HC Deb 20 October 1999 vol 336 cc407-13

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Mr. Llew Smith (Blaenau Gwent)

On occasions, we rightly debate what we sometimes describe as minority issues. However, this debate concerns not only the plight of 10 million pensioners, but the problems that face all of us—problems facing Members of Parliament, but, more important, those facing people outside Parliament who have not been as fortunate in the wages and pensions that they receive and will receive.

Next spring, if the Government insist on linking pension increases to prices, a single pensioner will receive an additional 75p a week, bringing his pension up to £67.50, while a couple's pension will increase by £1.20 to £107.90 a week.

If we as a Government allow that to happen, we shall be in the obscene position of having Cabinet Ministers who earn in excess of £94,000 a year lecturing senior citizens on why a 75p rise is adequate, why £67.50 or £67.70 a week is an adequate sum on which to live. I do not know whether that is the third way, but I do know that it is wrong. I suspect that few Labour Members would be willing to defend it and I am sure that pensioners will be outraged. I do not believe that the Government would act like that and I am confident that the settlement will be more generous, but the question is how generous? The Government will have to build on the positive initiatives of the past couple of years, including the reduction in VAT on fuel and the additional winter fuel allowance.

Today's debate is about beginning to rectify a wrong, that wrong being pensioner poverty. One of my predecessors, Nye Bevan, was fond of reminding us that Socialism is the language of priorities". I believe that there are still some Cabinet Ministers who remain proud of their socialism; that being so, they have a duty and an obligation to prioritise the attack on pensioner poverty. Nye was also fond of the quote: This is my truth, now tell me yours. The truth of pensioner poverty is that, from April this year, means-tested income support for pensioners rose to £75 a week for a single pensioner and £116.60 for a couple; for a couple with a non-means-tested pension, the figure is £106.70, while a single pensioner receives £66.75 a week.

The Government claim that, by raising income support, they are helping the poorest pensioners, but that is not so, because although the poorest pensioners live below the level set for income support and are entitled to income support, for a variety of reasons they fail to claim it. It has been estimated that as many as 860,000 pensioners are in that position. That is not all: as many as 600,000 pensioners below income support level cannot claim, because their savings are taken into account, with the result that the guaranteed minimum does not apply to them.

Another truth is that the value of the basic pension has fallen dramatically as a proportion of average earnings. If pensions had continued to be linked to earnings, as they were until that link was broken in 1980, a single pensioner would now receive £95.05 a week. In addition, the Green Paper "A new contract for welfare: Partnership in Pensions" shows that the combined value of the basic state pension and the proposed second pension will reach only about 21 to 26 per cent. of the average male wage by the middle of the next century.

When the Labour Government introduced their pensions reforms in 1975, they included a compulsory second tier, the state earnings-related pension scheme, and guaranteed that pensions would rise in line with earnings or prices, whichever was the higher. The two pensions combined were to be equal to almost half the average earnings. That is far better than the proposals in the current pensions Green Paper, which shows that the Government are determined to privatise much of our pension provision, despite the scandal of private pension mis-selling in the 1980s. If anyone doubts that, they should take note of what my right hon. Friend the Secretary of State for Social Security said: if people stay in the state system, they will lose money".—[Official Report, 15 December 1998; Vol. 322, c. 771.] That might be an honest statement of intent, but it signals disaster in terms of providing for future pension needs.

It is possible that the Minister who winds up this debate will express sympathy with the demands of pensioner organisations and myself, but he will quickly follow that by saying that the money to meet those demands is not available—indeed, he might challenge me to state where the money is to be found and who is to pay. Anticipating such a challenge, I shall suggest how the bill for increased pensions can be paid.

I remind the House that immediately after world war two this country faced bankruptcy, yet we still managed to finance the transfer of millions of workers from military to civilian production; to introduce a massive housebuilding programme; to create the finest piece of socialist legislation this century—the jewel in our crown—which established the national health service; and to legislate for a major welfare reform programme. All that and much more was achieved by a country which faced bankruptcy. Now, 50 years later, we are one of the richest countries in the world, so our potential achievements are far greater.

The National Pensioners Convention, Age Concern and Help the Aged campaigned for a 1999 increase to £75 per week for all single pensioners and £116.60 for pensioner couples. That, they emphasised, would be the first step. I am sure that they will agree that those sums are still a pittance, well below the 50 per cent. of male average earnings which, it is normally argued, represents the poverty line.

