him to consider other universal benefits as well as the £100 winter payment. For example, there has been the biggest-ever increase in child benefit, which is one of the most important universal benefits, and the state second pension will contract people in as though they were earning £9,000 a year. In many other areas, people are being contracted in to the national insurance system. Surely that suggests that the jury is out on whether the Government are moving in the direction of means-testing or universality.

Mr. Kirkwood

The jury is out; I shall settle for that. The Select Committee will soon journey to Australia to study these issues. The Australian system has gone almost exclusively in the direction of means-testing, and I hope that our examination of the system there will inform our report. I hope that hon. Members will consider it seriously when it is published. This debate should be considered in the longer-term context of what is happening to the national insurance system.

My other slight worry—again, the Select Committee has done some work on this—is about the wholesale introduction of tax credits. In many ways, there are positive aspects to them, but witnesses to the Select Committee inquiry expounded on the problems that they entail. They told us about problems such as whether money should be paid into the wallet or the purse and they referred to the increased potential for fraud and collusion and to the difficulties of administration. The full extent of the difficulties will become apparent only from this April, when employers start paying the working families tax credit, and the hon. Member for Havant (Mr. Willetts) was right to raise some questions about that. I share his doubts.

The working families tax credit is only the start. We already know that there will be an earnings credit, an integrated child credit and I believe that we shall ultimately have some form of housing benefit tax credit. A whole panoply of reform and change is taking place, and I do not suggest that it is all bad. However, we must be careful that we understand where it will all lead.

The general economic context is important to the debate. I recognise that much interdepartmental working has taking place since the election, and that is positive. The Government's emphasis on trying to encourage work is absolutely right, although I have quibbles about some details. The policy is working well, but that may have something to do with the economic cycle. If there is a downturn, it will be interesting to see whether—I hope it will—the policy continues to work and to be successful. However, the Government are right to focus heavily on trying to encourage people into work and to make work pay. We are all aware of what they have done in that regard.

However, I want to add one important qualification. The adage is "Security for those who can't", and the Government have a long way to go before they persuade me that they are providing that security. I do not want to make too much of this point, but the emphasis that the Government have rightly put on getting people into work risks stigmatising those who can never work. There are many reasons why people cannot ever work, and they include chronic sickness and their geographical location. The labour market in Garscadden in downtown Glasgow is very different from that in Northampton or Reading. Welfare to work may operate well and supply-side measures may train people to become better qualified to compete in the labour market. However, if the labour market has collapsed, it is wrong to stigmatise those who cannot find work and suggest that they are not pulling their weight. We must be careful about that.

If people who cannot take advantage of the world of work have to rely on the core level of income support benefits, the level of those benefits needs to be seriously considered. In that regard, my indefatigable noble Friend Earl Russell managed to obtain written answers to questions asked in the other place. They looked at income support as expressed as a percentage of average earnings for a variety of income groups. The figures will not be a surprise to the Minister or to the rest of the House, but they reinforce a point about the core level of benefits in relation to average earnings and about what people are expected to live on.

A single person aged 18 to 24 is expected to live on 10.15 per cent. of average earnings. Another example is a single parent with one child under 11 who is expected to survive on 21.78 per cent. of average earnings. The highest figure is in the example of a couple with two children aged 13 and 16—expensive teenagers—who are expected to live on 37.76 per cent. of average earnings.

It is perfectly reasonable to expect people who are in transition to go through a period when they live on a third of average earnings, even if they have expensive teenagers. However, the figures for households with below-average earnings show that some families with children have been living at those benefit levels for seven years. Some 11 per cent. of families are in that position. Significant numbers of families are living for long periods at that level of income disadvantage compared with average earnings.

What is income support for? If it is only to be a bridge to a better benefit, such as welfare to work, that is fine. One can survive on income support for six months or perhaps a year, but then the washing machine or another substantial item of household machinery goes wrong and has to be replaced. A downward spiral then begins, as the Acheson report and the earlier Black report demonstrated when they discussed the problem of levels of benefit leading to a bad diet and poor health and housing. I worry that the current core rates of income support for the long-term unemployed client group are inadequate, and we should carefully consider that matter.

Mr. Webb

My hon. Friend made an important point about the poverty of people who are on benefits for a long period. He will know that the old supplementary benefit system had a higher long-term rate. Does he accept that there is a problem in increasing people's benefits when they have stayed on benefits long enough to qualify for the higher rate? Does he have an answer to that paradox?

Mr. Kirkwood

No. That is an enormous problem. If people get more money after they have been on benefits for five years, they may be tied more tightly into the benefits system. I am certainly not saying that any of this is easy.

My hon. Friend made a sensible suggestion about introducing a special pensioner index. We should also consider more carefully the work done by the family budget unit. We should think about what a minimum income should be, because income support levels do not reflect the needs of a family. The family budget unit has used its own resources to do extremely valuable work and it has tried to work out what a modest but adequate income would be. I support that work, and I hope that the Government will study it.

None of the official statistics properly reflect the level of indebtedness of many of the households that I come across. It is all very well to specify income levels on which people are expected to support themselves, but we must recognise that many people have store cards and credit cards and some regrettably are even in debt to loan sharks. Even with an average income, they would struggle to get through the next two or three years. They cope by working from week to week, on a cash basis, and by robbing Peter to pay Paul. To do that year in, year out is debilitating and causes immense stress. That is the principal reason for the high level of family break-up in this country, which is worse than that in other European nations. Not enough is being done to deal with that problem.

I turn now to the promotion of entitlement to benefits. I wonder what it would cost to impose a duty on the Benefits Agency to maximise people's entitlement to benefit. I recognise that the administration is under a lot of pressure and that it has a big budget and an amazing task to do and that the staff do a very professional job in delivering benefits. However, claimants would be more confident that they were dealing with people who were on their side if they knew that agency staff had a duty not merely to respond to questions about entitlement to a particular benefit, such as severe disablement allowance, but to point out potential entitlement to housing benefit or council tax benefit, if that were obvious to them.

The Benefits Agency should have a statutory duty to use its best endeavours to ask questions of all claimants and to maximise their benefits. At the moment, that does not happen. I do not know what additional administrative costs would be involved, but if the agency were told to do that, it would have to do it. The House should seriously consider that proposal.

I turn now to housing benefit reform. If one assumes that all the welfare-to-work reforms are right and are working as well as they can, housing benefit would then be the biggest outstanding hurdle in preventing most people from getting off benefit and into work. There is no easy solution, but the issue is urgent. Pressure groups and others who follow these matters are beginning to express dismay about the delay in the Government even suggesting options that we could consider.

It is the Social Security Committee's intention to consider housing benefit. We would have much preferred to wait for the contents of the Green Paper, which would have given us something to work on, but we cannot. The publication date now seems indefinitely postponed, so we shall go ahead and do our best without the Green Paper.

Mr. Corbyn

I am pleased that the Select Committee will consider housing benefit. Will it look beyond the question of fraud and benefit tapers to the benefit's overall costs, including administrative costs, particularly in inner urban areas, where rents are sky high because of deregulation under the previous Government?

Mr. Kirkwood

I confess that, coming from a relatively rural area, I was staggered to learn from some Labour members of the Select Committee about problems in areas such as the hon. Gentleman's constituency and about rent levels. One could acquire a modest estate in Roxburghshire for some of the rents being paid for single room flats here in London.

Mr. Corbyn

Give me the address.

Mr. Kirkwood

If anyone is interested, I will provide contracts for estate agents after the debate.

