New Clause

HC Deb 24 July 2000 vol 354 cc796-802

Lords amendment: No. 16, before clause 36, to insert the following new clause—Report on cost of pension uprating in line with general earnings level—

" . The Government Actuary or the Deputy Government Actuary shall report to the Secretary of State his opinion on the effect on the level of the National Insurance Fund, and the effect which might be expected on the rates of contributions, in each year up to and including 2005–06 of annual increases in the basic pension by the percentage increase in the general level of earnings; and the Secretary of State shall lay a copy of the report before Parliament."

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

I beg to move, That this House agrees with the Lords in the said amendment.

Lords amendment No. 16 requires the Secretary of State to lay before the House a report from the Government Actuary setting out medium-term projections of the effect on the national insurance fund, and contribution rates, of uprating the basic state pension in line with earnings. The Government have no objections at all to publishing the figures as requested. Indeed, the information is effectively an amalgamation of the figures that are already contained in two reports that the Government Actuary publishes.

The first is the uprating report which is published early each year. That report contains information showing the effect on the balance in the national insurance fund, in the current and forthcoming year, of the Government's proposals for uprating of benefits and re—rating of national insurance contributions.

The second is the quinquennial review, which shows longer-term projections. That report gives snapshots up to 2060–61 and includes a table showing the level of contributions required to keep the national insurance fund in balance. The figures are given both for earnings and for price upratings.

The information is therefore not new. but I caution the House that there are all sorts of caveats on projections for more than a couple of years ahead. The surplus is the difference between two huge figures each year, but, subject to the normal caveats that I have mentioned, the Government are happy to accede to the amendment and to ask the House to accept it.

Mr. Webb

The background to the amendment is the long campaign by Baroness Castle to persuade the Government to restore the link with earnings. During this Parliament, the noble Lady has pressed the Government hard, and the Government have twice attempted to buy her off. The first occasion was under the previous Secretary of State, when she threatened troublesome amendments at a Labour party conference. She was told then that there would be a review, and she withdrew her plans. The review duly came and went, yet there was no significant change to the basic state pension, which retained its link to prices.

Baroness Castle then tabled an earnings-link amendment in proceedings on this Bill in the House of Lords. I am not an expert on the finer points of procedure there, but Labour peers said that the noble Lady had been "mugged". I am not sure what that means, but there was clearly some attempt to block that amendment. Later in the proceedings, this rather modest amendment was accepted.

In debate with Baroness Hollis, Baroness Castle said that the Minister's total indifference to the strengthening of the basic pension arises from the fact that not only she, but also the Government, abandoned the principle of state insurance altogether. There has been plenty of evidence of that this year. In April, the Government raised pensions by 75p. Last week, in his comprehensive spending review, the Chancellor of the Exchequer handed out £43 billion yet did nothing for the basic state pension, and this amendment should be seen in that context. The Government were elected on a manifesto pledge that pensioners would share fairly in the rising prosperity of the nation. The CSR was about carving up that prosperity, but not a penny could be found for pensions.

The amendment provides that, until 2005–06, the Government should publish estimates of the effect on the national insurance fund of earnings linking as well as price indexation, and Baroness Castle made a passionate speech about the Government's disregard for the principle of social insurance. However, the Government accepted the amendment, which should have made us suspect that it would have no effect. Baroness Hollis gave the game away when she said that the Government have accepted the amendment and are happy to do so…we are just splicing together two sets of reports.—[Official Report, House of Lords, 19 July 2000; Vol. 615, c. 1097-1102.] The Minister of State said the same thing when he moved the amendment—that two bits of information would be placed between one set of covers. That will not change the fact that the Government do not believe in the long-term future of the basic state pension as a true foundation for income in retirement.

What will be the effect of the annual report provided for in the amendment? A copy of the report will be placed before Parliament, but does that mean that there will be a chance every year for the House to debate the level and uprating of the basic state pension? I suspect that it does not. I suspect that the report will simply disappear into the Library of the House after publication and that it will not change any element of the Government's policy. I am sure that Baroness Castle intended the amendment to secure a real change in what the Government are doing with the values of the pension.

5.30 pm

We are concerned that the amendment does not go far enough. It requires information that is currently published to be published under a single cover instead of two. I am disappointed that Baroness Castle was unable to go further and table an amendment that would not merely have required the reporting of information on the level of the basic state pension, but would have put pressure on the Government to increase it forthwith.

The Liberal Democrats have advocated specific rates of increase, which the Chancellor should have brought forward in the comprehensive spending review last week. We have argued that there should be an across-the-board increase of £5 for all pensioners but that the older pensioners, who have suffered the most from the breaking of the earnings link, should see larger increases. We have suggested £10 at the age of 75 and £15 at the age of 80. That is a structural idea, which would go beyond the amendment and would involve the Government in not merely reporting facts but doing something about the real value of the state pension.

