Commons Sitting of 25 March 2002

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
Oral Answers to Questions
  CULTURE, MEDIA AND SPORT
  The Secretary of State was asked—
  CULTURE, MEDIA AND SPORT

    Tourism
    Mr. Peter Luff: If she will make a statement on her policies to promote tourism to England. [43142]
    The Secretary of State for Culture, Media and Sport (Tessa Jowell): I am sure that the House will join me in recognising that the achievement of the British film industry at last night's oscar award ceremony is a great shot in the arm for tourism. Our congratulations therefore go to Julian Fellowes, for best original screenplay for "Gosford Park"; to Jim Broadbent for his supporting role in "Iris"; and to Peter Owen for the best make-up award for "The Lord of the Rings: the Fellowship of the Ring".
    On the substance of the hon. Gentleman's question, we recognise the importance of tourism to the economy and the problems that it faced in 2001, so we are working closely with the industry on a programme to accelerate its recovery, which focuses in particular on raising quality, improving training and skills, strengthening data and marketing England's many wonderful tourism attractions.
    Mr. Luff: Notwithstanding Jim Broadbent's splendid performance in "Iris", I suspect that the oscars will be a rather bigger shot in the arm for the New Zealand tourism industry, bearing in mind the location of "The Lord of the Rings".
    The Heart of England tourist board represents my constituency. From a rather arbitrary glance at a group of other counties, it seems that it does not do a bad job representing that really difficult brand against the very stiff competition of Scotland and Wales, which are much more powerful brands. When will the Government give England equal footing in tourism promotion with Scotland and Wales?
    Tessa Jowell: There are two points to make. First, although England spends less than Wales or Scotland on marketing, the fact is that we do better in terms of the amount of money that visitors spend than they do, so what we spend represents good value for money. However, I take the hon. Gentleman's point that we need to do more
    546
    beyond the short-term focus on marketing, and my Department is currently in discussion with the English Tourism Council to establish how that will be achieved.
    Mr. Lindsay Hoyle: Will my right hon. Friend take on the plight of inland tourism for those constituencies, such as mine, that have had to deal with the problems of foot and mouth disease? The local authority is dependent on the millions of people who visit Chorley, so I wonder whether extra resources are available so that we can ensure that there is not a decrease in tourism this year, but a peak.
    Tessa Jowell: I thank my hon. Friend. Obviously, the million visitor campaign that I announced to the House last month, which is worth £40 million, will provide an enormous boost to help the United Kingdom tourism industry to get back the high numbers of visitors from abroad—particularly, from America—that have fallen sharply in the wake of the events of 11 September. However, the industry is optimistic, and we are working with it to deliver on that optimism.
    Mr. John Greenway: I am sure that the right hon. Lady would want to join me in expressing the hope that our tourism industry has a very successful Easter season over the weekend and the few days ahead, but is she aware of the widespread concern, in rural and urban areas alike, about the impact of any recurrence of foot and mouth disease? Can she tell us what strategy the Government have to deal with any new outbreak? Is she aware that it is strongly rumoured that the Government plan to merge the regional tourist boards into the regional development agencies? Will she take this opportunity to confirm that that is not the case and say when, at long last, she will announce a market function for the English Tourism Council?
    Tessa Jowell: The answer to the hon. Gentleman's first question is yes. The answer to his second question is that we are liaising very closely on the issue with our colleagues at the Department for Environment, Food and Rural Affairs. The answer to the third question is no.

    Digital Television
    John Robertson: What action she is taking to ensure equality of access to digital television. [43143]
    The Minister for Tourism, Film and Broadcasting (Dr. Kim Howells): The digital action plan, which was drawn up with the involvement and agreement of major players, sets out the Government's proposals to encourage the take-up of digital television by making it more accessible and the equipment and technology more available and, of course, affordable. The plan was published last December, and so far more than 8 million households in the United Kingdom are connected to digital services on a fee-paying basis.
    John Robertson: I thank my hon. Friend for his answer. Does he agree that it is vital that we have three solid platforms for digital television in the United Kingdom, if only to supply a service and provide value for money for the consumer? In the light of ITV Digital's

    547
    problems, will he ensure that the communications Bill, when introduced, promotes healthy competition, thus ensuring consumer choice and value for money?
    Dr. Howells: Yes, I can confirm that the communications Bill will be designed to promote healthy competition. Hopefully, it will maintain a number of platforms for digital broadcasting because we believe that that is important.
    Nick Harvey: Will not the difficulties of ITV Digital and the impracticality of putting cable into rural areas leave BSkyB in a strong market position, which the competition authorities have already suggested it is abusing? Will the Minister use the forthcoming communications Bill to ensure that the platform provider and the service provider are regulated separately? Will he also ensure that everyone gets access to all forms of digital television for a one-off payment without subscribing to services that they often do not want?
    Dr. Howells: I am sure that the hon. Gentleman will not mind if I say that the Bill is to be published in just a few weeks. If he can wait that long, he will, I hope, he pleased with its comprehensive nature. The Bill will be put out to full consultation, so he will have plenty of time to raise any specific points.
    Mr. Chris Bryant: My hon. Friend will know that although it would be a delight to have universal access to all forms of digital television immediately, it will be difficult to achieve that without exalting every valley and laying low every mountain. Bearing in mind many people's worries about the future of ITV Digital, what plans do the Government have to ensure that some form of digital terrestrial television survives so that everyone has not only universal access to digital television, but universal choice?
    Dr. Howells: The Government have correctly maintained a platform-neutral position on digital broadcasting and services, and we aim to stick to that. I am sure that my hon. Friend will agree that during the Ofcom debate the House became well acquainted with the problem posed by a large number of people living in hilly topography, and we are looking closely at that.
    Mr. Tim Yeo: If the Minister is not aware of the fact that the survival of ITV Digital can be only a matter of days, he should be. Talk about what the communications Bill, which will not become law until next year, may do is pie in the sky. The success of digital terrestrial television depends on a proper element of competition between at least three providers. Does the Minister have any immediate plans to achieve that in the next few weeks?
    Dr. Howells: I am sure that the hon. Gentleman does not mean to speculate on this subject. He knows how sensitive the issue can be for the value of shares in the relevant companies, for example. I have no more intention of speculating on the likely outcome of discussions involving ITV Digital than I have on the likely date of the next revival in Welsh rugby.
    Mr. Yeo: That certainly is a long way off, and the problem of ITV Digital is more serious and urgent. It is
    548
    not a matter of speculating about what will happen to ITV Digital. Everyone is aware of the acute problems that it faces, and the Minister has just told the House that the Government have no strategy to address them. Does he understand that the survival of ITV Digital has been made much more difficult by the Government's failure to set a clear timetable for digital switchover, to turn up the digital signal and to modernise the media ownership rules, as my ten-minute Bill would have done a couple of weeks ago? Does he agree that dithering by Ministers on all the issues is leading rapidly to a disaster for ITV Digital subscribers and for football, and is a huge setback for Britain, which had the chance to lead the world in digital television until Ministers set about squandering it?
    Dr. Howells: That rant serves only to undermine further the position of some important companies in this country. I hope that the hon. Gentleman will not take such stupid speculation outside the Chamber.
    Mr. Derek Wyatt: It is serious if the digital platform goes. Sky was originally going to be an investor in digital terrestrial television. Is that a possibility if the box itself is controlled by the new Ofcom status?
    Dr. Howells: We will present our plans for regulation when we publish our communications Bill, which, as I said, will be soon.

    King Edward VII Convalescent Home, Osborne
    Mr. Andrew Turner: What the intended use is of the former King Edward VII Convalescent Home for Officers, Osborne. [43144]
    The Minister for Tourism, Film and Broadcasting (Dr. Kim Howells): We are currently considering a range of options with English Heritage. These include using the lower floors to enhance visitors' appreciation of the house and the estate, using the upper floors for holiday lets and conferences, and opening parts of the gardens previously restricted to convalescent home use.
    Mr. Turner: I thank the Minister for that answer. Since the Government took the decision, which is much regretted on the island, to close the convalescent home more than two years ago, nothing appears to have happened. How are the Government complying with the requirement of the Osborne Estates Acts 1902 and 1914, which state:
    "As a memorial to Her late Majesty"
    that is Queen Victoria—the Government
    "shall devote the rest of Osborne House and the grounds under their management to be used for the benefit of officers of His Majesty's naval and military forces or their wives, widows or family"?
    That was subsequently extended to include other branches of the public service. I have had many answers from the Government saying that they are considering the matter; when will they comply with the law on this matter?
    Dr. Howells: I do not believe that that is the law on the matter. English Heritage is undertaking external repairs to the property. That work has been delayed, and we estimate that it will be completed by December 2003.

    549
    We are talking about a facility on the Isle of Wight. Most people recovering from serious illnesses or operations want to be cared for near their home and their family, and that is where the provision is being made.

    Gambling
    Mr. Mark Hoban: When the Government plan to bring forward legislation on gambling. [43145]
    The Minister for Sport (Mr. Richard Caborn): May I begin by expressing the shock and sadness felt, I believe, throughout the House on the tragic death of Ben Hollioake, the Surrey and England all-rounder? I would like, if I may, to send our sincere condolences to the family. My right hon. Friend the Secretary of State has today written to the family. Many would say that this accident has robbed us of one of our brightest young talents.
    In answer to the question, we shall publish tomorrow a document setting out the Government's conclusions on the report of the gambling review body. It will include proposals for comprehensive modernisation of the law on gambling in Great Britain. We shall introduce a Bill when parliamentary time permits.
    Mr. Hoban: I am grateful to the Minister for that answer, and I look forward to seeing him in the Chamber tomorrow when he makes an oral statement on the content of his proposals. The House will expect him to make that statement because of the enormous importance of the proposals to the gambling industry. Will he take this opportunity today to confirm to the House that his plans will safeguard the future of the jackpot machines on which so many members' clubs depend for their survival?
    Mr. Caborn: There will be a debate on the document and the Bill in Government time. It is right that the document is printed tomorrow and that Members have time to reflect on the proposals. As the hon. Gentleman said, the document is a comprehensive response to the Budd report, so it would be wrong to have that discussion tomorrow. We believe that there should be a full debate in Government time, and that will be arranged.
    The hon. Gentleman is right to draw attention to jackpot machines. Many of my hon. Friends, including my hon. Friend the Member for Wolverhampton, South-East (Mr. Turner), have campaigned very hard to retain jackpot machines in members' clubs. That has been considered very sympathetically, and we have decided to keep them because of the strong representations that have been made and because of the role that the clubs play in the social infrastructure in the areas where they operate.
    Syd Rapson: Will the Minister consider carefully the effects of the proposals on the mostly family-run seaside fairgrounds and arcades? These are places of wholesome entertainment, not gambling addiction.
    Mr. Caborn: That highlights the need to publish the document and let Members reflect on it. We shall have a
    550
    thorough debate on it in Government time, and I hope that what my hon. Friend hears tomorrow will be helpful to him.
    Mrs. Joan Humble: Will my right hon. Friend consider carefully the proposals for resort casinos contained in the report, and recognise that while they offer enormous opportunities for a town like Blackpool, some sections of the community are genuinely concerned? Will he ensure that there is full consultation on those important proposals with local communities, especially in towns such as Blackpool?
    Mr. Caborn: My hon. Friend knows that the issue was raised in the Budd report; the Government will state their position in their response. The gambling industry is extremely important: it employs 125,000 people, has a turnover of £7 billion, and contributes in excess of £1 billion to this country's tax revenues. It is therefore important that we get our policy right. When hon. Members have read the document published tomorrow, they will take a view and we will debate the matter in the House.
    Mr. Nick Hawkins: It is good news that a full response to the Budd report is to be published tomorrow. Will the Minister confirm that as the Government's proposals develop from a response to the report and into a Bill, he will hold further consultation with the leaders of the reputable parts of that important industry, in particular the British Amusement Catering Trades Association?
    Mr. Caborn: Yes. We have consulted the industry, including BACTA and many others who have a vested interest, to make sure that we deal with the gambling industry in a way that enables its potential to be realised, while ensuring that we keep the controls and restraints that have given the UK gambling industry its international credibility. We shall maintain a close working relationship and consultation with those who have a vested interest.

