AGE ADDITIONS

HC Deb 03 April 2000 vol 347 cc670-709

'For section 79 of the Social Security Contributions and Benefits Act 1992 there shall be substituted—

1. "79.—(1) A person who is above the specified age and who is entitled to a retirement pension of any category shall be entitled to an increase of the pension, to be known as 'age addition'.
2. (2) Where a person is in receipt of a pension or allowance payable by the Secretary of State by virtue of any enactment or instrument (whether passed or made before or after this Act) and—
   1. (a) he is above the specified age; and
   2. (b) he fulfils such other conditions as may be prescribed,
   he shall be entitled to an increase of that pension or allowance, also known as age addition.
3. (3) In this section 'specified age' means an age specified by the Secretary of State in regulations.
4. (4) Age addition shall be payable for the life of the person entitled, at weekly rates to be determined by the Secretary of State in regulations.
5. (5) Regulations under this section may—
   1. (a) specify one or more specified ages at which age addition shall be payable;
   2. (b) provide for different rates of age addition to be payable for persons of different specified ages.".'—[Mr. Burstow.]

Brought up, and read the First time.

Mr. Paul Burstow (Sutton and Cheam)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker

With this it will be convenient to discuss new clause 36—Annual increase in basic retirement pension— '.—The Secretary of State shall each year increase the basic retirement pension by not less than an amount equivalent to—

1. (a) the percentage increase in the general level of earnings during the preceding year; or
2. (b) the percentage increase in the retail prices index during the preceding year,

whichever is the greater.'.

Mr. Burstow

We believe that the quickest and most cost-effective way of getting help to many of our poorest pensioners is via the basic state pension. We hope, though, that the campaign that was finally launched by the Government last week, amid much publicity, to promote the take-up of the minimum income guarantee is a success. Who would not want to see between 530,000 and 870,000 of our fellow citizens who are entitled to the minimum income guarantee getting it? The sad fact is that those pensioners and many others are living below the poverty line. We must make sure that we get help to them in the most effective way.

We know from the Government's research that the success of the campaign that they have just launched is finely balanced. It will be tough for the Government to deliver a substantial increase in the uptake. A report published by the Government last year, entitled "Helping Pensioners—A Contextual Survey of Income Support Pilots", found that four out of 10 pensioners said that they would definitely claim as a result of the campaign. That is great.

We welcome the fact that four out of 10 pensioners would claim the minimum income guarantee. Another 18 per cent. said that they would probably claim. Most important and disturbing, however, was the fact that a further 36 per cent. said that they would not claim. They cited a number of reasons why they would not claim. The research reports a feeling of stigma, uncertainty and unwillingness to deal with benefits offices. The report details in considerable depth pensioners' concerns and the reasons why they were not keen on going down the means-testing route.

We know from parliamentary questions and statements from Ministers that the Government accept that the largest group of pensioners missing out on the minimum income guarantee are older women. Given that the evidence about income distribution on the basis of age suggests that the oldest pensioners are our poorest pensioners, why do we not consider ways of ensuring that they do not have to fill in any forms to get additional income into their purses?

We believe that a cost-effective and stigma-free way of doing that would be to lift the basic state pension through further age additions. A precedent already exists. There is an age addition to the basic state pension when the pensioner reaches the age of 80. It was set at 25p in 1971, and has been frozen at 25p ever since.

Hon. Members in all parts of the House know from meetings with pensioner groups in their constituencies that that 25p is a source of anger and frustration. Why on earth has it not been increased in all this time? There is no good answer to that. It is simply wrong that there has been no increase. If the sum had been indexed to earnings, it would now stand at £3.70 per week. More should have been done to uprate that figure, year on year. In our view, the age addition at the age of 80 should be set at £5.

We believe that a new age addition should be introduced into the basic state pension at the age of 75. That would mirror the Government's recognition of the need for age additions. The only problem is that the Government have decided to attach age additions to the minimum income guarantee. Attaching an age addition to the basic state pension would provide a cast-iron guarantee that the money would find its way into pensioners' pockets. That is why our new clause proposes age additions to the basic state pension.

Mr. Bercow

I am grateful to the hon. Gentleman for giving way. Given his specific recommendations, why do he and his hon. Friends propose—rather feebly, if I may say so—in new clause 8 that in future the detail should be dealt with via regulation?

Mr. Burstow

Unless the hon. Gentleman wants us to have to move amendments to primary legislation every year to uprate the figures, it would be nonsense for Parliament to deal with the matter in that way. Our proposal signals the need for a proper mechanism for annual upratings. Given the hon. Gentleman's interest, I am sure that he will support the new clause now that I have explained that important feature.

New clause 36, tabled by other hon. Members, gives us an opportunity to debate the future of the basic state pension. Our view is that age additions which targeted guaranteed additional income on older pensioners would ensure that the basic state pension had a future purpose, which it otherwise will not have because successive Governments have allowed its value to be eroded against earnings.

Whereas in 1980 the basic state pension was worth 22.6 per cent. of average earnings, by 2050 its value will be about 6 per cent. of average earnings. Age additions are undoubtedly the way forward, but we should take the opportunity of today's debate to signal the importance that the House attaches to the basic state pension.

A rally was organised a few weeks ago in London by the Greater London Forum for the Elderly to express its concern. People carried coffins to symbolise the demise of the basic state pension. That is a measure of what pensioners feel has happened to the basic state pension. The earnings link was broken by the previous Government, and has not been restored by the present Government. Many, many pensioners think that the earnings link should have been re-established.

We know that at the general election, the Government included in their manifesto a commitment to establish a different sort of link, based on growth in the economy. Since the general election, that has not happened. This year there was an indexation on the basis of prices, which has given pensioners only an additional 75p in their basic state pension in the coming year.

Mr. Christopher Leslie (Shipley)

Did the Liberal Democrat manifesto commit the party to re-establishing the link with earnings?

Mr. Burstow

The hon. Gentleman is not asking an awkward question; he is asking one that I am happy to answer. We did not commit ourselves to re-establishing the link. [Interruption.] If the hon. Gentleman will allow me to continue, I can explain that we continually review the matter, as do the Government. However, the Government have departed from their manifesto commitment and left our poorest pensioners with even less than they would receive if the Government had honoured the commitment to link the basic state pension to growth in the economy. No one can claim that 75p is a proper reflection of the growth in the economy.

Mr. David Winnick (Walsall, North)

The hon. Gentleman is courteous in allowing hon. Members to intervene in his speech. He made it clear that the Labour manifesto stated that the state pension should be uprated only in relation to prices. Does he accept that our manifesto did not mention winter heating additions or free television licences, which we have provided? Some of us have campaigned for that for years. It is a tremendous benefit to pensioners. Does the hon. Gentleman accept that?

Mr. Burstow

I congratulate the hon. Gentleman on his campaigning and on the success that he believes that he has secured. However, we believe that age additions constitute the most cost-effective way of helping our poorest pensioners. We have said that time and again, and our view was reflected in the amendment that I tabled initially. It is the most effective way of using the basic state pension.

We have lately been worried about some of the comments that several Ministers have made from the Dispatch Box about channelling additional resources through the basic pension. They suggest that, because the benefit is taxable, it is somehow inappropriate to use it to target our poorest pensioners. Again, that is nonsense. Taxing the basic pension allows the richest of our pensioners, who are in the minority, to perceive that redistribution is taking place. What is wrong with that? Targeting money through the basic state pension is sensible.

The incomes of the richest fifth of pensioners rose by £87 a week between 1979 and 1997, while those of our poorest pensioners increased by only £10 in the same period: 18 years of Conservative rule and only £10 in the pockets of the poorest pensioners to show for it.

New clause 36 provides a useful opportunity to send a clear signal that the House believes that the basic state pension has a role as a key foundation stone of support for our poorest pensioners. That role should continue well into this century and beyond. The basic state pension should not leave pensioners in poverty, but should provide a reasonable standard of living.

Dr. Lynne Jones (Birmingham, Selly Oak)

I support new clause 8, which the hon. Member for Sutton and Cheam (Mr. Burstow) moved, and new clause 36, which would uprate the basic state pension. I am a little shocked to be called, because I anticipated that my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) would be called first, to speak to new clause 36.

Our manifesto commitment gives the reason for the importance of uprating the basic state pension: the state retirement pension should remain the foundation of pensions provision. As I said at Question Time, in 1980 the basic state pension was approximately 23 per cent. of average earnings; the figure is now much lower. It is anticipated that by the time the Government's reforms are in place, the state pension will be worth about only 14 per cent. of average earnings. How can we have a foundation that is being washed away year after year? The Government's recent publication "The Changing Welfare State" provides a graph, which shows that in 2051 the basic state pension will be worth the equivalent of £25 a week at the rate of average earnings in 1999. How can the state pension thus be a foundation?

6.15 pm

The Government propose to introduce a state second pension, which will supplement the basic state pension. It is being promoted as a replacement for the state earnings-related pension scheme which will redistribute money to those on lower earnings and is therefore more generous than SERPS. That is true, but the combination of the state second pension and the erosion of the basic state pension will result in the pension constituting approximately 21 per cent. of average earnings in 2051, compared with a bigger proportion—23 per cent.—in 1980. The state second pension is a substitute not for SERPS but for uprating the basic state pension properly.

The Government are trying to tackle means-tested benefits; they are introducing the state second pension to try to ensure that people retire on incomes that are above means-tested benefits, but it will not work. The Government's figures in "Opportunity for All" show that after a lifetime of working, those who earn £300 a week will get only £16 a week more than they would receive if they relied on income support. A woman with caring responsibilities would receive £9 a week more than she would get if she relied on income support.

We are creating disincentives to saving for retirement and taking out additional pensions. Parliamentary questions have shown that in 12 years and nine years respectively, the two individuals I cited would be back on means-tested benefit after a lifetime of work. We must tackle the nonsensical position whereby a means-tested benefit is far higher than the basic state pension. The proposal to uprate the retirement pension in line with earnings will ensure that the difference will not become even greater and that the disincentive will not increase.

The Government say that additional increases to the minimum income guarantee target resources at the poorest. However, that is not the case. The poorest do not apply for the minimum income guarantee. I am pleased that the Government have a campaign to increase take-up, and I hope that it is successful. However, there is a marked reluctance among pensioners to apply for what they perceive to be a handout. People understand that they contribute to the basic state pension through a lifetime's work, or caring responsibilities such as bringing up children or looking after disabled people. They should be entitled to a reasonable state retirement pension at the end of that period.

We should not forget that although the money will go to those who are better off, the pension also targets those who are only slightly above the level of income support. Those people feel most aggrieved that, after accumulating modest savings, and perhaps having an occupational or private pension, they are only a few pounds a week better off than they would be through relying on income support. They feel that they would have been better off spending the money when they were younger.

The Government have made welcome moves to increase the savings that can be built up before benefit starts to be lost and I know that they are considering tax credits, but whatever they do there will still be a cut-off point at which people will feel that they might as well not have bothered to put money aside for their retirement. Having such a disincentive in the system affects people's behaviour, and many of those on modest incomes would be better advised not to save for their retirement and not to build up pensions, but to make sure that they spend their money on a well-built, well-insulated home and other possessions that they will not have to buy in their retirement.

If people's behaviour is affected in that way, more will rely on means-tested benefits. Although the Government say that they want to reduce such reliance, they already predict that the number of people on them will increase. That was the conclusion of the pension provision group—an independent body set up by them to advise on their pensions policy—and its submission to the Green Paper predicted that although the reforms would reduce the number on means-tested benefit to a lower level than if there were no change, more pensioners would need means-tested benefit than at present. It is predicted that one in four will rely on income support, as compared with one in five today, and that number could increase if there is a further disincentive to save and to opt for additional pension provision.

During their years in government, the Tories learned that the more they tried to target benefit on the poorest, the more the social security budget grew. Our new clause aims to restore the incentive to top up the basic state provision with private provision and, in the long run, that will be the most effective and efficient way to spend public money. I beg to move new clause 36.

Mr. John McDonnell (Hayes and Harlington)

With some surprise, I, too, beg to move new clause 36, which stands in my name and in the names of many others, some of whom are on Council of Europe duty and send their apologies.

Deputy Speaker (Mr. Michael J. Martin)

Order. To assist the hon. Gentleman and the hon. Member for Birmingham, Selly Oak (Dr. Jones), the lead new clause has been moved and he will be able to move his new clause formally when we reach the appropriate stage.

