Pensioners (Living Costs)

HC Deb 07 February 1983 vol 36 cc812-22 5.31 am

Mr. A. W. Stallard (St. Pancras, North)

This debate, timed as it is immediatedly after the publication of the White Paper on public expenditure, and just a few weeks before what could well be the present Chancellor of the Exchequer's last Budget during this Parliament, gives me the chance to raise again some of the more worrying aspects covered by the broad title of "Pensioners (Living Costs)." I hope that it will also provide the Chancellor with some thoughts on how to improve the content and quality of his forthcoming Budget speech.

I begin by repeating a plea that I and many others have made for some years for an urgent review of pensioners' incomes and spending needs, compared with those of the rest of the population, and an urgent rethink of the need for a new method of calculating and uprating pensions more accurately in accordance with pensioners' needs, while striving to allow pensioners the maximum personal choice on how to spend their income.

Almost all pensioners' organisations have argued for a long time that neither the official retail prices index nor the pensioner prices index accurately reflect the living costs of elderly people. The Social Services Select Committee, in its recent report to the House, House of Commons Paper No. 123, said: There are good grounds for believing that the welcome fall in the rate of inflation over the past 12 months has not been fully reflected in the expenditure patterns of pensioners and other groups of social security beneficiaries". It went on to say: Expenditure on fuel and light in particular accounts for between 15 and 20 per cent. of expenditure by poorer pensioner households, and there is reason to believe that these costs are rising faster than the retail prices index in general. Indeed the retail prices index figures for fuel and light rose by 2 percentage points between November 1982 and December 1982 alone, compared to a general RPI rise of 0.5 percentage point". Further proof of what I am saying was contained in a written reply to my hon. Friend the Member for South Ayrshire (Mr. Foulkes) on 7 December, when the Chief Secretary to the Treasury said: The 1.5 per cent. fall in the mortgage rate announced in August will have reduced the retail prices index by 2/5 per cent. The further 2 per cent. fall announced in November will in due course reduce it by another 3/5 per cent."—[Official Report, 7 December 1982; Vol. 33, c. 494.] That was his reply, although, according to another written reply on 13 December 1982, at c. 55, only 100,000 pensioners own their homes on a mortgage and will thus benefit from that fall.

The British Association of Retired Persons, in a letter to The Daily Telegraph, said: One aspect of the index-linking of old-age pensions which appears to have escaped the notice of both Sir Geoffrey Howe and Mrs. Thatcher is that the method of calculation of the retail prices index is most unjust towards old-age pensioners. The recent reduction in the rate at which the cost of living continues to rise is largely due to the fall in interest rates having caused a reduction in the mortgage interest element included in the RPI computation. Few retired persons, however, have mortgages, having paid such off by thrift during their working lives. Moreover, many retired people have their lifetime small savings on deposit with the building societies whose interest rates to depositors are now being reduced, the small supplementary incomes of the retired being thereby reduced while prices of food, fuel and other necessities continue to rise. No one can say that the association is full of people who think as I do. It could have mentioned that a reduction in the price of motor cars had contributed to a lower inflation rate. I am not aware that many pensioners in my constituency will have been affected by that reduction.

Paragraph 15 of the report of the Select Committee on Social Services stated: It would be in the highest degree unfair if, at the moment that pensioner and other households find their costs are rising faster than the general rate of inflation, on fuel and light in particular, their benefits were adjusted in line with that general rate. All hon. Members will, I think, agree with those sentiments.

A recent booklet entitled "Inflation and Elderly People", issued by Age Concern as a discussion document, estimates, on the basis of an alternative pensioner index, that pensioners have experienced 12 per cent. more inflation than other households since 1974. The author, Mr. William Smith, a lecturer in economics at the University of Kent, produces statistics and tables to prove that assumption. He argues that to keep pensioners' future living standards in line with the true rate of inflation, as it affects them, they should be linked to a new prices index.

