HC Deb 21 December 2000 vol 360 cc595-635

12.3 pm

The Secretary of State for Social Security (Mr. Alistair Darling)

I beg to move, That the draft Social Security Benefits Up-rating (No. 2) Order 2000, which was laid before this House on 13th December, be approved. This order and the draft Guaranteed Minimum Pensions Increase (No. 2) Order 2000 increase pensions, provide more help for families with children and do more for people with disabilities and carers than ever before. We are able to make the increases because we are now seeing the results of our reforms to the welfare state. Because we have more people off benefit and in jobs, we are spending £4 billion less this year and £4 billion less next year on the costs of unemployment.

At the previous general election, we promised that we would cut the bills of economic and social failure, and we have. As a result of that and other action, social security spending is now under control, for the first time in three decades. Consequently, we can spend more where it is needed, giving greater security to those who are retired or cannot work, just as we promised to do. Indeed, social security spending would be decreasing in real terms, for the first time since the second world war, had we not deliberately chosen to spend more on families with children, people with disabilities and pensioners.

All that stands in stark contrast to what happened in the 1980s, when, as we remember—in 1988, 1989 and 1990—Tory Secretaries of State came to the House to announce that they would freeze child benefit. By contrast, last year, we were able to announce a record increase in child benefit—which, this year, is being increased yet again.

Today's uprating order will increase most income-related benefits by the Rossi index, which is 1.6 per cent., in the usual way. However, there are a number of areas in which we want to do more than that.

First, we want to do more for children. We are determined to eradicate child poverty in this country, and to halve it in 10 years. When the Government came into office, one child in three was living below the bread line. That is unacceptable. It is economic madness, and it is also morally wrong to hold back a whole generation of children.

As a result of our Budget measures, a million children will be lifted out of poverty. That will deliver real opportunity for everyone, not just the privileged few.

However, from April next year we will go further. That is why we are increasing child benefit, and introducing the new children's tax credit. As a result of these measures, and of the working families tax credit, a single-earner family with two children, on half average earnings, will see its living standards rise by 20 per cent. this year—the biggest annual rise for a quarter of a century. By the end of this Parliament, we will be spending almost £6 billion extra a year on support for families with children, with most of the help going to the poorest families.

Mr. Steve Webb (Northavon)

I rise to seek clarification about the children's tax credit. I understand that the Inland Revenue does not know who the children of tax payers are, as such information is not part of the tax system. As a result, it sent out 7 million forms, just over 2 million of which have been returned. Apart from those 2 million families, what will be the situation for all other families who pay tax? If they have not returned the form, do the Government have a plan to find them? How will they get their money? What is the latest date by which forms can be returned so that families can still get the money in April?

Mr. Darling

The hon. Gentleman knows that responsibility for the Inland Revenue rests with my right hon. Friend the Chancellor of the Exchequer. I will make a point of asking my right hon. Friend, or one of his Ministers, to write to the hon. Gentleman to outline the Inland Revenue's plans in that respect. The hon. Gentleman is right to say that the tax authorities do not necessarily know who has children. That is why the Inland Revenue wrote to all those taxpayers who it thought might be eligible. From next year, the child tax credit will be worth £10 a week, and will be a valuable help to families on modest and low incomes. We are anxious to ensure that as many people as possible benefit from it, and I will certainly ask one of my colleagues to write to the hon. Gentleman with details of what we propose to do.

The important point to note is that the Government are not extending financial help alone. Other measures—such as the sure start initiative and our general objective of raising standards in education, which we are now achieving—are ensuring that millions of children get a far better opportunity and start in life than in the past.

In particular, we want to do more for families on low incomes who are bringing up children with disabilities, and to help with the extra costs that they face. That is why from April, for the first time, we will extend benefits to severely disabled three and four-year-olds. As a result, some 6,000 disabled children and their families will be better off by more than £38 a week.

We are also raising the disabled child premium by £7.40 a week, on top of the normal uprating. That means that around 80,000 children will see a rise in the premium, from £22.25 a week to £30 a week. That will be a real increase for some of the poorest families in the country who need that extra help.

Secondly, we want to do more for adults with severe disabilities. As I said in my statement to the House on 9 November, we have decided to introduce the disability income guarantee for people with severe disabilities from April next year at a far higher rate than originally intended. We had intended that it be introduced at the rate of £128 a week, but in fact the rate will be £142 a week—an extra £14 a week. For couples, the rate will be £186.80.

In addition, from April next year young adults disabled early in life will benefit from an extra £27.60 a week. Until the changes were introduced, those people got so little money that they depended on income support for most of their lives. I do not consider that to be acceptable in today's society, which is why we are increasing the amount that they get by £27 a week. All of the extra money has been made possible by the changes that we made two years ago.

Thirdly, we are doing more for carers. Many right hon. and hon. Members on both sides of the House have long recognised that the carer's contribution needs to be properly recognised. That is why we are increasing the carer's premium by £10 a week on top of the normal uprating. That means that the premium will rise in April from £14.15 to £24.40, helping more than 200,000 carers on low incomes. We are also increasing the earnings threshold for the invalid carer's allowance from £50 to £72—the rate of the lower earnings limit.

In total, we will be spending nearly £200 million more on supporting carers and people with disabilities next year, and every year thereafter. That is something that the Tories never did—what is more, they never could do it because of the cuts guarantee to which they are committed. It is interesting that so few of them have turned up for the debate. [Interruption.] I have found one. There is a Tory sitting at the back. I apologise to the hon. Member for Tewkesbury (Mr. Robertson)—he is lurking under the Gallery, and I did not see him in the gloom. He will no doubt tell his colleagues of all the good things that the Labour Government are able to do for people, thanks to our economic policies.

Mr. Laurence Robertson (Tewkesbury)

That will not take long.

Mr. Darling

In addition to the measures that I have outlined, we are also introducing measures to improve the vaccine damage regime. In case the hon. Member for Havant (Mr. Willetts) raises the matter again, I would like to take the opportunity of saying that we will be introducing the necessary legislation to reduce the disability threshold from 80 per cent. to 60 per cent., and to increase the time limits for claiming for children to the age of 21. We propose that these changes be introduced in the regulatory reform order as part of the Regulatory Reform Bill, which is now before the House. I said in the summer that we would act, and we will. With regard to the main changes that I announced in the summer to increase the vaccine damage payment to £100,000 for claims made after 22 July, those payments are now being made. That is the main step that I announced and it is being implemented.

No doubt the Conservatives—or, at least, the two of them on the Front Bench and the one on the Back Bench—will criticise us for not doing more sooner. However, the previous Government had 18 years to sort this out and they did not. We have made the necessary changes, which will go some way towards helping the families affected. I hope that most people will accept that.

I now turn to pensions.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Before the Secretary of State talks about pensions, could he answer the question of a 24-year-old constituent of mine? Have the Government any plans to alter the housing benefit system, because my constituent does not understand why, at the age of 24, his housing need is considered to be less than his neighbour who is 26? In a constituency like mine, if young people are to stay and work in the community, we must tackle the cost of housing for them.

Mr. Darling

I do not know whet her the hon. Gentleman has had a chance to read the Government's response to the consultation exercise that we carried out after publishing the Green Paper on housing. We have said that we want to broaden the definition of the single room reference rent to which the hon. Gentleman refers, which will help those under 25 in many parts of the country.

Mr. Webb

If I have understood my hon. Friend correctly, he might have been referring to the fact that the applicable amounts for the under-25s are lower than for those over 25. For a person in a low-paid job, for example, the tapering away of the rent rebate starts at a lower level for a 24-year-old than for a 25-year-old. Does the Secretary of State have any plans to address that issue?

Mr. Darling

We have made it clear that we do not propose to change the general regime, which is different from that for the under-25s. As I said to the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith)—who is no doubt capable of asking his own question—we have broadened the definition, which will go some way to help. However, if the question is whether we propose to remove the distinction between those over 25 and those under, the answer is no.

I shall now deal with pensions. Most national insurance benefits will rise in line with the retail prices index, which is 3.3 per cent. However, as the House will know, we want to do more than that to help pensioners. First, we want to tackle the scandal of pensioner poverty. Secondly, we want to ensure that every pensioner shares in the rising prosperity of our country. Thirdly, we want to reward pensioners for their saving instead of penalising it, as was the case under the system that we inherited.

Our first priority was to get more help quickly to the poorest pensioners; that is why we introduced the minimum income guarantee, which is already helping almost 2 million of the poorest pensioners. It is worth remembering that when we came into office, just three years ago, a single pensioner, aged 70, on income support, would have received a weekly income of £68.80. As a result of the measures before the House, the minimum income guarantee will rise to £92.15 from April, so that same pensioner—who would have been living on £68.80 three years ago—will be nearly £18 a week better off, over and above inflation. That is an example of how Governments can make a real difference in the standard of living of some of the oldest and poorest people in the country.

As we move towards the pension credit from 2003, we are increasing the basic state pension, which we believe should be the foundation of pension provision. It is part of the partnership between state and funded pensions that is essential if people are to retire on a decent income in the future. We want to raise the basic state pension by £5 a week for single people and by £8 a week for married couples; the pension will rise again in the following year. As I told the House in November, I can also confirm that widow's and bereavement benefits will rise by the same amounts.

That is on top of the £200 winter fuel payment, worth nearly £4 a week. Eleven million pensioners have already been sent their winter fuel payment; many of them appreciate that it makes a major contribution towards meeting their fuel costs at what is, traditionally, a time of great worry for many pensioners.

Mr. Webb

Will the right hon. Gentleman give way?

Mr. Darling

Yes, why not? The hon. Gentleman is determined to make his speech through interventions, so as it is Christmas I shall help him out for once.

Mr. Webb

I am very grateful to the right hon. Gentleman. My question is straightforward and factual. Will he confirm that, next year, he plans to cut the winter fuel payment to £150?

Mr. Darling

The hon. Gentleman is well aware that the Government make their proposals for pensions annually; we shall continue to do so as appropriate.

The hon. Gentleman might have been good enough to acknowledge the fact that the Government have gone a long way towards tackling the problem of fuel poverty—especially among older people—which he periodically raises in the House. We have cut VAT to the lowest permissible amount and we have also increased the winter fuel payment; that is making a real difference to many pensioners.

As for next year and the years after that, the hon. Gentleman will just have to wait. However, when people look back over the past three years at what the Government have done for pensioners, they will realise that we have done exactly what we promised—we have tackled pensioner poverty and ensured that all pensioners are able to share fairly in the rising prosperity of our country. In fact, we have done far more than the Liberals ever promised to do. The hon. Gentleman sometimes gives the impression that he has never read the manifesto on which he stood for election, but I remind him that the Liberals never promised to do even half of what we are doing.

As well as the changes to which I have referred, we have introduced free television licences for the over-75s; that is worth a further £2 a week.

Mr. David Drew (Stroud)

Given the European judgment on the payment of the winter fuel allowance to 60-year-old men, will that payment be made regardless of whether such men are in full-time work? Will it continue without affecting their tax and benefit in any way? Will my right hon. Friend clarify those points?

Mr. Darling

My hon. Friend is right. Following the judgment in the Taylor case last year, the Government announced that they would make payments to men aged over 60 and who were under the age of 65. All those who applied before the beginning of November should have received their payment. It is open to them to apply whenever they want and they will receive their payment as soon as it can be processed.

The advantage of the winter fuel payment and the free television licence—to which I am about to return—is that they are tax free and benefit free; if they were consolidated into the basic state pension, that would not be so.

When we debate these matters, it never ceases to amaze me that the Conservatives now oppose winter fuel payments and free television licences. Someone kindly reminded me of a private Member's Bill that had escaped my attention. It was introduced at the beginning of this Parliament and would have given free television licences to the over-75s. I was surprised to find that its promoter was the hon. Member for Arundel and South Downs (Mr. Flight) and that it its sponsors included the hon. Member for Bury St. Edmunds (Mr. Ruffley); the shadow Chief Secretary to the Treasury no less—the hon. Member for West Dorset (Mr. Letwin); the hon. Member for Westmorland and Lonsdale (Mr. Collins), who, I think, also holds a Front-Bench position; the hon. Member for Meriden (Mrs. Spelman), who was sitting on the Front Bench this morning before she left to pursue other activities; and the hon. Member for South Cambridgeshire (Mr. Lansley), who, I think, has something to do with the Tory manifesto.

