Pensioner Poverty

HC Deb 21 April 1999 vol 329 cc823-44

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jamieson.]

9.35 am

Mr. Paul Burstow (Sutton and Cheam)

When I tell the House that Older people are more likely to be living in poverty, whether this is defined as below half-average income or the receipt of means-tested benefits, I am using not my words but those of Sir Donald Acheson in his report on inequalities in health, commissioned by the Department of Health and published last September.

In Britain today, one in four older people live on incomes that are less than half national average earnings after taking housing costs into account. However, it is often in the personal and the specific that we come to a better understanding of what such figures mean in practice. For some time, I have been a regular visitor to the Sutton Seniors Forum, which meets in my constituency every month. With a regular turnout of 160 people, it is one of the fastest growing of such forums anywhere in Greater London.

That interest prompted me to initiate this debate, but the final spur was a letter from a Cheam constituent which arrived in my constituency office last week. My constituent and his wife might not fall under the definition of poverty that I gave earlier, but the letter expressed sentiments that will find an echo in the constituencies of many hon. Members. Let me quote briefly from it: We are pensioners aged 65 and 67, we have the state pension, a very small private pension, and pensioners bonds that mature this year, making up our total income. He goes on to describe the impact of price increases, tax changes and interest rate cuts, which, in his words, must be affecting many pensioners like ourselves. We have some hard earned savings but the interest is peanuts, so to meet the shortfall in income we will have to use our savings, but they will run out one day, and then presumably we live off the state.

Many older people are in the same boat as my constituents—living on a fixed income whose value is steadily eroding, while outgoings are steadily rising. That is the lot of far too many older people. That is where the Acheson report comes in; its recommendations stated that older people need higher state benefits to improve their living standards and, therefore, their health. A decent income is the foundation on which everything else rests.

What is a decent income? Last year, Age Concern published a report entitled "Raising the Wage of Retirement", based on work by Professor Eric Midwinter. In his analysis, Professor Midwinter came up with a figure of £150 per week per person, but even that is modest in comparison to average earnings. At the time, only 27 per cent. of single pensioners had gross incomes at or above that level and only 28 per cent. of couples had at least £300 per week. The amount spent on the three basics that we all need—housing, fuel and food—takes a far greater share of poorer pensioners' outgoings. Figures suggest that a single pensioner who relies on state benefits spends more than half of his or her income on those basics, while a two person non-retired household spends only 37 per cent. When other hon. Members have the opportunity to speak, I hope that my hon. Friend the Member for Northavon (Mr. Webb) will be able to draw the House's attention to some figures on fuel poverty that he recently obtained. I could not believe the figures because their impact was staggering.

Professor Midwinter put the matter clearly. In the report, he stated: Many older people cannot live 'ordinary' lives, simply because they have insufficient incomes. They can stay alive, they can exist, but they are effectively excluded from much of what we would regard as normal life. What is to be done? The Government's answer is more means testing for more pensioners, but that will condemn hundreds of thousands of people to a life of poverty. Indeed, as many as 700,000 older people who are entitled to claim income support are losing out now—on average by £16 a week. How a means-tested benefit can be called a guarantee is beyond me.

What about pensioners who have incomes of less than £68 per week, but are disqualified from income support because they have savings of £8,000 or more? There are more than 600,000 such people caught in that savings trap. The Government's Green Paper, published last year, says a lot about income support, but very little about the basic state pension. However, the trends are clear; the steady erosion of the basic state pension began under the Conservative Government, when the link with earnings was replaced by a link with prices. That erosion is set to continue. In 1980, for every £100 of average income, the basic state pension amounted to £21; by 2010, it will have fallen to only £13.

The Government are often criticised for placing far too much weight and reliance on the work of focus groups and other research tools in determining their policy and direction. Would that it were so in the case of pensions. Last year, the Department of Social Security published research note No. 83 on pensions and retirement planning, which makes for interesting, but depressing, reading. That research found that most people aged under 40 believe that the state pension will disappear, and that older people do not see the state pension continuing for their children or for their children's children. However, almost no one—according to that research—wants the state to withdraw. People want the Government to stay in the pensions business for the long term. When it comes to providing a basic, bread-and-butter foundation pension, the research found that the fairness, universality and dependability of the state pension carried much weight with the vast majority of a representative sample of the population.

The research certainly bears out the views of many of the members of the seniors forum in my constituency and, I am sure, of a great many people in this country. A couple of quotes from the research document are especially relevant. It states: Most people feel that a state pensioner should not need to claim income support—indeed, they see this as paradoxical. It continues: There is also often disquiet about the fact that Income Support thresholds can leave those who have worked to provide for themselves with a small occupational or personal pension worse off than those who have made no provision at all. This appears unfair and demotivating. It certainly is. The Green Paper rightly raises the possibility of some changes being made to the thresholds. Will the Minister tell us when decisions will be taken and, more important, when those decisions will be announced to the House; and when changes that will benefit our constituents will be made?

I acknowledge that the Budget contains welcome improvements to the circumstances of pensioners, but one or two unfortunate, and perhaps unintended, signals were sent to older people. Take the new 10p tax rate: it delivered good headlines on Budget day, but the small print revealed that pensioners with small incomes from savings were not to benefit from the new tax rate. Almost 1 million older people will continue to pay 20p of every pound of savings income in tax. The savings to the Government derived from not extending the benefit of the new tax rate is only £55 million. I hope that the Minister will assure the House today that the Government remain open-minded and are willing to consider the representations from a wide range of organisations, not least Age Concern. I wonder how much, or how little, the Treasury consulted the Department of Social Security on the new 10p rate. What message should older people take from their exclusion from that tax rate?

Another issue that focus groups picked out was the belief that British pensioners do not fare well by European standards. That is hardly surprising, because it is true: average incomes of older people in the UK are lower as a proportion of average income of the total population than in most other European countries. Older people in this country are over-represented among the poorest 30 per cent. of the population compared with older people in other European countries.

The Budget can best be described as a bit of a curate's egg for pensioners—good in parts. The basic state pension remains, but the earnings link was broken by the Conservatives in 1980s. To restore that link fully and catch up from the time it was broken would cost £12 billion. My hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes) raised that matter on Monday during Social Security questions, and the Minister of State made it clear that restoring the earnings link for the basic state pension was not an option that the Government would consider. To be honest, I doubt that Liberal Democrat Front Benchers are likely to declare a commitment to such a policy either. Nevertheless, it is worth noting that, had the link been maintained, a single pensioner would today have a pension of £94.50 per week.