Mr. Smith concludes that the use of the present retail price index as a measure of price rises for pension increases is inadequate. This, he says, is a cause for great concern, considering the amount of poverty among pensioners. A single person's pension amounts to only one-fifth of average male earnings. A married couple's pension is less than one-third of average earnings. Nearly half of all pensioners—over 4 million people—have to claim means-tested benefit to supplement their pension.

In his booklet Mr. Smith says of pensioners: However, their demographic importance is not reflected by their economic status. For example, total expenditure in the economy by single person and married couple pensioner households is only 12 per cent. of the total for all households, despite pensioners comprising approximately 22 per cent. of the adult population. That statistic is not widely realised.

The discussion paper concludes that, to keep in line with the living standard of those in work, the link between pensions and earnings should be restored. That is part of the problem which we all know as the break in the link. I assume that the Minister has read the booklet to which I have referred, because it has been widely distributed, and I hope that he will be able to comment on the useful points that are made in it.

There are many more more well-researched examples of the injustice being done to pensioners and other beneficiaries by the continued use of the present method of linking. I hope that the Chancellor and his colleagues will consider the need for an immediate review and the early introduction of a more accurate prices index that will reflect the true differentials of the pensioners' inflation rate.

I have mentioned the link with wages and the fact that the Government have broken that link. That is just one of a series of measures introduced by the Government to cut costs and save money that have seriously affected pensioners. By breaking the link with pensions the Government saved £500 million, but a married couple lost £2.25 a week. By delaying the date of uprating by two weeks the Government also made a huge saving, but a married couple lost £12.30 a week.

By freezing the earnings rule, despite a clear manifesto commitment to abolish it, the Government made further savings. The poorest pensioners on supplementary benefit received increases which were lower than the rate paid to other beneficiaries—0.5 per cent. less—due to changes in the method of calculating increases as a result of the changeover to housing benefit in November 1982. We know, too, that some pensioners will have lost entitlement to certain forms of heating allowance from November 1982, although at the moment the numbers are not available.

The total savings from all those measures must be well in excess of another £500 million. It is also a fact that the Government saved £160 million by the 1 per cent. clawback in 1981. A case can easily be made for saying that the Government owe money to pensioners, rather than to talk of further clawbacks.

According to the most up-to-date statistics, 1,119,000 pensioners in 920,000 households are dependent on incomes below the supplementary benefit level. The White Paper published last week shows that an estimated 1,730,000 pensioners are receiving supplementary benefit. There are also an estimated 2 million pensioners receiving either rent or rate rebates and many more who should be but do not claim. Therefore, we are talking about more than 4 million pensioners either living in poverty or just above the poverty line after three years of this Government.

In the face of all that, what are the Government doing? In his autumn Budget the Chancellor announced that because of overestimating at the Treasury pensioners had been overpaid. He said: We accordingly intend to make an adjustment to next year's uprating."—[Official Report, 8 November 1982; Vol. 31, c. 314.] Quite rightly, as was to be expected, that announcement brought anger from pensioners and pensioners' organisations throughout the land.