In 1997, all those Members were in favour of giving free television licences to the over-75s. Surprise, surprise: the bandwagon is now running in a different direction and they are all against it. I look forward to hearing, when the shadow Secretary of State for Social Security gets to his feet, how he squares what his colleagues, now on the Front Bench, said three years ago with what they say now. He will no doubt explain it to the additional Conservative Member who has now appeared in the Chamber since this debate began, bringing us to a grand total of four.

Mr. David Winnick (Walsall, North)

Is my right hon. Friend aware that before he became a Member of Parliament, virtually all his present Cabinet colleagues then in Parliament—including the Prime Minister—were good enough to vote for my private Member's Bill, the Free Television Licences for Pensioners Bill, on 16 January 1987? It was defeated on a Friday by strenuous Tory whipping. Have not our Cabinet colleagues honoured what they voted for then by starting the process of giving free television licences to the over-75s?

Mr. Darling

My hon. Friend is right to remind the House of that. It took a little longer than we hoped to deliver our promise. I Unfortunately, 10 further years were to elapse before we were elected to government.

The crucial point is to recognise the significant problem of pensioner poverty in this country. It is scandalous that in this country, the fourth largest economy in the world, there are pensioners living in poverty. That is why we introduced the minimum income guarantee, the winter fuel payments, and free television licences to help the oldest pensioners.

In total during this Parliament, we are spending £8.5 billion more on pensioners than the previous Government planned to do. We can do that only because we are delivering stable economic growth and reforming the welfare state, so we can make the necessary funds available to tackle these problems.

Earlier this year, I set out our plans to reward pensioners for saving and to take the next steps towards the integration of the tax and benefits system for pensioners. From 2003, the new pension credit will mean that, for the first time ever, pensioners will be rewarded for their thrift. That credit, which is opposed by the Conservatives, will help 5.5 million pensioners—half of all the pensioner households in this country. The message is clear: it will always pay to save.

As part of the transition to the pension credit, the order would double the lower capital limit for the minimum income guarantee from £3.000 to £6,000 and increase the higher limit from £8,000 to £12,000. As a result, half a million pensioners will gain.

We shall go on to abolish the capital limits completely when the pension credit is introduced from 2003. At that time we shall also abolish the tariff income, which assumes an extraordinarily high rate of return, which many pensioners find difficult to understand.

I believe that the pension credit, which is the third stage in our pension reforms, will mark a sea change in the way in which the social security system operates. For the first time, we will have removed the disincentive to save. That will ensure that, when pensioners do what successive Governments tell them to do, they will see the gain resulting from it. I find it extraordinary that the Conservatives should oppose, to coin a phrase, a common-sense measure.

We are able to spend more money on pensioners, families, people with disabilities and their carers only because of the measures that we have taken over the past three years. No doubt, in a few minutes' time, we shall hear the usual complaints from the hon. Member for Havant (Mr. Willetts), who speaks for the Conservative party, but he must explain how he will be able to achieve anything like the measures that we have announced today, when his party is committed to £16 billion of spending cuts.

Regarding social security alone, we know that the Conservatives do not support the earnings-related minimum income guarantee. They are opposed to pension credit. They want to keep a system that penalises thrift. We know that they want to the process of privatising the basic state pension, scrap the new deal for lone parents and take £90 million out of the social fund, which will hit some of the poorest and most vulnerable people in this country.

We also know that the Conservatives want to get rid of industrial injuries benefit, which will impose a jobs tax on employers. We also know the Conservatives would axe the winter fuel payment, the Christmas bonus and the free television licences for pensioners. That is some manifesto. The best that they can offer pensioners is a mere 42p a week instead, and that is before tax and benefits. Of course, 2.5 million pensioners do not get the full pension, or even any pension at all, and men aged 60 to 65 will all lose out completely under the Tory policy—all because there is no new money. It is almost tempting to go canvassing with a Conservative to find out how that goes down on the doorsteps.

We know that there is no new money because the shadow Chancellor has said so, and he should know. It is becoming increasingly obvious to those of us who attend Prime Minister's Question Time and note that the shadow Chancellor sits one step further away from the Leader of the Opposition each time, that he is becoming acutely aware of the problem that he faces: £16 billion-worth of cuts to find, and more and more spending commitments being made here, there and everywhere. He knows that his sums do not add up.

We know that the Conservatives are dedicated to cutting public expenditure because of the policies to which they have committed themselves. So there would be no extra money to look after pensioners, disabled people and carers, just as there was no money to do so during the 18 years in which the Tories were in power. We know what they would do—there would be no new money for pensioners, for children, for families and for people with disabilities or their carers.

There is a clear choice to be made between us and the Conservative party. That choice is becoming clearer day by day. Poverty, inequality and division do not happen by accident. They happened as a result of the deliberate decisions that the Tories took over 18 years, and if they got the chance, they would do exactly the same again.

We will tackle poverty and inequality because not doing so is indefensible in the 21st century. We believe in opportunity for everyone—a fair and more just society. The measures that I have announced today will help deliver that promise. I commend the proposals to the House.

12.26 pm
Mr. David Willetts (Havant)

I shall begin by reducing what might otherwise be the high drama of this occasion by saying that the Opposition will not vote against the uprating of benefits. We shall wait to see whether the Liberal Democrats repeat the mistake that they made last year, but this will not be a nail-biting debate because we do not want to stand in the way of pensioners receiving the uprating in their benefits. Perhaps we are enjoying the spirit of Christmas, as the debate on such measures is taking place a little earlier than usual.

I have some specific criticisms of the measures. We are worried about the position of people in care homes. In fact, we are worried about the Government's treatment of those people generally, because the Government do not seem to understand their interests or problems. We are concerned about the possible long-term implications of what the Secretary of State calls the simplification of rates in the minimum income guarantee.

I shall not go through all of our specific concerns, but I shall try to price out exactly the strategy that lies behind the various measures under debate. Our frustration is that, in debating with the Secretary of State, it is difficult to get a sense of exactly what the Government's social security strategy involves. I think that they thought that the right hon. Member for Birkenhead (Mr. Field) had a welfare strategy. He did have a strategy, but I agree with the Secretary of State: the right hon. Gentleman's figures never added up, and the strategy was never what it was cracked up to be. However, following the right hon. Gentleman's sad disappearance from the Government, we now have the Secretary of State with his head down, reading out his briefs, rather than giving us any clear sense of the direction in which they want to take the social security system.

In what direction might the social security system go for pensioners? As Christmas is coming, perhaps an illuminating way to think about that is to tell the story of the Christmas bonus—one of the few payments not being uprated. That story reveals much about the long-term problems that the Secretary of State's approach will create for the social security system. Of course, the Christmas bonus was introduced by the Government of the right hon. Member for Old Bexley and Sidcup (Sir E. Heath). It was their special payment to help pensioners at Christmas time.

A Labour Government came into power in 1974, found that they had inherited that special payment—they probably called it a gimmick—and wondered what to do with it. Members of Parliament, such as the hon. Member for Bolsover (Mr. Skinner)—sadly, he is not in his place—pressed the then Secretary of State for Social Services on what she was going to do about the payment. In a debate, she said: there will not be a Christmas bonus. A bonus is bound to be somewhat arbitrary in coverage and excludes a number of people who benefit from a general uprating.—[Official Report, 22 May 1975; Vol. 892, c. 1624.] The Labour Government decided that they were not going to retain the special schemes introduced by the previous Conservative Government. Instead, they would put the money into a general increase in benefits.

The trouble with special schemes is that there is no provision for their annual uprating. The hon. Member for Stroud (Mr. Drew) asked, in an earlier debate, what the value of the Christmas bonus would be if it had been uprated from its original 1972 value of £10. The answer is that by April 2000, a prices uprating would have taken its value to £76.75.

The social security system contains a series of special payments that are left over as a kind of historical deposit from different Governments trying their own special wheezes to help pensioners. They include the over-80 payment—a very good concept, but it has never been increased from 25p. That has been a source of anger and irritation to pensioners. We also have the Christmas bonus, left over from the Government of my right hon. Friend the Member for Old Bexley and Sidcup. No one, apart from the previous Labour Secretary of State for Social Services, has ever abolished it, and since it was reintroduced it has not been uprated. No pledge has been made to uprate the winter fuel payment. That is a political decision taken every year; I agree with the hon. Member for Northavon (Mr. Webb) on that point. At present, the Government's official position seems to be that the payment will be cut next year from £200 to £150.

If we go on in this way, we shall have a social security system with a variety of special payments for pensioners, each with its own political or historical justification. It would be much better if all that money, and more, were put into the basic state pension. The Secretary of State fails to explain why he believes that a pension system that is growing all those extra payments for special circumstances will be superior to one in which a guaranteed amount of money is put into uprating the basic weekly state pension.

Mr. Darling

About 2.5 million people who do not receive the basic state pension receive the winter fuel payment. There are also people who do not receive the full pension. If the hon. Gentleman were to take away the winter fuel payment, the free television licence and the Christmas bonus, what would be the cost of ensuring that all those affected would have the same amount of money returned to them in full?

Mr. Willetts

All the money saved would go to all pensioners in receipt of the basic state pension. That includes many pensioners who, for a variety of reasons, do not benefit from the Secretary of State's special schemes. Pensioners who are on income support, or who are having their costs met in residential accommodation or nursing homes, do not benefit from the winter fuel payment. Our payment would go to all pensioners in receipt of the contributory pension.

I heard the intervention by the hon. Member for Walsall, North (Mr. Winnick) about television licences, and I understand all the arguments pro and con. However, many pensioners over 75 live in a household with someone under 75, who would normally pay for the TV licence. Therefore, the chances of the free TV licence bringing an extra £104 to every pensioner over 75 are, sadly, limited. For example, many pensioners live with a son or daughter, who normally pays for a licence. Are those sons or daughters likely to say to their elderly parents, "Here's £104, because we now have the benefit of your free TV licence"? Our proposal is simpler and more straightforward, and will reach pensioners who do not enjoy the benefit of the winter fuel payment or the free TV licence.

Mr. Darling

I might have missed something, but I do not think that the hon. Gentleman answered my question. Some 2.5 million people who receive the winter fuel payment and the other payments do not have a full pension; some of them have no pension. Will the value of all the benefits—the winter fuel payment, the free television licence and the Christmas bonus—be restored to them in full?

Mr. Willetts

I have made it clear that our policy is for all people in receipt of the basic pension. There would be a full uprating for pensioners who are not receiving the full value of the basic pension. The costing of our proposal includes giving the full increase to all pensioners who receive the partial or full value of the contributory pension. That is our policy. It has a much greater logic than the various special schemes—[Interruption.]

Mr. Deputy Speaker

Order. I am sorry to interrupt the hon. Gentleman, but the hon. Member for Stockport (Ms Coffey) should remember that parliamentary private secretaries are meant to be silent, certainly when they are sitting down.

Mr. Willetts

They should be seen and not heard.

We should compare the distributional consequences of our measure, which would go to all pensioners in receipt of the basic pension, including those who receive it at less than full value. It would help pensioners who, for various reasons, will not benefit in full, or even partially, from the Secretary of State's proposals. For example, pensioners in sheltered accommodation pay a reduced rate of £5 for a television licence, but the full value of the increase would be consolidated into their basic pension. Out package would also help pensioners in residential accommodation and nursing homes. It is better designed than the schemes that it would replace.

Mr. Winnick

Does the hon. Gentleman accept that people who receive the full pension often pay tax, and will therefore have to pay tax on the additional sums, which are now tax free? What would a Tory Government's approach be to people who are not entitled to the state pension? Presumably, his package would mean that they would not receive a penny of what is being provided by the television licence scheme and the winter fuel allowance.

Mr. Willetts

On the second point, I explained that our package is for people in receipt of the contributory pension. The hon. Gentleman has studied the subject for many years. If we compare the various groups who, for whatever reason, will not be able to participate fully in the Government's special schemes, but who would benefit from a substantial increase in the basic pension, we will find that overall, the distribution of that package would be more beneficial than the alternatives, because it would go to every pensioner.