Mr. McDonnell

I am grateful for your advice, Mr. Deputy Speaker. I ask for a separate vote on our new clause, with your permission, because this is a matter of considerable concern in the House and in our communities. My hon. Friend the Member for Islington, North (Mr. Corbyn) has sought to legislate on it on 12 occasions and, more recently, my hon. Friend the Member for Blaenau Gwent (Mr. Smith) initiated an Adjournment debate on it.

Our new clause is simple and straightforward: it would restore the link between increases in pensions and increases in earnings that was established by a Labour Government in 1975. There had been years in which there was no increase in pensions at all, but we secured not only increases that protected pensioners against the erosion of their pension by inflation, but the earnings link. We wanted to ensure that pensioners shared in the wealth of our community as it developed and thought that the best indicator was average earnings. We decided that, if everyone's income increased, so should that of pensioners. I would rather establish a link between pensions and the biggest bonus in the City, but that is too moderate.

The link was broken in 1980 by the then Prime Minister, Mrs. Thatcher, and there was an angry response from the community and especially from Labour Members of Parliament. We gave a commitment to address the issue. As a result of the link being broken so many years ago, Age Concern and others calculate that pensioners have lost £30 a week and, as my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) said, the pension represents only between about 21 and 25 per cent. of average earnings, which is significantly less than the pensions paid by many of our European partners.

Pensioners feel that they were robbed by the break of the link because for nearly 20 years Labour Members told them that they had been robbed. There was a £2 increase in pensions before the 1992 general election and a Labour spokesperson stood up in the House to call it miserly… not even enough for a pound of sausages and a couple of loaves, while workers on average pay are receiving increases of more than £20 a week and some executives increases of more than £2,000 a week. I do not want to embarrass hon. Members—that is not my purpose—but another hon. Member said that we cannot get a decent link for pensioners …—[Official Report, 21 October 1991; Vol. 196, c. 645–651.] He wanted it to be restored and to be based on the pay of Members of Parliament. I do not want to embarrass the Minister of State, Department of Social Security, my right hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker).

Mr. Llew Smith (Blaenau Gwent)

Some days back, Lord Falconer said that he could live on current pension levels. I have to admit that I could not. Could my hon. Friend?

Mr. McDonnell

Not only could I not live on the current pension, but I find it difficult to understand how many of my constituents do so and stave off poverty. I see that week by week in my constituency. The poorest groups in our society are those with young children and people with disabilities. We are trying to tackle the problems; this is a life-and-limb issue not only for the poor, but for the elderly. How many pensioners will die of hypothermia this year because they cannot afford decent heating for their homes?

Ms Diane Abbott (Hackney, North and Stoke Newington)

Is the right hon. Member for Birmingham, Perry Barr, to whom my hon. Friend referred, the same Member who sits on the Front Bench and speaks for the Government on pensions policy?

Mr. McDonnell

As I said, it is not my duty to embarrass Members.

The inflation link this year will produce a 75p a week increase, but for most of my constituents that will be wiped out by council tax increases of 7 per cent. and above. As a result, they will be steeped in poverty and will sink further into it.

The Government's record on pensions in all other respects is superb and I pay tribute to Ministers for what they have done. The fuel allowance has been increased from £100 to £150, which is excellent. We promised to reduce value added tax on fuel and we have completed that. We have restored eye tests, given free television licences to over-75s and increased capital sums for those who have saved. We are introducing concessionary fare schemes across the country and have offered free entry to museums and other facilities. That represents a superb record and I cannot understand why the Government are so resolute in refusing to budge on the basic pension demand. There is anger among pensioners at the 75p increase and, unfortunately, it is not assuaged by those other benefits.

Mr. Paul Tyler (North Cornwall)

Does the hon. Gentleman accept that the poorest pensioners are particularly angry because income tax cuts are helping the better off, most of whom pay no income tax at all? Combined with council tax increases and a small increase in the basic pension, that is particularly frustrating.

Mr. McDonnell

A number of factors increase anger among pensioners, particularly poor pensioners. They feel that there is unfairness in society that goes against all that we stand for in the House and in the country. I draw on the Prime Minister's speech about British values of fairness and tackling hardship together. The Government's stance runs against all that we are saying about those values.

We have had this debate time and again, and Ministers have reiterated their argument that the Government is targeting resources to help the poorest pensioners through the minimum pensions guarantee. The Government are trying to direct resources at the poorest pensioners, but as my hon. Friend the Member for Selly Oak said, many pensioners continue to face the prospect of having to rely on a means test to gain access to the basic minimal level of financial support.

6.30 pm

Forty per cent. of pensioners rely on means-tested benefits. As my hon. Friend the Member for Blaenau Gwent (Mr. Smith) said in an earlier debate, it is estimated that more than 750,000 people do not claim those benefits. Why? Because it is difficult to claim, although I welcome and support the Government's initiative on take-up. Such campaigns will be run in my constituency and elsewhere to ensure that people get what they need.

People do not claim their entitlement partly because of the stigma attached to means-tested benefits. Anyone who has experienced a means test, or has a family folk memory of the means test from days gone by, realises the implications. People suffer a loss of dignity—the indignity of having to go through a means test.

We should recognise the distinction between pension and benefit. A pension is paid in return for either a financial contribution or a service contribution, as with a war pension. A benefit retains the link with beneficence and paternalistic donations. People do not receive it as of right, but are subject to a test. I thought that my party stood for universal benefits as a right.

We should consider an across-the-board increase in benefits. It is argued that they would also go to the richest pensioners, but there is a simple solution to that—tax them. The question is simple: do we target or do we tax? I believe that universal benefits are more efficient for the reasons that have been identified.

Mr. Alan Simpson (Nottingham, South)

It is not just a choice between tax or benefits. It would be perfectly compatible with Labour manifesto commitments to alter the thresholds so that the better-off would not be the beneficiaries, but the poorest off would not lose out. That is what many members of the Labour party and the general public believed we were saying in our pledges that referred to increasing pensioners' share of the nation's wealth.

Mr. McDonnell

Exactly. The mechanism that we have identified is relatively simple. If we distribute the benefit, we maximise take-up. If we feel that that is expensive, we take it back through redistribution. Targeting puts the poorest pensioners at risk, because they may not receive the benefit that they desperately need. Taxation makes certain that resources reach those who need it, and those who can pay back do so.

It is curious that the Government have accepted universality on the fuel allowance and free television licences, and they have even linked the minimum income guarantee to increases in earnings.

Mr. Llew Smith

And the NHS.

Mr. McDonnell

As my hon. Friend says, the NHS is a universal benefit for us all. As we have identified in previous debates, the cost of administering a universal benefit is much cheaper than the heavy burden of means-tested benefits.

Mr. Jeremy Corbyn (Islington, North)

Is my hon. Friend aware that the cost of administering the state pension is about 1.5 per cent. of its value, whereas the cost of administrating most means-tested benefits is between 20 and 25 per cent. of their value? Can it not be argued that universal benefits save a great deal of money?

Mr. McDonnell

I think that the expression is QED.

There has been a debate in the House about the political implications of the Government's actions for voters who put us in power with such a large majority. In an earlier debate, some people said that pensioners could not vote for anyone else. No, they cannot. They would not vote for the Tories, and I am not sure who else they could vote for, but they could stay at home. They may not deliver our leaflets for us, and they may not vote. They feel a sense of betrayal—I do not like using that phrase, but it has been used enough times in the debates that we have had with pensioners groups in our community. Pensioners always looked to the Labour party as the champion of their cause.

There are 11 million pensioners in this country. They consider that they created the welfare state from which my generation benefited, and which gave us life chances that we have used to provide for our families and to give them a good quality of life. We are now denying many of those pensioners that quality of life in their retirement.

We should refer to the Prime Minister's sense of fairness. He talked about fairness in tackling poverty and reward for hard work. We should honour the undertakings that we gave to successive generations of people who voted Labour because they thought that we were their champions. I gave an undertaking to the pensioners in my community that I would do all I could to lift the basic pension at every opportunity. I want to fulfil that commitment today, so I shall press new clause 36 to a Division, and I shall vote for it.

Mr. Robertson

I want to make a brief contribution to this debate. I suspect that, at the end of it, I may be persuaded to abstain, but that does not mean that I do not have strong feelings on this subject.

At the general election, I went to house after house and met many pensioners who fell into one of two categories: those who said that they did not have enough money to live on—they perhaps did not bother or were not persuaded to claim the other benefits available to them; and those who said that, after years of saving and paying into occupational schemes, they did not feel better off.

My concern is that the minimum income guarantee offered by the Government will not satisfy either of those groups. It will not satisfy many people in the first group, because they will not be persuaded to claim what they regard as a state handout. For many years of their working lives they have paid into the system and are entitled to claim from the state, but they do not see it that way. At a time when the Government Actuary accepts that there is a surplus in the national insurance fund that is likely to grow, it seems mean-minded of the Government not to offer help to those people.

The minimum income guarantee will not help pensioners who have been able to put money away for their retirement. They may have saved money or joined occupational schemes. They will continue to be aggrieved because they will think that they should be better off, but they will not feel better off for having saved because they will be no better off than the pensioners who claim every state benefit to which they are entitled. I do not think that the Government's actions will help either of those categories of pensioners.

I would like more help to be given to pensioners who are retired now. I draw a distinction between those who are retired now and those who will retire in the future. If I am fortunate enough to catch your eye on the next group of amendments, Mr. Deputy Speaker, I shall explain my thinking on that in greater depth. I recognise the enormous projected future costs of the state pension scheme. According to the figures from the House of Commons Library, serious problems will befall us if we do not address that issue.

I want a complete reform of the pensions system for pensioners who are yet to retire. There is no excuse for people of my age who are on a reasonable income not to make provision for their future. However, those who are retired now deserve a better deal from a Government who claim that the economy is in such robust shape. People in manufacturing industry may disagree with and object to that statement, but having looked at the figures and questioned the Secretary of State in the Select Committee, I believe that people who are retired now could get a better deal from the Government.

I shall probably abstain on these new clauses, because they are open-ended and commit Governments to expenditure that I do not believe is sustainable in the longer term. I want reform of the pension system for those who are not yet retired.

Mr. Burstow

The hon. Gentleman has told the House that he will abstain on both new clauses because they have open-ended commitments. However, his hon. Friend the Member for Buckingham (Mr. Bercow) pointed out that no specific figures are given. I answered him by making the simple point that that will be dealt with through regulation, so the House will be able to decide on the levels year on year. Surely the hon. Member for Tewkesbury (Mr. Robertson) could support such a motion to put down a marker.

Mr. Robertson

I admire the hon. Gentleman both for tabling the new clause and for that intervention, but, if I may say so, the new clause demonstrates rather muddled thinking and a typical Liberal Democrat wish to have it both ways. At the time of the general election, no commitment was made to do other than raise the basic state pension by more than the retail prices index. That is what the Government have done, and that is what has led to all the objections from pensioners. That is how the 75p increase came about.

New clause 8 is open-ended. New clause 36 is similarly open-ended, in that it ties the Government down to a certain level of spending. Those who study the figures will become very alarmed by them.

I have some sympathy with what is being proposed. I could have refrained from speaking in the debate—[Interruption.] Liberal Democrat Front Benchers chuckle, but it would have been easy for me to say nothing. I believe that there should be a better deal for pensioners who have already retired, but I also believe that we should think much more deeply about how pensioners of the future should be catered for. The state pension requires a great deal of radical thought, and it should not be a matter of party politics. It is too important for that.

Mr. Tony Benn (Chesterfield)

I rise to support my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell), and to look back a bit at the history of the issue. This is the centenary of the foundation of the Labour party. When Keir Hardie arrived, he demanded unemployment pay, and they laughed at him. "Work or maintenance," he said. "Wholly unrealistic: open-ended commitment," he might have heard in response.

I campaigned in 1945, when Labour won the election. The first thing that the Government did was raise the widow's pension from 10 shillings to 26 shillings a week, when we were absolutely bankrupt. They did not have the money, but they had the will. What is lacking now is not the money, but the will. Later, the Cabinet—I am proud to have been a member of that Cabinet, in the days of what is now dismissed and rubbished as old Labour—linked pensions with earnings. That constituted a recognition of the point made by my hon. Friend the Member for Hayes and Harlington that those who contribute to the increased wealth that we now enjoy are entitled to some part of that wealth. After all, pensioners looked after their children when they were young; it is not abnormal to expect the new generation to help the old.

