§ 7. Mr. Gordon Prentice (Pendle)If he will estimate the cost in the next financial year of linking pensions to the rise in average earnings. [120942]
§ The Minister of State, Department of Social Security (Mr. Jeff Rooker)It is a pity that the hon. Member for Altrincham and Sale, West (Mr. Brady) did not realise that he would stop debate on the question—
§ Mr. John Bercow (Buckingham)My hon. Friend did realise.
§ Mr. RookerIf that was the intention, it is unfortunate.
The cost of uprating the basic state pension in line with average earnings in 2001–02 would be an additional £400 million, on top of the expected £375 million increase in line with prices. Those figures are based on this autumn's estimates of a price increase of 3.4 per cent. and an earning increase of 4.9 per cent. Continuing to uprate in line with earnings would cost more than £6 billion by 2010, and £28 billion by 2030.
§ Mr. PrenticeThose figures are daunting, but may I express the situation in a different way? If pensions were linked to the increase in average earnings, this year, pensioners would be receiving a pension increase of £2.85 per week rather than 75p per week. I should also like to know why we cannot just tax well-off pensioners. The reason for not doing that is just lost on me.
The minimum income guarantee—[Interruption.] I do not want to raise my voice. The minimum income guarantee, which is going to the poorest pensioners, is linked to the earnings increase. However, for the next 10 years, all other pensioners will be receiving a real-terms increase of about 2 per cent. Over time, will there be a convergence in the treatment of the two groups? Does it worry my right hon. and hon. Friends the Ministers, as it worries me, that—with the minimum income guarantee and with the new pensioners tax credit—we shall be means-testing an ever-growing number of pensioners?
§ Mr. RookerThese are indeed daunting figures, and that is why we should not play around with them. As my right hon. Friend has made clear, if we had only increased the basic state pension in line with earnings, by this year—within the Government's first three years—we would have saved more than £800 million. However, that money has gone, quite deliberately, in a redistributive way, to the poorest pensioners. Over the lifetime of this Parliament, the £6.5 billion extra that will be spent on the pensioner population is £2.4 billion more than we would have spent if we had only increased the pension in line with earnings, re-establishing the earnings link. As I said, that extra money has gone to the poorest pensioners. I challenge any hon. Member, least of all those behind me, to argue against a redistribution towards the poorest pensioners.
§ Mr. Simon Burns (West Chelmsford)Does the Minister agree that it is slightly odd that, when a Labour Back Bencher lobs a particularly sycophantic question to the Secretary of State about his being the champion of pensioners, he replies in a purring mode, whereas, when a more independent Labour Back Bencher asks a slightly more penetrating question, the Minister of State answers in a rather petulant mode? Will the Minister please tell me why most of my pensioner constituents believe that, in opposition, Labour Members promised to change the linkage to earnings? How does the Secretary of State have 13 the gall to claim the title of the champion of pensioners when, after the measly 75p per week pension increase, most of my pensioner constituents believe that he is not the pensioners' champion, but the pensioners' Scrooge?
§ Mr. RookerIn answer to the first part of the question, I assure the House that my earlier answer would have been the same regardless of who had asked the question. Although I am not prepared to play around with those daunting figures, I will spell out the facts of the situation. It is a fact that, today, the average single pensioner's income is £132. It is also a fact that very few people exist on the basic state pension—which, as every hon. Member knows, is not intended to be the sole source of income. Pensioners should have either the minimum income guarantee or other pension incomes. At the last election, the Conservatives, the Labour party and the Liberal Democrats all proposed exactly the same formula for raising the basic state pension.
§ Miss Geraldine Smith (Morecambe and Lunesdale)Does my right hon. Friend agree that, now that the Government have helped the poorest group of pensioners, we must turn to the group of pensioners in the middle—those with small occupational or second pension schemes? They rightly feel that they need more help and support, but it would be foolish to restore the link with earnings across the board. That would do nothing to help the group in the middle.
§ Mr. RookerMy hon. Friend is right. Wherever we put a limit, there will be some above and some below. No doubt, delegations from both sides of the House will argue about any change to the limits. After 14 years of the savings limits for pensioners being frozen by the previous Government, we have already announced that, from next April, the £3,000 and £8,000 limits will go to £6,000 and £12,000. That will bring 500,000 more pensioners within the minimum income guarantee. We announced in the Budget that, by November, we shall publish proposals for a pensioner credit that, in some way, will enable us to help those with small occupational pensions. Those with tiny occupational pensions—say between zero and £10 a week—would not be helped if we put £10 a week on the basic state pension. We would not be able to help the poorest pensioners because of the minimum income guarantee. We have to get help to those with small occupational pensions that they have saved and paid for. They rightly feel that the problem is a festering sore that no Government have so far dealt with. We are committed to dealing with it and have said so.
§ Mrs. Jacqui Lait (Beckenham)Is the right hon. Gentleman happy that today the Secretary of State has said that the stakeholder system is aimed at moderate to high earners, when he himself has mentioned 10 times in Hansard that it is for low and moderate earners—and Ministers collectively have said that 44 times? Does he agree that, to curry favour with pensioners, the Department has spun the idea that they will get £2 from next April—or perhaps it might be £5 if they roll in the winter fuel payment? Perhaps he may care to comment on which of those is correct. Will he also tell us why the Government have spun tax credits for pensioners, 14 when they will have to wait until 2002 for them—after the general election? Is not the Government's pension policy all spin and no substance?
§ Mr. RookerI must disabuse the hon. Lady of one notion: we are talking not about a pensioner tax credit, but a pensioner credit, which is not the same. Only one third of pensioners pay tax. We want to get help to those identified by my hon. Friend the Member for Morecambe and Lunesdale (Miss Smith). They will not pay tax. My right hon. Friend the Secretary of State gave the official Government figures, which are correct. Having sat through umpteen hours upstairs with the hon. Member for Brentwood and Ongar (Mr. Pickles), the hon. Lady knows that we intend to target funded stakeholder pensions on those earning between £10,000 and £20,000 a year. We have also said that the state second pension, with its low earners boost, is particularly helpful for those earning less than £10,000 a year. They are not excluded from stakeholder pensions; it depends on individual circumstances. Stakeholder pensions are available to people earning more than £20,000 a year and to people not at work, because they are not work related. However, the target group is those earning between £10,000 and £20,000 a year who have no second pension. They will retire in abject poverty unless they get a second pension. That means an occupational pension, a personal pension or the friendly stakeholder pension.