Social Security

HC Deb 25 February 2002 vol 380 cc500-32 7.32 pm

The Secretary of State for Work and Pensions (Mr. Alistair Darling)

I beg to move, That the draft Social Security Benefits Up-rating Order 2002, which was laid before this House on 6th February, be approved.

Mr. Deputy Speaker (Sir Alan Haselhurst)

I understand that with this it will be convenient to discuss the draft Guaranteed Minimum Pensions Increase Order 2002.

Mr. Darling

These orders will uprate most benefits in the normal way, but, as in every year since 1998, this year I am able to increase some benefits by more than the rate of inflation. We are able to do that because of our success in helping people into work. By making work pay and by making work possible, we now have the lowest unemployment rate of any of the major industrialised countries for the first time in more than half a century.

Since 1997, claimant unemployment has fallen by over a third, and long-term unemployment is down by more than two thirds. As a result of that, we have saved £4 billion on the cost of unemployment and £0.5 billion has been saved by getting more lone parents into work, thanks, to a large extent, to the new deal. We have also started to bear down on fraud. All that has meant more money to invest in front-line public services, and more money to provide extra help where it is needed.

Our objective is to ensure that we do everything that we can to help all those who can work to do so and provide greater security for those who are unable to work or who are retired. I shall set out briefly how we are able to do more in line with our priorities. First, we want to do more to help families with children, and to enable parents to balance their work and home lives. So, from this April, we are raising the standard rate of maternity allowance and statutory maternity pay from £62.20 to £75 a week. As I told the House in November, that is the largest increase in maternity benefit since 1958.

Next year, we will raise maternity benefit again, to £100 a week, and at the same time we will also increase the payment period from 18 to 26 weeks, and increase the ordinary maternity leave to 26 weeks followed by the option of a further 26 weeks unpaid. That will allow women to take up to a year off work when their children are born. At the same time, we shall introduce a new right to two weeks paid paternity leave, and a new right to 26 weeks paid adoption leave plus a further 26 weeks unpaid leave.

We want to do more for families with children, as we have done in each of the last four years. Our objective is to end child poverty in a generation, and to halve it in 10 years. That is why we have increased child benefit by 25 per cent. more than inflation since 1997, and it will rise again this year. We have also increased the income support allowances for children under the age of 11 by 80 per cent. in real terms, which provides real help to families on low incomes.

As a result of these and other tax and benefit measures, along with policies that are helping more parents into work, we have started to make significant inroads into tackling child poverty. Next year, in addition to further measures, the child tax credit will also help us move along the road to eradicating child poverty. This year—as I said to the House last November—I want to do more to help parents who are bringing up children with disabilities, and who face considerable extra costs.

We have already extended benefits for severely disabled three and four-year-olds. Some 6,000 children and their families are now better off by more than £38 a week. But we want to do more than that to help those on the lowest incomes. 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 that by more than £7 a week. This year, we intend to increase it by a further £5 on top of the normal uprating to a new rate of £35.50, which will benefit about 80,000 children. Next year, it will rise again by a further £5 more than inflation, to more than £40 a week, benefiting a large number of children who need that help. That will help families on low incomes, both in and out of work, and provide greater security where it is most needed.

I can also confirm that the orders include the provision to remove barriers to work for severely disabled people, by making sure that work pays. From April we will no longer take into account the earnings of disabled people, or their partners, in the independent living fund. For the small number of families affected, that will be worth an average of £130 a week. We have also set out plans substantially to increase the capital limits, by extending help to people with savings of up to £18,500.

There is one new measure that I would like to draw to the attention of the House, which we propose to introduce alongside the pension credit. Members on all sides have argued that the hospital downrating rules can cause difficulties and distress for those affected, and for their families. Indeed, I am sure that most of us have come across cases in our constituencies in which that has happened. We said that we would review the rules, and we have. Amendments to the State Pension Credit Bill in another place urged us to change the rules for pensioners, and we have decided to go further and include other benefits paid to help people with the cost of everyday living.

The principle of avoiding double payment, which has been a feature of the welfare system since 1948, is important, and I do not intend to undermine that principle. But we recognise that people have continuing financial commitments when they go into hospital. I have therefore decided to change the rules, so that no reduction in pensions occurs until someone has been in hospital for 13 weeks, rather than the current six weeks. An estimated 26,000 people will benefit from this measure, at a cost of around £40 million a year.

On pensions, it is important to look at the uprating measures as part of the wider pensions strategy. The basic state pension is, and will remain, the foundation of pensioner incomes, and this year it will rise again in real terms by £3 for single pensioners and £4.80 for couples, on top of the last year's increases, which makes a total rise of 7 per cent. above inflation. We have also guaranteed that future rises in the basic state pension will be at least £100 a year for single pensioners and at least £160 a year for couples, and I can confirm that today.

Increases to the basic state pension alone would not be sufficient to tackle the pensioner poverty that we inherited. That is why we have radically improved the minimum income guarantee, benefiting more than 2 million pensioners. It is worth reminding the House that in 1997, the poorest pensioners were expected to live on just £68.80 a week. From April this year, the guarantee for a single pensioner will rise by £6 to £98.15. That is £30 a week more than it was in cash terms five years ago.

Next year, the minimum income guarantee will rise again to at least £100, and it will rise in line with earnings for the rest of this Parliament. That represents real progress towards ending pensioner poverty. Around £2.5 billion of the cost of this uprating will go to the poorest third of pensioners, which is three times more than an earnings link would have given them. Since 1997, 98 per cent. of pensioners are better off than they would have been if we had returned to an earnings link.

The House will shortly debate the principles and details of the State Pension Credit Bill, which has now passed through all its stages in another place. That will, of course, remove the disincentives inherent in the system that we inherited, because it addresses the long-standing tension between providing a floor below which pensioner incomes should not fall and encouraging people to save for retirement. It will also reward thrift and about 5 million pensioners on low or modest incomes will gain, on average, £400 a year. More than half the beneficiaries are women. Those who oppose the pension credit might want to reflect on what a difference its success would make. The pension credit will rectify a long-standing anomaly in the social security system and benefit a large number of pensioners.

The state second pension will also be introduced in April, which will benefit some 18 million people—2 million disabled people, 2 million carers and 14 million people on low earnings. A combination of what we have done on the basic state pension; the minimum income guarantee, which will rise again; the pension credit, which will reward savings; and the state second pension means that we can do far more than ever to ensure that we help all pensioners, but especially those facing poverty and those living on modest savings and modest incomes, who ought to be helped for their efforts rather than held back by the system that we inherited.

The measures before the House will be welcomed by a large number of people of working and of pension age as well as by families with children. They mark another stage in our reforms of the welfare state. We have been able to release funds by getting more people into work and by cutting fraud. We are able to spend more money where it is needed most. I commend the orders to the House.

7.41 pm

Mr. David Willetts (Havant)

I am grateful to the Secretary of State for his crisp and short speech—I shall do my best to be almost as brief—and I assure him that we shall not divide the House. We shall not make the Liberal Democrats' famous mistake of trying to prevent the uprating of the basic pension, so, if there is to be any drama in the debate, it will not be a knife-edge vote initiated by us. Instead, we shall press the Secretary of State and his ministerial colleagues for information on various aspects of the social security system, as the debate presents an opportunity to achieve clarification.

First, let us consider some measures that the Secretary of State did not refer to. We have been waiting for the package to help new carers, which he announced on 3 October 2000 by saying that new carers over the age of 65 would be eligible for invalid care allowance and the carer's premium in income support. That seems to be slowly making its way through the Whitehall machine, so we are interested to hear from the Minister when new carers might receive those higher benefits, which the Government announced to a general welcome.

I should apologise to the Minister, because I may have to leave to catch the train to my constituency before the debate ends, but my hon. Friend the Member for Daventry (Mr. Boswell), who will make the Opposition winding-up speech, is looking forward to hearing the answer to that question.

The Secretary of State also omitted any reference to housing benefit. I remember the days, only a couple of years ago, when it was to be the next big welfare reform target. On 29 June 1999, he said that the present Housing Benefit can't continue…So whether it is tax credits wholly or partly…people who need help with housing costs will get help". He was clearly expecting housing benefit reform to be part of the wider tax credit reform to which he referred, but it is clearly not to be. We and many outside the House are interested to know whether the Government intend to announce any housing benefit reform. Instead of that, we have had this evening's announcement on the hospital downrating rules in response to a campaign pressed by Age Concern in particular and by many Members on both sides of the House over the past few months.

We welcome the change, which is not a U-turn, but, perhaps, a J-turn that tackles a genuine concern for many pensioners. [Interruption.] A J-turn is shorter than a U-turn, because it runs to only 13 weeks. We have to be Kremlinologists with this Department, because the quality of its parliamentary answers is, sadly, so low that we cannot always get the information to which we are entitled. We have been following its answers on this subject with great care over the past few months. First, we had one from the previous Minister of State, now Lord Rooker, who said: We have no plans at present to revise the rules regarding the payment of Retirement Pension to people who remain in NHS hospitals for longer than six weeks."—[Official Report, 22 March 2000; Vol. 346, c. 600W.]

That was the original position, but then we had the review, which involved an answer from the Minister for Pensions, who said: The Department, in conjunction with the Department of Health, is looking at issues affecting hospital in-patients, including the rules governing the downrating of benefits."—[Official Report, 11 December 2001; Vol. 376, c. 781W.]

Everybody followed the review with great interest.

Miss Anne Begg (Aberdeen, South)

Will the hon. Gentleman remind the House of his position on that policy when he was in government?

Mr. Willetts

Since 1948, the position has been that, in principle, people should not receive two separate benefits in respect of the same need. Conservative Members, not least my hon. Friend the Member for Daventry, have drawn the House's attention to practical proposals for tackling that problem. [Interruption.] Perhaps I should explain to the hon. Member for Aberdeen, South (Miss Begg). A significant part of the problem has been not just the rules, but the way in which they are administered. The distress among pensioners has been greater because they were not confident that, if and when they left hospital, their benefits would be reinstated as promptly and efficiently as they ought to be.

