§ [Relevant documents: The Minutes of Evidence taken before the Work and Pensions Committee on Wednesday 27th February relating to the Pension Credit, HC 638-i.]
§ Order for Second Reading read.
§ Madam Deputy Speaker (Sylvia Heal)
I should inform the House that Mr. Speaker has selected the amendment in the name of the Leader of the Opposition.
§ The Secretary of State for Work and Pensions (Mr. Alistair Darling)
I beg to move, That the Bill be now read a Second time.
I want to set out the purpose of the Bill and how it fits with the wider pensions reforms that we have made. The pension credit marks the end of a fundamental unfairness in the social security system. Right from the early days of the modern welfare state, if people did what successive Governments asked them to do and made provision for themselves, the state could penalise them for their efforts. That was wrong.
Every one of us has met pensioners living on modest incomes who often struggled to put aside money for their retirement and who feel that they were let down. They have found that they are little or no better off than those who had saved nothing. To oppose the Bill is to perpetuate that unfairness and to deny extra help to around half of all pensioners. When we vote tonight, we should remember that through the Bill, 5 million pensioners stand to gain an average of £400 a year, with some gaining up to £1,000 a year.
§ Mr. Steve Webb (Northavon)
Will the Secretary of State confirm that the minimum income guarantee was introduced and the rates announced without the benefit of the State Pension Credit Bill, that the rates of the minimum income guarantee are therefore independent of the Bill, and that the only thing that the Bill introduces is a savings credit that will benefit nothing like the number of people he has just mentioned?
§ Mr. Darling
The minimum income guarantee and, as I shall show later, the guarantee element of the pension credit are essential parts of the policy. The hon. Gentleman is right that we introduced the minimum income guarantee first; we did so because in 1997 we had to tackle the fact that the Conservatives had left a whole generation of vulnerable people and vulnerable pensioners living in poverty. However, the pension credit has two elements: the guarantee element and the reward for saving.
The hon. Gentleman appears to have been seduced by the hon. Member for Havant (Mr. Willetts), and they have climbed into the same political bed—at least in terms of pensions. Just so that the hon. Member for Northavon (Mr. Webb) is clear, let me repeat: if he gets his way when he votes against the Bill tonight, he will deny half the pensioners in this country an average of about £400 a year. That is the position that the professor has got the Liberal Democrats into, and good luck to him—and to the rest of us if that is what they want.
598 During tonight's debate, we will hear arguments that rather than individually assess people's income and ensure that we get help to those individuals who need the help most, it might be better to focus on groups. On that point, the Opposition should pay attention to what the Bill would achieve. Of those who will gain from the Bill, about two-thirds are women, half are over 75, and more than a quarter are over 80. Those who want to help older pensioners in general, as well as those who are less well off and those who have modest savings in particular, should realise that the Bill achieves both those objectives. The Bill will ensure that for the first time pensioners who have saved for their retirement are rewarded for their thrift and effort, which does not happen under the system that we inherited.
We need to put the pension credit in the context of our wider policies on pensions. I will explain how it builds on the partnership between the state and the funded sector, and how it builds on the reforms that we have already made. I will then show why the Bill is necessary and why the reasoned amendment tabled by the Conservatives—and, it appears, their new friends—is wrong and unfair.
With the pension credit, the poorest third of pensioners will gain on average an extra £8.20 a week. By contrast, the same money spent on increasing the basic state pension across the board, as proposed in the amendment, would result in a gain of only £3.20 a week—£5 a week less. That is the difference between our proposals, which will help those who need that help most, and the misconceived approach adopted by the new alliance of the Conservatives and the Liberal Democrats. With the pension credit, the least well-off pensioners will gain more than two and a half times more than if the money were spread thinly by raising pensions across the piece.
Critical to the long-term success of pensions in this country is the partnership between the public and private sectors—partnership between what the state will do for a person and what a person should do for himself. I do not believe, as some have suggested and may well repeat this evening, that relying wholly or mainly on the state would be right. Apart from anything else, the demographics are against us. Such a strategy would impose on our children and grandchildren a burden that they would not be able to pay. Furthermore, I believe that people must have the right to choose funded provision in addition to their state pension, if that is right for them. The fact that more people are retiring with good second pensions explains why over the past few years pensioner incomes have risen faster than incomes of those in work.
On the other hand, it would be wrong to adopt the approach favoured by the Conservatives of moving to a private system in which one's entire pension depends on the uncertainty of the stock market.
The problem with that plan is that, by the Conservatives' own admission, it creates an immediate funding gap of £5 billion, with a cumulative debt of £600 billion in 35 years' time. It places on one generation the burden of providing entirely for themselves and of supporting current pensioners.
I expect that we will hear a great deal from the hon. Member for Havant about increasing the basic state pension. That argument will be advanced—and by the Conservatives of all people. We saw through that ruse when the hon. Gentleman made a similar proposal two years ago. He believed that the winter fuel payment was 599 an unnecessary complication and wanted to get rid of it, but he now wants to pay it to people in hot countries as well. Whatever he says, we should bear it in mind that, in effect, he still wants to privatise the basic state pension, as we saw from last week's newspapers. Strangely, the reasoned amendment is silent on that aspect of Government policy—perhaps to keep his new friends on board tonight.
The pension credit builds on the partnership between what the state does and what the funded sector does; that partnership is absolutely right. The system that we inherited in 1997 had too many gaps in that partnership, and too many people were missing out. The necessary incentives in the Bill were not in existence. The first problem, as I have just explained to the Liberal Democrat spokesman, was that more than 2 million pensioners in the fourth largest economy in the world relied on inadequate levels of income support. The minimum income guarantee has increased the incomes of 2 million of the poorest pensioners by at least £15 a week over and above inflation. Clause 2 sets out the way in which the pension credit will build on that approach and lift pensioners out of poverty.
The second problem that we had to tackle was that too many people were heading for poverty in retirement, either because they could not afford to save or because they did not have access to a good second pension. We therefore introduced the necessary long-term reforms to make saving possible, helping more people to build up a good second pension on top of their basic state pension. The Bill ensures that such additional saving pays. People on moderate and higher incomes tend to do better in the longer term in funded pensions. For those without access to company schemes—about half the work force—we wanted to increase choice in the funded sector, which is why we set up stakeholder pensions, nearly 700,000 of which have been sold.
Clause 3 makes it clear that the pension credit will complement stakeholder pensions by rewarding people who save even modest amounts, which has been warmly welcomed by the pensions industry. People on lower incomes are generally better off in state provision. From 6 April this year, the new state second pension will enable 18 million people on low incomes to build up far better pensions than under the state earnings-related pension scheme. That figure includes 2 million carers and 2 million disabled people who will benefit for the first time.
§ Lynne Jones (Birmingham, Selly Oak)
My right hon. Friend said that his proposals have been warmly welcomed by the pensions industry. It welcomes the extra assistance for today's pensioners to reward them for their saving, but there is concern that the proposals do not send a clear message to pensioners of the future that it always pays to save. Is that not the major flaw in the Bill? It does not give a clear message or provide the certainty of a stable system for younger people. The system is so complicated that—
§ Mr. Darling
As my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) knows, I hate to 600 disagree with her but, however much it pains me, I must do so. When I said that the pensions industry welcomed the measure, I meant it. I had in mind the Association of British Insurers, which said:The ABI welcomes the Government's proposals for a Pension Credit as an important step in addressing the issues which may currently discourage those on modest incomes from saving for their retirement".Scottish Widows, Legal and General and the National Association of Pension Funds have all said something similar.
It is true that some people in the industry take the view that rather than have something like the pension credit, which rewards people for every pound they save, depressing the amount the state gives will force them to go and buy pension products. I am sure that my hon. Friend does not subscribe to that view; if she does, she has moved her ground substantially. I always thought that she took a dim view of the pensions industry; it will find it very odd indeed that she is attempting to gallop to its rescue.
The important point is that the pension credit removes for the first time—this has been widely recognised—the disincentive in the present system whereby someone with moderate savings can find that they are no better off than somebody who has made no effort whatsoever. That is why I find it odd that perhaps not my hon. Friend but many Opposition Members are against the Bill.
§ Linda Gilroy (Plymouth, Sutton)
Does my right hon. Friend recognise that one of the most powerful messages that young people hear comes from their family—from their grandparents, who tell them that it does not pay to save? As from October 2003, every grandparent who has been thrifty enough to save will be rewarded and will be able to tell their grandchildren that it definitely pays to save.
§ Mr. Darling
That is an important message. Many people at the moment can find that, if they save only modest amounts, they get absolutely nothing for it. That cannot be right.
I always hesitate to quote people who support the Conservative cause, but I was struck by the words of Lord Fowler, who was of course a Secretary of State for Social Security for—if I remember rightly—some six years. He said:To be frank, I should have preferred it if my government had introduced the pension credit."—[Official Report, House of Lords, 18 December 2001; Vol. 630, c. 165.]He knows a thing or two about social security, and recognised something that most Secretaries of State in that Department have recognised: that there is something fundamentally wrong with a social security system if doing what the Government ask means a kick in the teeth. I find it odd that this generation of Conservatives seems to be reverting to type, especially since most of those who will gain from the pension credit are what one might call vulnerable people. The conversion in Harrogate to the cause of the dispossessed and poor does not appear to have lasted very long.
§ Paul Flynn (Newport, West)
My right hon. Friend prayed in aid the briefing supplied by the Association of British Insurers. Has he read page 3, which says:Most importantly, under the current proposals it is not true to say 'the Pension Credit will make sure that it always pays to save'"?When the Bill is considered in Committee, will he address clause 3, which seems almost incomprehensible and does not guarantee that future pensions will be respected and of good value?
§ Mr. Darling
If I remember rightly, one amendment that the ABI wants to be made in Committee concerns changes to disregards and capital. However, for somebody who receives the basic state pension but saves more than that, it will pay to save. That is a big leap forward. I am not saying that the Bill cannot be improved and that we cannot do even better. Indeed, a number of those who made representations, such as Age Concern, asked us to do a lot more. Age Concern is a bit like the Liberal party: whatever one does, one can never do enough.
§ Mr. Darling
That is the case; the hon. Gentleman knows that, for reasons of which he is certainly aware. Although it is nice that Age Concern has welcomed the Bill, I hope that it recognises that we have done a lot for pensioners. A balance must be struck when deciding how much can be spent on any measure, but the general principle behind the pension credit is right. I find it odd that Opposition Members should be against a measure that removes what I regard as a fundamental unfairness of the social security system.
Right on cue, my hon. Friend the Member for Birmingham, Selly Oak intervened as I was about to talk about redistribution, which might cheer her up. I was talking about the state second pension, which is of course also creditable under the Bill. I was about to make the point that, when it is introduced, it will benefit some 18 million people on low incomes. I find it difficult to understand how people who claim to be concerned with helping low earners and those with broken work records can be against the state second pension. It is one of the most redistributive measures that any Government have introduced.
Let us be clear about what the state second pension does. Somebody who, for example, takes five years out of the labour market to care for their children or an elderly relative can be credited with the state second pension as though they were earning £10,800 a year. That never happened in the past. People who take time out to do the right thing by their children or an aged relative will be assumed to be earning £10,800 a year—yet the Conservatives and Liberals are against that. People on low earnings who build up 40 years of state second pension will get at least double what they would have received under SERPS. That is a long overdue redistributive measure.
We have implemented reforms to tackle poverty, we are making saving possible and we are building on the partnership between the state and the funded sector. We now need to ensure that it pays to save—and that is what the Bill does. As I said, the pension credit will address a fundamental unfairness in the system. For the first time, 602 we will be able to say to people that even if they save modest amounts above the basic state pension they will be rewarded for their efforts.
I want to explain briefly how the pension credit will work. The detail is set out in the consultation paper that was published in November and, of course, in the explanatory memorandum to the Bill. The Bill works in two ways. First, it replaces the minimum income guarantee as the means to provide a floor beneath which we believe pensioner incomes should not fall. The pension credit will bring pensioners' entitlement up to a guaranteed minimum next year of at least £100 a week, or £154 a week for couples. Clause 2 provides for a higher guarantee for carers and for pensioners with severe disabilities.
Secondly and critically, the pension credit will provide an additional top-up to reward pensioners aged 65 or over who have saved for their retirement. Clause 3 will ensure that pensioners aged 65 or over who have a modest occupational pension or modest savings in the bank will get more as a result of their thrift. Those with income from paid work will also be rewarded for their efforts. The pension credit provides the incentives that are missing from the present system. Pensioners will generally qualify if their incomes are up to £135 a week for single people or £200 a week for couples. On any view, many pensioners are among the vulnerable and least well off in our society.
§ Mr. David Kidney (Stafford)
I have no doubt that the new savings credit will be very popular with my constituents, but let us return to the comments of the Association of British Insurers and of the National Federation of Post Office and BT Pensioners. Both have raised with me the assumption that the savings credit will cut in only once the full basic state pension has been reached, and that those with a lesser entitlement—often women—will lose the first bit of their savings in reaching that level. Is any change in prospect in Committee to address that criticism?
§ Mr. Darling
We believe that it is right that people should first use their money to pay contributions to the basic state pension. It would be curious if somebody who had chosen not to pay all such contributions then asked us to apply those they had paid to a pension credit, rather than in the first instance to the basic state pension. The basic state pension is of course contributory, but that is the argument.
I am glad that my hon. Friend recognises that the main thrust of the Bill is to reward saving among very many older people, especially those whom he rightly identifies as likely otherwise to be poor in retirement. Let us remember that the majority of the beneficiaries under the Bill will be women, who particularly benefit from the minimum income guarantee. I suspect that many Members will have met women at their surgeries who have paid a half stamp, for example, and have found that their pensions are a lot lower than they expected. For such people, the minimum income guarantee is very helpful.
Such people are vulnerable, so given everything that the hon. Member for Havant said on television yesterday to Sir David Frost, it is very odd that as soon as he gets 603 back from Harrogate he reverts to type. Liberals in my constituency will certainly find it odd that their party has jumped into bed with such a disreputable crew.
§ Mr. Paul Goodman (Wycombe)
Will the Secretary of State explain why he has not yet mentioned the take-up of pension credit? Will he confirm that up to 750,000 pensioners did not receive the minimum income guarantee? What firm evidence does he have that the take-up of pension credit will be higher?
§ Mr. Darling
My speech has a beginning, a middle and an end, and I have not yet reached take-up. I shall do so shortly, when I will deal with the point. Suffice it to say that I have never regarded the figure of 750,000 pensioners as realistic. I note that the authors of these findings warn the reader to treat them with great caution. There is a huge variation in the findings on take-up. I shall deal with take-up and the important point that the hon. Gentleman has either deliberately or inadvertently stumbled upon.
I shall deal with the criticisms that are made in the reasoned amendment. [Interruption.] I thought that the hon. Member for Havant liked a debate. Did I not read in the newspapers last week his assertion that if he, the hon. Member for Northavon, who is the Liberal Democrat spokesman on these matters, and my right hon. Friend the Member for Birkenhead (Mr. Field) were the first three speakers in the debate, the intellectual argument would be won. That is rough on the rest of us. I am sure that the rest of us have something to say. The hon. Gentleman is being touchy if he gets upset when we engage in a robust debate.
§ James Purnell (Stalybridge and Hyde)
My right hon. Friend mentioned events at Harrogate and the conversion of the hon. Member for Havant (Mr. Willetts) to the cause of poverty. Does he remember the hon. Gentleman saying only two years ago:The tax guarantee goes to the heart of what we Conservatives believe… Cutting back the growth of social security must be at the heart of the agenda for the next Conservative Government"?Does that not show that the real agenda for the Conservatives is to cut benefits for pensioners?
§ Mr. Darling
The Conservative spokesman is famous for having two brains. I think that the Conservative party speaks with two voices on pensions. It tells us that it wants to increase the basic state pension, yet we know that it is committed to privatising it. Look at what happened. [Interruption.] It always upsets Conservative Members when they are reminded of their true policy.
§ Mr. Darling
In one moment. I should like to make a wee bit more progress.
I shall explain why the criticisms made in the reasoned amendment are wrong and why I believe that our approach is better and fairer than the Opposition alternative.
604 Let us remember that the pension credit gives the least well-off pensioners an average of £8.20 a week, whereas the amendment would give them about £5 less. The Conservatives and their new friends raise three main arguments. They say that the pension credit will extend means-testing, increase complexity and undermine saving. I shall deal with each of those matters briefly.
First, let us confront the argument about means-testing head on. If we are serious about tackling individual pensioner poverty, we must undertake some form of income assessment. That is how we help vulnerable people. I turn again to Lord Fowler. He said:In making policy on pensions … there are two broad choices that any Minister and any government can make. One can give general benefits to everyone irrespective of need. The disadvantage of that is that one obviously gives benefits to many people who by most—virtually all—definitions do not need them … Alternatively, one can try and target benefits to those who need them … we should get away from the emotiveness involved in describing that process as means testing."—[Official Report, House of Lords, 18 December 2001; Vol. 630, c. 164.]He went on to regret the fact that it was our Government rather than his who introduced the measure.
I think that Lord Fowler has a point. If we want to tackle pensioner poverty and ensure that people who need help get it, we must have an individual assessment of that person's income. There is nothing new about that. The tax system does it, as does the benefit system. I do not believe that the argument stands up that we can more effectively tackle poverty by targeting extra help on the over-75s or the over-80s.
It is true that on average pensioner incomes decline as people get older. However, as I have said, half of those who gain from the pension credit are older than 75, and a quarter are older than 80. It is a fact that there are poor 67-year-olds, just as there are better off 82-year-olds. The only way we can be sure that we help the people who need help is to have some form of assessment of somebody's income.
§ Mr. Andrew Dismore (Hendon)
Half the population of the Burnt Oak ward of my constituency are on means-tested benefits already. Within a mile, there are wards where there are more millionaires than anywhere else in Britain. I have often heard people in Burnt Oak complain that they worked all their lives, put some money aside and have nothing to show for it, compared with those who were on benefit. I have yet to hear that complaint from people who live in millionaires' row. Does my right hon. Friend accept that the pension credit will provide extra assistance for people who live in Burnt Oak, who need it, and that there is little point in helping the millionaires in Mill Hill?
§ Mr. Darling
There is a fairly straightforward argument, and I expect that again my hon. Friend and I will part company. If there is a limited amount of money to spend, the question arises whether it is better to spread that money thinly regardless of whether people need help, or to do more to help people. This year, for example, the state pension will increase for everybody by £3 a week. It will increase by £6 a week for some pensioners on the lowest incomes. It is worth bearing it in mind that 80 per cent. of gains in pension credit will go to pensioners with incomes of less than £149 a week. These people are by no means well off.
605 That illustrates what a progressive measure the pension credit is. It is doing more for people. Those who are concerned about whether we should assess people's incomes are not squeamish when it comes to the tax system, and they should not be squeamish when it comes to the benefits system.
§ Lynne Jones
Given what my right hon. Friend has said, have the Government abandoned their initial aim when they embarked on welfare reform, which was to reduce means-testing?
§ Mr. Darling
Our objective, throughout the time that I have been responsible for this policy, is to get help to those who need help most. I say in the nicest possible way to my hon. Friend that that is one of the reasons why I joined the Labour party.
§ Kevin Brennan (Cardiff, West)
Does my right hon. Friend agree that it is absurd to use the emotive imagery of the means test of the 1930s and the National Assistance Board poking into families' and pensioners' business after the second world war? We are talking about the pension credit, for which a pensioner will be assessed every five years.
§ Mr. Darling
My hon. Friend is right.
When Conservatives say that they are against means-testing, we must understand that they are against giving money to poor pensioners. Despite everything that we heard at Harrogate this weekend—I dare say that compassionate Conservatives will be among us for some time to come until there is a move to the next phase—we must bear it in mind that if the House is serious about doing something for pensioners on low incomes, it is necessary to identify those people in the first place, and then, critically, to ensure that we have the resources and the means to help them. The Conservative party is still committed to reducing the share of public spending to about 35 per cent. of gross domestic product. The two approaches do not square.
§ Mr. Darling
I seem to have struck a raw nerve. I shall try to give way to as many hon. Members as possible without abusing my position. I give way to Lord Fowler's successor, the hon. Member for Sutton Coldfield (Mr. Mitchell), who I understand is working even as we speak on the half-baked policy to privatise the basic state pension.
§ Mr. Andrew Mitchell (Sutton Coldfield)
Does the right hon. Gentleman recall saying in his 1998 Green Paper:People who have worked all their lives should not have to rely on means tested-benefits when they retire"?Does he think that the Bill takes him nearer or further from that goal?
§ Mr. Darling
The hon. Gentleman will know, if he read the rest of the paragraph, that that statement was in the context that I believed—I still believe—that not enough people were saving enough towards their retirement because they did not have the means to do so.
606 That passage led to our doing two things—extending the basic state pension and introducing the state second pension.
I understand that the hon. Gentleman will he going along to the next Conservative party team meeting. These meetings are held on Tuesdays at 10.30 pm. If anyone wants to go along, I should say that no doubt the professor—the hon. Member for Northavon—will be there, and maybe others. They will find out more. [Interruption.] They are all flocking in. It will be an extremely crowded telephone box.
Surely it is the policy of all Governments to encourage people who can save for their retirement to do so. We should make sure that that happens. It should surely also be an objective of the Government to put in place incentives to encourage people to save. We do that through the tax system. The hon. Member for Sutton Coldfield will know that there is tax relief for saving towards pensions. The Bill introduces a further incentive. If someone goes that extra mile and saves money, he or she will get an extra incentive for having done so. As the hon. Gentleman has taken over the seat formerly represented by Lord Fowler, perhaps he should have a word with the noble Lord, unless he thinks that his views are completely misplaced and misconceived. I would be surprised if he did.
§ David Cairns (Greenock and Inverclyde)
: My right hon. Friend is right that a five-year assessment is infinitely preferable to the weekly means-testing assessment that was carried out until recently, but can he guarantee that as people's circumstances change in the course of the five years, they will be entitled to a reassessment, which it is to be hoped will lead to their being given even more generous sums? Can he confirm that it will be offered to them not grudgingly but as part of the pension service after their initial assessment?
§ Mr. Darling
Yes, I can. I shall shortly come to take-up and how we will deal with it. As hon. Members have said, five-year assessments will apply from the age of 65. People whose circumstances have changed and who are entitled to more will be able to come back, but as the vast majority of pensioners' circumstances do not change, I am reasonably confident that most people will not be troubled that often.
§ Mr. Darling
The hon. Member for Havant, who speaks for the Conservatives, has been urging me not to take any more interventions. I will therefore give way to perhaps two more hon. Members and then make some progress.
§ Mr. Mark Simmonds (Boston and Skegness)
Is not the real issue about means-testing the fact that many pensioners find it demeaning to go through the process, and that there is a direct causal link between means-testing and a lack of take-up?