The Government obviously support means-testing and would probably argue that it is wrong for the richer pensioners to receive as much from the state as poorer pensioners. In my opinion, the answer is not means-testing, but a progressive tax system that taxes at a higher rate those on high earnings when they are in employment. That is the way we should tackle inequality. I shall make some suggestions in that respect later in my speech. For now, I shall simply state my belief that the principle of universality in pension provision is just as important as in other public services.

The £75 non-means-tested pension, with proportionate increases for married couples, demanded for 1999 would have been a step forward, but only a single step. The other demand made by the National Pensioners Convention is that the Government should recognise the need to restore the link between wages and pensions—which, as we all know, was broken by the Tories in 1980—and begin to move toward setting pensions at the levels they would have been in 1999 had the link not been broken. That is obviously fair, given that national insurance contributions are linked to earnings.

The cost of meeting the £75 and £116.60 non-means-tested pension would be £4 billion—a tiny sum compared with the savings that have been made and the moneys now available. I shall suggest a few areas in which the money could be found to ensure that pensioners receive the income and the justice they deserve. Many of the figures I shall use were provided by the House of Commons Library statisticians. They emphasise that we can meet our manifesto commitment to ensure that pensioners share the benefits of increasing national prosperity. We have rightly placed considerable emphasis on fulfilling our manifesto commitments and I am sure that we do not want to break that one.

First, the Government Actuary estimates that there will be a surplus in the national insurance fund of approximately £5.9 billion in 1999–2000. Secondly, the breaking of the link between pensions and wages has resulted in massive savings. Answering a question in the other place in February 1998, Baroness Hollis said that those savings now totalled £10.1 billion a year. Since 1980, when the link was first broken, savings of about £85 billion have been made—at the expense of senior citizens.

Thirdly, about £4 billion is spent—and therefore wasted—each year on the administration of means-tested benefits. Fourthly, many people, including up to 860,000 pensioners, do not claim the benefits due to them. The Government recently announced that for the year 1997–98 the savings amounted to between £1.6 billion and £4.1 billion.

Fifthly, budget forecasts show that there is now a budget surplus of about £12 billion. That is almost certainly a conservative estimate, because we know that the economy has expanded far more rapidly since the forecasts were made, and the budget surplus for the years 2000–01 and 2001–02 is likely to be about £20 billion.

Sixthly, if we linked our defence expenditure to the average expenditure of other western European countries we could save about £4 billion.

Finally, the money could be found by changing tax rates. For example, if we taxed incomes over £100,000 at 50 per cent. we would raise an additional £2 billion, and increasing that rate to 60 per cent. would raise an additional £4 billion. It is important to apply the fine socialist principle of the redistribution of wealth by taxing the highest earners at a higher rate.

Redistribution is necessary because under the previous Government—unfortunately, this has continued under the present Government—the gap between the rich and the poor has widened, with the poorest 20 per cent. experiencing no change, or even a decrease, in their real income. Again, pensioners are a significant number within that group; again, they are losing out.

Those are just a few suggestions about where the money could come from to meet pensioners' demands. I emphasise that fact, because I am sure that other hon. Members, including my hon. Friends—and, who knows, perhaps even the Minister when he responds to the debate—may have other suggestions about how the money can be raised. I do not suggest that all the savings that I have mentioned should go to pensioners, although much of the money thus raised should go to them. We are no longer facing bankruptcy, as we were in 1945. We are an extremely rich country, awash with money that could meet the pensioners' demands.

Of course other issues, too, affect pensioners, and the Government must address those as well, including the costs involved when pensioners enter nursing homes. The Royal College of Nursing has called for nursing care to be free under the NHS to all who are assessed as needing it, wherever it is provided.

Finally, as I switch on my television every night I am confronted with news of the plight of the farming community, yet hardly any mention is ever made of the plight of the pensioners. There are far more pensioners than farmers—10 million of them. All of us, not only politicians but people in the media, too, should concentrate a little more time and effort on highlighting the plight of the pensioners.

I also saw on television that Prince Charles had come to the assistance of the pensioners. May I, through this debate, invite him to my constituency of Blaenau Gwent? Perhaps he could chat with some of the senior citizens organisations; I am sure that he would learn a lot about the plight of those 10 million pensioners.

Pensioners demand not the third way but justice. That is why we, the Labour Government, were rightly elected a while ago. For me, it is as simple as that, and I look forward to sitting on the Government Benches and sharing the joy as the Chancellor announces policies to ensure that justice is done for our pensioners.