The Minister for Pensions made another response: The Department, in conjunction with the Department of Health, has looked at issues affecting hospital in-patients, including rules governing the downrating of benefits. This rule prevents double provision from public funds as the publicly funded NHS maintains people while they stay in hospital as well as providing free treatment. Social security maintenance benefits are also paid from state funds. They are therefore not paid in full indefinitely… The double provision principle is a key cornerstone of the system of national insurance introduced over 50 years ago."—[Official Report, 8 January 2002; Vol. 377, c. 699W.] The review seems to have been concluded with a decision against doing anything, which is why today's announcement is such a pleasant surprise. We welcome it, but may I ask the Minister how it compares with the regime for pensioners in care homes?

Bed blocking is a significant problem in the NHS, so I would be grateful for clarification of the rules as they now apply. My understanding is that a pensioner or, as we know from what the Secretary of State said, any person in hospital will receive for up to 13 weeks their full basic state pension and their full income support. How does that compare with the position of a pensioner in a care home, who will receive £16.80 a week pocket money, as it is called, but who will not receive the full basic pension or the full value of income support?

In the process of tackling a grievance, the Secretary of State may have created another and different one—a wider gap between the treatment of people in hospitals and people in care homes. One problem for Ministers is their care homes blind spot, which is apparent in their winter fuel payment proposals. They still say that every pensioner gets a winter fuel payment. That is not true. Pensioners on income support in care homes do not get winter fuel payments.

There is the same problem with the pension credit. The Secretary of State referred to it, but we know that local authorities will take account of pension credit income in setting the income of pensioners in care homes. They will not get the benefit of the pension credit, which will be absorbed in higher charges from local authorities with hard-pressed social services departments. The contrast between today's announcement on hospital downrating and the wider care homes regime is striking.

David Winnick (Walsall, North)

The hon. Gentleman may have a point, but the Secretary of State's announcement on pensioners in hospital is very welcome, certainly on the Labour Benches. Why were the Conservative Government so adamant up to 1997 that under no circumstances should pensioners receive any assistance on winter heating, apart from the cold weather payments, which were limited to those on income support and had several disadvantages? The issue was raised time and again from the Opposition Benches, and not just by me. Why was there no shift? Of course, we know what happened the moment that Labour came to office.

Mr. Willetts

I know that the hon. Gentleman has pressed for such measures for a long time. In developing our philosophy, we learned much from the Christmas bonus, an attempt to achieve a similar result nearly 30 years ago. We thought it better for such payments to be part of the overall pension, rather than being special payments separate from the wider rules on indexation.

I do not wish to detain the House, but one striking feature of what we have heard today is the absence of an uprating of the winter fuel payment. I suspect that in 30 years it will be as the Christmas bonus is today. We will see whether I am wrong—but who knows whether either the hon. Gentleman or I will still be in the House then? It is one of those forecasts that can be made confidently by those who may not be around to see what happens. I think, however, that whether the winter fuel payment is an important and continuing part of pensioners' incomes or goes the way of the Christmas bonus is open to debate, and I remain sceptical.

David Winnick

Do I take it that, despite all the hon. Gentleman has said in comparing the winter fuel payment to the Christmas bonus, he now accepts the former?

Mr. Willetts

We believed all along that it would have been far better to consolidate the winter fuel payment in the basic state pension.

David Winnick

Subject to tax.

Mr. Willetts

We are revisiting old arguments. The Conservative party said from the start that there would be no tax increase for pensioners as a result of consolidation. We now live in a world in which the winter fuel payment is widely received by pensioners, and, recognising that, we have no plans to take it from them.

I hoped that we would hear rather more from the Secretary of State about the decline of pensions. We did not hear a word about what is perhaps the most significant change that will affect benefits, benefit expenditure and the incomes of those who retire, although it is taking place dramatically day by day. Two measures in the uprating order show that we are heading in the wrong direction. The minimum income guarantee is rising in line with prices, which will extend means-testing, and the pension credit will take it further up the income scale.

At the same time, we have contracted out rebates that create a significant risk of companies' re-entering the second state pension, because the value of the rebates is unlikely to match the cost of the liabilities from which they are escaping. I shall not detain the House with all the arguments, but I was struck by information from William Mercer, a leading firm of actuaries, which said only recently that it did not believe the contracted-out rebates would be adequate.

Companies may well end their current contracting-out arrangements, and enter the state second pension instead. We shall also have more means-tested benefits. Those two developments will mean that we shall not move into a world in which—this being the Secretary of State's own aim—60 per cent. of pensioners' incomes come from genuinely funded savings and 40 per cent. come from the state. Conservative Members entirely support that aim, but we are heading in the opposite direction.

A stream of companies are now announcing that they are closing occupational pension funds to new members: Alliance and Leicester, AstraZeneca, Barclays, BT Group, British Airways, Boots, Cable and Wireless, Capita, GlaxoSmith-Kline, HSBC, ICI—I could go on. Many companies now say that their final salary schemes will not be available to people joining them.

I was disappointed not to hear from the Secretary of State any recognition of the significance of the change that is taking place around him. What it means is that many people will retire with pension incomes much below what they expect, and will depend on means-tested benefits. Does the Secretary of State accept that there is a problem, when so many companies are announcing closure of their occupational pension schemes to new members? Do the Government recognise that there is an issue, or are they going to bury their head in the sand? We have heard nothing from the Secretary of State about the subject today, or over the past weeks and months during which it has become a matter of public concern.

I know that there are many factors behind the change, which pre-date 1997. Not just one factor but the burden of regulation, the burden of taxation and the impact of FRS17 led to it. Clearly, however, the consequence of a combination of ever-heavier regulation, ever-heavier taxation and, now, the new accountancy rules is that those who retire cannot expect to enjoy the incomes for which they hoped. Instead, they will depend on means-tested benefits. The pension credit about which the Secretary of State boasted will embrace more and more people as a substitute for what Conservative Members want them to enjoy—a more valuable funded occupational pension.

Rather than providing more generous occupational pensions and less dependence on means-tested benefits, we are heading in the opposite direction. We have yet to hear anything from the Government that shows that they recognise the scale of the problem, or can produce any measures demonstrating their willingness to tackle it. I am sorry that the Secretary of State has not intervened; we hoped that we might at least hear some reflection from him on the significance of the change that is taking place.

We need to hear more about credits and tax credits, which the Secretary of State did mention. His speech will have been the last to cover some of the benefits that are being uprated, and I think it important for those in all parts of the House to understand how measures for parliamentary scrutiny and parliamentary debate will function in future. According to the Institute for Fiscal Studies, there has been a lamentable lack of public discussion and openness in regard to the Government's proposals for credits and tax credits. What will be the arrangements for scrutiny of the value of such credits in future? What will be the parliamentary procedures? My understanding is that, unfortunately, we will not have the procedures that we have for the uprating of benefits.

At present, social security benefits are uprated by Standing Orders that are subject to the affirmative procedure. That includes the working families tax credit. Now, the new tax credits in the Tax Credits Bill will be subject to the negative procedure, and debated only if they are prayed against. It looks as if there will be similar arrangements for pension credits. The level of parliamentary scrutiny of the value of those credits will be much lower than the level of parliamentary scrutiny of the value of the benefits they are replacing.

I am pleased to see the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood). He chairs a Select Committee that has already done useful work on pension credits, and we hope that it will be able to perform a role in the absence of full parliamentary scrutiny.

How will the credits be treated in the public accounts? We know from the Office for National Statistics that there will be a move towards the European and OECD conventions, but does the Secretary of State seriously claim—I am thinking here of the working families tax credit conventions—that, for example, child premium and income support, with which all Members have been familiar for a long time, will miraculously become a tax cut? Will it appear in Government expenditure figures? Will it disappear from expenditure figures, and appear on the other side of the balance sheet as a tax reduction? Is that what will happen to the benefits whose uprating we are discussing? It seems an extraordinary proposal, but if working families tax credit is anything to go by it is what the Government envisage. Miraculously, the Secretary of State will be able to claim that he has saved money on the social security budget and that the Government are cutting taxes. It will have been done entirely with smoke and mirrors.

What about the other features of the system? Will the benefits be available, have the circumstances changed, what constitutes a significant change in circumstances, will people who may be on modest incomes lose as a result of a change in their finances of which the Inland Revenue will not take account until the end of the year? Those are important questions that will affect people who currently receive the benefits we are discussing, but we have had no clear explanation from Ministers.

I hope that Labour Members will pursue the issues as strongly as we have, because it is important to consider what happens in future years to people on modest incomes who experience a change in circumstances with no matching adjustment of what was their benefit entitlement. That is what happens if one tries to make a benefit into a tax. It does not work. Many people, including some of the most vulnerable members of society, will lose as a result.

This may be the last uprating statement on some of the benefits, which are going to disappear into the Treasury and become tax reductions. I hope that the Treasury and the Chancellor of the Exchequer, who will take responsibility for these measures, will ensure that they at least apply the level of scrutiny and sensitivity to the needs of our constituents that has been displayed over the years by the social security system.

8 pm

Mr. Steve Webb (Northavon)

I am pleased to follow the hon. Member for Havant (Mr. Willetts) and wish him well if he is off to spend an evening in a council house. I hope that he will report back to the House on that.

The orders deal with the benefits for the coming financial year and the guaranteed minimum pension. With one or two exceptions, they involve indexation in line with inflation and some above-inflation increases in the retirement pension, which we welcome. However, the House will be aware that, alongside the order, the Government Actuary prepares a report on the state of the national insurance fund. I listened carefully to the Secretary of State; I do not recall him mentioning the fund once. The document makes interesting reading. It shows what money the Government had available when they sat down to decide what to do with benefits this coming year.