The minimum income guarantee is income support by another name—means-testing pure, but not simple. However, even after the downward revision of the figure, we know that 700,000 older people will not claim that to which they are entitled. The Government have initiated a series of pilots to try to boost take-up, and that is welcome. I hope the Minister will give the House an update on how the pilots are progressing—it would be interesting to know what take-up rate the Minister believes can be achieved. If take-up is low, the minimum income guarantee is no guarantee at all.

Mr. Ronnie Fearn (Southport)

Does my hon. Friend agree that a new category of poor pensioners consists of widows who thought that they had been left well-off by their husbands? The dividends they receive from invested income has now dwindled and, because of that, the consequences of any structural damage to their houses, such as a leaking roof, can be that they have no income at all. Does my hon. Friend agree that that category of pensioner has never been adequately addressed by the Government?

Mr. Burstow

My hon. Friend makes a fair point. Some people who are described as asset-rich but who live on low incomes are caught by the way in which the current income support system operates. I hope that the Government will consider how to address that problem; if they do not, they will condemn many of our constituents to lives of poverty and increasing desperation as their properties deteriorate around them.

From my experience of attending meetings of the seniors forum and other gatherings of older people in my constituency, I know that an issue that often provokes anger, outrage and a sense of frustration is the age addition at the age of 80—the extra 25p which appears in one's pension book on one's 80th birthday. It is not even sufficient to pay for a first-class stamp to stick on the letter that expresses one's opinion, whether positive or negative, and it has remained unchanged since 1971.

Evidence collected by my hon. Friend the Member for Northavon from written parliamentary answers makes it plain that extra financial help would be best targeted on older pensioners. The poorest pensioners are older pensioners, and women pensioners are even poorer than men. According to the most recent figures, for 1996–97, pensioner couples where the man was over 75 had a net income of £226 per week, compared with £259 net income for those under 75; and while a single male pensioner had an average net income of £141, a female pensioner had to live on £126. That is why I strongly support the development of a pensions policy that targets more help on older pensioners. Liberal Democrat policies to increase the state pension for the over-75s by £3 a week and for the over-80s by £5 a week represent a good step in the right direction. There is no danger of low take-up and no stigma, and administration costs would be low, but the measure would be effective and get help to far more people than the so-called minimum income guarantee.

When preparing for today's debate, I came across a very interesting speech made at a conference last September by Chris Daykin, the UK Government Actuary. He put the issues very clearly, saying: In the UK, where the level of flat-rate social security provision is relatively low, public opinion seems to favour raising the basic pension to a more realistic level, rather than relying on means-tested top-ups. He must have been reading the findings of the Government's focus group work, because the research demonstrates strong support across all age groups for a decent pension. The research found that working participants in the focus group were willing to pay more national insurance to pay for an increase in the basic state pension of at least £10 per week, and even as much as £30 per week, for a single pensioner.

The final issue I want to raise during this debate is that of long-term care. I realise that that is not one of the Minister's direct responsibilities, but I hope that he will be able to say a few words on the subject.

Rev. Martin Smyth (Belfast, South)

Before the hon. Gentleman goes on to the subject of long-term care, I should like to compliment him on his excellent research and tell him that I support the thrust of his argument. One constituent of mine has only a 40 per cent. pension, because he did a great deal of voluntary work overseas. He put some money aside in savings and does not qualify for income support, although he does receive housing benefit. However, his income has now fallen by 20 per cent. Are there not many people like my constituent in the country? Should not the Government reconsider the way in which they deal with pensioners who tried to provide for their retirement, but who are now penalised for having done so?

Mr. Burstow

The hon. Gentleman's constituent could represent many others who, for one reason or another, find themselves without a full basic state pension, despite the important contribution that they have made to society. I am sure that my hon. Friend the Member for Northavon has tabled written questions on that subject and obtained detailed statistics that I do not have at my fingertips this morning. I hope that the Minister will take account of the point raised by the hon. Member for Belfast, South (Rev. Martin Smyth) and ensure that it is considered during the consultation on the Green Paper.

Returning to the issue of long-term care, this week alone about 1,400 older people will be forced to sell their home to pay for their care, and the emotions that that provokes range from bewilderment to anger. There is a real sense of betrayal—those people have paid in throughout their lives, but when they need the state to support them, it is not there. The royal commission reported at the end of February and its report concludes that there is no demographic time bomb and that the costs of care are affordable. The royal commission also supported an approach to paying for long-term care that is based on some kind of risk pooling. The current situation whereby people must rely on income or savings is neither efficient nor fair owing to the risk and the sums involved. Finally, the royal commission believes that most efficient way of pooling risk is through general taxation, based on need rather than wealth.

The Government have said that they will debate the royal commission's recommendations, and I hope that the House will soon have an opportunity to consider the matter in greater depth. Time is pressing, and uncertainty about the future funding of long-term care must be ended quickly. Decisions need to be made. The absence of a clear timetable from the Government has fuelled widespread cynicism about Ministers' intentions in this area. How soon does the Minister expect action from the Government?

I am grateful for this opportunity to air several issues affecting my pensioner constituents. I hope that the Minister will say something about the 10p rate, the income support take-up pilots, the derisory 25p extra per week for the over-80s and the urgent need for a clear timetable for decisions on long-term care. I shall finish where I started by quoting from the letter of my constituent: We are not moaning money grabbing people that drive a large car, or travel the world two or three times a year. nor can we afford private health care. All we want is to be able to live the rest of our lives in some degree of comfort, not living off the state, not living off my children, and if we do need hospital treatment it will be available. That is a reasonable request and I hope that the Government will meet it.

9.51 am

Mr. Bill O'Brien (Normanton)

The House has listened carefully to the hon. Member for Sutton and Cheam (Mr. Burstow), whom I congratulate on introducing this subject this morning. However, the hon. Gentleman had difficulty in congratulating the Government on their achievements in assisting pensioners over the past two years. I think we should congratulate the Government on their strenuous efforts to help old and disabled people in receipt of pensions.

The Government's first act was to cut value added tax on domestic fuel bills. While that cut applied across the board, it was particularly important for people on pensions. The Government have also increased substantially the winter fuel allowance. Under the Tories, old people had to suffer seven days of temperatures below freezing before they qualified for £7 or £8 to assist with their fuel bills. A winter fuel payment of £100 is now paid to pensioners.

The Government have abolished charging for pensioner eye tests. The Liberals used to complain loudly about such charges, but the hon. Gentleman did not mention that reform in his speech. The Government have offered help to the poorest pensioners in the Budget by reinstating the link with earnings. That is a step in the right direction, and I know that the Government will continue down that road.