As for the hon. Gentleman's first point, my right hon. Friend the Leader of the Opposition made it clear in his original statement that we recognise that, although the special payments are tax exempt, the basic pension is taxable. That is why we have said from day one that we would adjust tax allowances, which we could do by using the device of the age allowance for pensioners. Therefore, the package would not increase the tax taken from pensioners. I regret the fact that the Secretary of State goes on and on as if we had never said that. The costings of our proposal show that there is no special device to collect extra tax from pensioners to help finance it. It is straightforward and simple.

Mr. Vernon Coaker (Gedling)

Has the hon. Gentleman agreed that policy with the shadow Chancellor? What is the estimated cost of the package?

Mr. Willetts

I am pleased to say that the package was agreed with the shadow Chancellor and the Leader of the Opposition before we launched it. The point is that it is tax neutral. No extra tax would be taken from pensioners, so no one would be worse off. That is what we announced on day one, and it remains our policy. The hon. Member for Gedling (Mr. Coaker) seems to be baffled by that. I should be happy to take a further intervention, but ours is a straightforward position, and I am grateful to him for giving me yet another opportunity to make it clear.

The real task is not only to tackle pensioner poverty now but to try to ensure that the next generation of pensioners is not in poverty. Above all, we must encourage more funded pension provision. Perhaps the most worrying economic statistic under this Government is the savings ratio—the percentage of income that pensioners are saving. I am pleased to see my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) here because it gives me a chance to praise his record as Chancellor of the Exchequer. When he left office in the second quarter of 1997, households were saving 10.7 per cent. of their income. That figure has fallen to 3 per cent. That statistic is very worrying because it means that future generations of pensioners will retire with an income much lower than they expected. I support the Government's pension statements initiative. It is a useful measure to try to encourage people to understand what the value of their total pension package may be when they retire.

The evidence shows, however, that over the past few years there has been a significant decline in occupational pension provision. The average number of occupational pension schemes being set up each year has fallen from 9,000, when we were in office, to fewer than 5,000 since 1997. In 1999, only 3,000 schemes were set up. In addition, 14 per cent. of final salary schemes are closed to new members. The number of personal pensions being taken out is declining.

The combination of the extra tax that the Government have imposed on pensions, and planning blight as people wait for the arrival of stakeholder pensions, means that we face a significant decline in funded pensions. The danger is that although we in this country have been complacently patting ourselves on the back because our funded pension provision is way ahead of that on the continent, the boot may soon be on the other foot.

I will make a modest bet with the Secretary of State that if we carry on at this rate, within a few years the annual flow into funded pension savings in Germany will exceed that in Britain. The right hon. Gentleman, or any subsequent Secretary of State, will then be under understandable pressure to introduce yet more special schemes or other measures to increase state benefit income for pensioners, because they will not have enough pension savings of their own. That is the long-term problem that we face, and far from tackling it, the Government have, if anything, exacerbated it through regulatory complexity, planning blight and extra tax.

What is the Secretary of State's agenda? Whenever I refer to all the changes that are due in 2003, he looks rather baffled. I wonder how many Labour Members are fully aware of what is supposed to happen in 2003. It is frustrating that the only explanation the Government have given us of those proposed changes is Treasury working paper No. 5, from November 1999, "Supporting Children Through the Tax and Benefit System". There is a much consulted chart, which all the pundits love, on page 40, with graphs showing the current and new arrangements for financial support for children.

The Chairman of the Social Security Committee, the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), is in his place, and I am pleased that the Committee is conducting a study of that important subject. We face turbulence in the benefits system because the Secretary of State hopes, within one year, not only to introduce a pensioner credit but to abolish the working families tax credit and introduce a new integrated child credit and an employment tax credit. There will be considerable confusion.

Those charts in the Treasury working paper show the point at which welfare reform disappears up its own rear because the second chart has exactly the same distributional effect as the first, but is achieved by a different means. The game of going through all those changes simply to deliver to every family exactly the same income as they get at the moment, but through a radically changed organisation, does not seem worth the candle. Coming up with a different way to deliver exactly the same distribution of benefits is a perverse and unnecessary exercise.

I presume that the Government are embarking on the exercise only because they want to change some of the ways in which people gain from taxation and benefits. I think that they will encounter a paradox. Their main additional proposal is the employment tax credit, which is received by people in work on low earnings, regardless of whether they have children. Therefore the main distributional impact of measures that are supposed to help children will be to extend a benefit to low earners without children.

The Secretary of State might disagree, but I think that he will find that the main impact of introducing the so-called family package in 2003 will be to help people without children—that is where the additional expenditure is likely to be made. I see him shake his head, but he intends to introduce an employment tax credit, and he will not be able to withhold it from people who do not have children, so they are likely to be the recipients of the extra expenditure in 2003.

Mr. Darling

I am listening to the hon. Gentleman's interesting lecture. Our strategy is quite clear. He asks about in-work measures. We want to make sure that work pays, but we inherited the problem that many people were better off on benefits than in work. That is the logic behind an earnings tax credit. We also want to do more for families, especially those on modest or low incomes, who have children, while working towards achieving our objective of reducing child poverty. That is the logic behind the child credit. Rather than engage in academic debate, the hon. Gentleman should face up to his own problem, which is that he cannot give more money to eradicate child poverty, nor allocate the funds necessary to make sure that work pays, because he is committed to making massive cuts in public spending.

Mr. Willetts

The Secretary of State might think that the debate is academic, but all I am trying to do is elicit from him a coherent statement. His Department has never issued anything to tell us what he thinks is the purpose behind all the changes that the Government hope to introduce in 2003. He talks as if no help has ever been given to families on low incomes, but it has—family credit, for example. All the changes that he plans to implement will do is deliver to the person in work the money that family credit would have delivered to the caring parent. It is doubtful that there is any purpose in changing the delivery system in that way.

I do not know whether the right hon. Gentleman knows the history of the Labour party in this respect. It is ironic that what he thinks he is doing by making these radical reforms—although perhaps the Chancellor is behind them—is exactly the same as what the Labour Government tried to do in 1964. Lord Houghton was going to be the man who integrated tax and benefits, and he worked on it for years. The Secretary of State should read Richard Crossman's explanations of what went wrong as the Labour Government wasted years trying to integrate tax and benefits. They even had a precursor to stakeholders, in the form of "superfunds", which were going to encourage more funded pensions among those who did not have funded pension schemes.

Labour Governments have been through all that before, and I tell the right hon. Gentleman that tax-benefits integration will not deliver what he thinks it will. He cannot sit on his hands and say that everything comes down to the Treasury, or that I am delivering a merely academic lecture. In 2003, he will implement massive changes in the British tax and benefits system for which no person in his Department has ever offered any coherent explanation or justification. The right hon. Gentleman cannot wash his hands of the matter; it will come back to haunt him.

Oddly enough, an alternative strategy rests on an insight from Beveridge himself: that targeting is not the same as means-testing. Means-testing, either in the traditional way through benefits or through the tax system, is not the only way in which to target assistance on families and other groups who need help. If the categories of recipient are defined carefully enough, categorical benefits can be distributed in a way that is quite well targeted. That is why, before I became a Member of Parliament, I argued that help should be focused on families with children younger than five. Families with younger children tend to be those on low incomes. We know also that poorer pensioners tend to be older pensioners. That is why the help in our package is especially focused on the over-75s. If those elementary age rules are used, we could achieve quite good targeting without means-testing.

Mr. Webb

The hen. Gentleman has had an influence on my thinking on this issue. That is partly why Liberal Democrats advocate serious pension rises for older pensioners. The only respect in which the hon. Gentleman's policy does more for the over-75s is the fact that he would replace in cash the benefit that they get in kind. It would not give a penny extra to the over-75s.

Mr. Willetts

There are two ways in which our policy does help the over-75s more. As I have said, there are a significant number of pensioners over 75 who are not paying for their television licences, whereas they would all get the pension. Secondly, we have tried to direct the extra £320 million that we would gain from savings elsewhere in the social security system to the over-75s in particular. I think that the philosophy that lies behind the original higher rate fir the over-80s, like that in respect of the over-75s, is correct.

Mr. Darling

If we are to have an academic seminar—and as there are only a few of us in the Chamber, we might as well go down that route—let us take a pensioner over 75 who currently receives no pension, or even a part pension. The hon. Gentleman admitted a short while ago that that pensioner will not get a penny from what the Tories propose, because they will take away the winter fuel payment, the free television licence and the Christmas bonus. I suspect that quite a few over-75s do not get a pension for historical reasons, and they will lose out. What the hon. Gentleman has said is not true.

Mr. Willetts

Our package applies to all pensioners, including those with only a partial pension.

Mr. Darling

What about pensioners with no pension?

Mr. Willetts

The right hon. Gentleman talks about those with no pension. I might as well ask about those who do not pay for their television licences. What about those who are not benefiting from the winter fuel payment? Our package puts all the money into the basic state pension, and there is also the minimum income guarantee—that is the old income support, which was renamed—for pensioners regardless of whether they have a basic pension.

Mr. Darling

There are about 500,000 pensioners who do not get a pension, and the hon. Gentleman will take seven quid a week from them. That is the logic of what he is saying.

Mr. Willetts

The right hon. Gentleman is talking as if his package will somehow help every pensioner. He should remember the shambles of the early years of the implementation of the winter fuel payment. The Government had to track down a pensioner unit—a concept hitherto unknown to the social security system—so that each of them could have a winter fuel payment. There are problems for pensioners in nursing homes, and, as I have said, for pensioners who are not paying for their television licence.

The right hon. Gentleman's proposals are not universal, but he is talking as if they were. Our proposals cover every pensioner in receipt of the basic state pension. The right hon. Gentleman talks all the time as if the Government had put a great deal of money into helping the poorest pensioners, but the vast majority of their expenditure has not gone into the minimum income guarantee. Instead, it has gone into a variety of schemes, whose distribution impact is, to say the least, difficult to assess, because they do not amount to a straightforward package for every pensioner in receipt of the basic pension.

I shall finish with some other quick points. I am taking the opportunity of the debate—the attendance is less than massive—to try to tease out from the Secretary of State what he is trying to do with social security. I have talked about means-testing and about what will happen in 2003. It is frustrating that we do not seem to be able to persuade the right hon. Gentleman to offer a statement on the position in 2003. It is ironic that the best explanation that he can find of the case for tax benefit integration and tax credit is the Green Paper written by my distinguished colleague Lord Higgins, who is the Opposition's spokesman on these matters. He wrote the Heath Government's Green Paper in 1971, and it still remains a more articulate, better argued, more coherent and wider-ranging account of the case for tax credits and tax-benefit integration than anything that we have had from the Government. Such is the irony of political debate.

The right hon. Gentleman referred to poverty several times. I draw his attention to what I am sure many people are talking about in connection with the Government's initiatives. There is a problem in social security, and more widely; in fact, it is to be found in the Government's social policy initiatives as a whole. That is the extraordinary number of new schemes and special schemes that are introduced, supposedly with the aim of helping the most deprived parts of the country.

I do not doubt the sincerity of Ministers' motives when they say that they are trying to help the most deprived areas. However, the right hon. Gentleman knows that we have an extraordinary variety of such schemes—I am aware that they are not all DSS schemes. We have employment zones, education action zones and health action zones—and I believe that there are other zones. The previous Government needed a cone line, and the present Government should have a zone line, so that we can make a telephone call if we spot another zone.

The problem with all these zones is that there is no consistency between them. There is no correlation between area-based initiatives in different areas and how they score in terms of any objective measure of deprivation. In August 1997, the present Secretary of State for Northern Ireland, the right hon. Member for Hartlepool (Mr. Mandelson), announced the setting up of the social exclusion unit. It was probably a bid to get on to Labour's National Executive Committee, and I think that he failed—but he said that the case for the unit was as follows: There is a proliferation of programmes with insufficient collaboration between the different agencies involved at national, local, and area level. As a result we are spending vast sums of money, often over and over again on the same people through different programmes, without improving their ability to participate in the economy and society. That was the critique with which the right hon. Gentleman launched the social exclusion unit in the summer of 1997.

