HC Deb 26 January 1998 vol 305 cc2-5
2. Mr. Rammell

If she will make a statement on the progress of the review of pensions. [23053]

15. Mr. Don Foster

When she expects to announce the outcome of the pensions review. [23066]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman)

On 1 July, I announced the pensions review that we promised in our manifesto. We have already received more than 2,000 submissions. The next stage will be the publication of our proposals, which will be in the first half of this year, and consultations will follow.

Mr. Rammell

I thank my right hon. Friend for that reply. Does she agree that the biggest challenge facing the Government on pensions is the need to provide decent second-tier pensions for the 12 million people who are in work yet not in a company pension scheme? Does she further agree that we face that challenge because of the lamentable record of 18 years of Conservative Governments who, unbelievably, chose to try to encourage people to opt out of good company pension schemes in favour of fundamentally flawed private pension plans?

Ms Harman

My hon. Friend is absolutely right. We face two challenges relating to pensions: one is the situation of today's pensioners, and we have said that the poorest of them must be our priority; but we are also determined—this is why we have our pensions review—to ensure that today's people at work, the next generation of pensioners, retire not on the basic state pension and means-tested benefits, but on the basic state pension and a good second pension. For many people who do not have access to occupational schemes, the only alternative has been private pensions, which have eaten up too much of their savings in administrative costs. That is why we issued our consultation document on stakeholder pensions.

Mr. Foster

Is the Secretary of State aware that, as a result of a change in the computer system, many new pensioners have their pensions incorrectly assessed and often get less than the full allowance to which they are entitled? Will she take urgent action to resolve that situation and publicise her plans for the future? As part of the review, will she take action to ensure that such things do not happen again?

Ms Harman

Of course, we are concerned that pensions are paid accurately and promptly. We are always concerned that the system delivers that. I shall look further into the matter and perhaps write to the hon. Gentleman or find some other way of reporting on it to the House. There are a number of problems with the administration and delivery of pensions. The system needs to be modernised so that it gets it right first time, and all pensioners receive the income to which they are entitled.

Mr. Hope

Is my right hon. Friend aware that pension inequality has widened dramatically over the past 18 years and that if things carry on as they did under the previous Administration's policies, inequalities will continue to widen, with the poorest pensioners suffering the most? With the cut in VAT on fuel, the zero rating of the gas levy and the winter fuel payments, have not the Labour Government done more for pensioners in the past six months than the Tories did in the past 18 years?

Ms Harman

My hon. Friend is right. Overall, the average income of pensioners has increased, but that masks the fact that the incomes of pensioners at the bottom of the income scale have increased by less than half as much as the incomes of those at the top. There is a widening divide in pensioner income inequality. We are determined to address that, which is why we have said that our priority will be the poorest pensioners. We have already taken steps to address that inequality, and we shall look further at those issues in the pensions review.

Mr. Butterfill

Have not the right hon. Lady and the Government done all that they can to create a shambles on pensions? The Chancellor of the Exchequer plundered pensions through his changes in advance corporation tax, much to the dismay of the Minister for Welfare Reform. Everyone has had to switch back into the state earnings-related pension scheme, which the Minister for Welfare Reform has said that he wants to abolish in the long term. What is the Government's policy? Are they going to sustain SERPS, encourage private pension provision or carry on with the present muddle?

Ms Harman

We have said that, in addition to the basic state pension, we want to improve second-tier pensions and make them accessible to all. The hon. Gentleman is wrong on all counts in his allegations against the Government. The shambles on pensions came not from us but from the previous Government, who presided over growing inequality in which the poorest pensioners were left behind. They instigated the policy of mis-selling personal pensions and left hundreds of thousands of people uncompensated. We are acting on that. They left many working people with no opportunity to pay into a good-value second-tier pension. We are addressing all those issues. What is more, instead of doing it on the back of an envelope like the previous Government, we are having a proper consultation through our pensions review to build a consensus for the long term. That is the way to do it.

Mr. Wigley

Does the Secretary of State accept that among the poorest pensioners are those who lost their health working in industries such as coal mining and slate quarrying and their widows? Will she join me in welcoming last week's court announcement that compensation will be paid to coal miners and their widows for emphysema and chronic bronchitis? Will she give an assurance that this time, the needs of slate quarrymen and their widows will be taken into account?

Ms Harman

Everyone in the House will welcome the fact that, at long last, justice will be done to those whose health suffered through working in coal mining. Many people will wonder how it was that so many people ignored for so long the warnings about how working in coal mines can seriously damage health. It is a timely warning to us to ensure that workplaces are safe from accident and disease. I shall draw the attention of my ministerial colleagues to the right hon. Gentleman's point about slate quarry employees.

Mr. Duncan Smith

In answer to an earlier question, the right hon. Lady said that she was a great supporter of occupational pensions and accepted her party's manifesto pledge to support them. Last week, however, the Government did a U-turn on pensions because they announced that they had increased the national insurance rebate after having said that it had no effect. They did so because people were having to opt back into SERPS as a result of the chaos caused by the Budget and the announcement of the abolition of ACT dividend credit.

Will the right hon. Lady therefore now accept that the Government have done a U-turn, and will she apologise to pensioners who have been messed around? Most of all, will she now say why, when the Government made that change, they did not include occupational pensions? Will she explain why those with occupational pensions will have to pay out extra money for the next five years, so that they stay in line with the pensions that they wish to receive? Why were occupational pensions ruled out?

Ms Harman

We have done no U-turn. No pensioner has been mistreated by the Government. We sought and considered the advice of the Government Actuary, who, as the hon. Gentleman will know, is there to advise on such matters. We took his advice, which was—as reported in a written answer from the Under-Secretary of State for Social Security, my hon. Friend the Member for Southampton, Itchen (Mr. Denham)—that there was some risk that some people might be advised to opt back into SERPS. We considered the Government Actuary's advice and we changed the rebates. That action was a normal part of the process, and we acted promptly and correctly. It is important not only to make an immediate and appropriate response but to address the long-term problem, and ensure that we have a strong economy and a high level of investments. Thus we can ensure a good return on people' s second-tier pensions in the future. Our approach has been based on that aim.

Mr. Duncan Smith

The right hon. Lady has failed to answer the question that I asked her. As a result of the mess that the Government got into at the Budget, is it not a fact that the change to the national insurance rebates will cost the Government £500 million over the next five years? Does she accept that? Will she answer that Question, and apologise?

Ms Harman

I thank the hon. Gentleman for his second question. He will know that the Government Actuary's responsibility is to advise the Government when, from time to time, it is necessary to adjust rebates. We sought that advice and acted properly on it. The important thing is to ensure that in the longer term we have the right level of investment to sustain the growth of second pentions. We have taken the right action.