Mr. David Rendel (Newbury)

The hon. Gentleman has mentioned the Government's assistance to the poorest pensioners through continuation of the link with earnings. He is; presumably referring to the link with earnings through the minimum income guarantee. Is he aware—as my hon. Friend the Member for Sutton and Cheam (Mr. Burstow) made clear a moment ago—that the poorest pensioners do not receive income support, even though they are eligible for it? Therefore, they will not be helped by that link with earnings.

Mr. O'Brien

The Liberals will clearly not accept any move to strengthen benefits and to help eradicate pensioner poverty. The Government have introduced several measures that benefit the poorest pensioners. For example, the Government decided recently to compensate former mine workers whose health was broken by the conditions in which they worked underground. Some 100,000 retired mine workers—many of them my constituents—Will receive the largest compensation payment ever made in this country. The Government are keeping their promises, and these issues are worth mentioning in this debate.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

Will the hon. Gentleman confirm that that compensation was awarded after a long, hard-fought and ultimately successful High Court action?

Mr. O'Brien

Indeed, and I congratulate the mine workers who pioneered that claim. However, credit must go to the Government for not challenging that decision and for establishing the means of awarding that compensation.

There is still much to be done to improve the quality of life of old and disabled pensioners and to tackle pensioner poverty. After 18 years of Tory Government, which took so much away from our old people, pensioner poverty remains. I am pleased to have an opportunity this morning to express views on behalf of my constituents.

The Government must have regard to the gross inequality of the concessionary television licence scheme, which is part of the pensioner poverty issue. The concessionary television licence scheme required urgent review, and I am pleased that the Government have kept their promise and are in the process of that analysis. However, I plead with the Government to treat all old people equally under that scheme, as occurs with the winter fuel allowance. Many old people cannot afford BSkyB, so they miss out on those programmes that used to be broadcast on terrestrial television. Since BSkyB purchased the television rights of major sporting events, many of my constituents who are interested in sport have difficulty viewing those programmes. Television is the only means of entertainment for many old people, and I congratulate the Government on taking the initiative and deciding to review the concessionary television licence scheme. Let us get it right this time.

I draw the attention of the House to the previous Government's attitude towards local government. Under the Tories, many local government services upon which old people relied were withdrawn or charges for such services were levied or increased. As a result of the Tory Government's attacks and their application of capping and the rate support grant to local government expenditure, local government was forced to withdraw, or to levy charges for, services such as home help, assistance with bathing and personal hygiene, and help with gardening and decorating.

Bus deregulation has made it difficult for many old people to travel around their districts because of reduced services and the withdrawal of buses from certain routes. It has created pensioner poverty because pensioners must now rely on taxis. We all know that, when local government provided bus services, old people received more attention and were catered for better. Cross-subsidisation helped many of our constituents. I support the national bus pass scheme that the Deputy Prime Minister is considering, and I urge the Government to speed up its implementation. It will provide major assistance to our old people and help to reduce pensioner poverty further. That is another example of the Government's delivering on their promise to equalise public transport facilities for our old people.

It is the same with law and order. Every week, we hear about attacks on the elderly—many of which occur in their own homes. Our old people are very vulnerable to attacks because they cannot afford to install security lighting, extra-strong doors or window grills. It is those pensioners that we need to support, and I am pleased that the Government are helping people to be more secure in their own homes and providing better street lighting so that old people can feel more comfortable in their community. All those issues are part of pensioner poverty, but the Government are tackling them and making provisions to help elderly people.

As I said, there is still a great deal to be done to erase pensioner poverty. In 1980, the Tories cut the link between pensions and wages, and single pensioners suffered a loss of £22 a week. After the 17 years of Tory rule that followed the severing of that link, the reduced quality of life of many of our pensioners is apparent, and the Government must take action. I am pleased that they are reviewing future pension provision and keeping the promise that they made to the people. The hon. Member for Sutton and Cheam referred to the Green Paper on pension reform.

We must at all times remember that today's pensioners contributed a percentage of their earnings to their pension, but the pension does not relate to earnings. In comparison with today's rates of income from investment, the rate of return on those pension contributions is poor, particularly when we consider the number of years for which people paid into the pension scheme. Rich people tend to get more out of what they have paid in because they live longer than poor pensioners. With means-tested benefits, the pensioners who have saved more lose out.

The state pension is about 15 per cent. of average earnings, and that percentage is falling because wages are increasing. Between 5 and 6 per cent. of the UK's gross domestic product is paid in pensions. Pensioners in many European Union countries receive around 15 per cent. of GDP.

In the two years during which the Government have been in power, they have done more to eradicate pensioner poverty than the Tories did in 18 years. I plead with the House and the country never to let a Government come to power who will attack pensioners as the Tories did in their 18 years in power. The Government are on track to eradicate pensioner poverty, and I offer my congratulations to my hon. Friend the Minister of State and the rest of the Government on their work for pensioners over the past two years.

10.3 am

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing time for this debate. I am pleased to take part because the issue is important for many thousands of our constituents.

Poverty among the elderly is probably worse in Wales than anywhere else in the UK. In my constituency, 22 per cent. of the Meirionnydd section of the population are elderly, retired people. In the Conwy valley, that proportion is as high as 26 per cent. Thankfully, people are living to a greater age, so the proportion of elderly people is set to increase for the foreseeable future. Life expectancy for a woman in Wales is 79 and, for a man, 74. By 2016, there will be approximately 696,000 pensioners in Wales, and about 9 per cent. of the population will be over 75. That figure is 14 per cent. higher than that expected for England.

According to Shelter Cymru, at present, 60 per cent. of pensioners in Wales live on or below the poverty line. In Wales, a majority of pensioners rely on state pensions and other state benefits as their principal source of income. In 1997, 79,000 pensioners were receiving income support. It is estimated that a further 55,000 to 71,000 elderly people who are eligible for income support did not claim their benefits. Also in 1997, 13,700 disabled pensioners and 2,700 widows were in receipt of war pensions.

In that year, the average household in Wales spent £14 a week, or 7 per cent. of its income, on fuel, light and power. Single pensioners who are dependent on a state pension spent between £7.60 and £8.40 a week on lighting, fuel and power, while those not dependent on state pensions spent between £9.30 and £16.20 on those items.

The number of unfit homes occupied in Wales is about twice as high as that in England. Wales has the worst housing stock in western Europe if the age of the housing stock is used as an indicator. Over one third of the houses were constructed before 1919, and 52 per cent. of older people in Wales live in pre-1919 dwellings.