1.15 pm
The Minister of State, Department of Social Security (Mr. Jeff Rooker)

I am glad that my hon. Friend the Member for Blaenau Gwent (Mr. Smith) secured this debate, and I congratulate him on raising the issue so early after the recess. I am also glad about what he said in his last sentence, because I, too, will be on the Government Benches when the Chancellor makes his Budget statement in due course, and many of the issues that my hon. Friend has mentioned are for my right hon. Friend to decide. Clearly, my hon. Friend will not expect me to make a Budget statement today. However, I will do my best to deal with some of the issues that he has raised.

I make no apology for taking as my theme one of the first points that my hon. Friend made. He was, I believe, paraphrasing Nye Bevan when he said that we should prioritise our attack on pensioner poverty. That is what the Government intend to do. We cannot have more than one priority. If we are to prioritise our attack on pensioner poverty, pensioners who are not in poverty will not be the priority. That is self-evident, but it has to be said.

My hon. Friend made some fair comparisons when he talked about the way in which things have developed in the past 20 years. Those are fair and appropriate points. Since 1979, pensioners' average incomes have grown, but the fact remains that inequality among pensioners has also grown. A significant number of people have been left outside the improvements in general living standards. It is because we are not prepared to leave things like that that we intend to prioritise the issue.

I shall try not to use too many statistics, because sometimes they get in the way of the argument. However, the incomes of the least-well-off 20 per cent. of single pensioners have risen by only 28 per cent. since 1979, whereas there has been an increase of 80 per cent. for the richest 20 per cent. of pensioners. One can see that there has been a widening gap.

In the poverty report that we published three weeks ago, entitled "Opportunity for all—tackling poverty and social exclusion", we said that there had been a widening gap of inequality in society. That includes the gap between the poorer and the better-off pensioners, and the main reasons for that gap are the tremendous increase—162 per cent.—in the real value of occupational pensions and the rise of more than 100 per cent. in investment incomes.

As a result, the proportion of pensioners dependent on means-tested benefits fell from 57 per cent. in 1979 to 40 per cent. in 1996–97. I shall return to the issue of take-up later because, as my hon. Friend said, it is crucial.

At the moment, 28 per cent. of recently retired pensioners are means-tested in the widest sense, in that they are on state benefits. Talk of certain types of welfare reform and help with savings is much too late for those people. We need two separate policy initiatives, one for today's pensioners and one for tomorrow's pensioners. Many of the issues that my hon. Friend raised relate to today's pensioners, who need help now to enjoy a decent retirement. The Government have taken action in many areas, and will continue to do so.

I claim no special rights in this respect, but I was a Member of Parliament between 1974 and 1979, and I know that the link with earnings rather than prices lasted for only four years; it was a very short period. Indeed, when I was first elected, pensions were not even uprated annually. I believe that there was one period of two or three years in which pensions did not change.

We made it clear in our manifesto commitments that the basic pension would remain, would not be means-tested and would be raised in conformity with the rise in prices. I am not picking and choosing among our manifesto commitments, but I cannot pre-empt what my right hon. Friend the Chancellor will say in his statement about social security benefits next year, because that statement has not yet been prepared. However, my right hon. Friend is required to take into account a range of factors, including recent changes in the retail prices index.

Mr. Smith

Pensions may be linked to prices in future. Is the Minister saying that the 75p increase for a single pensioner next spring will be adequate, taking into account the possible price rises by that time?

Mr. Rooker

No; I am saying that there is press speculation, and everyone knows the level of the retail prices index. A statement will be made in due course, as normal. We are not required to make a statement until the second or third week of November. I do not know when that statement will be made, but it will be made at the appropriate time and in good time. At this time, I shall not debate whether that increase should be one figure or another.

There are now just under 11 million pensioners. Over the next 30 years, that figure will increase to almost 15 million, and there will be fewer people of working age. We must consider those long-term issues. We must also provide a help package to today's poorest pensioners. My hon. Friend referred to the minimum income guarantee. No pensioner in any hon. Member's constituency, whether or not he or she is listening to this debate, should have a total weekly income of less than £75 a week, provided that they have no more than £3,000 in savings. However, we know from estimates that there are several hundred thousand pensioners who receive less than £75 a week, and we can correct that situation.

