HC Deb 02 May 1984 vol 59 cc478-81 'In subsection (1) of section 125 (Duty to increase rate of certain benefits) of the Social Security Act 1975, after the final "of', there shall be inserted the words "earnings or".'.—[Mr. Kirkwood.]

Brought up, and read the First time.

Mr. Kirkwood

I beg to move, That the clause be read a Second time—[HoN. MEMBERS: "Hear, hear."] I feel in need of some protection.

I wish briefly to rehearse some of the arguments that show the plight in which the Government's actions have put pensioners. I can anticipate the Minister's reply—I have heard it before. It is a good turn, but it does not convince me. Indeed, the more I hear it, the more I doubt whether the Government live in the real world.

The pensioners will not be convinced by the way that the Minister juggles the figures, talks about real increases and so on. What the pensioners have to live on has, especially during the past five years, bought them less and less and caused them more and more hardship. If we compare their incomes with the increases in electricity and food bills, rent and rates, the Minister's talk of how the Government have done better than ever before is seen as nonsense.

I ask the Minister to spare us criticism of the Labour party. We have heard that before also. It would facilitate discussion of the Bill if he cut out all that rubbish and just dealt with the point of the amendment, which is very simple. The amendment imposes upon the Secretary of State, when he increases the rate of certain benefits, a duty to link it to earnings or prices, whichever is the greater. That would have a significant effect on the standard of living enjoyed by those living on pensions.

We are constantly being told by the Prime Minister and the Treasury Bench that the Government's policy is succeeding. If that is true, the rate of inflation is falling, the retail price index is falling and, therefore, the rate of increase for pensions will fall. We are also constantly told that earnings will increase as the great expansion hits us and takes us unawares. Increases in earnings may run at 6, 7, 8, 9 or 10 per cent. in future years, so clearly pensioners will receive a smaller proportion of the gross domestic product and will continue progressively to be at a disadvantage as the years pass.

The Minister is a fair man. I am sure that he cannot possibly miss the logic of the argument that if the present system continues, and if the so-called success of his Government continues, the pensioners must progressively lose out. Slowly, inexorably, year after year—it does not matter how we dress it up—in real terms the bills that they have to face will be higher and their incomes lower. That cannot be allowed to happen.

I know that the proposal in the amendment will cost money. No doubt the Minister will tell us how many millions of pounds it will cost. I believe strongly that if the British people were told that increases in national insurance contributions were necessary to provide a reasonable living income for retired people who have served this country well over many years, they would accept that because they would see it to be fair and just. They know, more than the Minister appears to know, that pensioners are suffering. The Minister does not comprehend that. If the Minister has confidence in the Government and compassion for pensioners, bearing in mind the way in which the system will develop, he will say that he has had a blinding conversion to our way of thinking, that the Government accept the new clause and that what we propose will start to operate from next Thursday.

Dr. Boyson

To have such a conversion I should need to be blinded. I shall follow the example of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) and be brief.

In considering this matter, we must compare the financial position of the pensioner today with what he was getting in 1978. [Interruption.] It is obvious that Opposition Members fear the figures that I propose to give. My confidence in the Government is such that I look forward to the hon. Member for Roxburgh and Berwickshire questioning us for many years to come on issues such as this.

In November 1978, the single pensioner received £19.50. Uprated in November 1983 for inflation in terms of the RPI, whereas the single pensioner should have received, with uprating in November of that year, £32.95, the pension in fact went up to £34.05, over £1 more in purchasing power than the pension was previously. The single and married pension increase over those five years was 74.6 per cent., whereas the increase in prices was 68.8 per cent. Naturally, all hon. Members would like the pension to be higher, but we can proceed only from a sound economic base, a fact which is understood at least on this side of the House.

I will not bore the House by giving further figures, of which hon. Members are aware from previous debates, showing what we have done by way of heating allowances and the rest. I need only quote from a letter which the Prime Minister wrote on 18 July to the director of Help the Aged, in which she said:

I can assure you that we intend to do the best we can for pensioners. I will ensure that they share in the prosperity that will be brought with the country's economic recovery. As I have said on numerous occasions, the best thing that the Government have done has not only been to increase marginally pensioners' purchasing power but, having brought down inflation, to ensure that pensions, especially occupational non-indexed pensions, continue to be worth something in money terms, and, similarly, the fact that savings, which were almost destroyed under the last Labour Government, are now retaining their value.

Mr. David Penhaligon (Truro)

The Minister gave the standard response, but as it is nearly 1 o'clock in the morning and nobody is listening — [Interruption.] Nobody who counts, other than the Minister, is listening. Perhaps, therefore, we can be rather more candid on the issue than is normally the case when pensions are being discussed.