    National Lottery
    Mr. Jim Cunningham: If she will make a statement on the progress being made to ensure a fairer distribution of lottery funds following the introduction of the fair shares policy. [43146]
    The Secretary of State for Culture, Media and Sport (Tessa Jowell): Fair shares is a major initiative designed to target funding at the deprived areas that have benefited least from the lottery. The Government will continue to encourage lottery distributors to ensure that all parts of the country benefit from lottery funding.
    Mr. Cunningham: I thank my right hon. Friend for that answer. How many and what percentage of applications have been successful, and who decides?
    Tessa Jowell: Fair shares is a new programme that is to start at the beginning of April. I announced it to the House two or three weeks ago. It is designed to meet a specific problem—namely, deprived areas that have received less than the average share of lottery funding. I announced a further consultation on the future of lottery

    551
    distribution last week. I believe that we will go further and take steps through the distributors to ensure that every part of the country receives the entitlement to lottery funding that those throughout the country who play the lottery have the right to expect.
    Mr. Geoffrey Clifton-Brown: The Secretary of State will be aware that one of the cardinal principles stated in the 1997 White Paper on the lottery was hat it should be operated through an arm's-length procedure, free from Government interference. The lottery has now operated for several years with a surplus of several billion pounds, but that money has been tied up with red tape, with the result that worthy applicants cannot access the funds. That gives the lottery a thoroughly bad name. Will the right hon. Lady investigate and ensure that the bureaucracy and red tape binding the lottery are rapidly diminished so that applicants can get the money that they deserve?
    Tessa Jowell: The hon. Gentleman confuses several points in his question. I assume that he is referring to lottery balances—the money held in the national lottery distribution fund on behalf of the distributors. Almost all this money is overcommitted: it awaits distribution to specific approved projects.
    There are delays in getting the money out. Two weeks ago I announced to the House the objective, agreed with the lottery distributors, of ensuring that current lottery balances—in excess of £3 billion—should be reduced by one half by 2004. The distributors are signed up to that objective. I believe that it will be an important way of maintaining public confidence in the lottery—confidence that the public's money is being well spent—and that people will continue to play.
    David Taylor: Is it not the case that the west midlands and east midlands have been poorly treated in relation to lottery distribution? If and when the Wembley project fails next month, as it deserves to, would not a way of bridging the gap be to reallocate the project immediately, preferably to Coventry or perhaps to Birmingham? Did my right hon. Friend see the comments in the Evening Standard next week about Wembley? The Standard said:
    "The transport links are dreadful, the surroundings grim, the whole area unequipped to handle major sporting events. It is nostalgia gone mad."
    Does my right hon. Friend agree with the comments of that London-based journalist?
    Tessa Jowell: Let me take issue with my hon. Friend on both parts of his question. First, it is not the case that the east midlands and west midlands have done badly from the lottery. Parts of the west midlands have certainly received less than their fair share; they are among the 51 areas that will benefit from the fair shares programme. On my hon. Friend's second point, the development of the Wembley stadium is a Football Association project, funded by the lottery. It is not for Government to intervene and pull the plug or anything else on a national stadium project that we hope will succeed.
    Sir Sydney Chapman: Although I wish the fair shares initiative success, will the Secretary of State take the opportunity to say that it will not
    552
    prejudice in any way the quality or worthiness of applications for lottery funding? Will she give an assurance, for which my hon. Friend the Member for Cotswold (Mr. Clifton-Brown) was asking, that there is a strong case for making applications simpler? I was involved with one on behalf of a charitable trust; we experienced extraordinary difficulties in seeking to apply for funds for a particular project.
    Tessa Jowell: The hon. Gentleman is right; it is important to be vigilant about reducing bureaucracy. That was one of the points in the proposals that I set out last week, and includes lottery distributors being more collaborative and working together to enable local community groups and other organisations that wish to submit bids that do not fit clearly with one distributor to do so. The awards for all scheme is a good example of that kind of collaboration.
    Mr. Ian Davidson: Given the dispute between English Members about the site of a new football stadium, does the Secretary of State agree that it would be better if money were saved and teams were invited to play in Glasgow or Cardiff, where they would be assured of a warm welcome? The money thus saved could be spent in areas like my own, where many constituents have particular difficulty with the complexity of the forms. Ordinary working-class volunteers find it immensely difficult to fill in all the forms and jump through all the hoops, which deters many of them from making an application. Does the Secretary of State agree that it would be far better not to waste that money in England but to spend it in Glasgow instead?
    Tessa Jowell: I note my hon. Friend's observation. I only add that yes, of course much more can be done by the distributors to solicit applications from parts of the country that have not yet put in bids. I should like to pay tribute to my hon. Friend the Member for Morley and Rothwell (Mr. Challen), who has led a group of Members on both sides of the House in driving forward the determination to ensure that every part of the country and every community has the opportunity to benefit from the lottery.
    Miss Anne McIntosh: May I echo the sentiments of the Minister for Sport about the tragic loss of Ben Hollioake, a talented young cricketer whose potential will never be realised?
    Last week, at Southwark cathedral, the right hon. Lady made an announcement which, she stated, was extremely important; it is regrettable that a similar statement was not made to the House. In that announcement, she mentioned that lottery funds are £3.5 billion underspent. Precisely how will that be allocated? Will the fair shares policy mean that there will be fairer distribution of those funds? Can she guarantee that they will be distributed in an objective, non-partisan and apolitical way, and that a balance will be reached, as she promised the House, between urban and rural areas, as rural areas have lost out greatly in the distribution of lottery funds?
    Tessa Jowell: May I try to clear up some confusion that the hon. Lady clearly has, which she also had when she spoke on behalf of her Front-Bench colleague, the hon. Member for South Suffolk (Mr. Yeo), in the debate

    553
    two or three weeks ago? Money in the lottery balances is not underspent. It is money that has been committed to projects, but that has not yet been spent. It is not free and unallocated; it is waiting to be spent—on projects under the fair shares policy, in coalfield communities, and so forth.
    I have made absolutely clear the Government's determination to bring pressure to bear on the distributors to ensure that the level of lottery balance, which I believe to be unacceptably high, is halved over the next two years.
    Mr. Bill Tynan: My right hon. Friend will be aware that Hamilton receives one of the lowest amounts of lottery funding. Therefore, on behalf of my constituents, I thank her for including south Lanarkshire in the group that will be targeted under the fair shares policy. What kind of publicity will there be to ensure that local charitable organisations are given the opportunity to apply? If there is such a campaign, when will it run?
    Tessa Jowell: My hon. Friend raises an important point. This is a matter for the lottery distributors, but he touches on an important gap. In deprived communities particularly, where there are not large numbers of voluntary organisations and active civic organisations, there is often simply not enough awareness of how the lottery works, how it can be accessed and what it can do. It is that information gap that we need to overcome. That will in turn ensure that our objective of every community benefiting from the lottery will be achieved.

    Ofcom
    Mr. Philip Hammond: What representations she has received from the existing regulators with regard to the shadow Ofcom. [43147]
    The Minister for Tourism, Film and Broadcasting (Dr. Kim Howells): All the existing regulators have welcomed the proposal to establish the Office of Communications and have been working closely with my Department and the Department for Trade and Industry on setting up the new body.
    Mr. Hammond: I am sure that the Minister would agree with me that part of the point of setting up Ofcom is to have a genuinely new body that is focused on the converged world and is a product of that converged world. Does he share any of my concerns about the fact that the communications Bill is being developed with a large input from the existing regulators' staff, who are uncertain of their status and even of whether they will still be employed under the new regime? Is he entirely confident that that level of input from the old regime is the best way to develop a regulatory regime for the future?
    Dr. Howells: I hope that the hon. Gentleman will take it from me that we are not being overly influenced by existing regulators or by any influence that they care to bring to bear on the debate. We have tried to consult as widely as possible, and once we have published the Bill there will be a period of about three months for further consultation. I very much hope that everyone—existing regulators as well as everyone else involved in the industry—will contribute to that consultation, and I am
    554
    very confident that they will. We have very few opportunities in a generation to make a good job of regulation, as I am confident we will under the Bill.
    Ms Debra Shipley: Will my hon. Friend take it from me that when the chief executive of the regulatory body for the Independent Television Commission appeared before the Culture, Media and Sport Committee on which I serve, she was extremely weak? Very disappointingly, she knew very little about children and advertising—a subject on which more than 120 Members have supported a ban for the under-fives. Furthermore, does he accept that there is a clash between what the Department of Health is promoting for children and health, and what the Department for Culture, Media and Sport is allowing in terms of advertising aimed at children? As we have seriously obese children in this country, that is a very serious topic.
    Dr. Howells: I have read my hon. Friend's early-day motion on the subject. I understand that my right hon. Friend the Secretary of State met her to discuss the matter.

    National Lottery
    Sir Teddy Taylor: What the total sum of unclaimed lottery prizes was at the most recent date for which figures are available; and what is the largest single unclaimed amount. [43148]
    The Minister for Sport (Mr. Richard Caborn): The total of unclaimed national lottery prizes was £455.6 million as at 19 March, and the largest single unclaimed amount was just over £3 million.
    Sir Teddy Taylor: While we should all be grateful to the national lottery for raising about £3 million every day for worthy causes over the past eight years, do not the Government and Camelot think that an inquiry should be made into why so many people do not claim their lottery prizes? Is there a case for putting a public notice at the place where tickets are sold if there is an unclaimed prize of £1,000 or more? Does the Minister accept that his figures are startling and that we should do something about the matter?
    Mr. Caborn: The hon. Gentleman has a point, and I will raise it with Camelot. No one wants to see prizes unclaimed. When I saw the figures, I thought that they were staggering. There is nearly £500 million of unclaimed prize money. However, the rules are in place. If the ticket is lost or has been stolen, a claim can he made within 30 days. A claim can be made within 180 days if the claimant has the ticket. There is accommodation for late claiming. If a ticket has been lost or burnt in a fire, for example, that is catered for by the rules.
    I take the hon. Gentleman's point and I will ask Camelot whether it can put notices in shops—
    Mr. Chris Bryant: Has the hon. Member for Rochford and Southend, East (Sir Teddy Taylor) lost his ticket?
    Mr. Caborn: No, I do not think so, but I will raise that with Camelot.
    Andy Burnham: If there is unclaimed lottery money, amateur rugby league clubs—Leigh has some of the best in the country—would gladly take it off my right hon. Friend's hands and make use of it. To date, rugby league at the grass roots has received only £12 million from the £1 billion or more in the sports lottery fund—less than a third of the money given to rugby union. Does he agree that rugby league is owed more from the lottery? Does he further agree that giving money to amateur rugby league clubs would be one of the best ways of fulfilling the Government's objective—
    Mr. Speaker: Order. The question is about prizes, not distribution.

    Television Drama (Impartiality)
    Dr. Julian Lewis: If she will make a statement on the requirement of broadcasting legislation that television drama based on recent historical events should be treated with due impartiality. [43149]
    The Minister for Tourism, Film and Broadcasting (Dr. Kim Howells): The BBC, under the BBC charter and agreement, and other broadcasters under the Broadcasting Act 1996, are required to preserve due impartiality as respects matters of political or industrial controversy or those relating to current public policy. Those general requirements would apply, if relevant, to drama based on recent historical events.
    Dr. Lewis: I thank the Minister for that excellent reply, which is absolutely right. Will he join me in giving a pat on the back to the BBC for its decision, at last, to broadcast "The Falklands Play" by the distinguished playwright, Ian Curteis, on the 20th anniversary of the Falklands crisis, both on BBC Radio 4 and on the new BBC 4 digital television channel?
    Does the hon. Gentleman recall the contrast when 15 years ago the same play was shelved by the bosses at the BBC because it presented the then Prime Minister in what they regarded as too favourable a light? Does he agree that when the play is broadcast on the new digital channel, and if it is well received, it would make amends if it were at last to be broadcast on BBC 1?
    Dr. Howells: I believe that the right authorities for deciding what should be shown on television are the television companies and the owners. The House would be a very poor place in which to make decisions on what should or should not be on television.
    I am glad that the play is to be shown. I understand that a radio version is to be broadcast. I hope that there will be a good and fulsome debate on the play, which will provoke further discussion on that type of controversial drama. I am entirely in favour of it.
    Miss Anne Begg: I am glad that the Minister said that it is not the role of Government to
    556
    interfere in the creative process. They should be cautious about increasing any type of regulation, because it smacks of censorship. It must be up to the broadcasters to decide what is broadcast. It is important that we allow our playwrights to dramatise events that may have occurred in the recent past. We often get a greater understanding of motivations and events through dramatisation, which may be slightly fictionalised.
    Dr. Howells: I agree entirely with my hon. Friend.

    Music Industry
    Mike Gapes: If she will make a statement on her Department's support for the British music industry. [43151]
    The Minister for Tourism, Film and Broadcasting (Dr. Kim Howells): We can be rightly proud of the quality of music produced in this country, and I fully recognise the enormous cultural and economic value that the industry represents. We are working closely with the industry to ensure its continued success at home and abroad.
    Mike Gapes: I am grateful for that reply. Does my hon. Friend agree that there is enormous diversity in music in this country, from folk music to jazz, from classical music to garage—[Laughter.] I had to mention garage for my daughter. Does he agree that it is important that we take account not only of the producers and publishers of music but of the interests of those that distribute music, including companies such as Britannia in my constituency, which plays a vital role in distributing every day the largest range of music as widely as possible, both in this country and abroad through exports?
    Dr. Howells: Britannia does an excellent job in distributing music. The music industry faces a great problem with distribution. A great part of society has a strange attitude towards what amounts to the stealing of intellectual property rights from musicians, composers, orchestras and so on through the internet. Napster was a classic example. It is important that we try to change those attitudes and that culture. The distributors have an important part to play in that. They must not only go about the business of distributing and selling music—and indeed of commissioning and promoting it—but move beyond that to try to convince young people that if we cut off its creative roots, music will not be available to buy in future.
    Pete Wishart: It will not have escaped the Minister's attention that EMI faces difficulties: it is to shed some 1,800 jobs. That seems symptomatic of the music business, whose situation can only be described as patchy. May I press the Minister further on what he and his Department intend to do about the vexed issue of music piracy? As he knows, the music industry has identified it as a very real and damaging issue.
    Dr. Howells: Over the past few years, we have worked to try to pull together all the enforcement agencies, from trading standards officers to the special police forces that the owners of intellectual property rights, especially the big recording companies, have set up, to try to track down the thieves who are rather romantically called pirates.

    557
    They are thieves. They are taking away the only source of revenue of one of our most important industries: it is worth perhaps £4.5 billion to this country and employs a lot of people. It is important that we do not lose impetus in taking these thieves on, tracking them down, punishing them and stopping their activities wherever they happen. That means that we must move across borders and continents.

