HC Deb 28 November 2001 vol 375 cc972-89 3.35 pm
The Secretary of State for Work and Pensions (Mr. Alistair Darling)

With permission, Mr. Speaker, I shall make a statement on the annual uprating of benefits and pensions, on the pension credit, and on new measures to help more people into work.

As a result of the reforms that we have made, we are again able to do more to give more security to those who are unable to work and to those who have retired. This year, we will again increase some benefits by more than the usual uprating. We are also making fundamental reforms to reward savings. I will explain how the pension credit provides a radical departure from the social security system that we inherited, and announce further measures to provide a greater employment opportunity for those who can work.

First, let me deal with uprating. Most national insurance benefits will rise in the normal way, according to the retail prices index—which is 1.7 per cent.—and most income-related benefits will rise by the Rossi index, which is also 1.7 per cent. Details will be placed in the Vote Office, and will be published in the Official Report.

We are also doing more to help parents, so that families can balance their work and home lives. The standard rate of maternity allowance and statutory maternity pay will rise from £62.20 to £75 next April. That is the largest increase in maternity benefit since 1958, and will help about 340,000 families a year. In 2003 it will rise again, to £100 a week. Moreover, the sure start maternity grant will rise from £300 to £500 next year. In 1997, a new mother on income support would have received just £100 to pay for essential items; from next year, she will receive £500. That is a substantial increase for mothers on lower benefits.

This year we want to do more to help families who are bringing up children with disabilities. When we came to office, the extra money paid to low-income families with a disabled child was just £21 a week. Last year we increased it by more than £7 a week; this year I can go further. I propose to increase the disabled child premium by another £5 a week—on top of the normal uprating—to a new rate of £35.50. In 2003 it will rise again by £5 over and above inflation, to more than £40 a week on top of basic income support or tax credits. That will benefit about 80,000 children. It will give extra help where it is most needed: it will help families on low incomes, both in and out of work, with disabled children.

I want to announce a further change. In the past, people with the most severe disabilities found that if they or their partners were in work—often against all the odds—they lost entitlement to the independent living fund, which paid for their essential care. From April next year, the earnings of disabled people and their partners will no longer be taken into account in the independent living fund. That is worth an average of £130 a week to those families. At the same time, we will increase the capital limits in relation to the fund, to extend help to people with savings of up to £18,500. That is a £10,000 increase on the current figure.

We are also determined to boost pensioner incomes. In 1997, the poorest pensioners were expected to live on just £68.80 a week. Last year we increased the minimum income guarantee to £92 a week; from April next year, the guarantee for a single pensioner will rise by £6 to £98.15 per week. That is an increase of £23 a week for the poorest pensioners, over and above inflation, since we came to office. For couples, the new rate will be £149.80.

So that all pensioners can share in the rising prosperity, the basic state pension will rise by £3 in April—by £4.80 for married couples. Widows' and bereavement benefits—which, because of the changes we made in 1998, are now paid equally to men and women—will also rise by £3.

As we promised in our manifesto, the basic state pension will remain the foundation of retirement income. That is why we have announced guaranteed rises for the future of at least £100 a year for single pensioners, and at least £160 a year for couples.

We also promised to do more to reward pensioners who have saved for their retirement. A year ago, I published a consultation document that set out our proposals to reward thrift. Today, I am publishing our response to that consultation, setting out how the pension credit will work. Copies will be available in the Vote Office. Tomorrow, I shall also publish the Pension Credit Bill.

All of us have met pensioners who struggled through their working lives to put something by for their retirement, but who then found that they are little or no better off than those who saved nothing. The pension credit will ensure that, in future, it pays to save. The credit works in two ways. First, it will bring pensioners' entitlement up to a guaranteed minimum level of at least £100 a week—or £154 for couples—in 2003, and it will increase in line with earnings for the rest of the Parliament. Secondly, the credit will provide an additional top-up to reward pensioners aged 65 or over who have saved for their retirement. So pensioners with modest second pensions and savings will receive more as a result of their thrift.

A further change is essential to reward savings. We shall abolish the rule that excludes pensioners with £12,000 or more in savings from any help and introduce a fairer system for taking into account income from savings.

About half of all pensioners stand to gain from the pension credit: more than 1 million pensioners from increased guaranteed income, and more than 4 million pensioners from the savings reward and the improvements to the rules on the treatment of savings. Two thirds of hose who stand to gain from the pension credit are women, half of them over 75. On average, pensioners will gain £400 a year, with some receiving up to £1,000 a year. That is the difference that the pension credit will make.

Any pensioner with an income below about £135, or couples with an income below £200, will see their hard-earned savings rewarded with extra money, not penalised as in the past. We are also going to make it easier for pensioners to receive all their entitlements. Last year, I said that we would end the weekly means test and the endless form filling, and we shall. The pension credit will be calculated at the same time as the basic state pension, when people retire. For those over 65, whose incomes tend to be more settled, in most cases we shall reassess their income only every five years. Each year, they will see an automatic increase in their pension credit, after the uprating, and that will take account of any changes in their second pensions.

The pension credit will increase guaranteed income, end the weekly means test and reward thrift. It will also remove an injustice in the system: for the first time, it will pay to have saved. More than 5 million pensioners stand to gain from it.