I was startled to read—perhaps I should have been aware of it beforehand—that when the Government Actuary sat down in November 2000 to forecast national insurance revenue for the current financial year, he estimated that it would total £55.5 billion. The outturn is more likely to be £57.9 billion, or £2.5 billion of extra revenue in a year. Therefore, we must set some of the Secretary of State's announcements in the context of a £2.5 billion overshoot of revenue to the national insurance fund.

The Government Actuary indicates that the balance of that fund in the year ending 2001 was 41 per cent. of benefit expenditure and payment; in 2002, it will be 47 per cent; and in 2003, it will be 52 per cent. Therefore, the balance in the national insurance fund is substantial and growing. Set against those huge sums and the fact that there is £2.5 billion more than was budgeted for, do we judge this as a generous or a mean settlement?

We must look at the welcome announcement of the relaxation of the hospital downrating rules. Perhaps I am not the only hon. Member who discovered that—as usual, not in the form of a statement from the Secretary of State but about four hours earlier through a press release that mysteriously appeared on my fax machine, which said: McCartney acts to help those on benefits". [Interruption.] The Secretary of State says from a sedentary position that we were sent it by the Department. We were not. We never are. We were sent it by a newspaper. That is the way in which we get information. He should check with his officials to find out why hon. Members find these things out from the press rather than in the House.

Mr. Darling

On that point, the announcement was made in another place properly by one of my ministerial colleagues.

Mr. Webb

I am grateful for that confirmation. I am rather confused as to why the Secretary of State does not feel able to ensure that Members of this House are notified at the same time.

Hospital downrating rules have been relaxed somewhat, so instead of pension being cut after spending six weeks in hospital, it is cut after 13 weeks in hospital. Clearly, that is a step in the right direction. The Secretary of State said that that would cost £40 million a year. The overall cost of the pension downrating is about £60 million a year. When we set that against the £2,500 million that the Government had not expected a year ago, we start to see how parsimonious the concession is. The Government could have paid for the abolition of the downrating of pensions over the next 40 years but they chose not to go the extra mile; they have moved barely an extra inch.

Although a few pensioners will welcome the announcement, when they read the small print they will discover that if they go into hospital this week they will still have their pension downrated after six weeks. Next month—indeed, this time next year—they will still have it downrated after six weeks.

According to the press release, the changes coincide with the introduction of the pension credit in autumn 2003, so although we have had the announcement today the Government will continue to take money off pensioners who have spent six weeks in hospital. We will hear the same announcement several times in the meantime, yet the measure will be implemented fully only in October 2003. I hope that the Minister who responds to the debate will tell the House why the change has been introduced in this way. It has nothing to do with the pension credit. It could have been brought in quickly. Could it not have been brought in sooner, sparing some pensioners the misery of having pension taken away from them?

Mr. Tim Boswell (Daventry)

Will the hon. Gentleman reflect on the possibility that, unless the transitional rules are very carefully scoped, a pensioner who falls within the six-week period before the operating date in April 2003 may have benefit withdrawn, but a pensioner who falls after that time may not? That could create a further anomaly.

Mr. Webb

I am sure that the hon. Gentleman is right. I understand that the changes come into force in October 2003 when the pension credit is introduced. The argument in principle is simply not there. People have paid for their pensions all their lives. If they have paid for a private pension they are allowed to keep it, but if they get a state pension some of it is taken away from them.

The Government say that there is double provision, but where is the evidence? What studies—I hope that the Minister will tell us when he responds—has the Department done of the costs that people incur as a hospital in-patient? The Department may say that they save money on food, but what about the extra costs that they incur? What about when a spouse comes to visit and pays for hospital car parking or for transport? What about the other costs, regardless of whether someone is in hospital? Has the Department any evidence that people are better off during a hospital stay? I suspect that it has no evidence whatever, and until it produces such evidence there should be no hospital downrating, not merely the half-hearted concession that we have heard about.

I mentioned that not all the rates in the orders have been uprated in line with inflation. I looked long and hard, and there it was on page 16 of the order: the age addition to the pension mysteriously remains at 25p. Year after year Ministers acknowledge that it is absurd and an insult to pay people 25p, yet they do nothing about it. Is not it clear that the poorest pensioners in the land are not merely the oldest but the oldest who fail to claim their minimum income guarantee? They do not get the MIG. They do get their pension. Twenty-five pence is all they get on top of their basic pension.

Mr. Howard Flight (Arundel and South Downs)

Does the hon. Gentleman agree that, as several pensioners in my constituency have pointed out, the cost to them merely of updating their pension book will be more than that pathetic 25p?

Mr. Webb

It is absurd. The fact that the cost of a first-class stamp exceeds that amount highlights how absurd it is, yet it is a perfectly good mechanism for delivering guaranteed cash to poor pensioners. In fact, it is the only genuine guarantee. When I take over from the Secretary of State, I shall rename it the guaranteed age addition. It is the only feature of the system that is truly guaranteed. [Interruption.] I should have added hastily that I shall be deputy to my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood).

The Government Actuary's report on the orders highlights another worrying factor that the Secretary of State again glossed over. It refers to the lack of information before the House about some key elements of the pension and benefit system because of national insurance recording system 2. Page 10 of the report says: The introduction of NIRS2 has meant that there is a lack of data showing current numbers contracted out…there is, at present, uncertainty about the numbers of people contracting-out. Therefore, the House does not have information, despite the fact that we are always assured that the computer system is sorted, there is nothing to worry about, and it is so good that the same people will be given the contract. Years after the system was introduced we still cannot obtain the basic information that we require to assess what the Government are doing.

Likewise, the information is uncertain about statutory sick pay and statutory maternity pay. Page 27 of the report states: Estimates of both SSP and SMP have suffered greatly from a lack of reliable data since the transfer…to the NIRS2 computer system. It has been some years since the data on SSP and SMP has been free of problems and there may be substantial revisions to estimates…once sufficient reliable data on amounts of SSP and SMP recovered…is available. When will we know? Perhaps the Minister can tell us. When will this be sorted out? When will the House have reliable information from that multi-million pound computer system? When will it work properly? That is what the House wants to know. Will the Minister tell us?

All the benefits in the orders are fine if people receive them. However, far too many of our constituents fail to get the benefits that they are being promised today. The Secretary of State has had his advertising campaigns, and Thora Hird, and people ringing up—but how many people, especially pensioners, are still not getting the money that they are entitled to? That number is still nearly half a million for the minimum income guarantee—[Interruption.] Does the Secretary of State question that number? I do not know why he is shaking his head.

Nearly half a million people are not getting their minimum income guarantee, and probably double that number are not claiming their council tax benefit. Year on year, successive Governments have used council tax to bring in extra cash through a mechanism of taxation for which they do not get the blame, so that has become an increasingly heavy burden for pensioners in all parts of the country. The fact that council tax benefit misses so many pensioners is an increasing source of concern.

What plans do the Government have to get the council tax benefit to pensioners? It has one of the lowest take-up rates of any benefit, yet it can be critical for pensioners just beyond the reach of the other means-tested benefits. What is the Government's strategy?

Vernon Coaker (Gedling)

rose—

Ms Karen Buck (Regent's Park and Kensington, North)

rose—

Mr. Webb

I shall give way first to the hon. Gentleman, and then to the hon. Lady.

Vernon Coaker

Has the hon. Gentleman considered whether part of the problem with the take-up of benefits may be that—for perfectly understandable political reasons—both he as a Liberal Democrat spokesman and the hon. Member for Havant (Mr. Willetts), who speaks for the Conservatives, always use the term "means-tested" in a derogatory way? Does he not think that that might sometimes influence pensioners, for whom, rightly, means-testing has certain connotations? Does he not think that if he talked instead about "targeting" benefits, that might encourage people to take up those benefits?

Mr. Webb

I understand the point that the hon. Gentleman is making, but I have some doubts about whether even my oratorical powers could affect benefit take-up rates. The key point is that resistance to means-tested benefits does not come from me. Actually, I am moderately comfortable with filling in long complicated forms—it is the sort of thing I do in my spare time—but that is probably not the sort of thing that many older folk want to do. They regard such questions as intrusive.

I freely accept that means-testing every five years is better than means-testing every week. Clearly, that change has the potential to be a step in the right direction. However, the principle that we all want for our old age is to know what our income will be, rather than depending on the whim of a Minister. We want to know with certainty, and that is possible only with a definite firm foundation from the state, reliable indexation rules and a good second pension on top to get us clear of means-testing altogether. We do not want to have to rely every year on documents such as those before us now, which nobody really understands, yet which can have a dramatic effect on people's living standards.

Vernon Coaker

If the hon. Gentleman were Secretary of State for Social Security, would his Liberal Democrat Government do no targeting at all?

Mr. Webb

The hon. Gentleman has heard me speak before on such subjects, so he probably knows that we do not regard targeting as synonymous with means-testing—[Interruption.] There are perfectly good reasons for that, as I shall explain.

There is a strong relationship between poverty and old age, especially advanced old age. Our ideas may not be perfect, but neither is targeting through means-testing, because of all the people who miss out, and the disincentive effect on savings. We are talking about not a choice between a perfect system and an imperfect system, but a choice between two imperfect systems.

We say that if we target primarily by age, while keeping a safety net for the recently retired poor, we cover most of the poor, including many of those who do not get their means-tested benefits—that is, half a million on one count alone. We would get through to those people with a guaranteed take-up, no administrative cost, and no disincentive to save—indeed, quite the contrary, because people's savings build on their guaranteed state pension. That seems to us a better trade off than mass means-testing—

Miss Begg

Will the hon. Gentleman give way?

Mr. Webb

I shall, but first I shall finish the point that I was making—and then I must give way to the hon. Member for Regent's Park and Kensington, North (Ms Buck), because I have already said that I would.

To give an idea of the scale of the failure that the Government are building into the proposals, I must remind the House that Baroness Hollis said that one in three of the people entitled to the proposed pension credit would not claim it in the first year. She said that take-up would build up as people became familiar with the credit, and I hope that she is right—but that still means that one in three of the 5.5 million pensioners will miss out on what they are entitled to. That is planning for failure, and it is no way to guarantee pensioners a decent standard of living in old age.