People forget that we are talking about a national insurance scheme. Let us take an example: there must be such cases. A man starts work at the age of 16, works for 50 years, never marries, is never unemployed, is never ill, and dies the day after his 65th birthday. He has poured money into the national insurance scheme, and has received nothing from it. What frightens me about the Government's argument is the use of the word "target". It is an aggressive word, which is normally used in wartime: people say that they will target this and target that. Moreover, once people introduce the idea of targeting, they are really saying that the whole principle of the welfare state must be rewritten.

Why should the wealthy be able to call on the police when they can afford to pay for their own policing? Why should the wealthy be allowed to use the national health service, when they can afford to pay for their own health care? Why should the wealthy be allowed to call in the fire brigade, rather than returning to the old system of insurance? Under that system, those who were insured had a plate put on their houses and, if a house was on fire, the insurance company would put the fire out. It is the principles underlying the Government's argument that I find difficult.

It would not take long for the Government to say that they were targeting the poorest patients. That would mean saying, "If you need health care, we will help you, but you will be means-tested before you are given your operation." People would be means-tested before they went to school. They are already means-tested before they go to college. It is a question of will and philosophy. We are told every day that the Government's values are the same as the historic Labour values, but I am afraid that they are not.

I have been a pensioner for 10 years today. The pensioners who come to my surgery are really angry. Let us make no mistake about this: people who have voted Labour all their lives say, "No one takes any notice of us. We cannot withdraw our labour, because we have already retired." They welcome the free television licences, the extra heating allowances and all the other little things, but some older pensioners remember the means test in the 1930s, when a man would be given some money only if he sold the piano. Not many people will remember that, but we hear stories about it.

6.45 pm

The whole idea of targeting is wrong. The pension is a benefit as of right: people pay for it while they are working. Moreover, as my hon. Friend the Member for Islington, North (Mr. Corbyn) said, the administrative costs are almost nothing, because everyone receives the pension—which also means that people do not experience the humiliation of having to expose their finances to some probing officer.

Income support, or what used to be called national assistance, is a safety net, which is entirely different from a benefit as of right. We do not want old people to feel that they are on probation. Pensioners have said to me, "I feel as if I have committed an offence. I must open my books before I can have enough to live on."

I urge the Government to think again. I know that there is a shortage of money, but I think that a shortage of will is the real problem. The health service was set up when we were bankrupt, and there were no charges for that. I am the last Member who sat in this place when Aneurin Bevan was Minister for Health and I heard his resignation speech when prescription charges were introduced. If we are not careful, in the name of modernisation, we shall erode what we are all about—the idea of a national insurance scheme with universal benefits.

A progressive income tax is about asking richer people to pay more to keep that scheme going. I am in favour of asking such people to pay more. I do not see why we should ring-fence the rich, and say that, whatever the Labour Government do, they will never ask the rich to pay more, because they will not increase income tax—but, of course, poorer people will be targeted and supervised and watched.

I merely want to convey some of the disappointment, disillusionment, anger and frustration that is felt about the way in which this has been handled. The Government would be ill-advised to disregard my argument, because it is one that will also have to be tackled on polling day.

Mr. Frank Field (Birkenhead)

I want to echo what hon. Members on both sides of the House have said about the view of many pensioners on our record so far.

Labour Members have rightly congratulated the Government on much of what they have done, which has significantly increased the income of some pensioners. The winter fuel allowance has been increased to £150 a week: that is a significant increase. [HON. MEMBERS: "£150 a year."] I mean £150 a year, but I hope that, after a few more Parliaments, what I said will come about. We also welcome the free television licences. However, it would be wrong for Ministers to assume that those two significant moves have reduced the genuine sense of grievance felt by many pensioners, a number of whom are extremely poor.

Although the minimum income guarantee may help many pensioners, it will not help all of them, and it has led to a number of grievances—as my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) pointed out—on the part of people who have saved, and have managed to save only small amounts or could acquire only small additions to their company pension schemes. Those people are disqualified from the minimum income guarantee, although their income is less than that of others who qualify for income support and receive the guarantee.

I received two letters recently—neither from a constituent. One came from a pensioner, who, as a widow, went back to work and acquired a small pension. She is £7 a week worse off than her neighbour, who did not acquire a smaller pension but who qualifies for the minimum income guarantee. She does not begrudge her neighbour that—her neighbour might well have saved a little, as the letter suggests, but did not do so—but she does not feel that she should be penalised.

The second letter was from a pensioner in the east end. As she, too, receives a small work pension, she is not eligible for the minimum income guarantee. She is paying full rent and full council tax. After paying those two bills, she is left with £14.50 a week to pay for everything else. We would be foolish to think that there is not—to put it most gently—real concern about the issue not only among voters generally, but among some pensioners.

As Dr. Johnson—like my right hon. Friend the Member for Chesterfield (Mr. Benn), although in different words—said: when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully. The Dissolution of Parliament is the hanging process in which we have to go back and face our voters. At this point in the Parliament, there is much in their pension's record for which we can give the Government credit, but I hope that we will not be fighting the next general election only on that record. The two new clauses in this group have been tabled to expand on that record.

The Government always have to think about how £1 billion should be spent. As my hon. Friend the Member for Selly Oak said, generally speaking, and for obvious reasons, the older the pensioner, the poorer he or she will be. If they have savings, they will have had to eat into them to ensure their own survival. Older pensioners have had less opportunity to make higher wages and to save greater sums, and they have had less chance of joining a company pension scheme. Therefore, although some older pensioners are—thank goodness—well placed, generally speaking, older pensioners are the poorest.

When the debate ends, I hope that many hon. Members will vote for new clause 8. I say that not because I disagree with the sentiments that have been expressed— or that we shall hear expressed later—on the general need for an increase in the state pension, but because I believe that the Government could most effectively use any given sum by significantly increasing the state pension for the oldest pensioners. However, as Labour Members have already said, it will not be adequate for us to go into a general election with only one single such action. We require a medley of actions to improve significantly the position of those pensioners who have not been able to include themselves in the bracket of those who are "well placed".

For 20 years, when Labour was in opposition, I did not agree that we should increase the state pension in line with earnings. I am not likely now, when Labour is in government, to have a Pauline conversion on the matter—although I appreciate the strength of feeling on the issue of those who have always believed that the pension should be increased in line with earnings. However, I hope that Ministers, especially those who are arguing that we should do even more for pensioners, will use this debate to strengthen their hand—so that when we are "hanged in a fortnight" at the hands of the electorate, our pensions record is even better than it is now.

The standard of living of some of our constituents is disgraceful, and any human being in our community should not have to survive in that way. The issue is urgent, and it will be pressed in the Lobby. However, when we press it, we shall do so to strengthen the hand of Ministers who are arguing not that all is fine on the western front, but that much more needs to be done.

Mr. Corbyn

A few weeks ago, at Congress house, in Great Russell street, the hon. Member for Sutton and Cheam (Mr. Burstow) and I addressed a conference of the Greater London Forum for the Elderly. It was a marvellous occasion, which was attended by more than 300 delegates from every single one of the London boroughs, who were unanimously agreed on three matters. The first was that, this week, far from a celebration, there will be deep anger at the size of the increase in the state pension. This week, as pensioners go into post offices to collect their pension and discover a 75p increase in it, they will be angry.

Secondly, they were all angry because they realised that, from this month, across the country, many local authorities will be increasing council tax and charges for day centre use, home helps and home carers, meals on wheels, adult education and many other services. Those increased charges will wipe out the 75p increase many times over. Therefore, even with the increase, many pensioners will be worse off.

Thirdly, the delegates were angry that—as many hon. Members have said today—many older pensioners are significantly worse off than other pensioners.

The Minister will recall that, earlier in this Parliament, he gave various detailed parliamentary answers to the hon. Member for Northavon (Mr. Webb) which outlined the poverty levels among older pensioners, particularly older women pensioners—who have not had the opportunity to build up occupational pensions; who, in many cases, were too old to become involved in the state earnings-related pension scheme; and who are desperately poor. Age additions are insufficient to meet those pensioners' needs. Although the free television licence and winter heating allowance are welcome, they are simply insufficient. The poverty in which older pensioners have to live is absolutely disgraceful. Women tend to live longer than men, and they tend to be poorer, colder and hungrier for it. It is simply immoral in our society to ignore the plight of many older pensioners.

Older pensioners, unfortunately, are not the ones who are able to go along to pensioner forum meetings and demonstrations. I do not denigrate those who attend those events, but simply recognise that problems of age, infirmity and mobility make it impossible for many older pensioners to come along to express their point of view.

It is good that the House is debating this issue this week. Nevertheless, we should also recall the history of the issue. First, I pay tribute to the speech made by my right hon. Friend the Member for Chesterfield (Mr. Benn). I also wish him a very happy birthday; I hope that there are dozens more of them. I regret only that he will not have dozens more birthdays as a Member of Parliament. However, I am sure that his voice will be heard from outside the House, and that it will be like a breath of fresh air coming through an open widow.

In 1980, the then incoming Conservative Government destroyed what had been achieved by the 1974 to 1979 Labour Government—who had taken the bold step of saying that, henceforth, pensioners should be able to share in the growing wealth of the rest of the community by linking pensions to earnings or prices, whichever was the higher rising in a given year. Those are precisely the terms of new clause 36, which was so ably spoken to by my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell). The Conservative Government's breach of the link has caused the state pension to decrease from 23 per cent.-plus of average earnings to about 14 per cent. of average earnings. It is continuing to decrease.

Unless something is done to arrest that decline, the state pension will simply disappear as something that is worth claiming. Something similar happened with the dog licence. Although I am not particularly bothered about the dog licence, after a while, people stopped paying for it because it was so cheap. In 50 years, unless something is done to arrest the decline of the state pension, it, too, will be an insignificant detail.

Mr. John Cryer (Hornchurch)

Like my hon. Friend, I shall be supporting new clause 36 in the Lobby. Is he aware that, if the state pension had been linked purely to prices since 1948, it would now be worth only £27 a week?

Mr. Corbyn

My hon. Friend is absolutely correct. At current trends, in 2050, the state pension will be worth a similarly insignificant sum. We have to make the case to arrest the decline.

I was first elected to the House in 1983, and I happily fought that general election on a pledge to restore the state pension's link with earnings. I fought the next general election on a pledge that we would increase the state pension by £5 and £8. In the subsequent election, we made a broadly similar pledge. In the following election, we said that we would increase the state pension at least in line with prices. We are only now increasing it exactly in line with prices. As any pensioner could tell us, however, those who buy in small quantities, in corner shops and in declining high streets pay more than those who can drive their Volvo out of town to a hypermarket, where they buy in large quantities. Pensioners pay more to get less in many cases. We must recognise their outrage and anger.

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Worse was to come under the Conservatives, with the legislation introduced in 1985–86 by the right hon. Member for Sutton Coldfield (Sir N. Fowler), and by the right hon. Member for Huntingdon (Mr. Major), who was then a junior Social Security Minister. They used bogus arguments against the state earnings-related pensions scheme, and misread the Government Actuary's report and used it to devalue SERPS, which was the secondary pension that everyone would be involved with. Over time, SERPS and the link with earnings would have guaranteed the lifting of all pensioners out of poverty. The Conservatives devalued SERPS to create a market for private pensions. I should like to know the final bill for the cruel mis-selling of private pensions during the latter years of the Tory Government.

The incoming Labour Government were faced with serious problems. I pay tribute to the Government for introducing the free television licence and the winter heating allowance and for their recognition of the plight of the poorest pensioners. However, I have a serious question for the Minister. Some 1.5 million pensioners are entitled to income support, but do not claim it. There are various complex reasons for that, including pride, lack of information, lack of support or simply being unaware of their entitlement. Is there any certainty that the Government's proposed campaign will result in a significantly higher take-up of the minimum income guarantee? Are we going to spend a great deal money on a publicity campaign to promote the take-up of the minimum income guarantee, which will itself be expensive to administer? As I said in an intervention on my hon. Friend the Member for Hayes and Harlington, the state pension costs 1.5 per cent. of its value to administer. The normal administration cost for a means-tested benefit is between 20 and 25 per cent. of its value, but the figure for the social fund moves up to the dizzy heights of 46 per cent. That means that we spend half the social fund telling people that they cannot have any of it. That does not seem a terribly sensible way of doing things.