When Baroness Castle said in the Lords that the Government had abandoned the principle of state insurance altogether, she was right. The Government argue that anything except money on the state pension is acceptable. When we said that we would increase the pension for the older pensioners, Baroness Hollis responded in another place that that would not be well targeted; yet the winter fuel payments are even less well targeted than any addition to the basic state pension, which is the subject of the amendment.

We are disappointed that Baroness Castle was able to get only this amendment through in another place. We believe that the amendment was accepted by the Government only because it lacks any teeth. We hope that we will get some assurances from the Government that although the Chancellor may have wanted to keep his powder dry in the comprehensive spending review, we will see not just a few extra reports under a single cover but some serious increases in the basic state pension. Pensioners not only expect that, but have a right to it.

Mr. Deputy Speaker

I remind the House that we are debating the amendment before us, not amendments that were tried in another place and did not succeed.

Mr. Paul Flynn (Newport, West)

I am baffled by the speech of the hon. Member for Northavon (Mr. Webb), because I have no idea why the Liberal Democrats did not table their own amendment if they thought that the one selected was not strong enough. Baroness Castle's amendment went through on Wednesday, and there has been plenty of time since then to table others.

I applaud the Government for accepting the original new clause in the other place and for accepting the strengthening of the new clause by adding the words and in order to enable Parliament to determine the introduction of such annual increases. To me, that means that we will have a chance to debate—and, I hope, to vote on—the level of the basic pension.

Mr. Rooker

Just so that I can disabuse my hon. Friend of that idea, let me remind him that amendment (a) to amendment No. 16 has not been selected.

Mr. Flynn

I accept what my right hon. Friend says. Life is full of disappointments. We must go back to our original position—the Government are at least accepting what was moved in the other place, which is something of a breakthrough.

We already know what the Government Actuary will say. He gave evidence on 28 June to the Social Security Committee inquiry into pensioner poverty. When asked to express his view on the result of restoring the link with earnings, he said that it could be increased for up to the next five years without any additional increase in national insurance contributions. The money is already there.

Other evidence has been given in answers to the written questions tabled by my hon. Friend the Member for Bethnal Green and Bow (Ms King), to the effect that without any increases in national insurance contributions beyond inflation, the link can be restored up to 2011. Not only would that not require any additional contributions—

Mr. Deputy Speaker

Order. I think that the hon. Gentleman is going so far that he is about to start, or has already commenced, debating an amendment that has not been selected. He cannot do that. He has given a little background as to why the Lords amendment is before us; now he must speak to the Lords amendment.

Mr. Flynn

Thank you, Mr. Deputy Speaker.

The acceptance of the amendment will give new heart to the 106 Members who signed early-day motion 1 and to those who signed early-day motion 985, which relate specifically to pensions. The fact that money has been sprayed in all directions is an act of gross injustice to pensioners, if there is no remedy for the insult of the 75p increase on the basic pension. That must be put right. I believe that the Government are moving in that direction. I cannot imagine why they hesitate for a second to announce that, for the foreseeable future, the link with earnings will be restored. It is affordable, it is justified and it would be hugely popular.

Mr. John McDonnell (Hayes and Harlington)

I welcome the amendment. Like my hon. Friend the Member for Newport, West (Mr. Flynn), I too almost got excited because I thought that amendment (a) to amendment No. 16 had been accepted—but such is life.

The amendment will allow us to debate, at an early date, the earnings link with pensions. Although Baroness Castle was thwarted in her attempt to restore the link—as were several Members of this place—she managed to secure that fundamental report, which, I hope, will be made in the autumn. That will enable us to compare the costs of the Government's current array of benefits for pensioners with the restoration of the link for which we have argued for so long.

Previous debates have made it clear that many pensioners welcome the litany of improvements—the increased fuel allowance, free eye tests and the reductions in VAT—and the benefits that they would provide. However, the demand from all the pensioners organisations is for an increase in the basic pension and for that increase to be protected in the long term by a link with earnings in future. They argue that that is the only way to ensure that pensioners share in the growing wealth of the country.

Mr. Dafydd Wigley (Caernarfon)

Does the hon. Gentleman agree that the pressure is to make up for the loss since 1981? That would now amount to £30 a week. The report would provide yearly information, but not a means to make up that loss.

Mr. McDonnell

Clearly, the information in the report would enable us to calculate the loss, but it might go further. A report issued by the Department of Health this month showed growing inequality, both in general and because of increased pensioner poverty. More than 30 per cent. of pensioner households have incomes that are below half average earnings. A fifth of pensioners live in dire poverty—in unsatisfactory housing or in houses that have been condemned as unsuitable for human habitation.