    Golden Jubilee
    Mr. Mike Hall: What meetings she has held with officials at Buckingham palace regarding the celebrations for the Queen's golden jubilee. [43152]
    The Secretary of State for Culture, Media and Sport (Tessa Jowell): I have had a number of meetings since taking over responsibility for the jubilee celebrations. My officials are in contact with the palace on a daily basis.
    Mr. Hall: May I draw my right hon. Friend's attention to the international fun in athletics team event on 5 July in the millennium stadium in Cardiff, organised by UK Athletics under the leadership of my good friend. George Bunner? It will bring teams from the UK and South Africa together in a decathlon event that will have worldwide coverage and be a great way of celebrating the Queen's golden jubilee. Does my right hon. Friend agree that it will be a great vehicle to export the idea of the jubilee across the Commonwealth?
    Tessa Jowell: That is but one opportunity, and it chimes well with the themes of the jubilee that the Queen has set and that are very much shaping the planning of events over the jubilee weekend and throughout the rest of the year.

  ELECTORAL COMMISSION COMMITTEE
  The right hon. Member for Berwick-upon-Tweed, representing the Speaker's Committee on the Electoral Commission, was asked—
  ELECTORAL COMMISSION COMMITTEE

    Voting Age
    Bob Spink: What recent discussions the Electoral Commission has had with the Government on the reduction of the minimum age for voting. [43172]
    Mr. A. J. Beith (representing the Speaker's Committee on the Electoral Commission): The commission has been working closely with the Government's children and young people's unit on the "Y vote, Y not?" project, which is consulting young people about measures to encourage increased participation in elections. One suggestion is to reduce the minimum voting age. The commission has told the Government that it intends in due course to reconsider that as part of its programme of reviewing electoral law and practice.
    Bob Spink: I am delighted by that reply, which represents a sound way forward. The right hon. Gentleman will know of the public's disenchantment with
    558
    politics in general and of young people's disengagement in particular. It is right that we should consult widely with young people in considering that important issue.
    Mr. Beith: The commission will note with interest the hon. Gentleman's comments, which are somewhat in line with my own views.
    Mr. Tam Dalyell: If we are asking people to fight in Afghanistan at the age of 19, should not we think about allowing them to vote at 16?
    Mr. Beith: I cannot disagree with the hon. Gentleman, but the commission has to take into account a variety of views. Several different views are represented even within the Government.
    Sir Patrick Cormack: Will the right hon. Gentleman take in one of those views now? Although it is absolutely correct to encourage young people to take an interest and participate in voting, many people feel that it would not be sensible to reduce the minimum voting age.
    Mr. Beith: The hon. Gentleman's different point of view will have been noted by the commission.

  The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—
  CHURCH COMMISSIONERS

    Sex Discrimination Act
    Mr. Huw Edwards: What recent discussions the Church Commissioners have had to bring the Church of England within the jurisdiction of the Sex Discrimination Act 1975. [43173]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): Although there is no general exemption in the Sex Discrimination Act for the Church of England, the Act contains a limited exemption for cases where that is necessary to comply with a religious body's doctrines or to avoid offending the religious susceptibilities of a significant number of its members.
    Mr. Edwards: My hon. Friend will appreciate that in Wales the ordination of women happened even later than in England. Does he agree that if the Church is to be relevant to modern society, women and men should have access to all jobs regardless?
    Mr. Bell: The national Church institutions have a comprehensive equal opportunities policy that applies to all their employees and a rolling programme of diversity awareness training for staff. As regards the ordination of women priests, the Church aims to follow best practice in so far as the provisions of employment law apply.

    Church Maintenance
    Mr. Andrew Mitchell: What steps the Church Commissioners are taking to encourage individual parochial church councils to undertake maintenance of church buildings. [43175]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): Parishes can draw upon the advice of the Council for the Care of Churches but need no encouragement, if money can be found, to maintain or repair our nation's churches, the general condition of which are a credit to the work that they carry out.
    Mr. Mitchell: I agree with the hon. Gentleman, but does he accept that the problem rests principally on rural churches, where there are particularly sparse congregations, and on some of our great inner-city churches, where the local congregations are not as wealthy as in other areas? Will he reflect, with me, on the joy and pleasure in the royal town of Sutton Coldfield that our town church, which needed to raise £70,000 for roof repairs, has been successful in raising that money by various means, not least the generosity and good sense of my constituents?
    Mr. Bell: The hon. Gentleman makes a pertinent point. Demographic changes mean that there are churches where there is no population. A diminution in traditional building skills means that simple works cost disproportionately more than in the past. We welcome his statement about his church in Sutton Coldfield. He is right: by virtue of huge voluntary fund-raising efforts by churchgoers, friends associations, local communities and others, and to a lesser extent the welcome support of the state, such costs are being met in the manner to which he referred.

    Hunting
    Mr. Gordon Prentice: How many accidents involving hunting with dogs on Church lands have been notified to them since 1995. [43176]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): None.
    Mr. Prentice: Is there an obligation on the tenants of Church land to report accidents to the Church Commissioners and if not, why not? Is not it about time that the Church of England showed some moral leadership on the issue and banned hunting with dogs on its land? Finally—
    Mr. Speaker: Order. The hon. Gentleman has put two supplementary questions. He is only entitled to one.
    Mr. Bell: I am grateful to you for your protection, Mr. Speaker. Two in a court of law is quite sufficient; three in the House of Commons is overwhelming.
    Any accidents on Church land would be referred to the Church Commissioners. In relation to foxhunting on Church land, existing tenancies may not be altered unilaterally but it may be possible to make provisions in
    560
    new tenancies. The enforcement of any ban on foxhunting by the commissioners as landlords would be difficult and could undermine our relationship with tenants.
    I notice that my hon. Friend the Member for West Ham (Mr. Banks) is in the Chamber. The Church Commissioners will support and follow any legislation that is passed in both Houses of Parliament.
    Miss Anne McIntosh: Will the hon. Gentleman tell the House what consultation has been held with tenants of Church land as to whether they are in favour of hunting with hounds?
    Mr. Bell: The position of the Church Commissioners is that our long-standing policy on foxhunting is to allow our tenants to follow their consciences in deciding whether to allow hunts on the land that we entrust to their care.
    Mr. Tony Banks: A number of clergy support hunting. Does my hon. Friend think it strange that so-called men of God should take pleasure from seeing one of God's creatures ripped to pieces for their fun?
    Mr. Bell: That was a short question. The Church recognises many differences on theological issues and many differences on foxhunting.

  ELECTORAL COMMISSION COMMITTEE
  The right hon. Member for Berwick-upon-Tweed, representing the Speaker's Committee on the Electoral Commission, was asked—
  ELECTORAL COMMISSION COMMITTEE

    Voter Participation
    Kevin Brennan: What consideration the Electoral Commission has given to the use of incentives to encourage voter participation in elections. [43177]
    Mr. A. J. Beith (representing the Speaker's Committee on the Electoral Commission): Consideration of the use of financial or other individual incentives to encourage voter participation is not currently part of the commission's planned review programme. However, I understand that the commission gave evidence to the Secretary of State for Transport, Local Government and the Regions earlier this year on a proposal from Blackburn with Darwen council for a pilot scheme linked to the May 2002 local elections that would have involved entering all electors in a prize draw. The commission concluded that the proposed scheme did not fall within the legal framework for electoral pilot schemes set out in the Representation of the People Act 2000.
    Kevin Brennan: Rather than considering ideas such as compulsory voting, would not it be better to offer incentives for people to vote? Perhaps we could have a good citizens tax credit or a free lottery ticket—as in the suggestion described by the right hon. Gentleman—on the basis that, for citizenship, the carrot would be better than the stick.
    Mr. Beith: The hon. Gentleman is entitled to his view but I believe that such proposals would face many legal and some ethical obstacles. Several other pieces of legislation might bear on them. As I said, the Electoral Commission has no current plans to conduct a review on the feasibility of introducing such proposals, but is considering a wide range of initiatives to encourage voter participation and to make the process of voting more accessible and user-friendly.
    Simon Hughes: Does my right hon. Friend agree that, for those for whom financial incentives are beyond the pale, a cheap—indeed, free—incentive would be to allow voters to vote at any polling station? In this age of modern technology, it must be possible for lists to be available at any polling station. Would the commission look into that?
    Mr. Beith: The commission is looking into the possibility of voters being able to vote at more than one polling station.

    Political Parties (Donations)
    Martin Linton: Whether it has asked the Electoral Commission to report on the desirability of an upper limit on donations from private individuals to political parties. [43179]
    Mr. A. J. Beith (representing the Speaker's Committee on the Electoral Commission): The Committee is not responsible for determining the Electoral Commission's work programme. Accordingly, we have made no request to the commission to report on the desirability of an upper limit on donations from private individuals to political parties, nor do we have any plans to do so. However, in its 2001 report on the general election, the commission stated its intention to look at the case for introducing a cap on party donations as part of a wider examination of state funding
    Martin Linton: In welcoming that reply, may I draw the right hon. Gentleman's attention to the problems created by large donations, even when the motives of donor and recipient are pure? Such donations often create the perception that parties will feel beholden to donors. Will he ask the Electoral Commission to examine the early-day motion on that subject, through which many hon. Members have expressed support for a limit of £100,000? Indeed, some have amended the figure to £20,000. Will he also ask the commission to consider the experience of Quebec, which has had a donations limit of 3,000 dollars for many years?
    Mr. Beith: I shall certainly draw the commission's attention to that early-day motion and to that experience. Of course, measures have so far concentrated on transparency and disclosure and the regular reporting of donations by parties.

  The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—
  CHURCH COMMISSIONERS

    Clergy Poverty
    Mr. Lindsay Hoyle: If he will make a statement on poverty among clergy members. [43182]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): A survey of stipendiary clergy, which considered their financial circumstances, among other matters, was undertaken by the Archbishops Council in 1999. A copy of it and its results is available in the Commons Library.
    Mr. Hoyle: My hon. Friend is doubtless well aware of the poverty that affects the clergy throughout this country. A modern society ought to ensure that we pay the clergy, who should not be so dependent on the Church. Can we look forward to their being paid proper salaries with regular increases?
    Mr. Bell: About one third of clergy said that they had debts, excluding mortgages, car loans or interest-free credit arrangements. Very few clergy—about 5 per cent.—had applied for, or were intending to apply for, working families tax credit. Fewer than 4 per cent. received any other state benefits, excluding child allowance. However, we of course take on board my hon. Friend's point.

    Stipends and Pensions
    Sir Sydney Chapman: If he will make a statement on the contribution made by the Church Commissioners to clergy stipends and pensions. [43184]
    Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): I am pleased to see that the hon. Gentleman is again present for Church Commissioners' questions.
    For the year ending 31 December 2001, the commissioners contributed £22 million to the stipends of parish clergy, and met bishops and cathedral clergy stipends totalling £7.1 million, of which £900,000 was pensions contributions.
    Sir Sydney Chapman: I am grateful to the Second Church Estates Commissioner for that information, but could he also give that answer in percentages of the total? In any case, will he confirm that those figures underline the Church Commissioners' important contribution to clergy stipends and pensions, and that the real lesson is that—within ethical restraints—we should encourage the commissioners to maximise their assets, because they are doing a worthwhile job in a noble way?
    Mr. Bell: On percentages and the pensionable stipend, in line with actuarial advice, the contribution rate will rise from 21.9 per cent. to 29.1 per cent. with effect from 1 April, and to 29.5 per cent. from 1 January. The hon. Gentleman's other points are valuable and will certainly be heard in other quarters.

  ELECTORAL COMMISSION COMMITTEE
  The right hon. Member for Berwick-upon-Tweed, representing the Speaker's Committee on the Electoral Commission, was asked—
  ELECTORAL COMMISSION COMMITTEE

    Voting Arrangements
    Simon Hughes: What reviews the Commission has undertaken into allowing electors to vote at any polling station. [43186]
    Mr. A. J. Beith (representing the Speaker's Committee on the Electoral Commission): The Commission is examining the matter. It has not undertaken a formal review of the principle of allowing electors to choose any polling station at which to vote, but it has declared its intention to press forward an agenda for making voting easier and more user-friendly. As part of that agenda, it will evaluate several pilot schemes during the May 2002 local elections, including a scheme to allow voters to choose from among a number of polling station locations the one at which they want to vote.
    Simon Hughes: If I may link my right hon. Friend's answer to the issue of younger voters, will the commission
    564
    consider locating polling stations in schools with sixth forms and sixth form centres, and in colleges and universities? If we are to get young people to vote, it is much more likely that they will vote if the voting place is somewhere that they have to go during that day.
    Mr. Beith: I shall pass on my hon. Friend's interesting suggestions to the Commission.
    Mike Gapes: Will the commission also consider electoral abuse at polling stations, and study my Adjournment debate on 4 July last year about intimidation in polling stations in my constituency at the general election? Will it also consider other abuses, including introducing stricter requirements for enforcing the law on leaflets distributed without imprints and those that tell people not to vote for sitting MPs and that are distributed months before the election?
    Mr. Beith: The commission has studied the hon. Gentleman's Adjournment debate, as have I, and I believe that he has met or communicated with the chairman of the commission on those matters. Although the commission is not the prosecuting authority in such matters—it is a matter for the police if an offence has been committed—it reviews the effectiveness of the law and whether any changes are required. I am sure that the hon. Gentleman's efforts are being carefully considered.