I now turn to employment. In the past four years, we have introduced more help than ever before to make work pay and to make work possible. Today, with my right hon. Friend the Chancellor of the Exchequer, I am also publishing a paper that demonstrates the need to provide more employment opportunities to those who have missed out in the past. The analysis shows very clearly what happened when we did not have a system that actively helped people into work, and when the then Government took a hands-off approach to unemployment, leaving it all to chance. Between the 1970s and the mid-1990s, the number of lone parents and sick and disabled people on benefits trebled. A whole generation was written off.

Three immediate conclusions follow from that paper. First, we have to do more to help everyone of working age to get into work wherever possible. That is why, starting next year, we are extending the single gateway to the benefits system—Jobcentre Plus—across the whole country. Everyone of working age will have work-focused interviews to help them into jobs wherever possible.

Secondly, when people lose their jobs, the evidence shows that the quicker we intervene, the quicker people will get back into work. As the Chancellor said yesterday, our economy is well placed to deal with global uncertainty and the labour market is in a stronger position than in a generation. However, when people do lose their jobs and there are redundancies, we have to take action quickly. In many cases, jobs are available: every month, half a million people enter work or change jobs. So we need to do more to match people with the vacancies that employers are trying to fill. The fact is that 10,000 vacancies are notified to the Employment Service every working day.

Today, therefore, I can announce that, over the next two years, I am allocating an additional £6 million to the rapid response service which offers prompt help to those who have been made redundant. The money will be used by each region to put together the right response for people in their communities, ensuring that people affected by redundancy have the information and help that they need to find new jobs. The service will work to match people's existing skills to those needed by new employers, and it will ensure that retraining is available to help people move into new industries.

Thirdly, we have the lowest unemployment level for 25 years, but there are still people who need extra help to take up available jobs in their areas. Over the past four years, the new deal has established a new welfare contract, with more help and support than ever before, in return for greater responsibility on the part of individuals to help themselves. Today, I can announce a further measure that will build on the new deal to help long-term unemployed people who need more intensive help to get into work.

We will guarantee those people who qualify a full-time job, lasting up to a year, and paid at the national minimum wage. They will have the same employment rights, and they will be entitled to the same in-work benefits, as anyone else. In return, it is not unreasonable to require people to take up that opportunity. We aim to give people a choice of job, but they will not be able to turn down all offers and remain on benefit.

We will start that approach in six places from April next year, in areas in Sheffield, Cardiff, Oldham, Sunderland, Lambeth and east Ayrshire. We will follow those with a second group over the summer, covering areas in Leeds, south Manchester, Sandwell, Bristol and Greenwich. In the autumn, we will start further pilots in Hackney, Great Yarmouth, Knowsley, Rotherham and Coventry, with provision starting by the end of the year in Burnley, Wrexham, Dundee and Bradford. I will be writing to hon. Members who represent the constituencies involved to ask them to become involved in the new project.

We will pay for those jobs, working in partnership with employers, local authorities and organisations with experience in offering intermediate labour market opportunities. It is an investment of more than £40 million over two years to equip 5,000 people who are currently long-term unemployed with the skills, the support and the experience of work they need as a stepping stone to jobs in the local labour market.

Britain's unemployment is the lowest since the 1970s. The new deals have helped hundreds of thousands of people into work. We are determined to ensure employment opportunity for all—including those who have missed out in the past—and these measures will help us to do that. We are doing more to help people into work, and to help those who cannot work. We are also making sure, for the first time, that pensioners are rewarded for their savings. I commend this statement to the House.

Mr. David Willetts (Havant)

I thank the Secretary of State for his statement. We welcome what he said about benefits for disabled people. At the heart of his statement, however, was a radical shift in policy on pensions. Hon. Members on both sides of the House used to regard the basic state pension as fundamental in determining the income of many pensioners. Those days are now over.

The minimum income guarantee is to be worth far more than the basic state pension and is to increase in line with earnings, not prices. It will provide the base for the pension credit. More than half of pensioners will therefore have their total income determined by that means test. The value of the basic state pension will be irrelevant for them. The Secretary of State made much play—as did the Chancellor yesterday—of the pledge that the basic state pension will always increase by at least £100, but he owes pensioners an answer to the following crucial question. Will those increases be passed on to pensioners who are on his means test, or is he only able to give that promise because it will cost so little—the value of the basic state pension being offset, pound for pound, against the minimum income guarantee and therefore, under the new regime, irrelevant for millions of pensioners? Will the Secretary of State confirm that, after the changes of which he is so proud, the only pensioners who will enjoy the full value of any increase in the basic state pension will be the most affluent pensioners, for whom it is a relatively modest part of their total income? Is that really what the Government mean by welfare reform?

By the time the Secretary of State has implemented his proposals, almost 60 per cent. of pensioners will be on means tests. Labour Members used to jeer at means tests, but today they cheer them. Surely, however, they must be concerned—I know that some of them are—by the implications of the policy for savings in general and the Government's stakeholder scheme in particular. How can the Secretary of State be so confident that he is rewarding savings when many more pensioners than ever before will face rates of benefit withdrawal of at least 40 per cent. A 40 per cent. marginal rate is bad enough, but for many pensioners it could be far worse. For a pension credit recipient who is also on housing benefit and council tax benefit, the marginal rate could be 91 per cent.