However, two years later, when the Cabinet Office performance and innovation unit reported, it said: the clear evidence from those on the ground and from the PIU's own analysis is that there are too many Government initiatives, causing confusion; not enough co-ordination; and too much time spent on negotiating the system, rather than delivering. Labour Members should reflect on the experience of those who are doing their best in the most deprived areas. These people tell us over and over again that there is initiative fatigue. They say that they are spending all their time bidding for penny packets under a variety of initiatives that are often not coherently put together. Instead of the competent delivery of core programmes, people are spending too much time chasing individual schemes that have been launched to get 48 hours of media coverage. Insufficient attention is paid to how they can be competently delivered.

Mr. Darling

This will be my final intervention, because we seem to have left benefit uprating way behind. I assume that Conservative Members find themselves in complete agreement with everything that the Government are doing. I am sure that the hon. Gentleman agrees with me that what matters is the outcome of policies. We will take 1 million children out of poverty as a result of what we are doing. Education standards are improving, and 1 million more people are in work. That is all the result both of our general policies and of some of the particular policies to which the hon. Gentleman has referred. His problem is that he is committed to cutting public expenditure and investment by £16 billion. Were he to return to office, we would face exactly the same problems that we inherited, which my right hon. Friend the Secretary of State for Northern Ireland described in 1997.

Mr. Willetts

Before the right hon. Gentleman speaks so complacently about the Government's record, he should read, if he has not yet done so, the Joseph Rowntree Foundation publication of only a week or so ago. It assesses the Government's record on social exclusion. [Interruption.] That document is an assessment of the Government's record, based on the fullest information that the foundation had. The right hon. Gentleman has no extra information that was not available to those who produced the report. It covers everything, from help from social services for pensioners living at home, and the number of pensioners with no income other than state benefits, to the position of children, including the poorest children in our society.

In many instances, the foundation identified either no change or a worsening trend. The trend of low-birthweight babies is worsening. Before the right hon. Gentleman becomes complacent about what is going on, he should take account of the best external independent audit of the Government's record on poverty and social exclusion, because poverty and social exclusion are an important benchmark of the effectiveness of all the Government's special schemes. The fact that I make these criticisms of the Government's approach—the flurry of initiatives within the DSS, and more widely across Government, getting in the way of what matters—should not be taken by the Secretary of State as evidence that I think that everything in the benefit uprating is marvellous or brilliant.

Like the troops fraternising as they emerged from the trenches on Christmas day in 1914, I was trying to take the opportunity of the privacy of this debate, before the House rises for Christmas, to raise one or two wider questions about social policy and the Government's approach.

Mr. Darling


Mr. Willetts

The Secretary of State wants to intervene again. We must be setting a record. Of course I give way to the right hon. Gentleman.

Mr. Darling

Even in the spirit of Christmas, the hon. Gentleman will not get away with that nonsense about the Joseph Rowntree Foundation report. As the authors freely acknowledge, the report does not cover many of the measures that we introduced over the past two years. If the hon. Gentleman read the report, he would see that many of the things about which it complains, such as the increase in poverty and disadvantage, happened during the time that the Conservatives were in government and he was a Minister.

I am happy to be judged on what we have done during this first Parliament, and I hope that we will get the opportunity to be judged as a result of what we do in a second Parliament. I remind the hon. Gentleman that, far from acknowledging that poverty had to be tackled and eradicated, one of my predecessors, now Lord Moore, spent some time trying to prove that poverty did not exist. No wonder the Tories did nothing about it.

Mr. Willetts

I see the Government Whip looking restless, as he has a train to catch, so I shall not go further down that route. More of my speech has been taken up with the Secretary of State's interventions than with my remarks about social policy.

Had we had more time, we might have debated some of the other things that the Secretary of State is doing, in the absence of any coherent overall approach to social policy, any coherent statement about what the Government are trying to do in 2003, or any serious attempt to learn one of the most important lessons that can be learned from Beveridge about how to target assistance on the people who most need it. We have had no clear and authoritative statement of what will happen to the organisation of the Department. I will watch with great interest to see what happens as the right hon. Gentleman tries, for example, to merge the work for unemployed people done by the Department for Education and Employment with that done by the Department of Social Security. However, that is a matter for a separate debate.

We will not oppose the uprating, although we have various specific criticisms of it. I wish the Secretary of State and his team, the House, and you, Mr. Deputy Speaker, a merry Christmas.

1.2 pm

Mr. Vernon Coaker (Gedling)

In his speech, the hon. Member for Havant (Mr. Willetts) attacked the Government's record on dealing with poverty. When we reflect on what the Government have achieved in their first Parliament, we can rightly be proud of the anti-poverty measures that they have introduced. A key feature of the uprating order, which we cannot discuss in detail in the time available, is that it is part of the welfare reform programme that the Government are pursuing.

Without a fundamental reform of the welfare system, the poverty that has blighted many of our communities for so long will continue. When we examine the benefits system and see the people who have been entitled to benefits, it is clear that without reform of the system we would merely have continued to pay people benefits. In five years, their children would have been on benefit, and in 20 years their grandchildren would have been on benefit. The culture of benefit dependency in some communities would be perpetuated. That has been one of the factors driving me on in politics.

The welfare system cannot carry on confirming people in poverty; radical reform is necessary. That is the purpose of the range of measures that the Government have introduced, particularly those designed to get people back into work. That is fundamental to tackling poverty. We must help people back into work, and at the same time ensure that those who remain on benefit have security.

The benefit uprating package is a part of a radical programme of which the Government can be proud, especially as it sets about challenging the culture of dependency.

I shall deal first with pensions. The Government have produced a programme of measures to help pensioners. As is well known by those of us who attend debates such as this—one always seems to see the same faces—one of the Government's priorities was to tackle pensioner poverty. I support that, My right hon. Friend the Secretary of State set out in detail the increased help available to the poorest pensioners as a result of the measures that we have taken.

The minimum income guarantee included in the uprating order will bring about significant increases for the poorest single pensioners and pensioner couples. One of the criticisms of the minimum income guarantee is that it rewards the feckless who have not bothered to save for their retirement, but it is clear from the profile of the poorest pensioners that they are mostly the oldest pensioners and mostly women who have had no opportunity to build up a contribution record.

I do not believe that the vast majority of people who depend on the minimum income guarantee are those who have not bothered to save for retirement. They deserve our support. If the welfare state means anything, it must mean supporting such people. The minimum income guarantee is one of the ways in which the Government have tried to help those at the bottom of the income scale in their old age.

One of the problems associated with such a benefit is the difficulty of getting people who are entitled to it to claim it. It might help if we spoke about it differently in the House and told people that the minimum income guarantee was part of the welfare state. People who shrink from claiming means-tested benefit do not have the same problem when it comes to claiming housing benefit or council tax benefit, which are also means-tested benefits. We must persuade people that if they are not embarrassed to claim those benefits and do not feel that that is scrounging from the state, they should have the same attitude to the MIG, which is also part of the welfare state and for which they have built up an entitlement over their lifetime.

Mr. Drew

I thank my hon. Friend for giving way. Does he agree that we should be more proactive in telling people about their entitlement? The Government have had a carefully planned programme to tell people, through the Employment Service or the Benefits Agency, what they should be claiming.

Mr. Coaker

My hon. Friend makes an excellent point. Often, the Government do not get the credit for what they are doing. I know that, as a Back Bencher, I would say that. When the Government introduce the pension age agency, that will also make an immense difference. It will be dedicated to provision and support for pensioners and elderly people. One of the things that elderly people tell me is that they do not like the DSS Alice because they associate it with people who are out of work. The change in the delivery of benefits for the elderly will help to get people to claim those to which they are entitled. It is incumbent on all hon. Members to talk about the minimum income guarantee as an entitlement that people can claim without feeling guilty, just as they do not feel guilty about claiming council tax benefit or housing benefit, even though those benefits are also means-tested.

Mr. Webb

As usual, the hon. Gentleman is talking a lot of sense. Is he disappointed that more progress has not been made on the following matter? It is true that lots of pensioners do not mind claiming rent rebate and council tax benefit. Evidence shows that half the pensioners who do not claim the income support to which they are entitled claim housing benefit or council tax benefit. As they have to give all the information necessary to calculate their income support to claim housing benefit, is the hon. Gentleman disappointed about that and will he do something to ensure that his colleagues—who, on the whole, do not listen to me—get those two systems together? That has been going on for years, but all the information is already in the system. We do not need a separate system, because the information is there; it simply needs to be passed on so that pensioners can get the money.

Mr. Coaker

That is a fair comment. Anything that would increase the number of people claiming an entitlement is important. The hon. Gentleman will know, as I do, that there are experiments throughout the country in which local authority housing benefit officials are working with DSS officials in DSS offices to try to do that. It is perfectly sensible so to marry the available information that we get the money to those people who need it.

Mr. Laurence Robertson

I, too, agree with a lot of what the hon. Gentleman has said. He put his finger on one problem when he said that claiming the minimum income guarantee is a matter of practical difficulties and a philosophical problem for a lot of pensioners. I agree that it is a philosophical problem, but is it likely that pensioners can be persuaded out of that?

Mr. Coaker

Again, that is a fair comment. It is possible to persuade people out of that, but Members of Parliament and people outside will have to adopt a different attitude to the MIG. We must continue to argue that people should claim housing benefit and council tax benefit, which are means-tested benefits but do not have the same stigma. There might be a philosophical problem, and we all encounter that in our surgeries. However, if we talk about the MIG as an entitlement that people have built up in their lifetime, just as they have built up their entitlement to access to other welfare state benefits, we can go a long way to achieving that aim. There are practical difficulties with getting people to claim, and we need to continue to search for ways to overcome that.

We have made progress on other measures for pensioners. The winter fuel payment and free TV licences are important. Before becoming a Member of Parliament I was aware that people felt strongly about the winter fuel payment. They demanded that the Government do something, as they felt that it was wrong that individuals were frightened to turn their fire on in winter. The Government have attempted to address that. They told people that they would make a special payment so that they need not be frightened to heat their home and turn on the fire. That is not a gimmick, but a sensible response to something that was being demanded of all of us when we looked at the problems faced by pensioners trying to heat their homes in winter.

The pension credit builds on the pension reforms in the uprating report. When people study the pension credit, they will see it as another part of the Government's reform programme for pensioners. It is easiest to describe it as almost a reverse income tax. My right hon. Friend the Secretary of State is right that pensioners and elderly people want to be rewarded for their saving and do not want to be penalised for thrift. We would all agree that we need to address that important matter. The pension credit will bring people up to a minimum income and will pay them for the savings that they have accumulated or their small occupational pension, which will be seen as another important stage in our reforms.

People also feel particularly strongly about the unfairness of capital limits, whereby a small amount of money disqualifies individuals from entitlement to a range of other benefits. I am pleased that capital benefits will be raised in April to £6,000 and £12,000, and abolished altogether in 2003. Again, that sends out an important message that, having started with poorer pensioners and having reformed occupational pensions, the Government are looking to reform the pension credit as well. The Government are delivering a package of systematic and affordable step-by-step reforms.

It is important to recognise that the uprating report includes considerable increases for some of the poorest families with children with disabilities. The child premium on income support for a disabled child will go up from £22.50 to £30, which is £7.40 a week more than the normal uprating and will be a significant improvement for those people. Throughout the country, 80,000 children will benefit from that. The disability income guarantee will ensure that none of the poorest families has an income of less than £142 a week for single people and £186.60 for couples. Again, the Government are delivering for some of the poorest people in the most difficult circumstances. As with the minimum income guarantee for pensioners, we need to talk about the disability income guarantee as an important benefit to which people with disabilities are entitled and which the Government have provided as an important element in the welfare state.

Carers can be pleased that the carer premium on income support will be increased. Again, the Government made a pledge to do something to support carers, and the premium will be raised by £10 to £24.40. An estimated 200,000 carers on low incomes will be supported as a result of that.