Ms Buck

Will the hon. Gentleman cost the proposal to provide an income at the level of the minimum income guarantee for all pensioner households, which is effectively the corollary of what he suggests when he says that the entitlement should be available to everybody?

Mr. Webb

The gap between the pension proposed in the regulations before us—£75.50—and the MIG figure, which is more than £90, is not very different from the pension rises that we proposed in our costed manifesto, which contained a £3 billion package of increases in pensions financed by the proceeds of the 50p rate of income tax on incomes over £100,000 a year. We asked the Treasury what money would be raised by such a rate of income tax, and were told that it would be well in excess of £3 billion. Our political choice would be that those most able to do so should pay for pension rises, which would go predominantly to older pensioners. That would enable us to fill the gap between the basic pension and the means-tested pension.

We do not propose that the pension rate would be the same for every pensioner at every age. We are saying that we want to get as many pensioners as we can clear of the MIG level, starting with the oldest pensioners. That is our strategy.

Mr. Darling

How does the hon. Gentleman square that with the fact that his party leader recently said that he hoped to go into the next election as a low-tax party?

Mr. Webb

As the right hon. Gentleman knows perfectly well, that is not what my party leader said—[HON. MEMBERS: "Oh!"] He may be aware that we have set up a review commission, of which I am a member, to consider the future of the public services, with a broad remit to examine both the role of the public and private sectors, and funding levels. That remit is wide, and there is an open debate going on within the party. The options of higher spending, lower spending, and a greater role for the public or the private sector, are all on the table at the start; otherwise, why bother with the review? However, our policy stance is that we are clearly committed to higher pensions across the board, particularly for older pensioners. That remains our position.

Mr. Darling

The hon. Gentleman is not in a position to make a promise that his party would increase pensions, either for pensioners as a whole or for some pensioners, at the same time as saying that all those promises are up for grabs. Even the Liberals cannot get away with going into the next election saying that they will increase spending here, there and everywhere, yet also cut taxes for everybody else. That does not make any sense; it has no credibility.

Mr. Webb

The right hon. Gentleman seems to have forgotten the fact that we have in front of us a document written by the Government Actuary showing that the Government have just found £2.5 billion—probably a recurrent £2.5 billion—in addition to what they expected. That would cover the vast bulk of what I am saying that we would do, even if nothing else, with no additional 50p tax rate. The suggestion that we could not do more for older pensioners is absurd.

Miss Begg

I am sure that the hon. Gentleman would agree that the national insurance fund funds not only pensions but unemployment benefits and a range of other contributory benefits. At the moment unemployment is very low; more people are working, so more people are paying into the fund. However, although I hope that that will remain the case, it may not. In five years' time the position might be reversed. Is the hon. Gentleman really saying that we should spend all that money today and have nothing to spare in the piggy bank for tomorrow? I do not think that that would do great things for pensioners tomorrow, when the fund will have been spent.

Mr. Webb

If we were suggesting blowing the entire national insurance fund I should agree with the hon. Lady—[Interruption.] No, I did not suggest that. The £2.5 billion that I am talking about is excess revenue—the amount above which the Government budgeted, presumably on the sober, cautious basis to which the hon. Lady referred. As I pointed out earlier, at the year ending March 2001 the national insurance fund was already 40 per cent. of the annual benefit expenditure. Next year, that figure is set to rise to 52 per cent. How high are we going to let that amount rise? The proportion of benefit expenditure is constantly increasing. It would be irresponsible to blow the lot, but at some point we might say that national insurance revenues are going well and they should be spent on pensioners.

Mr. Willetts

I was struck by the fact that the Secretary of State, who does not feel able to intervene on the subject of the current state of occupational pensions, intervened twice on the subject of Liberal Democrat tax plans. It is a pity that he devoted more effort to intervening on that subject than on the most important social change currently taking place.

I do not agree with the figures given by the hon. Member for Northavon (Mr. Webb) but I support his philosophy. As he knows, we have in common the view that there is a difference between means-testing and targeting. Does he agree that when he pointed out that difference it was disappointing that so many Labour Members laughed as though they thought that was manifest rubbish? In fact, the crucial insight of Beveridge—the most important single insight in the Beveridge report, about which at least one Minister sitting on the Treasury Bench has written eloquently—is precisely that under a smart social security policy we can target without means-testing, if we identify categories of claimant carefully enough. That is a powerful point and it is a pity that the Government do not recognise it.

Mr. Webb

I am grateful to the hon. Gentleman for those comments. He is right. I should acknowledge his parentage of that idea—I do not always manage to do so. As an impressionable early twenty-something, I studied one of his pamphlets for a little bedtime reading. It was called "The Age of Entitlement", and seemed like a good idea at the time, although the Conservatives never adopted it with any gusto, but I welcome the hon. Gentleman's reconversion. Perhaps that will give us the basis for consensus on both sides of the House. One of the things that has bedevilled pensions policy is the constant to-ing and fro-ing and the ripping up of previous promises. If we can find a basis for agreement—I know that some Labour Members are sympathetic on that point—it would be a step in the right direction.

I have been greatly heartened by the careful attention accorded to Liberal Democrat proposals as an alternative to those of the Government. The serious scrutiny that they have been given reflects our position as a Government in waiting, so I very much welcome that attention. We assure the House that we shall not oppose the regulations, but we feel that the measure on hospital downrating is a grudging concession made to deal with what was going to be a rebellion in this place. The Government had the money to go further; they should have had the grace to go further.

8.21 pm

Vernon Coaker (Gedling)

I have a few comments on the uprating statement and want to draw attention to a few points. When we consider the amount of spending proposed under the orders, it is extraordinary that the Chamber is not packed. Furthermore, these are social security orders, so whatever the rights and wrongs of the proposed measures, when we consider the thousands and thousands of people in each of our constituencies who are affected by the scale, uprating and receipt of benefits, the debate is hugely important.

Something must be happening to me because this is the third debate on this subject that I have attended and I actually enjoy them. The reason is that although there are differences between the Opposition and the Government and indeed between the Opposition parties, we none the less hold careful, intelligent debates—as we have just heard—on the fundamental issues that affect us.

Although I do not agree with everything that was said by the hon. Members for Northavon (Mr. Webb) and for Havant (Mr. Willetts), there are aspects with which I agree and which challenge us all. If we were all to be honest, I suspect that Opposition Members would say that some of the Government's views challenge them to reconsider their position. I make these points because we need to remember how fundamental this subject is and that our debate is important.

I want to make a couple of points about the minimum income guarantee for pensioners. Whatever the furore about the rate of the basic state pension—which, as we have heard, is to be uprated again in April—I know that the minimum income guarantee has meant that about 2,000 pensioners in my constituency have received a considerable addition to their income.

When we talk to people about the minimum income guarantee and pensions, for obvious reasons they do not put up their hands and say "I get the minimum income guarantee and what the Government have done means a significant increase in my income". In each and every one of our constituencies, a considerable number of pensioners will have benefited from the introduction of the minimum income guarantee. The hon. Member for Northavon was right to draw attention to the problem with take-up. However, if we can ensure that people take it up when they meet the rules—the capital savings rules have been relaxed—a single person will receive £98.15 and a couple will receive £149.70 from next April, which is a considerable improvement on the income that they would have had before the minimum income guarantee existed.

We can debate the difference between means-testing and targeting, but the word "means-testing" has a particular connotation for the pensioner age group. In a few years, when people who are now in their 50s and 60s become pensioners, it may not have the same connotation. However, the continual discussion in the House about means-testing being bad does not help to encourage people to claim means-tested benefits. It merely reinforces people's feeling that those on means-tested benefits have something wrong with them, are not the sort of people to whom others will look up, and have failed. Although the hon. Member for Northavon mocks his own oratorical skills, I was not saying that he was speaking passionately about the evils of means-testing all over the country. However, he consistently points out that means-testing is wrong, which, I believe, impacts on the number of people who claim the minimum income guarantee.

Through the minimum income guarantee, the Government have targeted support on thousands of the poorest pensioners in our constituencies. We can debate the basic state pension and take-up, but the Government deserve a great deal of credit for not taking the easy option of putting a few pounds on the basic state pension for everyone. Instead, the minimum income guarantee has added a considerable amount by targeting help on the poorest pensioners in the community, many of whom are older pensioners who do not have an occupational pension, or are older women. Far from being critical of the Government for doing that, we should credit them with a great deal of courage for saying that their policy will be to try to ensure that money goes to the poorest pensioners in our community. Through targeting, we can ensure that those pensioners receive a considerable amount of money. Of course, the problem of take-up remains, and hon. Members will need to continue to raise that issue.

The pension credit, to which my right hon. Friend the Secretary of State referred, was designed to tackle one of the real problems of the minimum income guarantee—a small amount of savings, a small income or a modest occupational pension might take people just above the level at which they could receive the minimum income guarantee. That caused a considerable feeling of injustice and unfairness. The hon. Member for Havant mentioned the genuine concern about occupational and private pensions. In discussing reform, a judgment must be made on pensions and social security uprating. The Government have said that their policy is to target resources on the poorest pensioners through the minimum income guarantee—Opposition Members will say that that is flawed—and that the next group that they shall try to help is those pensioners who feel left out because of the minimum income guarantee rules, on whom they will target resources through the pension credit.

Mr. David Heath (Somerton and Frome)

The hon. Gentleman is making a careful and sensible speech, and I agree with much of it. Given that hon. Members on both sides of the House share some of the same objectives, our argument centres on the delivery system. At what point will the hon. Gentleman accept that we are not delivering the benefit to the poorest pensioners? At what point will he accept that an alternative delivery system might achieve the same objective more effectively and efficiently so that we reach the pensioners whom we want to support?