§ Mr. Darling
With respect, that is complete rubbish. I do not find it demeaning, any more than I hope the hon. Gentleman does, to fill in a tax return once a year. A calculation is made of how much money we have and how much we are due to pay in tax. The new system, 607 which I shall set out shortly, will be very easy for pensioners. When they apply for the basic state pension, we will calculate their entitlement to pension credit at the same time.
What is clear from this debate—it has been clear for some time—is that the Conservatives are not against means-testing per se. It has been about in the social security system ever since it was started. What they really object to is a measure such as this, which puts more money into the majority of pensioner households. They have made it clear that they and their friends, the Liberal Democrats, are against this measure. That is great from our point of view, but it is very unfortunate for pensioners.
§ Mr. Tom Levitt (High Peak)
On the same topic, it is probably true that some pensioners have perceived the process of applying for benefits as intrusive and bureaucratic. They have believed that it is very difficult to get benefits and that there is a high risk of being turned down, but in future they will surely see that if they have a state pension and any amount of modest savings, it will be in their interests to make their circumstances known in order to claim their entitlement. Does my right hon. Friend look forward to the time when the pension credit can be paid automatically, based on income tax data?
§ Mr. Darling
That would be a very happy situation, although given what I had to tell the House last Wednesday about information technology systems we may be further away from that than I would like. It appears that there is some common ground in the House because both the Conservatives and the Liberal Democrats accept that there is a correlation between age and people becoming poorer. They accept that something needs to be done to help pensioners on low or modest incomes. The difference between us is that I think we have to treat individuals as individuals. There are poor 67-year-olds and better off 82-year-olds. All of us know the difficulty that we would get into if we decided that people can be poor only once they reach the age of 80. What would we say to a poor person who was in their mid-70s—wait five years and it will be all right? That seems a nonsense position.
Another argument that we will no doubt hear from the hon. Member for Havant relates to complexity. When someone claims to have a simple solution to pensions, people should watch their wallet. People lead complex lives. They may change jobs several times. They may take time out of the labour market to care for children and so on. Pension provision is necessarily complex to meet the complex individual circumstances of people's lives. Even the basic state pension, which some people think is a simple concept, is based on a complex set of rules and calculations.
What is important is that there are choices and options. A one-size-fits-all policy to pensions would not work. Many of the people who claimed to have found a simple solution often found that it was neither workable nor affordable in the long term—two essential ingredients of any pension policy.
Tonight, the Opposition position on the pension credit is ridiculous. They say that they would keep the pension credit for people who have already retired, but bring back the savings disincentives for people saving for their future. That is not just complex—it is absolute nonsense.
608 That brings me to another argument that the Opposition advance. The Conservatives, and their new friends, are setting themselves against the very reform that will make saving pay. Their approach would do nothing to remove the disincentives in the present system. Somebody with savings that took them above the basic state pension, but below an income of £100 a week, would be no better off than their neighbour who had not saved at all. That seems absolute nonsense.
I want to say a brief word about the pension service because the question of entitlement has been raised on many occasions. The pension service will provide a better way of delivering services. As I have said, when people apply for their pensions, we will find out whether they are eligible for the pension credit. Once they reach the age of 65, when their incomes tend to be fairly stable, we will set the awards for up to five years. That is a real change, which will be widely welcomed.
§ Mr. Bill Tynan (Hamilton, South)
Is there any way in which the pension service could be used to identify those who are on pensions at present and whether they would be due for pension credit? If not, they are going to escape through the net, which suggests that there will be a difficulty with take-up.
§ Mr. Darling
I certainly agree with my hon. Friend. People who are now retired will also be entitled to the pension credit. As he is aware, one of the improvements that we are making is to move to a system that is more telephone based, which appears to be more popular with pensioners, who can get in contact with people far more easily. We certainly do not want to have to force them to go to old DSS-style offices, which they would not particularly want to do.
The final stage of the reforms is to strip away some of the regulation and red tape that has built up over the years. The House will know that we will have the Pickering and Sandler reviews in the summer. We plan to publish proposals later this year to make it easier for people to save.
The pension credit is a substantial reform. As I have said, it will benefit around half of all pensioners. It complements the reforms that we have made to make saving possible, by rewarding people for their thrift. It puts right a long-standing grievance. The result is that it is fair and promotes saving.
The House has a choice between our approach and that of the Conservatives, and their new friends. Our policies are workable and affordable. They build on the partnership between the state and funded sector. Be in no doubt that the Conservative policy is to privatise the basic state pension.
Our policy is fair and tackles pensioner poverty, whereas the Opposition—all of them—will vote against a measure that helps vulnerable people. Our policies will remove once and for all the unfairness in the current system. The Tories and their new friends want to keep that unfairness.
609 This Bill is essential to tackle poverty and to reward thrift. It will benefit 5 million pensioners by an average of £400 a year. That is what Labour Members will vote for; that is what Opposition Members will vote against. I commend the Bill to the House.
§ Madam Deputy Speaker
Order. I remind all hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.
§ 6.8 pm
§ Mr. David Willetts (Havant)
I beg to move, To leave out from 'That' to the end of the Question, and to add instead thereof:
'this House declines to give a Second Reading to the State Pension Credit Bill [Lords] because it involves a further move towards the mass means-testing of the pensioner population; believes that it will greatly increase the complexity of the pension system both for today's pensioners and for future generations, will result in many pensioners missing out on their entitlements, and will serve to erode incentives to save; and believes that the additional expenditure would have been better directed towards the basic state pension, particularly for older pensioners.'The reasoned amendment is in my name and in the names of hon. Members from a range of other political parties.
The purpose of the debate on our reasoned amendment is to try to get the House to address what I think is the historic significance of the proposals that the Secretary of State for Work and Pensions is bringing before us today. He is announcing the end of the basic state pension as a determinant of the income of pensioners. In future, the amount that a pensioner receives will be determined by the minimum income guarantee, now renamed the guarantee credit, and the formula for determining the savings credit above that.
Throughout most of the 20th century, there was a belief in all parts of the House that the basic state pension would be an important part of provision for people in their retirement. The Secretary of State's measures today say farewell to that. I thought that his speech could have tackled that central issue with rather more seriousness than he was willing to demonstrate, especially given his party's history on the subject.
Under the strategy proposed by the Secretary of State, more than half of all pensioners will find themselves facing marginal rates of benefit withdrawal of 40 per cent. or more. It is important that the House has the opportunity to take a view on that strategy and to consider whether there might be a better alternative that nevertheless tackles the needs of poor pensioners.
§ Kevin Brennan
Does the hon. Gentleman agree that a far more significant date in the development of pensions was when his party broke the link between the basic state pension and earnings, which put us in the position that we are in today?
§ Mr. Willetts
If the hon. Gentleman is so worried about the breaking of the earnings link, why does not his party reinstate it rather than move towards means-testing?
§ Mr. Levitt
I am sure that the hon. Gentleman can grasp the intellectual difference between an income 610 guarantee and a pension guarantee. The pension guarantee will remain universal to pensioners, but those who have as their income only the pension, or the pension and a very small amount, will be rewarded for the thrift that has produced a little bit extra. It represents an acceptance that the pension is not by itself sufficient for somebody to live on.
I remind the hon. Gentleman that both the minimum income guarantee and the pension credit will indeed be index-linked, so more and more people's pensions will be put back on to that basis.
§ Mr. Willetts
I am afraid that I did not entirely grasp the hon. Gentleman's point. He seems to be trying to say that there is a big difference between the pension credit and the minimum income guarantee, but the figures given by the Secretary of State, which, he claimed, showed the marvellous effects of the pension credit, included the effects of the so-called guarantee credit, which is the old minimum income guarantee. Labour Members cannot have it both ways.
§ James Purnell
Some Labour Members found the remarks that the hon. Gentleman made over the weekend difficult to stomach. He claimed to be on the side of the poor, yet from 1979 to 1992, when he advised Conservative Governments, the income of the bottom 10 per cent. fell by 17 per cent. in real terms—not a relative, but an absolute, fall. Will he apologise for that?
§ Mr. Willetts
No, and I do not recognise the figures that the hon. Gentleman quotes.
I want to talk about the problem that has been created since 1997 as a result of the extension of means-testing under the minimum income guarantee. It has created a gap in that the value of means-tested benefits is now much higher than the value of the basic state pension. That is why the Secretary of State goes on about all the people who find themselves being penalised for having saved. It is a consequence of the increase in the value of the minimum income guarantee relative to the basic state pension. Now, apparently, the problem created by the extension of means-testing is to be solved by even more means-testing. I invite hon. Members to consider whether there is an alternative strategy that nevertheless targets help on poorer pensioners.
§ Paul Flynn
Indeed, and a long memory of the hon. Gentleman. He will not remember, but in 1948 the basic pension was 24 shillings and there was an occupational disregard of 10s 6d and an employment disregard of 20 shillings. The system continued in those terms for a long time, with some modifications, until the occupational pension disregard was abolished in 1980. That is the reason for the Bill. Does the hon. Gentleman recall who abolished it, and will he give us a mea culpa?
§ Mr. Willetts
The reason for the Bill is the spread of means-testing that has taken place since 1997, and that is the point on which I want to focus. The consequences of 611 means-testing are clear from the evidence around us. Before we rush into yet more, let us consider the problems caused by that which already exists. I should like to consider first the impact of existing and proposed means-testing on present-day pensioners and then its impact on pensioners in the future.
§ David Cairns
On the extension of means-testing, can the hon. Gentleman confirm that it is Conservative policy to keep the winter fuel payment as a universal benefit; or does he agree with his hon. Friend the Member for Daventry (Mr. Boswell) who, on 27 November, told the all-party disability group that it would be better to target fuel poverty by doing away with the payment and moving towards means-testing? Would not that be an extension of means-testing?
§ Mr. Willetts
My hon. Friend the Member for Daventry (Mr. Boswell), who speaks powerfully on these issues, assures me that his comments were misinterpreted. When he speaks at the end of the debate, he will have an opportunity to make clear exactly where we stand.
I accept, however, that means-testing will be part of the social security system—as it has always been. I do not pretend that we can suddenly get rid of it. I invite Labour Members to contemplate the implications of moving to a regime where almost 60 per cent. of pensioners will be on means tests. The question is whether we should embrace such a massive extension of means-testing. There will, of course, always be some means-testing.
I should now like to make some progress with my speech and consider the implications of the Government's proposals for pensioners. One of the problems with means-testing is that it breeds complexity, and complexity means declining and low take-up. The Secretary of State dismissed the figures on take-up, but his Department produces them annually. I shall not go to extremes but simply take his estimates for the mid-point in the number of pensioners who are entitled to the minimum income guarantee but do not claim it. The number was 500,000 last year, while the latest statistics suggest that it has increased to almost 600,000. That is the mid-point in the range.
The figures that we are given by Ministers always assume 100 per cent. take-up. In the real world, there is not 100 per cent. take-up, or anything like it. It is no good for the Government to try to sell us policies that assume 100 per cent. take-up. Every Member knows that that is simply not valid—that is not the situation for pensioners.
§ Lynne Jones
Does the hon. Gentleman also acknowledge that a problem of an over-complex system is that it would be easy for future Governments, who might be less generous to pensioners, to cut back on the benefits and pensions paid to elderly people? That is exactly what happened in the past.
§ Mr. Willetts
I certainly accept that one of the problems of a complicated system is that it is difficult to ensure its long-term viability. For example—to re-enter the debate that went on before the last general election—there are questions about all the special payments introduced by the Government. I think that pensioners 612 would have been better off if those payments had been consolidated in the value of the basic state pension. That would have been a better way to help pensioners rather than creating a large number of special payments. Of course, those payments exist and we understand why pensioners do not want to lose them, but had I been in the Secretary of State's shoes, I would much rather have put the money into the basic state pension.
One of the things I regret is that the Government could have achieved much more were they not so preoccupied with gimmicks, special schemes and extra new payments. That is not the best way to help pensioners. In a recent report on the consequences of the Government's proposals, the National Association of Citizens Advice Bureaux states:CAB evidence is that both the benefit and tax systems are complicated and intimidating to those lacking in financial literacy skills … The complexity of benefits and the claiming process is one reason why millions of pounds worth of benefits go unclaimed by people on low incomes … more needs to be done to ensure that all low income groups can claim the credits or benefits to which they are entitled.NACAB is telling us that the system is too complicated.
Furthermore, the Pension Provision Group, in a long and thoughtful set of comments on the Government's proposals, states:Ensuring take-up of Pension Credit is better than for existing means-tested benefits would be difficult.The group acknowledges that there will be a problem of low take-up of the pension credit—it is a pity that Ministers do not.
We want the Government to address that problem. Charities for elderly people say the same thing: there is a problem of take-up of the minimum income guarantee, despite the millions of pounds that Ministers have spent on advertising it, and there will be similar problems in the take-up of the pension credit.
§ Mr. Willetts
I appreciate the sincerity with which the hon. Gentleman makes that point, but in the attempt to tackle the problem, income support has been renamed the minimum income guarantee, which will now be renamed the guarantee credit, and with the savings credit it will form part of the pension credit. The frequent renaming and re-badging of benefits does not help pensioners, and it is one of the main reasons why take-up is, if anything, getting worse. It is another example of the way in which this Government's Blairite preoccupation with renaming and new initiatives is not in the best interests of the people whom they claim to want to help.
I want to discuss the faith that Ministers put in the new pension service, which will be introduced shortly, and the five-year entitlement as a solution to the take-up problem. The Secretary of State briefly referred to the pension service, which I hope will prove to be a success. However, it will be concentrated in a relatively small number of centres, and we are told that pensioners will be supposed to communicate with it on the internet and by telephone. It will be difficult for pensioners physically to visit a local branch of their pension service, because there will be so 613 few of them. I doubt whether the pension service will be able effectively to increase benefit take-up, which is currently going down. I hope that it will succeed, but we need more evidence as to why it will succeed than the Secretary of State has so far provided.
The five-year entitlement, which is guaranteed once a person has claimed it, will not help if people do not like the prospect of claiming the benefit. It is no good saying that pensioners will be able to claim it for five years, given that it is the very prospect of providing the necessary detailed information that puts pensioners off in the first place. The Institute for Fiscal Studies said:There is little in the plans for the pension credit that suggest that less information will be needed to establish benefit entitlement than in the past.The Secretary of State says that the entitlement will be held constant for five years, but pensioners' circumstances will not remain constant for that time. They will change all the time, and interest rates will go up and down, so the income from their building society accounts will change. Moreover, their personal circumstances and the value of their savings may change.
The right hon. Gentleman says that he will try to prevent changes in bureaucracy for five years, but he cannot prevent changes in pensioners' circumstances. If pensioners approach the pension service, detailed recalculations of entitlements to benefit will be necessary; if they do not, but their circumstances have deteriorated and their income is lower, they will get less credit than they are entitled to. I therefore fail to see how the five-year blanket fixed payment will solve the problem that the Secretary of State claims to understand. There is a problem with take-up now, and there will still be a problem under the pension credit.
The problem relates not just to pensioners today but to incentives to save in the future. Again, Ministers' claims for the pension credit's effect on the incentive to save are far too optimistic. I would much rather believe the Institute for Fiscal Studies, which says:Overall, the effect of the pension credit on the financial incentive to save is left unclear, for the relative magnitudes of the different effects we have disentangled are not known.In other words, there will he no improved incentive to save for some pensioners, but for others such an incentive will indeed exist. The IFS is not willing to commit itself on whether the number of pensioners with an incentive to save will, on balance, increase, and I am surprised that the Secretary of State is quite so confident in that regard.
§ Mr. Chris Pond (Gravesham)
On future savings and pensions, I wonder whether the hon. Gentleman can offer some independent financial advice to my nine-year-old daughter. In the event that there were to be a Conservative Secretary of State for Work and Pensions by the time she reached retirement age, and given the hon. Gentleman's current policy of replacing state provision with private provision, how much does he recommend that she start saving weekly now to ensure at least the equivalent of today's basic state pension by the time she reaches retirement age?
§ Mr. Willetts
The hon. Gentleman is straying into dangerous territory. He will know that one of the main groups of people taking out the stakeholder pension—which was supposed to tackle pensioner poverty— 614 is grandparents, who buy them for their nine-year-old grandchildren, for example. If he regards that as a serious contribution to the improvement of pensioner poverty, I suggest that he study the subject in rather more detail.
The question whether the pension credit will reward pensioners who have saved is a subject on which the IFS is unsure, and on which the Financial Services Authority has given a clear warning. In the context of stakeholders—the point is relevant to pension credit as a whole—the FSA says:The economics of stakeholder pensions are predicated on their sale without the need for personal investment advice.The hon. Member for Gravesham (Mr. Pond) is interested in encouraging us to give such advice, but we are not registered to do so. The FSA continues:Whilst the introduction of Pension Credit does not of itself make these (simple) products more complex, it does have the effect of making the decision whether to buy more complex. This could mean more people needing to take advice before reaching a decision. But this advice has to be paid for and many who may need it may be disinclined to be prepared to do so.The FSA is warning that, because of the complexity of the pension credit's impact, it cannot be sure that people will be better off buying a stakeholder pension, and recommends that they seek advice. The IFS and the FSA offer the same warning: that matters are not necessarily as straightforward as Ministers like to claim, and that the pension credit will not necessarily provide all pensioners with an unambiguous incentive to save more.
§ Mr. Levitt
If a pensioner has an income from investments or an occupational pension, it will surely be sufficiently high to take them above the pension credit level. If not, the pension credit will supplement that income. In both cases, there will be an incentive to save, and those whose income is below the pension credit level would also have an incentive, because they will qualify for extra help on reaching that level. Who has the disincentive?
§ Mr. Willetts
The subject is not as simple as that, which is why the FSA is warning people to take advice. We hear about the 40 per cent. rate of pension credit withdrawal—the higher rate tax level—but once housing benefit and council tax benefit are included, pensioners could face marginal rates of up to 91 per cent. People might well think that a 91 per cent. rate of benefit withdrawal does not offer much of a reward for saving. Labour Members need to contemplate the impact of those measures, which would extend such marginal rates up the income scale.
§ Miss Anne Begg (Aberdeen, South)
When the hon. Gentleman began his working life, did he decide that it would probably be in his best interests to save for his retirement, not knowing that he would reach the heady heights of Government office, earn lots of money and thereby be able to save? Like most of us, he probably decided at that early stage that it was probably sensible to save, not knowing whether he would be able to continue to do so, or to save as much as he anticipated. Most people in that situation would decide that it was better in the long term to save—either because they will be able to save a great deal for their retirement, or because they will be able to save a bit and therefore benefit from the pension credit.
§ Mr. Willetts
Again, I wish that matters were as simple as that. The savings gap—the gap between the amount 615 people are actually saving and the amount that they need to save to enjoy a reasonable income on retirement—is estimated at a massive £27 billion a year. That is the problem that we have been debating—with the notable exception of the Secretary of State, who has remained silent as occupational pensions for new members have closed. We pressed Ministers on this issue for years, on the introduction of the stakeholder pension. For example, we asked how much money one needs to build up in a stakeholder fund to be confident that it will yield an income sufficient to get above the minimum income guarantee. That straightforward question—it is the $64,000 question—is one of the first that any independent financial adviser would want to consider, but we have never received a straight answer from Ministers.
The answer could be $64,000. It could be even more. If means-testing spreads further up the income scale, it will affect the behaviour of the next generation. It is no good arguing that nobody will he affected and that people will carry on as if nothing has happened. Ministers cannot claim that this is a massive change in the way in which pensioners are helped without also recognising that it might have an effect—not always a desirable one—on the behaviour of the next generation of pensioners. That is what I ask Labour Members to consider.
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
If the hon. Gentleman wishes to sweep away all the complexities and rely on the basic state pension, what relationship does he think that that pension should bear to average earnings, now and in the future?
§ Mr. Willetts
Let me turn to that issue, because I now wish to set out a possible alternative approach. We would begin by acknowledging the most powerful point that the Secretary of State makes, although he did not put it especially succinctly today. He says that in the old days the basic state pension was well targeted on poverty because most pensioners were poor. However, he argues that pensioners now have a greater diversity of incomes, so the basic state pension is less well targeted on poverty. That is the kernel of the argument that the Secretary of State uses against those of his colleagues who wish to restore the earnings link and in favour of means tests. That point reflects the reality of greater diversity of income among pensioners and it is the challenge to us to think afresh about the problem.
Beveridge's great insight was that if one could define categories of benefit recipient carefully enough, measures could be well targeted on poverty without means-testing. In his day, the basic state pension was well targeted, but now it is less so. The Secretary of State says that means-testing is the only alternative, but we know that, by and large, older pensioners tend to be poorer pensioners. The correlation is not perfect, I accept, but it is broadly true. The figures are striking. Couples who have recently retired have, on average, an income of £384, compared with the under-75s on £359 and the over-75s on £283. Similar figures apply to single pensioners—those who have recently retired are on £210; those aged under 75 are on £184 and those over 75 on £158.
The hon. Member for Northavon (Mr. Webb)—my new friend, as the Secretary of State described him—made the fair point, sotto voce, that those figures are the reason 616 why the Government introduced free television licences and restricted them to the over-75s. The Government argue that that provision was well targeted because older pensioners tend to be poorer. The reasoned amendment does not propose a precise age range, because that would need to be decided, but if we paid a higher rate—not to all pensioners, as the Secretary of State claimed, but to older pensioners—it would be reasonably well targeted on poverty without more means-testing.
Despite the imperfections in that scheme, which I freely admit, we could at least be confident that all pensioners would receive the payment. I am not confident that all pensioners will get the pension credit. The Government cite a load of figures for the pension credit, but they all assume a 100 per cent. take-up. That is a bogus assumption.
§ Mr. Cousins
That is interesting, but I am still waiting for an answer to my question. What should be the relationship between the basic state pension—if the hon. Gentleman wants to rely on that as a means of delivery—and average earnings? Should it be 25 per cent., 10 per cent., or perhaps 4 per cent.? That is what we need to know.
§ Mr. Willetts
I do not propose that we bring back the earnings link. I propose a significant increase in the basic state pension when people reach an age at which we know they are likely to have a lower income. That is what Members on both sides of the House propose as a better way to tackle the problem than yet more means-testing, and it has much to recommend it.
§ Mr. Willetts
No, I wish to make some progress. There is a logic to the reasoned amendment and I invite the House to consider that alternative strategy. I hope that it will win the day in the Division at 10 o'clock. However, if the pension credit is implemented despite our concerns, I would not take it away from pensioners—
§ Mr. Willetts
I am pleased to get a hum of approval from the Minister. I would not take the pension credit away, but I wish that we had the alternative strategy that I have outlined.
I would now like to consider three particular points on the proposal. The hon. Member for Stafford (Mr. Kidney), who is no longer in his place, made a valid point about incomplete contribution records. I asked the Secretary of State a parliamentary question on that point nearly a year ago and I was told that some 2.9 million pensioners were in receipt of a partial pension. Many of those are women. We should remember, when we hear the claims of how marvellous the pension credit will be for pensioners, that 2.9 million pensioners—nearly a third—do not get the full value of the basic state pension. For them, their savings will have to go towards increasing the basic state pension to the full value and they will not get the 60 per cent. top-up—or whatever Labour Members fondly hope that those pensioners will get.