I have talked about increases in benefits and important changes made by the Government. We all recognise that, if we strip away the politics and the political point scoring, the benefits often go to very poor people, who are in exceptionally difficult circumstances. I say to the Under-Secretary, my hon. Friend the Member for City of York (Mr. Bayley), that we must keep an eye on the level of all benefits, as one sometimes thinks, "My God, is somebody having to live on that money, which is not an exceptional amount?" I think Members on both sides of the House could agree with that statement. In particular, we need to stay focused on the level of two significant benefits in the uprating: the disability living allowance and the attendance allowance. Those benefits are extremely important for the way in which society is developing, as there are people with all sorts of different care needs. I know from my mother-in-law's experience with attendance allowance that it is an important benefit.

Mr. Willetts

In asking the hon. Gentleman a question, I am also looking to the Minister, who will reply to our debate. The hon. Gentleman was talking about the value of benefits. Of course, it is important that benefits for disabled people are delivered competently and promptly. Is the hon. Gentleman concerned, as I am, about the increasing evidence of delays in getting attendance allowance to claimants and an apparent deterioration in performance evident from the unacceptable periods that people have to wait, especially if they appeal against a decision not to allow them benefit?

Mr. Coaker

We are all concerned. That is not a political point, as we are all anxious about unnecessary delay. I am sure that, as a constituency Member of Parliament, the Minister sees constituents who are worried about things that sometimes go wrong with the system. Of course, that is important, and we must make sure that the benefit system delivers to those people as quickly, effectively and efficiently as possible. My point is that the level of those benefits is crucial to some people who are living in very difficult circumstances.

I am delighted with the extension of disability living allowance to three and four-year-old children. Before the change, many of us had experiences of those children being excluded from the DLA provision. I also welcome the extension of incapacity benefit to young people under 20.

The uprating order deals with huge amounts of public money. We have had a good debate on the reforms and on what the benefits should be. The welfare state, as it is currently constituted, has contributed significantly to the society in which we live, but it cannot remain static and must change with the times. It must reflect the development of society. There will always be debate about the reforms that are required to achieve that, but I am proud that the Government are consistent and have remained true to the principles of the welfare state, while recognising that it needs to be changed and modernised.

I am pleased that the desire to help the poorest people first is at the heart of our welfare changes. I am pleased also that those changes relate not only to the payment of benefits, but are also about looking at our society and challenging the culture of dependency. They are about telling communities where large numbers of people have not worked for years and many families have existed on benefit for a long time that we must try to get people off benefits and into work while providing support for those who must remain on benefit.

In future, we will look back at a radical Government with radical policies who have brought about genuine change. There will be differences of opinion on how such change can be achieved, but today's debate will contribute to the reform process, which is, above all, about how to do the most that we can for some of the poorest people in society and tackling the problems of social exclusion that we see around us.

1.21 pm
Mr. Steve Webb (Northavon)

I begin by apologising to the House. As I am feeling slightly under the weather, I might not be present for all the subsequent contributions. Indeed, I might have to curtail my remarks, although it has struck me that no one would object if I did so. I suppose that I should not worry too much about courtesy, as the Secretary of State did his usual trick and did not even stay to listen to the first speech made by a Labour Back Bencher. Obviously, he does not think that he has anything to learn from any hon. Member, which is regrettable.

I do not want to keep the House in suspense any longer, so I inform hon. Members that neither the Conservatives nor the Liberal Democrats will seek to press the motion to a Division. This debate is a good opportunity to discuss the question of where the system is going and to exchange some ideas, as the hon. Member for Havant (Mr. Willetts) tried to do, so it is unfortunate that the House has been treated in a regrettable manner.

The hon. Member for Gedling (Mr. Coaker) used an interesting phrase in his contribution, which was, as ever, thoughtful and considered. He referred to a package of systematic, step-by-step reforms. The word "systematic" is the one word that I would not use about the Government's welfare reform process. Instead, I would use the phrase "make it up as you go along", for reasons that I shall expand, especially in relation to pensions. My hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood), who chairs the Select Committee on Social Security, is considering in depth the strategy for families with children, so I shall touch only briefly on that matter.

With regard to pensioners, the Government have a story. It sounds at first as if something coherent is going on, but the more I consider their policies, the less sure I am that much coherence exists. After the election, the first announcement that the Government made was that the minimum income guarantee—as income support was renamed—would rise in line with earnings. Few people disagree that the level was too low and that extra support for poorer pensioners was needed, so I associate myself with that decision, which was the first step. However, the next step was curious.

In the winter, the Chancellor found some spare cash that had been released by an underspend on his EU contribution, or something similar, and he wondered what to do with it. He decided to make a winter fuel payment to pensioners. The House may forget that it was introduced at £20. The policy was met with a fanfare, although I suspect that a similar payment would now cause a riot. The amount for those on income support was £50. The argument for that was that it targeted more help on those in need.

There is a fundamental inconsistency in the Government's strategy. Depending on whether there is an "r" in the month, they focus either on helping the folk who are most in need or on giving universal support as a way of providing tax-free help to everybody. A policy of granting a tax-free £200 payment to every household in the land is as untargeted as possible. However, when the Liberal Democrats said that 75p was not enough and asked the Government why they were not paying more, they told us that a general increase in the pension would be poorly targeted and that they wanted to spend money on those in need. They are facing both ways at the same time, and have done so throughout.

The Government could have said that they needed a mix, that they were only partly targeting those who were most in need and that pensioners as a group needed to do better. One might have had more sympathy with such a view. When it suited them, as it did with the 75p payment, they said that they had to help those who were most in need. When an election is imminent, however, they grant a winter fuel payment of £200.

When I questioned the rate of the winter fuel payment for the coming year and said that it would fall from £200 to £150, a few hon. Members queried that, and said that it could not be right. The hon. Member for Havant has asked about that. I do not know whether he has seen a written answer published this morning in response to a question that he tabled. He may not have spotted it, but I had nothing better to do over breakfast. He asked about the rate of the winter fuel payment next year. His question received the following opaque reply: The level of the Winter Fuel Payment for next winter … is set out in The Social Fund Winter Fuel Payment and Maternity and Funeral Expenses (General) Amendment Regulations 2000, and is included in the Government's spending plans.—[Official Report, 20 December 2000; Vol. 360, c. 224W.] There is a shorter version of that answer, but I think that it was felt to be embarrassing. I went to the Vote Office to obtain a copy of the regulations to which the answer referred. Initially, the document was unavailable, so one senses that there has not been a big demand for it. On finally obtaining it, I saw that in a paragraph of the regulations that set out the winter fuel payment, it stated: there shall be substituted the sum "£ 150 I always try to be fair to the Chancellor, so I remind hon. Members that when he announced the £200 winter fuel payment figure in the pre-Budget statement, he said that it was a special payment for this year. I am not questioning that.

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

Then why are you giving the wrong impression?

Mr. Webb

If the right hon. Gentleman will bear with me, I shall explain my point.

The Government's pensions strategy, such as it is, is all heading towards 2003. Everything between now and 2003 is described as transitional. In other words, the Government are introducing measures for the next two years, until they can get the new system in place. Thus, a big pension rise has been announced for next April and an above-inflation rise has been announced for the following year, albeit only a pound or so. Why, then, is the winter fuel payment not also dealt with transitionally? Why does it not apply for two years at the £200 level? The answer is that, between this winter and next winter, something will happen.

I think that that approach is extraordinarily cynical. Pensioners have seen the winter fuel payment move from £20 to £100 to £200. If we went out into the streets and asked pensioners to predict next winter's fuel payment, I suspect that we would not find one who would expect the Government to cut it by a quarter. Clearly, that message has not been conveyed. Will the Under-Secretary tell us whether pensioners were notified when they received this year's winter fuel payment that it would be cut next winter? Do pensioners know? I suspect that they do not. It is cynical to increase a benefit immediately before an election, to cut it afterwards and to hope that nobody will ask the awkward question.

The hon. Member for Havant spoke about what his party wanted to do with the winter fuel payment. I have a point for him to cogitate about on Boxing day. He announced that, were he given the opportunity to do so, he would introduce not the £5 increase to which the order refers but a £9.50 increase. I think that that is the figure for newly retired pensioners. Roughly speaking, that sum comprises the fiver that the Government are giving anyway, four quid for winter fuel and 50p for which the hon. Gentleman has scrabbled around in the social fund and elsewhere. However, if the Government provide not £4 a week but £3 a week—the hon. Gentleman has discovered that that is what they plan to do—the Conservatives could afford not £9.50 on the pension but £8.50. That applies unless the hon. Gentleman can find £1 a week for every pensioner household in the land, which amounts, I think, to £500 million. I shall have a word with the shadow Chancellor. I will tell him that he must either find another £500 million for the hon. Member for Havant or announce a smaller pension increase than he planned.

Mr. Willetts

The hon. Gentleman is correct to say that the Government have got into an extraordinary position in respect of the £200 and £150 payments. The Opposition's package consolidates the £200 into the basic pension and then uprates it. We have formulated the package on that basis, and it has been agreed with my right hon. Friend the shadow Chancellor. The problem with special payments is that they are not included in the basic pension and there is no requirement to uprate them. Thus, in some years they are not uprated and in others they are cut. Indeed, the Government's official position, on which I have received a more explicit written answer than that to which the hon. Gentleman referred, is that they will cut the rate next year.

Mr. Webb

I am afraid that the hon. Gentleman cannot get away with that, unless he thinks that the general election will take place in the current financial year, which I assume he does not. Let us assume that the general election will happen in May. Government spending plans for 2001–02 include a winter fuel payment of £150. Consolidating that in the pension, if that is what he proposes, represents £8.50, not £9.50. Strictly speaking, I am straying somewhat, so I return to the orders.

Another issue relating to the pensions strategy is take-up. It was clear on Monday that the Secretary of State was trying to run a line. I accept unreservedly and on the record that there is a role for means-testing—there always will be. I do not query that, but balance is important. We have criticised him for using an approach that relies so heavily on means-testing. He says that the Government have put a lot of money into the means test, which is true. When we ask about those who do not take up benefits, the Government refer to the take-up campaign. However, there is less to the campaign than meets the eye.

The Government sent letters to 2 million people offering free money. A third replied. Of that third, it appears that about 60,000 or 70,000—perhaps a few more—have received their money. Government figures suggest that 500,000 pensioners are not taking up their entitlement to income support, and Thora Hird and friends have reached 70,000 of those. That leaves 430,000. The Secretary of State's line is that there is no stigma in the mind of pensioners about applying for income support, but 2 million pensioners received a letter offering them free money and two thirds did not reply. To me, that suggests that fear of complexity and stigma may be out there, alive and well. Even on Government estimates, and even with the 70,000 taken off the figure, 430,000 pensioners entitled to income support are not receiving it. Almost all of them have received a letter from the Government telling them about their entitlement, but have not responded.

I would be interested to hear from the Government about those 430,000 people. Presuming that most received the letter, why did they not respond? What aspect of the system put them off replying?

Mr. Willetts

I am grateful to the hon. Gentleman for giving way a second time, because I know that he follows these issues carefully.

There is another puzzle that the Minister might tackle in his winding-up speech. The hon. Gentleman assumes that 500,000 pensioners are entitled to but not claiming the minimum income guarantee, but if he reads the Government's annual statistics on entitlements to means-tested benefits he will find that they have retrospectively reduced their estimate. Before the figure of 500,000 gains currency, it is worth remembering that, until recently, the Government estimate was, from memory, about 500,000 to 800,000. They have cut their estimate of the number of non-claiming pensioners for reasons that are not entirely clear.

Mr. Webb

At the risk of allowing the debate to degenerate even further into an academic seminar, I think that the Government have discovered that pensioners are under-reporting their capital in the family resources survey. Therefore, they are making a further adjustment. The 500,000 figure is the mid-point of the current range of estimates, but in opposition Labour went into the election campaign having a go at the Tories about the missing million. The figure of 1 million was at the top of the range, but the Government now tend to use the middle figure, which is much more sensible.