Vernon Coaker

The hon. Gentleman makes a fair point. I do not think that we have reached that stage. In general, the policy has been effective for a considerable number of pensioners in our constituencies. It is clear that there is a problem with take-up, but that does not mean that the policy has failed. The problem is the way in which we talk about means-testing—to be frank, it is sometimes used for political reasons as an easy way to attack the Government—and how it is perceived. That does not help the take-up of the minimum income guarantee. The targeting of resources to ensure that the poorest members of our community are supported does not have the same stigma attached to it and commands much greater support.

Ms Buck

I share the concerns of hon. Members about take-up and we need to address that problem. However, there is evidence—anecdotal in my experience—that a substantial number of the people who could claim for income-based benefits are eligible for only small amounts. The case remains to be proven that a large number, let alone all, of the people who are missing out on the minimum income guarantee or the working families tax credit would be entitled to a substantial amount or all of the sum that would make up the difference. We have to weigh that up. Many people are on the margins of a claim that would not necessarily give them a large amount of additional income.

Vernon Coaker

My hon. Friend's intervention needs no comment from me: she proves the standard of the debate by making an important and fair point that is probably true. However, it is difficult to ascertain how many people do not take up the minimum income guarantee for that reason.

I am pleased that the Government have announced a change to the rule on the downrating of benefits when people are in hospital. Many hon. Members have been contacted by people who think that it is unfair that their benefits are reduced when they are in hospital for longer than six weeks. I am pleased that the Government have increased that to 13 weeks. A constituent who was in Nottingham City hospital recently contacted me about that. I am sure that all hon. Members have similar constituency examples.

We often talk about the minimum income guarantee in terms of pensioners and the take-up of benefit, but the attendance allowance is one of the most important benefits for pensioners. In my experience, not everyone is fully cognisant of the fact that it is possible to claim attendance allowance to cover care needs. The higher rate for that will be £56.25 from next week and it enables people to get help so that they are looked after in their own homes. I cannot stress how crucial that allowance is for pensioners.

Mr. Flight

I fully agree with the hon. Gentleman, but is he aware of one of the resulting problems? People who may be old and not that mentally clear go into nursing homes, the costs of which have risen dramatically particularly in the southern half of the country, without realising that they will lose their attendance allowance. I have had many constituency cases of people who thought that they had done their arithmetic, settled in a nursing home and then found that they could not afford the care. Relatives had to be dug out to try to help. Therefore, such a worthy benefit illustrates one of the problems of means-testing.

Vernon Coaker

The hon. Gentleman makes a reasonable point about attendance allowance and nursing homes. As I said, points about various benefits can always be made, and that argument has been put to me and no doubt to many hon. Members. We often talk about the fact that many pensioners and others who are entitled to the minimum income guarantee do not claim it. Indeed, I have tabled a question on the matter for Monday's Question Time. My point is that a substantial number of elderly people who live in their own home do not claim the non-means-tested attendance allowance available—or claim the allowance at the lower rate when they are entitled to the higher rate. That benefit is hugely important and should be mentioned when discussing benefits and supports available.

I broadly welcome the social security uprating order, and I am to a certain extent pleased with the way in which the Government are trying to integrate the tax and benefits systems and with the work that has been done on tax credits. I say that because one important thing that a Department for Work and Pensions should do is to try to address a problem that we all recognise: the need for the social security system to avoid creating a culture of dependency. It should create a culture that not only, of course, supports people when they are out of work or in need, but encourages people back into work, because that is the best form of welfare.

One of the most depressing things which I am sure we all experience when we visit some houses, estates, streets and parts of our cities—as well as, indeed, some rural areas; the problem is not just in cities—is seeing generations of people who have become dependent on benefit. Entire families have become dependent on benefit and have been workless for a considerable time. Indeed, whole communities have been workless.

The Government are trying more effectively to integrate the tax and benefits systems, so that work truly pays. One problem with the benefits system is that when people return to work and gain pay, they lose benefits, which means that it is not worth their going to work—

Madam Deputy Speaker (Sylvia Heal)

Order. The debate is about increases in social security benefits and pensions rather than the wider points that the hon. Member is making.

Vernon Coaker

Thank you for bringing me back to the debate, Madam Deputy Speaker.

In the context of wider Government policy, I support the orders.

8.39 pm

Mr. Howard Flight (Arundel and South Downs)

I am disappointed by the uprating order. First, it illustrates, as my hon. Friend the Member for Havant (Mr. Willetts) said, that the Government have given up tackling the more difficult areas such as housing benefit. Secondly, although no doubt with the best will in the world the hon. Member for Gedling (Vernon Coaker) would rather means-tested benefits were called something else, the reality is that the hassle of filling out forms means that individuals perceive them as means-tested benefits. There is a major difference between targeting and means-testing. The order shows the Government going further in reshaping the welfare state into one that is means-tested. The children's tax credit and working tax credit yet to come increase that likelihood.

In addition, it is clear, as the hon. Member for Northavon (Mr. Webb) said, that the Government view national insurance merely as an alternative tax source. The Government should be more honest—if they want to take welfare in that direction, people should be aware of it. Many elderly people still believe that national insurance is national insurance. That is the system under which they paid, and their children are now doing the same to pay for broadly universal entitlements to benefits in their later years.

I want to focus particularly on pensions, the pensions credit and the minimum income guarantee. This is a serious mess—if Ministers had set out to smash private pensions, they could not have done it better. It is worrying that on several occasions when the Secretary of State has had the opportunity to express his concerns or thoughts about the major rundown in occupational pensions and final salary schemes, he has apparently not done so, although admittedly we await the findings of the Pickering report. Candidly, the alleged target of provision for pensions coming from private pensions savings—increasing from 40 per cent. to 60 per cent.—is becoming a farce.

There are many good things in the stakeholder arrangement. However, the minimum income guarantee and pension guarantee mean that for more than half the people for whom stakeholders were intended, there is no point in saving for one. As has been demonstrated in Canada, people do not want to be forced to sink their precious pension savings in an annuity where the real returns are nearly halved.

Many people have not realised that the shift from final salary to money purchase pension savings—

Madam Deputy Speaker

Order. I remind the hon. Gentleman of my earlier comment. We are debating the increases in social security benefits and pensions.

Mr. Flight

I thank you, Madam Deputy Speaker. However, the point that I am coming on to is that the Government's response to what is happening in private sector pension provisioning is shown in the increases to the minimum income guarantee made in the order. That takes us, as a nation, in the opposite direction from, the one that I think right hon. and hon. Members on both sides of the House want to go in.

The Government looked to stakeholder pensions to boost private sector pension saving, but that is not happening. Instead, we are seeing a very generous increase in the minimum income guarantee. It is well intended because it is designed to deal with the problem now. However, what worries me is that it leads to behaviour that is simply not sustainable. On the assumption that the minimum income guarantee continue as it is, the reaction of the public to perceiving that they will have a very adequate income in retirement is, if anything, not to bother with private sector pension saving, or to do less of it.

The right hon. Member for Birkenhead (Mr. Field) has said that, by 2005, the costs of such an approach would be the equivalent of something like 5p on income tax, rising to about 11 p by 2050. It would cost about £26 billion in today's money. Some 65 per cent. of the population would be dependent on a means-tested pension. Surely that is the exact opposite of the Government's intended pensions policy. I am particularly worried that, economically, it will take us into the very territory that has proved so problematic for continental Europe. Employment taxes are high, growth is relatively disappointing and overall taxation is higher than continental Europe would wish because pensions have to be financed on a pay-as-you-go basis.

Geraint Davies (Croydon, Central)

Is the hon. Gentleman's basic thesis that it is wrong to give the poor more because it encourages them to be poor?

Mr. Flight

I am surprised that the hon. Gentleman should make such a crass observation. My point is essentially the same as that made by the right hon. Member for Birkenhead. The policy that addresses the immediate issue of providing an adequate income in old age for those with inadequate private sector pension provision is shaping the future. It will affect behaviour and take us down a relatively unsustainable path. There are other ways to address the issue.

Madam Deputy Speaker

Order. Once again, I remind the hon. Gentleman that he is going rather wide of the scope of this debate.

Mr. Flight

Thank you, Madam Deputy Speaker. I was endeavouring to deal with the intervention from the hon. Member for Croydon, Central (Geraint Davies).

Some Conservatives have welcomed the minimum income guarantee and pension credit increases as a well intentioned attempt to address a current problem. However, targeting would be much more appropriate than means-testing, and we should consider treating older pensioners as a block, which would be better than giving them the ridiculous 25p increase that many of them regarded as a joke. I fear that, unknowingly and with good intent, the Government are presiding over what will become a major problem in the area of pensions. They are adopting an approach that, economically and in terms of the effect on private sector pension saving in particular, is the very opposite of their alleged policy, which we all want: healthy and rising private sector pension saving.

8.48 pm

Andrew Selous (South-West Bedfordshire)

I wish to look at some of the order's consequences for couples, families and the care of children in particular, and to consider the philosophy and structure that underpins the uprated benefits.

I welcome the increases in individual benefits, but I want to draw the House's attention to the overall collective impact of such benefits, particularly on couples and children. I ask the House to focus on the reason why a quarter of dependent children in the UK live in households headed by a single adult. The European Union average is 14 per cent., and even in northern European nations such as the Netherlands and Luxembourg, the figure is only 10 per cent. One main reason for that difference is the structure of our tax and benefits system.

Britain bases tax on an individual assessment, with no allowance for the number of dependants whom one income must sustain. The benefits system that we are looking at is based on joint assessment, which carries penalties for marriage or stable cohabitation. Remaining in an undeclared or informal partnership means that each partner is assessed separately for benefits. I shall come on to a couple of examples in a moment, but generally it is the case that openly cohabiting couples have a reduction in their welfare entitlements of about £70 a week. Although the Government, and, indeed, all parties talk about supporting family life and stable relationships, they must realise the penalties in the current system of which the benefits are part.

Madam Deputy Speaker

Order. The hon. Gentleman should relate his remarks to the order, which is about increases.

Andrew Selous

I shall do so, Madam Deputy Speaker. If I may, I would like to come to two examples relating to the benefits.

Madam Deputy Speaker

If the examples are germane to this debate, that would be appropriate.

