§ 6. Mr. Paul Flynn (Newport, West)What plans he has to restore the Treasury supplement. [141838]
§ The Financial Secretary to the Treasury (Mr. Stephen Timms)None. However, consistent with our prudent approach, we provided in the draft re-rating order laid before Parliament at the end of last month for a Treasury grant to the national insurance fund for this financial year and next year in the unlikely event that the fund should need it.
§ Mr. FlynnMy hon. Friend will recall that the Treasury supplement was the great achievement of the last Liberal Government and was paid for 80 years because it was thought to be affordable by all Governments for most of the past century. If it were now being paid at the rate paid in the late 1980s, when the Conservatives cut it, it would be worth £20 a week on the basic pension.
The Government have been congratulated on giving pensioners by far the best deal that they have had for 25 years, but there is enough money in the fund to ensure that the link with earnings could be maintained until 2007. In considering the policy of the next Labour Government, and the one after that, will my right hon. Friend consider complete reform of the national insurance fund to make it a truly independent fund, run by independent managers and with funds invested on the stock exchange, so that we can have what pensioners really want—a guarantee that their incomes in retirement will not be affected by inflation, but will be protected?
§ Mr. TimmsThe intention has always been that the national insurance fund should operate on a pay-as-you-go basis. In recent years, there has been a grant from the Treasury, but that has been in times of short-term difficulty, such as in 1993–94 as a result of the boom-and-bust policies of the previous Government. Importantly, there will be significant new demands on the national insurance fund, for example, from pensions reform through the introduction of the state second pension.
My hon. Friend is right about the package of improvements that we have introduced and announced for pensioners, which has been widely welcomed. He is right that that is the best prospect for pensioner incomes that we have had for a long time. It would be a mistake to attempt to use a Treasury grant for a long-term spending commitment, in particular an indefinitely escalating one, which an earnings link would represent.