Consignia (Restructuring)
3.31 pm
The Secretary of State for Trade and Industry (Ms Patricia Hewitt): I should like to draw the attention of the House to my declaration of interests contained in the register.
With permission, Mr. Speaker, I would like to make a statement on the announcement that Consignia made this morning about its restructuring plan for Parcelforce and the outcome of its review of its distribution systems.
That announcement, although it comes as a blow to many hard-working employees and their families, is the first of several necessary steps that will lead to the renewal of postal services in Britain. As is well known, Consignia plc—the company running the post office network, the Royal Mail and Parcelforce—has been losing money. Its costs have risen at a time when the rate of growth in mail volumes has slowed, with competition from fax, e-mail and the internet affecting demand. The company is losing more than £1.5 million every day and Parcelforce Worldwide alone is losing £15 million a month.
In the 10 years of its existence, Parcelforce has never made a profit and has now amassed losses of close to £400 million. Parcelforce's business model has failed and repeated attempts to make it work over the past 10 years have not succeeded. The losses on parcels have drained investment from the rest of the Post Office. For the sake of the company as a whole, Parcelforce now needs to be restructured and restored to profitability.
It is important to consider how the company got into this position. The British Post Office used to be admired across Europe for its high standards of performance. But in the 1980s and 1990s—[interruption.] Hon. Members should just listen. During those years, other postal services across Europe began to modernise and invest so that they could deliver better services in a rapidly changing market. But successive Conservative Governments did not care about improving delivery. [Interruption.] They allowed the Post Office to stagnate and starved it of investment. [Interruption.]
Mr. Speaker: Order. Hon. Members must allow the Secretary of State to be heard.
Ms Hewitt: Thank you, Mr. Speaker. It must be all that sea air in Harrogate. [Laughter.] Oh go away; they are pathetic. While new technologies and changing markets were transforming the communications sector, our postal services were allowed to drift and decline. [Interruption.] I meant bracing air, okay? It must have been the Conservative party leader's speech that over-excited them.
Since 1997, the Government have given the Post Office the greater commercial freedom to meet those challenges that management and unions had long called for. Greater freedom within the public sector has meant freedom for the company to make more commercial choices. But with freedom comes responsibility. The company will be responsible for controlling costs, organising itself to meet the needs of customers and modernising the way in which it works. The Government have a responsibility too—to ensure that the company has the best possible management and the resources needed for investment. In this way we ensure that public and business customers will get the best quality service.
566
We have already taken several steps to strengthen the management, and today I have announced that Allan Leighton has been appointed the new chair of Consignia, a role that he has been playing on an interim basis since January. He will be responsible for getting a grip on the situation that the company faces, and that involves stemming the losses, reforming the company's industrial relations and developing a new vision and strategy for the future.
Allan Leighton has a proven track record of success in business. I believe that he has the determination, drive and energy needed to transform the Post Office's performance. As the interim chair and as a non-executive director of the company, he has seen at first hand both the problems that exist in the company and the tremendous potential that it has. He has already spent considerable time in sorting offices, post offices and delivery offices around the country and he was out there again this morning, talking to some of the work force about the changes that the company announced today.
The changes are as follows. The first is the integration of the universal parcels service into the Royal Mail itself. Under the universal service obligation, which we have enshrined in legislation, the company is responsible for delivering parcels of up to 20 kg to every part of the country. By giving this responsibility to the Royal Mail, the company will create a more efficient service, safeguarding the 30 million parcels sent by the general public every year so that people will still be able to send parcels from their local post office just as they do now.
Secondly, there will be a radical reshaping of the remaining Parcelforce business, which will in future concentrate on high-value, time-guaranteed express services. Thirdly, there will be changes to the mail distribution system. The existing network of road, rail and air has developed on a piecemeal basis. It has been causing delays, imposing excessive costs and reducing the quality of service to customers. The necessary rationalisation will increase the volume of mail carried by rail. Although the practice of sorting mail on trains will be phased out, bulk mail will be carried by rail during the day. The total number of road journeys undertaken by Royal Mail will be reduced, as will the number of vehicles used, cutting pollution as well as costs. [Interruption.] Conservative Members do not care about that, either. Fourthly, the company is stripping out layers of management and jobs in its operations and support services that are no longer needed as a result of the other changes.
The company expects that, together, these changes will mean the loss of 13,000 jobs over the next three years with a further 2,000 jobs going through natural wastage. The company has also made it clear that there will be further unavoidable job losses over the next three years. I will, of course, continue to inform the House as the restructuring of the company is taken forward.
As a contribution towards supporting the company as it restructures, I can also announce that the Government will forgo a dividend for this financial year, releasing an additional £64 million for the company.
I understand the very deep disappointment that postal workers will be feeling at this news today. This is not a decision that the company has taken easily or lightly, but it is unavoidable if we are to create a high-quality postal service that will offer good and secure jobs. I know that

567
the whole House will welcome the fact that the company will offer as many of those affected as possible the option of continued employment in a different part of the business or a voluntary redundancy package. The company is, of course, in discussion with the trade unions. We will do everything that we can through the Employment Service and other agencies to provide support, assistance and new opportunities to those who lose their jobs.
These are difficult times for the company as management and work force grapple with the legacy of underinvestment and poor industrial relations and undertake the changes that are necessary to face the competitive postal markets of the 21st century. I have made it clear to the new chairman that there needs to be a better partnership relationship between the management and the unions if they are to deliver this. That was recommended by Lord Sawyer in his report published last year, and he believes that there is a genuine commitment to change from all sides in the Post Office and Royal Mail to achieve this. The benefits of that relationship have already been demonstrated since his report was published. Compared with more than 43,000 days lost to unofficial action between April and June last year—that figure itself considerably lower than in the last year of the previous Conservative Government—only 1,352 days were lost to unofficial action in the three months from October to December. That is a tremendous improvement and the whole House will want to see it maintained.
I am confident that the path that we are pursuing is the right one. Greater commercial freedom; strengthened management; universal service enshrined in primary legislation—in other words, a delivery every working day to every address in every part of the country.
Today marks a turning point for the company. In the words of the new chairman, the measures announced today
"will ensure that real progress is made in the first year of a three-year strategy to restore profitability, deliver positive cash flow, improve services and make the business a better place in which to work."
Central to Allan Leighton and the company's task will be the relationship with the regulator. As right hon. and hon. Members will know, the postal regulator recently announced an extension of the consultation period; a welcome response, in no small part, to the concerns expressed in this House. In the coming weeks, Allan Leighton, the company and the regulator must have further talks and reach a shared analysis, both of the company's financial position and of the postal services market.
I know that today's news will come as a blow to many workers. But these changes, painful as they are, are unavoidable. Today must be the first step towards renewal, and towards creating a postal service that justifies the pride, and lives up to the expectations, of the millions of people in Britain who depend upon it every day.
Mr. John Whittingdale: May I first thank the Secretary of State for giving me an advance copy of her statement?
568
This afternoon's statement is a humiliation for the Government. Less than two years ago, the then Secretary of State, the right hon. Member for Tyneside, North (Mr. Byers)—who will have his own humiliation later this afternoon—said of the Postal Services Bill:
"It will ensure a strong Post Office that is better able to serve all its customers in all parts of the country."—[Official Report, 18 April 2000; Vol. 348, c. 940.]
Since then, the business has gone from recording a profit of nearly £400 million to losses currently running at £1.5 million a day. It has seen 547 more sub-post offices close last year alone, and 63,000 days lost in industrial action. Its performance has deteriorated so that it is failing to meet its delivery targets, and estimates put the number of lost items of mail at 1 million every week; although that may be less surprising, having discovered that the Secretary of State thinks that Harrogate is by the sea.
The Secretary of State, incredibly, has tried to claim that somehow it is all the fault of the last Conservative Government, yet this devastating decline has happened in the last two years. Her statement has signally failed to offer any proper explanation for what went wrong in the time since her predecessor was predicting such a golden future for the business.
Is not the truth that the structure for the Post Office created by the Postal Services Act 2000 was, in the words of the Chancellor's then spin doctor, "a dog's breakfast"? Have not the Government failed to give Consignia the full commercial freedom it needed so that, as a result, it has been unable to take the action necessary to modernise due to the constant interference from Ministers, while at the same time, its competitors in Germany and Holland, having been given that freedom, have gone on to become global players? Is not the result that the restructuring and job losses announced this afternoon have been made worse by the Government's abdication of responsibility and failure to act before now?
Turning to Parcelforce, the Secretary of State has said that its business model has failed. Will she confirm that the business model was approved by the Government, who are the 100 per cent. owners of the business? Is it not the case that Parcelforce is operating in a market that is already open to competition? Is it not the case that while its competitors have built up very successful businesses, it has pursued a strategy consisting of a series of disastrous acquisitions costing nearly £750 million over the last five years, in each case approved by the Government at the time the necessary finance was obtained from the Treasury's national loans fund?
Consignia's announcement of 15,000 job losses represents, we are told, just the first phase of restructuring. In her statement, the Secretary of State referred to further unavoidable job losses over the next three years. Can she confirm the reports that the total number of job losses required under Consignia's plans will in fact number anything up to 40,000? Will she say whether any of those will be compulsory redundancies?
The right hon. Lady's statement devoted just three lines to the regulator's proposals to introduce competition into the delivery of postal services, yet that issue will be crucial to the future of the Post Office. It is simply not good enough for the Government to pretend that they have no responsibility for this matter.
Will the right hon. Lady say whether the Government support the introduction of competition? Does she believe that the timetable set out by the regulator is realistic?

569
Will she consider delaying the full opening up of the market to competition until the restructuring of Consignia has been completed? Will she confirm that whatever happens, the universal service obligation will remain the first requirement on the Post Office, with an affordable uniform tariff?
There have also been reports that the restructuring of Consignia will require the closure of up to 10,000 urban sub-post offices, yet that was not even mentioned by the Secretary of State. Will she say whether that figure is correct? She will also be aware that the majority of those businesses are privately owned small firms that are struggling to survive. Will compensation be paid to those who lose their franchise? How does she intend to deliver on the Prime Minister's pledge that all those who wish to continue to receive benefits in cash will be able to do so if more than half the sub-post office network is closed?
Finally, will the Secretary of State confirm the one bit of good news that has been reported—that the name Consignia is to be consigned to oblivion and that the business will revert to being called the Royal Mail? Is it not the case that the problems of the Post Office are summed up by the time and money that has been spent on rebranding the business with a name that is neither respected nor understood while the fundamental weaknesses have been left unaddressed? Is that not why the Secretary of State had to come to the House today and why 15,000 post office workers, with perhaps another 25,000 to come, are having to pay the price for her and her Government's incompetence?
Ms Hewitt: The hon. Gentleman has worked himself up into a great lather of synthetic fury. He fails to acknowledge that, precisely when the German, French, Dutch and Swedish Post Offices were getting commercial freedom, his Government refused to give the Post Office the commercial freedom in the public sector that the management and unions demanded and Labour Members supported. If the Post Office had been given commercial freedom in the public sector years ago, it would have been able to make the changes and investment that other European postal services were making, yet the Conservative Government refused to allow it to do so. That is the fundamental cause of the problems that have built up over years—years when the Conservative Government failed to invest and reform.
Parcelforce has lost money every year in its 10 years of existence. The Government enabled Parcelforce to make the investments that it needed to make, including the creation of the new distribution hub in Coventry and the track-and-trace technology that will form the basis for the renewed and strengthened company.
There is a great deal more work to be done to deal with the very deep-seated problems in other parts of the business and in our postal services. Allan Leighton has made it clear that, as chairman, he and the management will be taking forward those discussions with the unions and examining every part of the business to see what needs to be done to improve the service for the public, which is fundamentally what we all want. Future job losses will depend on the work that has to be done with the business.
Of course the Government believe first and foremost in the universal service obligation. As the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) should
570
be aware, Postcomm's primary duty as the independent regulator is to maintain that obligation. Of course, we believe in competition too, and subject to the duty to maintain the universal service obligation, the regulator's job, as established in the Postal Services Act 2000, is to promote greater choice and competition. The Government support an independent regulator, as did the Communication Workers Union in its submission on the White Paper. It seems that only the Conservative party does not know whether it supports an independent regulator.
Today's statement has nothing whatever to do with the network of post offices, and I am very sorry that the hon. Gentleman has repeated some of the scaremongering that we have heard before from him and some of his colleagues. I again remind the House of what Colin Baker, the general secretary of the National Federation of Sub-Postmasters said:
"Talk of mass closures is scaremongering and wide of the mark. It is wrong to criticise the industry for being out of date and in decline and then create panic when we are doing something about it."
We are investing both in a compensation scheme for sub-postmasters and in schemes to improve local services.
On the hon. Gentleman's final—and least important—point, the name change was proposed and decided on by management, with the support of the unions, a couple of years ago. I entirely agree with the new chairman's view that the sooner the name goes, the better.
Mr. Martin O'Neill: I thank my right hon. Friend for her statement and agree that consideration of the future of Parcelforce is long overdue. It should have been sorted out a long time ago, perhaps being sold off and dealt with once and for all. I welcome the forgoing of the dividend, which will provide the Post Office with additional resources to secure the most flexible redundancy arrangements that can be achieved.
Will my right hon. Friend confirm that the extension by Postcomm of the review period is largely due to the inadequate and inaccurate advice and information provided by Consignia accountants about the nature of the savings that could be achieved, and that Allan Leighton really needs to come in and sort out the Post Office, because most of us are sick and tired of an inadequate and incompetent management that cannot even produce proper financial information to enable the regulator to act effectively?
Ms Hewitt: I entirely agree, especially about the need to sort out Parcelforce. The proposal that the regulator made for opening the market to bulk mails above a certain limit was indeed based on information provided by the company, which has now decided that the figures were wrong. The important issue is that the regulator must, above all, make proposals for market opening that secure the maintaining of the universal service obligation, which is the No. 1 duty under the Postal Services Act. I hope that Allan Leighton and his colleagues will quickly sit down with the regulator to ensure that there is an exchange of accurate information to enable the regulator to make sound and sensible decisions that will secure the universal service obligation.
Dr. Vincent Cable: I add my sympathy to that expressed about the 15,000 postmen and women