Andrew Selous

With permission, Madam Deputy Speaker, I shall deal with those examples relating to the benefits, increases to which we are discussing tonight.

A lone mother living with a one-year-old child in local authority housing and not in paid work would currently qualify for child benefit, housing benefit, council tax benefit and income support of £157.80. The father of her child who is living on his own in a local authority flat and not in paid work would qualify separately for benefits of £103.97, which means that the two of them have a combined weekly income, before paying rent and council tax, of £261.77. If the couple married or established a stable cohabitation, their income under the current system would fall by £70.47, and they would have a joint income of only £191.30, which is a considerable disincentive.

Mr. Webb

The hon. Gentleman has done his research, looked at the figures and thought this through. However, if those two people were living together, the second rent would not have to be paid at all, so the difference in their disposable income is not £70, but probably £20 or £30. A couple with any commitment is not going to live apart for £30, although it is fair to say that they may try not to disclose the fact that they are living together. Surely, the only alternative is for the rates we are discussing today to be not 160 per cent. for a couple but 200 per cent. That would be a huge increase in expenditure which I do not suppose the hon. Gentleman's Front Benchers would allow him.

Andrew Selous

I accept that the hon. Gentleman made a relevant point about the costs of second property. However, in the figures I looked at, £70 a week is significantly more than the cost of renting an additional property. We have a problem with the fact that the household's taxation is based on an individual, but assessment of the benefits whose uprating we are discussing tonight is based on the whole household. I am trying to illustrate the fact that that fundamental mismatch is the nub of the problem. My thesis is that that is the core reason why a quarter of children in this country—

Mr. Webb

indicated dissent.

Andrew Selous

The hon. Gentleman may shake his head, but he needs to explain why 25 per cent. of children in this country live in households headed by a single adult; the European average is 14 per cent, and in the Netherlands and Luxembourg it is only 10 per cent.

Madam Deputy Speaker

Order. May I once again remind the hon. Gentleman that the scope of this debate is quite narrow; it is about the increase in the levels of benefit, not eligibility criteria?

Andrew Selous

I willingly accept your guidance, Madam Deputy Speaker. I was merely responding to the intervention of the hon. Member for Northavon (Mr. Webb).

The policies that I have been talking about and the perverse incentives that are their result are responsible for tying up unnecessarily a large amount of our housing stock. There is the cost to the Government in terms of council tax and housing benefit. I am aware in my constituency, as are other Members who represent other constituencies, of extreme pressure on housing. The motions that we are considering are in part responsible for tying up housing stock.

8.56 pm

Mr. Tim Boswell (Daventry)

As the hon. Member for Gedling (Vernon Coaker) said, in the only Back-Bench contribution made by a Labour Member, this has been an enjoyable debate. It has also been an interesting debate, if one that has not as yet extended itself as far as it might.

The debate was introduced by the Secretary of State in a terse, though not perhaps peremptory, manner. He had some good news to bring to the House about increases in benefit, which are always welcome where they are obtainable, although they were somewhat rubbished by the hon. Member for Northavon (Mr. Webb), who made a characteristically interesting speech. I did not agree with much of the detail, but I did agree with some of the broad sweep.

We have had some heavyweight contributions from those on the Opposition Benches. The first was from my hon. Friend the Member for Havant (Mr. Willetts), who has apologised for having to leave the Chamber early to fulfil another engagement. He made a powerful speech of analysis of what was wrong with benefits and the present structure.

Perhaps my hon. Friend the Member for Arundel and South Downs (Mr. Flight) prevented me from speaking even more discursively than I might have been minded to. Indeed, he even lifted one of the quotations that I was about to share with the House. I shall not repeat it.

With characteristic concerns, my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) referred to some of the moral hazards within the present system, while not perhaps having yet reached a completely watertight solution that would resolve the situation.

All this suggests that there is much life in what most of us have learned to call social security, which we must now learn to call work and pensions. This is a worthwhile and important debate. The Government have lessons to learn; indeed, they have been taught some sharp lessons in the past, and they would be well advised to keep their ears and eyes open to the changing tides of opinion.

I am conscious that there is a fine line to draw. You have already rightly reminded the House, Madam Deputy Speaker, that we are discussing uprating motions that are about mathematical adjustments to benefits that have not broadly been changed in scope on this occasion. They may have been altered in their sweep and their effect by substantial changes in one or two instances, but the structure remains largely unchanged.

It is very much within the sweep of Government policies that there should be a parallel consideration of the current state of the private sector in terms of the provision of retirement incomes. I shall have occasion to refer to the Government's objective to rebalance the financing of people's income in retirement between state provision and private sector provision. All of us on both sides of the House agree that those should operate like two blades of the scissors. We will not immediately remove one blade; we may just put one blade on top, instead of underneath.

There are genuine concerns, which is hardly surprising. The right spirit, especially when the Government have a reasonable amount of time to respond to the debate, is that they should take seriously the points that are being made and answer them.

The House would not expect me to be over-solicitous of the interests of Ministers. It must be extraordinarily distasteful for any Work and Pensions Minister to have to read the recent press, particularly the weekend press, with the cornflakes.

The Minister for Pensions (Mr. Ian McCartney)

Porridge.

Mr. Boswell

Indeed. The right hon. Gentleman rightly reproves me. There is nothing wrong with porridge. It no doubt accounts for his achievements today in the hospital downrating issue, to which I shall return.

At the beginning of our constituency week of absence, under the rather terse headline "Pensions crisis deepens", The Sunday Telegraph reported: Stakeholders have bombed, annuity rates are tumbling and companies are ditching final salary schemes". More pointedly, in an article to which my hon. Friend the Member for Arundel and South Downs referred, in The Times last Saturday, under the heading, "Poor get poorer as Whitehall meddles with retirement", Graham Searjeant posed the simple question: How did it all go wrong?

Tonight's debate is about the uprating of the state side of retirement income through the benefit system. The relevance of the general torrent of concern that has built up in the past few weeks is that it exposes the huge difficulties that Ministers face in their avowed—and perfectly sensible—objective of rebalancing the mix, which is currently 60 per cent. state-provided and 40 per cent. private-provided, so that the percentages are broadly reversed.

I have no quarrel with that objective of the Government's, but along with the authorities whom I have already mentioned, there is the palpable fact that companies are bailing out of defined benefits schemes and replacing them with defined contributions, with generally less generous employer contributions to pensions. That means that any realistic prospect of achieving that objective is fast receding. The reliance on state benefits may well increase, not diminish, in future.

I toss in two other points. The first is that a major culprit in all this was that disastrous decision in Government's very first Budget in 1997 to remove payable tax credits from dividends, at a cost of some £5 billion a year to pension schemes alone. I happened to be serving on our Treasury team at the time and alongside my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), we fought hard in Committee to explain the dangers, though perhaps not many were listening at the time. They are now. The Government were then prepared to rejoice in what they felt was an entirely painless stealth tax. Now they are living to regret it.

My second point, to which we shall properly return in another context shortly, when the State Pension Credit Bill reaches the House, is that the Government's vaunted pension credit legislation will make matters worse, by both increasing complexity and providing direct disincentives to long-term saving.

The right hon. Member for Birkenhead (Mr. Field), who is an unusual absentee from tonight's debate, was quoted in the article in The Sunday Telegraph to which I referred as saying that it would be madness for anyone in Labour's target stakeholder group to even think of buying one. He was reported as saying: There's no way they can save enough to provide a better pension than they'd get from the minimum income guarantee.

Very well then—what of the state pension itself? Of course, the current situation is a bit better for Ministers than their somewhat scarring experience with regard to the April 2000 uprating of 75p. There is a school of thought that goes under the simple caption "Never again 75p." One assumes that that experience will not recur. As a matter of fact, the Secretary of State said that it was the right thing to do and that he did not argue for more. However, he is arguing for more tonight, so we will not blame him for that. The change in retirement benefits comes alongside a number of changes that I personally welcome, including those affecting disabled people, not least in relation to independent living funds, for example.

This year—let us make no bones about it—;the basic pension will increase by £3 for single pensioners and by £4.80 for couples. Effectively, the Government have committed themselves to a 2.5 per cent. minimum increase in future years, regardless of the rate of inflation. At the same time, however, the risk remains that the minimum income guarantee, which is tied to earnings, certainly for the remainder of this Parliament, may outstrip even the ratcheted-up basic pension increase. I notice that the Institute for Fiscal Studies has suggested that by 2038, the MIG could be worth twice the value of the basic pension. To put it another way, the value of the MIG at that time would be equivalent to an implied pension pot that would, if converted into an annuity, approach a six-figure sum. People would have to save at least that sum to get more than they would have done from the minimum income guarantee.

The first result is more means-testing, however it is described. I accept that there is a difference between careful targeting and means-testing. The issue has to be handled with very great sensitivity and, dare I say it, a degree of scepticism. The second consequence is a downgrading of the value of the basic pension, so that it becomes a mere supplement to other sorts of income, including those generated by the minimum income guarantee. 'IN e must also consider poor take-up—perhaps only two thirds of the MIG target group. The Secretary of State referred to a figure of 2 million, but I understand that some previous official take-up figures have suggested a level of 1.7 million. If he has improved take-up, that is welcome. It has also been suggested that, as pension credits develop, about two thirds of all pensioners could be sucked into what is a means test by any standards. A final concern, which was raised by the hon. Member for Northavon, is that all these arrangements still give very little acknowledgement to the growing number of elderly patients, with their distinctive needs and characteristically high poverty.

It is interesting to contrast what is happening now with the long-term figures, which suggest that one third of all benefits are means-tested—I refer not only to pensions—compared with only 8.5 per cent. of total benefit spending at the initiation of the modern scheme under the Attlee Government. Today, one modestly encouraging concession has been given: extension of the qualifying period for hospital downrating to 13 weeks. However, I have never seen a concession so rushed out, having been so unexplained, by any Department at any time.