Housing benefit is a problem that needs to be addressed seriously, and I hope that the Select Committee report will make a positive contribution to that.

Prompted by the earlier intervention of my hon. Friend the Member for Northavon (Mr. Webb), I remind the House in passing that the old supplementary benefit system used to contain an element to take into account water and sewerage charges. I do not know whether this is true for the rest of the country, but some of the increases in water charges in Scotland are swingeing, and there is no accommodation for that or for the costs of increased sewerage charges in the current income support system. We need to look into that.

I am also coming to the conclusion that the council tax property bandings militate against the poor much more than they used to do. A recent report from the New Policy Institute starkly demonstrated that the incidence of council tax benefit was prejudicing people on very low incomes in modest accommodation. We need to consider that problem.

I shall not dwell on capital limits because my hon. Friend and others have referred to them. It is high time that the Government dealt with those limits, which penalise saving. They were last revised in 1988, so change is a long time coming. Earnings limits also cause me concern because they penalise work. I shall give the Minister two examples, which are always cropping up in my constituency surgery. The first is the therapeutic earnings limit for severe disablement allowance and incapacity benefit, which is now set at £58. That is too low if one believes that it is important to try to encourage people into work. That earnings limit could be increased modestly, but regularly. The same is true of the situation facing carers. The earnings limit for invalid care allowance is £50—below the lower earnings limit for the national insurance system. Surely increase to such earnings limits should be addressed in these orders.

The parental leave proposal will have an important social impact. The orders do not directly address the issue, but the Select Committee reported on it. Before the inquiry, I was very sceptical about making such leave paid, but there is overwhelming evidence that the Government's proposal is likely to be useless and irrelevant without some form of payment. Payment would help enormously, bind family groups and assist in meeting some of the Government's other perfectly proper social targets. I hope that that will be considered urgently.

Although I am intrinsically against rejecting orders such as these, I support my hon. Friend the Member for Northavon. If I were Secretary of State—we are all playing Social Security Secretary in this debate—I could not in all conscience simply valorise these pension increases. I would double them because pensioners were led to expect a return for the national insurance contributions that they made. The Minister gave me a bit of criticism for being a little superficial about the £16 billion, but it is a lot of money. If we cannot increase pension upratings by more than 1.1 per cent. against the background of a massive £16.6 billion surplus, when will we ever give such increases a little consideration?

Such consideration could have been justified by the argument that it is necessary to discharge the duty and liability that was undertaken under the national insurance scheme. My hon. Friend is absolutely right and, if he divides the House, I shall—very unusually on this subject—be happy to follow him into the Lobby. These are wholly exceptional circumstances. It is impossible successfully to argue in front of a group of retired people that a 75p increase is right in the circumstances. The House should respond in the way in which my hon. Friend suggests.

I should like to say a word about overseas pensioners. I know that the Minister of State receives the same e-mails as I do from Canada, Australia and other exotic places. When the Select Committee visits Australia, I have no doubt that we shall spend much of our time dodging pensioners whose pensions have not been uprated for many years.

I am not advocating immediately finding the £400 million or £500 million that it would cost to put things right. However, it is contrary to natural justice to leave such pensioners languishing without any uprating consideration. Something should be done—even if we give them only a small amount this year. I am arguing not for gesture politics but for a recognition of an honourable commitment that pensioners look to us to fulfil. I am disappointed that hon. Members who usually take an interest in these debates are not present this evening to continue to support that case.

I am not saying that we are short of reform or that the Government are not doing anything but, as well as the delay to which my hon. Friend the Member for Northavon referred, there is piecemeal approach to social security policy, especially for those who cannot reasonably be expected to work. I want the Government seriously to consider that. I welcome public service agreements and all the other performance indicators that the Government have set out at length, because they will be helpful in trying to measure performance.

I am generally IT-friendly, but even I am worried about the impact of ineffective computer systems on the delivery of benefit mechanisms. I do not need to tell the Minister that. The Child Support Agency computer system and NIRS2 are causing problems, and the working families tax credit might cause some computer problems as well. If implemented properly, computerisation can help, but much more work needs to be done.

If the Minister takes anything from this debate from me, I hope that it is that those who cannot reasonably be expected to work should receive greater consideration. I would be happier if that consideration were undertaken in a coherent framework of modernisation of the national insurance contributory system.

6.15 pm
Mr. Tony McWalter (Hemel Hempstead)

I shall evaluate the orders from the perspective of those of my constituents who have a very strong sense that a major injustice has been visited on them, considering the extent to which it is fair of them to think that and what can be done about it. Their sense of injustice is, of course, partly because of the 75p uprating. Many have also contributed to an occupational pension and saved all their lives, but feel that they are getting precious little in return. One might add some stuff about long-term care and worries about how savings and occupational pensions will not protect pensioners in that difficult area.

I differ significantly from the Liberal Democrats' stance on the 75p increase, although I was tempted by one idea that came out in debate across the Floor of the House. Pensioners seem worried not so much about the precise amount of the increase but that it represents an erosion of their living standard. Even if there were a pensioner index and that produced a 78p uprating, pensioners might not be satisfied with it, but they would not have such a sense of erosion—however small. Their perception is that they have contributed to the fund throughout their working lives but year on year it entitles them to—however little—less.

The Government should seriously take on board such structural matters in the orders, although I realise that structural matters cannot be part of this debate. A separate pensioner index could address the sense of injustice, but it might lead some time down the road to upratings of less than the rate of inflation. I therefore agree with what eventually emerged in Liberal Democrat policy on the hoof: we should take the greater of the two figures and allow pensioners to share in the country's improving wealth, but not if it led to an alarming rate that might generate inflation.

From talking to my pensioner constituents, I have found that some would be perfectly happy with an increase of, say, £16—a nice big figure—even though it might result in inflation raging at the levels sometimes witnessed under the Conservative party in the late 1980s. The Government, in fact, are keeping inflation down for pensioners; they are maintaining the erstwhile purchasing value of pensioners' savings. We cannot have it both ways. We cannot lament the low increase and suggest a much bigger one without considering the inflationary consequences and the threat of derailment of a well-managed economy, from which pensioners benefit. That is important. If a marginal change in structure were accepted by the Government for future orders, we could tackle the feeling of anger on the part of some pensioners that the system leads to the unjustifiable lowering of their standard of living in some years.

However, the Government have not left the matter in limbo. They have targeted the poorest pensioners by including the minimum income guarantee. We all know the difficulties involved in getting people to claim that. They feel reluctant to do so, and the barriers in the way of claiming it are substantial. The Government are committed to lowering those barriers and making it much easier for people to claim the minimum income guarantee.

That could have been done more easily if the increase were a nice round figure. It is much more difficult to publicise a sum consisting of some pounds and some odd pence than a round sum such as 80 quid. Everyone can understand that. A simple headline figure, slightly larger than the Government propose, would assist publicity. People would focus on the £80, rather than on the 75p. That would get over the idea that a single pensioner cannot be expected to live on the new pension level of £67.50.

A marginal change in the minimum income guarantee to a round figure that was easily publicised would help us all. We have all tried to get across to people what that figure is, how much difference it could make to their lives and what improvement it could provide.

When dealing with some of the other anomalies in the system, my hon. Friend the Member for Gedling (Mr. Coaker), who is no longer with us, mentioned three categories of pensioners—rich, in the middle or poor. That is not a sufficiently fine-grained distinction. I would divide them into four quartiles.