I understand the Government's position and I have no desire to distort it. It is to uprate pensions each year according to whatever the real increase in inflation was during the previous year — to do no more or less —making an adjustment according to any modification that the figures suggest. That means that, at best, pensioners can look forward to precisely the same standard of living in future as they are receiving now.

The Minister's comments coincide with a statement by the Prime Minister at the weekend that those in work were enjoying the highest standard of living since the economy was measured. That is not surprising when those in work have had an increase in their standard of living in every year but one during the last 20 or 30 years. The Government claim that as a great triumph, and we are pleased that the standard of living of our people is increasing as time goes by.

1 am

The Government's policy of raising pensions by the amount of the previous year's inflation means that that section of the community will be at a disadvantage. I realise that this amendment would present difficulties during periods of substantial inflation. If, sadly, the inflation rate should reach 10 per cent. or 20 per cent. I can see that the ratchet effect of giving the higher increase would create substantial problems. It was the Labour party who cancelled the arrangements that existed until 1976 and pensioners have lost a considerable amount of money because of that.

It might be difficult to write this provision into the law of the land but I should like to see the Minister departing from the policy that the Government are defending of increasing pensions only by the percentage increase in the cost of living for the previous year. On the Government 's own figures that means that the standard of living of those who have retired compared with that of people in work will deteriorate as time goes on. Pensioners recognise that.

We cannot talk about living standards in absolute terms because everyone here has got a good living standard relative to those who live in Bangladesh. Yet our pensioners can see that those who are in work are enjoying a larger percentage of the fruits of society and of the economy. I put it to the Minister that there is no fundamental justification for that. The Government's policy of merely improving pensions by the rate of inflation means that at best pensioners will get no increase in their living standard.

All the predictions for the next three of four years are for a marginal increase in the cost of living. That means that each year pension increases will be indexed according to the previous year's inflation rate which will probably be less than the rate of inflation in the year in which the pension increase is awarded. During their term of office the Government promised to pensioners a reduced standard of living compared to that of those in work. I do not believe that many of the Minister's own party want that, nor do the public at large. I assure the Government that if they do not change their policy, pressure on them will mount greatly during this Parliament.

Mr. Simon Hughes (Southwark and Bermondsey)

I have one question for the Minister. I am grateful for his explanation in answer to the question posed by my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), but why should our pensioners continue to have such an appallingly poor level of pension compared with pensioners in all the other countries in the European Community? Even if there is a level that the Government are not prepared to give, why will they not at least bring the basic pension up to the next lowest pension among our partners? If they cannot advance towards that by accepting amendments such as we have proposed, they are giving pensioners a poor deal whatever the absolute level of wealth in society.

Mr. Kennedy

I was interested to hear the Minister's reference to the real purchasing power of pensions. Can he tell us how far that bold statement in defence and supposed support of pensions goes in the light of the other provisions of the Bill, which were approved earlier and which will lead to pensioners having to pay more for optical services which are now subsidised through the NHS? How can the Minister make sweeping claims that under the Government of which he is a member the purchasing power of pensions continues to improve when elsewhere in the same piece of legislation the Government are taking decisions which will increase the financial burden which pensioners will have to endure? I should be grateful for clarification of that point.

Dr. Boyson

When comparing our position with Europe we must take into account not only the pensioner and the supplementary benefit recipient but also the employment position. The percentage of money spent is not different, but our priorities are. The Liberals are all here, for once. Perhaps they should adjourn and work out a breakdown of social security benefits here and in Europe.

The figures that I have given are based on accepted RPI figures and what pensioners are receiving in relation to what they would have received if the 1978 figures were revalued. Pensioners' purchasing power has increased by 5 per cent. My hon. Friends would be delighted if we could increase that further.

Mr. Michael Meacher (Oldham, West)

Will the hon. Gentleman confirm, before he waxes too complacently about the pensioner, that if in 1980 this Government had not reversed the provisions of Labour's Social Security Pensions Act 1975, the single pensioner today would be receiving about £3 more and the married pensioner couple about £5 more? Will he also confirm that, contrary to the Prime Minister's promise that pensioners would keep up with the rise in national standards, the reversal of Labour's pensions act has meant that they have done no better than keep up with prices, which is quite different?

Dr. Boyson

Wages have increased more than prices. If pensions had been tied to wages instead of prices, the purchasing power of old-age pensions would be more. However, if the Government had not taken action in many other ways the inflation that we inherited from the last Labour Government would still be with us and pensioners would be much worse off.

Mr. Kirkwood

It may come as a devastating surprise to the Minister that we have given due consideration to the closely argued logic that he has deployed this evening, and that I must tell the House that we are not satisfied.