The Minister for Pensions will have some time for his reply. Perhaps he can clarify the figures that the Secretary of State gave earlier and confirm the maths. There is a confusion between pensioners and other beneficiaries, but can he tell us the number of people who will benefit and at what cost in terms of the £60 million that is currently raised through hospital downrating? How many will remain in the scheme and at what cost to them? When we prepared our case on hospital downrating, I did some figure work. The total disallowance could be £2,000 a head. That means a sharp descent when benefit is withdrawn.

As my hon. Friend the Member for Havant said, restoring benefit remains a genuine administrative problem, to which Ministers need to pay more attention. For example, they should consider what are technically called the outliers in distributing the restored benefit. It is all very well saying that the average time taken to restore benefit is three or four days, but reapplying for benefit is not the first matter that a pensioner leaving hospital considers. Uneven distribution may mean that some pensioners lose out for an inordinate length of time.

Although the Government's concession is welcome, they should explore further with representative organisations whether flaws, especially administrative flaws, remain in the system. Now that they have taken the heart out of the system in terms of cost, they should consider how much benefit and revenue they continue to get from it.

Our emphasis tonight has been on the pension increase above inflation, but we should not overlook some of the wider implications. Everyone knows the financial strains of the current system; they will not go away. They were well set out in the context not only of this country but of the world in a recent survey in The Economist. If all hon. Members studied the table that shows the change in distribution of pensioner numbers in Japan between 1950 and today, they would understand why Secretaries of State will always have a problem of containment.

Of course the Government want to relieve some of the burden of dependency. I doubt whether they will admit to wanting to adopt the method of increasing the retirement age, or, to put it more positively, removing some of the disincentives to continuing to work. We may have further comments to make about ageism and age discrimination. Employers' simple acceptance of continuing to employ fit and able employees will be an important social change. It matches the wider objective of encouraging people to stay on at work while they feel able to do that and thus enhance their pension. They may need to do that.

Some unfairness and potential policy hazard is buried in uprating. Although the basic pension is increasing by more than 4 per cent., the extra components such as the additional pension and the graduated pension allowance continue to increase by 1.7 per cent. If the Government are prepared to be generous on the one hand, the imbalance will increase and convey the worst possible signal to those who contemplate staying on at work.

No one has commented on the new pension service that will come into play in only a few weeks and provide the benefits. Ministers may choose to reflect and, indeed, comment on the fact that, now that we have had the press release and the characteristic flood of adjectives about the new service—it is "modern", it is "high quality", etcetera; that is all I get in written answers on the subject—they now have to provide the service for pensioners.

I am a keen reader—and, dare I say it, a modest advocate—of the Department for Work and Pensions newsletter for advisers, intermediaries and other professionals. I am not sure whether I qualify as one of those, but I do my best. The newsletter is known as Touchbase, and we can all get it if we ask for it. The edition that has just reached me is the winter 2001–02 edition, so it is a bit late, rather like the winter fuel payments—but we will leave that aside. An article in the newsletter makes it clear that 26 new centres are to be provided for the pension service. These centres are only just getting under way, and claims will not, in the rather charming phrase of the article, even begin to "migrate from local offices" to the pioneering centre in Burnley until mid-April.

By 2005, however, everything will be all right, because the article concludes that all sites should be operating the optimum best-practice model, and that the policy of the Government is clearly one of continuous improvement. Of course, that will be the case only if one happens to be a pensioner who can send an e-mail or succeed in getting through to the centre by phone.

More seriously, perhaps, there are genuine concerns among the retirement associations and those representing older people about the division of departmental responsibilities implicit in the division between the pension service and Jobcentre Plus. Pensioners have an interest not only in pensions. For example, they may well have dependents, and some might still be in receipt of child benefit. Others might be at work, or might need to access disability services.

Vernon Coaker

Does the hon. Gentleman not agree that a pension service dedicated to pensioners is more likely to attract them to contact it when they need to than is the current arrangement? Is this not a good change that is taking place?

Mr. Boswell

I hope that I can agree with the hon. Gentleman, but Ministers must handle this matter with more attention than we have publicly been aware of, or at least allow us to have a debate about the issues. If this service works seamlessly as a one-stop shop, and if people in the service are capable of answering questions on child benefit, for example, or of getting a prompt answer delivered to a pensioner, that will be fine. If it does not work properly, however, and pensioners are shuffled from, say, Burnley to Bootle, it will be very bad news.

Implicit in this debate has been a concern on both sides of the House about take-up, and the way in which the system works in practice. It will be great if it works, but it is quite clear to all of us that it does not work as it is intended to. It may even be clear to some of us that if it did work as it was supposed to, take-up would increase to a level that might give rise to concern for the Chancellor in relation to some of the benefits being paid. However, that is perhaps an argument for another day.

More attention should be paid to the delivery of the pension service than it has hitherto received. Let me be positive, however, and say that I am pleased that Ministers propose to involve the voluntary sector in the delivery of services, but that must be genuinely bureaucracy-free and comprehensive. That is my response to the point made by the hon. Member for Gedling (Vernon Coaker).

The Minister has ample time to reply and I shall be friendly to him, as I hope I always am, by reminding him that the late Iain Macleod—a great fellow Scot, though a Conservative, whom I admired immensely—always advised young politicians against shooting Santa Claus even when Santa Claus was one legged. I do not suggest that Ministers have been tremendously generous, but they have made advances and a further concession has been wrung out of them today.

Although there are matters that can be welcomed—we shall not divide the House on the orders—it is clear from the tone of the debate that there are serious questions to be answered by Ministers. Frankly, the climate for pensions generally and for the income of pensioners, whatever its level and whatever their status and way of life, is deteriorating. If Ministers remain in denial and do not address that, we could all end up losers.

9.21 pm

The Minister for Pensions (Mr. Ian McCartney)

I thank hon. Members for what has been, for the most part, a useful and interesting debate—it says here. Before proceeding, I must tell Opposition Members and my colleagues that I shall answer the points made tonight, so I give the hon. Member for Daventry (Mr. Boswell) a word of caution. I do not intend to go over the ground covered in our previous two pensions debates in the past few weeks.

I do not say that as a criticism, but much of the hon. Gentleman's contribution and of his hon. Friends' speeches was about general pension issues, which I am more than happy to debate on Second Reading and in Committee when we discuss the State Pension Credit Bill and when we examine over the coming months a range of issues, such as the simplification review, the Sandler review and the rest of it.

Mr. Boswell

I feel particularly generous tonight and I am also conscious of the rather tight nature of the orders and the debate that flows from them. I am content for the Minister to reserve his responses on the wider matters for other and perhaps more appropriate occasions, but will he at least undertake to consider seriously the points made by a number of colleagues about the current situation, which genuinely concerns us? Ministers must not resort to denial.

Mr. McCartney

I thank the hon. Gentleman for his kind remarks and reassure him that my colleagues and I always take the comments of hon. Members seriously, even when they do not deserve the seriousness that we attach to them. A number of specific points have been raised and I shall try to answer them.

My hon. Friend the Member for Gedling (Vernon Coaker) raised issues about attendance allowance, and I am happy to meet him to discuss them. His point was about take-up, which relates to the pension service, and I shall write to colleagues about the next stage of its development. I remind the hon. Member for Daventry that at each stage we have written either directly to the Members of Parliament for the constituencies concerned or to Members generally.

I have no problem with maintaining a close working relationship with colleagues during the delivery of the pension service in a rolling programme over the next few years. I want Members on both sides of the House and their staff to be involved proactively so that we are as one on that. This Government are not a secret society, believe it or not, and we want to engage with colleagues in respect of development and delivery of the service.

The orders confirm our conviction that it is essential to provide effective support for those who cannot work or are retired, while promoting the principle of work for those who can. We are continuing to put right the wrongs of the past. Over the 18 years before we came to power, millions were discarded to a life of poverty. Listening to the hon. Member for Daventry, I would never have thought that the Conservatives were in government for 35 of the past 50 years. In government, we have done something about hospital downrating, we have done something about means-testing and we have done something about pensioner poverty—to cut it rather than to create it. That is an aside. I shall not get partisan. [Laughter.] I shall try my best not to be too partisan.

There are some key figures. The estimated cost of the uprating for 2002–03 is £2.985 billion: £2.06 billion for the elderly, £480 million for the sick and people with disabilities, £330 million for families, £65 million for the unemployed, and £50 million for widows and others with special needs. We are taking action to cut the costs of economic and social failure with a combination of sound economic management and policies to increase employment. We are investing in public services to tackle issues such as health inequalities and poor housing, and to get extra help to priority groups.

We were not prepared to allow generation after generation to suffer the indignity of poverty, be it relative, absolute or persistent. We have addressed the legacy of pensioner poverty head-on, introducing the minimum income guarantee so that poorest pensioners will be at least £15 a week better off. Rough and ready the guarantee may have been, but we were the first Government ever to challenge pensioner poverty. From a standing start, 1.7 million pensioner households and 2 million individual pensioners are now receiving the minimum income guarantee. We are the first Government to intervene in the cycle of pensioner poverty—a cycle for which I refuse to apologise. The Conservative party created it; the Liberal Democrats talk about it; at least this Government are doing something about it.

We have made significant progress towards reaching our long-term objective of ending child poverty within a generation, and halving it within 10 years. We have introduced a range of tax and benefit reforms to give help at the time when families need it most. We have made record increases in child benefit, extended the mobility component of disability living allowance to three and four-year-olds, and delivered wide-ranging reforms to ensure that work pays and to make work possible. Measures such as the national minimum wage and working families tax credit have helped to ensure that people are better off in work.

The history pages will make clear the Tories' legacy. They failed to provide help for those who needed help most; it is now up to us to do so.

We know that it is particularly hard for families on low incomes to bring up children with disabilities, so we are again providing substantial extra help for disabled children. The order gives an additional £5, on top of normal uprating, for the poorest families, bringing the disabled child premium to £35.50 a week. There has been an increase of more than £15 a week since 1996. That will benefit about 80,000 children.