Pensioners in the third and fourth quartiles have under-average earnings. It is important to deal with not only the poorest—those in the fourth quartile—but those with under-average earnings, who may have ploughed a great deal of energy and effort into trying to build up an occupational pension and savings, in the third quartile, where much of the feeling of injustice resides.

That is where a huge number of anomalies in the current system exist. As we increase the minimum income guarantee—rightly—by more than the level of earnings and by more than the level of headline inflation, we nudge ever closer to the incomes of people who have put by all their lives and are now above income support levels, but have standards of living below income support levels.

If, under the new figures, the income of those pensioners is £80, they cannot claim income support, so in my patch, for example, they cannot claim a Dacorum travel card for cheaper travel on the buses, and various other benefits that follow from being on income support. The sense of injustice may be heightened, unless we take more specific account of those on modest occupational pensions.

We have also heard about the threshold for savings. I know that that is under review. It must be addressed, as it compounds the sense that pensioners are being treated unjustly. From the Opposition Benches we heard a spectacular figure for the amount of savings needed to generate income support. A reasonable figure for savings is about £12,000, which would provide a top-up to the basic pension. The interest on £12,000 would take the income a little above income support level—not the £49,000 suggested from the Opposition Front Bench.

That figure was arrived at by compounding all income support, not just income support for pensioners. That would produce an average of £60 a week, but it is not relevant to the present debate.

We must recognise pensioners' sense of injustice and belief that they are not being treated fairly. In some ways, that sense of injustice is erroneously directed. If the increase is low, it is because we have kept inflation low and we have tried to allow pensioners to benefit from a well-managed economy. However, many other aspects of the system need change, such as the threshold and the provision for capital allowances.

There is a perception among pensioners that they must go cap in hand to claim the income support top-up. We must get across the idea that those who receive that money deserve it and have earned it. We must make it clear that we understand that £67.50 is not full recompense for their contributions throughout their working life. We need to change people's attitude to that money, and we could do that through the publicity campaign that has been discussed, but such a campaign would be more successful if the headline figure were £80, not £78-odd.

I hope that my right hon. Friend the Minister will regard my remarks as constructive. I commend the many improvements in the orders. Some of the criticisms being levelled against us are unfair, but some of the underlying structures need careful fine-tuning if we are to avoid the sense among pensioners that the Government are willing to visit injustice upon them. That perception is unfair, and I hope that it will be dispelled by the time that the changes are introduced next year.

6.27 pm
Mr. Andrew George (St. Ives)

I follow the constructive contribution of the hon. Member for Hemel Hempstead (Mr. McWalter) by drawing attention to the theme of the debate—targeting the poorest, and how best we can do that. That is largely a technical matter. We may disagree on policy, but we on the Liberal Democrat Benches do not question the Government's intention.

In my brief contribution, I shall deal with take-up, following an earlier intervention from the hon. Member for Gedling (Mr. Coaker), whom I welcome back to the debate. We are discussing not merely an increase of 75p a week in the basic state pension but, according to the Government Actuary's report, a low increase of 1.1 per cent. across the board—for example, in jobseeker's allowance.

Personal benefit for those aged 18 to 24 will increase from £40.70 to £41.35, an increase of 65p, and personal benefit for those aged 25 and over will increase by 80p. Incapacity benefit will increase by 65p. We have not done justice to the fact that there are groups other than pensioners who face relatively low increases in benefit income.

The Government rightly want to find mechanisms to encourage people into work and off benefit. In the context of housing benefit, we are considering not simply those who are unemployed, but those who are in work on low incomes. They sometimes have the opportunity to do overtime, or to improve themselves, but the housing benefit system provides little incentive for them to do that. Several hon. Members have commented on the fact that the steepness of the tapers adds to severe social problems.

My constituency includes people on some of the lowest incomes in the land. Many people are already employed, but find that taking up overtime is hardly worth their while. For example, a constituent recently told me that doing overtime as a school cleaner because of another member of staff's illness was hardly worth while. Newspapers report today that there is some debate between the Department of Social Security and the Treasury about the possibility of an announcement on tapers. Such an announcement would be welcome. It would be helpful to hon. Members who take a deep interest in the matter if the Minister could throw any light on the press speculation.

I want to consider the take-up of disability benefits. A recent Government report shows an underspend in disability benefits of £754 million last year. That is greater than the effect of the cut in incapacity benefit for which the Welfare Reform and Pensions Act 1999 provides. Earlier, the hon. Member for Gedling referred to concern about the take-up of attendance allowance. Why is there no take-up campaign? The Government said that they were worried about the low take-up of income support generally. That applies especially to those who are elderly and disabled. Those who are eligible should claim attendance allowance. However, Government research shows that between 40 and 60 per cent. of eligible applicants claim. That means that a potentially large group does not. The figures are vague, but almost half of those who are eligible for attendance allowance do not claim it.

It is worth stressing that we are considering not only the poorest of the poor but those who are especially socially excluded: those who have neither the income nor the ability to go out. A recent Government report drew attention to that. The Government claim that pensioners are a priority, and we agree. However, little is being done to encourage those who are elderly and disabled to take up attendance allowance. I hope that the Minister will deal with that point, and, if he can, commit the Government to future plans to tackle it.

Mr. Rooker

I shall not talk about attendance allowance because the order does not cover it. Attendance allowance is not a national insurance benefit. However, the hon. Gentleman should reflect on the fact that it is not means-tested. The arguments about stigma therefore cannot apply to attendance allowance.

Mr. George

I accept the Minister's intervention in the spirit in which it was intended. [Interruption.] I am stimulated to refer to attendance allowance because, as my hon. Friends are pointing out, the order refers to it. I stress that we are considering one of the most socially excluded groups in the country. I am sure that the Government agree that we should concentrate on that group and do all that we can to ensure that they are enabled to take up the benefits to which they are entitled. I hope that a Labour Government want to take action to remedy previous Governments' failures to deal with the matter.

Mr. Rooker

The hon. Gentleman homed in on attendance allowance and was right to say that take-up is low. However, unlike pensions and other contributory benefits, and minimum income guarantee, which is means-tested, another group of benefits are not means-tested. The reasons for the low take-up cannot, therefore, be stigma and other reasons that are associated with minimum income guarantee. The reasons for the take-up of various benefits are different. We are considering a serious matter, which must be addressed, but stigma cannot be responsible for the low take-up of attendance allowance.

Mr. George

I agree with the Minister. There is no reason to hang back on promoting attendance allowance. Department of Social Security research report 94, which was published in July last year and entitled "Disability in Great Britain", referred to a survey on the number of outings that disabled older people made. They were asked how many outings they had made in the past four weeks. The report said: over 40 per cent. of the most severely disabled people (severity 9–10) and a quarter of disabled people aged 70 and over had not been out shopping, to visit family or friends or on any kind of excursion in the four weeks prior to interview. A quarter of more seriously disabled people said they would make more outings were help available or facilities better. That is a matter of shared concern. I am not criticising the Government; it is helpful that they undertook the research.

The Government are clearly concerned about the report's findings. We are considering not only the poorest of the poor but the most socially excluded. We are discussing literal exclusion from society. Government action, especially a take-up campaign, would therefore be welcome. It would support carers and combat social exclusion.

6.38 pm
Mr. Jeremy Corbyn (Islington, North)

I am disappointed that there are not more hon. Members present; it seems that, on a Monday evening, the House of Commons is as empty as the millennium dome.