I do not want to burden the House with long quotations, but it is appropriate to quote from "Pensioners' Voice", the official organ of the National Federation of Old Age Pensions' Associations. It says: The Chancellor's announcement of a 'claw back' from this year's uprating met a bitter and angry response from the National Executive. The proposal was condemned as callous and cheese-paring and the following letter sent to the Prime Minister and the Chancellor. The letter contained the following paragraph: The decision was condemned as callous and cheese-paring coming, as it does, at the end of a year which has seen allround increases in the basic essentials of life. Statistically, it may be possible to prove a fall in inflation. Practically any pensioner will tell you that prices in the shops, on the buses and especially the cost of heating continue to rise. Further, the retail prices index is hardly a fair yardstick by which to calculate the living cost of pensioner households. The pensioner prices index is much more accurate and throughout this year has exceeded by four or five points the RPI. On the basis of that statistic, therefore, it would appear that a 9 per cent. increase is correct. There is no overpayment. It went on to say: The cut now proposed, although of itself apparently insignificant, will mean a loss of £41 to single pensioners and some £67 to married couples. A considerable sum especially when one considers that it will be deducted at a time when inflation can again be expected to rise. Hugh Faulkner, the director of Help the Aged, said: Help the Aged is dismayed and despairing on hearing the announcement by the Chancellor that pension increases next year will be reduced because of the more rapid fall in the rate of inflation than had been anticipated. It is an act of hurtful meanness deliberately reducing pensioners' standard of living and ignoring their years of battling against heavy inflation on a pension which is still all too low. The Chancellor has lost his sense of compassion as well as his trousers". The Britsh Association of Retired Pensioners had this to say: Most old-age pensioners need every penny of their present near-poverty-level pensions, and any threat further to penalise them seems to be singularly inept treatment of some 9 million voters with a general election in the offing. Perhaps the Chancellor is only making this threat of a 'claw-back' with the intention of withdrawing it in his spring Budget, but even the possibility has caused much worry among the elderly and it is our sincere hope that either the Chancellor of the Exchequer or the Prime Minister, or both, will take an early opportunity of setting at rest the fears that they have raised in the minds of the old aged pensioners of the United Kingdom by their recent statement". Those are just a few of the many reactions to the autumn Budget announcement of the claw-back. I know that the phrase upsets Ministers. Nevertheless, it is true.

Age Concern and the British pensioners trade union action committee made similar responses. It is hoped by all of us that the Cabinet is reconsidering the situation.

From recent pronouncements by Ministers, it seems that some rethinking is going on. For example, following the Chancellor's very definitive statement, there have been a number of follow-on statements. The Secretary of State for Social Services, for instance, said: Decisions on what the 1983 uprating should be will be taken, as usual, at the time of the next Budget. Legislation will be introduced as necessary, but I have no specific timetable in mind at this stage."—[Official Report, 30 November 1982; Vol. 33, c. 125.] On 15 December, the Minister who is to reply to the debate said to the Select Committee on Social Services: I hope to avoid legislation —there was a change— if at all possible, because legislation leads to other problems". There one sees a slight shift in the language and in the emphasis. It is a welcome shift if it goes far enough.

In further evidence to the Social Services Select Committee on that day the Minister said that there is no statutory restriction on the size or frequency of uprating on, for example, war pensions, supplementary benefit, child benefit, one-parent benefit, family income supplement, mobility allowance, death grant, maternity grant and Christmas bonus". In a letter to myself on 6 January of this year, Lord Trefgarne, who is a Minister at the Department, said: All we have said is that the level of next year's increase in pensions and other benefits in November 1983 will be decided at the time of the next spring Budget. It will then be necessary to consider to what extent we have to bring pensions and other benefits in line with inflation or allow them to continue to run ahead of it". There is a change of language, almost moving away from that definitive statement by the Chancellor in his Budget.

Page 66 of volume two of the public expenditure White Paper states: It is intended that the decisions about the increases in November 1983 will have regard to the fact that the forecast increase in prices over the year November 1981 to November 1982—on which the November 1982 uprating was based—exceeded the actual rise in prices over that period. That again is an attempt to soften the language.

Could it be—we are entitled to speculate—that there will not be a claw back, that there will merely be a tiny claw back, or, as the Minister seemed to suggest to the Select Committee just before Christmas, that there could be a claw back on benefits which the Government are not required by legislation to uprate in line with inflation?

To most people there is something very wrong with a procedure that can produce such a farcical and worrying situation. In any other walk of life, increases are agreed and, if necessary, back pay is given, often by a lump sum, if negotiations drag on past an agreed date. No one else must rely on an estimate made in March for an increase the following November, with the uncertainty and possibility of having some snatched back. We can imagine what would happen in industry if that procedure were applied.

The days of this pernicious procedure must surely be numbered, and the Government should urgently seek alternative methods of indexing and uprating pensions. On probably their last Budget before the election, the Government should announce an urgent review of the present method of calculating upratings. In the meantime, they could restore the link with wages, extend heating allowances to those on rent and rate rebates, increase the capital cut-of from £2,500 to at least £3,000, raise the £300 limit for single payments to £500, and restore I he death grant to its 1949 level. There are plenty of arguments to justify all those propositions, and these few modest requests would go some way towards improving the serious plight of thousands of pensioners.