If pensioners do not lose housing benefit—I know that the Secretary of State mentions the point in his paper on the pension credit—when they receive the pension credit, it will mean that many more pensioners will be on housing benefit and will face those high marginal rates of benefit withdrawal even further up the income scale.

The Secretary of State's Department and the Treasury have made an art form of disguising true marginal rates by ignoring council tax benefit and housing benefit in the figures that they bring to the House. You, Mr. Speaker, made a very welcome statement a few minutes ago, in which you referred to the need to answer written questions fully. Last night, I tabled questions to the Chancellor about marginal rates of benefit withdrawal—[Interruption.] No, and I am giving him notice. Those marginal rates of benefit withdrawal were not merely the marginal rates of loss of pension credit, but included the loss of housing benefit and council tax benefit. I look forward to the Treasury's full answers to the questions that I tabled.

I also welcome the Secretary of State's complete climbdown on the capital rules for pensioners. When he announced that he was abolishing the old formula, he said that he would instead take account of the actual incomes that pensioners earned from their savings. We warned him then that millions of pensioners would be trapped in incredibly complicated and fine judgments with regard to reporting tiny changes in actual income. The right hon. Gentleman has now reverted to a formula almost identical to the one that he was denouncing until a few weeks ago. We welcome the fact that, instead of trying to measure the actual income from savings enjoyed by millions of pensioners, we are once more to have a far simpler formula for the treatment of savings.

Another question about the Secretary of State's pension proposals concerns the Government's promise that the pension credit would be introduced alongside the minimum income guarantee uprating in April 2003. I am glad that the Chancellor is in the Chamber today, as the table on page 170 of the pre-Budget report makes it clear that the cost of the pension credit when it is introduced in 2003–04 will be £975 million. However, that is only half the £2 billion that it is expected to cost in the following year.

That can mean one of two things—either that the Government are delaying the implementation of the pension credit beyond their original target of April 2003, or that the pension credit will be so complicated to claim that the Chancellor's forecast is that half of eligible pensioners will not be able to secure the credit in its first year of operation. I should be very interested to hear why the Secretary of State believes that the cost of the pension credit in its first year of operation will be half that of subsequent years.

I shall look with interest at the report compiled by the Secretary of State and the Chancellor on the new deal in employment. It is striking that, although unemployment has risen recently, the claimant count has risen by only a very modest amount, despite a dramatic increase in economic inactivity. We will read the debate on the matter with interest. The Chancellor suggested that there should be a big national debate on these questions, and we look forward to future debates on economic inactivity.

However, I hope that those debates do more than analyse the problem of economic inactivity. I hope that they analyse the effectiveness of the Government's claims to be tackling the problem. The Secretary of State knows, from the evaluations published by his Department, that many of the reforms for which he claims credit—such as the new deal for lone parents and the new role for personal job advisers—are not leading to more participants in the schemes finding work. That is what was promised, and the deficit is especially notable in the pilot areas. I hope that the debate analyses the effectiveness of the Secretary of State's policy measures, not just the increase in economic inactivity.

I regret that the Secretary of State omitted to refer to the changes in family benefits. The Chancellor has introduced four new tax credits already—the working families tax credit, the child care tax credit, the children's tax credit and the baby tax credit. He has now decided to scrap them, and to introduce two other tax credits—the employment tax credit and the integrated child credit. However, just in case any family in Britain was in danger of understanding the regime, the new credits have been renamed, even before they have been introduced. They are now to be called the child tax credit and the working tax credit, and they are not to be confused with the children's tax credit and the working families tax credit.

Do the Chancellor and the Secretary of State seriously expect Britain's hard-working families to negotiate their way around a system whose structure—let alone the rates involved—changes every year that the Government are in office? Is it any wonder that the National Association of Citizens Advice Bureaux gave a warning last week, which I wish the Chancellor had taken to heart? It said: both the benefit and tax systems are complicated and intimidating to those lacking in financial literacy skills … The complexity of benefits and the claiming process is one reason why millions of pounds worth of benefits go unclaimed by people on low incomes … more needs to be done to ensure that all low income groups can claim the credits or benefits to which they are entitled". That is the challenge which the Government must answer. The relentless tinkering with the structures of credits and tax credits does no service to the very families whom the Chancellor claims he wishes to help.

The Secretary of State and the Chancellor are still refusing to give any reliable figures for the cost of their new child benefits, although they are due to be implemented in 2003. I believe that the Chancellor is in clear breach of his own code for fiscal stability, which he published with the 1998 Budget and which was subsequently incorporated into the Finance Act 1998. The code for fiscal stability makes it clear that when the Government are planning measures with a fiscal impact, the cost should appear as soon as possible in the pre-Budget report or other economic statements. It states: where the fiscal impact of these decisions and circumstances cannot be quantified with reasonable accuracy by the day the projections are finalised, these impacts should he noted as specific fiscal risks. That is the code to which the Chancellor bound himself to bring transparency to fiscal policy. He has failed to live up to that in his treatment of credits and tax credits in his statement yesterday. We ought to know how much they are going to cost; that ought to have been covered in the Chancellor's pre-Budget report, and the right hon. Gentleman is in breach of his own obligations for having failed to provide that information.