Since older people tend to be concerned about owing money and sliding into debt, I often come across people who choose to prioritise their spending as best they can, frequently choosing between eating and heating. Is that how we shall treat old people? They have, after all, given us a good start in life and a reasonable standard of living. We owe it to them to treat them better.

It is a long-standing indictment of successive Governments that so many hard-working, honest and decent people have been pushed below the poverty line. One of the reasons for that is that Baroness Thatcher's Administration decoupled state pensions from the average rise in wages and imposed the softer option of price inflation. That has meant that, in real terms, the value of retirement pensions has slipped back considerably over the past 15 years, and that is why there is such a shameful disparity between what pensioners receive and what they should receive. The situation appears far worse when one compares the UK's retirement pension with other European examples.

Pensioners in rural Wales often have to bear the brunt of petrol price rises. Although the Government say that they will introduce free or reduced price travel for pensioners, they will have to leave that measure to local authorities, which cannot, at present, make ends meet to pay for it. I should welcome a full and honest commitment to introduce centrally funded free transport for all pensioners.

Recently, two of my constituents, Mr. Arthur Holland Williams and Mrs. Jenny Hyde, both of Blaenau Ffestiniog—that should give Hansard something to think about—came to see me at my advice surgery. They were speaking out on behalf of many other pensioners in the constituency. Mr. Williams told me that the net effect of the Government's recent pension increases has given him an extra 38p a week. His story is similar to many thousands of others. We ought to remember, at a time when water rates in Wales are crippling, and every outgoing, such as electricity standing charges, fuel, transport and food, is racing upwards, that 38p a week does not even buy a cup of coffee.

A few weeks ago, a pensioner wrote an anonymous letter to me in which he told me off most severely for criticising the Budget. Perhaps when he realises that he is less than 40p a week better off, he will understand what I meant by saying that the Budget was really a poor one—all smoke and mirrors and a spin doctor's triumph.

The Budget is hardly as generous as it seems. The basic minimum income guarantee is extended only to those who claim income support. As I said, it is estimated that between 55,000 and 71,000 pensioners in Wales are entitled to income support but do not claim it. Furthermore, those people who are just above income support levels gain nothing from that new income. There is a 7 per cent. increase in council tax and an increase in the price of fuel and other utilities, so that increase has already been cancelled out. Age Concern, for example, says that, on balance, it would prefer a Budget that helps pensioners by making a generous increase in the basic state pension. That is the crux of the whole matter.

Mr. Williams and Mrs. Hyde, to whom I referred, gave me the following figures relating to a neighbour of theirs, whose outgoings I shall briefly detail. They are as follows: rent, £1,371.76 per annum; water rates, £54.25; council tax, £61.81; telephone, £240; electricity, £210; coal and gas, £523.08; clothing and other items, £260; food and cleaning materials, £1,300; television licence and piping service, £20.24, and household and personal insurance, £185. That is a grand total of £5,026.14. The state pension is £4,464.02, which means a deficit of £562.12. Even working out a very careful and meagre budget, and despite what one could hardly call high living, that person still has a shortfall. She hardly has a lavish life style. She must avoid buying any kind of luxury and is desperately worried about sliding into debt. Her health is being affected by the worry, and that example is typical of many cases that I have come across over the past few months.

The treatment of our pensioners is downright unfair, and that is something that I greatly resent. At a time when they should be enjoying life, having made a great contribution to our comforts, pensioners are desperately worried about making ends meet. On Monday, I met a constituent who was widowed in 1983. Her late husband was an acquaintance of mine. He was a hard-working man who was as conscientious as they come. Sadly—it was a great blow to everyone in the Bala area who knew him—he died of an industrial disease. His widow is being paid £66.75 a week in industrial benefits, which is the lowest rate of income support. Her only other means of support is a retirement pension of £38.77. She is in dire straits and unable to make ends meet. She pleads with the Government to do something.

I appreciate what the hon. Member for Normanton (Mr. O'Brien) said about the efforts being made and the pledges being given, but nothing much is changing on the ground. It is a grave injustice that the lady to whom I referred not only lost the companionship of her husband in 1983 but—after all that he and, indeed, she, suffered—is paid the lowest rate possible. I shall be writing to the Minister about the case to seek more and proper explanations and, better still, I hope, some changes.

The time has surely come to stop tinkering with pensions and to stop hiding behind the elusive £1 excess income, which deprives people of benefit. Surely the time has come to overhaul and simplify the system to ensure that pensions are substantially increased. I welcome some of the Government's proposals, but they are merely tinkering at the edges. We should be considering abolishing utility standing charges for the elderly and ensuring that pensioners' means are taken into account when calling for the payment of council tax and water charges. There are many more things that could be done to improve the quality of life of our elderly citizens. I am angry and ashamed, as I am sure many other hon. Members are, about a system which cuts taxes for the well-off but denies the elderly the decent standard of living that they richly deserve.

I conclude by quoting from a report entitled "The Financial Situations of Older People in Wales" by Age Concern Cymru, Help the Aged and the Welsh Consumer Council. The report concludes: It is said that a society is judged by the way it treats its young and its old: if this is the case then the treatment of older people in Wales and Britain as a whole reflects very badly on the British state and British society. While notions of poverty are subjective in many respects it is objectively evident that older people in Britain are the poor relations of the European Union—they deserve more. I fully agree with those words.

10.14 am

Mr. Eddie O'Hara (Knowsley, South)

I, too, congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this debate and providing hon. Members with an opportunity to draw attention to various matters of concern. We must be aware of the context in which this debate is taking place, and I join my hon. Friend the Member for Normanton (Mr. O'Brien) in congratulating the Government on doing more than any Government in recent history, and certainly more than the previous Government, to alleviate pensioner poverty. It is telling that there is not a single Conservative Back Bencher present for this debate.

I shall save time by not dwelling on the benefits that the Government have introduced, some of which have already been mentioned: the reduction of value-added tax on fuel, the universal winter fuel payments, the minimum income guarantee, tax allowances which take another 200,000 pensioners out of taxation—on top of the two thirds who already pay no tax—free eye tests, moves towards more and universal concessionary travel and many others which my hon. Friend the Minister will perhaps mention. Let us not forget that the Government have already made enormous advances in alleviating pensioner poverty, but I want to draw attention to some remaining concerns, make some appeals and perhaps offer advice to the Government as to how they might target future action further to alleviate pensioner poverty.

One concern is that the gap will continue to widen between pensioners and the rest of the population. It has already been pointed out that although the minimum income guarantee will now rise in line with earnings, for which we are grateful, the basic state pension will continue to be linked to inflation.