5.54 am

Mr. Thomas Cox (Tooting)

I welcome the opportunity to take part in this debate, just as I welcome the debate itself. All hon. Members are aware that the problems faced by our 10 million elderly increase year by year. We often tend to think that, once a person has retired, he needs less income that he received when at work. Indeed, most people accept that once they retire, their income will fall. However, we often forget that people have built up a standard of living while at work, and they have the right to expect to retain that standard once they have retired.

Sadly, many of the essential services such as heating and lighting are needed far more in retirement, when people are at home all day rather than out at work, and such services cost a lot of money.

On many occasions in the past few months we have raised the subject of standing charges, none more consistently than my hon. Friend the Member for St. Pancras, North (Mr. Stallard). Eventually the Government became extremely concerned, although the concern came initially from the Opposition, and changes have now been made in standing charges for people who consume very little gas or electricity.

Standing charges, however, are only part of the problem. For many people, the real problem is the size of the quarterly bill that they have to pay. At Question Time on 31 January, figures were given, which the Secretary of State for Energy did not challenge, to show that since the last general election gas prices had increased by 97 per cent. and electricity prices by 82 per cent. Many people, especially retired people, find it extremely difficult to meet those exorbitant price increases. If the Government are really concerned, they should reduce the amount that people have to pay for their heating.

As my hon. Friend the Member for St. Pancras, North has said, and as the Minister must know from his travels throughout the country and his meetings with pensioners' groups and representatives, the one constant request is for an increase in the heating allowances that are now paid. I hope that the Minister will not merely tell us that the Government are aware of this, concerned about it, and so on. I hope that he will tell us that the Government intend to do something about it before next winter.

Insulation is occasionally mentioned in the House, but one wonders how much is done about it outside. We know that there are grants to help with roof insulation, which has a major role to play in heat conservation within the home, but what about the windows and doors, especially in the older properties in which so many retired people live? It is no use heating a house if the heat is lost through ill-fitting windows and doors. What constructive policy can the Government offer to deal with that problem?

The Chancellor will soon be introducing a new Budget. The one thing that pensioners will certainly watch is whether the threatened clawback occurs. Let us hope that it does not. Let us have none of the talk in which some Ministers have indulged about how pensioners must be realistic and recognise that they were paid far too much in the past because inflation did not increase so fast as the Government expected and a slight reduction will be no great loss. According to the popular press, the Budget is likely to contain many pre-election handouts. I am sure that no hon. Member is in any doubt as to the deep offence that pensioners will feel if the clawback operates.

We hear from the Government that inflation has fallen, but the real issue is the cost of commodities in the shops. That does not fall. Hon. Members should walk around the shops and, if they are in any doubt about my assertion, talk to pensioners. They should tell them not to complain because inflation has fallen, as have prices—and then wait for the abuse from pensioners who will ask, in no uncertain terms, "What kind of world do you live in? What prices are falling?" Therefore, the threatened clawback is a crucial issue.

I realise that my next remarks may be somewhat controversial, even with my colleagues. Pensioners have complained bitterly to me about the amount of income tax they must pay. It is because they have a state pension and also a work superannuation pension. I well understand their concern. When they were at work, and wages were much lower than they are today, many of them made the effort to join company superannuation schemes to look after themselves when they retired. Now, they feel that they are being unfairly treated in the amount of income tax they must pay on the total income. I am sure that many Treasury Ministers could, in a matter of moments, demolish that argument, but I know from the pensioners I meet—ordinary working-class people—that when they were in work they genuinely tried to provide for themselves in retirement. They feel aggrieved about the amount of tax that they must pay.

As we approach the forthcoming Budget, if there is a possibility of giving an additional £1 in tax concessions to the retired person or those in the low income group, rather than to someone in receipt of a salary of hundreds of pounds, I am sure that there will be little doubt in people's minds where the priority should lie. That matter will be watched closely by pensioners throughout Britain.