571
who will lose their jobs. In the Secretary of State's discussions with Mr. Leighton during the past few days, did he specifically tell her that 40,000 redundancies are now in prospect? Was that one of the conditions that he set for his appointment as chairman of Consignia?
I welcome the new dividend policy, which the Liberal Democrat and Conservative parties have sought, but does the Secretary of State agree that £64 million, however welcome, is very small compared with the £2 billion that successive Governments have taken out of the Post Office in the past decade, undermining its ability to compete with the private sector?
Specifically on competition, I welcome the conversion of the Conservative spokesman to slowing the introduction of competition; it was the first statement to that effect that I have heard. Is the Secretary of State now part of that consensus, which seems to affect both sides of the industry and both sides of the House?
Finally, on the transfer of the universal parcel service as part of the universal service obligation, irrespective of whether that service makes a profit or a loss, is Parcelforce transferring a liability or an asset to the Royal Mail? Why is the private sector being introduced into not merely the parcel service, but the mail service, while making no contribution whatever through a levy to the maintenance of the universal service obligation?
Ms Hewitt: First, the conditions of Allan Leighton's appointment have nothing whatever to do with the job losses announced this morning or any that may be announced in future. Any question of future job losses has to do with the necessary modernisation and restructuring of the business. The point that Allan Leighton and I have discussed, which may be of interest to the House, is our agreement that we need to get away from detailed interference by Government and officials in the running of a company to which we have given commercial freedom. When the new strategic plan has been approved, it will be up to the company to deliver on that plan. It will report to us, and I, in turn, will report to the House at appropriate intervals.
The hon. Gentleman is right to draw attention to the enormous dividends that were taken out of the company during the Conservative years, when the dividend was set at 90 per cent. Of course, one of the first steps that we took was to cut that dividend to 40 per cent. As I announced a few moments ago, we will waive that dividend for the current financial year. A decision on dividends for other years, during which we have been in power, will be taken in the context of the strategic plan.
We made our position on competition clear when the Postal Services Act 2000 was introduced. The first and primary policy goal is to sustain the universal service obligation. Competition is valuable, and I would expect the hon. Gentleman to support the introduction of greater choice and competition to benefit consumers.
As for Parcelforce's detailed accounts, as I have said, it has made losses every year since it was established. I do not know how those losses break down between different parts of the Parcelforce business, and I am not at all sure that the company knows.
Mr. Tony Clarke: I listened carefully to what my right hon. Friend had to say, but
572
does she not consider it to be a matter of gross incompetence that Post Office managers announced the 15,000 redundancies at the same time as they announced that they had got it so badly wrong in wasting £2 million on changing the name to Consignia? Does she not feel that workers in the industry may ask why they should trust their judgment now if they got it so badly wrong then? Furthermore, considering the inevitable instability that there will be in the industry, why cannot the Government tell Postcomm that the unilateral liberalisation of mail at this time, outside that accepted by our European partners, could sound the death knell for the Post Office as we know it today?
Ms Hewitt: As I said, we have taken steps in government to strengthen the management of the Post Office. Even before the appointment of the new chairman, we had secured the appointment of a new finance director to the company, and my hon. Friend the Minister for E-Commerce and Competitiveness recently announced the appointment of a new chief executive for the post office network. The unions and hon. Members, at least on the Labour Benches, have welcomed that.
On Postcomm, I remind my hon. Friend that when we consulted on the new proposals and the creation of proper commercial freedom within the public sector, the Communication Workers Union said that it wanted a new regulator independent of the Government, on the same basis as Oftel, Ofwat and Ofgas, for instance. That is precisely what we have delivered within the framework of an Act that makes it clear that the No. 1 duty of the regulator—independent though he or she may be—is to secure the universal service. I know that the regulator takes that duty seriously.
Mr. Edward Leigh: As the Secretary of State knows, the National Audit Office has produced a full report on the subject. Will she say more about Postcomm's proposals for the immediate liberalisation of mail and for achieving full competition by 2006, because those proposals go to the heart of the matter? Consignia accepts the need for competition but is against the timetable laid down by Postcomm, which it says will endanger the company. What timetable does the Secretary of State consider would ensure the survival, growth and profitability of that company and the maintenance of the universal service? Does she accept Postcomm's rationale that it is only by increasing competition to the extent that we have a fully competitive market by 2006 that the company can be saved?
Ms Hewitt: The excellent report by the NAO, to which the hon. Gentleman refers, clearly identifies two risks inherent in the situation. The first is that of introducing too much competition too fast, which might damage and jeopardise the universal service obligation. The second is that of not introducing enough competition, thereby removing from the company an incentive to modernise and to improve its service to its customers.
It is important at this stage for the company and the regulator to sit down and talk to each other, which they have only just begun to do, and to arrive at an agreed view of the company's finances and the nature of the market. On the basis of that analysis, the regulator will arrive at a sensible view of the situation and make a decision about market opening that does not jeopardise

573
the universal service, but which delivers the benefits to the consumer that I would expect the hon. Gentleman to wish to see.
Mrs. Louise Ellman: Can the Secretary of State say whether Allan Leighton has been given complete commercial freedom in relation to urban post offices ? Do the Government value urban post offices? How will they protect services to deprived communities in Liverpool and elsewhere, and value post offices and sub-post offices for the services that they provide, as well as for the jobs that they offer?
Ms Hewitt: As someone who represents a number of deprived urban communities, I entirely agree about the importance of the services that local post offices provide in low-income areas, both urban and rural. The fact is that about two thirds of people in urban areas live within half a mile of two or more sub-post offices, many of which are struggling to survive commercially, as we all know from our constituencies. It makes sense for the Post Office to sit down and talk to sub-postmasters, to consider the detailed market within local communities and to produce proposals to rationalise and improve the network of urban post offices. That is what it will do, and it will not make any decisions on closures of any urban sub-post offices until and unless those consultations have taken place.
Mr. Keith Simpson: The Minister will be aware from the course of the questions that she has been asked this afternoon that the House appears to be unhappy with Consignia's track record. Will she now answer the question put to her by my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) and tell us whether Consignia's business plan, which seems to have failed, was signed off by her predecessor?
Ms Hewitt: I was referring to the business model for Parcelforce, which is the main subject of today's announcement. That model was put in place in 1986, and although it formed part of the previous year's strategic plan, this Government, and my predecessor specifically, noted concern about its viability. I have no doubt that the company is right to grasp this nettle and to recognise that we cannot carry on with a company that is publicly owned and has been given commercial freedom, but which has been losing money for the last 10 years. By integrating the universal parcel service in Royal Mail, which the unions, among others, have been arguing for, we will strengthen the universal service and stem the losses that Parcelforce has been making ever since its business model was established under the Conservative Government.
David Hamilton: Does the Minister understand several points? One is that the work force already accept that restructuring should take place. Parcelforce is an example, and a bad one, of what happens when cherry-picking is allowed to take place throughout an industry.
The Minister spoke about vehicle losses that would take place under restructuring. Is she aware that in urban and semi-rural areas, workers require those vehicles because they are the only vehicles that they have nowadays to get them from one place to another? That is due to the subsidies that were paid, and indeed every local authority
574
has to pay out millions of pounds because of that lot on the Conservative Benches. They sit there and cry crocodile tears over thousands of workers, but that is absolute rubbish. I can understand angry workers in the industry, but can the Minister understand why there will be great anger about what is happening under a Labour Government?
Ms Hewitt: The reorganisation of the transport system is something that the management and the unions have been discussing for some time. We are all familiar with the situation in urban and rural areas where a Royal Mail van that is collecting or delivering mail is rapidly followed by a Parcelforce van delivering parcels. That is not a sensible way to run a business, and by reintegrating the universal parcel service within Royal Mail, the company will be able to manage with fewer vehicles and deliver a better service to customers. Despite the fact that painful job losses will result from that, we should support the better service that will result.
Mr. Alan Duncan: Perhaps the only sympathy that one might have for the right hon. Lady stems from the fact that most of these problems have been dumped on her because of the incompetence of her hapless and hopeless predecessor, the right hon. Member for Tyneside, North (Mr. Byers). What plans are there to increase the price of a first-class stamp?
Ms Hewitt: That is a matter for the company and the regulator, and the company may well wish to apply to the regulator for an increase in the price of the stamp. But I do not think, and I hope that this is not what the hon. Gentleman was suggesting, that the problems faced by the loss-making Parcelforce or the inefficiencies inherent in an out-of-date transport system should be dealt with by increasing the price of the stamp paid by the customer.
John Cryer: Is my right hon. Friend aware that the Post Office has for many years been run with a steadily and steeply declining work force and a management that is vindictive and bullying in the extreme? The job losses that have been announced today and those that will follow from the announcement in the coming years will hit some of the poorest and most vulnerable communities in Britain, including many of the people whom I represent in the London borough of Havering. Is not the only real answer to start to invest properly in the Post Office and even to allow the price of a stamp to rise, which it has not for some time? In addition, we should tell Postcomm and the European Commission, which seem desperately keen to break up the Post Office, to open it up to commercial competition and to end universal service, to get lost and stick their plans.
Ms Hewitt: I agree entirely, and I have said so before in the House, that part of the Post Office's problems are down to poor management and appalling industrial relations in some parts of the country. That situation, for which the union as well as the management bears some responsibility, was well described in Lord Sawyer's report last year. I am glad to say that many of those problems now appear to be behind us and that the union and the company are now committed to partnership working of the sort that is essential in any modern organisation that is to deliver decent customer service and be a good place to work.

575
However, I repeat, today's announcement of job losses, extremely regrettable though they are, has nothing to do with the proposals from the regulator. They are a direct result of a parcels company that has been losing money for 10 years, an out-of-date and inefficient transport system, and inefficiencies in the management and support services—all of which are now being dealt with by new management.
Hywel Williams: Mr. Allan Leighton, the new chairman of Consignia, is charged with reforming the company's industrial relations. That he begins with 15,000 redundancies is a kick in the teeth for the Communication Workers Union, which has worked hard to improve industrial relations over the past few months.
It is a kick in the teeth for the people of Wales that the depots at Wrexham and Pontypridd are to be closed, leaving only the Swansea depot working. Will the Secretary of State tell us what environmental or commercial sense it makes for parcels to be delivered to the far reaches of my constituency in the Llyn peninsula from Manchester or Liverpool?
Ms Hewitt: As Allan Leighton's announcement made clear, parcels that fall within the universal service will be integrated within the Royal Mail and will therefore use the logistics and delivery system of the Royal Mail as a whole. As for Parcelforce, the only way in which a sensible organisation can be created from the existing loss-making one is to rationalise the distribution system in the way that Allan Leighton proposes.
Kate Hoey: The Secretary of State says that the regulator Postcomm is independent, but surely the Secretary of State ultimately has overall responsibility for the Post Office. Surely now is the time to discuss with the regulator the nonsense of accelerating the process of opening up to competition, to say that because of the current situation we need more time, and, as my hon. Friend the Member for Hornchurch (John Cryer) said, to tell the European Union that the process is not something that we can speed up?
Ms Hewitt: The proposals made by the regulator, on which the regulator is consulting, are clearly within the scope of the European directive and are not being imposed on us by the European Commission. However, the independence of the regulator, which was sought by, among others, the union itself, was enshrined in the Postal Services Act 2000, which Labour introduced and supported. Now, the company and the regulator need to sit down and discuss the restructuring needed in the company, of which today's announcement forms a part, and a sensible regulatory framework that will allow the company to go forward and, above all, continue to deliver its universal service obligation. I hope that the regulator and the company will achieve that rapidly.
Tim Loughton: I am sure all our constituents are greatly encouraged by the fact that the Minister responsible for mail delivery thinks that Harrogate has a coastline, and even more encouraged to learn that even more of our mail is to go by rail and thus be the responsibility of the Secretary of State for
576
Transport, Local Government and the Regions. Before she prays in aid the National Federation of Sub-Postmasters, which has its headquarters in my constituency, may I remind the Secretary of State for Trade and Industry that that organisation co-ordinated the gathering of 3.5 million signatures in petition in response to her original proposals? She complacently reels off the fact that everybody lives within half a mile of two sub-post offices, but may I remind her that half a mile is well beyond the reach of pensioners in towns such as Worthing, and that many of those sub-post offices are the life-blood of parades of shops in village areas within urban areas, and without those sub-post offices whole communities will quickly fade and die?
Ms Hewitt: I welcome the hon. Gentleman's support for sub-post offices, whether in urban or rural areas; thousands of them closed under the Conservative Government. We have responded to the deterioration in the post office network under the Conservatives with the comprehensive report of the performance and innovation unit, and we have already invested and committed £270 million to investing in the urban and rural networks. Of course, we put a requirement on the company to prevent avoidable closures—something that the hon. Gentleman's Government never did.
Mr. Lindsay Hoyle: I am sure that my right hon. Friend agrees that this is a very sad day for the 15,000 people who are losing their jobs. As the representative of the shareholder—the Government—I hope that she will try to ensure that there are no compulsory job losses and that they will be voluntary. We ought to stop hiding behind the protection of Postcomm, which is not acting for the benefit of the business or the consumer. It needs to be dragged back and told that we ought not to change in advance of our European competitors, as we would face the danger of the same problems that we had with electricity market, where France has still not opened up its market. We keep saying that we will provide a universal service; however, we can do so only if one is profitable.
Ms Hewitt: I entirely agree with what my hon. Friend said about the people who face the prospect of losing their jobs. As the company said, every effort will be made to find alternative employment in other parts of the business for people whose jobs will disappear as a result of the restructuring; the rest will be dealt with, as Allan Leighton said, through voluntary redundancies. When people lose their jobs and take voluntary redundancy, the Employment Service will be ready to help them get new jobs as quickly as possible.
My hon. Friend is of course right that the company must restore its profitability, above all to secure the universal service and a better quality of service for customers. It is for that precise reason that these difficult and painful decisions have been made today; they are in the longer-term interests of the company and its customers.
Mr. John Redwood: What would the Secretary of State say to the postman in the Wokingham sorting office who told me that costs have got out of control on branding, imaging and an increasing number of managers—from three to eight in Wokingham alone—