I am concerned to ensure that future pensioners should be allowed what I call, although it is not my own term, active ageing. That means being allowed to enjoy health and mobility and, indeed, in their pre-retirement years, employment which allows them to make provision for their old age. My hon. Friend the Member for Normanton mentioned access to information and entertainment in connection with the television licence.

The minimum income guarantee is welcome, but there are well-known concerns about it. It causes much confusion among older people, many of whom think that it is the same as the state pension, when of course it is not. More than 1 million pensioners do not get the minimum income guarantee—700,000 of them because, as the hon. Member for Sutton and Cheam said, they do not claim the income support to which they are entitled. A further 600,000 do not receive it because they have savings in excess of £3,000

In that connection, I remind my hon. Friend the Minister of an answer he gave on 13 April to a question from my right hon. Friend the Member for Birkenhead (Mr. Field). My right hon. Friend asked how much it would cost to buy an annuity now which would give an income equal to the state pension in 15 years' time, assuming that the basic pension is raised in line with prices, the minimum income guarantee is raised in line with earnings and so on. The answer was that it would cost £15,000 in 1999 earnings terms, or £19,000 in 1999 prices to purchase an annuity now which would provide an income equivalent to the difference between the basic State pension and the Minimum Income Guarantee".—[Official Report, 15 April 1999; Vol. 329, c. 151.] I remind my hon. Friend that 600,000 pensioners are not entitled to the MIG because they have savings in excess of only £3,000. I ask the Government to bear that in mind.

Age Concern conducted a survey of pensioners and health. There is certainly a perception among pensioners that there is discrimination on grounds of age in some parts of the national health service. Ill health is expensive and contributes to poverty.

My hon. Friend the Member for Normanton said much that needed to be said on the question of mobility and about the need to provide the transport for which increased concessionary travel will be available. I remind the Minister that many old people have large cars because of their disability—for example, they may need to transport a wheelchair—but they cannot claim the new concession on vehicle excise duty. Also, if they have large cars, they suffer from the increase in the price of petrol above the rate of inflation every year. There may be ways in which pensioners can be helped with that problem.

With regard to employment, I mentioned that if people lose their jobs in the years leading up to old age, they lose the opportunity to prepare for old age. The Government must intervene actively where necessary to help older people into employment. It is pleasing that the new deal is now taking account of people over 50.

I shall deal briefly with other concerns. Some older people will be taxed at 20 per cent., even though they fall within the 10 per cent. tax band, because the tax on savings will not be reduced. In addition, the Minister will be aware of the long, hard campaign that I and others have waged on the issue of reclaiming tax credit on dividends.

The abolition of the widows bereavement allowance particularly affects older widows. The abolition of tax relief on new home income plans reduces the opportunity for some older people to realise capital tied up in their houses to increase income.

I have an early-day motion on the Order Paper today drawing attention to the fiasco of the 1986 decision to reduce to 50 per cent. widows' and widowers' entitlement to inherit SERPS. That decision was not publicised by the Department, so between 1986 and 1999 pensioners have been planning for the future on the basis of wrong information. I appeal to the Government to sort out that mess as quickly as possible.

The overall picture shows some darts well aimed by the Government. Much help has been given to all pensioners, and much more immediate help to the most needy, but more needs to be done in future Budgets. Millions of responsible, deserving pensioners are penalised by an array of relatively small losses as a result of recent taxation measures.

The Chancellor has shown himself to be imaginative and generous in his targeting of fiscal Policies. I ask my hon. Friend the Minister to use his influence with the Chancellor so that in future Budgets my right hon. Friend will take corrective action where he has room for generosity. If that is done, I look forward to seeing more darts on the dart board, hitting the bull's-eye and the double top, bringing about the secure old age that current and future pensioners deserve. Let us not forget that all the benefits of prosperity that we enjoy have already been contributed to and paid for by current pensioners and pensioners soon to come.

10.24 am

Mr. Quentin Davies (Grantham and Stamford)

The hon. Member for Sutton Cheam(Mr. Burstow) is to be Warmly congratulated by the House on having seized the initiative and secured the debate on such a timely issue, which is of immediate concern to millions of our fellow citizens.

We have had an extremely interesting debate. The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) produced numerous facts and figures. It was useful for our debate to be informed by precise information and by the personal cases of the hon. Gentleman's constituents. our constituents' view of the world. The hon. Gentleman made an excellent speech.

We heard some extremely interesting remarks from the hon. Members for Normanton (Mr. O'Brien) and for Knowsley, South (Mr. O'Hara). There were the ritual genuflections to their own Front Bench, a few nasty things said about the Tories and a few quotes from the latest Millbank tower handout, but the broad thrust of their contributions was a damming critique of the Government's actions or inaction in respect of older and retired people: inaction in the case of concessionary television licences,buses—a matter that the hon. Member for Normanton was right —and age discrimination in varies cases cited by the hon. Member for Knowsley, South.

I was particularly struck by what the hon. Gentleman said about age discrimination in job market and in the national health service. I introduced a private Member's Bill on that subject in the previous Parliament. The Labour party made a number of commitments before the last election. During parlimentary questions last November, the Prime Minister made a commitment to me to legislate on the matter, but, so far, nothing has been done. The indictment of the Government's inaction is well deserved.

The hon. Members for Normanton and for Knowsley, South were even more critical of the Government's failure to restore the earning link, which was the thrust of the Labour party's propaganda in opposition, and of the Government's great extension of means-testing.

There was a good joke this morning from the hon. Member for Sutton and Cheam. I am sure that it was a deliberate joke; it was certainly very amusing. The hon. Gentleman asked whether the Treasury had consulted the Department of Social Security about the Budget. I have been in my present job for only a few months, but that is long enough to realise that the Treasury does not consult the Department of Social Security about anything—the Treasury gives orders to the Department.

Policy on matters such as pensions and welfare is made entirely in the Treasury. The Benefits Agency hands out the money in the country, and the only role of the Minister of State and his ministerial colleagues is to defend the indefensible in the House and elsewhere. That is an unenviable role and some of us might consider it unedifying as well, but that is the role in which they have allowed themselves to be cast. Let us have no doubt about who is calling the shots on policy.

There is profound concern among retired people and those approaching retirement for all the reasons that have emerged during the debate. People are wondering what is going on. The answer is that the Government are engaged in making colossal fools of older and retired people. Before the last election and for many years previously, all the propaganda suggested that Labour would restore the earnings link. I had that thrown at me at public meetings and on the doorstep during the election campaign. Millions of people voted for the Labour party in that expectation and the Government have defaulted on it.