The title of the debate is "Pensioners (Living Costs)". It covers many issues, and I wish to touch upon one. In my area there is a sub-post office in Franciscan road, Tooting. I am told that it is under review. I am sure that many hon. Members are in no doubt about the meaning of "under review". It is that there is a real possibility that it will be closed. If that should happen, it would be an utter madness that wholly ignored the needs of that area and the local residents. The sub-post office covers a populated area in which many elderly people live. They use that office.

The office is popular, as is the sub-postmaster who runs it. I received 22 letters from constituents today. They are worried by the knowledge that the sub-post office is under review. I shall read just one which is typical and gives some idea of the strength of feeling that exists: I have been given to understand that my post office at 180, Franciscan road, SW17 is threatened with closure. If so, it will be a great hardship for us pensioners because we will have further to walk. Also, we will have to cross busy main roads, which is dangerous for elderly people. My wife is 75 and I am 77. I strongly protest against the closure. Will you give this every consideration and do all in your power to oppose? In part of my constituency called Bedford hill, there is housing occupied by elderly people but not on a bus route. Many of those people have to take a taxi to go shopping because they cannot walk up and down the hill. The taxi fares can be anything from £1.50 to £2. It is often difficult for elderly people to walk long distances. If the sub-post office is closed, many elderly people will be forced to take a taxi to draw their pension. That would add to their costs.

Every hon. Member should be aware of a report which could affect us all, even those in the Minister's constituency. It says: Post Office chiefs were considering a plan to close 200 post offices and 3,000 sub-post offices. They were also thinking of downgrading another 1,500 main post offices to sub-offices and shutting others at lunchtime and on Saturdays. Such plans would hit tens of thousands of customers who would have to travel further to the nearest post office. Hardest hit would be the old age pensioner and people without their own transport and the disabled. The plans have been drawn up by Lord Rayner, until recently a top adviser to Mrs. Thatcher. I do not know what the Minister can tell us about that. He should say what is taking place. It would be better for every hon. Member if he made a statement soon. Not long ago there were mass rallies protesting at closures. We had a special debate on the threatened closure of sub-post offices. Hon. Members were left in no doubt about the disastrous effect that that would have on local communities. We are entitled to know what is happening now.

My hon. Friend the Member for St. Pancras, North talked about pensioners' living costs. In my area which is a built-up area of inner London, people have to take taxis to shops because there is no bus service. Therefore, I hope that we will hear about that matter as soon as possible.

Pensioners now form a large part of our population. No hon. Member would dispute that conditions have improved, but there is still a long way to go. If any one is in doubt about that, all he has to do is to attend the all-party pensioners group, regularly attended by hon. Members of all parties, and listen to the pensioners' representatives talking about the varying concessionary fares schemes, television licences, the death grant and so on, which are of crucial importance. The pensioners have to pay for those important services.

The Budget will soon test the Government's concern for a large section of our population. Who will benefit? Will it be the wealthy or the pensioners and those in the low income groups? Many people both in the House and outside will be watching how the Government as they come up to the next election treat each section of the community. Many people in my constituency will keenly watch where the Government put their priorities in the next few weeks.

6.11 am

The Minister for Social Security (Mr. Hugh Rossi)

With the leave of the House. I am grateful to the hon. Member for St. Pancras, North (Mr. Stallard) for the way in which he introduced the debate. I am well aware of his concern for pensioners and of the fact that he represents many pensioner organisations in the House. He will forgive me if I do not answer all the matters that he raised. If I understand him correctly, he addressed his remarks more particularly to my right hon. and learned Friend the Chancellor of the Exchequer than to my Department. I cannot anticipate what he will or will not do in his Budget Statement, nor can I anticipate what my right hon. Friend the Secretary of State will say in any uprating statement.

The hon. Member for Tooting (Mr. Cox) referred to the threatened closure of his sub-post office. I regret that I can give him no answer on that matter as it does not fall within my responsibilities. Nevertheless, I can share his concern. I have had similar problems in my constituency. One has to do battle with the chairman of the Post Office. One wins some and one loses some. That is the only comfort that I can give to the hon. Gentleman.