The report proposed in the amendment should highlight such matters. However, unless it is followed by action—by which I mean an order enabling Parliament to determine the restoration of the earnings link—pensioners will be disappointed.

Recently, there has been much reporting about memos to the Prime Minister on how to get the Government back on track and how to ensure a place in history for the Prime Minister and the Government. One way to restore the Government's record among pensioners is through the proposed report. It will show that we can restore the link with earnings, which can be afforded by the national insurance fund. Pensioners would not only be lifted out of poverty but out of continued dependence on means-tested benefits. I urge the Government not only to accept the amendment but to think again about its implications for long-term policy.

Mr. Frank Field (Birkenhead)

I welcome the amendment. Given that the House can guess where the sympathies of my right hon. Friend the Minister of State lie on the issue, I hope that, before the provisions of the amendment are effected, an announcement will be made to the House that there will be an increase in the national insurance pension, weighted to older pensioners. Those of us who canvassed in the local elections realise what a hiding we received because of this matter. I hope that the Government will not merely issue a report, but will take action before it is published.

Mr. Rooker

I am grateful for the contributions of my hon. Friends—I also consider the hon. Member for Northavon (Mr. Webb) to be a friend.

Anyone would think that the Government did not accept amendments in the House of Lords, but we did. There is no argument about that. However, at the risk of upsetting noble Lords, especially Lord Higgins and Lord Goodhart, I think that the comments that they made last week at columns 1101–02 of Lords Hansard after my noble Friend Baroness Hollis had accepted Lady Castle's amendment were impolite and insincere—and I mean that. If I were a little less diplomatic, I would probably say that those comments were outrageous but one does not say that about Members of the other place.

Given the remarks of the hon. Member for Northavon, I want to make one point clear so that there is no ambiguity. I do not want to sound pompous, but we are making law by accepting amendments to the Bill. We have accepted the amendment that has come from another place. The actual words on the amendment paper—not what people think they mean—will go on to the statute book.

It will not be an annual report, because the amendment does not call for that. There will be a report at the earliest available opportunity, which is likely to be in January. That is when the normal report on uprating appears and it is based on the uprating statement. The figures will be amalgamated from the quinquennial report and that is the earliest opportunity that the House would normally have to see those figures. The amendment calls for a report up to 2005–06, and we have accepted that. It is not practical to produce a report for when we return from the recess.

The hon. Member for Northavon can rattle on all he likes about the Government's action but I remind him that, when push came to shove, he and the Liberal Democrats even voted against the 75p increase this year.

Mr. McDonnell

Although it is true that we are debating the words that will appear in the Bill, is my right hon. Friend also clear that we are sending a message to pensioners that the Government have not closed their mind on the restoration of the earnings link with pensions?

Mr. Rooker

We are sending out all kinds of messages. By the time the report is published—the earliest available opportunity would normally be in January—the Government will have fulfilled the commitment that we gave on Budget day to put forward our proposals for consultation on the pension credit. That will be a radical departure from the status quo arrangements. Although there is still much work to be done over the coming weeks, we will keep that commitment and thereby enhance the debate and send all sorts of signals to pensioners. I assure my hon. Friend of that.

I do not want to digress, but, as one of my hon. Friends said, simply restoring the link would not, of itself, help the poorest pensioners. Hon. Members who simply advocate restoring the link as a mantra must also have the courage to say, "But this will not get any more money fast to poorer pensioners. They won't gain from that of itself." That is why we need the pension credit.

Mr. Webb

Is the Minister saying that the amendment means that we shall have a report in January that will include figures that we would have had anyway, together with figures from the quinquennial report that would also have been available? What additional information will the amendment produce next January that we would not have had anyway? Will he clarify that point?

Mr. Rooker

I made it clear that the information requested in the amendment is already available from two different sources, and I explained what they were. We will make sure that that information is pulled together in one of the publications. I do not want to be hung out to dry on this, but, in the normal process, the earliest opportunity—the one that is of most use to the House—to publish the information would be in January. The information requested in the amendment is already publicly available. There is nothing new about that at all.

Mr. Flynn

If the information is available, why did the Department of Social Security refuse to give me information about the state of the national insurance fund in 2003 and 2004, which it has done twice in response to parliamentary questions in the last six months? Does the Minister agree with Baroness Castle that targeting sounds like a good idea, but in fact is another way of describing means testing?

5.45 pm

Mr. Rooker

I do not accept that, and I am not going to get into a row with the goddess of the Labour movement in an argument between the two Houses. She knows that, and I have told her on more than one occasion that I am not going to do that.

Without the details, I cannot respond fully to my hon. Friend's question. It may be that he was referred to the Government Actuary's report. As I said, there are big caveats on the figures published years in advance, which may be why Ministers chose not to give what could have been a misleading answer to my hon. Friend's question. However, it is open to him to come back and ask the question again.

Lords amendment agreed to.