577
in recent years? He forecast that the bill would be paid for in job losses and the abolition of the early morning delivery. Despite all that nonsense about the universal service provision, the truth is that the first delivery in the early morning will go. That is the price of failure in spending far too much on branding, logos and more management.
Ms Hewitt: It is pathetic of the right hon. Gentleman to try and suggest that the £2 million spent on the rebranding exercise is the cause of the problem. It turns out to have been a waste of time, but it is certainly not the cause of the enormous problems that the company faces. Much more serious is the fact that costs have not been adequately controlled at a time when the expected growth in mail volumes has simply not been achieved. Let me point out to him that of the redundancies that the company announced today, 4,500 will fall in management and administrative support services.
Mr. Jim Cousins: Does my right hon. Friend accept that many of us who supported the introduction of a postal regulator did not anticipate that that would result in throwing post office services into a competition for which investment had not been made? Will she assure the House that there will be investment in the capacity to compete? Will she ensure that people who lose their jobs—most of them will be older workers who will come forward for voluntary redundancy—will be offered flexibility so that they do not face the choice of a slashed pension or income support? In particular, will she ensure that the urban post office network, without which neighbourhood shopping in working-class areas in this country will not survive, will be the target of sustained meaningful and determined Government support?
Ms Hewitt: I share my hon. Friend's concerns about the urban post office network. In addition to the investment that I announced last week and the support that we have already provided, my right hon. Friend the Secretary of State for Transport, Local Government and the Regions has established a fund to support sub-post offices in deprived urban areas, where they are particularly essential.
My hon. Friend is right that the company has suffered from underinvestment for a very long time. We are now supporting it in making the necessary investment in restructuring and modernisation. Of course, as part of the voluntary redundancy package, the company will be taking steps to enhance and support the pensions of those leaving the Post Office.
Mr. John Greenway: How can the Consignia business plan be taken seriously when, judging by the right hon. Lady's answers, she cannot tell us how many urban post offices will close, where the redundancies will fall or even whether the price of a first-class stamp will rise? How many postal workers in rural areas will lose their jobs? There is already a shortage of them, and the service is deteriorating. Is not the bottom
578
line of what she has told the House, as with everything else under this Government, that the price people pay will go up and the service that they receive will get worse?
Ms Hewitt: The hon. Gentleman does not seem to understand the idea of commercial freedom—[Interruption.]
Mr. Speaker: Order. Let the Secretary of State answer.
Ms Hewitt: Thank you, Mr. Speaker. The whole point about commercial freedom, which we have given the Post Office and which the hon. Gentleman's Government wholly failed to give it, is that those in management are responsible for managing the company. They must make the decisions about the necessary restructuring and modernisation of the company, and they will need to decide whether a price rise is justified and whether they can justify that to consumers by providing an improved quality of service.
I do not think that many of us in the House have been satisfied with the quality of service from the Post Office over some years. This morning's statement and the appointment of the new chairman of Consignia—the Post Office—are essential first steps in restoring the Post Office to health and in ensuring that consumers get a service on which they can rely and of which we can all be proud.
Mr. Kelvin Hopkins: May I ask my right hon. Friend about stamp prices? Are not stamps in Britain cheaper than in any other European Union country apart from Spain? A first-class stamp in Germany is the equivalent of 37p, as opposed to 27p here. Have we not had a Post Office on the cheap? Regardless of incompetent management—that is no doubt true—we have relatively low-paid postal workers and no blame should be attached to them for what has happened. Is not it as likely as day following night following day that, if the Post Office is opened up to competition and the private sector gets hold of some lucrative chunks, the first thing that will happen will be massive price rises to maximise profit?
Ms Hewitt: It is perfectly true that stamp prices here are lower than those in not all but most parts of the European Union. It is for the company to decide whether it wants to seek a price rise, and for the regulator, after consulting the consumer watchdog, to decide whether to grant it. However, we should be clear that stamp price rises, which may or may not follow, are not a way to get: round problems of inefficiency, poor management and bad industrial relations. Those problems must all be addressed in any case. This morning's announcement was the first step to sorting them out.
David Burnside: Will the Secretary of State explain why in the necessary rationalisation of Parcelforce depots, Great Britain has taken a 50 per cent. cut but Northern Ireland has taken a 75 per cent. cut, which includes the closure of Belfast North, Londonderry and Portadown? Why are we taking more of the pain than the rest of the United Kingdom? When the Secretary of State is in discussion with Allan Leighton on job losses and consigning Consignia to the dustbin of marketing

579
disasters of all time, will she see that the senior managers who are responsible lose their jobs first, rather than the ordinary people on the ground?
Ms Hewitt: I want particularly to pay tribute to the men and women working in the Post Office in Northern Ireland, who have continued to do their job with enormous courage in extremely difficult circumstances.
The specific proposals for rationalisation of the transport depots have been made by Consignia on the basis of a detailed examination of postal patterns in different parts of the country. I shall be happy to obtain further information on the specific point in relation to Northern Ireland, and I will write to the hon. Gentleman accordingly.
Mr. Tony Banks: Is it not a fact that Conservative Governments plundered billions of pounds from the profits of the Post Office, money that could have been used for investment purposes and restructuring? Is that not a further example of where we are inheriting the legacy of Thatcherism?
Will my right hon. Friend tell me—I have a large Parcelforce depot in West Ham—that there will be no compulsory redundancies? Will she tell us also to what extent there is still room for negotiation on which depots are due to be closed?
Ms Hewitt: I entirely agree with my hon. Friend's point that the Post Office has suffered from many years of drift and decline under the Conservatives. There was one review after another under the Conservative Government, and no decisions. There was a flat refusal to
580
give the company commercial freedom within the public sector. Ninety per cent. of its profits were taken in dividend, and there was no investment. That was at a time when every other postal service in Europe was modernising.
My hon. Friend is right to say that it is this Government who have seized the problem and have put in the management that is required to make the tough decisions that are needed to start turning the Post Office round.
Sir Patrick Cormack: Will the right hon. and geographically erroneous Lady confirm that on 25 March 1997 the Post Office was in profit? Will she tell us that she is confident that on 25 March 2007 the Post Office will be in profit again, that all the village post offices in my constituency will still be open and that we shall still have an early morning delivery?
Ms Hewitt: The profits that were being made in the Conservative years were artificially inflated to secure covert tax rises and the subsidy to the Treasury—[Interruption.]
Mr. Speaker: Order.
Ms Hewitt: There was little point in having a profitable company when the Conservative Government were taking 90 per cent. in dividends and refusing to let the company make the necessary investment. I believe that we are putting in place a management capable of restoring the Post Office to health. This is the first in a series of restructuring measures that will restore the Post Office to profitability and ensure that we have postal services throughout the country that will deliver for customers, including our constituents.

Railtrack
4.28 pm
The Secretary of State for Transport, Local Government and the Regions (Mr. Stephen Byers): With permission, Mr. Speaker, I would like to make a statement on the bid for Railtrack plc made today by Network Rail.
As the House will be aware, Railtrack was taken into administration on 7 October as a result of a High Court order. As Mr. Justice Lightman said at the time:
"This is clearly a case where the making of a railway administration order is not only appropriate, but absolutely essential, and I shall therefore make that order immediately."
Railtrack was put into administration because it was, or was likely to be, unable to pay its debts. But let us remember also that it had failed to maintain the railway safely and properly. It had failed to gain a proper understanding of its assets. It had failed to manage modernisation projects such as the west coast main line. Let us not forget that Railtrack was at the heart of the flawed and failed privatisation carried out by the Tories.
The Government have always said that what we need is a successor to Railtrack that is focused on the public interest and on the needs of passengers. Railtrack has made some progress during administration under the management of John Armitt, and his appointment as chief executive has been widely welcomed in the industry, but I agree with the Transport Committee, which said in its latest report, the first for this Session:
"It is imperative that the process of administration be completed as soon as possible."
Because of the difficulties in putting together a business plan and the limited knowledge that Railtrack had of its own assets, the administrator has indicated that there will be further delays in launching his competitive process.
What we need is an end to administration, so that the improvements that we all want to see to the country's rail infrastructure can be delivered as soon as possible. There is therefore a value to the Government, the taxpayer and rail users in an earlier exit from administration. Network Rail's bid reflects that approach.
Network Rail says that its proposal could if accepted by the shareholders take Railtrack plc out of administration as early as the end of July this year. Network Rail would be a company limited by guarantee. It would not have shareholders, so it will not be paying out dividends. Unlike Railtrack, its operating surplus will be reinvested in the rail network. Its core focus will be the maintenance and renewal of Britain's railway. It will focus on the needs of the travelling public, not short-term profit for shareholders. It will be able to raise capital for investment more cheaply—a better deal all round for the travelling public.
The Government have always said that Railtrack shareholders should get the value in the company to which they are entitled. Railtrack Group has assets that could be used to provide value for its shareholders. My understanding is that Railtrack Group has over £350 million in cash deposits; it has an interest as owner in section one of the channel tunnel rail link; and it has some property interests.
The Government have indicated that a grant of £300 million will be made available to reflect the benefits of an early exit from administration. I must inform the
582
House that, if such an early exit is not achieved, the money will not be available. An earlier exit from administration, resulting in a more focused and efficient rail network operator, would lead to a quicker realisation of efficiency savings, reduce performance penalties, and allow 10-year plan projects to proceed more quickly.
Network Rail's proposal, based on the concept of a company limited by guarantee, is designed to be more efficient than Railtrack, with lower financing costs and no dividends to pay. That is why the Government are prepared to make this payment. For the Government, it will be self-financing from savings that will be made. It therefore follows that, if there is not an early exit, the savings will not be made, and in such circumstances the £300 million will not be made available.
Since Railtrack was taken into administration, the Government have said that every single penny of taxpayers' money must be used to improve the rail network. That is exactly what the grant of £300 million will do. It will benefit the travelling public, and that has to be our top priority.
The administrator has said that he is actively reviewing Network Rail's proposal in the context of the administration. If today's bid were successful, it would enable a company limited by guarantee to become the successor to Railtrack. As the House will know, the Government have said all along that they view a company limited by guarantee as an attractive successor body.
Network Rail is committed to engineering excellence. Its bid has the potential to bring the rail industry together and overcome the fragmentation that has all too often characterised it in the past.
It is now for the administrator to decide how he should conduct the process in the light of today's bid. He has confirmed that he will treat any further proposals that might be made on their merits. Getting Railtrack out of administration must be done on the basis that it will produce a viable, financially sound company—one that takes a long-term perspective, and that puts the emphasis first and foremost on operating a safe, efficient and reliable rail network.
Taking action on Railtrack has been criticised by some, including the Conservative party—[HON. MEMBERS: No."] Yes. But today's developments demonstrate what, can be achieved. As a result of today's bid by Network Rail, we can now see a railway system that is united and not fragmented; a railway industry with a shared strategic vision; a railway industry that values its employees and will invest in them; and a network provider that will answer to the interests of passengers and not private shareholders.
That is all now possible as a result of today's proposals. We are now in a position to lay Railtrack to rest and to put in its place a successor body that will deliver for the travelling public. On that basis, I commend today's developments to the House.
Mrs. Theresa May: And so the entertainment continues—as Fred Karno's army parade one by one this afternoon. Today's two statements have one thing in common: from the Post Office to Railtrack, the originator of the problems is the Secretary of State for Transport, Local Government and the Regions.