I share the concern of the hon. Member for St. Pancras, North about pensions. I agree with him that for someone who is solely dependent upon the old-age pension life is very difficult. It always has been for someone who has not been able to accumulate savings of his or her own during a lifetime or enjoy the benefits of an occupational pension as well as the State pension. That is why we have supplementary pensions that assist people who find themselves in that unhappy situation.

One recognises that people in that unhappy position, dependent upon the old-age pension, have particular problems with the cost of heating. It is precisely for that reason that the Government have extended heating allowances for those people who need them. We are spending some £325 million in the current financial year on supplementary benefit heating additions to help the people for whom the hon. Member for Tooting expressed such anxiety. It is more than any Government have spent. There is other help that such people can receive in grants for insulation which is possibly one of the best ways in which old people can help themselves to keep warm.

Standing charges were debated in the House on 13 December 1982. I do not think it would be right for me to go over the same ground once more. The hon. Member for Tooting has tempted me, because, although he made a grudging reference to the fact that the nationalised industries are prepared to make some concession in respect of standing charges for fuel, he claims a great deal of the credit for that decision for the Opposition. The record does not show that. In 1976 the Government he supported looked at the matter and ruled out both the elimination of the standing charge and the half standing charge concession.

The Secretary of State for Energy at the time was the right hon. Member for Bristol, South-East (Mr. Benn). He said: After considering the group's report the Government have concluded that none of these possibilities offers a satisfactory way of helping poor consumers with their fuel bills. The Opposition had the chance when in Government and rejected it. It has been left to us to put the matter right as best we can in the prevailing conditions.

The hon. Member for St. Pancras, North referred me to a recently published booklet which questions whether the retail price index is the proper basis upon which one can have regard to the uprating of pensions. I have received the book recently and I have skimmed through it quickly. It seems to contain a great deal of interesting information. I have not yet had an opportunity to study the arguments in detail, but I shall. The hon. Gentleman quoted the Select Committee on Social Services with approval when it suited him. He did not quote that passage of the Committee's report which supported the view that the RPI remains the best price measure for general social security upratings. The Select Committee on Social Services said: We would need more convincing evidence of a case for change than has so far been produced, to persuade us to move from an index which is widely accepted, comprehensive and reliable to any alternative so far available. I have the authority of an all-party group of the House which specialises in such matters supporting the use of the RPI for that purpose.

Mr. Andrew F. Bennett (Stockport, North)

Will the Minister give way?

Mr. Rossi

Yes. The hon. Gentleman is a member of the Select Committee.

Mr. Bennett

I am pleased that the Minister supports that recommendation. I assume that he will be consistent and support all the other recommendations; or is he quoting selectively?

Mr. Rossi

The hon. Gentleman must await, with his usual patience, the Government's response to the report which will be issued in due time.

The hon. Member for St. Pancras, North mentioned the increases that pensioners have received compared with increases in prices. I remind him that during the Government's period of office pension levels have been increased, over four upratings, by about 68.5 per cent. By comparison, the retail price index rose by only 61 per cent. between November 1978 and November 1982. The pensioner price indices, which are often recommended by hon. Members as a more reliable basis for comparing increases in pensions, rose between the final quarter of 1978 and the final quarter of 1982 by only 58 per cent. for a single pensioner household, and by 57.5 per cent for a two-pensioner household. On those criteria, the Government have more than redeemed their pledge to ensure that pensions are fully protected against price increases.

Both the hon. Member for St. Pancras, North and the hon. Member for Tooting referred to the comparison with average adult earnings. There was a lament for the breaking of the link with earnings on the upratings. If one takes a longer period than the term of office of the present Government, to try to see those matters in a wider perspective, the hon. Gentleman will find that during the 10 years from October 1972 to November 1982 the State retirement pension rose by 386.7 per cent. As against that, average adult male earnings rose by 310.3 per cent., and the pensioners price indices for a single pensioner-household, from final quarter to final quarter, rose by 277.6 per cent. By whatever yardstick, over a substantial period pensioners have been kept ahead of the field by successive Governments. That must be borne in mind when one is considering the general questions with which we are concerned.