The Secretary of State and the Chancellor have lost their way on welfare reform. Ministers have abandoned their promise to introduce a welfare reform Bill. They published figures only last week showing that the number of people claiming income support, which is the main means-tested benefit, is for the first time above the level that Labour inherited in 1997 and has reached almost 4 million.

The Government are means-testing more and more people for benefits. I had a letter from a pensioner in Huddersfield this morning. I am pleased to see the Chancellor in his place, because the letter is quite simple: I seem to remember, before the 1997 election, Gordon Brown made a clear promise: 'If we win, all means-testing of pensioners will end.' Could you check this for me? What has happened to Labour promises about the abolition of means testing? Benefits expenditure is out of control, means testing is growing and the welfare reform Bill has been abandoned.

We read in the press that the Chancellor and the Secretary of State work hand in hand. It is true that they work together. The Chancellor puts more taxes on the pension funds that belong to pensioners and more taxes on families and the Secretary of State, then hands the money back in means-tested benefits for which he expects people to be grateful. The Secretary of State is no more a welfare reformer than the Chancellor of the Exchequer is a tax cutter.

Mr. Darling

I assume that that is it, Mr. Speaker.

Let me go through the various points raised by the hon. Member for Havant (Mr. Willetts). With respect, I think that it is the hon. Gentleman who has lost his way. I recall that this is the man who wanted to get rid of the winter fuel payment. He also wanted to get rid of free television licences, although his policy is now to give them even to people who do not have televisions.

The hon. Gentleman is also the proud owner of a pension reform policy that would require a 14-year-old boy to start saving £10 a week just to buy back his basic state pension. So much for the hon. Gentleman's concern about the basic state pension.

The Labour party has made it abundantly clear that the basic state pension will remain the foundation of pension provision. What is more, following my right hon. Friend the Chancellor's announcement earlier this year, we have guaranteed that the basic state pension will go up by at least £100 a year.

What the hon. Gentleman is actually saying is that he does not like the minimum income guarantee and the pension credit and, if he were to get into power, he would get rid of them. Let us be clear about that. It would mean that the floor of £100, which we think is the minimum that pensioners should have to live on, would go.

As for pension credit, Conservative Members might come to regret the position that the hon. Gentleman has taken today. The pension credit would mean that a 65-year-old with an occupational pension of £100 a month would receive £60 a month more. If the Tories got back in, that £60 would go.

At the next election, I would love to come out with any Conservative Member as they go canvassing in the evening, knock on the door and tell a 65-year-old with a £100 occupational pension, "If you vote for the Tories, it will cost you 60 quid." It would be a pleasure to accompany any Tory party canvasser on such an expedition.

On housing benefit and council tax benefit, the response that I referred to a moment ago makes it clear that people will not lose out as a result of the pension credit being introduced.

The hon. Gentleman also had something to say about the capital rules. Yes, we have listened to what Age Concern, in particular, has said. It said that, as far as the capital rules are concerned, it would be wrong for pensioners to have to account for every single penny of interest that they might earn. Therefore, as people have asked, we have kept the £6,000 disregard—which we ignore—and we have introduced a far fairer system.

Let me illustrate the difference between us and the scheme that the Tories promoted. If someone has £10,000 in the bank, that person would have been assumed to have an income of £16 a week under the old Tory scheme. Under the simpler, fairer system that we are introducing, that same person would be assumed to have an income of only £8 a week, half what the Tories were assuming. If the hon. Gentleman wants to argue about which system is better, I am happy to have that argument.

The hon. Gentleman asked about the timing of the pension credit. I have made it clear again and again that the pension credit will be introduced from October 2003. That is why the costings are as they are set out.

The hon. Gentleman then went on to talk about employment, but I am not sure whether he is for or against our proposals. He referred to the paper on the problems that we face as a result of people of working age being economically inactive—I am sure that, as a semi-academic, he will look forward to reading it—but he should realise that there is a difference between the Labour Government and the Conservative party. We have introduced policies to deal with what is undoubtedly a major problem. Through Jobcentre Plus and other measures we are systematically getting people back into work who were not in work before.

It is worth reminding the Conservatives about the new deal for young people. More than 300,000 more young people are now in work, double the number that would have been in work had it not been for the measures that we have introduced. The new deal for 25-plus means that nearly 75,000 of that group have gone into work and the new deal for lone parents has led to more than 100,000 of them going into work None of that would have happened if the Conservatives had remained in office. Therefore, I take with a very large pinch of salt what the hon. Gentleman says.

The hon. Gentleman mentioned two other points. First, he said that income support levels are up. Actually, the number of people on income support is lower than it was in May 1997. He was of course including the fact that far more pensioners receive the minimum income guarantee. I will not apologise for the fact that more pensioners now get more money as a result of what we have introduced.

The hon. Gentleman then went on to complain about the complexity of tax credits and the integrated child credit. We are making sure that it is easier for people to obtain the access to the monetary help to which they are entitled. We are getting rid of the high marginal deduction rates, and it is worth remembering that, before the working families tax credit was introduced, many people faced more than 100 per cent. deduction. That has gone as a result of the working families tax credit.

Critically, in respect of the measures that we are introducing today and the child credit, we are making work pay for hundreds of thousands of people for whom it did not pay in the past. We are also making sure that we help families in a way that never ever happened under the Conservative party.