Will Ministers discuss take-up with their officials, many of whom I used to work with on take-up statistics at the Institute for Fiscal Studies? Will Ministers consider whether more resources might be provided to bring the take-up figures up to date? We have only just received take-up figures for 1998–99, although we have received the 1999–2000 poverty figures—those for households below average income. I appreciate that extra processing has to be done between getting the survey and producing both the HBAI figures and the take-up figures, but, given that take-up is central to the Government's means-testing strategy and that we rely on figures that they say are years out of date, that is unsatisfactory. I hope that they will consider the timeliness of the take-up figures, especially as the take-up campaigns are taking place now. Whenever we criticise the Government's figures, we are told that they are out of date. Well, that is not our fault.

Mr. Rooker

I am grateful to the hon. Gentleman for giving way and apologise for being absent for the early part of the debate.

The take-up figures are behind time, but the take-up campaign marks the difference between the past and the present. It is freely admitted that all past take-up figures and those in the system are estimates based on statistical surveys, not on real people. We have written to almost 2.5 million individuals by name, and that has given us a much better idea of the level of unmet need. I am not saying that the system is perfect, but although the take-up campaign will take some time, as I have acknowledged in answers to parliamentary questions, the information that we will gather as a result of it will make a big difference. All previous estimates are just that: gross statistical estimates based on small sample surveys. With the best will in the world, they do not represent real people.

Mr. Webb

One knows where the Minister is coming from, but the family resources survey, which is one of the biggest social surveys, receives responses from 25,000 households a year, and a good chunk of those are pensioner households. Every pensioner whom the survey identifies as entitled to but not receiving income support is a real person. Short of talking to all those 2.5 million people, we will never get to the whole lot. However, the survey is a legitimate way to arrive at a figure, and those who reply are real people.

I do not have a problem with the take-up campaign, but saying that it proves that there is no stigma attached to claiming puts a gloss on matters. The campaign proves the contrary; two thirds of those offered free money said no because they were bewildered by the system or did not like the means test. The Minister shakes his head. Will he do any follow-up work or research on those who received the letter but did not reply? I hope so, because that might help to resolve the issue.

The key point is that the Government have relied heavily on means-testing, and they will double means-testing by introducing the credit. Their answer to the take-up problem is, "We have a take-up campaign." The campaign has got money to 70,000 people, whether one describes that figure as good or bad. That is great for the 70,000, but more than 400,000 people at least—that figure is still our best guess—are entitled, but not receiving. They were offered free money, but turned it down. Where do the Government go next with them?

Mr. Coaker

I tried to make a thoughtful contribution, and the hon. Gentleman is doing the same, because the matter is immensely difficult. Take-up of the minimum income guarantee is not the only problem because those who will not claim it are prepared to claim means-tested housing benefit and council tax benefit. There is also a difficulty with take-up of non-means-tested attendance allowance. That is a big issue and we all need to address the problem. The Government are trying to consider all the ways that they can of encouraging people to take up benefits, whether means-tested or non-means-tested.

Mr. Webb

The hon. Gentleman makes a number of good points. Clearly there are take-up problems with non-means-tested benefits as well, and those need to be tackled. Support and advice are necessary, and I would like citizens advice bureaux to be backed by central Government at local level. It is unacceptable that local councils are left to their own devices—some help, some do not—when local citizens advice bureaux, which do a fantastic job on take-up, struggle from hand to mouth.

Heavy reliance on means-tested benefits represents a structural problem: it will hit the target for some, but miss it for others. Despite Thora Hird's best efforts, the target is being missed for 400,000 or 500,000 people who, by definition, are the poorest pensioners in the land. Their income is less than income support, which itself does not even cross the poverty line. They do not receive income support, which is why my party is committed to the basic state pension and why, like the hon. Member for Havant, we are particularly committed to increasing substantially the pension for older pensioners—not by 46p, or whatever the figure is, but by £5, £10 or £15. Older pensioners should be guaranteed that money, which is why we decided on such a strategy.

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley)

The hon. Gentleman refers to three figures—£5, £10 and £15. Under the Liberals' proposals, when would each of those be introduced?

Mr. Webb

They would be introduced simultaneously. Pensioners under 75 would receive £5, those aged between 75 and 79 would receive £10 and those aged 80 and over would receive £15. That is our proposal.

For several years, I and my colleagues have argued in the House that £250 of capital for £1 a week of income is absurd, and that the capital limits discourage people. We batted away for years, and suddenly the Secretary of State announced on Monday that the Government have always thought that the capital limit rules were silly and will now change them. We welcome the sinner repenting, but we had to put up with an awful lot of rubbish while the Government tried to defend an unjustifiable system.

There is an important practical question. Under these orders, from next April pensioners with £6,000 in the bank will not have a penny imputed from their savings. If that money is in a 5 per cent. interest account, they will get £6 a week actual income. When the Government switch over to using actual income for the purposes of assessing means-tested benefits, what will happen to those people? Will there be a £6 disregard so that no one with £6,000 capital will lose out? Have the Government decided that yet? I know that consultation is taking place. The Minister shakes his head, so perhaps the Government have not decided yet. I urge them to ensure that pensioners with modest savings who have no imputed income—even from capital of £6,000—do not lose out, particularly once the orders are in force. I hope that the Minister will reassure us that that is the Government's goal for that group. It would be perverse if the opposite were true.

The Government are still incapable of paying all pensioners their pensions on time. We have raised the NIRS2 computer problem many times in the House. These pensions increases will not reach pensioners on their pension date, in some cases because of the computer problems. After three and a half to four years, the excuse that it was the other lot's fault starts to wear a bit thin. We have been promised that this matter will be resolved by certain dates, and every one of them has been missed. I hope that as a Christmas present to Britain's pensioners, the Minister will tell us finally whether before the next election every pensioner reaching pension age will get their pension on time.

On a more upbeat note, an announcement was made during the year on the widows' state earnings-related pension scheme proposals. That was a welcome change of heart. People will not lose their inherited SERPS entitlements, provided that they have already reached pension age. I stress how much we welcome that.

The document contains many welcome measures, such as the additional support for carers and for disabled people. We welcome the £5 on the pension. It is not clear why the arguments that justify a £5 increase this year justified only 75p last year. As I have argued, the Government's strategy is incoherent and inconsistent. It would be nice to think that we will have a response to the specific points that have been raised, but experience suggests otherwise. As it is the festive season, I shall live in hope.

1.42 pm
Mr. Laurence Robertson (Tewkesbury)

The Secretary of State said that I was the only Conservative Back Bencher in the Chamber. I am sorry to say that that remains the case, but I promise him that I am not a token Back Bencher, because I serve on the Select Committee on Social Security under the expert guidance of the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). I also served on the Standing Committee considering the Child Support, Pensions and Social Security Bill a short while ago, so I take an interest in these matters. I do not intend to speak for long, but I want to make a few comments about the current situation on pensions and about future pensions. I also want to refer to some of the points that the Secretary of State made. I am sorry he is not in his place to answer my points.

The more one considers an issue, such as law and order or Northern Ireland—two subjects that I am also interested in—the clearer it becomes that there is no one big answer to any of those problems, and that that is so with all aspects of social security, especially pensions. I share the Government's stated objective of relieving poverty among the poorest pensioners. Although it is difficult to define poverty, we all accept that many pensioners are poor, especially elderly women. Their position cannot be corrected in one go, because although people may not be particularly poor when they retire, given the income that they receive, as they get older life becomes more difficult. Things that they bought new when they were 65 are not new when they reach 80. Problems may come about simply because they have got older. Although the problem may be solved for someone of 65, it could recur when they get older.

What the Government are doing is not necessarily helping. Given the spirit of the debate and the fact that Christmas is approaching, I shall not be too critical or unfair, but it is a little easy for the Government to say that they are providing the minimum income guarantee so that no one should be on less money than that minimum. The Government know that many people do not take up the MIG—we have heard eloquent speeches explaining why that is so. The fact that people do not take it up must be taken into account, regardless of the reasons.

At a Select Committee meeting, the Secretary of State said that we should judge a system by how effective it is, and I entirely agree with him. He hung himself with his own words. The system is not effective because people are not taking up the minimum income guarantee. Why are they not doing so? I take the point that the hon. Member for Gedling (Mr. Coaker) made. As well as the practical difficulties, there are philosophical arguments. I accept that those people claim housing benefit and council tax benefit, but there is a crucial difference. They get bills for rent and for council tax, and that provokes some action, whereas they have to be proactive to claim the minimum income guarantee. Although I sympathise with the hon. Gentleman's view, I think that there is a difference. If the MIG were part of the basic state pension, they would automatically claim it, because there is a philosophical expectation of that pension. They understand correctly that they have paid into the system all their lives and are entitled to claim a pension. If they see the minimum income guarantee as welfare, they do not believe that they have paid in all their lives for that, even though they have. There is a very big difference.

It is fair to say that the feeling on the Select Committee is that the MIG is unlikely to be taken up universally unless it is part of the basic state pension. I shall quote one of the witnesses to the Select Committee. He may seem to be making a point that is opposite to the one that I am making, but I shall explain what I mean.

Mr. Andrew Dilnot, a director at the Institute for Fiscal Studies, said: If our only concern is targeting the standard of those living on the lowest incomes, then we will always be driven towards relying more on means-testing and less on universalism. If our key concern is upholding the dignity of the elderly, then we are driven towards universalism. He is saying that, in theory, the means-tested benefit is precisely what is needed for the poorer pensioners, but in effect that is not happening. The second part of that quote explains why that is not happening: it is because it challenges the dignity of people who have to claim the benefit.

There are also the practical problems of claiming the MIG. Are elderly people, whom we accept are probably the poorest in society—whether they are men or women does not matter for the purpose of this point—the most likely or the least likely to claim the minimum income guarantee? I suggest that such people, by virtue of their age, are probably the least likely to claim the MIG, yet they are the very people who need it. It is almost certain that it will fail.

If the problems are philosophical or about practicalities and not about information, is the take-up campaign likely to succeed? As the hon. Member for Northavon (Mr. Webb) said, the system is not working. Regardless of the philosophical arguments that we have all made, the fact that the system is not working should be taken into account.

When preparing its report on pensioner poverty, our Select Committee stopped short of recommending a restoration of the earnings link, although many members favoured that. One factor was our wish to see how the pension credit system would work before returning to the issue, but I warn the Government—I hope that the hon. Member for Roxburgh and Berwickshire, the Chairman of the Select Committee, will agree if he catches your eye, Madam Deputy Speaker—that we may return to the subject if it is felt that pensioner credits are not doing enough. I suspect that the evidence received so far suggests that they will not do enough.

Our report called for an increase in the state non-means-tested pension sooner rather than later. It also called for an increase in the basic state paid pension for those aged over 80 to minimum income guarantee level, so that the income of the poorest members of society could be guaranteed.

When we—Members on both sides of the House—are trying to make political points, we tend to stress that the United Kingdom is the fourth largest economy in the world. I am proud that it is, but when that fourth largest economy apparently cannot afford to do what it should be doing, we should question the motivation that may be involved. It horrifies me to think that members of my family might have to claim under the minimum income guarantee, and I suspect that other hon. Members may also not be too happy about the idea.

Pensioners are clearly not happy about proposals for the future. Labour Members must receive the same letters that we receive; pensioners must visit their surgeries, as they visit ours. They must have heard pensioners complaining about the level of the basic state pension only a few weeks ago, in Westminster Hall.

Although I have suggested that the basic pension should be increased, I recognise the problems posed to continual uprating by demographic changes. I speak from memory, but I believe that 50 years ago there were about five and a half contributors to every pensioner. I think that the figure is now 1.8; the Minister will correct me if I am wrong. Those figures suggest that there is a problem—and the figure of 1.8 is due to fall over the next few years, and as we enter the next century. I do not accept that we have entered the next century yet: I am one of those who think that will start at the end of the current year. Anyway, the figure will fall as we reach 2030, 2040 and 2050.

I accept that, in the long term, we shall find it difficult to provide a basic state pension that will retain the degree of comfort and dignity that the recipients deserve. That is why the Conservative party wants a pensions system that is funded. Why have a number of pensioners—not all, of course—become better off recently? Because they have taken up occupational or private schemes. Although I have made criticisms of the Government's approach, I accept—as I have said—that it is difficult to provide a basic state pension that enables pensioners to live as they would want to live, and as we will want to live when we reach their age.