We have not yet discussed the interaction between the pension credit and nursing homes. One of my frustrations with the Secretary of State and his Department is that they 617 have a blind spot about nursing homes and their costs. That is why the Government got into a muddle over the winter fuel payment, which they wrongly claimed was being paid to all pensioners when it was not paid to pensioners in care homes. We need to know how pensioners in care homes will be affected by the pension credit. The Minister in the other place said thatpeople in residential care or care homes will enjoy both the savings element and the guarantee element"—of the pension credit. That was a good start. Unfortunately, she continued:Whether local authorities go on to recover all or part of that in increased charging will be for them to determine in consultation with the Department of Health."—[Official Report, House of Lords, 18 December 2001; Vol. 1858, c. 191.]So the Bill is a device to enable local authorities to extract more money from pensioners in receipt of the pension credit. The Pension Provision Group made that point clearly when it said:Unless changes are made to the existing Department of Health guidelines, the immediate beneficiaries of Pension Credit paid to pensioners in residential care could be local authorities.That could also include any pensioner who receives any assistance with care costs, including domiciliary care. Any income that they get from the pension credit will be taken into account by local authorities when deciding how much to charge those pensioners. The Secretary of State did not mention that point and I hope that the Minister will do so later, because it is very important.
We are all waiting with bated breath to know what decision the Government will reach on another aspect of the pension credit—the treatment of earnings. Considerable confusion still exists on that point, even after days of debate in the House of Lords. We thought that the Government believed it to be important to encourage people to carry on in work, if at all possible, with new flexibility. However, let us consider the case of two pensioners, both aged 67, who live side by side in a block of flats. One has a £30 a week pension from Tesco to boost the basic state pension and the Secretary of State claims that that person will get help from the pension credit. The other pensioner has only the basic state pension and goes out to work at Tesco and earns £30 a week. Is the pensioner who works to earn £30 a week to be entitled to the same level of support as the pensioner with the occupational pension? That is a point on which we have regularly pressed Ministers in another place. We have not yet been told whether the calculation of the pension credit will treat earnings in the same way as it treats income from savings.
§ Mr. Darling
That is an important point, and I specifically said that we propose to treat income from work in the same way as money from occupational pensions or savings. I mentioned that, although, clearly, the hon. Gentleman may have been distracted at the time.
§ Mr. Willetts
I welcome that. We shall want to check the detail in Committee, but it seems that the only logical position is to treat earnings in the same way as one treats savings. I presume that that means that pensioners will not claim the working tax credit. There is no upper age limit on the working tax credit, and I am sure that the interaction of the working tax credit and the pension credit—one of the many credits that the Government regularly throw in front of us—will be considered by the Committee in great detail.
618 I want to return to the issue of whether the pension credit will tackle the pension crisis that confronts us as every day passes. That crisis is caused by a number of factors: the closure of occupational pension schemes to new members; a catastrophically low level of saving; a spread of means-testing; increasing complexity, which means that financial advisers are more and more reluctant unambiguously to advise people that it is in their interests to save; and stakeholder pensions not reaching their target group—sales are very low, and very few of them are to people in the £10,000 to £20,000 income range. The Government's advertising campaign to increase people's knowledge and awareness of the stakeholder pension might be thought of as a success. We know from research, however, that the only consequence of people knowing more about the stakeholder pension is that it leaves them even more confused and uncertain than they were before they started.
We have a low level of saving, and the only solution from Ministers is more means-testing. I invite the House to consider whether means-testing is helping to get us into this mess, and therefore whether more means-testing is really the best way to get us out of it.
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
I thank you for calling me, Madam Deputy Speaker, although I am a little surprised to be called at this point.
I am happy to support the Bill on the basis that it will add to security and increase fairness, particularly for the many pensioners—or, as I ought to say, for the many people over 60—who have now and will have in the future small savings and small pensions other than the basic state pension. They in particular have not benefited fully from the introduction of many of the Government's measures in the minimum income guarantee, because their small savings, earnings and work pensions take them above the limit. The fact that this state pension credit proposal will vastly extend the coverage and reach of the pension credit compared with the minimum income guarantee illustrates how many of those people there are.
I am also encouraged to support the Bill on the basis of the failure of the hon. Member for Havant (Mr. Willetts) to answer my question. If the alternative to the state pension credit and the minimum income guarantee will be the basic rate of state pension, we need to know what will be the relationship between the basic state pension and average earnings. The fact that the hon. Member for Havant could not answer that point illustrates the need for the state pension credit proposals.
§ Mr. Willetts
We do not know that about the pension credit either. We do not know what the long-term uprating formula will be for the pension credit.
§ Mr. Cousins
That is a very interesting point, which I intend to try to address.
My difficulty with the Bill relates to whether it forms a permanent part of the pension system. Is it something on which people can rely, that they can plan for, and that they can build in to their expectations, or is it a short-term fix to deal with the limitations of the minimum income guarantee that I have just set out? One of the most important aspects is the uprating system. The Government have made it clear that the guarantee element of credit 619 will be uprated in line with earnings for this Parliament. The crucial question, however, is the relationship between the savings credit and the guarantee credit. Because of the way in which savings credit is placed on top of the guarantee credit—if that were calculated as we currently understand it—there would rapidly be an enormous increase in the number of people who have an entitlement to pension credit. The reach of savings credit—because of the way in which it sits on top of the guarantee credit—would advance faster than the rate of increase in earnings. If that were sustained and built into the pension credit as a permanent feature, it could be an enormous strength, but it could also be a source of enormous weakness, as it is very vulnerable to future changes in assessment and eligibility.
One of the objects that we ought to seek to achieve with the pension credit is to make sure that the relationship between the savings credit and the guarantee credit is in the form that is now proposed. Unless we can secure that, there is a danger that the benefits of the pension credit system would be rapidly changed by a future Government. Conceivably, it could rapidly change even if there were not a change of Government, because these schemes are vulnerable to changes in policy.
The big protection against a change in the way in which the savings credit is assessed would be a scheme of such robustness and popular support that no future Government—whether of the Labour party or another party—could seek to change it. That is precisely what has happened to the winter heating allowance. It was introduced and it has now become embedded in our system. Pensioners understand it, it carries huge popular support, and it cannot now be changed. The official Opposition have given up on their attempts to change it.
§ Lynne Jones
Is not the problem with the winter fuel allowance that there is no built-in annual increase in its value? Is there not a danger that the same thing will happen to the winter fuel allowance as happened to the pensioners' Christmas bonus if it is held at £200 or not increased every year?
§ Mr. Cousins
My hon. Friend is right, but it is a matter of fact that it has gone up like a rocket. If we could achieve the same for the pension credit, I would be tremendously happy. Let us look at the some of the elements of the state pension credit proposal in the time that I have left.
The state pension credit is a sort of third way proposal. People have argued for many years about means-tested benefits on the one hand and universal benefits on the other. The state pension credit is a huge breakthrough in thinking. It is an income-tested benefit that, from the start, will cover more than half the population, and if the relationship between the savings credit and the guarantee credit continues in the way that I have described, it will rapidly cover most of the pensioner population. It is a third way measure in that respect. It breaks through the arguments that we have had for many years in relation to universality and means-testing. However, it has some unfortunate deficiencies. The rate of the benefit is linked to 40 per cent. so these proposals will levy a withdrawal rate on relatively low-income pensioners that equates to 620 the higher rate of tax. That worries me, because it will cause problems and will reduce pensioners' enthusiasm for the credit.
The maximum sum is capped in a way that many pensioners will find confusing. Unlike tax, the pension credit will continue the systems of attributed income. It will be a much better system of attributing income than the ones that we have had hitherto, but it will be a continuation of them. That fact will also undermine the credit's credibility and popularity. Most important, the minimum income guarantee attributes income even from small private sector pension plans of which there will be many in the future. The state pension credit will continue such attribution, so I see little point in the House having a huge argument about what age people should be able to keep their private pension funds without the need to draw down the pension if the lowest income pensioners with the smallest private pension funds are to have income from those pensions attributed to them from the outset.
If the state pension credit could integrate tax and benefits in the way that many of us have hoped for for many years, that would be a huge step forward. Unfortunately, my noble Friend Baroness Hollis made it clear on Second Reading in the other place that that would not occur and that a crucial difference between tax and benefits was to be maintained. The pension credit will be subject to a household measure of income whereas tax is subject to an individual measure of income. That difference will particularly affect women who have smaller pensions both in their own right through the state and through work. I hope that we will be able to change that feature of the Bill. The issue of women who have incomplete contributions that bring them a pension that is smaller than the basic state pension has been mentioned already. I hope that it will be pursued.
During the passage of the Bill, the Government could introduce a savings disregard to the pension credit. Such an important measure could lift people through some of the difficulties that I have described. If the Government were willing to conceive of the pension credit as free standing from the payment of pensions so that the savings credit could be paid from the age of 60 to both the men and women who are entitled to it, that again would be a huge breakthrough in establishing the pension credit as a permanent feature of our system.
The Government must seek to embed their pension reforms so that future Governments cannot tamper with the benefits. The discussion on how that can be achieved goes far beyond this debate. However, I wish that the national insurance fund were a proper trust fund that was defended by trustees with a statutory responsibility to protect it from being raided in the way that it has been by successive Governments. We should do much the same for the state pension credit. It is an important and potentially powerful innovation, but it will be compromised if the benefits cannot be embedded in the system.
People will support the pension credit if they understand it and know that the benefits are embedded in the system. For it to become popular, it must, as far as possible, be a tax-like benefit and not like a traditional means-tested benefit. The Government's proposals have not yet achieved that aim, which would be consistent with their plans. If we could go further and embed the benefits 621 in the system, the credit would become popular and enable the Government to secure their objectives in a way on which people could rely.
There is little point in a constant stream of innovations for pension products and pension planning devices—whether devised by the state or the private sector—if people cannot rely on their being permanent features that will enable them to plan over 30 or 40 years. Our objective must be to make the state pension credit proposals in the Bill into something on which people can rely in the longer term as a permanent feature of pension planning. I hope that we will succeed and—
§ Mr. Steve Webb (Northavon)
It might be helpful to the House if I clarify what we shall vote on and describe what is and is not in the Bill. The State of State's speech might—I am sure inadvertently—have misled the House into thinking that certain provisions are in the Bill when they are not.
The Secretary of State said that a typical pensioner would be £8 a week better off, and he seemed to imply—I may have misunderstood him—that that was because of the Bill. From April, the minimum income guarantee will be £98 and the promise is that—as a result of inflation or, possibly, earnings indexation—it will be £100 from April 2003. Even if one puts a charitable interpretation on the difference between the two figures and counts it as a gain, it involves an increase of £2 for pensioners on the minimum income guarantee. The Secretary of State said that the increase would be £8, so something does not quite add up. I think that he is counting things that have already happened, and including the increase in the minimum income guarantee from last April when it was £92—or possibly even the increase from the April before that.
The minimum income guarantee has gone up significantly, but the Bill has had nothing to do with that. The £98 and the £100 for next year have already been announced. Whether we pass or ditch the Bill, the figure for next April will still be £100. None of the gains and none of the figures for the minimum income guarantee that the Secretary of State quoted are attributable to the Bill.
I may be wrong but, as I understand it, the Bill does not contain the stuff about the capital limits. All that the capital limits stuff does is change the imputed rate of income on savings through the income support system, and that can be done by regulation anyway. That provision is not in the Bill. So if we got rid of the Bill or had never had it, what would we lose? The answer is the savings credit.
I want to focus on whether the savings credit will achieve the two things that are claimed for it. Will it reward today's pensioners for having saved in the past and will it encourage tomorrow's pensioners to save for their old age? Both claims are fundamentally questionable.
First, and most obviously, the savings credit will not reward those people who have been thrifty if they do not claim it. The Secretary of State poured scorn on his Department's figures for non-take-up of the minimum income guarantee. I accept that they are estimates, but Baroness Hollis told the other place that one in three pensioners entitled to the pension credit would not take it 622 up when it is introduced. If half of all pensioners—that is 5.5 million—are to receive the credit, 1.5 million or more will miss out on their entitlement in year one. What sort of scheme is it if it rewards people according to the lottery of whether they take it up? It will not be an entitlement like the pension. If we delivered the cash with the pension, we would guarantee that it reached the people who are entitled to it, but these proposals are a lottery, and one in three of those who have saved will not receive the credit.
As the hon. Members for Newcastle upon Tyne, Central (Mr. Cousins) and for Stafford (Mr. Kidney) pointed out, women with incomplete contribution records will not receive the credit in full. Not only are they penalised for having brought up children by receiving a grotty pension, but they will be penalised again through receiving a grotty savings credit. The first part of any savings that they have been able to muster will be used to bring them up to the basic pension, and they will receive a reward only on what is left thereafter. The system will penalise not only the one in three who do not claim, but women who have taken care of children.
The modern social security system provides benefits for having cared for children, but it did not begin to do so until the late 1970s. Women retiring now had their child-bearing years before such protections were introduced. When the hon. Member for Stafford intervened on the subject of women with incomplete contribution records, the Secretary of State gave a rather feeble response and asked, "What if they did not choose to contribute?" It is not a question of not choosing, because those women brought up their children when the social security system did not value child rearing. Not only are those women punished by receiving a grotty pension when they retire, but they will punished again by receiving a poor savings credit.
§ James Purnell
The hon. Gentleman is doing a good job of trying to get his party off the hook as regards what will be a popular measure. What will he say when faced on the doorstep by a 67-year-old with a basic state pension who earns less than the minimum income guarantee, if he is going to oppose the pension credit? It seems to me that the hon. Gentleman is supporting the MIG and the increases, but if he does not support the savings credit, those concerned will lose all their private income from a pension or earnings. Would he continue to take that away, pound for pound?
§ Mr. Webb
We have never at any point opposed the MIG, or said that the additional support for low-income pensioners is not welcome. However, if we are to spend the £2 billion implied by the Bill and by related measures, is the best way to do so through a lottery—with a one-in-three chance that those who need it will get it—and by penalising women with incomplete contribution records, or is it better to guarantee the money to the people who need it most and who may, indeed, have saved as well: the older pensioners? It is a question of priorities. Who would be the better person to get it?
§ Mr. Webb
I will in a moment, but I would like to make some progress.
The proposed pension credit, or savings credit, is not a reward for saving at all. People who have not saved a penny voluntarily get the pension credit. How can that be, 623 if it is a reward for saving? The state second pension—as the Secretary of State has called it—is creditable. In other words, if people do not make any voluntary savings at all but accumulate a state second pension or SERPS pension, they get a top-up; not for voluntary or additional saving, but because they are automatically in the system.
When the legislation was proposed, we said that the basic state pension and the state second pension were not adequate because they did not keep people clear of the basic means-tested poverty line. At the time, the Government said that that was nonsense and that the proposal was quite enough. However, before the pension had even been introduced, it was reformed. That has to be some sort of record; pension schemes normally last about 10 years before they are reformed. The Government said that a top-up was needed—in other words, "The second pension is not good enough; we need a third one." People will get a basic pension, a SERPS or a state second pension or perhaps a graduated pension. However, all of that is not enough and the Government will give them a pension credit on top.
The sense that the Government's pensions policy is being made up on the back of a fag packet is irresistible. They make it up as they go along, spotting the blunders one year and trying to amend them for the next. The savings credit is a lottery for those who will not get it; it penalises women; and it gives people money who have not saved in just the same way as it does those who have. In what sense is that an incentive to save?
§ Mr. Tynan
Does the hon. Gentleman not realise that some people cannot afford to save money and that their full income is used to survive? The pension credit will mean that if they have a small occupational pension scheme, they will be given extra money so that they can improve their living standards.
§ Mr. Webb
I do not disagree with anything that the hon. Gentleman has just said. The savings credit is not a significant reward for those who have saved; more fundamentally, it is not an effective incentive to those currently of working age.
The House should consider the sort of person at whom the Bill is aimed. Let us suppose that someone has just turned 40. Life, perhaps, has just begun, but that person has also begun to panic about pensions. What effect will the scheme have on someone who is 40? He has 25 years—a relatively long time—to think about saving for a pension. He is on relatively small earnings but could, if he sacrificed something, put perhaps £50 a month into a pension—although as the hon. Member for Hamilton, South (Mr. Tynan) says, a lot of people could not afford that.
According to the Secretary of State, the 40-year-old is supposed to ask what he will get for £50 a month. First, he must assume the return on the fund. His adviser says that he will get 3 per cent. above inflation, through a mix of equities and gilts. In 25 years' time, he will have about £22,000. What sort of annuity or pension can he get with that? The second thing he must do is guess what the annuity rate will be in 25 years' time. It might well be lower than today, if one thinks that today's 65-year-olds will not live as long as those in 25 years' time. However, let us assume that the rate is the same; so he will receive 6 or 7 per cent on a £22,000 pot.
624 What sort of pension will that give? The answer is £1,400 a year, or £27 a week. The 40-year-old has done all these calculations, but then remembers that there is a pension credit or savings credit. He must guess what his pension will be, without knowing what the minimum income guarantee will be in the future or whether it will be price-indexed or earnings-indexed. We know the situation until the end of the Parliament, but the Government's own forecasts do not assume necessarily that the MIG will be earnings-linked or indexed beyond then. He must guess about indexation and work out the difference between the two things.
For the sake of argument, let us assume that the provision is the same as at present; between £77 and £100. That is a gap of £23. Our 40-year-old has a £27 pension, the first £23 of which gets him 60p in the pound, or £13.80. However, the last £4 takes money off, at 40p in the pound. That is £1.60 off, so he will get a £12 pension credit.
At the age of 40, this person is supposed to consider whether to save £50 a month in the hope of getting £12 a week above income support. How many people will do that calculation, make all those guesses and assumptions and sacrifice £50 a month? To give a concrete example, £50 a month could pay for a subscription to a nice sports club. For the next 25 years, that person could go swimming, or to the gym. He has a choice between doing that, and putting that £50 a month aside for 25 years in the hope of receiving £12. Does anybody seriously think for a minute that people will do those sums and, because of the Bill, save more? It is complete and unutterable nonsense to suggest that this Bill is an incentive to save.
§ Mr. Cousins
Could I press the hon. Gentleman in the way that I pressed the hon. Member for Havant (Mr. Willetts)? If the blue-yellow front amendment is carried tonight, what can that same 40-year-old assume about the relationship of the basic state pension to average earnings when he retires?
§ Mr. Webb
I will come to that point; if the hon. Gentleman feels that I have not addressed it, I encourage him to intervene again and I will do so.
All of this assumes, as the hon. Gentleman was hinting, that the scheme is still there in 25 years' time. Typically, second-tier pensions last about 10 years or so. The graduated pension lasted 10 or 15 years, while SERPS lasted about 10 years before the Conservatives cut it. The state second pension was reformed by the Government before it had even come in.
What chance is there that the state pension credit will even be there in 25 years' time? What chance is there that any sane person in middle age will plan for their retirement on the basis of a scheme that is so complicated that they cannot work out what they will be entitled to? It is simply nonsense. [Interruption.] The heckling from Members sitting behind the Secretary of State shows that they have lost the substantive argument.
The Secretary of State is fond of saying that the Bill proposes "a 60p in the pound reward for saving". It is a 60p in the pound reward for small saving, or for £23 a week of saving, to be precise: the gap between the pension and the means test. If people save more than £23, they will not get a 60p in the pound reward. Someone who saves £40—£2,000 a year of pension on top of the £3,500 basic pension, which is not much to live on—will not get 60p in the pound of pension credit; they will get 15p in the pound. That is the effect of this system.
625 Unless one is clever enough to calculate one's pension to match exactly the gap between the pension and the means test and get the maximum credit, one does not get 60p in the pound at all. It suits Ministers to imply to people that when they save, they will get a 60p in the pound top-up. But they will not; if they save £40, they will get a 15p in the pound top-up. As ever, the measure has been grotesquely oversold.
§ Lynne Jones
Does the hon. Gentleman agree that the only way to get complete security is to have the basic state pension set at the same level as the minimum income guarantee? In that way, people will know that they will keep everything that they have saved.
§ Mr. Webb
I have a lot of sympathy with that point. Let me come back to the point made by the hon. Member for Newcastle upon Tyne, Central about our proposals. At the last election, when we proposed the 50p income tax rate on those earning more than £100,000 a year, the Treasury estimated a yield of well in excess of £3 billion. From that, and with money to spare, we proposed raising the pension in tiers according to the age of the pensioner. For those over 75, we proposed putting £10 a week on the pension. The Government are spending £2 billion on the Bill and related measures, and have told me that they could have put £15 a week on the pension for every person over 75. If we add our proposed £10 to the Government's £15, that £25 would bring the pension for everybody over 75 up to the level of the minimum income guarantee. As the hon. Member for Birmingham, Selly Oak (Lynne Jones) rightly says, that is the incentive to save. Every penny saved on top of the basic pension that brings people up to the minimum income guarantee is pure gain. It is not taxed at 40 per cent.—it is not taxed at all That is the incentive to save.
§ Kevin Brennan
I shall be grateful when the hon. Gentleman eventually answers the point made by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) as to whether it is the policy of Liberal Democrats—the Tories' little helpers tonight—to link the pension to earnings over time.
§ Mr. Webb
Earnings indexation of perhaps a couple of per cent. a year more than inflation—[Interruption.] Of course we do not know what it would be, but we have to make an assumption. If that figure were added to a pension of, say, £75 a week, that would be £1.50 a week in the first year. I am talking about a rise proposed in our manifesto not of £1.50 but of £10 a week, and the £2 billion that the Government are spending would be another £15 a week on top of that. That is vastly in excess of earnings indexation.
We are not proposing across-the-board earnings indexation—we did not in our manifesto and we are not tonight. We are proposing something that goes much further, and would achieve what the hon. Member for 626 Birmingham, Selly Oak referred to for the over-75s. I freely admit that that would not apply to all pensioners. One reason why that is so difficult is the chasm that the Government have opened up between the basic pension and the means test. There is a huge and growing chasm, and our priority is to get the pension up, particularly for the over-75s, to the level of the means test. The critical advantage is that people's savings would not be taxed at 40 per cent., as the Bill proposes—it would not be taxed at all. They would get the full benefit, and that is the real incentive to save.
There is one other incentive to save built into our proposals and the amendment.
§ Mr. Webb
I did promise to give way to the hon. Gentleman in a moment, and also to my hon. Friend the Member for Mid-Dorset and North Poole (Mrs. Brooke) but let me first pursue this point.