I want to consider two matters: the effect of social security on poverty, and the uprating of pensions. I represent an inner-urban area that is variously described as chic, wealthy and the home of new Labour; and as a centre of poverty and unemployment. It might be all of those things. An inner-urban area with high rates of unemployment inevitably has high levels of poverty. In some schools in my constituency, 70 per cent. of the children receive free school meals. That is possible only if parents are on income support.

Statistics show that my constituency has one of the highest long-term unemployment levels in the United Kingdom. That is due to a combination of the loss of manufacturing industry and small workshop industries; to increases in IT-related industries; and to the fact that many people do not have appropriate skills for such jobs. It is advantageous for an employer to sell anything resembling a workshop or manufacturing unit anywhere in inner London for private housing development, which they can do at phenomenal prices. That is a product of the property boom, to which I shall return shortly. There is a paradox: there is a property boom and huge profits are being made from speculation, but that does not benefit local people on housing waiting lists and it helps to create high unemployment.

The effect of social transformation in my area of inner London is not that different from the effect in many other areas around the inner-London ring, such as Tower Hamlets, Hackney, Camden, Lewisham and Lambeth. The poorest people cannot get council housing or housing association property because there is hardly any investment in them. Last year, the princely total of 200 new affordable rented properties were created in the whole borough. The housing waiting list is about 10,000. The transfer list is about 12,000. An unknown number of single people cannot even register to get on the council house waiting list in the first place.

Younger people either have to pay high private rents to get a place to live or move out of the area. In turn, that creates a sense of isolation and anger among the elderly who no longer have extended family networks around them or the joy of meeting or seeing grandchildren frequently. They live increasingly isolated lives and one detects a degree of bitterness about what is happening in their community. I realise that the social security system cannot address that issue, but the debate is about social security, so I want to discuss it. The other aspects of Government policy that impinge on poverty have to be considered within the system.

I am not altogether critical of a lot of what the Government have done in areas of poverty. The introduction of the minimum wage has had a good effect in my constituency, even though it is not one of the lowest-paid in the country. The working families tax credit has likewise had an enormous impact—a lot of people have benefited from it hugely—as have the single regeneration budget and the support provided through the new deal, which has enabled people who have been on benefits in the long term to return to work.

However, I am worried about those who are removed from benefit altogether because they fail the actively seeking work test or a restart interview. I am disturbed that a large number of people are on no benefit whatever and have poor lives. They end up homeless or on the streets as they refuse to undertake training courses that they believe are inappropriate for them. Perhaps my right hon. Friend the Minister will deal with that in his winding-up speech. That is the downside of the effort to reduce the number of people on benefit, and it must be addressed seriously. People disappear from the statistics altogether because they are no longer on benefit, seeking work or claiming anything. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), the Chairman of the Social Security Committee, is present, and I hope that his Committee—and the social exclusion unit—will take that on board and consider it seriously.

I welcome the money being spent on the single regeneration budget, which is specifically targeted on inner-urban areas of great poverty where long-term unemployment is a problem and a large proportion of the population are on income support. In parenthesis, I stress to my right hon. Friend the Minister that that has to be accompanied by significantly greater public sector investment in good-quality rented housing—otherwise, all the problems that I have described simply will not go away.

The order that we are asked to approve mentions housing benefit tapers. A few Members have referred to them and to the whole system of housing benefit. I was a local councillor when housing benefit was introduced and its administration was rather unfairly put on local government which, by and large, is not particularly well equipped to administer what is in effect a social security benefit. Indeed, if the experience in my own community and neighbouring London boroughs is anything to go by, the administration is something akin to abominable or appalling—depending on whether I am in a good or very good mood when I describe it. Indeed, the administration of a company named IT Net, which operates in Islington and Hackney, is so poor that a large number of people have been threatened with eviction because their rent is allegedly in arrears, although they are not in arrears at all. The incompetent delivery of housing benefit puts them in arrears and they are therefore threatened with eviction. Many such people have been evicted by that company on behalf of private sector landlords.

I look to my right hon. Friend the Secretary of State to consider a number of issues such as the cost to local authorities of administering housing benefit. Local authorities pay a direct penalty, as administration represents a cost unless they are fantastically efficient. If they are lucky, they may achieve a nil deficit. There is a positive disincentive to administering housing benefit in the way that it ought to be administered.

I also want to refer to the sum that society spends on housing benefit, which is absolutely phenomenal. Very high rents apply in inner-London areas and possibly in the inner-urban areas of other cities. The normal council rent for a two-bedroom property might be about £70 or £80 a week, but a house sold under the right-to-buy scheme and let out privately could be rented out for £150, £200 or £300 a week. Often, that is paid by housing benefit. House A, which receives housing benefit, might cost £80 a week, but house B could cost us, the community, two or three times as much because the right to buy was exercised some years ago. Private rented one-bedroom flats cost £150 week, and houses £400 a week. Through the rent deregulation introduced by the Tories, the housing benefit system is creating property millionaires through public sector expenditure.

I look to my right hon. Friend the Secretary of State to do something about that. He must be prepared seriously to consider the reintroduction of rent controls and the need for investment in good-quality public sector housing. We are pouring money into the pockets of landlords when we ought to be putting it into bricks and mortar to house people in desperate need. Those issues are extremely important.

I have spent many years working with the Islington Pensioners Forum and am pleased to have been able to do so. I work also with the Greater London Pensioners Association and the Greater London Forum for the Elderly, which meets quarterly in the House. When one considers history, one sees the great determination of 110 or 120 years ago which eventually led to the introduction of the state old-age pension in the Lloyd George Budget. [Interruption.] Before the Liberals get completely carried away, I have in my possession a book entitled "No Thanks to Lloyd George: the Introduction of the State Old-Age Pension", which was presented to me by the Highbury Pensioners Forum. Apparently, the old charlatan had to be driven to it at the last moment; he had not the slightest intention of doing it. I shall leave that for a Liberal Democrat history workshop. I should be happy to come along and discuss the whole question with them. We could have a fascinating debate.

The old-age pension was introduced about 100 years ago—essentially as a result of pressure from radical groups such as Churches, trade unions and elements of the Liberal party—and began fairly modestly. As a proportion of average earnings, it fell at various times and at one point was worth very little indeed. The great reforms in the pension system occurred in 1975 when Barbara Castle and Brian O'Malley introduced a Bill that linked the state pension with earnings and recognised that a large number of people in work were not eligible to enter an occupational pension scheme because they were part-time, on short-term contracts, or working for a company that did not have such a scheme. SERPS was developed to take over from previous schemes that were meant to mop up those who were not covered.

The incoming Tory Government inherited a good situation. By 1980, the state pension was rising in line with earnings and the number of people with access to either a low or a nil-contribution occupational pension was very high indeed. Former Chancellor Geoffrey Howe described the abolition of the link between the state pension and earnings in 1980 as his greatest achievement. A great achievement it certainly was: as a result of that single act, the state pension as a proportion of earnings has been reduced from about 24 per cent. in 1980–81 to about 14 per cent. at present—if my memory serves me correctly.

A Bill that the right hon. Member for Huntingdon (Mr. Major)—the former Prime Minister—helped to guide through the House as a junior Social Security Minister in 1986 falsely claimed that SERPS was unsustainable, and therefore must be revalued. The purpose of that Bill—which became the Social Security Act 1986—was to create a market for the private pensions industry.