The hon. Member for St. Pancras, North also mentioned the imperfections in our system for uprating pensions, because the announcement is made at about Budget time, the increase takes place in November, and in the uprating there is an element of forecast that invariably proves to be wrong, which requires an adjustment in the uprating from year to year. I remind the hon. Gentleman that the present system of forecasting, of which he was so critical, was introduced by Mrs. Barbara Castle when she was Secretary of State. When she did that, she departed from the historic method of calculating the upratings. It caused great comment and criticism at the time, because the effect of changing the method of uprating was to deny pensioners about £500 million, which at today's rates is in excess of £1 billion.

We were then left with this curious method of uprating pensions, legislated for by the previous Administration. Each uprating decision can happen at any time between March and June. My right hon. Friend the Secretary of State has to take the past six months of increases in prices and estimate the next six months of rises in prices. He must then state a percentage figure by which the pension shall be uprated. In making a forecast of a likely increase in prices in the future, certain assumptions or guesses, to use an easier term, must be made. Whenever one guesses or makes assumptions, it is only right to accept that one will not be able to get it right every time. Assumptions are no more than assumptions and can be proved to be wrong. It is not the same as a calculation based on known figures of what has happened.

Therefore, ever since the present Government have been in office, inheriting that particular way of uprating the pensions, it has followed that one year we have overestimated and another year we have underestimated the increases in prices. When we have underestimated the increases, we have made good, the underestimate as we did in November 1982. We underestimated the preceding year, so in November 1982 we added an additional 2 per cent. to pensions to make good the underestimate. If one makes that type of adjustment, it follows logically that if a forecast is going to be wrong the other way, an adjustment must be made. What is sauce for the goose is sauce of the gander. That is no more than the Chancellor has indicated might be the position when he comes to consider what he has available at Budget time.

Mr. Stallard

I did not pray in aid for my criticisms the previous conduct of any Government. I am sure that members of the Government for whom the Minister has voiced support will be touched by his support, however belated. I did not pray those in aid and I will not do so now. I would criticise them as I criticise the present Government or any Government, because I believe that all Governments have the system wrong. Now is the time for a total rethink, which is why I quoted some of the new thinking that is coming forward. I mentioned one idea from the new pamphlet to which I referred.

Mr. Rossi

I accept what the hon. Gentleman says. I do not know, and have not taken the trouble to find out, whether he voted for or against his Government when they changed from the historic to the forecasting method of uprating. I am not sure that he can recall now which way he voted and whether he gave his Government his support on that occasion. Whether he did or did not, it was a decision of his Government as a whole. That is the consequence and this is the trouble we find ourselves in today. One must consider these matters to see whether it is possible to produce a better method. The historic method has its advocates because it has certainty. There is automatic uprating within that method, albeit six months too late. The difficulties with a historic method is that one is basing the increases on past rises in prices. If there is rapidly accelerating inflation, there is an appreciable time-lag for the pensioners before the pension is put right to take account of the rise in prices which has taken place. That is the difficulty with that method.

These are matters that must be of continuing concern to the Government. We must try to satisfy ourselves that we can find the best practical means of dealing with these difficult matters. The best solution of all would be to achieve an economy in which there is very little inflation. The method of forecasting the uprating would become increasingly academic in that climate. The House knows that that has been the basis of the Government's economic policy. Our aim has been to reduce inflation as rapidly as we can and to restore the economy to a firm and sound basis. As Labour Members know, the Government have been singularly successful in their policy of reducing inflation. This has been all to the benefit of the pensioners.

I do not feel that I can take the matter much further. The various other issues which have been raised in the debate are really for my right hon. and learned Friend the Chancellor of the Exchequer or for my right hon. Friend the Secretary of State. I cannot anticipate statements that they may be making in future.