The Labour party has always shared with us scepticism about means testing. During my time in the House, I have heard eloquent and persuasive speeches from Labour Members about the unfairness of means testing and the damage that it does to a sense of social responsibility and to the incentive to save. Perhaps the Government had a secret agenda, but no one was prepared for what has happened. There has been the most colossal extension of means testing since the 1930s. The worst aspect has been the extension of that to pensioners.

Most extraordinarily, the Chancellor declared as recently as 1993 at the Labour party conference: I want the next Labour Government to achieve what in 50 years of the Welfare State has never been achieved. The end of the means test for our elderly people". In fact, as I said, he has brought about the most colossal increase in means testing for elderly people since the 1930s, of which the Government should be thoroughly ashamed.

Mr. Rendel

Will the hon. Gentleman therefore confirm that the Conservatives will make it their official policy to agree with the Liberal Democrats that an extra £3 should be given to over 75-year-olds and an extra £5 to over 80-year-olds, which will reduce means-testing?

Mr. Davies

I entirely agree with the hon. Gentleman that, where the country can afford it, it is absolutely right to increase the state retirement pension, for which people have paid through their national insurance contributions, and not to discriminate particularly invidiously against people with small savings or to extend means testing. That has been quite the wrong approach. We shall propose our own policies for the next election—and for the next Government—which will be diametrically opposed to the direction in which the Labour party has been taking us over the past two years. I give that assurance unambiguously and clearly.

As if that were not enough, the Government have used the tax system to discriminate against retired people and those with small savings in a way that would have been

quite unimaginable—indeed was so until it happened. The Government have found a way of forcing people who are below the income tax threshold on their aggregate income to pay 20 per cent. tax on their small savings income. That particularly impacts on small savers and retired people.

I understand that, as a result of the Government's vicious decision to force people whose total income is under the threshold that Parliament has fixed—below which people should not pay any tax on their income—to pay tax, 300,000 non-taxpaying pensioners and a further 330,000 non-taxpayers will lose an average of £75 a year each, and 80,000 pensioners will lose more than £100 a year, and they can ill afford that. That is utterly unforgivable. The Government have cynically done that—perhaps in the belief that retired and older people are so stupid that they will not realise what is going on. If that is what the Government think, they have another think coming.

With a great many bells and whistles, it was announced in the Budget that we would have a new lop starting rate of income tax, but we were not told that it would not apply to savings income. So, those who have retired, and therefore do not have earned income—they may have very modest savings—will not benefit from the lop rate. That is vicious discrimination against savers in general, and retired people in particular. If the Government do not think that the country will notice, they are in for a very nasty shock.

This is a Government who are all positive rhetoric and no positive substance. The real substance, such as it is, has been thoroughly negative—certainly for the retired and elderly sections of our population over the past two years. I dread to think where retired people, particularly those on modest incomes who have small savings, will find themselves at the end of four years if we continue as we have over the past two.

10.34 am

Mr. John Cryer (Hornchurch)

I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this important debate. I wonder where all the Tory Members are. The words of the hon. Member for Grantham and Stamford (Mr. Davies) ring a little hollow, given the empty Benches behind him.

All hon. Members have referred to their constituencies in this debate. Both my constituency of Hornchurch and the borough of Havering have a very high proportion of pensioners. Like other hon. Members, I see pensioners in my surgeries and meet them in the street, and they write to me and call me, so I feel able to represent their views quite effectively.

The biggest complaint that I receive undoubtedly concerns the reliance on means testing. Without any shadow of doubt, the Government have moved in the right direction. The Budget was marginally redistributive. The cut in value added tax on fuel was important, although, personally, I would have abolished it completely. Free eye tests are also important, as is the minimum income guarantee.

However, the number of people who are dependent on means-tested benefits, particularly income support, is generally rising. In my constituency, the number of pensioners in privately rented accommodation who are dependent on income support is 500. The number who are council tenants is nearly 2,000. That is unacceptably high.

I know that the Government and my hon. Friend the Minister have often said that their principal aim on pensions is to remove reliance on means testing. I read the pensions Green Paper when it was released a short time ago, and have some specific questions about exactly how the state second pension—the replacement for the state earnings-related pension scheme—and the stakeholder pension will work.

The Green Paper claims that, as a result of the state second pension, there will be enormous increases over SERPS for low-income earners when they retire, but does not explain exactly how that will work. I would be interested in knowing the exact mechanism for guaranteeing such increases. Where will the savings and investment come from? What kind of figures are we talking about? How many pensioners will the state second pension remove from reliance on income support? I would be very interested in that, given the constituency that I represent. What time scale will apply to the state second pension? How soon will pensioners start to benefit from it?

I worked in the pensions industry during the 1980s as an underwriter, and saw the mis-selling. "Mis-selling" is just a euphemism; what took place was fraud—with the previous Government's blessing, by the way. Having seen that, I cannot envisage how the figures will stack up in the stakeholder pension scheme. There will be no compulsion, or even pressure, to ensure that employers contribute or help to set up the schemes, and that is the vital missing part. If the schemes are to be successful, there must ultimately be some compulsion on employers to take part and contribute to them.

I do not know how low-income workers will be able to contribute sufficiently to stakeholder schemes to give them a decent income when they retire. Such schemes generally concern people not on very low incomes, but on relatively low incomes. What actuarial analysis lies behind the potential stakeholder schemes?

I should like the Government to move toward the type of nationwide occupational schemes in Australia, which force employers to contribute and to take part in setting up the schemes. Even if we moved towards that, the problems on retirement of the very poorest pensioners and wage-earners would not be solved. I have always believed that the answer for the poorest pensioners and lowest wage-earners is ultimately the national state pension, to which we all contribute throughout our lives. That must be the saviour for the poorest pensioners. As many hon. Members have pointed out, if the increases in the state pension had been in line with earnings, and not just prices, since the link with earnings was abolished in 1981, the lowest pension would be about £90, rather than the current pretty miserly one.

As I said, the biggest complaint made by pensioners who come to my surgery is about means-testing. There is an almost visceral dislike of means testing among pensioners, which is entirely understandable. The Government have launched many schemes to find out why pensioners are not taking up their entitlement to income support. About 700,000 pensioners refuse to do so.

I can answer those questions for the Government, without using any schemes. The last thing that people want—certainly those in my constituency who might have worked on the docks all their lives, been through the war and perhaps brought up a large family in difficult circumstances—is to have to go down to the Department of Social Security office to be patronised by someone half their age, patted on the head and told that they can have something to which they should be entitled in the first place. That leads to bitter, deep and long-standing resentment among pensioners.

We should be moving towards universal benefits that are available to everybody and, effectively, abolition of means testing. I would like greater emphasis to be placed on that.