There are difficulties in the take-up of benefits. We have done more to solve those problems than previous Governments and have recently published research on that subject so that we can introduce a specific Government-led campaign to reach those pensioners. Ministers cannot simply say that the minimum income guarantee exists so no pensioner should be receiving less than £75 a week, without introducing an active, positive campaign to seek out every one of those poor pensioners, and that is what we intend to do. The basic figure for the minimum income guarantee is £75 a week, and the figure will be higher for older pensioners and those who are disabled. About 1.5 million pensioners have already benefited. Single pensioners have gained £160 a year in real terms.

The Chancellor has made it clear that the guarantee will be increased in line with earnings. That is important for today's pensioners, but it has consequences for our plans for stakeholder pensions and the state second pension, which we must tackle in due course. We are prioritising our attack on the poverty of today's pensioners. The guarantee means that pensioners over 80 will be more than £400 a year better off after two years of increases. No one can argue that we are not taking action.

We have just published a large programme of research into why some pensioners do not claim benefits. I regret, as do the Government, that we cannot run the campaign this autumn. It must take place early next year. It is not possible for the Benefits Agency to carry out that work before Christmas. We are preparing for that campaign and we shall ensure that it is effective. We must focus on building links with partner organisations, including those in the voluntary sector and local authorities. Pensioners who are identified as being potentially entitled to benefit will be issued with a specifically tailored leaflet that will provide information. There is no leaflet and no application form relating to the minimum income guarantee. The relevant application form is that for income support, which is 40 pages long.

It is not necessary for pensioners to visit a benefits office to claim the minimum income guarantee. If they do not want to go to the office, the information can be taken over the telephone or during a home visit. I encourage hon. Members to make that abundantly clear to pensioners in their constituency who argue that they do not want to go to the social. We shall explore ways to work on a permanent basis with our partners in local government to offer pensioners services relating to benefit entitlement.

My hon. Friend referred to the capital limits for the guarantee as a disincentive for saving, including saving for long-term care. We recognise that those limits can appear to be—and are—unfair to those who have saved. The present capital limits, which have been frozen for a considerable time, have been a disincentive and send the wrong message to the people who will be the next generation of pensioners. The message is that it does not pay to save, which is the exact opposite of the message that the Government seek to send out. We are therefore considering the rules on capital. They are not straightforward because there are different rules for different benefits. We shall make an announcement on that as soon as possible. I regret that I cannot give a date for that.

Our package for pensioners is not only for those who are the least well off. As my hon. Friend acknowledged in an earlier meeting, the £100 winter fuel payment will go to all pensioner households and is not means-tested. People do not need to apply for that payment, which will be paid to 10 million pensioners in 7 million households before Christmas. That is a substantial increase on last year's payment. Pensioners are not a homogenous group and one cannot treat them as such, but, by and large, that payment should mean that people should not be afraid to keep warm this winter.

My hon. Friend mentioned SERPS. Many people retiring today, who have been fortunate enough to have 20 years' work, will receive SERPS. SERPS is not to be sniffed at, despite the previous Government's attack on the system in 1986. The average male retiring today will receive £49.44 a week from SERPS, and women will receive between £22 and £24. That is a tribute to the planning of the previous Labour Government. Unfortunately, it is not possible to turn back the clock and reverse what happened in 1986. We are grappling with the major problem of the mis-selling of pensions and the changes to SERPS for widows, which the previous Government deliberately hid for over a decade. We must get to grips with that within the next three weeks because of the Welfare Reform and Pensions Bill, which is being considered in the other place. That legislation may entail the expenditure of billions of pounds.

We have made progress on the tax guarantee for pensioners. Under the guarantee announced by the Chancellor, two thirds of pensioners will not pay tax, and this year 200,000 fewer pensioners are paying tax than last year. My hon. Friend was generous enough to mention VAT on fuel. People tend to forget that 5 per cent. is the lowest that we can set VAT on fuel. We have reintroduced free eye tests for pensioners.

We are conducting a listening process across the country. Ministers are listening not to organisations but to ordinary people. I have participated in two such events. The first was in Liverpool last week, and the second was in Southampton on Monday. We are listening to people so that we can construct policies that are effective for today's pensioners and tomorrow's pensioners. We need to make two specific policy efforts because if we introduce our measures for tomorrow's pensioners using the normal methods of the House, they will not help today's pensioners. We are prioritising today's pensioners in our attack on pensioner poverty. That means that we have to target our resources and we make no apology for that. We shall be judged on what we have done for the poorest in our society, and we shall be judged at the next election, not halfway through the next century when our new pension programmes will have come on-stream.