HC Deb 07 June 1993 vol 226 cc9-11
8. Ms Eagle

To ask the Secretary of State for Social Security what plans he has to encourage contracting out of state benefits.

Mr. Lilley

The Government have always favoured encouraging people to choose to make extra financial provision for themselves where appropriate. We are committed to introducing age-related rebates to make it equally attractive to people of all ages to join private pension schemes.

Ms Eagle

Can the Secretary of State confirm whether, as part of the current review being conducted, his Department has held meetings with private insurance firms about the possibility of contracting out state benefits and arrangements for the payment of health service and other benefits of the welfare state? Does he realise that extending the privatisation principle to the welfare state will sound its death knell? Where in the last Tory election manifesto did it say that the Conservative party would butcher the welfare state?

Mr. Lilley

The last point made by the hon. Lady is unworthy of someone of her intelligence. A modern welfare state is expensive and we may have to stop doing certain things in order to perform other tasks more successfully. It was not me who said that, but the Labour Co-ordinating Committee. The hon. Lady had better have words with her friends if she is worried about people ceasing to do things in the welfare state. It does not damage the welfare state to enable people to make additional provision for themselves, which was an intrinsic principle on which Beveridge based the system.

We are meeting people in the insurance and pension world to discuss the proposals that I mentioned in my main answer, the arrangements that we shall have to introduce and the consultations that we shall have to hold to enable pension funds to conform to the European Court judgment on the equalisation of private pension arrangements and their co-ordination with a state scheme. We consult on and discuss all these things. There is no question of doing anything surreptitious that will butcher the welfare state.

Mr. Jenkin

Does my right hon. Friend agree that the rapid growth of the Department's budget since 1979 not only reflects our commitment to the most needy but is a cause for concern? Is not the contracting out of genuinely insured benefits to the private sector, where they are genuinely fully funded, an advantage to the people concerned and an advantage to the Department—because that enables resources to be better devoted to those who really need them?

Mr. Lilley

My hon. Friend is absolutely right in both respects. The fact that we have increased public expenditure on the welfare state by two thirds in real terms since 1979 is guarantee enough of our commitment to that system; but my hon. Friend is right to say that the great advantage of private provision—unlike state provision, which is based on pay-as-you-go arrangements with nothing set aside or saved or invested for the future—is that private schemes are fully funded and savings are made and invested in British industry to develop the assets which will create the resources to pay for pensions and other benefits in future years. That is good for the economy, for the individual and for the welfare system.

Mrs. Golding

This Government seem to spend many thousands of pounds on advice and instruction, much of it to do with the social security system, including contracting out. Will the Secretary of State reply to one of my constituents, who has written to ask me whether the Government will provide a helpful guide setting out the best way in which people can survive on their pensions? Perhaps he will consider starting with another of my constituents, who is 76 years old, who has no savings and who has £67.55 a week to live on. Could the right hon. Gentleman give him any guidance on how he can pay his gas, electricity and water charges, his council tax, fares and telephone charges, and save towards maintenance and repairs of his home? In addition, my constituent has to clothe himself, eat and pay for his one pleasure in the form of a television licence. Will the Secretary of State produce a helpful guide for this constituent?

Mr. Lilley

The hon. Lady knows full well that no one in this country has to survive only on the basic pension. Because we have encouraged so many people to make additional provision, two thirds of all new pensioners have occupational pensions on top of the basic pension; a great many other people have other savings and investment income as well, and those who have none receive income support on top of the pension—and other income-related beneits to which they are entitled. We have been able to enhance those benefits because of our success in encouraging people to make private provision and in focusing additional help on those who need it—as we did last October, when we gave £2 more a week to individuals and £3 a week to couples on income-related benefits. In all, £1 billion more has been focused on these very groups in recent years.

My advice is to continue voting Conservative and not to risk going back to Labour, which undermined all pensioners by inflation.

Mr. John Greenway

Does my right hon. Friend agree that the worst possible world would be means testing for the basic state pension, which would discourage people from making private provision? Is not the future for people in work now to make their own private pension provision; and will the Government continue to encourage them to do just that?

Mr. Lilley

My hon. Friend is right. That is precisely the mix towards which Labour Front-Bench spokesmen are moving—discouraging private provision and means testing the basic pension. Then they try to scare everyone with the idea that we would do something so foolish.