After 18 years of Tory Government, we have a state pension linked to prices rather than earnings, which has fallen dramatically in value. We have also seen a massive mis-selling of private pensions as a result of the 1986 legislation. I think there is a good deal of common ground between the Liberal Democrats and Labour: both parties believe that the situation is appalling, and that the poverty of many pensioners must be addressed.

Pensioners whom I meet are extremely angry about their lot. They are angry about their poverty; they are angry about being told that they will receive an increase of 70-odd pence this year; and they are angry—I think they are right to be so—about something else. They have contributed to national insurance-related benefits all their lives, and their generation created the welfare state consensus of the post-war period. They now feel that they are being sold something that they do not want: something that should be very different.

My problem with the Government's pensions strategy does not lie in the adoption of the winter fuel allowance, or with the abolition of payment for eye tests. I welcome those moves. My problem lies in the Government's failure to recognise the high cost of living experienced by many elderly people. The hon. Member for Northavon (Mr. Webb) mentioned a pensioner index. I think that such an index should be adopted officially, because people who buy in small quantities tend to spend more in doing so. Moreover, hidden expenses are involved in the increased cost of many activities in which pensioners want to engage.

In London, following the abolition of the Inner London education authority, adult education has been the victim of a holocaust, and that has been replicated in many other parts of the country. It now costs a great deal to undertake an adult education course. Most people must pay to go to day centres, or to engage a home carer. All those costs have been introduced by stealth over the past decade or so. It is time to recognise that, for many pensioners, life is prohibitively expensive. The day centres that were created for the benefit of specific people are often half empty, or indeed closed, because those people cannot afford to pay what are actually quite small charges.

Mr. David Heath (Somerton and Frome)

I agree with much of what the hon. Gentleman has said, especially about the need for a pensioner index. It will be interesting to see whether the Minister responds to that point; he did not do so the other day, when we debated the same issue.

Does the hon. Gentleman agree that one reason for grievance is the fact that people do not differentiate between different parts of government? People who see national Government granting a 75p increase, and know that it will immediately be taken away by local government through either council tax or additional charges for services such as those described by the hon. Gentleman, perceive that as a con trick.

Mr. Corbyn

Absolutely. After last year's pension increase, I attended my local pensioners forum. Having discussed the increase, the pensioners decided that the amount had already gone. Indeed, they calculated that they had been given a "negative rise", because of various other charges and council tax rises.

Pensioners in every part of the country probably rely on local authority services more heavily than the rest of the population, through the very fact of their greater age and needs. Local authorities wishing to reduce the council tax rise that they must impose on the electorate as a whole are often quick to introduce high charges for marginal groups, in order to ameliorate their demand on society generally. In fact, increasing taxation overall is much fairer and cheaper than introducing charges that apply to specific groups.

Let me make a final point about the Government's pensions strategy. I believe in a large state old age pension. I wish that the Government had chosen to revalue and maintain SERPS, keeping in mind the vision of the 1970s, rather than adopting the idea of stakeholder pensions and the minimum income guarantee. I suspect that there is a problem. The Government believe in universal benefits: they believe in child benefit, the winter fuel allowance and the state pension, none of which are means-tested. In our debates on pensions, the Secretary of State has produced figures showing that many pensioners do not claim income support for various reasons, including poor advice and the stigma that they feel is involved. I suspect that, if we engage in a similar debate in 10 years' time, we shall hear a similar argument—on a larger scale—about the number of pensioners who do not take up the minimum income guarantee because they do not want to negotiate the hurdles involved in applying for it, or are unable to do so.

We are dealing with a generation of people who are now retiring. Many of those people, particularly the men, are on occupational pension schemes, and are, if not well off, then better off than people who retired some years ago. The age profile of the pensioner community shows that the older they get, the poorer they get. The women are poor in the first place, and the oldest female pensioners are often the poorest.

As for those who are now in their 30s, 40s and 50s, they change jobs frequently. Many are in no private scheme, no occupational scheme, no other scheme of any sort. Such people will rely on a state pension, plus any top-ups that they can get. In 20 years' time, a significant number of pensioners will rely heavily on means-tested benefits that are expensive to administer, inefficient in their direction and inefficient generally.

We should instead consider a substantial increase in the basic state pension, and, in principle, a link with average earnings. If it is good enough to link the principle of the minimum income guarantee to average earnings, it ought to be good enough to do the same with the basic state pension. If we at least adopted that principle, pensioners would see that the state pension was beginning to increase in line with the wealth of the rest of the community. That is the vision that Barbara Castle and others had in the mid-1970s, and I think we should have the courage to have it now.

A couple of Members have mentioned overseas pensions. When I was a member of the Social Security Committee in the last Parliament, we examined the whole question of British people living abroad who were eligible for a British pension. It depends where people live: it is a lottery. People move abroad, on or before retirement, for a number of reasons to do with home, family or other factors. There is nothing wrong with that. They have paid for, have worked for, and are eligible for, pensions in this country, and I see no reason for the pensions that they receive not to be linked to what is paid here.

We expect Australia, which has a comprehensive welfare state, to support British pensioners. British pensioners living in South Africa, where there is no such comprehensive welfare state, do very badly. Canada, which has a comprehensive welfare state, gives pensioners strong support, but pensioners living in another country will not receive that support. I think that that is morally wrong, and that we should arrange for the current state pension here to apply to British pensioners wherever they happen to be, provided that they are eligible to receive it.

Mr. Mackinlay

I see the Secretary of State lurking behind the Speaker's Chair, but I hope that the Minister will respond to a question that I asked the Secretary of State earlier, which he did not answer.

When I asked the Secretary of State my question, he said that we must use our resources carefully, and that they must be used in other ways. He did not, however, tell me why there should be a disparity between expatriates in some countries and expatriates in others. It is a logic that I do not understand.

Mr. Corbyn

I do not think it fair to say that the Secretary of State is lurking behind the Speaker's Chair. He seems to be standing beside it with great confidence, and no doubt he will shortly come in and announce that he agrees with everything my hon. Friend and I are saying about the uprating of the overseas pension.

The position is entirely illogical. Those who live in one country will receive the pension, while those living in another country will not. As I have said, people live in countries for a variety of family and related reasons, and I think that we should deal with the moral issue involved.

The House has a chance to do far more for pensioners. As a start, we should agree to link the state pension with earnings again. That would give an awful lot of confidence to an awful lot of pensioners who feel hard done by. They are very angry about the minuscule increase being offered to them from April, and look to politicians of all parties to ensure that in future years they receive a decent increase.

7 pm

Mrs. Jacqui Lait (Beckenham)

This debate, like most of our debates, has been not only wide-ranging, but very interesting—I am just grateful that I am not the one who will have to add up the sums requested today by hon. Members on both sides of the Chamber. Those sums would make the sum provided for pensions—which is one third of the social security budget—look very meagre.

I do not follow the hon. Member for Islington, North (Mr. Corbyn)—who certainly committed himself to large sums—but would point out to him that, given the current population structure, his thinking on pensions would be unlikely to produce for him either a state or funded pension on which he could live happily for the rest of his life.

We have been debating some complex but actually rather simple motions to approve the social security uprating orders. Conservative Members will not vote against the motions, and—although I am tempted to deal with some of the many suggestions made in the debate—I shall be brief in my comments. Moreover, I suspect that the Minister and I are still trying to get our heads round clauses 28 and 29 of the Child Support, Pensions and Social Security Bill, which we shall start debating tomorrow in Committee. Some of the matters mentioned in the debate—such as the state second pension—are dealt with also in the Bill.