Critically, in relation to the pension credit, we are making sure that 5 million pensioners will get more money to reward their thrift. When one strips away everything that the hon. Gentleman said, the key difference between us and the Conservative party is that we want to make sure that we give all pensioners an increase in their income, that we do far more to combat pensioner poverty and, crucially, that we reward the 5 million or so pensioners in this country who have got nothing for their effort and thrift.

Under the Labour Government and under the pension credit, those pensioners will for the first time get a reward. I am willing to bet that that is another position that the hon. Gentleman has got himself into where it will not be too long before his Back Benchers come to him to say, "I think perhaps you ought to rethink your position because, once again, you've got it very, very wrong."

Mr. Steve Webb (Northavon)

As another semi-academic, I thank the Secretary of State for his courtesy in making the statement.

On integrated child credit, will the right hon. Gentleman clarify the position of a two-earner couple, both on £20,000 a year who at present get a full child credit, who, when their incomes are added together, might get next to nothing? Those people do not know what their incomes will be the year after next. Will the Secretary of State tell them?

On pension credit, what computers underlie that complicated system? Will the Secretary of State confirm that his Department's spending on computers to run pensioner benefits has risen sevenfold, from £57 million to £432 million? Given that he will not tell us in written parliamentary answers why that has happened, will he tell us on the Floor of the House? Has it anything to do with the pension credit, perhaps?

Does the right hon. Gentleman accept that the pension credit is far more complicated to claim than the basic state pension? Is it not inevitable that a complicated benefit is less likely to be taken up than a straightforward benefit? Given that half a million people already fail to claim the safety net benefit—the poverty line benefit—will he confirm that he expects the take-up rate for the pension credit to be higher than it is for the minimum income guarantee? Is he confident that the proportion of those who claim their entitlement to the benefit will be higher—yes or no?

Finally, given that the pension credit is so straightforward, perhaps the Secretary of State can tell me one thing: how much pension credit will a single pensioner on a basic pension with an occupational pension of £40 be entitled to receive?

Mr. Darling

On the hon. Gentleman's last question, I can help by referring him to the excellent publication "The Pension Credit", which I presume he received with my draft statement. It has an extremely helpful table in the back which shows exactly how much someone gets for every pound of saving. I strongly commend it to him.

Mr. Webb

How much?

Mr. Darling

Being an academic, the hon. Gentleman should not be too hard on himself. He is after all, as we are constantly reminded in the Order Paper every day, a professor. If he cares to look at some of the evidence, he will see exactly how much someone can get from the pension credit.

The hon. Gentleman asked about computers. I will deal with that, although I cannot for the life of me understand what it has to do with the policy on pension credit. As I have told the House before, the Department for Work and Pensions computer systems are for the most part 20 to 30 years old. They are antiquated and in sore need of investment. We got that investment last year in the current spending review, which is why the figures in our departmental estimate for replacing the computers have increased. In our first term in office, just after the Conservatives had been in power, the money was not allocated to us. From this year, we have the money. We must replace the information technology systems. If we do not, they will be obsolete in about three or four years time. I understand why the hon. Gentleman, as a Liberal and a professor, would raise such a point, but it does not have much to do with the pension credit.

The hon. Gentleman also mentioned the complexity of the system. He will know, because he does know something about this, that the calculations behind the basic state pension are complex because of the contributions and the rest. As I said, it is the foundation of pension provision and it is important. The concept of pension credit is also straightforward. It does two things. It provides a floor beneath which pensioner incomes should not fall. If someone has a pension of less than £100, from 2003, we will top it up to £100. On top of that, we will reward their second pension or their savings, as the case may be.

I gave the example to the Conservatives and I will give ft to the Liberals because it looks as if they will be knocking on doors with the same message—that they, too, will take away the pension credit. If they knock on the door—perhaps in the hon. Gentleman's constituency—of someone who is 65 with an occupational pension of £100 a month, that individual will receive £60 a month on top under the pension credit. The Conservatives and the Liberals will no doubt be fighting on the doorstep to persuade that person to vote for them on the grounds that they will remove £60 a month. There will, of course, be three of us on the doorstep, because I mean to be there to listen to the argument.

Mr. George Mudie (Leeds, East)

I congratulate the Secretary of State on the many measures that he outlined, in particular the transitional employment scheme and its good tie-up with the national minimum wage. That will enable us in Leeds—I am delighted that he has included Leeds in the pilot areas—to put in work the 10,000 people in the inner-city, many of whom are from the ethnic communities, including Bangladeshis, Afro-Caribbeans and Pakistanis, and the thousands of one-parent families, all of whom have not had the opportunity to share in the nation's prosperity. My right hon. Friend deserves to be congratulated on the scheme. It seems bad after saying that, but I must draw my right hon. Friend's attention to a slight error: he has put Leeds in the second tranche of pilot areas. As we are very anxious to put those people into work, I wonder whether there is any flexibility to enable us to start earlier.

Mr. Darling

On the latter point, I did say that I would be writing to all the hon. Members who represent the areas concerned, and that will include my hon. Friend.