583
I refer hon. Members to the declaration that I made on 14 January, at column 33 of Hansard.
How many times since Railtrack was put into administration on 7 October last year has the Secretary of State come to the House clinging to his political life only to be saved by the support of the Members on the Benches behind him—support given because of statements such as the one he made last October when he told the House that
"the Government are not here to fund the shareholders of private companies."—[Official Report, 15 October 2001; Vol. 372, c. 959.],
or what he said to the Financial Times, also last October:
"I can say for certain that there will be no taxpayers money made available to support shareholders."
Indeed, in his statement today, the Secretary of State said:
"Since Railtrack was taken into administration the Government have said that every single penny of taxpayers' money must be used to improve the rail network."
That position was confirmed by the Prime Minister, who made it clear to the House in response to questions from my right hon. Friend the Leader of the Opposition—I note that the Prime Minister is not in the Chamber to support his Secretary of State—in November and December last year and earlier this month, that money should go into improving the rail network and not to shareholders. But what do we see now? The Secretary of State has performed a 180-degree turnaround and there can be no weasel words about new money, extra money or money going to the company or, as the right hon. Gentleman put it earlier, "a grant to reflect the benefits of an early exit from administration". There is only one early exit that would benefit the railways and that is the Secretary of State's.
If the £300 million that will be used to fund the purchase of Railtrack is not new money, what work to improve the railways will be abandoned to pay for it? It is passengers who will pay the price for the Secretary of State's incompetence.
The Secretary of State repeated the point about an early exit: he said, "There is a value to the Government, the taxpayer and rail users in an earlier exit from administration." I wonder whether his indecent haste in trying to conclude the deal has anything to do with his desire to avoid legal action by Railtrack's shareholders. Of course, such action would have required him to explain, under oath, why he sought a court order to wind up Railtrack, given that funds from the rail regulator were available to keep it afloat. Some £300 million of taxpayers' money is being spent to save the Secretary of State's face—because we now know that a deal was on the table that would have compensated shareholders, sorted out Railtrack's finances and brought it out of administration early, and which would not have required money from the taxpayer.
I have this question for the Secretary of State: given his repeated assurances—in and outside this House—to Members, to journalists, to the public and to his own party that this Government would not use taxpayers' money to compensate shareholders; given the Prime Minister's assurance that taxpayers' money would not go to shareholders, but would be spent instead on improving the railways; and given that a deal was on the table to compensate shareholders without using taxpayers' money,
584
why has the Secretary of State broken his word yet again by spending taxpayers' money on compensating shareholders? That is one question—and I expect an answer.
Mr. Byers: I will answer in my own way. There was one element of the hon. Lady's question that I agree with—that there is a link between the two issues of the Post Office and Railtrack. On looking back, people will see that it is this Government who are tackling the Conservatives' failure in respect of the Post Office—[Interruption.]
Mr. Speaker: Order. Hon. Members must allow the Secretary of State to reply to the hon. Lady.
Mr. Byers: The reality is that Railtrack was a Tory creation that was failing the travelling public, and I make no apology for taking action on it; it was part of the problem with our railway system, not part of the solution. The Conservatives would have thrown millions more into it, but it would not have delivered an improvement in our railway system.
The hon. Lady raises a number of important questions. [HON. MEMBERS: "One."] No, there were a number of questions, as I think the record will show. She said that the £300 million will be taken away from other transport projects, but as a result of changes being made that sum will be self-financing through savings elsewhere. The simple explanation is that Network Rail will be able to raise money more cheaply than Railtrack was ever able to do.
On the hon. Lady's specific question, if there was a precise deal on the table that involved spending no taxpayers' money, the Government would consider it. Indeed, as I pointed out in my statement, the administrator has made it clear that, if further proposals are put forward, he will consider them. It is right and proper that he should do so. That is the answer to the hon. Lady's question. If there is a deal on the table, it will be for the administrator to deal with it.
Mr. Iain Duncan Smith: Why make the statement, then?
Mr. Byers: I am making the statement because I felt that it was appropriate that the House should be informed. The £300 million is money that the Government are prepared to make available because of the savings that we will make as a result of an early exit.
The hon. Lady raises the question of the winding up of Railtrack. No application was made to the regulator by Railtrack. It could have applied for an interim review, but it failed to do so. Railtrack attended the court, but it did not object to the administration order being made. That is the truth of the situation.
The hon. Lady asked about the statement that not a single penny would go to shareholders as opposed to the railway, but every single penny of the £300 million that we are committing will be used to improve the railway network. That is what will happen as a result of the deal that has been announced today. The difficulty the Conservatives have is that they cannot come to terms with the fact that their creation, Railtrack, is now being laid to rest and the alternative will put the travelling public first.
Mrs. Gwyneth Dunwoody: No one doubts that the sooner we have a non-profit-making

585
company in charge of the infrastructure of the transport system the better for every passenger who uses the system. However, in a week in which the Secretary of State has issued letters of comfort to the private companies involved in the public-private partnership on the underground and an extension of the insurance to the aviation industry, I would be grateful if he could now clarify the Government's attitude to finance for transport. If this money is to be found, will the company be compensated from Government funds? If it is to be allowed to do the job that desperately needs doing—upgrading the west coast main line and modernising the other systems—it is essential that the cash is found. Will my right hon. Friend make it clear that in future infrastructure projects will be wholly Government projects or they will be private deals, and that we will see far less of these monstrosities that leave the taxpayer with the ultimate burden but not with the advantages?
Mr. Byers: I know that I have a disagreement with my hon. Friend on the role that the private sector can play. Private finance has a legitimate role to play in some of our major public sector contracts. However, it has to be on clear terms of value for money and it has to be for a reason. The reason must be that it will drive up the standard of provision.
In relation to the 10-year transport plan, we have £180 billion that will make a significant difference to the quality of the transport infrastructure. In relation to the £300 million grant that might be made available if there is an early exit from administration, none of that sum will be cut from existing projects because it is money that will be saved because of the efficiencies that will come from a company limited by guarantee.
I shall remind the House of the situation. Railtrack plc came to the Government to ask for additional resources—for £1.5 billion to be brought forward into control period 2. At the same time it was paying £709 million in dividends to its shareholders. There is a clear contrast between the two. The company limited by guarantee will have the interests of the travelling public first, and savings will be made as a result. Indeed, savings will come from the fact that the company limited by guarantee will be able to obtain money more cheaply than was possible for Railtrack. I agree with my hon. Friend that we must be clear about the benefits when we involve the private sector in such arrangements. The greater clarity we have will also be so much to the good.
Mr. Don Foster: I am sure that the Secretary of State will acknowledge that although Liberal Democrats have been highly critical of the way in which he has handled the administration of Railtrack, we nevertheless gave full support to the principle of a not-for-profit public interest company to replace it. At the same time, we also fully supported the Secretary of State's earlier statement that no additional taxpayers' money should be used to bail out the shareholders of a company that has so badly let down the travelling public. He will be badly letting down taxpayers if he now uses more of their money to provide compensation for the shareholders—because however he seeks to wrap up the £300 million, that is exactly what it is.
Despite the confusion in the Secretary of State's statement, will he make it absolutely clear that only Railtrack plc is in administration, and that Network Rail
586
seeks to purchase the assets of that part of Railtrack Group only? If so, can we be absolutely assured that Network Rail will focus solely on activities that are directly related to improving the running of our railways, and that it will not be bidding to obtain further of Railtrack Group's assets and turn itself into the multi-headed monster that was the Railtrack Group?
Will the Secretary of State explain the basis on which Network Rail has made its bid? On what basis has he apparently given it his full support? As he admits in his statement, it is not the case that the administrators have not yet made available their analysis of the assets or liabilities of Railtrack plc or their method of sale. Can we therefore be absolutely sure that Network Rail has had no access to information that has not been available to other potential bidders? Given the latest revelations to which the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) referred—that the Secretary of State has given written letters of comfort to potential London tube bidders to the effect that they will have to accept little or no liability for future problems—can we be absolutely assured that no such letter has been given to Network Rail by the Secretary of State?
Finally, given that the new chief executive of Railtrack plc has said that he is not yet in a position to judge the financial robustness of any replacement company, on what basis is the Secretary of State so confident, and on what basis can the public be confident? Given that the Secretary of State agrees that the Conservative party sold off Railtrack far too cheaply, is he not in danger of buying it back too expensively?
Mr. Byers: The hon. Gentleman has raised a number of points. He is right that Railtrack plc is the body in administration. Railtrack Group is not in administration; it is the parent company and is still functioning. Network Rail has put in a bid for Railtrack plc and wants to operate the licence. I welcome that for the same reasons as the hon. Gentleman—it can be focused on the maintenance renewal of the network, which is crucial if we are to improve punctuality and reliability. I am sure that the administrator has treated everybody who is interested equally, as he would be bound to do. I am sure that he has provided all the appropriate information to any interested party and that he will have discharged his legal responsibilities. Network Rail has brought forward a robust business plan and it is on that basis that the Government have today been able to indicate this level of support. As I said, we believe that a company limited by guarantee would be a good successor body as far as the railway network is concerned.
The letters of comfort can hardly be described as a revelation—I know that not many people read Hansard, but I replied to a parliamentary question last week to make that point. The £300 million will be made available only if there is an early exit from administration. If that does not happen, the money will not be made available, and will therefore not be available to Railtrack Group. We are making that grant available on the basis that we and the travelling public would receive benefits as a result of administration coming to an end earlier than would otherwise be the case.
David Taylor: Does my right hon. Friend agree that we on the Back Benches deserve a rather fuller explanation of this volte face in

587
relation to the £300 million bail-out of shareholders than he has so far given? Is it not the case that it appears to many that the cosy relationship with the City seems to involve the development of a risk-free zone on transport projects? As my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) suggested, such projects include the public-private partnership for the tube and the plans for National Air Traffic Services and Railtrack, but why should we cushion speculative investment on public projects from any form of risk whatever? Is that not a disgrace?
Mr. Byers: When my hon. Friend has had the opportunity of reading the detail of what I have said this afternoon, I think that he will recognise that that is simply not the case. The reality is that the shareholders wanted £3.60, and they will reflect on what now might be possible. They will look carefully at the basis on which we are prepared to make available the grant. It will be available only if there is an early exit, because we will receive savings as a result of that. No other transport project will be adversely affected.
I ask my hon. Friend to think of where we are today as a result of the action that was taken. Six months ago, the railway network was operated by Railtrack, a company with private shareholders as the paramount concern. We are now talking about our railways being operated by a company limited by guarantee, a body which has one overriding priority—the interests of the travelling public and not private shareholders. I happen to believe that we have come a long way in six months. The Conservatives do not accept that, but we do because we know that we now have in place potentially a successor body for the railway network that will make a real difference, turning away from Railtrack and embracing the interests of the travelling public.
Mr. Christopher Chope: Why is the £300 million not being made available as a grant to other bidders on an equal basis? Everything that the Secretary of State says increasingly suggests that the £300 million is effectively a bribe to a stooge company that is being organised by the Government and on which he will stand in judgment when the rival bids come in. If £300 million of taxpayers' money is available, should it not be made available to all the bidders?
Mr. Byers: The £300 million is being made available for the benefits of an early exit. If someone else or another proposal can deliver that early exit, that money will, of course, be available. We have been very clear that there is no favouritism. If another proposal offers an early exit, that sum of money could, of course, be made available provided that the benefits are achieved that we believe would be achieved from Network Rail.
Mr. Tam Dalyell: My right hon. Friend refers to Network Rail aspiring to engineering excellence. Given that there is the real problem of a shortage of engineers, with poaching from one company to another taking place, what will be done to increase the total pool of rail engineers? They are crucial to any advance.
Mr. Byers: My hon. Friend is right to stress the importance of skills in the industry. That is why I was
588
particularly pleased that one of the first acts of John Armitt as the new chief executive of Railtrack was to double the number in Railtrack's graduate intake. It has also increased the number of engineers, and it has set a target of having 1,000 engineers in Railtrack. I believe that, as we move away from the short-term approach to the industry to a more long-term one, the skills deficit will need to be addressed. One of the ways in which that will be done—this was stated in the strategic plan—is through the development of a national rail academy. That offers the opportunity of developing skills in the industry so that we do not have the problem that we face at the moment of not having the skilled engineers, the drivers and the people to make the network operate well. That will change not through the short-term approach that has handicapped the industry in the past, but through a longer-term approach that will deliver the skills that the industry needs for the future.
Mr. Gregory Barker: On 15 October, the Secretary of State, in respect of paying taxpayers' money to shareholders in Railtrack, said:
"We believe that it would be wrong to make new money available, and we will not do it."—[Official Report, 15 October 2001; Vol. 372, c. 955.]
Has not he completely shot any credibility that he had? Would it not be fair to the travelling public and taxpayers if he did the decent thing and resigned?
Mr. Byers: Once people have had an opportunity to see the context of what I said on 15 October—it was in relation to the £3.60 that was being claimed by the Railtrack group—they will see that we are not compensating shareholders. We are putting the interests of the travelling public first. When people have the opportunity of seeing the big change that we are making to the network, as a result of the prospect of a company limited by guarantee taking responsibility for the railways, they will be able to compare what happened with Railtrack with what will happen with the company limited by guarantee. When they can see that and compare the difference, they will know that today's developments are good news for the travelling public.
Hugh Bayley: As a representative of a great railway city that has hundreds of skilled engineers working for the train-operating companies and a wide range of infrastructure companies, may I say that what the railways need is a clear future for infrastructure, which this statement gives, and it will be widely welcomed in my constituency? [Interruption.] Conservative Members have forgotten that the failure to grant a long franchise extension for the east coast main line was a result of Railtrack's failure to bring forward its costed proposals for the infrastructure renewal. Railtrack was dragging the railways down—
Madam Deputy Speaker (Sylvia Heal): Order. The hon. Gentleman must ask a question.
Hugh Bayley: Will my right hon. Friend emphasise the importance of Network Rail bringing forward costed proposals to use the great increase in investment that the Government are putting into the railways?
Mr. Byers: My hon. Friend is right to point out the devastating consequences of rail privatisation for the