Although I have not yet tabled them, there will also be amendments to the Bill on annuities and the 75-year rule. I certainly agree with my hon. Friend the Member for Vale of York (Miss McIntosh) that there needs to be substantial change to the rule.

I was sad to see that, on Friday, the Department of Social Security felt it necessary to slip out a consultation paper on indexation of annuities. The paper has not yet reached either the Vote Office or the Library, although it is available on the internet—which is perhaps where, in future, we shall receive our information, rather than receiving it in the usual manner in the House. Nevertheless, I give the Minister notice that the annuity issue will undoubtedly arise in our consideration of the Bill in Committee.

As many hon. Members have said, pensioners believe that the 75p increase is measly. The Government have regularly made the point that pensioners have access to the minimum income guarantee. Nevertheless, the guarantee is merely a part of the income support system, but with a splendid new name. As hon. Members have said, support provided as part of the guarantee is means-tested. The guarantee is also not being taken up with great enthusiasm. I think that it is really a bit of a cruel trick to play on pensioners.

I look forward to hearing the Government's proposals on how they will try to increase take-up. Although many attempts have been made on many occasions to improve take-up, no one has yet succeeded. Perhaps Ministers, in the Government's new world of spin doctors, will find the key and ensure increased take-up of the minimum income guarantee.

I look forward also to hearing the Government's statement on widows' inheritance and the state earnings-related pension scheme. Earlier today, I was slightly surprised by the Minister's reply to my question on when a decision on those matters is likely to be made, and on whether we shall have to wait for a decision until 2002—when one will be made also on pensions—or might expect one a bit sooner.

I shall not take up more of the House's time on the motions. As I said, on the pensions Bill, it is cold-towel time for the Minister and me. I reiterate, however, that Conservative Members will not vote against the motions.

7.4 pm

The Minister of State, Department of Social Security (Mr. Jeff Rooker)

I believe that—other than at today's Question Time—this has been the first time that the hon. Member for Beckenham (Mrs. Lait) has replied to a debate since being given her new portfolio.

Mrs. Lait

It was the first time in the House.

Mr. Rooker

Yes. It has reminded me of when my right hon. and noble Friend Lord Orme first allowed me a run at the Dispatch Box. It was in a social security debate, but at a low-key moment, after 10 o'clock at night, so that it would not matter if things went wrong.

We have had a very interesting debate. Although there is no way in which I shall be able to reply to all the points made by hon. Members, I shall try to reply to some of them.

Some thoughtful speeches—some short and thoughtful, others long and thoughtful—have been made, and the Government have been asked many questions, not to mention the four issues that were raised by Liberal Democrat Members, who will be voting against the uprating.

I tell Liberal Democrat Members now that, when the general election comes, it will be no good complaining that every Labour candidate is highlighting how the Liberal Democrats voted at the end of this debate. Liberal Democrat Members will be voting against an increase in child benefit, in disability benefit and in pensions, and no amount of pontificating outside the Chamber—[Interruption.] No. In the heat of a general election, when Liberal Democrat Members try to explain to local journalists the rules and procedures of the House, it will not wash. The message will get across that they simply voted against the increases.

I shall deal with the speeches in reverse order. My hon. Friend the Member for Islington, North (Mr. Corbyn), who—I know; he told me them—had extremely good reasons for not attending the early part of the debate, made a point on overseas pensioners and expatriates. The point was dealt with earlier today. I believe that £300 million was mentioned as the sum necessary to address the issue as some hon. Members would like it addressed. Frankly, we have other and better ways of spending £300 million. Before people leave the country, they fully know the rules on how pensions are uprated around the world. There is no secret about the countries with which we have international treaties. International treaties are the main factor, and there really should not be any argument about that.

I made my second intervention on the speech of the hon. Member for St. Ives (Mr. George) because I felt that I owed him an apology for the way in which I made my first intervention, on his point on attendance allowance. I misunderstood the point that he was making. He was rightly raising the serious issue of attendance allowance take-up. All the evidence shows that take-up of the allowance by pensioners is not as great as research indicates that it should be. However, it is difficult to target attendance allowance, and we certainly could not run the same type of targeting campaign as we shall soon be running on the minimum income guarantee. For a start, attendance allowance is not means-tested. The reasons for low take-up in the two benefits are not the same.

Ignorance is one element in low take-up of attendance allowance. Some pensioners may think, "I'm a pensioner; I can't get attendance allowance," but that is not correct. I have come across cases in which people in the medical profession think that pensioner patients are not eligible. It is simply not true.

There is scope for working on take-up of attendance allowance—which is one way of getting money to the pensioner population. The allowance is not means-tested; based on circumstances, it is theirs as of right. I agree entirely that there is work to do on the issue.

The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who is Chairman of the Social Security Committee, made a long and thoughtful speech—which is not a criticism. I shall not drop myself in problems, but at the end of his speech, he concentrated on earnings limits and gave two examples, one of which was the long-standing £50 earning limit for those receiving invalid care allowance.

On Friday, I raised that very issue both with constituents, and—strangely enough, in the context of the national minimum wage—on a live radio phone-in, in the midlands. A husband rang up about his wife, who was the carer, but was also doing a little job on the side that she wanted to continue doing. The caller said that many of the people with whom his wife worked benefited from the minimum wage. Although that is a real plus, ultimately, to continue receiving the allowance, the wife would have to cut her hours.

With a £50 threshold, the danger is that one might have to cut hours to such an extent that an employer will say, "If you can work only 13 hours, don't bother coming in—it's not worth it." Earning limits for carers are a real issue.

The Government wish to encourage carers, and we have long wished to enable people to remain in their own homes for longer than they have hitherto been able to. Accomplishing both those goals is part of the difficulty of giving an early response to the royal commission. Nevertheless, we shall give that response by this summer. Although there is nothing new in those comments on earnings limits, the hon. Member for Roxburgh and Berwickshire raised the issue, and it is an absolutely valid one.

My hon. Friend the Member for Gedling (Mr. Coaker) made a robust and honest speech. I should like to think that he might have done what I have done when faced with 200 or 300 quite angry and vociferous pensioners. I have said, "Hands up anyone here living on £66.75." To date, no one has put their hands up. I am talking about big groups, one of which had been addressed by my noble Friend Baroness Castle, my right hon. Friend the Member for Chesterfield (Mr. Benn), Jack Jones and Rodney Bickerstaffe; there were seven or eight of them. I was the last to do so.

I made it a central point that we were targeting our resources on the poorest pensioners in the land. There is an issue about who is being missed out—hence the research. We cannot be certain about the figures. There is a broad spread of figures; they come from the general household survey. We do not know where those people are. It is not as precise as the hon. Member for Northavon (Mr. Webb) says. We have an idea, and that will be part of our take-up campaign.

These people may, in the main, live in other people's households. The chances are that they will not be single and living alone in their own household; otherwise we would have, if you like, caught them by now, or they would have needed the extra help. That, too, will be part of our take-up campaign.

Following the Benefits Agency work, we estimate that the figure is a little over 2 million. Those people will be targeted in three tranches anyway. There will be television and press advertising. We will make an early announcement about the way in which we intend to go forward; we certainly will make the announcement before the end of this month. There will then be a large Government-sponsored take-up campaign, with a telephone national line and television advertising.

The work has been done, in the sense that we have seen the scripts and literature, with "minimum guarantee" on leaflets and drafts. At present, there are no posters or leaflets with minimum income guarantee on them. There are no documents, but there will be: we have seen the proofs. To that extent, we are on the verge of being able to launch that campaign. It is important that we get the money to the people who deserve it.