The first six areas are those in which we are reasonably confident that we can get the scheme up and running quickly. For the reasons that I stated, I want to set up the pilots as quickly as possible. As my hon. Friend will know, Leeds is an interesting case that shows why we need to take action. Its employment rate is about 80 per cent., one of the highest in the country, yet there are parts of Leeds—my hon. Friend highlighted those with an ethnic minority population—where the employment rate is only just over 50 per cent. If we genuinely want to provide opportunities and jobs for everyone, we need to introduce measures such as this to provide people who are not yet in work with far more intensive help than ever before.

Local leadership, including employers and Members of Parliament, is absolutely critical for this policy, as it was for the new deal, particularly in the early days. I believe that it will go a long way towards solving a problem that many people thought was intractable. I do not think that it is intractable, and it is worth putting in the extra effort to make sure that we get people into work. I am grateful for my hon. Friend's support.

Mr. Paul Goodman (Wycombe)

The Secretary of State knocked on the door of Help the Aged yesterday, and Help the Aged said of the pensioner credit that it is complex and arbitrary, and will draw half of the older population into means testing. What is his response to that?

Mr. Darling

Naturally, I do not agree with the hon. Gentleman or the analysis to which he refers. The objective of our pension reform is to make sure that we help all pensioners, just as we help all children, but we give more to those who most need that help.

As a Conservative, the hon. Gentleman may care to remember his party's legacy to us. By 1997, the gap between the better-off pensioners and the poorest pensioners was as wide as it had been nearly 40 years earlier. We believed that to deal with that problem we had to give more money to those poorer pensioners, which was why we introduced the minimum income guarantee, and the guarantee element will continue. We believed also that for those millions of people who had done everything that successive Governments told them to do—Conservative and Labour Governments told people to save for their retirement—it was important to introduce a system that supported rather than penalised thrift.

The hon. Gentleman must be aware that if he had his way, and there was no pension credit, we would return to a system in which somebody who saved money would lose out. That cannot be right, which is why we are introducing what I regard as one of the most radical changes to the social security system for 50 years and moving to the credit system, which rewards people for their thrift. I should be very surprised if, once it has been introduced, another party were to come along and offer to remove money from over half of the pensioner population—it would certainly be a courageous step.

Mr. Chris Pond (Gravesham)

Following the comments of my hon. Friend the Member for Leeds, East (Mr. Mudie), may I point out a further error by the Secretary of State? Gravesham is not included in even the second tranche of the pilot schemes for the transitional employment programme, although I have to admit that we have had considerable success in creating employment.

I very much welcome the fact that the scheme will include a basic minimum wage and the employment rights and in-work benefits that my right hon. Friend mentioned, so that people will not only be helped into work but be given an opportunity to move on to the next stage. Will he give a commitment that those in the scheme will also have the support of personal advisers to make sure that they can move into long-term employment and build an even better standard of living for themselves and their families in the years ahead?

Mr. Darling

I believe that unemployment in my hon. Friend's constituency has come down by over 44 per cent. since 1997, helped to a considerable extent by the various measures that we have introduced to get people into work, of which the new deal is the centrepiece. The new measure is in addition to all that, and will now be a major part of the work implemented by Jobcentre Plus. People will have their own personal adviser who sticks with them—that is central to the Jobcentre Plus approach. As my hon. Friend knows only too well from his previous occupation as well as his experience as a Member of Parliament, people who have been out of work for a long time very often need far more help and intensive engagement than those who have just come out of mainstream employment. The new measure will incorporate that feature, because it is essential to get people into work.

Lady Hermon (North Down)

I warmly welcome the Secretary of State's statement, but may I draw to his attention what appears to be a slight oversight in relation to Northern Ireland? The 20 areas pinpointed for the new deal pilot schemes include areas in Scotland, Wales and England, but not a single one has been selected in Northern Ireland. I ask him to add at least one more area—if not two—that is in Northern Ireland.

Mr. Darling

It was not entirely an oversight, since these matters are the responsibility of the Northern Ireland Assembly. The hon. Lady did not mention pension credit, but I know that the Minister concerned is keen that measures we introduce are also introduced in Northern Ireland, as has been the case for a long time. As she will know, there are other measures operating in Northern Ireland that will help. I am quite sure that we will do everything we can to work with those in Northern Ireland, share experience and so on, because long-term unemployment is a problem no matter where it occurs.

Mr. Ernie Ross (Dundee, West)

I also welcome everything that my right hon. Friend has said, particularly about transitional employment. Unlike my hon. Friend the Member for Leeds, East (Mr. Mudie), I want not flexibility but acceleration, so that my area is moved out of the last tranche and closer to the top.

My right hon. Friend is correct that, under the new deal, we have learned from the mistakes of the Conservative party and dealt with the holes as they have appeared. Today's proposal fills the last hole. With the best will in the world—with the intermediate labour market and new deal advisers working as closely as they can—there will always be one or two individuals who find it almost impossible to get a job. Someone must take responsibility for employing them in the short term in order that longer-term employment can be provided by the private sector. If the Government must take such responsibility, I fully support them in doing so. I welcome the scheme, but I want just a little acceleration for Dundee and Tayside.

Mr. Darling

Everybody wants to be first. I very much hope that, if the pilot projects prove to be successful, we can do more. My hon. Friend is right in saying that some people have substantial difficulties in entering the labour market. The advantage of what we are proposing is that people on the programme will gain experience of a full-time job, which in itself brings invaluable experience and discipline. As I have said, they will get the minimum wage and be entitled to all the rights and benefits that go with full-time employment. Long-term unemployed people, some of whom have substantial difficulties, have often missed the experience of going to work. Most of us here take such experience for granted, but many have just not had that opportunity.