Mr. Rooker

We spend £100 billion on benefits. The Department has a running cost of £3.5 billion. I know that the figures are different for different benefits, but the figures for 1997–98 show that the administration costs of income support were 6 per cent. of benefit expenditure. The figure for retirement pensions is 0.9 per cent. A means-tested benefit will inevitably cost more because of the calculations involved, but the figure is nothing like the 20 per cent. that my hon. Friend is quoting.

Mr. Corbyn

I thank the Minister for that intervention. He has confirmed my argument that it costs six times as much to administer a means-tested benefit as it does to administer a direct benefit. I should be interested to see the figures for the administration costs of the minimum income guarantee when it gets going. Would it not be better if that money went into the pockets of pensioners? I shall move on, because I do not want to take up too much time.

The cost of administration is a serious issue, but the underlying principle is also important. The proposal will cost a lot of money without helping many of the poorest pensioners. It will also increase the market for private pensions. I belong to the school in the Labour party that believes that the welfare state should be universal. We should provide for all and we should tax for all on a fair basis. I have no problem with the state pension going to every retired person, because if pensioners have a great deal of other income, it will be recouped through taxation.

However, many pensioners feel keenly the problems of poverty traps. With a small occupational pension, they can lose out on housing benefit and other passported benefits. We have to address that issue. We should aim to eliminate pensioner poverty. As the state pension is the building block of the pensions system, it must rise in line with earnings. If rising in line with earnings is good enough for the minimum income guarantee, the same rule should apply to the state pension.

Let us put the issue the other way round. If the political will was not there in 1980 to maintain the link with earnings and it is apparently not here in 2000, who is to say that some future Chancellor in five or 10 years, when life is not so easy and there is not so much money about, will not decide to break the minimum income guarantee link with earnings? That would leave pensioners with a declining income once again. The Minister should think seriously about the anger of pensioners across the country. Younger people who think that pensioners deserve to be treated better are also demanding the relinking with earnings.

I should also like the Minister to explain the issue at the heart of the debate. He mentioned the growth in the number of pensioner households that is expected over the next 40 or 50 years. That is clearly an issue that we can, must, should and will face. If there are more pensioners, providing for them will cost more. That is the price of a civilised society. We should pay for people to live in decency in retirement. I am alarmed to read the proposal in the Government's Green Paper on pensions to reduce from 60 to 40 per cent. the proportion of the cost that the Government pay in support for pensioners. That is a pointer towards the idea that people should make their own private pension provision during their working life. Private pensions cost more to administer, are less secure and generally provide less at the end than the security of a state communal system. That is where the socialist and social democratic parties of Europe came in, demanding a welfare state that was inclusive of all.

I do not expect that we shall be successful in the vote tonight, but I hope that those in government who are arguing for a relink with earnings and who recognise the justice of the pensioners' case that they are hearing on the doorstep and in the high streets will at least have more power to their elbow to argue for justice for the elderly of this country.

During the previous three Parliaments, I introduced private Members' Bills to try to give effect to that principle. I have not done so during this Parliament, because I believed that we would achieve justice for pensioners. I am sorry to tell the Minister that 1 am not happy with the Government's policies on this. We should restore the link with earnings and, over time, revalue the pension to its original level. That would be justice for the pensioners of this country.

It is said that a civilisation can be judged on how well it treats its elderly. We are not doing enough for our elderly and the very elderly are doing very badly. It is time that we addressed that issue.

Mr. Webb

I shall make a brief contribution, reflecting on some of what has been said so far. I thank the hon. Members for Birmingham, Selly Oak (Dr. Jones) and for Islington, North (Mr. Corbyn) and the right hon. Member for Birkenhead (Mr. Field) for their support for the principle of higher pensions for older pensioners. The right hon. Member for Birkenhead has been such a powerful advocate of the cause that I find myself receiving letters from pensioners asking why I do not follow his lead on that.

I should like to comment on the Conservative approach to the new clauses. The contribution of the hon. Member for Tewkesbury (Mr. Robertson) was thoughtful as far as it went. He said that he was concerned about today's pensioners, but did not support a means-tested response, a universal response or a targeted response by age. It was not clear where that rejection of all three options—the two advocated in the new clauses and the third in the minimum income guarantee—left the Conservatives. I am not sure whether we are going to hear from those on the Conservative Front Bench.

Mr. Pickles

We are.

Mr. Webb

That is reassuring. The hon. Member for Havant (Mr. Willetts) has said that the Conservatives would simply have put 75p on the state pension and that any further response would have to wait for a manifesto. We have reached a sad state when the supposed principal Opposition party has no policy on the basic state pension.

The Government has accepted the principle of a higher pension for the over-75s by introducing the free television licence for those pensioners only. When the Chancellor announced that in the Budget, he said that he had been asked to put money on the pension but was going to use television licences, presumably because of the political attractiveness of the issue rather than any reason of substance.

When asked why the extra money was not put on the basic state pension, Treasury Ministers say that it is because the benefit is taxable. As we have heard, many of us support taxable universal benefits, with the better-off paying something back, freeing up extra money for the basic pension, so the fact that the benefit is taxable is no defence at all.

The other defence is that the money would not go to the poorest pensioners, but, as the hon. Member for Selly Oak said, the poorest pensioners are those who do not take up their entitlements. The proposals in the new clauses are well targeted and would benefit the poorest pensioners, so I do not know why the Government do not support them.

Two new clauses are on offer. New clause 8 is our party policy. New clause 36, on the earnings link, is not but we will support it because we now have a Government who do not believe in the basic state pension. They had hundreds of millions of pounds to give to pensioners, and the money has gone on the means test, the capital limits, the television licence, the prescriptions, the winter fuel payments—everything but the basic state pension. We support the idea that the basic state pension should have not a funeral march but a future. Our preferred mechanism is new clause 8, but if that does not succeed we will support new clause 36 as a statement of our continuing belief in the basic state pension.

Mrs. Alice Mahon (Halifax)

I support new clause 36. I welcome the help given to pensioners in the Budget. I am a practical person, and I have the figures. In Halifax, 18,000 pensioners were helped by the increase in the winter fuel allowance and by the free eye tests. Those measures are worth £3 a week to a household, so they should not be ignored. Because people seem to live a long time in West Yorkshire, I also welcome the free television licences from which thousands in my constituency will benefit, but I give notice that I would like the qualifying age to come down to 65 in the next Budget.

I also welcome the abolition of VAT on fuel, the help with transport and the increase in the savings threshold. Furthermore, I am aware that the allocation of £8 million to Calderdale and Kirklees health authority will help pensioners more than any other group—and quite rightly, as they introduced the national health service and fully deserve that help.

However, I am firmly convinced, and always have been, of the arguments for restoring the earnings link. That is why I shall vote for new clause 36. What is more, I believe that I speak for the majority of pensioners, especially in Halifax, when I say that they need a substantial rise in the basic pension now, and the restoration of the earnings link as soon as possible.

I listen to pensioners. Before tonight's debate, I looked through all the submissions to the Green Paper "A new contract for welfare: partnership in pensions". One response was a booklet, "The Unwanted Generation", published by the National Pensioners Convention. In the foreword, Jack Jones, who has been a stalwart fighter for pensioners, says: We published our written submissions (Pensions, not Poor Relief) in March 1998. They amounted to a comprehensive and sustainable programme of reform, taking account of the needs of both today's and tomorrow's pensioners. We stressed the need to make good the loss of the value of the basic pension resulting from the breaking of the link with average earnings, and to restore the link for the future. I could have brought along a dozen publications giving such advice in response to the Green Paper, and I really wish that the Government had taken that advice.

I have listened to Ministers' arguments about targeting and affordability, and I simply disagree with them. Elderly people think that they have a right to a non-means-tested pension. The arguments about the stigma and shame that some elderly people feel when they have to fill in forms and claim what they see as handouts have been well put. I really hope that the publicity that we are about to mount to ensure that the 1.5 million poorest pensioners take up their entitlements is successful, but I suspect that many of them will still slip through the net.

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If we are genuinely committed to helping pensioners—the Budget proves to some extent that we are—and want to convince a quarter of the people in our society that we will give them the security in old age that they deserve, we must restore the link with average earnings.

I have listened for years to the argument that wealthy pensioners will benefit if we restore the link. So what? They have contributed, too. I want to keep them in the system, contributing to the NHS and to everything else that makes society worth while. We have a tax system and we could use it, paying out at one end and taking at the other. There is nothing wrong with redistribution. I was brought up on it in my many, many years in the Labour party.

I give the last word to Baroness Castle and Professor Peter Townsend, two eminent fighters for social justice if ever there were two. In line with what everyone else with a real interest in pensioners said in response to the Green Paper, their excellent pamphlet, "We CAN afford the Welfare State"—I believe that, as one of the richest countries in the world, we can—said: We must resurrect the basic pension as the foundation of security in old age for everyone. This means the restoration of the earnings link for future annual upratings. I believe that, and I hope that many hon. Members will join us in the Lobby tonight.

Dr. Norman A. Godman (Greenock and Inverclyde)

I support new clause 36. It was, however, right and proper that my right hon. Friend the Member for Birkenhead (Mr. Field) and others paid tribute to the Government's achievements. I sincerely believe that my right hon. Friend the Prime Minister and the Government are genuinely committed to creating a more tolerable society, as reflected in matters as diverse as constitutional reform, the peace process in Northern Ireland and tackling racism and other evils that bedevil our society.

That more tolerable society is a wholly admirable objective, but our society is intolerable because of the demeaning position and the humiliation that our elderly people suffer. In the past few days, several of my elderly constituents have said that they warmly welcome the increase in the winter fuel allowance and the concession on television licences. Down the years, I have supported those measures, admirably campaigned for by my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Islington, North (Mr. Corbyn) and others who have worked to make life more tolerable for our elderly citizens.

We have to do more, and one of our objectives, as a party in government, with the history to which my right hon. Friend the Member for Chesterfield (Mr. Benn) referred, is to ensure that life becomes more tolerable for our elderly people. The other day, an old fellow, when talking about his bitter disappointment with the Government, reminded me—I confess that I needed reminding—that it was Charles de Gaulle who said that old age is a shipwreck. He told me that what makes old age so hazardous for him and for many of his neighbours is the rottenness of the treatment that they suffered under Tory Governments and the present Government's failure to do more for them, so I make that plea to the Government: they must seriously address the plight of elderly people.

I guess that I am not alone in having an elderly forum in my constituency; I think that just about every constituency in the UK now has such a forum. My local one is led by a formidable female by the name of Mrs. Nell McFadden. As people say in the west of Scotland, if she is angry with someone, she does not miss them and hit the wall. At some heated meetings that I have attended in recent times, she and her colleagues have said to me that they are bitterly disappointed although they greatly appreciate what has been done by the Government, which is in dramatic contrast with how they were treated by the odd job lot opposite when they were in power for so long.

I tell my hon. Friend the Member for Hayes and Harlington (Mr. McDonnell) that, in Scotland, disaffected elderly constituents do have a choice. Very few of them vote Conservative, rightly, but they can choose to vote for the infant Scottish Socialist party or the Scottish National party, both of which play to the gallery on the issue. [Interruption.] I remember Ayr well, and so should the Conservative party because it was the first election that it had won in many years. There are no Conservative Members representing Scotland in this place. I suspect that that will last for some years, but that is another story.

If we are to honour our obligations to elderly citizens, we must lift them out of poverty. Up to now, we have failed them because we have not done that. With regret, I shall vote against the Government. I will vote for new clause 36 because it has long been my aim to restore the link, which was cruelly taken away from elderly people by the Conservatives when they were in power.

Many of the people whom I represent are in their 70s, 80s or 90s. Because of the occupation that they followed—many experienced long periods of unemployment—they never had the opportunity to save money for their elderly and declining years. We must restore dignity and respect to their lives.

The Government are doing that with some of their measures. In that regard, their achievements are admirable, but more must be done. If it means taxing those with the money, so be it. I have always argued for a progressive tax system. If we must have such a system to make life better for elderly people, that is what we should have. They deserve better from us and, at the moment, we are failing them.