Suppose that, as the hon. Member for Hamilton, South said, someone cannot afford to save a lot, but can save a small amount. At the age of 65, if they convert that money into an annuity, it has to last the rest of their life. The insurance company has to cover itself against the possibility that that person will live to 90 or 95, so annuity rates are very poor at present. However, if that annuity had to last someone of 65 not for the rest of their life but until they were 75, at which point a decent basic pension at the rates we are talking about cut in, it would be worth double what could be bought under the present system. Instead of people saving and then buying an inadequate annuity that would not lift them clear of the means test—in which case they would not bother—they would have the opportunity to save for an annuity of twice the size. That is another savings incentive built into this scheme.
§ Mrs. Brooke
I thank my hon. Friend for giving way. Does he agree that the very best way to help pensioners is to have a system that is clear, easy to understand and sufficiently generous? Labour Members claim that if the Bill is not supported tonight, pensioners will suffer, but the Government are not proposing the best way in which to help our pensioners, particularly the most vulnerable.
§ Mr. Darling
Some time I must find time to visit the academic institution from which the hon. Gentleman 627 comes—he seems to be making up his policy on the hoof. Can he explain one thing to me? He says that by taking the £2 billion from the pension credit and adding it to another £3 billion that has been conjured up from somewhere—we know not where—he would tell the over-75s, "Have another £15 a week." I understand that part of his argument, but what does he say to someone who is 67 and is poor?
§ Mr. Webb
As the hon. Member for Havant (Mr. Willetts) said, we all agree that there must be a continuing role for a safety net. There is no disputing that—there must be a continuing role for means-testing. I hesitate to use a new Labour phrase, but we are talking about whether means-testing should be for the few and not for the many. That is the difference between us.
§ Mr. Dismore
I am grateful to the hon. Gentleman for giving way to me at last. Under his theory, a millionaire in Mill Hill would get an extra £25 a week but someone on minimum income guarantee in Burnt Oak in my constituency, where half the people are on means-tested benefits, would not get one penny more—even though the paperwork might be clearer. How can the hon. Gentleman justify giving so much more money to people who do not need it while the people who really need it do not get a penny more because they are on minimum income guarantee?
§ Mr. Webb
The hon. Gentleman has not been paying attention. The minimum income guarantee does not come under the Bill, so rejecting it will not take a penny off his pensioners who claim the minimum income guarantee. They would continue getting whatever they got under the previous arrangements. The millionaires in his constituency pay 40 per cent. tax so we would claw that back from the richest pensioners.
§ Mr. Webb
Perhaps the hon. Gentleman would do me the honour of listening to my reply before he intervenes again.
What does the hon. Gentleman have to say to the one in three pensioners in his constituency who have been promised largesse by the Government but will not claim it because the system is so complicated? That is the question that he has to answer.
We have heard that this is means-testing with a human face. People aged between 60 and 65 will be subject to means-testing, as at present, every week. Any change in circumstances has to be reported, so for 60 to 64-year-olds, it is business as usual. However, the hon. Member for Newcastle upon Tyne, Central referred to the over-60s. The savings credit does not apply to the over-60s. Hundreds of thousands of women will have heard the Secretary of State saying on television or on radio that the Government want to reward thrifty 628 pensioners. Some 62-year-old women might think of themselves as pensioners and they might think of themselves as thrifty, but the Secretary of State does not count them until they are 65. That is another group missing out on the Government's proposals.
As for whether these measures are an incentive to save, the House does not have to take my word for it. The Pension Provision Group is an organisation set up by the Secretary of State's predecessor, consisting of the great and the good of the pension world, to provide independent expert advice on pensions. The group, to which the Government apparently listen, said of the pension credit:The Government's wish to reward savers through the Pension Credit scheme could have the unintended effect of reducing … the amounts some people save.Help the Aged said:
In terms of promoting independence and dignity … a Pension Credit is no substitute for a decent state pension.The Minister was quite rude about Age Concern although he has representatives of the organisation on his taskforces. I do not know what they think about that. Age Concern says:For future pensioners, we are not convinced that the Credit, as proposed, is likely to do a great deal in terms of encouraging people to save".That is what it is for—it is the only reason why it is in the Bill.
The Government have been known to speak well of the IPPR, which said:In theory, the Government strategy has some merit"—I love a good theory, and I bet the scheme looks very good on a whiteboard at the Department of Work and Pensions, but—In practice, it falls short of eliminating pensioner poverty and providing an environment whereby people can understand their entitlements, save and be rewarded for doing so.The theory is lovely. The bar charts look great. The practice falls short.
We have been told that people will be reassessed only every five years, so that is all right, but it is not all right if they get worse off in those five years. Let us suppose, hypothetically, that their Railtrack shares are worth less—or worthless. Their capital falls, so their imputed income falls and their entitlement rises. They have to make a fresh claim to get all the money that they are entitled to.
The Secretary of State said that pensioners' circumstances do not change much—but if they have investments or the husband dies, they do. Earnings can fluctuate in retirement. The idea that people will be reassessed once every five years and be left alone between times is a myth.
If the Secretary of State wants to intervene to tell us what estimate he has made of the proportion of people who will have to claim again within the five-year period, I will be delighted to give way, but of course the Government have made no such estimate. This will not work in practice.
§ Mr. Tim Boswell (Daventry)
Does the hon. Gentleman—or my hon. Friend—agree that it is a remarkable thing that until now the benefit system has been predicated on a weekly need to be and the tax system on an annual capacity, but now the Government are overleaping both by suggesting that five years is the 629 appropriate period? Not only will people whose income has fallen get less than they should, unless somebody flags it up for them—as is to be done on the internet, apparently—but people who have received a windfall will not have it taken off them unless they choose to disqualify themselves.
§ Mr. Webb
The hon. Gentleman is right to point out the anomalies in the Secretary of State's proposals.
The Secretary of State touched on the new pensions service. I note that it is a pensions service, not a pensioners service, because it is driven by the Department's desire to save some money by doing as much as possible through call centres, although most pensioners would like to see a human being and do not want to talk about complex personal financial details down the phone or fill in a complicated form.
We have had no joy in getting a response from the Department to a serious question. The Department wants everything to be done by phone as first preference. There are to be some house visits, presumably for the infirm, which is fair enough, but what if someone wants to talk to a real human, face to face? Will that be possible, without notice, and if so where? The suspicion is that face-to-face interviews in the local benefits office will no longer be possible. If there is a monthly surgery at the local Age Concern or citizens advice bureau, that is okay, but it is not the service that pensioners want.
The Secretary of State had a bit of fun about my choice of bedfellows, but I could not help noticing that his bedfellow was Lord Fowler, who was Secretary of State for Social Security for many years under Mrs. Thatcher. The Labour party did not seem to have much time for his opinions then, and he is applauding the Government today only because they have adopted a mass means-testing, Thatcherite approach.
The savings credit neither rewards those who save today nor encourages people to save for tomorrow, and I urge the House to reject it outright.
§ Paul Flynn (Newport, West)
Like all hon Members, I am familiar with the problems that the Bill is intended to solve. We have all had bewildered pensioners at our surgeries saying that they saved and made sacrifices to pay into a small works pension all their working lives, on low incomes, but find that in retirement their pension is not worth a penny to them because it is at a level that does not allow them to take an income from it but disentitles them to other benefits. There is clearly a problem, and the Government are to be congratulated on trying to solve it, but there are clear arguments against the Bill.
I warmed to what my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said about national insurance. It is one of the rewards of being in this place that if we keep saying the same thing year after year, eventually people will listen. It was heartwarming to see the IPPR report, "A New Contract for Retirement". To our astonishment—and its own—it advocates raising the basic pension to the level of the minimum income guarantee.
The minimum income guarantee was a piece of branding. All Governments have indulged in that, as with national assistance changing to supplementary benefit and 630 then income support. They have always found new labels that they hope will be more acceptable. The minimum income guarantee is the old income support, topping up the basic pension, but it was a good presentational move. If we have a criticism of the Bill, it is that it errs on the side of presentation. I dread the future, when pensioners come to our surgeries because the presentation made them think that they would get the true benefit of all their pensions but they have found that the true position is very different.
The head of the IPPR said:An enhanced basic pension is the best way to tackle pensioner poverty and to provide an environment in which people can plan with confidence and he rewarded for saving.He also said:These conclusions were as much a surprise to us as they will be to others who believe that as a centre left think tank we would support targeting of resources on those in most need.In general, we do support that, but targeting resources is an imprecise activity. The winter fuel payment is targeted on those of us of an appropriate age, as it arrives in royal palaces and elsewhere. It is difficult to get targeting right.
We should consider the state of the national insurance fund. My hon. Friend the Member for Newcastle upon Tyne, Central asked why on earth it is not a fund that is separately run, with managers who can invest and be paid according to the fund's profits. That would be far better. If the national insurance fund were a true fund, so that the pensioners who had paid in could get their reward, we would be in a very different situation. At present, people on low incomes are being defrauded of their money. The basic unfairness is that those on the lowest income pay the largest proportion in.
Furthermore, there is another new wheeze. Although Conservative Members complain a great deal about the effect of green taxes, in fact £1 billion has been lost to the national insurance fund because of allowances made to industry by cutting their national insurance contributions to compensate them for those taxes.
Let us consider the state of the national insurance fund. Is it on the rocks? Is it in trouble? In fact, it is in a very healthy state and has been for some time. The balance at the end of 2000 was equivalent to 41 per cent. of the benefits payments throughout the year. There is an in-built safety level of 16.7 per cent. of the contributions made, which has to he guaranteed in case there is a slump, with rising unemployment, but in 2000 the figure was 41 per cent. and things have improved steadily since then.
The 2002 report shows an opening balance of £19 billion and an income for the year of £59 billion, or £2.4 billion more than the estimate, but the closing balance is expected to be 47.7 per cent. of benefits payments, or £24 billion—a huge surplus again. The 2002 report gives a forecast for next year and states that receipts are expected to exceed payments by almost £3.4 billion, producing a closing balance that would he 52 per cent. of benefit payments—a surplus of £27 billion. We are entitled to ask about that enormous unneeded surplus, which would be enough to make a substantial increase in the basic pension.
Some of my hon. Friends have objected and said that the means test is okay, that it is a relic of the past that has no effect, but it has a profound effect. As has been said, 631 between 500,000 and 600,000 people are put off, presumably by the means test. That figure is robust and has not been denied. It has been around for a long time, and there is a very good reason for it. This is a generation thing that might not be easily understood, perhaps, by those of a different generation who have not experienced the ignominy of claiming benefits.
A generation of people are proud to say that they have worked from the time that they left school at 14 and have never been on the dole or claimed any benefit. When they get to retirement age, they say, "I've paid my dues and done everything that I should", and they view claiming for income support as the act of a scrounger. In their view, those who claim it humiliate themselves. That view is deep-seated. They will not take such a step, having spent a lifetime of self-respect on their own earnings. A large group of people are in that position.
I have heard no one deny that the Bill will result in an increase in the number of people who claim means-tested benefit to 5.4 million, which amounts to half the pensioners involved—a very high figure. We should not regard that as trivial or automatic. There will be great resistance to claiming the pension credit, however it is given.
I have been impressed by the evidence from the various bodies. In particular the National Pensioners Convention has made a serious case. Although it supports many of the wishes expressed in the Bill, it wants the Bill to be simplified and changed in many ways. I hope that, in Committee, the Government will show a little humility about the Bill's deficiencies.
It was heartening to hear tonight that earnings will be taken into account as a disregard. That is profoundly important because pensioners now aged 60 or 65 seem a great deal younger than those of their parents' generation and, to have a healthy time, the most beneficial and therapeutic thing that they can do is work, but there is an enormous disincentive in the scheme to stop that happening.
The official Opposition are in a position of great weakness because of their atrocious period in government. I reminded them tonight that much happened in 1980. Lord Fowler, who has been mentioned, was the man who wanted to wreck the state earnings-related pension scheme, but could not do so because the insurance industry did not want the low earners to be landed on them. That Government encouraged people to leave very good-value occupational pension schemes and to enter the extremely poor-value private personal pension schemes.
I vividly remember Baroness Thatcher telling me, when I asked her a question when she was in government, that I was against personal pensions because, as a socialist, I was against choice. Unfortunately, people had to make a choice under a bribe; they were told to leave the scheme and that they would have £5,000 if they remained in SERPS. They were told, "Don't be a SERP" and not to accept that amount. How many of those people now bitterly regret that they abandoned their good-value occupational schemes to enter money purchase schemes?
§ Mr. Boswell
I thought that the hon. Gentleman started well, but was beginning to deteriorate. Even if he did not like everything that was done under the Conservative 632 Government, in view of what he said about the need for older people to work if they want to, I invite him to remember that we abolished the earnings rule, which was a major disincentive to their doing so.
§ Paul Flynn
The Conservative party must have done some things right in its 18 years in power, but they were rare events. I do not know whether the hon. Gentleman was in the Chamber when I said in an intervention that the main reason for the Bill was the very generous disregard that applied from 1948, when the pension was 24s—this may date many hon. Members—and people could have l0s 6d in their pension while earning £1, which is a vast amount in today's money. That disregard was built into the pensions system and continued for a long time, until it was abolished by the Conservative Government in 1980. That had a profound affect on the attitude towards pensions and savings.
I have grave doubts whether the Bill will have an effect on savings, as has been suggested. Clearly, there is a great argument for simplicity in our pension scheme, such as that found in France, where people seem to understand the point of their pension scheme. I find some clauses completely incomprehensible, and someone could earn a fee by translating the meaning of clause 3, which sounds like poor quality gobbledegook. I believe that, in trying to—
§ Mr. Howard Flight (Arundel and South Downs)
Hon. Members are aware that the reason for the Bill is, in truth, not suddenly to offer substantial incentives to people to save for their own pensions, but because the Government introduced the MIG and stakeholder pensions and suddenly realised that, for a lot of people, there was no point taking out stakeholder pensions because of the MIG. Indeed, people could be misadvised to take out a stakeholder pension if their earnings were very modest.
The Bill provides that those modestly above the MIG level should have this benefit, and it is hoped that there will be no obvious disincentive to save for those at the lower end of the stakeholder market. As other hon. Members have said, the arrangements, in essence, involve a 40 per cent. tax charge, and its impact can be much greater if people save a lot. The arrangements will really only benefit those who save up to £23 a week.
There then appear all the categories that the Bill does not address, where it will not help and where it leaves disincentives. It will not help those with less than the full basic state pension entitlement and, for the reasons that the Minister explained, this will particularly damage women because, in the past at least, many have not worked for part of their younger lives while bringing up children. As has been said, the Bill will not apply to women in the 60 to 64-year-old age range. It will not apply to the self-employed, who are often the least well provided for in old age; nor will it benefit those who have saved for a limited time—for example, up to 12 years—who will receive no benefit from the credit as a result.
I am still not entirely clear what the earnings rule will be, but the point is that the Bill has been spun as a great pension credit and incentive to save, but it will do nothing 633 at all for many people and it may represent a major disincentive to save for many people. We need to dig deeper to solve many of the problems that have been unleashed by the principle of the MIG and its extension. Many people have pointed out not only that the credit will be too complex, but that the Government assume there will be only a 67 per cent. take-up.
§ Mr. Flight
I hope to suggest the solution in the few minutes allotted to me.
There is nothing about the cost of the credit. Hon. Members will be aware that estimates by the Department for Work and Pensions have put it as high as £20 billion by 2040 and £26 billion by 2050 if it continues and depending on the qualification rules.
The approach makes a nonsense of the Government's target to change the 60:40 relationship. In addition, I find it disturbing that at a time w hen occupational final salary schemes are being abandoned and alternative money purchase pension provision is going to be less generous, the Government are laying down the principle that the state will make good the lack of provision in people's savings for their retirement. That runs the risk of taking us down the economic path that is damaging the economies of Europe so much, where inadequately funded pension provision has led to taxation on employment, which damages economic growth and, above all, employment.
The Government should think again. A pensions crisis is engulfing the country and we should be cautious, albeit with the best of intentions Although we want to help those in need in retirement today, if the policy takes us down a wrong and irreversible path, it will not do future generations any good. Both my hon. Friend the Member for Havant (Mr. Willetts) and the hon. Member for Northavon (Mr. Webb) made the point that it is crucial to target those age groups that need assistance.
People who are 75 today are fitter than those who were 65 some 40 years ago. Most people will want to work certainly to 65 and possibly, as far as I am concerned, to 75. It is the older people who are in the greatest need and a significant increase in the universal pension for those over 75, which would lift everyone off means-testing, would solve many problems. It would provide security for people when they really need it, such as when the nursing home bills start to arrive or an annuity is worth only half of what it was when purchased. It makes sense to address those problems. Although it leaves certain difficulties for those who are under 75, more of them will work in the future and they will be able to use their private sector pension savings in a more focused way during that time.
§ Mr. Flight
My hon. Friend answered that. No one is denying that means-tested benefits will remain in the welfare system for such people, but we need a pension system that works. We do not want to give people the 634 wrong incentives. The system must be targeted on groups of people who are most in need. The problem with the proposed measures and the MIG is that they send the wrong signals on pension accumulation. They will end up costing more than will be deemed affordable and do not provide the pension saving incentives that the spin attached to the label implies. At worst, they lock us into a path that will cause us to have the same problems as continental Europe. We want to achieve an affordable and workable compromise. The Liberals and the Conservatives have joined together on this issue to offer a practical path that makes sense for a community in which people will live and work for longer.
§ Mr. Frank Field (Birkenhead)
When this measure was first thought of, our constituents' views on their pensions and the pension promise were rather different from their current views on their pension prospects. It is beyond all doubt that when the Secretary of State rose to introduce the measure, he did so in support of a Government who have done more for poorer pensioners than any other Government in our history. However, I want to set out why I will not support the Bill in the Lobby tonight. There is a reasoned amendment, and I hope that we will vote on whether the Bill should receive its Second Reading. I believe that it should not.
I agree with the Secretary of State that in speaking thus, one allies oneself with people with whom one would not normally agree. It is true that when I was on the Opposition Benches, I spent all my energy, as did other Labour Members, in opposing the Governments of 1979 to 1997, who extended means-testing. I will continue to vote that way tonight. Of course we must be careful with people who push one line of policy in office and another in opposition. However, if the Government can change their mind, presumably Oppositions can do so as well.
Although there might be a dispute about whether anyone understands the Bill or what its likely effect might be, there is agreement on both sides of the Chamber that taxpayers need to spend more money on supporting retired people. We have not had that point of agreement for many days, and it is much more significant than divisions over the Bill itself.
There are four reasons why I oppose the measure. First, it breaks a manifesto commitment. In 1997, our general election manifesto highlighted the rising number of pensioners on means-testing, which had increased to one in three under the Tories. We found that an appalling state of affairs and promised to reverse the trend. Early in the life of our Government, we set the aim that when all our pension reforms were complete, the number of means-tested pensioners would fall from one in three to one in five. As has been pointed out, we will not achieve that objective if the Bill becomes law. Instead, the objective will be to increase the number to two out of three of our retired constituents. So breaking a manifesto pledge is the first reason why I will reluctantly vote against the Bill on Second Reading.
Secondly, we opposed means-testing not merely because we opposed the Tories; we had clear reasons for thinking that it was a damaging policy for the country as a whole. We did not oppose it only for the reasons that were given in the 1930s. In the last debate on this subject, my hon. Friend the Member for Stalybridge and Hyde 635 (James Purnell) quoted an essay, which I consulted, about people's fear of the means-test man, as he put it. That fear clearly operates in some instances, but that is not the only charge that one makes against means-testing. As the House has already been told, the Bill will design out of eligibility many of the pensioners whom we would like to gain benefit, so it will not even be an effective means test for targeting help on those in greatest need.
There was another reason for our opposition to means-testing, apart from our simply being bloody-minded and wanting to oppose the Government of the day. We began to see that means-testing had an effect on how people behaved, and not simply on those who learn to work the system, although one can hardly blame them for that if we design and put in place mean-testing systems, which encourage it.
As the hon. Member for Northavon (Mr. Webb) explained to the House, people have a responsibility to try to calculate how they can make themselves and their families better off, and they change their conduct accordingly. Means tests undermine most of the attributes that we want from strong citizens, and that was one reason why we pledged ourselves in 1997 to reverse what seemed to be an ever-growing tide of pensioners on means-tested benefits. The Bill therefore goes against a manifesto pledge. We had specific reasons for thinking that means-testing was a bad policy.
The third reason why I oppose the measure is that I do not believe that it will last. Before you, Mr. Deputy Speaker, were chairing our proceedings, my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said that he was rather surprised to be called at that point in the debate. All I can say is that if surprise leads him to deliver a speech of the quality that he gave us tonight, I hope that he is surprised on many more occasions and engages the House as he did tonight.
If my hon. Friend was right, and the Bill could last, there could he a case for it, but I do not believe for a moment that it will be on the statute book in 10 years, nor do I believe it should be, given the issues that people who are trying to save for their retirement currently face. The Government's own projections of the cost of the measure show that, when it is fully effective, in today's terms it will cost 8p on the standard rate of tax. Does anybody think that future Governments will see this system grow and prosper with a tax bill of 8p in the pound for every taxpayer? Perhaps some people think that is realistic; I do not think that it is.
In a few weeks, in the Chancellor's Budget, we will cross a threshold when we debate with the electorate the need possibly to raise taxes to support the health service. That will be nowhere as easy to negotiate as some of my colleagues think, even though we will be fronting a tax rise on the service that this country cares most about—the national health service.
The fourth reason why I oppose the Bill, therefore, is that whereas people planning for their retirement want as much certainty as possible in the regimes that they have to negotiate, the Bill will add to uncertainty. It will not last. One has only to look at the record of previous Governments, let alone the record of previous Oppositions in responding to Government measures, to realise the likely fate of the Bill, no matter how noble its objective. 636 Although we agree across the House about the voters' growing sense of unease about how pensions will be paid for and about how an increasing share of that will come from taxation, the Bill is not adequate.
I shall end my speech by suggesting how I hope the Government, through their programme, will shape the next move. The real weakness of our system is that people can work for 48 years and not get a pension that takes them out of poverty. The inadequacy of the first tier is the stumbling block to longer-term successful reforms. I hope that, at some stage, the Government will recast the state second pension. Instead of being a safety net benefit, it should be one of which everybody has membership. Instead of operating as a pay-as-you-go system, it should be funded. It should be bound up with the existing national insurance pension. At the end of the day, people participating in both schemes would have an adequate first-tier pension. That would simplify the system and there would be no disincentive to save. People would be able to make their own provision as they thought fit.
There would be a balance between risking the pension promise through investments and trying to deliver the crucial first-tier pension through a pay-as-you-go system. It does not take much to begin to reshape the Government's measures to give us the basis of long-term, sustainable and successful reform. The Government need soon to respond to people's increasing concern about whether there will be an adequate pension for them when they retire. I hope that they will do so not by throwing away all the measures that they have taken, but by recasting some of them, putting aside this measure and looking at the state second pension. They should realise the potential that it will have if it is funded, if everybody is included, if it is compulsory and if it is linked to the national insurance state pension.