Several hon. Members raised the issue of winter fuel payments. Some said thanks, but not many. They said, "It is nice to have it, but it should have been on the pension." That was not the option. Everyone knows that. My right hon. Friend the Chancellor has made it clear that we have to pay it every year from now on. That is a big advance. Payment went up fivefold. Because of European Court judgments, it will be paid to men and women aged 60. That will change progressively as the retirement age goes up to 65—we make no secret of that.

The hon. Member for Vale of York (Miss McIntosh) was carping again, basically. I was aware of the press cuttings that she was reading from. It is true that, in trying to put it across that winter fuel payments were not tied to being a pensioner—they are not following that court judgment; they are tied to the age of 60-plus—I made that bold statement about every person in the country. Okay, I did not say that people in prison and people who were not 60 before the relevant date in September were excluded. All right hon. and hon. Members should know that. If we had not done it in that way, they would make another point.

Miss McIntosh

Will the Minister give way?

Mr. Rooker

I will not. We had the cut-off point of the date in September because we guaranteed to get the winter fuel cash in hand before Christmas. I regret to say that, with the old technology that we have inherited, it takes us a long time to do it; we have to have a long run-in to do the work. This year's date will probably be a similar one.

In the meantime, we have to do the work to find the people who, for the past two years, have missed out following the court judgment.

Miss McIntosh

Will the Minister give way?

Mr. Rooker

I will in a moment. I want to finish the point about the winter fuel payment.

We have to find those males aged 60-plus who did not have a spouse who was receiving the winter fuel payment; it is per household, not per person. We estimate that there are 1.5 million such males. Many will not be receiving any benefit. They will be at work. We do not have direct day-to-day contact with them, other than the fact that they pay national insurance contributions. We do not have a database from which to drum the information up, so it will take time to put together. Some of the 1.5 million-plus will have a spouse who received the £100. Obviously, the date of birth is relevant; it could have been before or after 20 September.

The European Court judgment might have made it look a simple matter of paying everyone from 60, rather than at our state retirement ages, but life is not as simple as that. We will do our best to get the backdated payments of about £100—it could be £20, or £140 to £170—to those people as soon as possible. However, it is as important to get our database correct—so that they receive their winter fuel payments before Christmas this year—as it is to pay the arrears.

Miss McIntosh

I am sure that the right hon. Gentleman would agree that I am not known for carping in this place. I am trying to be helpful. What advice would he give my constituents who have not been paid winter fuel payments for 1998, let alone 1999? Should they wait, or apply now?

Mr. Rooker

If those people have not received the payment for last year and the year before, obviously something is seriously wrong, and we should be provided with the details. There has been a telephone helpline. There have been facilities for people to be able to do that. If the hon. Lady provides information, we will ensure that the matter is dealt with immediately. I have made the point about winter fuel payments because it was said that we were being lethargic in the way in which we were dealing with the matter.

On capital limits, I repeat what the Secretary of State said. They will be reviewed in the current Parliament. We will make an announcement as quickly as possible. They will be reviewed more quickly than the period for which they have been frozen. The last time that there was an increase was 1990—from £6,000 to £8,000.

On inherited SERPS, the definition of "shortly" and "as soon as possible" is not as long as a piece of string, because we are obliged to do the work. Obviously, there have been inquiries by the parliamentary commissioner as well. The decision is not far off as to which way we shall proceed, but I repeat, although I should not have to do so any more: no change will take place this April. The reduction to 50 per cent. will not occur this April, so there will be no change. We have already said that in the legislation that was passed last year.

I do not think that it can be said that no decision is imminent on the major issues of winter fuel payment take-up, SERPS and the capital limits; decisions are imminent. We will announce them to the House as quickly as we can—that is what we will seek to do.

My hon. Friend the Member for Bedford (Mr. Hall) made an extremely articulate speech, as others have, regarding the position of pensioners who feel hard done by because of the 75p increase. As I said at Social Security Question Time, the only people who will get the 75p will be those who receive only £66.75. Hon. Members might shake their heads. The fact is that net average pensioner income for a single person in 1997–98 was £132. We cannot ignore SERPS. As Opposition Members have rightly said, the build-ups of occupational pensions in the 1960s and 1970s, and of SERPS, which is part and parcel of the same thing, during the 1980s, have dramatically changed total pensioner incomes. It would be stupid to ignore the position. The increase follows on into those pensions, on top of the 75p addition to the £66.75. Of course that is the average figure, and averages can be misleading. However, we make no apology for targeting those who have not achieved anywhere near those averages, such as those who are on the means test of the minimum income guarantee. We must make sure that we do our best for them.

Reference was made to the pensioner price index, as if there were not such an index. The Office for National Statistics still operates a pensioner price index, which reflects a basket of goods used by most pensioners. However, comparing the pensioner price index with the retail prices index over the past 20 years produces a significant reduction in the basic state pension of over £10 a week, so I do not think that we will be offering to use that index for the foreseeable future.

The pensioner price index excludes housing costs, including council tax. Pensioners on the minimum income guarantee, and just above it, can claim all or part of their housing costs or council tax. It is not as if they are deprived of help with their housing costs. Some will get all of their housing costs met, while others can get much of their costs met. I make no apology for the increases in the orders, which I commend to the House.

Question put:

The House divided: Ayes 284, Noes 31.