Ms Abbott

I support new clause 36. I pay tribute to my hon. Friend the Member for Islington, North (Mr. Corbyn). For many more years than he cares to remember, he has been an advocate for the elderly and taken up this issue, in season and out of season, on the Floor of the House.

As many Members have said, if there is one group of people that feels let down by the Government, it is pensioners because, for 20 long years, we promised them the restoration of the link with earnings. Many of us are speaking to the two new clauses, but I am surprised that many more are not doing so because each and every Labour Member must hear what I hear from pensioners in my constituency about their disappointment in respect of the failure to restore the link. I suspect, perhaps unfairly, that those Labour Members who troop through the Lobby against the new clause will not publicise the fact in their constituencies.

If I were not aware of the real feeling among pensioners about the issue, members of my local Hackney pensioners forum would have ensured that I was. I pay tribute to Hackney pensioners, who are some of the most vigorous and forthright in the land, although some Members might contest that claim.

Pensioners are not easily fooled. They cannot be deluded with spin, announcements and re-announcements. They know that they were promised one thing for many years while we were in opposition and that, now we are in government, suddenly those promises are out of the window. They have observed that. All the spin in the world and all the articles drafted by Alastair Campbell will not distract pensioners' attention from that.

Ministers have said, and will say again tonight, that many pensioners are better off. That is true. Those with occupational pensions and so on are better off, but, like my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman), most of the pensioners whom I represent did not have jobs which made it possible for them to have a big occupational pension and other benefits. The pensioners whom I see are among the poorest.

In 2000, poor pensioners are seeing their income shrink alongside the erosion of social service provision, which pensioners in particular rely on. It is bad enough that the value of the pension is being eroded, but if, as is certainly happening in my part of London, pensioners are seeing cuts in the home help service, charges for that service, cuts in day-care services and cuts in adult education, that makes the decline in the state pension ever more acute. The safety net of social security provision, which they have come to rely on, is being eroded by overall cuts in public expenditure, not to mention—I hope to address the House on the matter on another occasion—the chaos in housing benefit in many local authorities throughout the country, which is hurting the elderly in particular.

Members have spelled out the case against means-testing. It is a disincentive to save. It is six times more expensive to administer means-tested benefits, as the Minister has admitted, than to pay a universal pension.

The thing that weighs with me most about means-tested benefits and pensioners is that more than any other single group in the land—more than the disabled or lone mothers—it is pensioners who feel the stigma of such benefits. If there is one group that should be excluded from having to claim means-tested benefits, it is pensioners.

As I know from personal experience in my family, many pensioners, through sheer pride alone, will not claim means-tested benefits. Ministers talk about the minimum income guarantee and urge reliance by pensioners on means-tested benefits. They know that, however effective the take-up campaign, a considerable number of pensioners will not claim because of the stigma and the association.

Kali Mountford (Colne Valley)

Can my hon. Friend explain why people do not feel the same stigma when applying for housing benefit and council tax benefit?

Ms Abbott

My hon. Friend has not been here for the entire debate, but let me explain. When she has been a Member of Parliament for a considerable time—[Interruption.] When she has done that, she will know that pensioners believe that they are entitled to a pension as of right. What pensioners want is a basic income as of right. They do not want to ask for what they perceive as handouts in the form of means-tested benefits. If she does not believe me, I suggest that she discusses that with pensioners in her constituency. Furthermore, the ultimate problem for pensioners who do not claim housing benefit is that they will be evicted, but—I am surprised that she makes that point—I cannot overstate the extent to which pensioners believe that they are entitled to a basic income as of right and should not have to claim for means-tested benefits.

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Kali Mountford

Will my hon. Friend give way on that point?

Ms Abbott

No, I have to make some progress. I am sorry that my hon. Friend is not aware of the strength of feeling among pensioners. If she has any doubt about pensioners' fear of the stigma attached to claiming means-tested benefits, she should come to the next meeting of the Hackney pensioners forum. That will remove her confusion.

As has been said, pensioners appreciate the free television licences being granted to those over 75, and the fuel provision. However, they want the long-promised rise in the basic pension to be implemented and the link restored.

Members of the Labour party across the country also want that link restored. By any test of opinion—a postal ballot, say, or an electoral college—that is what most party members want. I served for a few years on the party's national executive committee. I well remember the 1996 party conference, at which a composite resolution, heavily supported by the constituencies and trade unions, called for the restoration of the link.

Behind the scenes, there was a momentous battle to prevent that resolution from going to a vote. The hapless delegate who was to move the resolution was told by the then shadow Chancellor that, if he went ahead and moved it, he would be responsible for losing Labour the next general election. The same shadow Chancellor telephoned that delegate's constituency party chairman with the same message.

Delegates buckled under the incredible pressure exerted by officials and the shadow Cabinet. The composite was moved by Baroness Castle, in a brilliant speech—

Mr. Deputy Speaker

Order. I am well aware of the background activities at that Labour party conference. However, the hon. Lady has made her point, and should keep to the amendment.

Ms Abbott

I am grateful to you, Mr. Deputy Speaker, for acting as a witness to internal Labour party matters, but I will not dwell on those sadnesses.

However, my point is that Labour party members—from the left, right and centre of the party—feel just as disappointed as pensioners. Even at this late stage, Ministers should consider their position on the matter.

The Government are willing to give out money for fuel relief and free television licences, so why will they not do anything about the basic pension? There may be several reasons. Labour Members and pensioners forums around the country may not have put their case compellingly enough. Perhaps the Government want to keep overall public expenditure within the limits set by the Maastricht treaty—but I will not delay the House with such speculation.

For 10 long years as a Member of Parliament, I have attended meetings of the Hackney pensioners forum. I would tell them of the party's commitment on the matter, and the pensioners would talk about what would happen when the Labour party got into power. The Labour party is in power now, and 20 years of commitment to restoring the link has gone out of the window. Many pensioners will be left in poverty, despite the take-up campaign for the minimum income guarantee. The sadness is that, after waiting so long for a Labour Government, pensioners are being failed by that Government. What hope have they now?

I urge Ministers to re-examine this matter, which is at the heart of the concerns felt by many Labour party members across the country.

Mr. John Austin (Erith and Thamesmead)

Some of the relevant figures may explain why there is so much anger among pensioners. The basic pension is £67.50 a week, or £107.90 for a couple. If the previous Conservative Government had not broken the link, those amounts would have been £97.45 and £155.80—£30 and almost £50 a week higher, respectively.

How can people live on the basic pension? Many do not live on it, but merely survive. Sadly, some do not even do that, as the figures for hypothermia show.

I accept everything said by my hon. Friends the Members for Hayes and Harlington (Mr. McDonnell) and for Islington, North (Mr. Corbyn) about all the material benefits that the Government have given to pensioners. There is no doubt that pensioners are immeasurably better off than they would have been under Conservative spending plans and policies. We must remind ourselves that when the Leader of the Opposition talks about reducing taxation, he does so in the context of reducing spending on welfare. We know from the record of Conservative Governments in the past that tax cuts come from breaking the link between pensions and earnings.

We must bear in mind the feelings of pensioners, despite the benefits that have come from the Labour Government. As my hon. Friend the Member for Bolton, South-East (Dr. Iddon) said to me, the increase for a single pensioner on the basic pension this year was less than the price of half a pint of beer. As my hon. Friend the Member for Islington, North pointed out so clearly, the rate of inflation for pensioners is much higher than for other members of the community, as they cannot make savings through cheap shopping, bulk buying, and so on.

The Government may argue that the cost of restoring pensions to what would have obtained had the link not been broken is too high and cannot be afforded. However, raising the pension level to that of the minimum income guarantee would cost about half as much, and I urge the Government to take that option.

I have talked to Ministers, including my right hon. Friend the Prime Minister, about this matter. I have been told about the cost, and that money put on the basic pension would not reach those most in need. However, the fuel allowance represents an inconsistency on the Government's part. It is universal and goes to everyone but, unlike pensions, it is not taxable. That benefit therefore goes to everyone, irrespective of income, and the Government cannot claw it back from the better off.

My hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones) spoke about means testing. She pointed out the problems associated with it: she said that it was a disincentive to saving, and that, wherever the threshold or limit was set, some pensioners would be placed in a poverty trap.

From our surgeries, all hon. Members will be familiar with people whose few pounds a week from occupational pensions remove them from eligibility for means-tested benefits. The Minister intervened earlier and admitted that it cost six times as much to administer means-tested benefits as it did to administer universal benefits.

Mr. Rooker

I intervened to give the facts. It is six times more expensive to administer means-tested benefits, but not 25 times more expensive, as had been claimed.

Mr. Austin

I am using the figure that the Minister gave—that it cost six times as much to administer means-tested benefits. However, that does not include the cost of a take-up campaign. Half my constituency is in the borough of Greenwich, which has one of the best welfare rights units in the country. The Conservatives have criticised the council for spending council tax money on a job that should have been done by the Department of Social Security.

I think the job is better done by people outside the Benefits Agency, and the take-up campaigns have put hundreds of thousands of pounds into the pockets of the poorest people in the borough. However—perhaps because of the associated stigma, or for some other reason—hundreds of thousands of people do not claim their entitlement. A million people who are entitled to the minimum income guarantee are probably not claiming it.

If we continue to uprate the basic pension in line with inflation, it will be worth half its current value by 2040. The argument for linking pensions with earnings is so that elderly people can share in the increased wealth of the country. Those who argue for a link with prices say that at least that maintains the purchasing power of pensioners. Hon. Members have shown that it does not.

I wonder how many hon. Members read the report this morning about the rising cost of funerals. Someone from the National Association of Funeral Directors said that funerals may have increased above the rate of inflation, but they have fallen in relation to average earnings. So not only do pensioners suffer in life: they are penalised in death.

Mr. Frank Cook (Stockton, North)

I have just returned today from a week in which I was leading a delegation from the NATO parliamentary assembly which was looking into nuclear matters in the Czech Republic. We also visited the comprehensive test ban treaty preparatory commission and the International Atomic Energy Agency, both in Vienna. What has that to do with the debate? It is this—I was told this evening that a debate had taken place on this topic in the parliamentary Labour party meeting on Wednesday, that it had been a good debate and that everyone was satisfied. I was asked why I was going to vote against the Government, because as soon as I knew that this was to be debated on the Floor of the House, I sent a note saying that I have always promoted the concept of a link between earnings and pensions, so I would support new clause 36. I was told, "We have already had the debate." I said that I had not been there. When asked where I had been, I explained. I was told, "We did not know you were absent." What does that say about how much I count for in the House? I am noticed only if I threaten to vote against the Government. I offer this explanation for people who have not been here as long as I have.

I confess that I have a vested interest in the debate. I am 65 this year, and I do not know what will happen to me. The outcome of the debate may matter to me next year. However, that is a facetious remark.

Mr. Michael Jabez Foster (Hastings and Rye)

The hon. Gentleman is an extremely good example of a person with a substantial pension to come as well as his retirement pension from the state. He has no need for an increase above inflation in any event, because he is one of those with a second pension.

Mr. Cook

I remind my honourable colleague—I am not sure whether he is a Friend yet—that, come the day, I shall enjoy paying my income tax. That is a distinction that many people miss. We are talking about people whose income is so paltry that they will be unable to pay income tax on their benefits.

7.45 pm

I have the greatest respect, in a fraternal sense, for some of my colleagues. I watched the performance of my hon. Friend the Member for Colne Valley (Kali Mountford) in Committee, and I admire her ability. Yet from a sedentary position, she said that she had spent 25 years in public service. I am sure that she spent 25 very praiseworthy years in the service. If that is the case, she should remember a time when pensioners were provided for better than they are today, or will be tomorrow.

Kali Mountford

Not according to the report.

Mr. Cook

If my hon. Friend has the good fortune to catch your eye, Mr. Deputy Speaker, I am sure she will be able to make her case.

Another colleague for whom I have great respect and admiration said that the Tories are loving this. They might well be—

Mr. Field

If they were here.

Mr. Cook

Yes. It would be one of the few times the Tories have enjoyed something that is true. The truth is coming out of the debate tonight. The people who do not enjoy differences among Labour Members will be the pensioners—the people to whom we have given these promises year after year, election after election. I have been an associate member of the Teesside pensioners' association since 1971. I qualify for full compliance next year, and I will be proud to do so.