It is rather disingenuous of any Labour Member to suggest that we would scrap the basic state pension. That is certainly not our policy. I am sure that, if it were proposed by my hon. Friend the Member for Havant (Mr. Willetts), it would not be accepted by the Conservative party, and I do not think such allegations serve politicians—or, indeed, the House—very well.

Many general elections ago, we were accused of planning to abolish the national health service. We won many general elections, and did not do that. We have no intention of scrapping the basic state pension now, and I would not support it if it were a proposal; but saying that is very different from making plans to help and guide people to provide for a better future. We betray those people if we do not stress the importance of their making their own pension provisions. Whatever our argument, and on whichever side of the House we sit, the fact remains that that is the only way in which those people will enjoy any prosperity in their old age.

It will come as no surprise to Conservative Members that our proposal to allow people to opt out of the state pension and, perhaps, to receive a rebate that can be invested in a private scheme is not unique. Other countries are well ahead of us. As I have told Front Benchers, two years ago I went to Mexico and studied its pensions system. Mexico is already up and running in this regard: the proposal is not exactly revolutionary.

When I was in Mexico, I asked Ministers whether there might not be a bit of a black hole in resources, given that those in retirement would continue to need funding. They said. "We feel we can manage that", adding, "We would rather face the problem now than pass huge burdens to our children and grandchildren". That, I think, is a very responsible attitude for a so-called developing country to take, but it is too revolutionary for the fourth largest economy in the world.

Mr. Willetts

My hon. Friend is an expert, and has contributed useful information about the reforms in Mexico. He is quite right.

Attending a conference on this subject, I was struck by the radicalism of the Chinese Government's proposals. A former general in the Red Army, who is now roughly the equivalent of the Minister of State—[Laughter.] He spoke of the desirability of encouraging more funded pension saving in China, so that people would be less dependent on pay-as-you-go systems. My hon. Friend is right: this is an international trend.

Mr. Robertson

China, of course, boasts two systems. There is a political system, in which people say what they really think should happen, and an economic system, in which people have come to realise what must happen. Anyway, I am delighted to learn that the Chinese are also showing us the way forward.

We have developing countries and Communist countries, and here we are lagging behind, in the hope that if we are elected on 3 May—or, hopefully, earlier—we are given a chance to offer people the prospect of a more prosperous retirement.

I have spoken for longer than I intended, but I want to mention one or two other issues that concern me. The first is that of disability living allowance claims. I am sure that all hon. Members can cite cases of constituents' being done down, but I believe that in many cases people are making justifiable claims. Not only are those claims being turned down; when they go to appeal, the process is stretched out. In the case of my constituent Mr. Orrey, papers were lost and the case goes on and on. My constituent has not been given the correct treatment, or the money that is due to him. I urge the Government to look closely at what is happening, especially at the appeal stage.

We heard a little about how certain benefits would be paid to people of the same age, whether they were male or female. Will the Minister tell us his intentions in regard to widows' benefit?

As I said, I have spoken for rather longer than I intended. Let me echo what others have said, and also wish Members on both sides of the House a happy festive season.

1.59 pm
Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I am very pleased to be able to speak in this debate. I start by immediately acknowledging the important and valuable role played by the hon. Member for Tewkesbury (Mr. Robertson) on the Select Committee on Social Security. He works assiduously in Committee and his experience is highly valuable to us. We look forward to his contribution continuing for a long time to come.

I should like to make just a couple of comments which are additional to those that have already been made. I agree with the hon. Member for Gedling (Mr. Coaker) and other hon. Members that this debate—academic seminar or not—has been very good. I concur with much of what has been said and do not have to repeat points that have already been made.

The tone of the debate, however, has not fully reflected a fact pointed out by my hon. Friend the Member for Northavon (Mr. Webb)—that, for a variety of reasons, many families and domestic households in the United Kingdom are forced to live below income support levels. However good today's uprating statement may be—I have seen many such statements, and this one is better by a margin than most—we must not forget that some households struggle, sometimes for a long time, on incomes that are below the income support levels set by the Government.

The House will have to return to that issue. The Social Security Committee is examining the social fund partly to begin to address precisely that issue, and I hope that we will be able to make some constructive suggestions.

I am concerned also about the debt levels that I hear about in my constituency casework. None of the official statistics—as good as they may be; although, historically, as my hon. Friend the Member for Northavon said, they have been out of date—record debt levels. I am increasingly concerned about the role of loan sharks and the extent to which they are able to charge ludicrously high, usurious rates of interest to provide cash to enable some households below income support level to get by from week to week. We should bear that issue in mind.

We should remember the context in which the uprating statement—which, as I said, is generous—is being made. I concur with my hon. Friend the Member for Northavon that the increases—particularly the 5 per cent. increase in the retirement pension and widows' bereavement benefit—are extremely welcome. However, table 4 of the Government Actuary's report on the uprating orders—Command Paper 4933, at page 8—which deals with the balance in the national insurance fund at the end of successive financial years, shows that, at 31 March 2000, the percentage of benefit payments in the previous financial year was 31.1 per cent. It predicts that, for 2001, the percentage balance in the national insurance fund would be 39.1 per cent; and that, for 2002, it would be 41.1 per cent.

As we all know, the Government Actuary's recommended fallback, minimum residual working balance is 16 per cent. Therefore, the national insurance fund has working balances that considerably exceed the Government Actuary's recommendation. He forecasts considerable surpluses in those years. He predicts that, for 2000–01. it will be £3,981 million. Therefore, although the Government's November announcement on disability benefits—which the Secretary of State mentioned at the beginning of the debate, and increased expenditure by £200 million—was generous and is very welcome, it should be put in the context of the available sums.

The academics, by whom I am surrounded, will no doubt say, "The Government have already announced plans to spend some of that surplus." I agree that we have to have stability in the national insurance fund, and I am not saying that we should be profligate. Indeed, in our report on the contributory principle, the Social Security Committee made some suggestions about how we could constructively spend some of that money and stay within the general stability targets. Nevertheless, I hope that hon. Members will bear in mind that the position of the national insurance fund is currently quite healthy. We should bear that fact very much in mind.

I should like to underscore the importance of dealing with a situation that is emerging as a result of the Government's attempts, quite rightly, to increase take-up of the minimum income guarantee. My hon. Friend the Member for Northavon was absolutely right that we cannot allow the matter to rest if the number of those who refuse to respond to the Government's blandishments to get in touch remains so high. However, I do not think that the Minister was saying that we should let the matter rest, and I agree that there is disagreement on how the figures should be interpreted.

I agree with my hon. Friend the Member for Northavon also that we should be considering ways of discovering and testing—even if, initially, it is only through a pilot project, and working locally with citizens advice bureaux, local authorities and others—why there is such a poor take-up rate for the minimum income guarantee. The Government's policy is focusing very much on developing means-tested benefits. If they are serious about using such benefits, they should realise that, as useful as it has been, simply mounting a one-off take-up campaign is not enough. It would be complacent of Ministers to think that everything is all right and that they need to do nothing else. I hope that Ministers can be persuaded to re-examine the issue and introduce further measures. I would be happy to try to encourage local activity, and I am sure that all hon. Members would like to increase uptake of the minimum income guarantee.

I confirm the point made by the hon. Member for Tewkesbury that the Social Security Committee will be watching very carefully how uptake and the matter of the pension credit unfold. If we do not get better uptake levels, and if the pension credit does not deliver as Ministers and the rest of us hope that it will, I for one would be very willing to return to the idea of relating the uprating to earnings. It is a live issue to which we propose to return.

If we have means testing, there should be an attempt to adopt a light touch—which is a phrase that appealed to me and was used by Professor Jane Millar when she gave evidence to the social Security Committee on the integrated child credit inquiry. The Government should attempt to develop the concept of means testing with a light touch. Some of the changes in capital limits are a move in the right direction but need to go further.

I am grateful that the non-dependent deductions for housing benefit have not been uprated from April 2001. However, although that is very welcome, the Government could have been expected to go further. Indeed, some of us anticipated that they would go further. The Committee recommended that the higher deduction rates should be abolished completely and that the number of rates should be reduced, as that would not only create simplification but increase the available sums. The Government must consider that to be unfinished business. If they do not, people will be rightly disappointed. Additionally, housing benefit is now the biggest block to work incentives embedded in the social security system. The Government's document was a bit disappointing by not pursuing further reform of housing benefit tapers and disregards. I hope that Ministers will return to the issue.

I have a technical question to which the Minister could reply in writing. I am puzzled about the future of contributory additions for children. As hon. Members know, the additions are paid to children of widows, retirement pensioners and those who are on the long-term rate and the higher short-term rate of incapacity benefit, and recipients of invalid care allowance. The additions have not been uprated for years.

There seems to be no justification for reducing the real value of those children's allowances, which are part of the contributory benefits system. They have not been mentioned in any of the Government's plans to integrate the "streams of income" for children that the tax and benefit systems provide. I should like to know the future of the additions. If I cannot have an answer today, a letter would be very welcome.

There is still a question about the future of child benefit, and some assurances from Ministers that child benefit will continue to be fully uprated in future would not go amiss. There are some misgivings among pressure groups and the academic community about that matter.

My penultimate point—bringing me back to where I started—is that it would be very valuable and useful if Ministers could aspire to provide modest, but adequate minimum income levels. Other European countries have developed systems that help people to measure the progress of Governments in a way that some other performance indicators do not. I hope that that concept will be studied by Ministers.

Finally, the one element missing from the debate so far has been the vexed question of frozen pensions for overseas pensioners. I know that the matter has been raised before, but this is the appropriate debate in which to raise it again. I still receive regular and heart-rending letters about the unfairness of the system.

I admit that it is not so much a poverty issue. The people who write to me and bombard me with terabytes of e-mail information are not necessarily poor. What irks them, especially given the positive balances in the national insurance fund, is that nothing is being done.

The Minister may say that rectifying the problem all at once would cost a lot of money, and that would be especially true if payment were to be backdated. I am not calling for that, but something has to be said on behalf of that dwindling group of pensioners. There is a comfortable surplus in the national insurance fund, and some gesture to them is needed.

The Social Security Committee has recently undertaken study visits to Canada and to Australia, and both have been very instructive. We were given a very clear idea of the damage done to the relationship between Britain and those very valuable members of the Commonwealth. That damage should not be overstated, but it should not be underestimated either. It stems from the fact that Britain is walking away from the problem and refusing to pay any attention to the legitimate claims of people who have some entitlement to consideration in this uprating statement, especially given the positive balance in the national insurance fund.

2.11 pm
Mrs. Jacqui Lait (Beckenham)

I was somewhat puzzled that the House should debate this important matter on the day that we rise for the Christmas recess. It was almost inevitable that the debate would not attract large participation by hon. Members, although it is interesting that it has benefited from the sheer quality of contributions. I want to thank all who have taken part in a debate that has ranged very widely over social security policy. The quality of all contributions has been exceedingly high. I suspect that I am about to reduce the debate to the mundane, but I shall try very hard not to.

The debate began with the Secretary of State making essentially the same speech that he made when he announced the uprating. It really took off and caught fire when my hon. Friend the Member for Havant (Mr. Willetts) challenged the Secretary of State's strategy on social security policy. We could see the interest in the Chamber in what he was saying. I thought that the members of the Government Front Bench also enjoyed it, and I noted that they participated regularly in the discussion.

I am glad that the hon. Member for Northavon (Mr. Webb) is still with us, and I hope that he manages to stay to the end of the debate. He also contributed in a very thoughtful manner, as did my hon. Friend the Member for Tewkesbury (Mr. Robertson) and the hon. Member for Gedling (Mr. Coaker). Many people have analysed the minimum income guarantee and the problems with take-up. I am sure that all hon. Members would agree that there needs to be more research into how we can ensure that people entitled to benefits get them. I have not been in the House as long as the Secretary of State, but my memory is long enough that I recall the previous Conservative Government trying very hard to encourage people to take up the benefits to which they were entitled.