To help remove the barriers to work from people with severe disabilities and to make sure that work pays for them, their earnings or their partners' earnings will no longer be taken into account for independent living fund assessments. The hon. Member for Daventry acknowledged that. The change will be worth an average of £130 a week to those families. We will also extend help to people with savings of up to £18,500 by increasing capital limits in relation to the fund. That is in addition to the increase in the independent living fund from £109.6 million in 1996–97 to £131.3 million in 2000–01.

We are doing more than ever to help families balance their work and home lives. That was raised by the hon. Member for South-West Bedfordshire (Andrew Selous), although I think he took a somewhat different line. We actually believe in helping families. It does not matter to us whether they are single-parent families, or whether a parent is absent; children are the most important aspect. They are our future, and every child in the country counts.

The standard rate of maternity allowance and statutory maternity pay will rise from £62.20 to £75 a week. That will benefit about 340,000 families a year, and is the largest weekly increase in the benefit since February 1958. The sure start maternity grant will rise from £300 to £500, giving a further substantial increase to mothers on low incomes. The new deal and other measures have already helped 100,000 single parents into employment and out of poverty.

[Mr. McCartney]

We are again giving significant help to the elderly. We are committed to the demise of pensioner poverty. We will, as promised, increase the minimum income guarantee in line with earnings, to £98.15 for a single person and £149.80 for a couple. That shows our continuing commitment to ensuring that our pensioners benefit directly from the growing prosperity of this country. As a direct result of the minimum income guarantee, a single person will be at least £15 per week better off and a pensioner couple £23 per week better off than in 1997. In conjunction with winter fuel payments and free television licences, that will make a single pensioner at least £18 per week better off, while a pensioner couple will have gained more than £27 per week.

We shall debate pension credit soon. That is another significant measure in the modernisation of the welfare state, giving positive support to more than 5 million pensioners.

Between now and the introduction of the credit, we will continue to ensure that those on low and modest incomes can share in the growing prosperity. The transitional arrangements introduced in last year's order and continued in this year's order allow for that. As promised, the basic state pension will be increased by £3 to £75.50 a week in April 2002 for single pensioners and by £4.80 to £120.70 for couples.

The state second pension that is being introduced this April will, as it builds, give more help to those on lower earnings or with broken work records such as carers and people with disabilities. That will mean additional help to 18 million people who are left out of the current system because of the modernisation of the pension system through the introduction of the state second pension.

As my right hon. Friend the Secretary of State announced earlier, we have reviewed the rules governing the reduction in benefit when one of our clients goes into hospital. Put simply, we will no longer downrate benefit, whether it be for pensioners or other customers, after the recipient has been in hospital for six weeks. In effect we have doubled the six-week rule so that benefit will continue to be paid in full for 13 weeks. As most hospital stays, including those of pensioners, are shorter than 13 weeks, most people will not see a reduction in their weekly income. An estimated 26,000 people will benefit at a cost of around £40 million. Approximately 20,000 of those beneficiaries will be pensioners.

One would have thought from the churlish response of Opposition Members, whether Liberal Democrat or Conservative, that they had debated the matter, done something about it, or even spoken about it. The truth is that they said nothing and did nothing until a public statement only a few months ago by organisations representing older people.

However, we had already made it clear in the public domain that we were reviewing the matter. We have not responded to older people's organisations. Their contribution to the debate came after I had made it clear that we were going to look at the matter with the Department of Health. We have done that. We have been honest and loyal to that pledge. Having done it, we have come forward with proposals.

The hon. Member for Daventry asked what other beneficiaries were affected. This has been a comprehensive statement by the Government. It has related not just to the retirement pension but to bereavement allowance, widow parents' allowance, widow mothers' allowance, widow's pension, age-related widow's pension, incapacity benefit, severe disablement benefit, unemployment supplement, industrial death benefit, income support, the minimum income guarantee, pension credit, housing benefit and council tax benefit. I would have thought that the hon. Gentleman would be less churlish.

Mr. Boswell

We will not debate the tone of our response, but the Minister of State has given information that was not in his press release. I ask him to go back to the organisations representing older people and look with them long and hard at whether he can to some extent either ease the requirements or improve the performance of the Department in ensuring that benefit is restored quickly where it is withdrawn. That is the major outstanding concern. It would help everyone if he gave an assurance that he will at least look at that.

Mr. McCartney

We have a common approach in our Department. We work with all the stakeholders regularly. That work is about not just policy but how we can manage the service better. If the hon. Gentleman wants an assurance, that is exactly what we are doing. We are involving stakeholders in the design of the pension service locally. There is potential for them to be involved in our outreach work in the community with older people. It is part of the Government's strategy of engaging with older people: not just providing services passively but being proactive and involved where pensioners are based—in their local community—working with pensioner organisations and stakeholders. It has been an ongoing policy of the Government since we won the general election in 1997.

We have created the better government for older people project and a Cabinet sub-Committee on older people. We are the first Government ever to have a strategy for people over 50, working across Government to introduce better services, to develop policy and initiatives. This Government are alive to the needs of pensioners—unlike the previous Government, who ignored them.

The hon. Member for Havant (Mr. Willetts) asked about long-term care and hospital downrating. Those in long-term care are generally left with a personal expenses allowance after paying their care home fees. That is intended to strike a fair balance between financial help and state providers, and avoid double provision.

In addition, a great deal of work has been done in connection with residential care in nursing homes. The abolition of preserved rights gives registered protection for local authorities' contractual arrangements for the first time. The phasing out of residential and part III accommodation rates will provide a fairer system of funding for long-term care. At the moment, about half of all preserved rights customers do not have enough public support to cover their fees. Many have to pay some of their personal allowance towards the fees. The new arrangements will mean that those customers no longer have to do that.

Some questions were asked about the uprating of disability and carers benefits in connection with invalid care allowance. The regulatory reform order currently before the deregulation Committees of the House of Lords and the House of Commons will provide for the removal of the upper age limit for claims for invalid care allowance, and the introduction of a caring entitlement condition for people over 65. We have said that, with parliamentary approval, we want to introduce that by autumn 2002.

The hon. Gentleman also asked what had happened to housing benefit reform. The strategy for housing benefit was set out in response to the consultation on the housing Green Paper in December 2000. First, we are working with local authorities to drive up standards of service, tackle fraud and error and reduce barriers to work. Secondly, we have begun rent restructuring in the social rented sector. We believe that it is essential to level those two stages before considering more fundamental structural reform.

The hon. Member for Arundel and South Downs (Mr. Flight) asked about improving the take-up of housing benefits. Local authorities have been given a legal duty to encourage take-up of housing benefit and council tax benefit. Much of that is achieved in day-to-day business rather than through special campaigns—but we are not complacent, and we support local campaigns when they take place.

We do a lot of campaigning about entitlements—but when we do, the Opposition usually complain that we are spending money. What is wrong with giving people an entitlement and then telling them about it? When we do that the Opposition complain, but when they come to a debate here, they complain that we are not doing enough of it. What do they want? Do they want us to let people know or not? My colleagues and I are prepared to work with the stakeholders to produce effective innovative approaches to campaigning on take-up, and we continue to do that on a regular basis—and when we do, the Opposition spokesman complains.

I think that on pensions strategy we agree that there must be partnership, but I must make one point about the scaremongering that we have heard: 66 per cent. of large employers still have some form of pension provision. We have introduced the simplification review, the Myners review, the minimum funding requirement and the Sandler review. We are the first Government in history to take seriously the need to carry out a fundamental review of ways to help the providers of pensions to continue to provide them on a basis of partnership.

I think that we will come back to this debate when the Sandler review is in the public domain. There is also the simplification review, and the implementation of the minimum funding requirement arrangements following the Myners report, to which we are already committed.

Let us be clear: the Government support and are alert to the need to increase the pool of employees who have a vehicle for their pension, whether that be a stakeholder pension, a defined benefit, a defined contribution or some other form. It is important to work with employers to continue that provision.

It is interesting to note that contributions to non-state pensions are at their highest ever—£ 19 billion up in real terms since the 1997 election. We are not complacent, but we are the first Government ever to participate effectively with the industry on an ongoing basis to find ways of improving and maintaining pension funds and access to pensions. For those who did not have access, we have created the stakeholder pension to give them access for the first time. Six hundred thousand people who this time last year had no access to a pension fund now have access because of the stakeholder system—and that will continue to grow. More than 80 per cent. of the targeted employers who last year had no vehicle to create a pension fund for their employees now have one.

That is progress. This is the first Government in a generation to make progress and benefit large numbers of people who were abandoned by the Conservatives with no hope of a pension—and the Liberals had no view about that at all.

Sir Robert Smith (West Aberdeenshire and Kincardine)

On defined benefit pensions and final salary pensions, some companies are saying that times are hard and that they are going to get rid of the schemes—as a constituent who visited my surgery on Friday has been told—so will the Minister point out to those companies that when times were good they took a contributions holiday? The Government will have to work with such companies to honour the moral contract. At present, employers are saying, "I wasn't around then so I don't have to pay the consequences".

Mr. McCartney

Another Liberal Democrat campaign tactic! We have held Adjournment debates on those issues recently and the hon. Gentleman's party did not participate. If the hon. Gentleman had serious points to make, he should have listened to his hon. Friend the Member for Northavon (Mr. Webb) who spoke earlier and whose pensions policy was economic illiteracy. The Liberals' pensions policy is economic illiteracy. The problem for the Liberals is that the hon. Member for Northavon cannot agree with the leader of his party on their policy for the next election. He came to plead for support from the House because he cannot get it from the leader of the Liberal Democrat party.

I ask my hon. Friends to support both orders. I commend the orders to the House. We are the first Government in more than a generation with a strategy to end poverty among children, a strategy to tackle and end poverty among older people and a strategy to make work pay. At last, we have a Government who are on the side of all the citizens of this country—not like the last Government, who abandoned them.

Question put and agreed to.

Resolved, That the draft Social Security Benefits Up-rating Order 2002, which was laid before this House on 6th February, be approved.