10.40 am

Mr. Steve Webb (Northavon)

It is a pleasure to take part in a debate on this important subject. My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) has campaigned very hard on this issue, and I congratulate him on securing the debate. It is also a pleasure to speak after the hon. Member for Hornchurch (Mr. Cryer), who raised issues relating to employers being required to put money into stakeholder schemes and made some telling points. I hope that the Minister will respond to them. There may be less pension provision, not more, if employers start opting out of occupational schemes, into which they are putting money, and run stakeholder schemes instead.

In the few minutes available to me, I shall address primarily the future of pensioner poverty—where are we headed? However, a comment made by my hon. Friend the Member for Sutton and Cheam prompts me to remark briefly on where we are now. I asked the Secretary of State for the Environment, Transport and the Regions to say what proportion of pensioners in different age bands—on his definition, not on mine—were living in fuel poverty, which is spending more than 10 per cent. of income on fuel. The figures for younger pensioners were frightening enough, but the figure for households headed by a pensioner aged over 80 was 80 per cent.

That figure for such households was reached through the Department of the Environment, Transport and the Regions' definition of fuel poverty and its own figures. It shows the problem that we face and highlights our particular concern about older pensioners. However, I want principally to address our tomorrow—indeed, all our tomorrows, in 2020 or 2050. Where are we headed?

The Government have said that we start from a situation in which one pensioner in four is dependent not on means-tested benefits, but on income support alone. Hundreds of thousands more receive rent rebates, council tax benefit and so on, but 1.5 million pensioners out of about 6 million pensioner benefit units receive income support. The Government tell us that, on unchanged policies, that figure will be one in three in 2050, but the pensioner population will rise over that period and that figure will increase to 3.5 million pensioners, compared with 1.5 million today.

The Government also say that we need not worry because, if the Green Paper proposals are implemented, the figure will be one in four—but one in four of a bigger pensioner population, or 2.5 million pensioners. The Government say that, if they introduce their policies—leaving aside the possibility that lots more people will suddenly save, and assuming that a mass savings habit does not suddenly start—the figure will still be one in four, but 2.5 million pensioners will be receiving income support instead of 1.5 million. That figure also leaves aside all the other means-tested benefits.

If I were about to write a pensions policy for the next 50 years, I would not consider an extra million pensioners receiving income support in 50 years, when the whole blasted scheme was working, to be a triumph. I would consider that a failure. The Government say in response, "But we are trying to encourage more people to save for their old age, through stakeholder schemes." I am sure that stakeholder schemes will overcome some of the barriers that people face under the personal pension regime, but there is real danger that, because of the Government's commitment to link the minimum income guarantee to earnings—I reiterate my support for that—the yawning gap between the basic pension and the poverty line will discourage people from saving.

It has been suggested that an annuity of between £15,000 and £20,000 would fill the current gap between the basic pension and the income support line, but that gap will grow quickly—not in line with prices or earnings, but faster than both. The gap between an item linked to prices and an item indexed to earnings rises faster than both; the simple arithmetic tells us that. The annuity that people would need to buy to fill that gap—the stakeholder pension pot—would rise exponentially, which would discourage people from saving.

I believe that the Minister genuinely wants to do something about pensioner poverty and that he cares about poor pensioners. For those who receive it, the minimum income guarantee will be of great value. A crucial issue, therefore, is non-take-up. In its election manifesto, the Labour party used the available figures and said that 1 million pensioners did not claim their income support. It has since emerged that there was a statistical blunder: that was not the Government's fault; they did not know that the figure was wrong. We hear that the figure is between 400,000 and 700,000; I ask the Minister to go back to his civil servants and demand proper figures now.

I have asked for details of those 400,000 to 700,000 pensioners: for example, how many of them are older pensioners? That is germane to assessing the validity of our strategy for helping older pensioners. I am told that I will have to wait for those details until May, when we will finally get some take-up figures. They will be three or four years out of date.

I used to be involved in constructing such statistics. One error made those figures wrong: the Government missed out private widows' pensions when they were working out people's incomes. I do not see why it should take four or five months to put that error right. Parliament is being denied proper information on a key issue for evaluating the Government's pensions policy.

The Government are relying heavily on means testing. Even if the figure is one in four in 2050, it will represent 2.5 million people; if it is one in five, it will represent 2 million people. That is a serious amount of means testing. A crucial aspect of assessing that policy is whether take-up is a big problem. It is shocking that we do not have proper information. I hope that the Minister will go back to his Department and get us proper information.

I want to raise a final point about the future of pensioner poverty. Let us assume that Government policy is introduced; although a mass savings habit does not

develop, there is no mass desertion from saving and we end up with a figure of one in four, which is an average over all pensioners, from those aged 65 to those in the oldest age groups. What will be the proportion for the over-80s or the over-85s? It will not be one in four because we know that the newly retired are, on average, much better off than the very elderly. The figure may be one in four for all pensioners, but perhaps one in six or one in seven for the newly retired. What would it be for the very elderly—one in two?

If half the people in our country aged over 80 end up on means-tested benefits after 50 years of a bright, shiny new pensions policy, what will have been the point of it? By then, people aged 80 may still have 10 years of life left, on average. If the Government will not put pensions up across the board, which would be expensive, can we not do something to make sure that those people at least do not have to fill in means-tested benefit forms every year, with us hoping that they will claim, when they reach extreme old age?

The Minister is a reasonable man, and I shall sit down now to allow him as much time as possible to respond.

10.47 am

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

I too congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on his success in securing the debate. I was pleased to hear that he is a regular attender at meetings of the older people's forum his constituency. I commend that to the House; it is important that Members listen to what older people say. I will say a little more about how the Government are listening to older people and I hope that the hon. Gentleman's practice will be taken up much more widely.

The complete absence of Conservative Back-Bench Members is striking and telling, as a number of contributors have said. This is the International Year of Older People, whose slogan is "A Society for All Ages", and it is appropriate that we are having this important debate at a relatively early stage of it.

There have been big changes in the structure of the economy during the past 50 years. Traditional industries have declined and working patterns are very different. During that period of immense social change, spending on social security has moved inexorably upwards. Despite the increase in spending, poverty and inequality have increased—in particular, for pensioners. The average pensioner income has risen sharply over the past 20 years, due largely to the success of occupational pensions, which I welcome, but a large number of people have not shared in the benefits of that rise.

The best-off 20 per cent. of pensioners have an income that is, in real terms, 70 per cent. higher than in 1979. The figure for the least well off 20 per cent. is only 30 per cent. There has been a huge rise in inequality among pensioners, and hon. Members were right to draw attention to that. The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) provided some interesting figures on the position in Wales.