I appeal to Ministers to listen to the arguments—arguments that they themselves have made repeatedly in the past. I appeal to colleagues who perhaps have more of an eye on career development than on the retention of principle—[Interruption.] I invite my colleagues who think that that is a dirty remark to stand up and be dirty in return.

Mr. Deputy Speaker

Order. I have listened to the debate throughout. As we do not want to lower its tone, perhaps the hon. Gentleman should not use such language.

Mr. Cook

I accept your reprimand, Mr. Deputy Speaker. If I withdraw that comment—which I do unreservedly—I am at a loss to establish the motive for the stance that has been adopted or espoused by some of my hon. Friends.

I appeal to Ministers to listen to the arguments. I appeal to those who support the Government on this matter to listen to the arguments. I hope that we will have the opportunity to change course, even at this late stage.

Kali Mountford

I had not intended to speak in the debate. I sat through the debate all day last Wednesday, I have been sitting here expectantly from 3.30 this afternoon listening to the debate on a range of issues relating to the Bill, and I served in Committee. However, I rise to speak because I feel that I have been patronised more thoroughly today than I have been in a long time.

I have worked in public service since I was 20 and have been, for a substantial amount of that time, involved in the voluntary sector. I have come across many people in many circumstances, particularly those who felt stigmatised when income support was related not just to pensions but to all parts of the benefits system.

Having thoroughly supported the Minister of State when he supported a link with earnings, I do so no longer, and for very good reason. State benefits, and pensions in particular, have changed since then. If I felt that a continued policy of a retained link with earnings gave a particular benefit to all pensioners, I would support it. I even went so far as to write to the Chancellor when the link with prices showed that the sum would be derisory.

I was concerned about that, but to be frank, it was because it looked bad, not because it was bad in principle or because I felt that there were people who were more deserving. I mean, 70p just does not sound good. Hand on heart—it was not because I thought that that was the right thing to do.

When I listened to the Budget statement, things changed radically for me, and I looked more closely at our own reports, what we were really saying and what we were trying to achieve.

Mr. Stephen Pound (Ealing, North)

I appreciate that it may not look good, but is my hon. Friend aware that, over the past 15 years, the annual monetary increase in pensions has swung from 40p one year to £5.17 another year? We cannot make an argument about whether it looks good. It is linked with inflation—that is the reason for those figures.

Kali Mountford

Obviously, if it is linked with inflation, that is the reason for the figures. However, we must look at the total amount of pensioner income. I do not believe that re-linking pensions with earnings would necessarily benefit all pensioners in all circumstances.

The new clause would create a catch-all safety valve enabling us to offer the biggest pension increase possible at any time. I am not sure that that would be the wisest use of public money. Why give large one-off increases to pensioners? The increase of £100 to £150, for example, seems huge. Why provide that rather than increasing the amount of money that we can give pensioners in line with earnings? The answer is simple, and it has nothing to do with taxation. Doing that helps pensioners who need it most, and it does so most swiftly, most effectively and most efficiently. It deals with the poverty gap.

I advise my hon. Friends to read page 25 of "The Changing Welfare State", volume 2, which shows the growing gap between the poorest and richest pensioners since 1979. Clearly, there has been a vast change in pensioner incomes. If we wish to affect the lives of those about whom I care most—the poorest pensioners—there are several things that we must do.

Dr. Lynne Jones

My hon. Friend points to the growing gap. Has not that gap grown while the basic state pension has been linked to prices, not earnings?

Kali Mountford

If my hon. Friend reads the report closely, she will find that there has been a huge increase in occupational and private pensions, which have changed what we should do for pensioners. We must target resources on people who have never had access to occupational or private pensions, which is why I support the second state pension, which will give money to carers, people with disabilities and those on low incomes who have not had access to second pensions. The minimum income guarantee, which includes the safeguard of a link with earnings, will lift people in poverty out of it. We must do something to close the poverty gap.

I have heard nothing in the debate that would help to close the gap. We want to lift people out of poverty and make a real difference to their lives, and the Government's pensions policies do that. I have heard nothing to make me think that a return to a link with earnings would make an instant difference to people's lives.

Mr. Field

My hon. Friend says that she has heard nothing said that would lessen the gap between richer and poorer pensioners. In fact, we are having two debates, and one of them is about ensuring a much more substantial state retirement pension for the oldest pensioners. Does anything in the volume to which she has referred disprove the point that one of the most effective moves we could make to combat poverty among the oldest pensioners would be an increase of, say, £15 in the state pension for people aged over 80?

Kali Mountford

Obviously, a sudden huge increase would put money in people's pockets. How could I dispute that? We all know that the oldest pensioners receive the least and are the most likely to be in poverty. That is why I support the £150, which, rather than going through hoops, goes straight into people's pockets without a means test, and which is not discounted against means-tested benefits. I support it as a quick, efficient and effective means of getting money to people.

We have taken great strides towards helping those in the greatest need, including policies such as free television licences for those aged over 75. Some people in my constituency have said that that is patronising, but several have stopped me in the street to say that they are pleased with what I am doing and that it has changed their lives— and that does not happen often. An elderly constituent told me that she had received a £100 cheque in the same week as a £130 fuel bill. That makes a significant difference to people's lives; and that elderly person told me that she will be 75 this year, so she will receive a free television licence. She did not feel patronised; she felt a real difference to her life.

Mr. Winnick

Is my hon. Friend aware that I have received not a single complaint about pensioners feeling patronised about the television licence or winter heating payments? The opposite is the case. Time and again, pensioners asked why Conservative Governments refused to help, and they feel no more patronised about television licences and winter fuel than they do about bus passes. Indeed, they would be deeply offended if the bus pass were taken away.

Kali Mountford

My hon. Friend is right. Nor do pensioners feel patronised when they make claims for housing or council tax benefit. We must tackle the stigmatisation of particular benefits, and not just for pensioners. Across the board, people feel stigmatised if they think that benefits are not theirs of right. The Government must tell people that they have worked all their lives—in the home, as carers for elderly parents or someone who was disabled, on low pay, as part-time earners or as a disabled person who was unable to work—and that we all value them. We must tell them that extra income will go into their pockets not as a stigmatised, means-tested benefit but because it is theirs of right. The minimum income guarantee is theirs of right, and we should launch a take-up campaign beyond anything ever done before.

Mr. Kelvin Hopkins (Luton, North)

I am sorry to say that I cannot follow all my hon. Friend's arguments very well. Does she agree that even if pensioners claimed all their means-tested income support and did not feel that there was a stigma, that would not alter the fact that means testing is not right? We want a higher, non-means-tested state pension.

Kali Mountford

I do not hold the same view as my hon. Friend. In all my time dealing with benefits, it troubled me that people stigmatised that sort of benefit. By doing so, we make it difficult to get benefits to people even when it is their right to have them. We should make it clear that people have a right to the benefits that the country has decided belong to them. As long as we talk in the way my hon. Friend does, we shall demean what we seek to do as a state and a Government.

It is right to put money in people's pockets. I am very disturbed by some of what I have heard today. I do not think it right to demean people. We should put money into the pockets of those who need it, and that is what we are doing.

Mrs. Lait

I shall not speak for long because I do not want to intrude on family grief. I have been interested to see that we face two parties—one below the Gangway and one above it, although even that distinction is beginning to splinter. I hope that the hon. Member for Colne Valley (Kali Mountford) will not think me patronising if I say that she made a brave speech. That was a difficult thing to do in face of the emotional appeals made on behalf of elderly pensioners.

I hope that the right hon. Member for Chesterfield (Mr. Benn) will accept congratulations from everyone in the Opposition on his birthday—[HON. MEMBERS: "Everyone?"] I am sure that everyone would wish a happy birthday to such a pillar of the House of Commons. The right hon. Gentleman, as so often, put his finger on a good point. He mentioned the compact between the generations on which the whole national insurance system is built. The compact implies that those who pay should be prepared to do so. One reason for the break in 1980 between earnings and prices was a fear felt by the Conservative Government that the pay-as-you-go system would put an intolerable weight on the current generation. It was feared that the compact that produced national insurance benefits would be broken in the long run. We need only consider the structure of the population to realise that generations behind us—it will not be long before I can claim my pension, although I am not planning to retire—will ask whether it can afford me. That is the real problem.

Mr. Ronnie Campbell (Blyth Valley)

Cheap.

Mrs. Lait

They probably do feel that they cannot afford me, because I am not cheap. However, I would just point out that I am just one of very many people.

8 pm

Dr. Lynne Jones

Surely the existence of a basic state pension to which everyone contributes reinforces solidarity between the generations rather than the reverse. People have to make provision, whether by pay-as-you-go into a state system or by paying into a private system.

Mrs. Lait

The hon. Lady has rather missed the point, which is that if there is no money left in someone's pocket to pay for private provision, they will resent paying too much for the older generation. That is the point that needs to be addressed.

Mr. Tony Benn

Pensioners have been productive during their lives. If the hon. Lady really wants an example of a completely non-productive unit, she should visit a hospital where babies are delivered. Not a single baby has ever produced a profit for anybody. A visit to such a hospital exposes the outrageousness of the argument that we cannot afford to look after old people. I visited the hospital in Chesterfield; I was shown round by an accountant. When we came to the premature baby unit, she said, "This is the most expensive part of the business." If premature babies are uneconomic units, why should we pay for them? The hon. Lady has misunderstood the whole purpose of the welfare state.

Mrs. Lait

I think the point is that the premature baby who, luckily, because of the national health service, can survive, is the future payer of our pensions. That is the crucial thing, and that is why we need to ensure that all those pensioners who can are able to pick up all the benefits that are available. That is why the Conservative Government ran campaigns to encourage people to take up all the benefits; and we wish the Government well with their campaign on the minimum income guarantee.

I hope that the Government can crack the stigma and turn the issue into a matter of rights. As the hon. Member for Colne Valley said—and I am sure that my hon. Friends do not disagree—it is people's right; they have paid in, and they should accept their benefits without feeling any stigma. I sincerely hope that the Government's campaign works.

I understand that the Government believe that about 600,000 people are eligible for the minimum income guarantee, not 1.5 million—doubtless the Minister will make that clear. In any case, we need to ensure that those people who need more benefits get them.

We should also bear in mind the fact that one of the reasons why so many pensioners are so angry at the 75p increase is that they have been on the receiving end of the hidden stealth taxes that the Government and the Lib-Lab pacts that run so many local councils are piling on to council tax and all the other services that people receive through local authorities. Pensioners would not feel nearly so aggrieved if those stealth taxes had not been dumped on local authorities to enable the Government to sustain the hope of keeping their promise on income tax so that they do not offend the heartlands or middle England.

Mr. Rooker

I shall do my best to respond to the debate, which I applaud. As I mentioned at Social Security questions today, a couple of weeks ago the Government arranged for a three-hour debate in Westminster Hall on pensions reform, and one Back Bencher turned up, who happened to be a Labour MP. I notice the dearth of any attempt at a debate by Conservative MPs on this important issue.

I am in no way, in anything that I have to say, criticising the fact that new clause 36 has been tabled for debate, because that is what this place is for; the day we forget that, we might as well all pack it in. Nevertheless, I cannot accept all the arguments, even though, as I happily admit, I have made many of them myself in the past—indeed, more than most. [Laughter.] Well, I have. I suspect that I have attended more meetings of pensioners at factory gates and in pensioner groups, in trade unions and at particular companies, and more meetings of the National Pensioners Convention, than most hon. Members, simply because I have been in this place for 26 years.

I argued the toss up and down the country in 1983, 1987 and 1992, on the Labour manifesto of restoring the link, using the figures that my hon. Friend the Member for Islington, North (Mr. Corbyn) mentioned—£5 and £8. At the end of each election I went back to my constituents—I never really left them—and told them, "I am sorry; I did all the speeches but we lost. We have not even got a crumb off the table."

We lost every single election at which we made those commitments. My hon. Friends should start to think about why we lost all those elections. We made absolutely firm, positive commitments: no one was in any doubt about their clarity, because the manifesto promise even included the figures in pounds—£5 and £8. That was absolutely clear and unequivocal. No one could have doubted what we would do, but we did not get the chance to do it. I am not saying that we lost for that reason. We lost because people did not believe, by and large, that we could deliver the overall package that we were proposing: they thought, "Economically, it don't make sense".