§ Mr. Deputy Speaker
Before I call the next speaker, I point out that there is a 12-minute limit on all Back Benchers' speeches, but an awful lot of Members are still trying to catch my eye. It would be extremely helpful if they could take slightly less than their allotted time, in which case fewer of them will be disappointed.
§ Mr. Andrew Mitchell (Sutton Coldfield)
I start by drawing the attention of the House to my interests, which are laid down in the Register but which do not abut directly to the contents of the debate.
This is turning into a most interesting occasion. It has always seemed to me that the House has a duty, in pensions legislation, both to address the needs of today's retired people and clearly to lay down long-term plans because the effects of legislation last such a long time. The comments made about that by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) and the right hon. Member for Birkenhead (Mr. Field) were particularly important.
I say to the Minister that although I shall certainly support the amendment, I have not yet decided whether, if the amendment is defeated, I shall support the Bill in the Lobby, so I will listen particularly carefully to her response to the debate.
§ James Purnell
I have great respect for the hon. Gentleman's views and, in particular, for what he says in 637 meetings of the Select Committee on which we both sit. If I remember correctly, last week he said that he thought that the pension credit had a number of valuable qualities. Does that determine that he will support the Bill? I hear that he has been supporting the pension policy of the hon. Member for Havant (Mr. Willetts), who seems to oppose the Bill.
§ Mr. Mitchell
The hon. Gentleman is attempting to lead me down a cul-de-sac, and if he listens he will learn why I am in some doubt about how I will vote on the Bill if the reasoned amendment, which I strongly support, is defeated.
The Bill is certainly muddled and complex, and in many ways it is a waste. That is why I welcome the reasoned amendment, which makes it clear that the Bill has a number of serious faults. It proposes a tremendous increase in complexity and means-testing, and the erosion of the incentive to save. In addition, we have to ask whether better use might be made of the money by targeting it on those who need support.
I shall deal first with the massive extension of complexity and confusion. The hon. Member for Newport, West (Paul Flynn), who knows a great deal about this subject, is confused, and I, who used to be a Social Security Minister, am pretty confused about the effects of the Bill. It does not begin to pass the doorstep test, nor to live up to the description offered by Baroness Hollis, who said that the Bill is the final piece of the Government's pensions strategy jigsaw. Personally, I prefer the judgment given by Sue Ward, of the Northern Pensions Resource Group, who said that it reduces the Government's strategy to incoherence.
My hon. Friend the Member for Havant (Mr. Willetts) referred to the Institute for Fiscal Studies, which says that it remains unclear how the credit fits in with the other parts of the Government's pensions strategy, notably stakeholder pensions and state second pensions. Andrew Dilnott said that he could not envisage the state second pension lasting much beyond the introduction of the pension credit. I shall pass over the interaction between the credit and housing benefit and community tax benefit. The Government say that no one will lose out, but the upper capital limits are still in place, so it is simply not clear how that would work. Gordon Lishman of Age Concern says that we constantly get into the position of saying, "We really don't want to start from here." On the ground of complexity, I have grave doubts about the measure.
Secondly, the reasoned amendment mentions the massive increase in means-testing. The Government should heed the eloquent words of the right hon. Member for Birkenhead. He is right: there will be great complexity and low take-up. Not one third, but two thirds of pensioners are to be drawn into the means-testing net. I cannot understand how anyone can argue that one targets through a means test that draws in two thirds of pensioners. Depending on what the Government choose to say about uprating, it is possible that more than two thirds of pensioners—up to 70 per cent.—will be drawn into that net before long. It is impossible to square that with the Government's commitment to a 60:40 funded pension policy.
Thirdly, the measure erodes the incentive to save. The highly respected Institute of Actuaries says that the Government's strategy of pension credit, second state 638 pension and stakeholder pension means that it is impossible to provide savings advice to those on low to medium incomes. That point was well stated by the hon. Member for Northavon (Mr. Webb). How can serious pension advice relating to savings be given if we do not know by how much the pension credit will be uprated in future, nor whether there will be a consistent, long-term, sustainable result?
The Secretary of State mentioned the Association of British Insurers, whose members deal with 97 per cent. of insurance business in the UK. The ABI is concerned that pension credit may not encourage three specific groups who have been mentioned to save: the self-employed, those with small savings, and those without full basic state pension. The complexity is itself a disincentive to save. The Bill makes it more difficult to tell people that they will always be better off if they save.
I pass over the fourth point made in the amendment, which deals with whether the additional expenditure—of course we have no idea what that might be—might be better directed elsewhere.
The Government are getting into a terrible muddle with their pensions policy. There was some merit in the IPPR scheme in that it was clear, concise and would have put the money into the basic state pension, the advantages of which have been made clear by several hon. Members. I do not support the IPPR approach, but it is with a deep and growing sense of unease that I watch the way in which pensions policy is developing. I believe that we should to an increasing extent have funded basic state pensions for everyone. I want my party to commit to that, and I want the Government to do so as well.
Recently, the Secretary of State said that he thought that it was impossible to get young people to focus on providing for themselves—I think that he told the Select Committee on Work and Pensions that young people prefer to go clubbing. He may be right, but it is wrong and a conceit of politicians to believe that young people expect the state to look after them in their old age. They do not believe that now.
Some time ago at Cumberland lodge, I had the opportunity to speak to some Oxford PPE graduates about social security. They had had the pleasure of a visit from a new Labour Minister to talk about new Labour's approach to social security, and they invited me to talk about the old Tory approach. I discussed several aspects of social security, including pensions. For 45 minutes, every question asked by those young people, who were of an age at which I would have regarded anyone interested in pensions as a bit of an anorak, centred on pensions.
Young people today know that they cannot rely on the state to provide for their old age. It is right that, on as consensual a basis as possible across the House, we seriously reconsider the possibility of providing funded basic state pensions for everyone who is now entering the labour market.
§ Mr. Dismore
I have a straightforward question: is the hon. Gentleman advocating compulsory contributions to pension schemes?
§ Mr. Mitchell
I have not yet made up my mind finally on whether that is essential, but my instincts are that it should be compulsory.
639 I would not say it was a blueprint, but for all its faults the scheme launched by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) was a significant contribution to the debate. Unfortunately, it was launched during the run-up to the 1997 general election and so did not receive the cool and calm scrutiny it merited. The timing was not good and there were specific problems owing to the industry not believing statements about the tax position of the scheme, but it was a step in the right direction.
The scheme, worked up and refined, was also mentioned in the Conservative manifesto at the last general election, but I would like the debate to extend far beyond the Conservative party. Serious consideration should be given to the opportunities that would accrue were we to start funded pension provision for all those now entering the labour market.
Conscious of your injunction, Mr. Deputy Speaker, I shall draw my remarks to a close.
§ Mr. Mitchell
No, if the hon. Lady will forgive me.
It would be in the finest traditions of spreading power and ownership widely throughout society—traditions that enthused my party to create a property-owning democracy and to sell council houses—to ensure that there were funded basic state pensions for everyone in future. I urge my Front-Bench colleagues to give serious consideration to a "pension plus mark 3" approach, which would ensure that considerable advantages are available to those who start work now and in future—advantages that have not been available to the present generation.
§ 8.7 pm
§ Mr. Andrew Dismore (Hendon)
I am pleased to follow the hon. Member for Sutton Coldfield (Mr. Mitchell) because my starting point is the same as his. I should say first that I welcome the Bill, because it makes important provision for pensioners, especially the sort of people whom I encounter all the time in my constituency, who tell me that they have a small occupational pension or savings and feel that they have missed out on all the additional help that we have given to pensioners so far.
The hon. Gentleman spoke first about complexity—an issue that I think is greatly overstated. In the Chamber tonight are a few pensions nerds who are extremely interested in the minutiae of pension schemes. They sit on both sides of the House and include the professor who leads for the Liberal Democrats. To be frank, when I speak to pensioners' groups in my constituency, I find that they are interested not in the algebraic formulae, but in how much money they will get at the end of the day. When speaking to such groups, I give them a copy of the ready reckoner that appeared at the back of the White Paper and which is now found in the policy statement. They know how much money they have put away, or how much their pension income is, so they should be able to work out for themselves how much money they will get. Most are able to do so.
All the pensioners in my constituency who will be affected by the pension credit are not like those who are represented by some Conservative Members. They do not 640 have enormous share portfolios or complicated trust arrangements. They have small occupational pensions, perhaps derived from the public services, or they have been able to put away the odd thousand pounds or two. They know how much money they have—they do not have great complicated problems. They are the people we are trying to help. People with great complicated problems are not those who will come within the pension credit regime.
§ Sandra Osborne (Ayr)
I agree with my hon. Friend. Does he agree that those are the pensioners who are most aggrieved about the current position and who feel most strongly that they are missing out, and that they will warmly welcome the pension credit?
§ Mr. Dismore
I very much agree. One criticism of the alternative proposal advanced by the IPPR, the Liberal Democrats and now, I presume, the Conservatives, is that the position would be even worse for people who have paid national insurance; they would not benefit from having done so because those contributions would be equalised at the MIG level, whether the basic pension or the MIG is paid.
§ Mr. Dismore
We have a limited amount of time, and I should like to make some progress.
There is also the question of the great evil monster that we are creating by extending the means test to more people. Frankly, if more people get involved in means-testing, the stigma will be reduced and greater numbers of people will claim. In Australia, the entire pension system is means-tested, but that is not a disincentive for people wishing to make a claim.
The Government's proposals are much simpler than present arrangements; we are not talking about weekly assessments and intrusive 40-page application forms which, I am pleased to say, have now been reduced. I can understand why people get concerned if, for example, they are asked whether they are pregnant; that question was on one of the old forms. We sensibly envisage a broad-brush approach with a five-yearly assessment and a pension stock-take with the first claim when someone reaches pensionable age. Most pensioners will find that much easier and more straightforward. The complications ascribed to the proposals are erroneous.
Claiming through a pensions agency will be easier than claiming under current arrangements. However, when replying to the debate, I urge my hon. Friend the Minister to consider the position of pensioners in the south-east. There is no pensions agency office in the south-east at the moment, which could create particular problems for ethnic minority pensioners. In London, 300 different languages are already spoken; if call centres are spread around the world and a call is re-routed to, say, Newcastle it may be difficult for Cockneys to understand the Geordie accent, never mind Geordies trying to understand the more obscure dialects and languages spoken in London. I hope that we can address that. I should also be grateful for confirmation that telephone calls will be charged at local rate; I hope that one day, it will be possible for calls to be free.
I am pleased that face-to-face interviews will still be possible for pensioners who prefer to deal with their pension arrangements that way. I am pleased that we are 641 adopting an outreach approach by going to libraries and pensioners' groups. However, how long will it take to arrange a personal interview if a pensioner applies for one? I am pleased that the Secretary of State, in introducing the debate, dealt with the question of part-time earnings, about which I am very concerned. If we take a more flexible approach to retirement and ask people to continue to work later in life, we must make sure that people are not penalised for working the odd day or two and can gradually ease into full-time retirement, if one can put it that way. I am a great believer in flexibility, but there could be problems with the means test if someone's employment patterns swing from one extreme to the other.
I am pleased that the Government have accepted the point about downrating for hospital stays to 13 weeks; it is important to adjust calculations in relation to that. We have been assured that housing benefit and council tax benefit claimants will continue to receive their full benefits, but I am concerned about the way in which the mechanics will operate. The Opposition spokesman made an important point about local authority care charges, whether for social services support at home or residential care. I urge Ministers to talk soon to the Department of Health to make sure that we can give clear guidance to people who say, "Well, you've put my pension up, but the council just claim it all back it back again through a council tax rise." They should not be left in that position. If they are in residential care or in receipt of personal social services for which a charge is levied, they should not be penalised through local authority means-testing. As has been said, that would simply mean that we would be transferring a penalty to local authority benefits, which should rightly go into the pensioners' pockets.
I heed your request, Mr. Deputy Speaker, to draw my remarks to a close. The one outstanding question to which I would like an answer is that of uprating. In the Select Committee, the Secretary of State was pressed hard on uprating; it is important that the Government say whether they regard uprating as the way to proceed.
§ Mr. Paul Goodman (Wycombe)
All Governments face the dilemma of trying to solve the trade-off between poverty and saving. This Government find themselves wrestling with that dilemma now. Obviously one could, if one concentrated exclusively on relieving poverty, create disincentives to saving; or one could, if one wanted solely to create incentives to save, end up with growing numbers of pensioners in poverty.
The Government's central claim for the Bill is that it will reduce poverty and increase saving; it is on those two claims that the Bill should primarily be judged. The most effective way to begin to make that judgment is to look at the main way in which the pension credit will be delivered—in other words, means-testing. I shall give the House a few simple figures. In 1979, approximately 57 per cent. of all pensioners were means-tested; by 1995, the figure had come down to 38 per cent. The Library estimates that by next year the figure will have returned to 57 per cent; by 2050, up to 70 per cent. of all pensioners could be on pension credit, if it lasts until then. I want to make an important concession to the Government, who contend that means-testing is the best way to help poorer people; their main argument is that that method targets people individually. That is right, and it is a strength of their position.
642 However, there is a difficulty. How do the Government's argument and all the abstract arguments flung around the Chamber this evening relate to the experience of the people in, say, my Wycombe constituency which, in places, is not particularly rich; people do not always have, to quote the hon. Member for Hendon (Mr. Dismore) "enormous share portfolios". Some of the people who come to see me find the forms that they have to fill in complex; they find the relationship between one benefit and another extremely complex and do not fully grasp it. Indeed, I am not sure that I or many other Members in the Chamber fully grasp those complexities either. People often do not have a family member close at hand to advise them and are entirely reliant on professional advice. They are therefore experiencing genuine problems in dealing with increased means-testing.
Moving on to the link between increased means-testing and take-up, I want to quote some of the Government's own figures. The Secretary of State, if I understood him correctly, did not seem to have great confidence in all his figures, although the hon. Member for Northavon (Mr. Webb) shrewdly pointed out that in the House of Lords Baroness Hollis appeared to have great confidence in the same figures. I am therefore curious to know whether the Government's approach is consistent. The key figures for the minimum income guarantee are as follows. In 2001, about 1.7 million pensioners took up the MIG; the highest estimate is that 750,000 pensioners did not take it up. I want to make another concession to the Government for the moment and assume that that figure was in fact not 750,000, but about 500,000. By my figures—perhaps I am wrong—that is almost a third of those who took up the minimum income guarantee. So we are not talking about a small number or a small proportion. To nick, if I may, a phrase from Baroness Thatcher and apply it to Labour Members, we are talking about people who the Labour party likes to think of as its own—yet up to a third and certainly more than a quarter are not benefiting from the MIG.
The key point is that there is no hard evidence that a larger proportion of those entitled to the pension credit will take it up. The Government estimate—this is their aim—that 67 per cent. of those eligible will take up the pension credit by 2004, but even they admit that that target is "ambitious". Even if they reach the target, by definition, at least 33 per cent. will not take up the pension credit and therefore not benefit at all.
If I correctly understand the Government's approach from what the Secretary of State said earlier, their basic argument is that they do not want to consider the alternative of targeting by age because that would create anomalies—I agree; it certainly would—and that they are content to carry on means-testing and means-testing, regardless of the proportion of pensioners who do not take up pension credit. That is a huge hole in the Government's argument, and it is where the pension credit fails the first of its two tests—whether it will relieve poverty. For those who take it up, it surely will, but what about the third or quarter of those entitled who will not do so? I do not believe that the Government can or will carry on like this.
643 The evidence on saving is ambiguous. Many figures have been bandied around the Chamber during this debate, but like my hon. Friend the Member for Havant (Mr. Willetts), I am content to rest on those from the Institute for Fiscal Studies. It says:Overall, the effect of the pension credit on the financial incentive to save is left unclear, for the relative magnitudes of the different effects we have disentangled are not known. So whether the pension credit will encourage or discourage saving is an empirical question on which future research may be enlightening.In other words, the IFS simply does not know. I tend to think that if it does not know, the Government cannot say with certainty that the pension credit overall will boost savings. It is therefore perfectly clear that the Government's pension credit has failed one of the two tests, as we have no reason to think that the quarter or third of pensioners who do not take up the MIG will take up the pension credit. It is also clear that the Government have not really hit their target on saving.
My hon. Friend the Member for Havant made a series of telling points about the increasing crisis in pensions, with which the Government will now have to deal. Watching the Secretary of State, I got the feeling that he was digging himself deeper and deeper into the pension credit and more means-testing without being able to guarantee that that approach would stand up in the medium term, let alone the long term. The Government have put all their eggs in the pension credit basket.
The Government like to say that the pension credit is the final brick in the architecture and that, once it has been introduced, the whole Government pensions building will be secure and will stand. However, Conservative Members have very good reason to vote for the amendment, and will do so, as will the right hon. Member for Birkenhead (Mr. Field) and the hon. Member for Northavon.
As the hon. Member for Northavon said, the pension credit has been rushed in even though the Government are not yet clear about the consequences of the minimum income guarantee. Therefore, it is hard to see the pension credit as completing a perfect whole. It is far easier to see it as a sign of a Government whose pension strategy is in deep confusion. I urge the Government to think again about going down this road before they find themselves in a hole from which they cannot get out. That is why I, my hon. Friends and others will support the amendment.
§ Miss Anne Begg (Aberdeen, South)
I am delighted to be called in this debate and I am aware that many Members still wish to speak.
I was interested in the comment of the hon. Member for Wycombe (Mr. Goodman) that the pension credit had been introduced with such high speed. Four years is hardly very quick. I say four years because I spent the summer recess of 1999 not swanning off on some foreign holiday, as the popular press seem often to paint Members of Parliament doing, but going round most of the sheltered housing complexes in my constituency, holding a large number of pensioner meetings—I held about 20 in total—and speaking to pensioners about how they felt about the Government's pensions policy.
644 The summer of 1999 saw the height of pensioners' unhappiness about this Government's pensions policy. The 75p rise had just been announced, but pensioners had not yet received it. Going to speak to large groups of pensioners—they turned out in some force—was like entering the lion's den. However, there were some things about the Government's pension policy that they liked. The first was, of course, the introduction of the minimum income guarantee.
It was important that the new Labour Government, having come to power in 1997, tackled pensioner poverty, especially poverty among women pensioners, who were losing out because the pension system was based predominantly on a contributory principle. These women had not paid any contributions, or only very few, or had broken work records. Many working women had paid only the small stamp and therefore did not have full pension contributions.
The MIG was crucial. The Government should not make any apology for dealing with pensioner poverty by introducing it. It was a good measure that was extremely well liked. People still come up to me to thank the Government for what they have managed to do, although they often do that on the quiet. It is rare at a large meeting of pensioners to find pensioners who have benefited to the tune of sometimes £20 or £30 a week as a result of the MIG. That is not admitted at such gatherings, but pensioners will come up quietly afterwards to admit that they have benefited greatly from the measure.
There is also the winter fuel allowance, a free television licence for the over-75s and increases in the basic state pension. Obviously pensioners are slightly happier now than they were during the summer when I was talking to so many of them.
One major problem was identified. There was huge resentment among pensioners whose income was just over the MIG, those who had worked very hard all their lives and perhaps had a small occupational pension or a small income from some savings. They felt—resentment is not too strong a word—aggrieved that their hard work and thrift was not getting any reward.
In some instances, these pensioners did not understand why the Government should give money to people who had not saved and who had not invested in the future. I was keen to emphasise that that was the right thing for a Labour Government to do and that it was right that we should tackle pensioner poverty. The fact that they felt that somehow they were losing out was not a reason why the Government should not act, and the MIG was absolutely the right approach.
Obviously there was a problem that needed to be addressed. It was interesting that the hon. Member for Arundel and South Downs (Mr. Flight) talked constantly about the problem caused by the MIG. I think that all Labour Members accept that there are problems caused by it, namely the resentment that many pensioners have felt. I am not quite sure what the hon. Gentleman's solution is. He said that he would tell the House what it is, but I do not think that he did, or else it was so confused that I could not follow it.
Perhaps the hon. Gentleman's solution was that we should still give means-tested benefit to some people, but I am not sure whether it was to the level of the MIG. He suggested that the Conservatives would give lots of 645 money to the over-75s. That is not an answer. It is not a reply to those pensioners who felt that they were being let down and left out because their income was just above the basic MIG levels.
The Bill is the solution to the problems caused by the MIG. It answers the questions that many pensioners in my constituency were putting to me. Like my hon. Friend the Member for Hendon (Mr. Dismore), I feel that it passes the doorstep test. An Opposition Member claimed that it failed to do so, but it is easy to explain on the doorstep to those who have saved a little and who feel that they are being let down because they are not getting anything back that, with the pension credit, there will be some reward for their saving.
The real challenge and the big problem with the Bill will be whether there is proper take-up of the pension credit once the Bill is enacted. It will be an incredible challenge to the Government to persuade people that the credit is something for which they qualify and not something of which they should be ashamed, and is something that they will get as of right. It will be doubly difficult if the Opposition continue to harp on, as they have tonight, about how complex it is. If pensioners are told, "This is such a complex measure", of course, they are not going to apply.
§ David Cairns
My hon. Friend is being harsh on the Opposition. At least they have turned up and made a contribution. When she is on the doorstep in Aberdeen talking to voters in her constituency, will she undertake to point out to them that not one member of the Scottish National party bothered to turn up to take part in this incredibly important debate, or even sought to intervene
§ Miss Begg
I will be interested not only in how the Scottish National party votes tonight, but in how the Liberals vote, because the Liberals are the main opposition in my constituency. Liberals who fight elections for a Scottish Government in Aberdeen next year will have a hard job on the doorstep explaining exactly why their party has voted against the pension credit. I have no doubt that that in itself will undermine their case. If they continue to support the Tories in saying that this is a means test, and it is demeaning to claim the credit, obviously it will be harder and harder to persuade people that they should be claiming it and that it is not like the 1930s means test.
I support many of the things that my hon. Friend the Member for Hendon has already said. The credit can be sold on the doorstep. It can be sold to today's pensioners on the basis of the fact that it is their reward for saving. That is easy to understand. It is also easy for them to understand that they are getting something back. That is where the resentment came in: they felt that other people were getting something for nothing. They will feel that they are getting something back from the Government, but not in the form of a handout or of a demeaning means test. They will qualify because of their thrift.
If, as is projected, 70 per cent. of pensioners qualify for the pension credit, the stigma that the Liberals say will be attached to it will not exist. They have said, however, that there must still be some means-tested benefit. If a very small number receive means-tested benefit, there is a huge stigma attached to that—only the very poor get the means-tested benefit. However, if 70 per cent. of pensioners qualify for the credit, that stigma will not exist.
