HC Deb 19 April 1999 vol 329 cc560-2
9. Mr. John Bercow (Buckingham)

What assessment he has made of the effect of his pension reform plans on the level of means testing in the benefits system. [79736]

The Minister of State, Department of Social Security (Mr. Stephen Timms)

The proposals in our pensions Green Paper are designed to ensure that an employee contributing for a full working life will receive a pension on retirement above the minimum income guarantee. We estimate that, by 2050, the number of those receiving the minimum income guarantee will be about one in four, or fewer. That proportion would have been one in three if the policies of the previous Government had been maintained.

Mr. Bercow

The Minister's reply to my question is lamentably inadequate. Why can he not accept the point—which is so transparently obvious that only an extraordinarily clever person could fail to see it—that, by penalising those who save and rewarding those who do not, his pension reform proposals will discourage thrift and encourage dependency?

Mr. Timms

Last week, some 1,400 pensioners in Buckingham who are in receipt of income support secured a substantial boost to their income of at least £160 a year as a result of the minimum income guarantee. The Chancellor has announced that there will be a further earnings-related increase in the minimum income guarantee next year. If the hon. Gentleman thinks his constituents should receive a lower income than the Government propose, I believe his constituents would like an explanation as to why that is so.

My right hon. Friend the Secretary of State referred to the issue of pensioners who have saved modest amounts. We are examining the saving limits for the minimum income guarantee—which were a feature of the previous Government's income support regime—and considering the option of a modest income disregard. We want to improve the incentives to save—the hon. Gentleman is correct to say that that is very important—which is why we are proceeding in this manner.

Mr. Peter L. Pike (Burnley)

I greatly welcome the Government's proposals on pension reform, which will remove many people from dependency on means-tested benefit. May we be assured that the Government will assist those who will continue to depend on means-tested benefit, both in the shorter and long term, by replacing the many application forms with just one? Many people applying for income support and benefits—such as council tax benefit and housing benefit—lose out because they do not understand the present complex system.

Mr. Timms

My hon. Friend makes an important point. We are considering several ways in which the Benefits Agency and local authorities, in particular, can work together. For example, a very successful pilot scheme in Lewisham allows people to claim local authority benefit, council tax benefit, housing benefit and Benefits Agency benefit simultaneously. My hon. Friend is correct to say that the present system is too confusing, and we aim to make it easier for people to access.

Mr. Iain Duncan Smith (Chingford and Woodford Green)

Is it not a fact that the Government have broken two clear pledges? First, they pledged to cut the cost of social security which has risen under their proposals and will continue to rise by more than £40 billion over the next three years. The Government's second pledge was to break the dependency culture and, although the Prime Minister referred to it endlessly, they have not delivered that promise. As my hon. Friend the Member for Buckingham (Mr. Bercow) said, the Government are driving more and more people on the margins away from an instinct to save and into dependency on the state. In so doing, the Government will increase the cost of social security. The people who will meet that cost are those on the margins who will pay more tax as a result. The Government have failed totally. Will they now apologise?

Mr. Timms

No. Ours is a record of success. We are spending significantly less on social security than the projections of the previous Government suggested. We have halved the rate of benefit growth—which is a significant achievement—and we are tackling the problem of dependency that we inherited from the previous Government. Most importantly, we must have an active welfare system that helps people instead of the passive system that we inherited, and the Welfare Reform and Pensions Bill will achieve that transformation. We are tackling the causes of poverty and dependency.