Addressing that inequality requires fundamental reform of the pensions system. Our pensions Green Paper, which was published before Christmas, sets out our strategy for reform. It is based on the principle that everybody who can save for their retirement has a responsibility to do so. In turn, the Government have a responsibility to provide security in retirement for those who cannot save enough, and to regulate the pensions system effectively.

We want to put pensions on a sound footing, so that every pensioner is assured of a decent income in retirement and people can rely on secure and effective private pensions. We want to deliver security for today's pensioners and peace of mind for tomorrow's.

I want to focus most of my remarks on today's pensioners, but my hon. Friend the Member for Hornchurch (Mr. Cryer) and the hon. Member for Northavon (Mr. Webb) raised important questions about the future of pension provision, so I shall respond briefly to those points. Our proposals are based on four interlinked pillars.

First, we had a manifesto commitment to uprate the basic state pension annually at least in line with prices, and we have honoured that commitment as we have all our others. The basic state pension will not be means-tested and will not be privatised. Secondly, the minimum income guarantee, delivered through income support, will provide an income floor below which no pensioner without savings will fall, and we aim to uprate the level of that guarantee over time in line with earnings. Thirdly, the state second pension will ensure that everybody who has worked and contributed throughout their lives—allowing, for the first time, for periods out of work caring for a disabled person or bringing up children below the age of five, and for periods out of work through long-term disability—will have an income on retirement above the minimum income guarantee.

My hon. Friend the Member for Hornchurch asked for more details about how that will work. Under the state second pension, anyone who has earned in lifetime earnings less than £9,000 a year will be treated as if they had earned £9,000. In addition, the accrual rate for someone at the £9,000 point will be twice as much as it would have been under the state earnings-related pension scheme. I hope that it is clear from that explanation that, for people earning above the lower earnings limit and below £9,000, and for those earning rather more than £9,000, the state second pension represents a significant improvement on what is available under SERPS. It should come into effect in 2002 and, to gain the whole benefit of that, a person would have to have spent his whole working life in the state second pension. As with everything to do with pensions, it will take a long time for the full benefit to work through. I think that my hon. Friend will recognise that we are proposing a substantial improvement.

The fourth pillar is stakeholder pension schemes, which will provide people for whom no suitable funded scheme is now available with good value, reliable, funded pensions, which will benefit from higher levels of national insurance rebate than are currently available. There are large numbers of such people. In answer to my hon. Friend the Member for Hornchurch, let me say that employers will be required to give access to a stakeholder scheme under our proposals. We will not require employers to contribute to them, although some are considering doing so.

That approach has been widely welcomed, and we are now analysing more than 550 responses to the Green Paper. However, the central point in this debate is that there are millions of existing pensioners for whom those reforms will come too late and who need help now to enjoy their retirement. We are determined to do more to help those who need it most. We have taken action to help all pensioners while giving priority to the least well-off, who are the central concern in this debate.

We have announced a £2 billion a year package for today's pensioners. From this month, income support rates for eligible pensioners will increase by three times the rate of inflation to give a minimum income guarantee for pensioners who are entitled to income support of £75 a week for a single person and £116 for a couple. As a result, pensioners receiving income support will be at least £160 better off in real terms in the coming year, and 65,000 pensioners not previously entitled to claim income support because they have been just above the threshold—a point made by the hon. Member for Meirionnydd Nant Conwy—will for the first time be able to do so and enjoy the benefits of the higher level of minimum income guarantee.

In April next year, the guarantee will be increased in line with earnings. That will help to ensure that even the least well-off pensioners are able to share in rising national prosperity. From that month, a further 20,000 will become entitled and so benefit from the guarantee.

The guarantee is being set at a higher level for older pensioners. The hon. Member for Sutton and Cheam referred to the needs of older pensioners. Given the earnings-related rise, from this month, the rate will be £125.30 for couples one or both of whom is over 80, and we expect that rate to increase by another £5 per week next April. So, next year, an older pensioner couple on income support is likely to be more than £600 a year better off in real terms over this two-year period. Those are substantial gains for the least well-off pensioners—those on income support. We are proposing a series of well-aimed darts, to use the term of my hon. Friend the Member for Knowsley, South (Mr. O'Hara).

Mr. Burstow

Hon. Members have drawn attention to the fact that 700,000 pensioners are not taking up their entitlement to income support. I hope that the Minister will say something about the Government's pilot projects, because that is an important matter. Those well-aimed darts are not hitting their targets, because those pensioners are not getting the benefits.

Mr. Timms

One and a half million pensioner households certainly are receiving the benefits. However, the hon. Gentleman is right: this is an important issue. Last year, we commissioned new research into the reasons why up to 700,000 pensioners are not submitting claims. We set up pilot projects to examine new ways of identifying potential recipients and how best to encourage them to claim. We are now examining the results as they emerge, and we are planning our next steps. I hope to be able to tell the House more about that in due course.

However, we are left with the problem of pensioners with low incomes and modest savings that are just above the savings limits for income support. They see little benefit from the effort that they have made to save for their old age, and we do not think that that is right. People should feel that it is worth while to save, and we want them to do so. That is why we said in the Green Paper that we want to examine ways in which we can better reward those who have saved for their retirement. We have consulted on that and we are analysing the responses. We shall announce our proposals for change later in this Parliament.

The Budget made substantial changes to improve the tax position of pensioners. The income tax personal allowance for pensioners aged between 65 and 74 rose by £310, which is £130 more than the normal indexation. Other changes were made for people aged over 75. As a result of those substantial changes, 200,000 pensioners will be taken out of income tax. Two thirds of pensioners will not pay any tax at all.

The hon. Member for Sutton and Cheam asked me to talk about long-term care. We are addressing that complex issue. The report of the royal commission was published at the beginning of March, and we are considering it carefully. Yesterday, I spoke to one of the commissioners, Claire Rayner. I am unable to say when that response will be published, but we are considering the matter urgently.

The inter-ministerial group on older people, which I chair, has commissioned wide-ranging research on older people's attitudes and aspirations. It has focused on active ageing as one of the major themes—to pick up the point made by my hon. Friend the Member for Knowsley, South. We are also focusing on the importance of consultation. During the year, we are having a series of "listening to older people" events, jointly organised by non-governmental organisations, to support the United Nations International Year of Older Persons. There will be about 10 events, and all 15 of my fellow Ministers on the inter-ministerial group will be taking part in one or more of them. We want to know what older people want from the Government.

Mr. Deputy Speaker (Mr. Michael Lord)

Order. We must now move to the next debate.