Division No. 64] [7.21 pm
Abbott, Ms Diane Connarty, Michael
Ainsworth, Robert (Cov'try NE) Cooper, Yvette
Alexander, Douglas Corbett, Robin
Allen, Graham Corbyn, Jeremy
Anderson, Donald (Swansea E) Cousins, Jim
Armstrong, Rt Hon Ms Hilary Crausby, David
Ashton, Joe Cryer, Mrs Ann (Keighley)
Atkins, Charlotte Cryer, John (Hornchurch)
Banks, Tony Cummings, John
Barnes, Harry Cunningham, Jim (Cov'try S)
Barron, Kevin Dalyell, Tam
Battle, John Darling, Rt Hon Alistair
Bayley, Hugh Darvill, Keith
Beard, Nigel Davey, Valerie (Bristol W)
Beckett, Rt Hon Mrs Margaret Davies, Rt Hon Denzil (Llanelli)
Benn, Hilary (Leeds C) Davies, Geraint (Croydon C)
Benn, Rt Hon Tony (Chesterfield) Davis, Rt Hon Terry (B'ham Hodge H)
Benton, Joe
Bermingham, Gerald Dean, Mrs Janet
Berry, Roger Denham, John
Best, Harold Dismore, Andrew
Betts, Clive Dobbin, Jim
Blears, Ms Hazel Doran, Frank
Blizzard, Bob Dowd, Jim
Blunkett, Rt Hon David Eagle, Angela (Wallasey)
Boateng, Rt Hon Paul Eagle, Maria (L'pool Garston)
Bradley, Keith (Withington) Edwards, Huw
Bradley, Peter (The Wrekin) Efford, Clive
Bradshaw, Ben Ennis, Jeff
Brinton, Mrs Helen Etherington, Bill
Brown, Russell (Dumfries) Field, Rt Hon Frank
Browne, Desmond Fitzpatrick, Jim
Buck, Ms Karen Fitzsimons, Lorna
Burden, Richard Flint, Caroline
Burgon, Colin Foster, Michael Jabez (Hastings)
Butler, Mrs Christine Foster, Michael J (Worcester)
Caborn, Rt Hon Richard Fyfe, Maria
Campbell, Alan (Tynemouth) Gardiner, Barry
Campbell, Ronnie (Blyth V) Gerrard, Neil
Campbell-Savours, Dale Gibson, Dr Ian
Cann, Jamie Gilroy, Mrs Linda
Caplin, Ivor Godman, Dr Norman A
Casale, Roger Godsiff, Roger
Caton, Martin Goggins, Paul
Cawsey, Ian Golding, Mrs Llin
Clapham, Michael Gordon, Mrs Eileen
Clark, Rt Hon Dr David (S Shields) Grant, Bernie
Clark, Dr Lynda (Edinburgh Pentlands) Griffiths, Jane (Reading E)
Griffiths, Nigel (Edinburgh S)
Clark, Paul (Gillingham) Griffiths, Win (Bridgend)
Clarke, Charles (Norwich S) Grogan, John
Clarke, Eric (Midlothian) Hain, Peter
Clarke, Rt Hon Tom (Coatbridge) Hall, Patrick (Bedford)
Clarke, Tony (Northampton S) Hamilton, Fabian (Leeds NE)
Clelland, David Heal, Mrs Sylvia
Clwyd, Ann Healey, John
Coaker, Vernon Henderson, Ivan (Harwich)
Coffey, Ms Ann Heppell, John
Coleman, Iain Hesford, Stephen
Colman, Tony Hill, Keith
Hinchliffe, David Marsden, Gordon (Blackpool S)
Hoey, Kate Maxton, John
Hope, Phil Meacher, Rt Hon Michael
Howarth, George (Knowsley N) Meale, Alan
Howells, Dr Kim Michie, Bill (Shefld Heeley)
Hoyle, Lindsay Milburn, Rt Hon Alan
Hughes, Ms Beverley (Stretford) Miller, Andrew
Hughes, Kevin (Doncaster N) Moonie, Dr Lewis
Humble, Mrs Joan Moran, Ms Margaret
Hurst, Alan Morgan, Alasdair (Galloway)
Hutton, John Morgan, Ms Julie (Cardiff N)
Iddon, Dr Brian Morley, Elliot
Illsley, Eric Morris, Rt Hon Ms Estelle (B'ham Yardley)
Ingram, Rt Hon Adam
Jenkins, Brian Mountford, Kali
Jones, Rt Hon Barry (Alyn) Mudie, George
Jones, Helen (Warrington N) Mullin, Chris
Jones, Ms Jenny (Wolverh'ton SW) Murphy, Denis (Wansbeck)
Murphy, Jim (Eastwood)
Jones, Dr Lynne (Selly Oak) Naysmith, Dr Doug
Jones, Martyn (Clwyd S) Norris, Dan
Jowell, Rt Hon Ms Tessa O'Brien, Mike (N Warks)
Kaufman, Rt Hon Gerald O'Neill, Martin
Keeble, Ms Sally Organ, Mrs Diana
Keen, Alan (Feltham & Heston) Pearson, Ian
Kemp, Fraser Pendry, Tom
Kennedy, Jane (Wavertree) Perham, Ms Linda
Khabra, Piara S Pickthall, Colin
Kidney, David Pike, Peter L
King, Ms Oona (Bethnal Green) Plaskitt, James
Kumar, Dr Ashok Pollard, Kerry
Laxton, Bob Pond, Chris
Leslie, Christopher Pope, Greg
Levitt, Tom Powell, Sir Raymond
Lewis, Ivan (Bury S) Prentice, Ms Bridget (Lewisham E)
Linton, Martin Prentice, Gordon (Pendle)
Lloyd, Tony (Manchester C) Prescott, Rt Hon John
Lock, David Primarolo, Dawn
Love, Andrew Prosser, Gwyn
McAvoy, Thomas Purchase, Ken
McCabe, Steve Quin, Rt Hon Ms Joyce
McCafferty, Ms Chris Quinn, Lawrie
McCartney, Rt Hon Ian (Makerfield) Rammell, Bill
Rapson, Syd
McDonagh, Siobhain Raynsford, Nick
McDonnell, John Reed, Andrew (Loughborough)
McFall, John Reid, Rt Hon Dr John (Hamilton N)
McGuire, Mrs Anne Roche, Mrs Barbara
McIsaac, Shona Rogers, Allan
Mackinlay, Andrew Rooker, Rt Hon Jeff
McNulty, Tony Rooney, Terry
Mactaggart, Fiona Rowlands, Ted
McWalter, Tony Roy, Frank
McWilliam, John Ruane, Chris
Mahon, Mrs Alice Ruddock, Joan
Mallaber, Judy Russell, Ms Christine (Chester)
Ryan, Ms Joan
Sarwar, Mohammad
Savidge, Malcolm
Sawford, Phil
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Sheldon, Rt Hon Robert
Short, Rt Hon Clare Turner, Dennis (Wolverh'ton SE)
Simpson, Alan (Nottingham S) Turner, Dr Desmond (Kemptown)
Singh, Marsha Turner, Neil (Wigan)
Skinner, Dennis Twigg, Derek (Halton)
Smith, Rt Hon Andrew (Oxford E) Twigg, Stephen (Enfield)
Smith, Angela (Basildon) Tynan, Bill
Smith, Rt Hon Chris (Islington S) Walley, Ms Joan
Snape, Peter Ward, Ms Claire
Soley, Clive Wareing, Robert N
Southworth, Ms Helen Watts, David
Spellar John White, Brian
Squire, Ms Rachel Whitehead, Dr Alan
Starkey, Dr Phyllis Wicks, Malcolm
Stoate, Dr Howard Williams, Rt Hon Alan (Swansea W)
Strang, Rt Hon Dr Gavin
Williams Mrs Betty (Conwy)
Stringer, Graham Winnick, David
Stuart, Ms Gisela Winterton, Ms Rosie (Doncaster C)
Sutcliffe, Gerry Wise Audrey
Taylor, Rt Hon Mrs Ann (Dewsbury) Wood Mike
Woolas, Phil
Taylor, Ms Dari (Stockton S) Worthington, Tony
Temple-Morris, Peter Wright, Anthony D (Gt Yarmouth)
Thomas, Gareth (Clwyd W) Wyatt, Derek
Thomas, Gareth R (Harrow W)
Timms, Stephen Tellers for the Ayes:
Tipping, Paddy Mr. David Jamieson and
Trickett, Jon Mr. Mike Hall.
Allan, Richard Llwyd, Elfyn
Ashdown, Rt Hon Paddy Maclennan, Rt Hon Robert
Beith, Rt Hon A J Michie, Mrs Ray (Argyll & Bute)
Brake, Tom Moore, Michael
Brand, Dr Peter Oaten, Mark
Breed, Colin Öpik, Lembit
Burstow, Paul Rendel, David
Campbell, Rt Hon Menzies (NE Fife) Sanders, Adrian
Stunell, Andrew
Chidgey, David Taylor, Matthew (Truro)
Cotter, Brian Thomas, Simon (Ceredigion)
Davey, Edward (Kingston) Tyler, Paul
Feam, Ronnie Webb, Steve
Foster, Don (Bath) Willis, Phil
George, Andrew (St Ives)
Harris, Dr Evan Tellers for the Noes:
Hughes, Simon (Southwark N) Mr. Bob Russell and
Kirkwood, Archy Mr. David Heath.

Question accordingly agreed to.

Resolved, That the draft Social Security Benefits Up-rating Order 2000, which was laid before this House on 31st January, be approved.