If my hon. Friend has time to read the paper that the Chancellor and I are publishing today, he will see clear evidence of what happens when such measures are not taken. As he knows only too well from representing Dundee, there is now a generation of people—mostly over 50 and some in their 60s—who suffered grievously because they were abandoned. I am determined that that should not happen again.

Mr. Christopher Chope (Christchurch)

Why is the Secretary of State ignoring the plight of 1 million pensioner households that are in council tax poverty, in the sense that they are spending more than 10 per cent. of their income on council tax each year? Do not his statement and that made by the Chancellor yesterday show that, as a result of Government policy, council tax next year will rise by 7 per cent—four times the rate of inflation, as set out in table B11 of the pre-Budget report—and that even more than 1 million pensioner households will find themselves in council tax poverty? Is not that totally unacceptable?

Mr. Darling

I must say that I had no idea that the hon. Gentleman was a champion of people on low incomes. That escaped my attention during all the years during which he was a Minister and I sat on the Opposition Benches. I do not recall him expressing any such concern.

The Government have done a number of things to help people living in council houses and elsewhere—principally getting people into work and ensuring through the working families tax credit that work pays, and by introducing measures to help older people. A whole range of measures have boosted the income of people on low pay. The hon. Gentleman did not of course mention that he is against each and every one of them.

Mr. Andrew Dismore (Hendon)

When going around my constituency explaining pension credit to my constituents, I have met pensioners who are somewhat suspicious of the programme—not for the reasons given by the Conservatives, but because they thought it was too good to be true that, at long last, a Government were recognising their long-standing complaint that they had been saving all their lives but had nothing to show for it. On behalf of the thousands of pensioners in my constituency, I congratulate my right hon. Friend on his statement. What plans does he have to make sure that all those who are entitled to it take up that important benefit?

Mr. Darling

On my hon. Friend's first point, I am sure that once pension credit starts to be paid, from October 2003, more and more pensioners will come to realise its benefit. If I were my hon. Friend, I would not worry too much about what the Conservatives say. Remember, theirs is the party that said that pensioners would not like the winter fuel payment—so certain were they of that that they intended to abolish the winter fuel payment. They have changed their mind, as they have on the minimum wage and other measures. That suits me fine: if the Tories want to take money away from people, Labour Members will be absolutely delighted to test that policy at the next opportunity.

My hon. Friend raises an important point about entitlement. When people retire, we have to write to them to say what their basic state pension is. Our objective is to make sure that at the same time we calculate their guarantee element and the credit. We intend to fix the award to pensioners over the age of 65 for five years so that we do not have to trouble them unless some major change in circumstances occurs. All that plus the IT to which the professor referred will ensure that in future we 'will have a far easier and a far better system for getting pensioners the money to which they are entitled.

Hywel Williams (Caernarfon)

We in Plaid Cymru and the Scottish National party are concerned about the operation of the means test and its differential effect in areas such as ours, where incomes are low and there are many pensioners. Will the right hon. Gentleman tell us, not the number of people who are claiming minimum income guarantee but the percentage of people who are not claiming it? Does he foresee that percentage falling as his measures are applied?

Mr. Darling

The hon. Gentleman is right in one respect. The effect of pension credit is differential; basically, it gives more money to poorer people as well as rewarding those who have modest savings. I regard that as a good thing. Unfortunately, Scotland and Wales have more than their fair share of poor pensioners. That is why the minimum income guarantee proved so successful and popular in both countries and why I believe the pension credit will prove successful in both countries. When the hon. Gentleman has had a chance to reflect on his party's position—no doubt, the Scottish nationalists will do the same—I think that he will see that the pension credit will be welcomed in both countries. If those parties want to take a different view and to oppose the measure, I shall be extremely happy.

Gillian Merron (Lincoln)

I welcome the announcement of more money going into the pockets of all pensioners, especially the poorest, as well as the simplification of the minimum income guarantee claim form—a change that was warmly welcomed by Age Concern in Lincoln. May I ask my right hon. Friend to ensure that his Department increases its efforts to find new ways in which to promote the take-up of minimum income guarantee, so that we can be sure that every pensioner who is entitled benefits both from the benefit and from the recent increases that he has announced?

Mr. Darling

I certainly intend to do that. I want two things to be developed in the coming years as new and better IT is implemented. We are starting to send annual pension forecasts to the working population, but we have a problem in that no one has to tell my Department when they move, so we do not always keep in touch with them. Once more regular contact is established, it will be much easier to get in touch with people as they approach retirement and tell them what their basic state pension is likely to be, as well as asking them about second pensions and so on.

In the coming years, we will get better, but in the immediate future we will, as my hon. Friend rightly urges us to do, continue to step up efforts to ensure that people get the money to which they are entitled. It has been our experience that as we increase the amount of money available, interest tends to increase. I am pretty confident that, as the years pass, more and more people will receive their entitlement. In future, people will wonder why it took so long for any Government to start to work to eradicate pensioner poverty and, critically, to reward those 5 million people with modest means who should have been helped long ago.