At the last general election we made a different, more modest, commitment—more modest in the sense that we made the commitment of using the basic state pension as the building block. We said that it would not be means-tested, that it would rise at least in line with prices—which 1 accept is what has happened in the first three years of this Government—and that pensioners would also share, in ways that were not specified, in the wider economic gains of the country.

I must tell my hon. Friends that this debate really should not be an argument for or against the means tests; it is much narrower than that. However, if my hon. Friends want to have the argument about whether pensioners should or should not be means-tested, they cannot ignore the past. The last Labour Government introduced the link between the pension and earnings or prices—whichever was the higher. I was here, and I was proud of what that Government did. We even raised pensions twice in one year. I might add that the reason why that we did it was that there was no annual pension increase before the Labour Government of 1974. There were some years—four or five since 1948, and always under a Tory Government—in which there was no increase whatever.

We also maintained that link in a period of extremely high inflation. Both prices and earnings inflation were into the teens or the early twenties. The figures were astronomical—no doubt about it. But we introduced that pledge, and we carried it out. I know that it is a nit-picking point to say that, in the four years in which we did so, we got it wrong three times out of four because a system of forecasting was used rather than the historical system that we use now. In April, the Minister used to stand at the Dispatch Box and say, "I think that, in November, earnings will be a certain figure and prices will be a certain figure. This is the higher of the two, so we are fixing the pension"—it had to be fixed 20 weeks in advance. When we reached November, in three years out of four, the figure was not quite right; and in one year, our forecast of which would be the greater of earnings and prices was wrong. We really got it in the neck for being wrong, even though there were often substantial monetary increases—although not real-terms increases.

In 1979, when we got the boot, we had what looked like a good track record, because there had been a real increase in the pension package over those four years. And when we got to 1979, anyone would have thought that we had done so well that we had got the pensioners off the means test.

I regret the fact that there are pensioners on the means test. I wish that we had a policy that would enable us to declare, "We guarantee that, in a year's time, no pensioner will be subject to the means test." As I said at Social Security questions today, even with our current package of so many measures, we cannot say that. We can get the number of means-tested pensioners down to one in five from one in three, but one in five is still a large number of people. Even today, some 28 per cent. of new pensioners go on to the means test. Today, 40 per cent. of all pensioners are on means-tested benefits.

Dr. Lynne Jones

Will my right hon. Friend give way?

Mr. Rooker

No; not at the moment—not until I have made the point that I wanted to make about 1979. In 1979, when we left office, after those halcyon days of the link, 57 per cent. of pensioners were still on means-tested benefits—millions, more than half of all pensioners. So we have to ask ourselves, what has happened between then and now? The answer, in a nutshell, has been mentioned by my hon. Friend the Member for Colne Valley (Kali Mountford) and it appears on page 25 of the document that we published last week. An enormous difference has grown up between high and low-income pensioners—a massive change between the top 20 per cent. and the bottom 20 per cent. Therefore, fewer pensioners are on the means test than in 1979, but they are poorer by far. There is no doubt about that, and they have no hope of digging themselves out of the position that they are already in.

Dr. Jones

My right hon. Friend said that his aim was to get the proportion of pensioners reliant on the means test down to one in five. Is that not the current figure?

Mr. Rooker

As I have said, if we do nothing, one in three pensioners will end up on the means test. This overall package will get the figure down to one in five, and I regret that the number will not be less than that. However, I have described the effect of all the pension changes that we are making.

Mr. Willetts

When will that be?

Mr. Rooker

In the middle of this century—2047. I have never hidden that fact. I have always said that a pension is a pension. It is not something that one buys off the shelf and that is available today. One has to build it up.

The halcyon days—the link lasted for only four years—left us with 57 per cent. of pensioners on the means test in 1979. There are still many on the means test today, but an enormous gap has grown up. Nobody who seriously wants to attempt to tackle that gap can do so by lifting everyone's income up. That does not make sense in anyone's calculation; there are no good grounds for doing that, either with public money or with private funds. Therefore, it is our moral responsibility to target resources on closing that gap by lifting the incomes of the lowest 20 per cent. up while not holding down those of the top 20 per cent. We must lift the bottom 20 per cent. up at a faster rate than the highest 20 per cent. That is the only way that we can tackle the gap, and we must do that as quickly as we can. One of the measures to deal with the gap is the introduction of the minimum income guarantee.

Mr. Alan Simpson

I am grateful that my right hon. Friend has drawn the House's attention to the graphs on page 25 of the document. We are faced with the burgeoning gap between the richest and the poorest pensioners, so will he explain how free television licences and the winter fuel payments, which are tax exempt, will help to narrow the gap? Raising the state pension would bring more people into tax bands and would enable us to recoup income. That would be a redistributive measure and would be more effective in directing resources towards those on the basic state pension.

Mr. Rooker

My hon. Friend—like other hon. Members—has made the case better than I can for a mixture of measures. It is not possible to say that benefits should be either all universal or all means-tested. There must be a mixture of benefits for the foreseeable future.

We must ask ourselves why the gap came about. First, it is the result of the changes that took place in the 1960s to occupational pensions when millions more people had the opportunity to take part in an occupational scheme. In addition, it is a consequence of SERPS. Very few people recognise the fact—I regret that many of my hon. Friends have not raised the issue—that a male pensioner who was on an average income and who retires today, just over 20 years after SERPS started, will retire with a SERPS pension of near enough £60 a week on top of the basic state pension. Before we introduced the link with earnings or prices—whichever was the higher—there was no state second pension or SERPS. SERPS was the only hope for people who did not have the good fortune to be in an occupational pension. However, we had to say that they would have to wait 20 years before the scheme came to fruition.

8.15 pm

At that time, we tried to ensure that pensioners did not lose out in periods of high inflation, which is what we Shad at the time, and that, when earnings and prices were yo-yoing with each other, we tried to mix the best of both. I was not in the Government at that time and I doubt whether the matter was discussed, but I cannot prove that when the forecasts were made for what SERPS would deliver in 20 years, the policy assumed that the basic state pension's link with prices or earnings—whichever was the higher—would be retained. The scenario was different, because it was a different world.

By law, the majority of the pensioner population is now forced into two pensions. They are either contracted in or contacted out, so they are virtually forced into two pensions. Obviously some people have missed out, and that is why have introduced the state second pension for the low paid and for carers.

Mr. Austin

After all my right hon. Friend's fine words, will he tell the House whether he could live on the present state pension?

Mr. Rooker

The answer is no. I would not dream of trying to do so. I do not think that any Member of Parliament should try that even though a Conservative Member once tried to do so. In one week, one does not face the problems of buying an iron or a kettle and there are not many clothes to buy, so that is not the issue. Nobody should be required to live on the basic state pension of £66.75 a week. That is not enough, and that is why the minimum income guarantee exists.

Mr. Tony Clarke (Northampton, South)

rose—

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

rose—

Mr. Rooker

I give way to the Chairman of the Select Committee on Social Security.

Mr. Kirkwood

The Minister is putting a brave face on the matter and concentrating on means testing and the relative incomes of pensioners. However, the national insurance fund is a contributory system and contributions are, subject to the upper earnings limit, earnings related. I am certain that the right hon. Gentleman will acknowledge that the national insurance fund—certainly in my experience, and probably even in his—has never been in a better condition. The Government actuarial quinquennial review, which was published last July, made it quite clear that the Government Actuary believed that relinking pensions with earnings was affordable. Does the right hon. Gentleman accept that? If that is true, and given what was said in the review that was published last July, the money is available to re-establish the link as of this year.

Mr. Rooker

I have great respect for the hon. Gentleman, and his argument is seductive. However, the Government Actuary's report that I want to see is the one that will be produced now that we have made a policy announcement on inherited SERPS. All the Government Actuary reports published to date, including the specific one on the Bill, assume that inherited SERPS was not an issue and that, from March this year, pensions would drop from 100 to 50 per cent. The scenarios of the possible costs to the Government of inherited SERPS are for figures of between £8 billion and more than £20 billion, and I must tell the House that that money must come out of the national insurance fund because it is a national insurance fund benefit. We simply cannot operate on that basis.

Under the minimum income guarantee no one is expected to live on £66.75, the basic state pension. That is not enough. We know that the average single pensioner's total income—net of any tax—is £132 a week and, for a couple, the figure is £248. I know that people might argue that we do not come across many pensioners like that, but they exist and those are the average figures.

I am the first to admit that averages can be misleading. However, we cannot ignore the fact that average pensioner income is virtually double the basic state pension. That has happened because of SERPS and occupational pensions and—despite the fact that some were mis-sold—because of some personal pensions. That explains how the extra income is made up.

Although we shall not accept new clause 8, we recognise that the chances are that the older people get, the poorer they are likely to be. That is inevitable. By and large, they will be female. That is why, on the basis of next week's increase, MIG for pensioners aged 60 to 74 will provide an income of £78.45, which is well above the basic state pension. For those aged 75, the figure goes up to £80.85 and, for those aged 80, the figure is £86. The MIG figure for an 80-year-old is almost £19 a week higher than the basic state pension. We recognise that pensioner poverty is connected to age. There is no doubt about that, and, when we roll out the publicity machine for the MIG take-up campaign that we have announced, we shall target that group. We shall write to 2 million people.

We estimate that between 500,000 and 700,000 people are currently missing out. Why should that be the case? I am not sure whether or not it is due to stigma. I meet constituents and receive letters from them, but I have not met anyone for a long time who has said that they do not claim because of the stigma of the means test. They might say, "I'm not going down the social. I'm not going to Soho road along with that lot." They do not consider themselves to be beneficiaries, and there is something in that because Governments have in the past treated pensioners as a block and mixed them up with everyone else who claims from the Benefits Agency.

Of our benefits payments of £100 billion a year, £47 billion, or 47 per cent., goes to pensioners, but only about 10,000 of the Benefits Agency's 80,000 staff work on pensions and pensioners, which is wholly disproportionate. That is why, three or four weeks ago, we announced that we will centralise pensions and move all aspects of pension planning and provision out of the Benefits Agency into a separate, free-standing agency responsible to the Department. We have started planning that only in the past couple of weeks, so I cannot say when it will start. That agency will deal with a big chunk of the Department's money.

It has been said that many pensioners who are entitled to MIG do not claim it even though they readily claim housing and council tax benefits. Why do they claim one and not another? Housing and council tax benefits are central Government money but they are delivered via local authorities, and pensioners can pop into what is, in my constituency, their friendly neighbourhood office. It is different from the social. There is therefore a paradox, in that pensioners will claim one means-tested benefit but not another because the delivery of the first is perceived to be more pensioner-friendly. That is why we are, as I have said, separating pensions from the Benefits Agency.

Many of my hon. Friends have read out the Government's record, including measures such as the free television licence for those over 75. The measure is worth £2 a week to those pensioners: that cannot be gainsaid. The winter fuel allowance this year is worth £3 a week to an individual or a household. For those over 75, that adds up to £5 a week that they would otherwise have spent out of their income. It is real money; it is not a token.

That is on top of all the other measures that we have included in the pensioner package, including the first-time concessionary fares for areas of the country that hitherto did not know what the words meant. Of course my city invented concessionary fares in 1956. That is not a benefit that I would boast about to my constituents, and I might add that it has been under threat when we have had the odd Tory controlled-council.

I say to my hon. Friends that it is unacceptable to use words such as "betrayal", "rottenness" and "failure". Those are unacceptable descriptions of the Government's package of policies for pensioners, rich or poor, since May 1997. Frankly, they feed the lie that those who are opposed to our party, from the left and the right, will permeate through society come the general election, and it is no good lending credence to that lie.

Mr. Winnick

Is my right hon. Friend aware that although I have absolutely no illusions about the poverty of many pensioners and I am glad about the minimum income guarantee, I will not be supporting the new clause simply because the Government have done more than they promised at the general election? They gave £100 of winter fuel allowance, which has now risen to £150, which many of us campaigned for year after year when the Tory Government refused to take action, and the same applies with the free television licence. Although I certainly want the Government to do more on pensions, I recognise that much has been done, and no one could accuse me of looking for a job.

Mr. Rooker

Nor me. My hon. Friend is right.