646 Another thing that will, I hope, help take-up of the pension credit—again, it is a challenge for the Government—is the new pension service, an agency dedicated to looking after pensioners and their needs, and ensuring that those who reach pension age are properly catered for and have their needs looked into. The hon. Member for Northavon (Mr. Webb) said that the pension is the easy option because everyone gets it, and the means test is difficult because not everyone is subject to it. I do not know what he would say to my constituent who told me that she had found that she did not get a pension because she had not realised that she had to fill in forms that were sent to her—she thought the pension came automatically. It is simply not true that people get the basic state pension as an automatic right. They do not if they have not made contributions or filled in forms as they approach their 60th birthday. Therefore, I believe that the pension credit can be sold to today's pensioners.
There has been much talk about whether the measure will give pensioners of the future an incentive to save. People I know do not behave in the way described by the hon. Member for Northavon. I do not know of anyone aged 40 who sits down and calculates to the nearest penny how much they will get in 20 years' time. Most people do not make those kinds of complicated calculations. They work on the principle that they hope—as did today's pensioners when they were younger—that it always pays to save. The introduction of the minimum income guarantee provided an incentive to save, but the introduction of the pension credit means that it will always pay to do so. It will pay to save a little, because people will qualify for the pension credit; it will pay to save a lot, because people will he so much better off than if they had not done so at all.
We cannot know at age 40, 18 or 22, when I started work, what wages we will have for the rest of our lives—or, indeed, whether we will work for the rest of our lives. A person may be hit by a bus and end up paraplegic or have a broken work record owing to continual ill-health or family commitments. We should remember that the pension credit is not the only thing—
§ Andrew Selous (South-West Bedfordshire)
I welcome the Government's desire to tackle pensioner poverty, but, like many of my hon. Friends and, indeed, some Labour Members, I must put on record the fact that I do not believe that the Bill is the best way to do so. I reiterate the comments of my hon. Friend the Member for Havant (Mr. Willetts), who said that if the Bill is introduced, Conservative Members will ensure that there are no losers through any alternative proposals that we make.
The Bill introduces a significant increase in means-testing for our pensioner population, and we are entitled to fuller answers from the Government about why that is so. In 1993, the Chancellor of the Exchequer said:I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved. The end of the means test for our elderly people".Only four years ago, the Prime Minister said thatthere are problems if you move to too much means-testing, as you can see with pensioners who do riot take up income support".647 So there has clearly been a seismic shift of opinion on the part of the Government about whether it is worthwhile to means-test, and they have not adequately explained the reasons for that.
Help the Aged estimates that 2.5 million people are entitled to the minimum income guarantee, but only about 1.7 million of those are receiving it. That is a take-up rate of only 68 per cent., which equates to about 800,000 pensioners. Due to the complexity of our benefits system, last year around 500,000 people did not receive the income support to which they were entitled; that has increased to 580,000. Similarly, 150,000 did not receive housing benefit—that has now increased to 210,000—and 1.07 million did not receive council tax benefit; that has increased to more than 1.2 million. Help the Aged drew attention to the Department for Work and Pensions' own research showing that some of the most newly qualified pensioners are some of the most reluctant to take up the minimum income guarantee.
We have heard about the problem of what is to happen to the poor 67-year-old pensioner. That is a valid question, and Labour Members are entitled to ask it. However, surely the bigger picture is that if large numbers of pensioners—perhaps hundreds of thousands—do not take up benefits as a result of the proposals, more pensioners overall will be worse off than would be the case if the needs of that 67-year-old pensioner were precisely met by this massive extension of means-testing.
The current figures are all the more disappointing, given that the Government have recently spent £15 million on an advertising campaign. I do not begrudge spending that money, but it is depressing to note that the results appear to be going in the wrong direction. In respect of certain benefits, take-up is falling rather than rising.
The Prudential Assurance Company estimates that some 3 million pensioners fail to claim about £1.2 billion worth of benefits each year—a situation that the Bill will make even worse. In May 2000, the then Social Security Committee—I am a member of its successor body, the Work and Pensions Committee—said that urgent steps should be taken to address pensioner poverty through non-means-tested methods, and called for the Government to take that route.
The Bill will vastly extend means-testing up the income scale, which will blunt the incentive to save for certain sections of our community. It is not true that people will be better off saving in all cases. About one third of pensioners will indeed be better off, but for a further third, the anticipated results are ambiguous; the final third will have a slightly reduced incentive to save. The National Federation of Post Office and British Telecom Pensioners—the headquarters of which is in my own, South-West Bedfordshire constituency—has pointed out that those who make less than a full contribution to the basic state pension will not benefit in any way from the savings credit. Women aged between 60 and 65 will not benefit, and because the self-employed are not eligible for the state second pension, they, too, will not benefit.
§ James Purnell
I hope that the hon. Gentleman accepts that such people will benefit through the minimum income guarantee and the guaranteed element included in the Bill.
§ Andrew Selous
Indeed, but I was referring to the savings credit, not the minimum income guarantee.
There is a savings crisis in this country. There is a £27 billion gap between what we as a country should be saving, and what we are saving at the moment. Indeed, it is a tragedy that, in many cases, today's generation of workers will retire on less than do current pensioners, who were lucky enough to enjoy a defined benefit contribution scheme. To fill that gap, today's generation will have to save significant extra sums.
We have heard today about younger people's attitudes to pensions. It is my personal belief that young people want a real sense of ownership of their pension assets. They want to feel that they own their pension in the same way that they own a house or a car—if they are lucky enough to do so—and that includes inheritability.
On pensions advisers, even Help the Aged has said that advice for the current generation of workers on saving for the future will be about as reliable as that given by horse racing tipsters, such is the complexity of the landscape at the moment. We salute the Government's intention to do something about pensioner poverty, but our proposals are simpler and clearer, would lead to far greater take-up and would be much more easily understood.
§ Sandra Osborne (Ayr)
I shall curtail my comments as much as possible, to let other hon. Members speak.
I believe that this legislation represents a promise kept to a very important group of people—those pensioners who have missed out because of modest pensions or savings. All of us should be aware of how aggrieved they feel—and rightly so—not because of selfishness or greed, but as a simple matter of fairness. However, it was right, as my hon. Friend the Member for Aberdeen, South (Miss Begg) said, to tackle the needs of the poorest pensioners first—the 2 million who were living on or below the poverty line in 1998. That was an absolute disgrace, with a major gap between the richest and the poorest pensioners.
It was essential first to ensure that pensioners did not have to choose between eating and heating. My parents, who worked in low-paid jobs all their lives, often had to make that choice when bringing up five children. My mother, who is now a widow, has benefited greatly under this Labour Government, and that is as I would have expected. I would have been extremely angry if she had not been able to have that security in her retirement in the time of a Labour Government. It is also right to tackle the problem of the large group of pensioners who are by no means well off, but who deserve a reward for their efforts in saving on what was often a very tight budget.
I intend to dwell on the issue of fairness, because I felt a sense of déjà vu when my hon. Friend the Member for Aberdeen, South was speaking. She talked about the doorstep test. I remember that test during the Ayr Scottish parliamentary by-election, when the pensioners of my constituency gave the Government a clear message about their feelings on the 75p increase. A simmering discontent boiled up into anger about the fact that that group of pensioners above the level of the minimum income guarantee felt that they had missed out on the benefits that they deserved under successive Governments.
649 Many hon. Members have mentioned take-up. I see advantages in the pension service, but I wonder how the link will be made between the national service and the local services. For example, the IPPR has referred to an "advice vacuum". What arrangements will be made to ensure that, for example, welfare rights advice will still be available at a local level?
I share the frustration of other hon. Members at the position of the large group of women who will miss out on the savings credit. A woman over 65 and one under may have exactly the same income but will end up with different benefits, even if they have the same savings. The same problem applies to those who have not acquired rights to a full basic pension but who have savings. There are 1.4 million people in that category, 1.1 million of whom are women.
The Government have introduced the state second pension for people with broken work records, and women will now have an entitlement to a pension in their own right. The important role of carers has also been recognised, as has the need for a work-life balance. That is a major breakthrough for women in this society. However, how does the Minister reconcile that recognition of a broken work record in relation to the state second pension, which is completely valid and most welcome, with the fact that so many women of this generation of pensioners who are in exactly that position will lose out under the savings credit?
I turn to the issue of public confidence in the market to provide an income in old age, because that confidence is rapidly being eroded. I have raised in Westminster Hall the plight of former United Engineering Forgings workers in my constituency who will not receive the returns from their final salary scheme because the company has gone into administration with an underfunded scheme. Those workers will now get nothing like the pension that they were expecting. They took the advice, as many others have done, of successive Governments and invested in provision for their old age. However, that has been ruined by the vagaries of the stock market. It has been said tonight that people do not feel that they can rely on the state for their benefits in the future, but many people are very worried about the ability of the private sector to deliver.
In the overall context of pension provision, the state pension credit is a big step forward. However, I worry about the overall context, especially in the private sector, and I hope that the Minister will be able to comment on that issue when she winds up.
§ Hywel Williams (Caernarfon)
The right hon. Member for Birkenhead (Mr. Field) broke the duopoly that has existed so far in support of this reasoned amendment. I add the support of the Scottish National party and Plaid Cymru, and I note from the names on the reasoned amendment that there are supporters from Northern Ireland as well. There is broad support for this reasoned amendment.
Plaid Cymru and SNP Members will support the reasoned amendment because the Government's proposals will involve extensive means-testing of the incomes of older people. That means-testing will become a long-term feature of our pensions system, which will lead to complexity in an already complex pension system. If we 650 want more targeting on the basis of income, we must have a more complex testing system. After all, that was the argument in relation to the 1986 Act. The Secretary of State has referred to the noble Lord Fowler, and I seem to remember that when Lord Fowler introduced the 1986 Act one of the arguments that he deployed was that the means-testing system would be simplified by introducing premiums. I do not want to rehearse those arguments again, but that is the point—to be more sophisticated, we must be more complicated.
Means-testing will continue to have severe disincentive effects on take-up. Pensioners will therefore miss out on their entitlement, as many hon. Members have argued. The Government claim that the means test will take place every five years or up to every five years, and that, in some way, that negates the disincentive effect. Pensioners know better, however. They know that the hurdle of the test is the demeaning effect of the means test at the start of the five years. The Secretary of State might disagree with that, but pensioners know that that is the case.
§ David Cairns
The hon. Gentleman said eloquently that he does not like means-testing. If he rules out means-testing, what is the impact on the mythical 67-year-old—who has reappeared time after time in this debate—who is poor, who will gain under this system, and who, as the hon. Member for Northavon (Mr. Webb) has said clearly, will not gain under the reasoned amendment? What is his answer to the 67-year-old in Greenock who will benefit under our system but lose out under his?
§ Hywel Williams
No one has said that means-testing will disappear. After all, the current system combines a pension that is a universal right and a certain amount of means-testing. There is no way out of that.
One of the effects that is claimed for these proposals is that they will help young people to realise that they should be saving. The hon. Member for Aberdeen, South (Miss Begg)—who is sadly no longer in her place—seemed to be confident that a large number of younger people were considering saving or were already saving. I have no confidence about that. Younger people will see that it is not clear what the value of saving will be to them decades down the line. All that they will see is that the system is changing, that it is complicated, and that means-testing is increasing.
There are better ways to target help where it is most needed, to which the hon. Member for Northavon and other hon. Members have referred—targeting money on older pensioners. The hon. Member for Hendon (Mr. Dismore) mentioned that he had no qualms about 100 per cent. means-testing. The Government contend that this extension of means-testing is the best way to target help on those most in need, and they appeal for support to their friends in the pension industry. I refer, however, to my constituent, Mr. W. H. Evans, of Clwt y Bont, who is a veteran of the D-day landings and a tireless campaigner for the rights of older people and for a recognition that older people need to have a proper income. He called to see me at my surgery last week, and was outraged yet again by the miserly 25p increase in his pension as an older person. As he says, it is not enough to buy the first-class stamp needed to send a complaint to the Government. He was outraged, and he knows what 651 many hon. Members recognise. It is possible to target help effectively at some of the poorest pensioners by targeting money at older pensioners, many of whom are poor.
There will be more poorer pensioners in the future. In 2000, there were 584,200 people over retirement age in Wales—20 per cent. of the population. By 2016, the percentage is expected to rise to 23.5 per cent. and the most significant increase will be among the 80-plus age group who are often the poorest pensioners.
It is particularly apt that I should speak on this issue for Plaid Cymru and the Scottish National party given that I represent the constituency once held by David Lloyd George, the politician who introduced the retirement pension which has been hugely popular, successful and long lived. It is sad but hardly surprising that the recent Age Concern MORI poll shows that the majority of people have no confidence in the Government's strategy to tackle pensioner poverty. That contrasts with the opinion that they hold of the pension introduced by Lloyd George.
The Government say that their new system of means-testing does not involve means-testing as such. Perhaps it is soft testing or even third-way testing—I do not know what they would like to call it. At every turn these days, we are told that this is the age of the consumer. The customer is king, so what do the potential consumers of this new system say about it?
The Secretary of State told us a great deal about what the pension industry and Lord Fowler think, but I have a document launched for Welsh political parties at Plaid Cymru's spring conference in Swansea on 16 March. It is entitled "A Pensioners Manifesto for Wales" and it was produced by the Pensioners Forum Wales, which includes representatives of organisations such as the MSF retired members section, the Transport and General Workers Union retired members section, Unison retired members Wales and many other trade unions.
What do those consumers say of the Government's plans? In point 5 of the manifesto, they call on the National Assembly for Wales—not this august institution—torecognise the financial plight of many pensioners and press the Westminster government to address the provision of adequate guaranteed non-means tested basic income as a matter of urgency".That is the opinion of the TGWU, the MSF and many other pensioner groups in Wales.
The Government's proposals take us further and further from a system intended to provide a universal basic pension and a safety net for those not covered to one in which means-testing is to become the norm. The gap between the minimum income guarantee and the basic pension is widening and it will widen further. The Secretary of State's answer to that is even more means-testing, but Plaid Cymru and SNP Members agree with Age Concern and the Pensioners Forum Wales.
§ Kevin Brennan (Cardiff, West)
One likes to support the institutions to which one belongs—whether it is one's team, one's alma mater or one's political party. Unfortunately, in my case, over the past weekend, the first two have taken a bit of a knocking, first with what happened at Twickenham and then with the revelation that 652 my old college and that of the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Liverpool, Garston (Maria Eagle), had sold places for £300,000. I assure the House that neither of us read law at that institution.
I am pleased that my party is honouring its manifesto pledge. On this, I part company with my right hon. Friend the Member for Birkenhead (Mr. Field), because we pledged at the last election that we would introduce this measure, which is intended to meet the twin objectives of continuing to help the poorest pensioners while properly rewarding thrift. Tomorrow when I meet the healthy, wealthy and wise project—the grey power project—in Ely in Cardiff, West, I shall be delighted to stand before its members and outline the Government's record on helping pensioners, including the state pension credit proposed in the Bill. I shall also inform them—I am sure that they will be interested—of the new Opposition coalition against the introduction of the pension credit.
The Bill addresses an issue that all of us will have encountered on the doorstep, as I did while canvassing at the general election: the complaint that it is simply not worth having a modest occupational pension, because it leaves one no better off than someone who has not contributed to a pension at all, and that there is no incentive to save because of the limits on capital. As a candidate for Parliament for the first time, I was pleased to be able to say that we would be doing something about that if re-elected and that I would do all that I could to support that. I gave that pledge on the doorstep and it is in fulfilment of that personal pledge to voters in Cardiff, West that I stand here in support of the Bill on Second Reading, despite the traumatic blows at the weekend that I described earlier.
I support this Bill, even though I have traditionally taken the view that the best way to deal with the state pension is to link it to earnings and to eradicate the stigma of the means test, because all pensioners should automatically share in economic prosperity. After all, most of today's generation of pensioners believed that the state pension would provide adequate support without recourse to the indignity of the old-fashioned means test. They were, after all, a generation that sacrificed so much so that we could benefit from peace and democracy today.
I am thinking here of people such as my father—I know some hon. Members have similar backgrounds—an Irish immigrant to this country, who worked as a navvy and helped to build the physical infrastructure on which our current prosperity is based. Elsewhere, that generation has been called "the greatest generation", appropriately. But they are also the generation that remembers the dreaded means test. I think, too of my mother, a miner's daughter from Nantyglo in south Wales, and her stories of the harshness of the means test at the depth of the great depression of the 1930s. I am still attached, emotionally and philosophically, to the earnings-related argument.
One must give credit to the Government for the ingenious way in which they are approaching this problem and the ingenious mechanism that the Bill represents. In a way, it echoes many of the reforms that the Government are bringing in, which aim to reward work and thrift. The Government have gone some way to meeting an accusation levelled by the Opposition today by ensuring that once a pensioner's position has been established at retirement, there is not the need for a weekly means test, as with income support. Instead, there is a five-yearly 653 review of circumstances, with the minimum circumstances for pensioners in keeping with what is necessary for the protection of public finance.
Any comparison of that with the means test of the 1930s—or even with the post-war National Assistance Board, which poked its nose daily into every detail of a pensioner's personal circumstances—is an insult to those people who had to suffer the heartless indignity of that era. I hope—it may be a forlorn hope—that those who, properly, wish to oppose the Bill will not engage in scaremongering of that kind to try to sabotage the working of the pension credit. There is a case for considering whether, in practice, the name "pension credit" is the best way to describe the change. Pensioners' groups have expressed concern about this, as the word "credit" is associated by many pensioners with debt. That matter should be considered in Committee. I can understand the Government's desire to retain the term as it now applies to several flagship initiatives, but there may be a case for providing another term for use in publicity; perhaps "enhanced pension" to make it clear that it is not a loan that has to be paid back. That would help to change the culture of fear that some people are trying to build up about the credit being a new means test.
The Bill will bring real and direct benefits to people. An elderly widow with a monthly £100 pension—perhaps half the pension of her deceased husband—currently receives no benefit from that occupational pension. Under the Bill, she will be able to keep 60 per cent. of it. That is in addition to the other benefits that she will already have gained since Labour came to power, including the free television licence for the over-75s and the £200 winter fuel allowance—the Tories wanted to take that away—which is the equivalent of £15 a month tax free. If she lives in Wales, from next week she will have free local bus travel as a result of the policies of the Labour-led National Assembly for Wales.
Let us contrast all that with the approach of the last Tory Government. They halved the value of SERPS, abandoned the earnings link with the state pension and deliberately forced pensioners on to real means-tested benefits as a result of that decline in value of the state pension. To top it all, they generated the pensions mis-selling scandals of the 1980s. I was teaching at the time and can remember salesmen—they were no better than con men, really—coming into school staff rooms and telling young teachers that it was in their best interests to pull out of teachers' occupational schemes and take out a private pension.
Instead of responsibility and social conscience, which the Tories are trying to convince us they now have, they ushered in the era of the pensions spiv. For Beveridge, Jim Griffiths and Barbara Castle, they substituted Flash Harry. It is to the Government's continuing credit that they have tried to restore some fairness and sustainability to pension provision. This measure is a major step forward in that mission.
I look forward to telling the people at tomorrow's grey power meeting in Cardiff, West about today's debate. Some say the pensions credit is complicated, but I do not think that they will find the concept of 5 million pensioners benefiting by, on average, £400 a year a difficult concept to appreciate. The measure will be widely welcomed by pensioners, and I commend it to the House.
§ 9.6 pm
§ Mr. Mark Simmonds (Boston and Skegness)
I represent a constituency that contains many less affluent pensioners in urban and, in particular, rural areas. I did not appreciate the comment of the hon. Member for Hendon (Mr. Dismore) that most Conservative Members represent people with large share portfolios. That is absolute nonsense.
I warmly welcome any proposals that attempt to eradicate pensioner poverty. I have no objection to ending the current iniquitous paradox of the minimum income guarantee system that penalises thrift and saving. Indeed, I should like to see a system that encourages people to put money aside and rewards financial responsibility. I strongly believe in the independence of the individual and a reduction in the reliance on the state, enabling and facilitating people to make choices and take responsibility for their own life.
The current system, which requires ever-larger numbers of pensioners to claim moneys through means-testing, is considered, not just by hon. Members on this side of the House, but by the very pensioners whom it affects, to be demeaning and degrading. It carries a stigma for many pensioners. Many are frightened by the process. That is borne out by the figures that were discussed earlier. There is a tremendous variance, but if between a third and a fifth of those who are entitled to claim minimum income guarantee fail to do so, there must be something wrong with the system.
As always with the Government, there is a great divergence between rhetoric and action. As my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), said, both the Prime Minister and the Chancellor have said that they wish to reduce means-testing for pensioners, if not eradicate it altogether. However, not only does the Bill fail to reduce means-testing or to make an attempt to reduce it, it vastly increases the propensity to means-test.
Between 1979 and 1995, the proportion of pensioners on means-testing fell significantly, from 57 per cent. to 38 per cent. Since 1997, it has increased significantly. According to the House of Commons Library, up to 60 per cent. of pensioners will be means-tested by 2003.
The two component parts of the pensions credit—the guarantee credit and the savings credit—extend the reliance on the state into the future, which will further act as a disincentive for pensioners to save.
It is my view that the endless and pervasive intrusion into and manipulation of people's lives by the state is a deliberate attempt by the Government further to weaken the individual's responsibility and enhance reliance on a centrally controlled state. Pensioners, like so many other responsible groups in our country, want to be self-reliant and to be treated with dignity. Extensive means-testing does not fit comfortably with that ambition.
The uniform criticism of the Bill, among everyone except Labour Members, is of its overriding complexity, which will deter claimants and lower take-up rates. I was astonished when the Secretary of State dismissed as nonsense the fact that there is a causal link between complexity and take-up rates. That is staggering, especially when one bears it in mind that the National Association of Citizens Advice Bureaux has said:
The complexity of benefits and the claiming process is one reason why millions of pounds worth of benefits go unclaimed by people on low incomes.655 If the House is to attempt to help those on low incomes, we must surely be honest and look at why people who are entitled to claim benefits—whether the minimum income guarantee or the new credit—are not doing so. Just as the critical test of a successful tax is collectability, for benefits the measure of success must be simplicity and therefore take-up. The Government must take responsibility for increasing the complexity and exacerbating the problem via the contents of the Bill
I have four specific points that I want the Minister to address. First, I understand that the guaranteed credit will subsume the premium paid to carers and severely disabled people. Will she take this opportunity to make it clear that these very hard-working and vulnerable people will not be made worse off?
Secondly, in the Bill it is proposed to set up a pensions service, and I believe that there will be only 26 offices. To my mind, that will eradicate the personal contact that has been mentioned, with home visits allowed only in exceptional circumstances. I see the Minister shaking her head, and I hope that she will be able to tell me that I am wrong. Many people who currently have contact with pensions professionals believe that they will not be able to do so under the proposals.
Thirdly, the Bill contains a change in the analysis to a five-yearly rather than a weekly assessment. That may not eradicate bureaucracy but may make it easier for people to abuse the system. What safeguards and structures will be put in place to ensure that abuse of the kind that happened with individual learning accounts cannot take place?
Fourthly, what will the pension credit do to close the savings gap?