Although I do not want to reduce the debate to the mundane, one question is hard to avoid. The Government claim to be radical and reforming, so why do the texts of the statutory instruments containing the regulations have to be presented in a way that is completely incomprehensible to outsiders? I hope the measure contained in the Queen's Speech to simplify tax legislation successfully completes its progress through the House, but I hope that similar legislation can be introduced with regard to benefits—at least in respect of simplifying the uprating statement. I shall not read out any examples, as I am sure that all hon. Members know what I mean.

I was glad that the statement contained the Conservative policy that invalid care allowance should be paid to carers over retirement age, and that the Secretary of State should have seen the need for that. As my hon. Friend the Member for Havant said, we agree with a number of elements of the statement and do not plan to vote against it. However, questions remain to be asked, one of which was raised by the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). That is the problem involving frozen pensions for pensioners living abroad.

In fact, I noticed that one of the questions in today's Order Paper dealt with what will happen to the pensions of people who have lived in Australia. I understand that the Minister of State has answered that question and indicated that the benefit entitlement of people who have worked in Australia will be recognised, provided that their work began before April 2001.

However, it would be helpful to know what will happen with regard to people who want to work in Australia after that date. Given the other problems involved with communicating with people and informing them of their entitlements, what plans are there to ensure that people working in Australia after April 2001 will know about their entitlements? In addition, any clue as to what will happen with regard to people in Australia who receive British pensions is conspicuously absent.

The Under-Secretary of State is to reply to the debate, and he and I have crossed swords about capital limits for disabled people. However, I hope that he will comment further on the matter. I understand the situation with regard to capital limits for pensioners, but we still have had no answer about capital limits for disabled people. It would be helpful if the Minister could address that matter, which has been raised a number of times. I warned that I might reduce the debate to the mundane, but some questions have to be asked, and answered.

No mention has been made of the second order, which deals with the guaranteed minimum pensions increase. It is therefore incumbent on me to raise the matter. The order is fairly standard, and raises by 3 per cent. the guaranteed minimum pension to be paid by occupational pension funds.

The problem this year is that inflation is above 3 per cent—the order quotes a rate of 3.3 per cent. That means that the state will have to pick up the bill for the difference, as required by the legislation governing contracting out. That emphasises that the Government face a problem with their economic policy, as inflation is higher than 3 per cent.

The previous Government introduced the 3 per cent. rule as part of our campaign against inflation. However, the Government's general policy on social security and spending, which means that growth will be higher than the rate of expected economic growth, will add fuel to the inflation flames. I hope that the Under-Secretary will be able to give us some idea of how much he expects the social security budget to be affected by the change in the inflation rate.

The issue of increases in the payments to rest homes, known as preserved rights, has not yet been mentioned. This year the rest home payments will be increased to £225 a week and the figure for nursing homes will be £337 a week. It is generally reckoned that the genuine cost is about £250 and £400 a week respectively, so care home owners are losing out dramatically in the amount of money that they can spend on their residents.

The Government's NHS winter strategy depends on ensuring that people are taken out of hospitals and put into care homes to stop the trolley waits. However, rest homes and nursing homes are closing at an increasing rate—15,000 beds have gone this year—and because property prices are going up, more and more people are able to sell their homes and get out of the market, thereby reducing the number of beds available. This uprating does not, in any way, shape or form address the Government's political problem; indeed, it will exacerbate the crisis that will almost inevitably hit the NHS, come the new year.

Finally, I turn to the unwarranted increase in the national insurance upper earnings limit of £2,080 a year. This is yet another of the Government's stealth taxes. It has hardly ever been mentioned; it has been slid out quietly so that no one knows that they will be hit by an increased tax. Like the withdrawal from the pension funds and like the fuel duty taxes, it adds up to a huge impost on the basic pay of every individual. The way in which the Government have slid out this increase is reprehensible.

We have spoken at great length about the pension credit and we will be examining its effect very carefully. However, when people have forgotten that the benefits and the pensions interacted at 100 per cent. level, they will in due course see this as a tax rate of 40 per cent.

As we have said, we will not be voting against the order. It is a Christmas present for the Government, and I wish everyone a happy festive season.

2.22 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley)

I, too, would like to enter the spirit of things. I wish you and your family a happy Christmas, Madam Deputy Speaker. I also wish all Members in the Chamber and their families a happy Christmas, and relatively good fortune to some in the new year.

Right hon. and hon. Members on both sides of the House have entered the Christmas spirit by coming up with extremely generous spending proposals. It is important to reconcile spending proposals with the overall budgetary policies that the parties follow. The proposals from the official Opposition for increased expenditure do not square with their policy to reduce public expenditure by £16 billion. That would make Christmas a rather mean and threadbare affair, especially when we consider the social policies introduced by the Government.

The hon. Member for Havant (Mr. Willetts) was the first to create the atmosphere of a seminar which I think made for a good debate. Some real issues of social policy were discussed. He made the criticism that the Government do not have a coherent, overarching social policy. I believe that we do. Our policy focuses clearly on poverty reduction. We have stressed the importance of work. We have modernised and changed fiscal and social security policy to pursue those aims, with remarkably good results. This year we will be spending £4 billion less on unemployment benefits, which creates the space and opportunity to improve benefits for others whose age or circumstances mean that they cannot work.

I ask the hon. Gentleman to reflect on what it was like when his party was in government. During those 18 years, the number of workless households—families with people of working age who did not work—doubled, as did the number of children growing up in poverty. Was that as a result of the Conservative Government's clear and overarching social policy or was it a failure of their social policy?

Let me say to the hon. Member for Beckenham (Mrs. Lait) that the regulations debated in Committee a few weeks ago which increased the capital limits in relation to a minimum income guarantee for pensioners from £3,000 and £8,000 to £6,000 and £12,000 have been widely welcomed by pensioners. The regulations were also welcomed by Liberal Democrat Members on the Committee and, indeed, by the hon. Lady herself. We are introducing these improvements to the capital limits—which were frozen for a decade under the Conservatives—as a staging post towards the introduction of a pension credit which will provide a real incentive to people to work hard and save hard during their working life.

We are not applying those changes in relation to people on working-age benefits because the considerations are different. If the hon. Lady had listened to the debate in Committee, she would know that; as it is, she can read the record. We have been successful in pursuing policies to ensure that work pays—to create incentives so that people of working age who can work do work. That is why there is a difference between the two age groups.

The hon. Lady spoke about the invalid care allowance. She flatters herself if she believes that the Conservative party's representations on the invalid care allowance led the Government to increase the age at which people can apply for the benefits. She flatters herself if she thinks that carers believe that the Conservative party is genuinely interested in providing more support for older carers. Let me remind her that the invalid care allowance was introduced by the previous Labour Government in 1976. The Conservative party was in power between 1979 and 1997. If they had wanted to extend the allowance to people applying over the age of 65, they had 18 years in which to do so, and they did not. Within three years of our coming into power, we did it. We did it because we thought that it was right, and I presume that the Conservatives did not do it because they thought that it was wrong.

The hon. Member for Northavon (Mr. Webb) spoke about the winter fuel payment. It has been increased to £200 for this year because the Government wish, in the period leading up to the introduction of a pension credit to do more for pensioners on modest incomes. We are this year doubling the value of the winter fuel allowance to £200. Next year we are increasing the basic state pension by considerably more than inflation—by £5 and £8—to provide more for people who are just above the minimum income guarantee level.

Mr. Webb

I am aware that everyone wants to go home, so I promise not to intervene again, but for the avoidance of doubt, will the hon. Gentleman give a simple yes or no answer to this question—next year, will the winter fuel payment be £150 or £200?

Mr. Bayley

The hon. Gentleman will have to wait and see; he was not told last year what this year's winter fuel payment would be—the amount was not included in last year's regulations. He will have to wait and see what it is for next year.

The orders confirm our determination to provide more support for those people who need in most—those with severe disabilities, carers and the elderly. Our pilots for the new deal for disabled people have shown that it is possible to create opportunities even for those who have been on incapacity benefit for many years—perhaps for 10 years—to get back into the labour market, provided they receive adequate help and support.

Through the new deal we have shown that it is possible to provide support for those who are able to work. The orders make it clear that we are also providing security for those who cannot work. My hon. Friend the Member for Gedling (Mr. Coaker) asked whether the Government would do more to allow the use of information collected for council tax benefit and housing benefit purposes in calculating entitlement to the minimum income guarantee and to income support. The one service initiative is piloting joined-up working to achieve the outcome that he seeks. The consultation document on the pension credit includes proposals to develop a single application process for those means-tested benefits.

My hon. Friend also referred to the overall rate of benefits and drew attention to disability living allowance and attendance allowance. As he mentioned, from next April we shall improve DLA by extending the higher rate mobility component to three and four-year-old children. We shall also do more for people with the most severe disabilities, who are on the lowest incomes and receive the higher rate care component of DLA. Under the new disability income guarantee, which comes into operation next April, they will receive a further enhancement of their benefit. That enhancement would have provided a minimum income of £128 a week, but as a result of these measures, it will be £142—£14 more. A single, severely disabled person on income support will receive £142; a couple will receive £186.80.

We have made further changes to improve the benefits of disabled people and their carers. We realise that it is hard for people with disabled children to support their families, so we are increasing the disabled child premium in income support by £7.40 a week—raising the amount to £30 a week.

In response to a point made by the hon. Member for Beckenham, we recognise the pressures on carers. I have mentioned our intention—when legislative time permits—to extend new claims to ICA to people aged over 65. These regulations introduce improvements for carers from next April. The carers premium rises by £10 above the normal inflation uprating to £24.40 a week.

The measures for disabled children and for carers and the introduction of disability income guarantee will help about 350,000 of the poorest and most vulnerable families.

The decision to equate the MIG to the highest rate for all pensioners who receive it is another radical step in our battle to end pensioner poverty. Many pensioners will receive a real-terms increase of £12.45 a week as a result of that measure alone. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) drew attention to the surplus of about £3 billion in the national insurance fund. However, the disability measures in the uprating are alone worth more than £200 million a year—this year, next year and in future—than a simple inflation uprating.

As for the pensions uprating, the value of the pensions increase is about £4.5 billion a year more in real terms than the regime that we inherited from the Conservatives in 1997. By 2002–03, there will be about £5 billion a year more for pensioners. That puts into perspective the £3 billion national insurance fund surplus. One could blow the money all at once, but then it would not be there for the future, so the Government are following prudent policies; we are building an economy that generates resources and allows real-terms increases in benefits for disabled people and for pensioners. However, that must have a sustainable basis.

Mr. Kirkwood

I understand the hon. Gentleman's point; the figures have been published and they are clear. I repeat the practical question that I put during my speech. Is it possible for Ministers to ask the Benefits Agency to assist positively all of us who have the opportunity to promote local take-up campaigns in our constituencies? Obviously, we must be careful, because without proper support such campaigns may generate a volume of applications that the benefits agencies cannot cope with. Will the hon. Gentleman commit himself to helping Members who are working locally—with citizens advice bureaux and so on—on such campaigns?

Mr. Bayley

I welcome the spread of take-up campaigns to reinforce the Government's work on the biggest and most successful such campaign—on MIG. As the hon. Gentleman is aware, we do not have the power to make discretionary grants to CABs or other groups who undertake similar work. However, we should be happy to see and support such work.

The fact that we have got so far with the MIG take-up campaign—about 60,000 additional cases, and it is not over yet—is something that we should celebrate. Indeed, the hon. Member for Northavon was celebrating that.

The orders give additional help where it is most needed: more help for severely disabled adults and children and for those who care for disabled people. They provide a guarantee that, from April, no pensioner need live on an income of less than £92.15 a week. We have listened to pensioners and introduced reforms through the pension credit proposals to ensure that saving is rewarded instead of being penalised as it was in the past. We have acted to ensure that all pensioners benefit from the country's rising prosperity, by proposing—from next year—an increase in the basic state pension of £5 a week for a single person and £8 a week for a couple.

I commend the orders to the House.

Question put and agreed to.

Resolved, That the draft Social Security Benefits Up-rating (No 2) Order 2000, which was laid before this House on 13th December, be approved.

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