Question put, That the clause be read a Second time:-

The House divided: Ayes 27, Noes, 127.

Division No. 275] [1.07 am

Beckett, Mrs Margaret Hogg, N. (C'nauld & Kilsyth)
Bermingham, Gerald Hughes, Simon (Southwark)
Bruce, Malcolm Kennedy, Charles
Campbell-Savours, Dale Lloyd, Tony (Stretford)
Carlile, Alexander (Montg'y) Meacher, Michael
Cocks, Rt Hon M. (Bristol S.) Morris, Rt Hon A. (W'shawe)
Corbyn, Jeremy Nellist, David
Dobson, Frank Penhaligon, David
Field, Frank (Birkenhead) Pike, Peter
Fisher, Mark Skinner, Dennis
Freud, Clement Steel, Rt Hon David
Harman, Ms Harriet Wallace, James
Haynes, Frank Wareing, Robert
Williams, Rt Hon A. Mr. Michael Medowcroft and
Mr. Archy Kirkwood.
Tellers for the Ayes:
Alexander, Richard Maude, Hon Francis
Alison, Rt Hon Michael Maxwell-Hyslop, Robin
Amess, David Mayhew, Sir Patrick
Ancram, Michael Meyer, Sir Anthony
Ashby, David Miller, Hal (B'grove)
Aspinwall, Jack Mills, lain (Meriden)
Baker, Nicholas (N Dorset) Mitchell, David (NW Hants)
Batiste, Spencer Moynihan, Hon C.
Bellingham, Henry Murphy, Christopher
Bendell, Vivian Newton, Tony
Benyon, William Nicholls, Patrick
Biffen, Rt Hon John Norris, Steven
Boscawen, Hon Robert Onslow, Cranley
Boyson, Dr Rhodes Osborn, Sir John
Brandon-Bravo, Martin Ottaway, Richard
Bright, Graham Page, Richard (Herts SW)
Brinton, Tim Peacock, Mrs Elizabeth
Brooke, Hon Peter Powell, William (Corby)
Brown, M. (Brigg & Cl'thpes) Powley, John
Burt, Alistair Proctor, K. Harvey
Butterfill, John Rhys Williams, Sir Brandon
Carlisle, Kenneth (Lincoln) Robinson, Mark (N'port W)
Chapman, Sydney Rowe, Andrew
Chope, Christopher Sackville, Hon Thomas
Clarke, Rt Hon K. (Rushcliffe) Shaw, Sir Michael (Scarb')
Colvin, Michael Shelton, William (Streatham)
Conway, Derek Sims, Roger
Coombs, Simon Smith, Tim (Beaconsfield)
Cope, John Soames, Hon Nicholas
Couchman, James Speed, Keith
Cranborne, Viscount Speller, Tony
Currie, Mrs Edwina Spencer, Derek
Dorrell, Stephen Squire, Robin
Dover, Den Stanbrook, Ivor
Dunn, Robert Stern, Michael
Evennett, David Stevens, Lewis (Nuneaton)
Fallon, Michael Stevens, Martin (Fulham)
Forth, Eric Stewart, Allan (Eastwood)
Fowler, Rt Hon Norman Stradling Thomas, J.
Gale, Roger Taylor, Teddy (S'end E)
Garel-Jones, Tristan Thompson, Donald (Calder V)
Goodhart, Sir Philip Thompson, Patrick (N'ich N)
Goodlad, Alastair Thorne, Neil (llford S)
Grant, Sir Anthony Thurnham, Peter
Gummer, John Selwyn Tracey, Richard
Hamilton, Hon A. (Epsom) Twinn, Dr Ian
Hayhoe, Barney van Straubenzee, Sir W.
Hickmet, Richard Viggers, Peter
Hogg, Hon Douglas (Gr'th'm) Wakeham, Rt Hon John
Holt, Richard Walden, George
Howarth, Gerald (Cannock) Waller, Gary
Jackson, Robert Wardle, C. (Bexhill)
Knight, Mrs Jill (Edgbaston) Wheeler, John
Lester, Jim Whitfield, John
Lilley, Peter Wilkinson, John
Lloyd, Ian (Havant) Winterton, Mrs Ann
Lloyd, Peter, (Fareham) Winterton, Nicholas
Lord, Michael Wolfson, Mark
Lyell, Nicholas Wood, Timothy
Macfarlane, Neil Young, Sir George (Acton)
MacGregor, John
Maclean, David John Tellers for the Noes:
Major, John Mr. Michael Neubert and
Malins, Humfrey Mr.Tim Sainsbury.
Mather, Carol

Question accordingly negatived.

Forward to