The Government's pensions strategy is at best confused. To be more blunt, it is in a mess, from the perfidious and pernicious tax on people's pension funds to the shambles of the stakeholder pensions and the Government's opposition to annuity reform. The Bill further complicates an already over-complex area and increases means-testing for the section of society that least wants it. The solution surely lies in increasing the basic state pension for the specific targets of harder-up pensioners.
§ David Cairns (Greenock and Inverclyde)
I shall endeavour to be brief. I welcome the Bill, and I believe that in my constituency, which is in the top third in the United Kingdom in terms of pensioner numbers, it will be welcomed for the reasons outlined by many of my hon. Friends, such as the sheer sense of iniquity that people have felt about saving all their lives and losing out under the current arrangements, which has been the perception. Those complaints are always accompanied by detailed descriptions of pensioners who live three doors down who have smoked and drank all their lives, but who seem to be better off than our constituents. However, our constituents will welcome the Bill, and so they should.
Much of this evening's debate, which I should like to respond to briefly, has focused on the role and nature of means-testing. I accept the Government's argument that the type of means-testing outlined in the Bill is 656 quantitatively different to the means-testing that has gone before, as well as qualitatively different, given that it will not involve a weekly means test, but an assessment every five years or so.
I agree entirely with my hon. Friends the Members for Hendon (Mr. Dismore) and for Aberdeen, South (Miss Begg) that extending means-testing to the extent that proposed in the Bill will dilute the stigma—if a stigma can be diluted—so that it becomes less of an onerous burden on people. However, it has become abundantly clear during the debate that, far from abolishing means-testing, the Conservative party would maintain it and increase the stigma of the means test.
I make no apology for reintroducing our 68-year-old poor friend, who was mentioned by my hon. Friend the Member for Stalybridge and Hyde (James Purnell) and by the Secretary of State himself. Such people are not entirely invented; they exist in all our constituencies. Confronted with the reasoned amendment that suggests that people over the age of 75 should be given extra help, we have repeatedly asked what we should say to our 68-year-old poor pensioner. The answer is that he or she would be means-tested, so the poorer people who need the extra help would be means-tested. How on earth would that remove the stigma of means-testing? How would that progress beyond a time when reliance on means-testing was seen as a bad thing, when the very poorest people were told that they would have to put up with means-testing?
Under the new scheme, those who are not poor, but who are by no means rich, will be brought into a system that is akin to one that the Borne report, on which the hon. Member for Northavon (Mr. Webb) was an esteemed specialist adviser, referred to as the partial affluence test. I never liked that expression; it would not kid anybody about what is involved in reality, but the proposal is qualitatively different to the old means-testing, which involved rooting around people's houses looking for valuables to offset any income that they might have received.
I want to focus my remaining remarks on the pension service. Uptake is not just an issue used to scaremonger; it is a genuine concern, and Labour Members are as concerned about it as anyone else. It is important that the system has adequate take-up, and the key to that must be a pro active pension service, which goes out of its way to ensure that people get what they are entitled to. It has to allow people to interact with it in a broad range of ways by telephone, on the internet and by post. We know that the telephone is the Government's preferred route because they tell us that pensioners prefer it. I accept that, but I agree with my hon. Friend the Member for Hendon, who said that if a freephone number were used, so much the better. The number of silver surfers on the Internet will grow in years to come. Although I appreciate that there will not be a network of local offices, the opportunity to interact face to face is important. I would welcome the Minister's reassurance that face-to-face interviews will still be allowed to play a part.
The pension service must act as a gateway, allowing people to get quicker housing benefit assessments. As we know from the operation of the working families credit, particularly in the new Jobcentre Plus scheme, things all wander along absolutely marvellously until they hit the 657 brick wall of housing benefit assessments, when people are not any further forward. Although I welcome what has happened, such things have to be improved in future.
There was some confusion about the role of the call centres. There will be 26 call centres throughout the country, and it has been said that confusion might arise in understanding cockneys and geordies, so there is a good argument for locating all the call centres in Scotland because everyone understands a Scottish accent. I had hoped that Mr. Speaker would be in the Chair when I made that comment. In my constituency, there are two excellent call centres—those of One to One and the Royal Bank of Scotland—which shows that people are used to interacting with call centres and to the professional service that they receive from them, and there is no reason why they cannot work in the public sector as well.
I welcome the Bill. It makes an important contribution to those people who feel aggrieved. I hope that we reject the reasoned amendment and stick with the Government's proposals.
§ Mr. Bill Tynan (Hamilton, South)
I welcome the opportunity to participate in the debate and will be quick because other hon. Members want to speak.
I believe that life's experiences shape our character. People where I came from would find it difficult to compare their lives with people's experiences in the House of Commons. As a youngster, I was brought up in a tenement close. We had two rooms and a kitchen. There were five in the family. My mother waited for my elder sister to come in to get the tips so that she could feed us the next day. I experienced poverty at first hand. I was fortunate because I was the youngest in the family, which meant that I was able to serve my time as an apprentice toolmaker. That gave me a skilled trade, but I could achieve that only because of my family background and the fact that people were willing to support the family unit.
Hon. Members have expressed a very negative view of the proposition. It is possible to look at something and see it as being either half full or half empty. If two thirds of the people who will benefit from the pension credit manage to improve their standard of living, that is substantial progress. Like everyone else, I am concerned about the take-up, but the best way to deal with that problem is to stop talking about means-testing. Means-testing was used in the 1930s to ensure that people stayed poor. The new test will ensure that they qualify for additional benefit. That is an important distinction.
The Bill is part of the crusade on which the Government have embarked. There have been some interesting comments on what direction we should take and what we should do. The Leader of the Opposition said:A nation that leaves its vulnerable behind diminishes us all.I agree, but we must remember that selfish individualism over 20 years helped to create a society in which our most vulnerable were left behind. The Opposition have reverted to type on this issue. If we support the reasoned amendment, the Bill will fall and those two thirds whose standard of living would improve will fail to benefit from it. That is an important consideration.
Poverty is not an academic debate; it is a reality for many of my constituents. During the election campaign, an elderly lady called my office. She had been targeted 658 by South Lanarkshire council for arrears that she had accrued on her community charge. Those people who think that the proposals are complex should sit down with such individuals and talk about what is on offer because they would readily understand the position. I spoke to that lady that day. As she was on the old-age pension and had no other means of support, she qualified for the minimum income guarantee, which meant that she no longer paid community charge and went on housing benefit. That boosted that woman and her standard of living.
We must remember the beneficiaries when we discuss in a forum such as the House of Commons whether the academic debate is too complex or how a proposal can be implemented. It is important to support the Bill. It is a step forward. I ask hon. Members to recognise that there is poverty in this nation and that the Bill will improve the standard of living for more than 5 million people. If we achieve that, Parliament will have done its job.
§ James Purnell (Stalybridge and Hyde)
There are two points on which I should like the Committee to scrutinise the Bill. The first concerns foster carers who, as we know, provide a vital service for children in this country, many of whom have faced the worst that life can throw at a child today—sexual abuse, dysfunctional families, poverty and abandonment. However, foster carers do not get credit towards their basic state pension as they would if they were looking after their own children. If they take time off work to fulfil their fostering duties, they do not receive home responsibilities protection as they would if they were caring for their own children. I urge Ministers to look at that anomaly because it is unfair to an important sector of society.
Secondly, although I very much welcome what the Secretary of State said about the treatment of earnings, at the moment the amount of earnings that will be entirely disregarded is just £5. If we want to encourage people to have an active retirement, it is at least worth considering whether we should disregard a slightly higher level of income so that people could work for, say, a day a week after age 65 and keep all that income.
I am glad that the hon. Member for Havant (Mr. Willetts) has returned to the Chamber because I am slightly mystified by his reasoned amendment and I am trying to understand the motivation behind it. I have noticed over the past few weeks that he is trying to position the Conservative party on the side of the poor. Of course the Opposition would say that they are on the side of the poor, but we have to ask ourselves what they would do if they were in government. To establish that, it is worth trying to remember what they did when they were in government.
Between 1979 and 1983 the Conservatives ended the link between earnings and the basic state pension and viciously cut benefits, while their monetary policy unnecessarily forced 3 million people on to the dole. Where was the hon. Gentleman when all that was happening? In the run-up to the 1979 election, he was advising Nigel Lawson, who was centrally involved in taking those decisions even though the policies were not mentioned in the manifesto. During that first term, the hon. Gentleman was in the Treasury, where he was private secretary to Nigel Lawson and an official advising on monetary policy, so he bears a direct responsibility for those policies.
659 After that first term, SERI'S was cut, benefits for widows were halved, £10 billion was taken out of overall pension income and housing benefit was slashed by nearly 50 per cent. The result of all that was that on estates such as Easterhouse people could not afford to take jobs because they were trapped on benefit rates that meant that they would be worse off if they were employed. Where was the hon. Gentleman when all that was happening? First, he was in Mrs. Thatcher's policy unit, advising her on social security policy, and after that he was running her favourite think-tank, the Centre for Policy Studies, and acting as a part-time adviser to her.
It is worth remembering all that because although I welcome the Damascene conversion of the Leader of the Opposition and the hon. Member for Havant after their visit to Easterhouse, the rest of us know estates such as that and have been working on them for years. While the hon. Gentleman was driving past those estates on the motorway on the way to seminars with the hard right during the 1980s, the people there were being thrown into poverty and out of jobs by the monetary policy that he advised on and having their benefits cut by the Ministers whom he advised.
Those estates did not magically appear in 2001; they were the direct result of the unnecessary viciousness of Conservative economic policy and of the housing policy that turned them into sink estates. The poor on our estates have been suffering from those policies for the past 20 years. Where was the hon. Gentleman? At every single stage from 1979 to 1992, a time during which the income of the bottom 10 per cent. fell by nearly a fifth, he was advising on and constructing those policies—he was in the vanguard of those policies. Indeed, if one believes the biographies, the policies would have been even more severe if his views had been completely heeded.
I welcome the Bill because it will help the poor pensioners in my constituency. If the Opposition had any self-respect, they would apologise for what they did in those years before espousing the cause of the poor.
§ Mr. Chris Pond (Gravesham)
I support the Bill. I do not want to be as unkind to Opposition Members as my hon. Friend the Member for Stalybridge and Hyde (James Purnell), but I am a bit disappointed that they will not be joining us in the Lobby tonight. We heard over the weekend about their new-found concern for the vulnerable—no doubt that is why they have taken the Liberal Democrats under their wing tonight. Like Victor Meldrew discovering the delights of skateboarding, the Tory party has discovered a passion for helping the poor.
I had therefore assumed not only that the Tories would support the Bill, but that they would utter a few words of apology for the £10 billion that they lifted from pensioner incomes during their 18 years in government. One reason why they might want to support the Bill is that it provides an opportunity to give back at least a fifth of the amount that they took away. Much of the remainder has been returned through other measures that the Labour Government have introduced—measures that even this evening the hon. Member for Havant (Mr. Willetts) again described as "gimmicks".
660 The reasoned amendment suggests that the resources given to the Bill would bebetter directed towards the basic state pension".I asked the House of Commons Library to tell me what would have happened had the basic state pension been indexed in line with earnings. The answer is that it would have resulted in a sum similar to the basic state pension today—but of course the pension credit and the other measures we have taken will result in a substantially higher level of non-means-tested income for pensioners on the basic state pension.
Earlier I asked the hon. Gentleman whether he could give financial advice to my nine-year-old on how much she would have to invest each year between now and her retirement to achieve what the hon. Member for Sutton Coldfield (Mr. Mitchell) described as a funded basic state pension, but he did not have the answer to hand. In fact, she would have to start now investing £10 a week until her retirement to achieve such a pension.
Many hon. Members spoke about means-testing. I am not enthusiastic about means-testing, not least because of its traditional impact in terms of stigma and loss of dignity. However, I have never been against targeting to ensure that those who are most in need receive the help they deserve. The proposals in the Bill provide an effective targeting mechanism, minimising stigma and maximising take-up wherever possible. They include the five-year assessment, simpler claim forms, help through the pension service to complete the application, and making use of information already available to make an assessment without requiring new forms to be filled out. All those measures mean that we will be able to target resources without imposing the traditional stigma associated with means-testing. For that reason, I support the proposals.
The decisions we make tonight are about long-term pensions policy. We have to make sure that the policies that we put in place can last the test of time. I am extremely disappointed to hear that the Opposition parties will not join us in a consensus to ensure not only that today's pensioners have a decent income, but that we provide some security for future pensioners.
§ Mr. Tim Boswell (Daventry)
In spite of its delayed start, or perhaps because of it, the debate has proceeded at a cracking pace. I have recorded 20 speeches, all of which—even the Secretary of State's—have added something to the discussion. We do not always hear much of substance from the right hon. Gentleman, but today he made the welcome announcement that earnings will be treated broadly like savings under the legislation. We look forward to hearing the details of that and to discussing other points in Committee. Even those other Labour contributors who might be regarded as trusties all had something of interest to say. My hon. Friends and our newly acquired associates in the reasoned amendment also made telling contributions.
There is a degree of mutual understanding of the fact that there are some problems, even if only of complexity. I suppose that in his daily life the average, not very well off, older person has quite enough to deal with in terms of difficulties with transport, hospital appointments, local law and order and so on, without worrying too much about the theology of pensions—whether the pension he 661 receives, or hopes to receive if he has not yet retired, is sourced primarily from the state and the taxpayer or from private provision. As has been said this evening, what people want is an adequate income. The signs are that they are not getting it now and the position of those who will retire in future may be worse rather than better, which nobody in the House wants.
I am surprised that the Government have not claimed any credit for the 4.1 per cent. increase in the basic retirement pension this year, or claimed it as absolution from the error of the 75p increase in the past. They are committed to a minimum annual increase, even if it is above the inflation rate. While the increase seems substantial, it is interesting how quickly it is absorbed in my county where, for example, council tax is to rise by about 12 per cent. It is well known that the number of pensioners who fail to claim the council tax benefit for which they are eligible is even higher than those who do not claim the MIG. Those examples put the state pension increase in context.
I am not sure how often Ministers are let out to talk to ordinary people, but I could not help but be struck when I attended a meeting last week in the House with the Greater London Pensioners Association—not my natural soul mate—by the intensity of its members' feelings about their situation. Words like "betrayal" were bandied about, and were not being applied to the Opposition. One lady gave a trenchant summary:If the Government can give us this pension credit, it can afford to pay us a decent basic pension.That was said some time before we tabled our reasoned amendment.
Let me say, almost at the outset, that we have no problem with the Government's objectives or motives. They have a good stated objective of reversing the proportions of 60 per cent. state provision for retirement and 40 per cent. private provision, although we have doubts about whether they will succeed. We recognise that the Bill would provide additional resources for pensioners of at least £2 billion in the first full year, no doubt mounting to an astronomic figure if the measure lasts the course. The essence of our amendment, however, is that the money could have been spent to better effect; it is being frittered away and is going in the wrong direction.
Ministers need to come to terms with the fact that not all is well on the pensions front. I happened to pick up the money section of The Sunday Telegraph yesterday. It is stuffed with problems; one article on the front page says that the Government's annuity reforms are "unworkable", and the main headline concerns a row about auditing stakeholder pensions. Turning the page, the personal finance editor on page 2 describes stakeholder pensions as
about as useful to future generations of pensioners as a soluble bikini to a keen swimmer.Then there is the implosion of final salary schemes under the searchlight of FRS17 and the general current advice that the level of contracting-out rebates on offer makes it sensible for many holders of personal pensions to opt back into the state second scheme. That is all the more reason for the Government to come clean about the function and purpose of the state second pension, created inadvertently through mistaken analogy with SERPS, which was set up for a different purpose, without crucial details about its future course, for example the date at 662 which it becomes flat rate. Whatever we say about who is the friend of the pensioner, we can be sure that the Government are friends of a broadly friendless second pension system.
Of course, we do not mind Labour giving more money to any pensioner, but we do not accept the tangled and complicated way in which it is doing so. No doubt the Secretary of State rather prides himself on being an intellectual—he is not the only one in this place, of course—and no doubt he can understand how his new system works. I might be able to claim that my single brain drifts in and out of understanding of the system, but in terms of the system's basic intelligibility to the electorate on the doorstep, it is an absolute no-go area. The less intelligible the system, the less likely people are to make well-informed choices about their retirement planning, and the greater the shock that they may encounter, as the hon. Member for Hendon (Mr. Dismore) said.
The Government may well find that the costs of the system will escalate and become unsustainable. It is a very heavy price to pay for a temporary fix to the incomes of some but not all poorer current pensioners—those who manage to take up the benefit and/or who suffer no natural downturn in their income while enjoying the pension credit.
The operation of the pension service is of growing concern, which has been echoed not just on the Conservative Benches. I do not know whether the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle), has any experience of fighting bush fires, but she now has a second one breaking out with the Public and Commercial Services union. In addition to the concern that it has expressed on security matters in relation to Jobcentre Plus, it has recently circularised members expressing concerns about the local accessibility of the pension service.
I note that the Trades Union Congress in its evidence to the House of Commons inquiry on pension credit emphasised specifically that the Government should take particular care to communicate the way in which the credit will work to all pensioners. With the greatest respect to Ministers, one cannot do that on the internet when only 10 per cent. of pensioners are silver surfers—although we hope that that number will increase. Pensioners need to be able to get through on the telephone, although they also need the opportunity of seeing a person who can give them advice and, indeed, reassurance on what is to happen.
Behind all this is a much more substantial fact. The spectre of the means test is being fattened up by the Government's new approach to it. Whatever the Chancellor of the Exchequer may have said in opposition, when means-testing was anathema, it has become the centre of Government pension policy. It spreads its tentacles: two thirds of pensioners very soon and perhaps three quarters in due course will be caught up in the system.
§ Mr. Levitt
If the hon. Gentleman believes that it is right to attack poverty by providing more means to those who are most in need, how would he go about identifying those who need the greatest help?
§ Mr. Boswell
I think that we have already discussed the fact that there will need to be a means-tested safety 663 net, as there is provided by the minimum income guarantee already. The hon. Gentleman will appreciate that it is unreasonable to expect a detailed prescription in the three or four minutes remaining to me, but I can tell him and the House that we are convinced because of one simple fact that the Government are not going about this in the right way. If, even on the minimalist estimates, one in five of those who are entitled to the MIG are not claiming it, how much less likely is it, particularly when income changes, that pensioners will claim pension credit? Nearly everything in policy seems to be going the opposite way from the Government.
I find it striking that the recent IPPR report concluded after 18 months, though it was rubbished by the Secretary of State in 10 minutes, thata policy framework which relies heavily on means-testing retirement benefits is flawed.It also indicated that it had not started with the assumption but that it would be recommending an increase in the basic pension.
I find it remarkable that so many Members of Parliament from different parties have associated themselves with our reasoned amendment. I cannot remember when that has happened before. I believe that it reflects a number of genuine concerns across the House. First, there is a pensions crisis. It is already apparent but has not come to a head. Secondly, means-testing is not the way to solve that crisis because it involves disincentives to save, and complexity is the greatest disincentive of all. Beyond that, there is the current pressure on funded pension provision: the reduction, for example, of employer contributions; the erosion of income by the Chancellor's pensions tax, and the decline in final salary schemes. The Government may end up with a huge and unsustainable contingent liability to support pensioners' incomes. There is also the issue of whether moneys could have been better spent.
As my hon. Friend the Member for Havant (Mr. Willetts) said, Beveridge understood that universal benefit, given careful targeting, can meet most specific needs. There is a real problem, especially for older pensioners, many of them female, in achieving adequate income. Help could be given to them without creating a cat's-cradle of means-tested incentive.
The final drivers to the amendment are perhaps more general. Pension provision, above all aspects of social policy, is long term. I think sometimes of my new granddaughter, who has not yet reached the age of one year. It might be sensible for me to take out a stakeholder pension for her. The signs are that she will have to work up to the age of 70 to provide herself with an adequate pension.
As politicians, we cannot allow our ego or our own pet nostrums, or political positions, to get in the way of agreed decisions that will affect the quality of life for the next few generations. We need to get on side people of good will, even including, if possible, the Government. We need to get them behind a programme of, preferably, agreed and well-targeted reforms. The Bill does not provide those reforms.
There is perhaps even one wider consideration that is worth mentioning briefly. The Opposition amendment, which has the support of other parties, is a reasoned 664 amendment, and a reasonable amendment too. I have supported the Conservative party throughout my adult life because I believe strongly, as I always have, that the party of Wilberforce, Shaftesbury and Disraeli has had something worth saying on social policy. It has real achievements to its name in this as in other areas.
I am pleased that this side of Toryism is reawakening. I say to everyone in the House that when we reach out in the spirit of consensus to help disadvantaged people, I hope that they in turn will respond.
§ The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)
I agree with the hon. Member for Daventry (Mr. Boswell) about one thing, and that is that we have had an interesting debate that has illustrated, among many other things, a massive gulf between our own aims as a Government and the views of the ragbag of opposing parties that are supporting the reasoned amendment. In contrast to them, we are determined to provide all pensioners with a decent and secure income in retirement, by concentrating on promoting fairness, rewarding thrift and targeting the most help on those who need it most, the poorer pensioners. The widening income gap which was our inheritance from 18 years of Tory pension policy makes that the right thing to do.
Meanwhile the Tories—we have heard this again this evening—are committed to privatising the basic state pension and washing their hands of any obligation to ensure fair and adequate pensions for everybody in retirement. The hon. Member for Sutton Coldfield (Mr. Mitchell) called it pension plus mark 3. He is writing the policy, so he should know.
We have had the usual demonstration of rank opportunism from Liberal Democrat Members. That is familiar to all of us who encounter the cynical campaigning methods of Liberal Democrats at a local level. I am sure that Conservative Opposition Members will agree with me about that. They steal some Labour policies and add a dash of uncosted aspiration while agreeing with Tory criticisms. Yet again they are trying to appeal to everyone by claiming that they can conjure better outcomes out of the air with the same amount of money. That is the usual sleight of hand that we expect from them.
We had the most incredible flight of incomprehensible mathematical fantasy from the hon. Member for Northavon (Mr. Webb). Perhaps that is why the hon. Member for Winchester (Mr. Oaten) says that the Lib Dems are positioning themselves to the right of Labour while Lord Ashdown bemoans them being stranded to the left of Labour. The right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) says that they are not left of Labour and not right of Labour. It will take all of the higher degrees of the professor, the hon. Member for Northavon, to sort that one out. Of course, the confusion is part of the trick. We still do not know whether they are committed to cutting tax or increasing it. How can anyone believe a word that they say?
Our approach is the correct one. We want to keep the basic state pension as the foundation of security in retirement but we want everyone who can save towards a second pension to do so. The pension credit assists us in achieving that aim by rewarding those who have saved, 665 instead of penalising them for saving. It is targeted on pensioners at the poorer end of the income distribution, but will none the less help up to 5.3 million pensioners by an average of £400 extra a year. It enables as to continue to redistribute resources to those who need them most. In short, it is fair.