Mr. Gerry Steinberg (City of Durham)

I welcome my right hon. Friend's proposals. The greatest grievance about which I heard in my constituency was from pensioners complaining that they were being penalised for saving when they were younger. The majority of pensioners to whom I have spoken are delighted with Government policies. They tell me that they are much better off than they have ever been.

I still have a big worry. Will my right hon. Friend assure me—I ask him to explain more fully—that his latest proposals will not mean that some pensioners will lose out in terms of council tax relief and housing benefit? When pensioners have been given increases in pensions, they often lose out in that way. They find that they are worse off at the end of the day. Can my right hon. Friend assure me that that will not happen this time?

Mr. Darling

My hon. Friend raises an important point. I can do no better than refer him to page 6 of the pension credit document, which he can send to his constituents. The passage clearly reads: Nobody will lose Housing Benefit or Council Tax Benefit as a result of the Pension Credit. I strongly commend the paper. It is a handy size for putting into an envelope, if my hon. Friend would care to send it to his constituents.

Mr. Chris Mullin (Sunderland, South)

I am grateful to my right hon. Friend the Secretary of State for the fact that Sunderland is to be included in the pilots for the new programme that is aimed at the hard-core unemployed. The working families tax credit and the new deal have been of great benefit in Sunderland, where we have some of the most intractable unemployment problems.

May I put it to my right hon. Friend that the best way of dealing with the vast benefit culture that we inherited from the previous Conservative Government is to widen the gap between the world of work and the world of benefit, as we have been doing? Will he confirm that it is his intention to continue widening that gap?

Mr. Darling

My hon. Friend is right to say that it was necessary in the reforms that we put in place to ensure that it really did pay to work, and that people could see the difference. That is what the working families tax credit has done.

We shall keep these matters under review. Despite the fact that my right hon. Friend the Chancellor of the Exchequer is no longer sitting next to me, I do not think that I can give an undertaking on his behalf to widen or improve the working families tax credit just like that. However, my hon. Friend can take it from me that it is the Government's strategy progressively to ensure that it makes a real difference to people if they are in work.

In the programme that I have outlined, there will be a pilot in my hon. Friend's area. A single person who goes into work will be £40 better off a week than if they had stayed on the jobseeker's allowance. That is an example of how much better off people will be, but we certainly want to continue to do more.

Mr. Anthony D. Wright (Great Yarmouth)

I thank my right hon. Friend for his statement, and certainly for the inclusion of Great Yarmouth in the new deal for the long-term unemployed. He will be aware that unemployment has fallen by 44 to 45 per cent. since 1997. However, we still have 5.5 per cent. unemployment. The new deal for the long-term unemployed will certainly be welcome.

Will there be any restrictions relating to the age of those who can come on to the scheme? Will there be restrictions on the numbers of people who are eligible for it? There are more than 900 long-term unemployed people in my constituency.

Mr. Darling

These are pilot programmes. They are aimed at people who have been through the new deal and are still out of work post six months. However, many people go into work immediately after being on the new deal. To start with, and as part of the pilot programme, we want to ensure that as many people as possible can get on to the programme and benefit from it. We shall evaluate the position and see how well they do with a view to extending the programme.

I am aware that in my hon. Friend's constituency—I have visited it on a couple of occasions—he has some intractable problems. Great Yarmouth has gone through some quite substantial structural changes. I believe that the experience that we build up from the pilots will show us new approaches which work, and we want gradually to roll them out. It is critical that we ensure that we can do more, and not only in this area. It should be remembered that there is also a new deal for disabled people, a new deal and other measures for lone parents and a new deal for the over-50s. They are all designed to ensure that they help people. I hope that a combination of measures will result in people getting into work.

Paul Flynn (Newport, West)

The Secretary of State will know of the great campaigning appeal to restore the earnings link in pensions. Had we done so from 1998 until now, the single pension in 2002–03 would be £78.25. We are close to that level, and could raise it by spending £1 billion from the national insurance scheme. If we did that, there would still be an unneeded surplus, in addition to contingency funds, of £11 billion in the national insurance scheme. I urge my right hon. Friend to take such action so that we can go back to the public with an offer. We can face the pensioners now with great pride, but if we restored the link we could offer them a great triple crown of achievements—winter fuel payments, additional payments now for those who are losing out and the restoration of the link.

Mr. Darling

It will not surprise my hon. Friend that I cannot agree with him. Anticipating that he might be in the Chamber and that he might catch your eye, Mr. Speaker, I did some research. It is a fact that 98 per cent. of pensioner families are better off as a result of measures that we have introduced since 1997 than they would have been with an earnings-linked basic pension.

The critical difference between us is that I believe we ought to pay more to the people who need it most. I have never entirely understood the argument that we should pay exactly the same to, say, Lady Thatcher and the poorest pensioner. I do not think that that approach is fair—(Interruption.] Conservative Members think that it is; we have to part company on that.

The measures that we have introduced mean that we are giving the poorest pensioners an average of £15 a week more than they would have got without the minimum income guarantee. As for the pension credit, it is our policy to encourage people to save for a second credit. The pension credit means that it pays to save; that is not the case at present. Our approach is fairer and much better, which is why, my hon. Friend will not be surprised to learn, we do not intend to change it. It is the right approach and, come the next election, people will see that it is.