I want to finish on a point that is not generally appreciated, and when we make it, people do not believe us, but it demonstrates the scale of the problem that we are dealing with among millions of our fellow citizens. The minimum income guarantee is at present targeted at 1.5 million people, who happily apply for it and collect it. We want to encourage the other 500,000 to do so. With the changes to MIG and the winter fuel payments, the pensioner population are receiving £800 million more in the first three years of this Parliament than they would have done if we had restored the link between the basic pension and earnings. I ask my hon. Friends to think about that.

We are unable to do everything that we want to do. I want to do more. There is not a single Minister or Back-Bench Labour Member who does not want the Government to do more. However, we have to tell the truth, and so far over this Parliament we have delivered £800 million more to the pensioner population—targeted, it is true, in the case of MIG, but as a balance the other measures are widespread—than we would have spent if we had simply raised the basic pension in line with earnings. That is a record that we should be proud of, and not one that we should attack.

Mr. Burstow

I want briefly to pick up on one or two of the points that have been made in this full and useful debate, which is about the importance that Members on both sides of the House attach to the basic state pension and the ways in which its role might be developed.

The Minister did not entirely address new clause 8. He said that the Government accepted its spirit but were unable to accept its terms. The new clause would give the Government a power, which they could choose whether or not to use, to introduce and uprate age additions to the basic state pension. That would be a useful power that the Government should take, and we urge hon. Members who agree with us to join us in the Lobby in support of the new clause to get extra money to our oldest pensioners, who the Minister and many other hon. Members have rightly acknowledged are almost always the poorest.

The debate about new clause 36 has been particularly good, and many powerful speeches have been made by Labour Members. I do not want to add to those; they speak for themselves, and I hope that the House will have the opportunity to divide on that new clause.

The debate has been about the future of the basic state pension. Is it a future of continuing erosion, so that we will have a state pension that is withering away, or is it one in which we will be able to be proud of the basic state pension, which people expect the House to protect? I believe that we should protect it.

Mr. McDonnell

On a point of order, Mr. Deputy Speaker. There is some confusion about the voting pattern this evening. Can you clarify that the vote on new clause 36 will come after the debate on new clauses 18 and 19?

Mr. Deputy Speaker (Sir Alan Haselhurst)

I say to the hon. Gentleman and any other hon. Members who may be confused that the vote on that new clause—if the occupant of the Chair is disposed to accept a vote—will come in the appointed order on the amendment paper from which we are working, and not immediately.

Question put, That the clause be read a Second time:—

The House divided: Ayes 39, Noes 275.

Division No. 136]	[8.28 pm
AYES
Abbott, Ms Diane	Hughes, Simon (Southwark N)
Allan, Richard	Jones, Dr Lynne (Selly Oak)
Ashdown, Rt Hon Paddy	Kirkwood, Archy
Ballard, Jackie	Llwyd, Elfyn
Benn, Rt Hon Tony (Chesterfield)	McDonnell, John
Brake, Tom	Maclennan, Rt Hon Robert
Brand, Dr Peter	Moore, Michael
Breed, Colin	Öpik, Lembit
Burnett, John	Rendel, David
Burstow, Paul	Sanders, Adrian
Campbell, Rt Hon Menzies (NE Fife)	Simpson, Alan (Nottingham S)
	Stunell, Andrew
Chidgey, David	Taylor, Matthew (Truro)
Corbyn, Jeremy	Thomas, Simon (Ceredigion)
Cotter, Brian	Tonge, Dr Jenny
Davey, Edward (Kingston)	Tyler, Paul
Fearn, Ronnie	Webb, Steve
Field, Rt Hon Frank	Wood, Mike
Foster, Don (Bath)
Harris, Dr Evan	Tellers for the Ayes:
Harvey, Nick	Mr. Bob Russell and
Heath, David (Somerton & Frome)	Mr. Andrew George.

NOES
Ainger, Nick	Campbell, Mrs Anne (C'bridge)
Ainsworth, Robert (Cov'try NE)	Campbell, Ronnie (Blyth V)
Alexander, Douglas	Campbell-Savours, Dale
Allen, Graham	Caplin, Ivor
Anderson, Donald (Swansea E)	Casale, Roger
Anderson, Janet (Rossendale)	Caton, Martin
Armstrong, Rt Hon Ms Hilary	Cawsey, Ian
Ashton, Joe	Chapman, Ben (Wirral S)
Atherton, Ms Candy	Clapham, Michael
Atkins, Charlotte	Clark, Rt Hon Dr David (S Shields)
Austin, John	Clark, Dr Lynda (Edinburgh Pentlands)
Banks, Tony
Barnes, Harry	Clark, Paul (Gillingham)
Barron, Kevin	Clarke, Charles (Norwich S)
Bayley, Hugh	Clarke, Eric (Midlothian)
Beard, Nigel	Clarke, Tony (Northampton S)
Beckett, Rt Hon Mrs Margaret	Clelland, David
Begg, Miss Anne	Clwyd, Ann
Bell, Martin (Tatton)	Coaker, Vernon
Benton, Joe	Coffey, Ms Ann
Bermingham, Gerald	Cohen, Harry
Berry, Roger	Coleman, Iain
Betts, Clive	Colman, Tony
Blears, Ms Hazel	Connarty, Michael
Blizzard, Bob	Cooper, Yvette
Blunkett, Rt Hon David	Corbett, Robin
Boateng, Rt Hon Paul	Cousins, Jim
Bradley, Keith (Withington)	Crausby, David
Bradley, Peter (The Wrekin)	Cryer, John (Hornchurch)
Bradshaw, Ben	Cunningham, Jim (Cov'try S)
Brinton, Mrs Helen	Dalyell, Tam
Brown, Rt Hon Nick (Newcastle E)	Darling, Rt Hon Alistair
Browne, Desmond	Darvill, Keith
Buck, Ms Karen	Davey, Valerie (Bristol W)
Burden, Richard	Davidson, Ian
Byers, Rt Hon Stephen	Davies, Geraint (Croydon C)
Caborn, Rt Hon Richard	Dean, Mrs Janet
Campbell, Alan (Tynemouth)	Dismore, Andrew

Dobbin, Jim	Liddell, Rt Hon Mrs Helen
Donohoe, Brian H	Linton, Martin
Doran, Frank	Lock, David
Dowd, Jim	Love, Andrew
Eagle, Angela (Wallasey)	McAvoy, Thomas
Eagle, Maria (L'pool Garston)	McCabe, Steve
Edwards, Huw	McDonagh, Siobhain
Ennis, Jeff	Macdonald, Calum
Fisher, Mark	McFall, John
Fitzsimons, Lorna	McNulty, Tony
Flint, Caroline	Mactaggart, Fiona
Follett, Barbara	McWalter, Tony
Foster, Rt Hon Derek	McWilliam, John
Foster, Michael Jabez (Hastings)	Marsden, Gordon (Blackpool S)
Foster, Michael J (Worcester)	Marsden, Paul (Shrewsbury)
Foulkes, George	Marshall, Jim (Leicester S)
Galloway, George	Marshall-Andrews, Robert
Gardiner, Barry	Maxton, John
Gerrard, Neil	Meacher, Rt Hon Michael
Gilroy, Mrs Linda	Michie, Bill (Shef'ld Heeley)
Godman, Dr Norman A	Miller, Andrew
Goggins, Paul	Moffatt, Laura
Golding, Mrs Llin	Moonie, Dr Lewis
Gordon, Mrs Eileen	Morley, Elliot
Griffiths, Jane (Reading E)	Morris, Rt Hon Ms Estelle (B'ham Yardley)
Griffiths, Nigel (Edinburgh S)
Grocott, Bruce	Mountford, Kali
Grogan, John	Mullin, Chris
Hall, Mike (Weaver Vale)	Murphy, Denis (Wansbeck)
Hamilton, Fabian (Leeds NE)	Murphy, Jim (Eastwood)
Heal, Mrs Sylvia	Murphy, Rt Hon Paul (Torfaen)
Healey, John	Naysmith, Dr Doug
Henderson, Doug (Newcastle N)	Norris, Dan
Henderson, Ivan (Harwich)	O'Brien, Mike (N Warks)
Heppell, John	Olner, Bill
Hill, Keith	O'Neill, Martin
Hinchliffe, David	Osborne, Ms Sandra
Hoon, Rt Hon Geoffrey	Palmer, Dr Nick
Hope, Phil	Pearson, Ian
Hopkins, Kelvin	Pendry, Tom
Howarth, Alan (Newport E)	Perham, Ms Linda
Howells, Dr Kim	Pickthall, Colin
Hoyle, Lindsay	Pike, Peter L
Hughes, Ms Beverley (Stretford)	Plaskitt, James
Hughes, Kevin (Doncaster N)	Pollard, Kerry
Humble, Mrs Joan	Pond, Chris
Hurst, Alan	Pound, Stephen
Hutton, John	Powell, Sir Raymond
Iddon, Dr Brian	Prentice, Ms Bridget (Lewisham E)
Illsley, Eric	Prentice, Gordon (Pendle)
Jackson, Ms Glenda (Hampstead)	Prescott, Rt Hon John
Jackson, Helen (Hillsborough)	Prosser, Gwyn
Jamieson, David	Purchase, Ken
Jenkins, Brian	Quin, Rt Hon Ms Joyce
Johnson, Alan (Hull W & Hessle)	Quinn, Lawrie
Johnson, Miss Melanie (Welwyn Hatfield)	Radice, Rt Hon Giles
	Raynsford, Nick
Jones, Rt Hon Barry (Alyn)	Reed, Andrew (Loughborough)
Jones, Helen (Warrington N)	Reid, Rt Hon Dr John (Hamilton N)
Jones, Jon Owen (Cardiff C)	Roche, Mrs Barbara
Jones, Martyn (Clwyd S)	Rooker, Rt Hon Jeff
Kaufman, Rt Hon Gerald	Rooney, Terry
Keeble, Ms Sally	Ross, Ernie (Dundee W)
Keen, Alan (Feltham & Heston)	Rowlands, Ted
Kemp, Fraser	Roy, Frank
Kennedy, Jane (Wavertree)	Ruane, Chris
Khabra, Piara S	Ruddock, Joan
Kidney, David	Ryan, Ms Joan
Kitfoyle, Peter	Salter, Martin
King, Andy (Rugby & Kenilworth)	Savidge, Malcolm
King, Ms Oona (Bethnal Green)	Sawford, Phil
Laxton, Bob	Sedgemore, Brian
Lepper, David	Sheerman, Barry
Leslie, Christopher	Short, Rt Hon Clare
Levitt, Tom	Singh, Marsha
Lewis, Terry (Worsley)	Skinner, Dennis

Smith, Rt Hon Andrew (Oxford E)	Trickett, Jon
Smith, Angela (Basildon)	Truswell, Paul
Smith, Jacqui (Redditch)	Turner, Dennis (Wolverh'ton SE)
Smith, John (Glamorgan)	Turner, Dr George (NW Norfolk)
Smith, Llew (Blaenau Gwent)	Turner, Neil (Wigan)
Snape, Peter	Twigg, Derek (Halton)
Soley, Clive	Twigg, Stephen (Enfield)
Southworth, Ms Helen	Walley, Ms Joan
Spellar, John	Ward, Ms Claire
Squire, Ms Rachel	Watts, David
Steinberg, Gerry	White, Brian
Stevenson, George	Whitehead, Dr Alan
Stewart, David (Inverness E)	Williams, Rt Hon Alan (Swansea W)
Stewart, Ian (Eccles)
Stinchcombe, Paul	Williams, Alan W (E Carmarthen)
Stoate, Dr Howard	Williams, Mrs Betty (Conwy)
Stringer, Graham	Wills, Michael
Stuart, Ms Gisela	Winnick, David
Sutcliffe, Gerry	Woodward, Shaun
Taylor, Rt Hon Mrs Ann (Dewsbury)	Woolas, Phil
	Worthington, Tony
Taylor, Ms Dari (Stockton S)	Wright, Anthony D (Gt Yarmouth)
Taylor, David (NW Leics)	Wright, Dr Tony (Cannock)
Temple-Morris, Peter	Wyatt, Derek
Thomas, Gareth (Clwyd W)
Thomas, Gareth R (Harrow W)	Tellers for the Noes:
Tipping, Paddy	Mrs. Anne McGuire and
Touhig, Don	Mr. Greg Pope.

Question accordingly negatived.