That is in contrast with the Tories, who spent 18 years targeting billions of pounds to induce people to opt out of state provision, only to stimulate massive mis-selling of private pensions. It is not what I call looking after the vulnerable; it is more like looking after the wide boys.
I shall answer some of the points raised in the debate in a minute, but before I do I want to look at why we need to help poorer pensioners most; it goes to the heart of the points about the means test, and we have heard a lot about that. It is due to the record of the Tory party after its 18 years in charge of pension policy. We are still trying to right the wrongs that it created. Labour Members are not going to forget that it is an appalling legacy.
Over those 18 years, the newly styled party of the vulnerable over on the Conservative Benches deliberately, and as a result of their smash-and-grab ideology, dismantled vast swathes of state support for pensioners. My hon. Friend the Member for Stalybridge and Hyde (James Purnell) set it out excellently. The Tories impoverished one in three of our pensioner population—that was 3.5 million people.
That was not the accidental result of impersonal market forces and global economics. It was the deliberate choice of the Conservative party. It expected a pensioner to live on £69 a week. It cut the value of the basic state pension by £20 a week in real terms and offered no compensating measures. It slashed the value of SERPS not once but twice, while spending billions of pounds bribing peogle out of it and rewarding the mis-selling of inappropriate private pensions to almost 3 million people. It was responsible for slashing the value of inherited SERPS in half and then not bothering to tell anyone, a debacle that it has left us to put right. It left 10 million women who were without proper provision with no alternative but poverty in old age—not much help for the vulnerable there. It introduced VAT on fuel at 8 per cent. and tried to increase it to 17.5 per cent. As a result—
§ Mr. Goodman
On a point of order, Mr. Speaker. Perhaps the Minister will be so good as to tell the House when she will respond to the debate that we have had?
§ Maria Eagle
By 1997, there was an ever-widening gap in pensioner incomes, with the bottom fifth of pensioners—[Interruption.] Conservative Members do not want to hear this, but Labour Members are not going to forget. The bottom fifth of pensioners saw their income rise by only 20 per cent. in 18 years, while the top fifth had a 70 per cent. boost, and they were better off to start with. The richest 10 per cent. of pensioners had five and a half times more income than the poorest 10 per cent.
§ Maria Eagle
No. I do not have time.
666 It was not just pensioners who were impoverished by the last Tory Government. The number of people living in poverty trebled: it went from one in 14 of the population to one in four. The number of children living in poverty increased from one in 10 to one in three. It was the worst and most shameful record in the industrialised world, and I am not surprised that the Conservative party does not want to hear about it tonight. That was its record.
It is that disgraceful disparity that we are tackling. The pension credit is an essential part of how we do that for pensioners. That is why we make no apology for targeting help at the poorest end of the income scale. After the Tory years, it is the right thing to do. It is the only thing to do to help the vulnerable.
By next month, we will be spending an extra £6 billion a year in real terms to boost pensioner incomes and to narrow the income gap between pensioners. We are targeting £2.5 billion of that money directly towards the poorest third of pensioners.
As a result of our policies between 1997 and 2001, policies that the Tories opposed vehemently, the average pensioner household is now £840 a year better off. Those at the poor end of the income scale have benefited by even more.
The hon. Member for Havant (Mr. Willetts) has suggested doing things differently. He has tried taking money from pensioners before. During the last Parliament he condemned the winter fuel payment and the free television licence as gimmicks—just as he called the pension credit a gimmick tonight—and pledged to abolish them and consolidate the savings into the basic state pension. That was deeply unpopular with pensioners and within weeks he scuttled back to the drawing board, ending up with a complete hash of a policy. That was the policy on which the Conservatives fought the last general election—to keep the winter fuel payment and the free TV licence or to add them to the basic state pension, with each pensioner having to say which they preferred.
Having developed that policy, the hon. Gentleman complains about the complexity of our proposals. Maybe having two brains, as he is reported to have, simply means that he has to learn every lesson twice. Labour Members are more than willing to teach him the same lesson again. Going into the next election promising to take an average of £400 in pension credits from pensioners is unlikely to be popular with them. I was going to suggest, Mr. Speaker, that you should watch out for the U-turn, but I think that we have already heard it during the hon. Gentleman's speech.
I want to deal with some of the points raised in the debate. [Interruption.] At least I listened to the whole debate, unlike some hon. Members. On means-testing, what Conservative Members call means-testing I call making sure that people who lost out when they were in power get a decent pension. A five-yearly simplified assessment is hardly comparable to a complex weekly means test designed to cover all the variable circumstances of people of working age. The pension credit will abolish the intrusive weekly means test for pensioners. The Tory and Liberal Democrat proposals would not: that assessment would stay if their policy were to be implemented. The assessment that we propose is a decisive move away from treating pensioners in the same way as those of working age.
667 We heard a lot about complexity, but the system will be simpler, not more complex. For example, 85 per cent. of pensioners will not need to report the level of their savings or capital at all, because there is a £6,000 disregard and no upper limit. Pensioners will have to report only some income changes, and even then, in most cases, only once every five years. Housing benefit and council tax benefit will be ignored when working out pension credit and some of the smaller, sillier income rules in the MIG will go—for example, the remunerative work rules. Charitable and voluntary payments will be ignored, as will student loans and grants.
Many hon. Members talked about targeting. Opposition Members of both parties suggested that targeting by age is a proxy for poverty, but if we spent the £2 billion increasing the basic state pension for those aged over 75, only 32 per cent. of it would go to the poorest third. Paying £2 billion to the over-75s would still leave three quarters of them short of the current MIG level.
Hon. Members said that the pension credit does not benefit women and the very elderly, but it does. Two thirds of the gainers are women, half are over 75 and more than a quarter are over 80. So I do not accept that argument either. Hon. Members from both Opposition parties suggested that we should spend the £2 billion on the basic state pension, but the poorest third of pensioners will gain two and a half times more with the pension credit than with the equivalent spending in basic state pension.
Now we see that the Tories are trying to reinvent themselves as the party of the vulnerable, but the Leader of the Opposition opposed both the winter fuel payment and the minimum income guarantee. He described the winter fuel payment as "cock-eyed" and the minimum income guarantee asa huge rise in spending … I can think of nothing to recommend it."—[Official Report, 15 March 1999; Vol. 327, c. 740–41.]The Tories' record clearly shows that they did not care about the vulnerable when they were last in office, and they do not care about them now.
After the wrecking job that they did on pensioners' incomes between 1979 and 1997, they went into the 1997 election campaign pledged to their pièce de résistance—to privatise the basic state pension. They suffered their worst electoral defeat since 1832. Having condemned all our measures to alleviate pensioner poverty and to put right the mess that they had left us in during the previous Parliament, they went into the 2001 election pledged to privatise the basic state pension. They made a net gain of one seat. They are still in favour of privatising the basic state pension—the leaked letter from the hon. Member for Havant to the hon. Member for Sutton Coldfield shows that they are working on that now. Their big new idea to help the vulnerable is to privatise the basic state pension. Can a leopard change its spots? Can the Tories stand up for the vulnerable? I think not.
The Bill is the right way forward, and any party that truly wants to help the vulnerable would support it. I commend it to the House.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 191, Noes 299.671
|Division No. 202]||[9.59 pm|
|Ainsworth, Peter (E Surrey)||Greenway, John|
|Allan, Richard||Grieve, Dominic|
|Amess, David||Gummer, Rt Hon John|
|Ancram, Rt Hon Michael||Hammond, Philip|
|Arbuthnot, Rt Hon James||Hancock, Mike|
|Atkinson, Peter (Hexham)||Harris, Dr Evan (Oxford W)|
|Bacon, Richard||Harvey, Nick|
|Baker, Norman||Hawkins, Nick|
|Baldry, Tony||Hayes, John|
|Barker, Gregory||Heald, Oliver|
|Baron, John||Heath, David|
|Barrett, John||Hendry, Charles|
|Beith, Rt Hon A J||Hoban, Mark|
|Beresford, Sir Paul||Horam, John|
|Blunt, Crispin||Howard, Rt Hon Michael|
|Boswell, Tim||Howarth, Gerald (Aldershot)|
|Bottomley, Peter (Worthing W)||Hughes, Simon (Southwark N)|
|Bottomley, Rt Hon Virginia||Hunter, Andrew|
|Brady, Graham||Jack, Rt Hon Michael|
|Brake, Tom||Jackson, Robert (Wantage)|
|Breed, Colin||Jenkin, Bernard|
|Brooke, Mrs Annette L||Johnson, Boris (Henley)|
|Browning, Mrs Angela||Jones, Nigel (Cheltenham)|
|Bruce, Malcolm||Keetch, Paul|
|Burnett, John||Kennedy, Rt Hon Charles|
|Burns, Simon||(Ross Skye & Inverness W)|
|Burnside, David||Key, Robert|
|Burstow, Paul||Kirkbride, Miss Julie|
|Burt, Alistair||Kirkwood, Archy|
|Cable, Dr Vincent||Laing, Mrs Eleanor|
|Cameron, David||Lait, Mrs Jacqui|
|Campbell, Rt Hon Menzies||Lamb, Norman|
|(NE Fife)||Lansley, Andrew|
|Cash, William||Laws, David|
|Chapman, Sir Sydney||Leigh, Edward|
|(Chipping Barnet)||Letwin, Oliver|
|Chope, Christopher||Lewis, Dr Julian (New Forest E)|
|Clappison, James||Liddell—Grainger, Ian|
|Clarke, Rt Hon Kenneth||Lidington, David|
|(Rushcliffe)||Lilley, Rt Hon Peter|
|Clifton—Brown, Geoffrey||Loughton, Tim|
|Collins, Tim||Luff, Peter|
|Conway, Derek||McIntosh, Miss Anne|
|Cormack, Sir Patrick||Maclean, Rt Hon David|
|Cotter, Brian||McLoughlin, Patrick|
|Cran, James||May, Mrs Theresa|
|Curry, Rt Hon David||Mercer, Patrick|
|Davey, Edward (Kingston)||Mitchell, Andrew (Sutton Coldfield)|
|Davies, Quentin (Grantham)||Moore, Michael|
|Davis, Rt Hon David (Haltemprice)||Moss, Malcolm|
|Djanogly, Jonathan||Murrison, Dr Andrew|
|Donaldson, Jeffrey M||O'Brien, Stephen (Eddisbury)|
|Doughty, Sue||Öpik, Lembit|
|Duncan, Alan (Rutland & Melton)||Osborne, George (Tatton)|
|Evans, Nigel||Ottaway, Richard|
|Fallon, Michael||Page, Richard|
|Field, Rt Hon Frank (Birkenhead)||Paice, James|
|Field, Mark (Cities of London)||Paterson, Owen|
|Flight, Howard||Pickles, Eric|
|Flook, Adrian||Price, Adam|
|Forth, Rt Hon Eric||Prisk, Mark|
|Foster, Don (Bath)||Pugh, Dr John|
|Fox, Dr Liam||Redwood, Rt Hon John|
|Francois, Mark||Reid, Alan (Argyll & Bute)|
|Gale, Roger||Rendel, David|
|George, Andrew (St Ives)||Robathan, Andrew|
|Gibb, Nick||Robertson, Angus (Moray)|
|Gidley, Sandra||Robertson, Hugh (Faversham)|
|Goodman, Paul||Robertson, Laurence (Tewk'b'ry)|
|Gray, James||Roe, Mrs Marion|
|Grayling, Chris||Rosindell, Andrew|
|Green, Damian (Ashford)||Ruffley, David|
|Green, Matthew (Ludlow)||Russell, Bob (Colchester)|
|Salmond, Alex||Tonge, Dr Jenny|
|Sanders, Adrian||Tredinnick, David|
|Sayeed, Jonathan||Trend, Michael|
|Selous, Andrew||Turner, Andrew (Isle of Wight)|
|Shephard, Rt Hon Mrs Gillian||Tyler, Paul|
|Simmonds, Mark||Tyrie, Andrew|
|Simpson, Keith (Mid-Norfolk)||Viggers, Peter|
|Smith, Sir Robert (W Ab'd'ns)||Waterson, Nigel|
|Soames, Nicholas||Watkinson, Angela|
|Spelman, Mrs Caroline||Webb, Steve|
|Spicer, Sir Michael||Whittingdale, John|
|Spink Bob||Widdecombe, Rt Hon Miss Ann|
|Spring, Richard||Wilkinson, John|
|Stanley, Rt Hon Sir John||Willetts, David|
|Williams, Hywel (Caemarfon)|
|Stunell, Andrew||Wilshire David|
|Swayne, Desmond||Winterton, Mrs Ann (Congleton)|
|Swire, Hugo||Winterton, Nicholas (Macclesfield)|
|Syms, Robert||Wishart, Pete|
|Taylor, Ian (Esher & Walton)||Yeo, Tim|
|Taylor, John (Solihull)||Young, Rt Hon Sir George|
|Taylor, Matthew (Truro)||Younger—Ross, Richard|
|Taylor, Dr Richard (Wyre F)|
|Taylor, Sir Teddy||Tellers for the Ayes:|
|Thomas, Simon (Ceredigion)||Mr. John Randall and|
|Thurso, John||Mr. Julian Brazier.|
|Abbott, Ms Diane||Clark, Paul (Gillingham)|
|Adams, Mrs Irene (Paisley N)||Clarke, Rt Hon Tom (Coatbridge)|
|Ainger, Nick||Clarke, Tony (Northampton S)|
|Ainsworth, Bob (Cov'try NE)||Clelland, David|
|Alexander, Douglas||Clwyd, Ann|
|Allen, Graham||Coaker, Vernon|
|Anderson, Janet (Rossendale)||Coffey, Ms Ann|
|Armstrong, Rt Hon Ms Hilary||Coleman, Iain|
|Atkins, Charlotte||Connarty, Michael|
|Austin, John||Cook, Rt Hon Robin (Livingston)|
|Bailey, Adrian||Corbyn, Jeremy|
|Banks, Tony||Cousins, Jim|
|Barron, Kevin||Cranston, Ross|
|Bayley, Hugh||Crausby, David|
|Beard, Nigel||Cruddas, Jon|
|Beckett, Rt Hon Margaret||Cryer, Mrs Ann (Keighley)|
|Begg, Miss Anne||Cryer, John (Hornchurch)|
|Bennett, Andrew||Cummings, John|
|Benton, Joe||Cunningham, Rt Hon Dr Jack|
|Betts, Clive||Cunningham, Jim (Cov'try S)|
|Blackman, Liz||Cunningham, Tony (Workington)|
|Blears, Ms Hazel||Dalyell, Tam|
|Blizzard, Bob||Darling, Rt Hon Alistair|
|Borrow, David||Davey, Valerie (Bristol W)|
|Bradley, Rt Hon Keith (Withington)||David, Wayne|
|Bradley, Peter (The Wrekin)||Davidson, Ian|
|Bradshaw, Ben||Davies, Rt Hon Denzil (Llanelli)|
|Brennan, Kevin||Dawson, Hilton|
|Brown, Russell (Dumfries)||Dean, Mrs Janet|
|Bryant, Chris||Dhanda, Parmjit|
|Buck, Ms Karen||Dismore, Andrew|
|Burden, Richard||Dobbin, Jim|
|Burnham, Andy||Dobson, Rt Hon Frank|
|Caborn, Rt Hon Richard||Donohoe, Brian H|
|Cairns, David||Doran, Frank|
|Campbell, Mrs Anne (C'bridge)||Dowd, Jim|
|Campbell, Ronnie (Blyth V)||Drew, David|
|Caplin, Ivor||Drown, Ms Julia|
|Casale, Roger||Eagle, Angela (Wallasey)|
|Cawsey, Ian||Eagle, Maria (L'pool Garston)|
|Challen, Colin||Edwards, Huw|
|Chapman, Ben (Wirral S)||Ellman, Mrs Louise|
|Clapham, Michael||Etherington, Bill|
|Clark, Mrs Helen (Peterborough)||Farrelly, Paul|
|Clark, Dr Lynda||Fitzsimons, Mrs Lorna|
|(Edinburgh Pentlands)||Flynn, Paul|
|Follett, Barbara||McAvoy, Thomas|
|Foster, Rt Hon Derek||McCabe, Stephen|
|Foster, Michael (Worcester)||McCafferty, Chris|
|Francis, Dr Hywel||McDonagh, Siobhain|
|Gapes, Mike||MacDonald, Calum|
|Gardiner, Barry||McDonnell, John|
|George, Rt Hon Bruce (Walsall S)||MacDougall, John|
|Gibson, Dr Ian||McFall, John|
|Gilroy, Linda||McGuire, Mrs Anne|
|Godsiff, Roger||McIsaac, Shona|
|Goggins, Paul||McNulty, Tony|
|Griffiths, Jane (Reading E)||MacShane, Denis|
|Griffiths, Nigel (Edinburgh S)||Mactaggart, Fiona|
|Griffiths, Win (Bridgend)||McWalter, Tony|
|Grogan, John||Mahmood, Khalid|
|Hall, Mike (Weaver Vale)||Mahon, Mrs Alice|
|Hall, Patrick (Bedford)||Mandelson, Rt Hon Peter|
|Hamilton, David (Midlothian)||Mann, John|
|Hanson, David||Marris, Rob|
|Harman, Rt Hon Ms Harriet||Marsden, Gordon (Blackpool S)|
|Harris, Tom (Glasgow Cathcart)||Marshall, David (Shettleston)|
|Havard, Dai||Marshall, Jim (Leicester S)|
|Healey, John||Marshall—Andrews, Robert|
|Henderson, Doug (Newcastle N)||Martlew, Eric|
|Henderson, Ivan (Harwich)||Meacher, Rt Hon Michael|
|Hendrick, Mark||Meale, Alan|
|Hepburn, Stephen||Michael, Rt Hon Alun|
|Heppell, John||Milburn, Rt Hon Alan|
|Hewitt, Rt Hon Ms Patricia||Miliband, David|
|Heyes, David||Miller, Andrew|
|Hill, Keith||Moffatt, Laura|
|Hinchliffe, David||Mole, Chris|
|Hoey, Kate||Moonie, Dr Lewis|
|Hood, Jimmy||Moran, Margaret|
|Hoon, Rt Hon Geoffrey||Morley, Elliot|
|Hope, Phil||Mullin, Chris|
|Hopkins, Kelvin||Munn, Ms Meg|
|Howarth, Rt Hon Alan (Newport E)||Murphy, Jim (Eastwood)|
|Howarth, George (Knowsley N)||Murphy, Rt Hon Paul (Torfaen)|
|Hoyle, Lindsay||Naysmith, Dr Doug|
|Hughes, Beverley (Stretford)||O'Brien, Mike (N Warks)|
|Hughes, Kevin (Doncaster N)||O'Hara, Edward|
|Humble, Mrs Joan||Osborne, Sandra (Ayr)|
|Hurst, Alan||Pearson, Ian|
|Hutton, Rt Hon John||Perham, Linda|
|Iddon, Dr Brian||Picking, Anne|
|Illsley, Eric||Pickthall, Colin|
|Ingram, Rt Hon Adam||Plaskitt, James|
|Irranca—Davies, Huw||Pond, Chris|
|Jackson, Helen (Hillsborough)||Pound, Stephen|
|Jamieson, David||Prentice, Gordon (Pendle)|
|Jenkins, Brian||Prescott, Rt Hon John|
|Johnson, Alan (Hull W & Hessle)||Primarolo, Dawn|
|Jones, Helen (Warrington N)||Prosser, Gwyn|
|Keeble, Ms Sally||Purchase, Ken|
|Keen, Alan (Feltham & Heston)||Purnell, James|
|Keen, Ann (Brentford & Isleworth)||Quin, Rt Hon Joyce|
|Kemp, Fraser||Quinn, Lawrie|
|Khabra, Piara S||Rapson, Syd|
|Kidney, David||Raynsford, Rt Hon Nick|
|Kilfoyle, Peter||Robertson, John|
|King, Andy (Rugby & Kenilworth)||(Glasgow Anniesland)|
|King, Ms Oona (Bethnal Green)||Robinson, Geoffrey (Cov'try NW)|
|Knight, Jim (S Dorset)||Roche, Mrs Barbara|
|Ladyman, Dr Stephen||Rooney, Terry|
|Lawrence, Mrs Jackie||Ross, Ernie|
|Laxton, Bob||Roy, Frank|
|Lepper, David||Ruddock, Joan|
|Leslie, Christopher||Russell, Ms Christine (Chester)|
|Levitt, Tom||Ryan, Joan|
|Lewis, Ivan (Bury S)||Salter, Martin|
|Liddell, Rt Hon Mrs Helen||Savidge, Malcolm|
|Linton, Martin||Sawford, Phil|
|Love, Andrew||Sedgemore, Brian|
|Luke, Iain||Shaw, Jonathan|
|Lyons, John||Sheerman, Barry|
|Sheridan, Jim||Tipping, Paddy|
|Shipley, Ms Debra||Todd, Mark|
|Short, Rt Hon Clare||Touhig, Don|
|Simpson, Alan (Nottingham S)||Trickett, Jon|
|Skinner, Dennis||Turner, Dennis (Wolverh'ton SE)|
|Smith, Rt Hon Andrew (Oxford E)||Turner, Dr Desmond (Kemptown)|
|Smith, Angela (Basildon)||Turner, Neil (Wigan)|
|Smith, Rt Hon Chris (Islington S)||Twigg, Derek (Halton)|
|Smith, John (Glamorgan)||Tynan, Bill|
|Smith, Llew (Blaenau Gwent)||Vis, Dr Rudi|
|Soley, Clive||Ward, Ms Claire|
|Spellar, Rt Hon John||Wareing, Robert N|
|Squire, Rachel||Watson Tom|
|Starkey, Dr Phyllis||Watts, David|
|Steinberg, Gerry||White, Brian|
|Stevenson, George||Whitehead, Dr Alan|
|Stewart, David (Inverness E)||Wicks, Malcolm|
|Stewart, Ian (Eccles)||Williams, Rt Hon Alan(Swansea W)|
|Stinchcombe, Paul||Wilson, Brian|
|Stoate, Dr Howard||Winterton, Ms Rosie (Doncaster C)|
|Strang, Rt Hon Dr Gavin||Woodward, Shaun|
|Stringer, Graham||Woolas, Phil|
|Stuart, Ms Gisela||Worthington, Tony|
|Sutcliffe, Gerry||Wright, Anthony D (Gt Yarmouth)|
|Tami, Mark||Wright, David (Telford)|
|Taylor, Rt Hon Ann (Dewsbury)||Wyatt, Derek|
|Taylor, Ms Dari (Stockton S)|
|Taylor, David (NW Leics)||Tellers for the Noes:|
|Thomas, Gareth (Clwyd W)||Dan Norris and|
|Thomas, Gareth R (Harrow W)||Jim Fitzpatrick.|
§ Question accordingly negatived.
§ Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on Second or Third Reading), and agreed to.
§ Bill accordingly read a Second time.