589
people and the city of York, where literally thousands of jobs were lost as a result of the programme implemented by the Conservatives when they were in government. My hon. Friend is also right that Railtrack failed as far as large infrastructure projects were concerned. The east coast main line was one example; the west coast main line is probably the other major example of that. That is why we want the successor body to concentrate on renewals and maintenance of the network and not to be involved in those large infrastructure projects, where we feel a different mechanism is needed. We are learning from the mistakes made by Railtrack to ensure that Network Rail concentrates on running the network for the benefit of the travelling public. That is what Network Rail wants to do and what we want to happen.
Mr. Nick Hawkins: The Secretary of State will be aware that one of the very interested observers of his antics over the railways has been the rail regulator, in whom the Government used to say they had huge confidence. Can the Secretary of State explain why the rail regulator, speaking to the all-party railways group last week, said that he had severe concerns about a company limited by guarantee? Will the Secretary of State explain how his company limited by guarantee will improve on an equity model that would provide a buffer against poor performance, as the rail regulator has put it? While we are talking about the buffers, has not the Secretary of State hit the buffers in a terminal way?
Mr. Byers: The rail regulator will have his own views about the company limited by guarantee. I have not heard a report of his comments at the all-party group, but he has not raised with me any difficulties with the idea of a company limited by guarantee. As far as the equity model is concerned, it became clear that Railtrack's difficulty was that it had to put the interests of shareholders first; it had no choice, legally. There was a great conflict between the needs of the travelling public and the interests of shareholders. In the end, legally, Railtrack always had to put the interests of the shareholders first The Conservatives may still believe that that is the right model to pursue; we do not agree. We believe that a company limited by guarantee, which puts the interests of the travelling public first, is far better.
Mrs. Louise Ellman: What would the speedy setting up of Network Rail mean for west coast main line modernisation in contrast with the abject failure of Railtrack? How much taxpayers' money did the failed Railtrack cost the people of this country? How much would it cost to keep the administrators in being for every additional month after they are required, as that seems to be what the Opposition want?
Mr. Byers: The costs of administration are not borne by the Government. Ultimately, they are borne by the shareholders, so it is not in their interests for the situation to go on.
I know that my hon. Friend is concerned about the delays and lack of progress on the west coast main line, which will go down as the most tangible illustration of Railtrack's failure to manage major upgrade projects. There are many meetings taking place to resolve the difficulties around the west coast main line. That is being pursued irrespective of the position on administration, so in a sense, the issues are
590
separate. Nevertheless, my hon. Friend makes an important point about learning the lessons of the difficulties surrounding the west coast main line and ensuring that the company limited by guarantee or any successor body to Railtrack do not repeat those mistakes.
Mr. Howard Flight: How can the Secretary of State say that the Government are entirely neutral towards the decision to be taken by the administrator when today's statement to the House is clearly intended to support and prejudice a decision in favour of Network Rail? Is that not yet another case of "Animal Farm" language, which we have seen throughout the Railtrack saga?
Mr. Byers: We have been consistent about saying that the model of a company limited by guarantee is attractive, and that is the point that I have been making today. Network Rail has put forward such a proposal, and I think that we should welcome it. However, the point that I made in my statement is that the administrator has made it clear that if there are other proposals, they will be considered. The administrator will look carefully at the proposals and will then make a recommendation to me if it is a transfer scheme. [Interruption.] For the benefit of the House, the Railways Act 1993 is not the basis on which Network Rail has made its approach to the Railtrack group. [Interruption.] No, the House needs to be aware of this. The proposals made by Network Rail are not under the 1993 Act. Its proposals will be voted on by Railtrack's shareholders; they are not for the administrator or the Secretary of State to determine.
Mr. Kelvin Hopkins: My right hon. Friend rightly received unanimous support on this side of the House when he put Railtrack into administration. We thought that that was the right thing to do as a significant step back towards public ownership. The whole railway industry is now in trouble—the train operating companies require extra money, the maintenance companies are in chaos and we know about Railtrack. Given that the railway industry is a natural monopoly, providing a vital public service, and that the ultimate risk is always taken by Government, is it not about time that we seriously considered bringing the industry back into public ownership?
Mr. Byers: That is a point of view, but it is not shared by the Government. We believe that the company limited by guarantee model, which has been put forward today and has the interests of the travelling public at its heart, is the best way forward. The benefits that we will get from a company limited by guarantee may not completely convince my hon. Friend but I hope that they might go some way towards convincing him that this is real progress and will benefit the railway industry.
Chris Grayling: Has the Secretary of State approached the European Commission to seek state aid approval for any of the support that he is giving to the company limited by guarantee, and if so, what was the response?
Mr. Byers: It would be premature to do that, but the hon. Gentleman is absolutely right to say that any proposals would need state aid approval.
Mr. Jim Murphy: Like most people in our party and in the country, I welcomed the Secretary of

591
State's decision to take Railtrack into receivership. Can he confirm that his announcement represents the end of the line for public financing for the shareholders, notwithstanding the fact that the Tories are still demanding further handouts for them? In his discussions with Network Rail, will he ensure that on the agenda is not only the modernisation of the west coast main line but the integration of the rail network in the north-west of the United Kingdom, and in particular the link between Glasgow airport and the modernised west coast main line?
Mr. Byers: Ultimately, it will be for the Railtrack shareholders to decide whether to accept Network Rail's proposal. If they do, there will be a speedy exit from administration and Network Rail will operate the licence, which will bring real benefits. On integration, there is clearly an issue about the interface between wheel and track, and that is the subject of a Strategic Rail Authority inquiry. On the specifics of developing the rail network in Scotland, there are several major projects that would make a significant difference, one of which is developing the links with Glasgow airport. I know that the SRA is examining that closely, as a result of representations that have been made both by Labour Members and by the Scottish Executive.
Pete Wishart: We have paralysis on the tracks, a rail industry in Scotland that is riven by strikes, a Department that can only be described as bizarre and chaotic, and now we have this astonishing U-turn. Given that the Government were elected on the basis of the song "Things Can Only Get Better", can the Secretary of State think of a time when things were worse for the railways?
Mr. Byers: We were never going to improve significantly the quality of rail in the United Kingdom with Railtrack as the operator of the licence. I hope that the hon. Gentleman will agree with that. We had to make big decisions about Railtrack and its successor body. Those big decisions are not easy and are bound to be criticised, but they are the only way in which we can secure real improvements. In the end, we will be judged on whether the punctuality and reliability of our rail network have improved. I believe that the changes in hand will produce real improvements in punctuality and reliability in Scotland, as elsewhere in the United Kingdom.
Mr. Ivan Henderson: Is it not a fact that the previous Government were warned several times that the privatisation of our railway infrastructure would be a disaster, and did not the Conservatives privatise it as an afterthought, because our country's finances were in such a mess that they were scratching around for extra cash? Is there any other country that privatised its railway infrastructure in the same way?
Mr. Byers: It is true to say that it was a pretty unique form of privatisation. On the £300 million that the hon. Member for Maidenhead (Mrs. May) is so excited about, hon. Members should read the excellent report published by the Public Accounts Committee when the current chairman of the Conservative party was its Chairman. The report shows very clearly that Railtrack was floated and
592
sold for less than £2 billion, and that within 18 months the value of the shares was up to about £8 billion—a £6 billion shortfall for the taxpayers of this country. Conservative privatisation brought a shortfall of £6 billion, as well as worse service on the railways. Our proposals will make a real difference and improve the quality of rail travel.
Miss Anne McIntosh: I remind the House of my interests in Railtrack, Eurotunnel and First Group.
I know that the Secretary of State does not drive, but he has performed a U-turn, and so has the Prime Minister. Why? Is it because he feels that he should not after all have put Railtrack into administration and that he should have taken the advice of the independent rail regulator and granted an interim review, or is it because he is frit of a legal action that would force him to give evidence on oath? This offer is time barred. What happens if Railtrack does not come out of administration, the offer fails and the shareholders get nothing? May I remind him that 90 per cent. of Railtrack employees hold shares? Why has he changed his mind?
Mr. Byers: Railtrack could have applied for the interim review; it had the power to do so, but it failed to do so. Its representatives sat in court and did not oppose the petition for administration. The £300 million is available only if there is an early exit from administration. If that does not happen, it will not be available to the shareholders. That is why it is not compensation; it is money that is being made available for the benefits that we, as a Government, will get from an early exit from administration. If the shareholders do not support the proposal, they will lose the benefits and we will not get the benefits, so the £300 million simply will not be available. We will then go through the competitive process, which the administrator will put in place. That will take time, so we will not get the savings of an early exit, which is why the £300 will not then be available.
Mr. Gary Streeter: In relation to transport, will the Secretary of State please tell the House what part of his job he thinks he has done well since he was appointed last year?
Mr. Byers: The taking of Railtrack into administration was absolutely right for the simple reason that Railtrack was at the heart of all that was wrong with our railway network and many of the problems. Conservative Members will disagree with the action that I took in relation to Railtrack—we can all understand why—but I firmly believe that that action was necessary. Railtrack was put into administration because it could not pay its debts or was unlikely to pay them. Most importantly, we are now putting in place a new structure for the railway industry that will provide us with the opportunity to bring the industry together, to get away from the fragmentation and to put the interests of the travelling public first. That is what a company limited by guarantee will do, and I hope that the hon. Gentleman, who is concerned about transport to the south-west, will recognise that those real improvements will be delivered for the south-west as well as the rest of the country.
Bob Russell: May I congratulate the Secretary of State on his impeccable timing? He chose to

593
make his statement on the very day when the problems on the Colchester to Liverpool Street line were so bad that my constituents took up to five hours to complete a one-hour journey. I was lucky; my journey took only three hours. Does he agree that, despite the fact that the previous Government caused the problem in the first place, after five years of Labour Government, the situation is worse now than it was in 1997? Who does he blame—himself or the former Transport Secretary, the Deputy Prime Minister? Has he stopped digging, or is he going to fill himself in?
Mr. Byers: I have been very clear with the House in saying that we have to take responsibility, and I will take responsibility for the performance not being as good as it should be, which is unacceptable and we must move forward. However, we will never see the sort of improvements that the hon. Gentleman and I want by tinkering around at the edges and playing around at the margins. We have to take the big decisions that will make a difference to our railway industry, which we are now doing. Some people find that uncomfortable, but it has to be done if we are to achieve an improvement in the service from Colchester to Liverpool Street—a line that I know very well—as well as elsewhere in the country. I honestly believe that we can do that, and I think that the measures that are being taken and today's developments will lead us to a far better future for our railway industry.
Mr. Michael Jack: Will the Secretary of State tell us precisely from which part of his Department's vote will the £300 million come? Will he be more specific about the savings that he mentions? He says that the costs of administration will be borne by the shareholders, so there appears to be doubt about where the Government will get their savings from. Finally, will he agree to the National Audit Office making an early inquiry into his proposals to ensure that the taxpayer gets good value for money?
Mr. Byers: Of course we always co-operate with any National Audit Office inquiry. The savings will not come from the costs of administration to the Government. As with every other administration, those costs are borne by the shareholders, so it is not a call on the Government. The savings to the Government will come about because Network Rail's proposals are designed to be produce greater efficiency than Railtrack. It will have lower financial costs and no dividends to pay, so it will be easier and cheaper for it to raise money. There will be a quicker realisation of efficiency savings and a reduction in performance penalties, which will come about as a result of a company limited by guarantee and the fact that Railtrack is no longer responsible. Those are all benefits and savings that the Government will get, from which we will be able to fund the £300 million without that being a claim on another part of the railway budget.
Mr. Julian Brazier: Can the Secretary of State answer the questions repeatedly asked by a number of my hon. Friends? What has changed since his original statement that has led him to make a U-turn on compensation for shareholders?
Mr. Byers: I repeat that the £300 million is available only if there is an early exit. If that does not happen, it is not available, so it is not compensation for shareholders.
594
It is linked to an early exit from administration and the savings that the Government will obtain as a result. There is no change. It is absolutely consistent with the statements that I have made since 15 October last year.
Richard Ottaway: In response to a question on how the grant is self-financing, the Secretary of State replied that Network Rail will be able to get money more cheaply. Is not that the real reason why he introduced the package today, because if he had not, the City would have charged him higher penalising interest rates for future infrastructure projects?
Mr. Byers: No. If hon. Members look at the refinancing deal of some £4.1 billion announced by the administrator this afternoon, it is clear that no premium is being charged by the City. The City makes a clear distinction between the position of Railtrack, a company quoted on the stock market, with all the risks that arise from that, and the public-private partnership approach in which the Government enter into contractual obligations. That is the difference, and it is understood by the City. As a result, no premium has been charged.
Mr. Andrew Robathan: Before conjuring up the £300 million that every newspaper describes as compensation for shareholders, what legal advice did the Secretary of State receive on the impending shareholders' action? Was he led to believe that he might easily lose a legal action? Was he told that he might be found to have acted illegally by taking Railtrack into administration without providing compensation and, indeed, to have acted in a manner akin to theft?
Mr. Byers: The proposals by Network Rail have been produced because it thinks that this is the right time for it to make this approach. It has nothing to do with any action or threat of action by Lovells on behalf of the shareholders of Railtrack.
Miss Julie Kirkbride: The Secretary of State has given an unclear and confused picture of who takes the decisions from hereon in. Can he clarify what he said? Who is going to take the decision to remove Railtrack from administration and go forward with the new company—is it the Secretary of State, the administrator or the shareholders, because he told the House that they, too, will take that decision?
Mr. Byers: There are two possible routes to get Railtrack plc out of administration. One is to use the Railways Act 1993, which allows the administrator to propose a transfer scheme to me as Secretary of State. Network Rail is pursuing a different approach, however. It involves a bid for Railtrack plc in which the shareholders decide the outcome. There are two separate routes, one under the 1993 Act and one that has been adopted by Network Rail, which is to make a straightforward bid for the shares of Railtrack plc.
Mr. Mark Francois: Is not the simple fact of the whole matter that the Government and the Secretary of State in particular forced Railtrack into administration prior to Christmas and that the same Government are now proposing to spend £300 million of taxpayers' money to bring it out of administration? Some trains in my

595
constituency were delayed by up to four hours coming into Liverpool Street this morning. My constituents are utterly sick and tired of the shambles over which the Secretary of State presides. They dearly hope that he will soon depart and that the problems are put right.
Mr. Byers: The problems that Conservative Members are referring to have come about because of Railtrack's failure to invest in its assets—that is the truth of the situation. We need to get Railtrack out of administration and get the benefits that will come from that. The Network Rail proposals will do precisely that. We will get benefits and the hon. Gentleman's constituents will get benefits from having a railway network that is far more efficient and effective than it is at the moment.
Mr. David Cameron: Will the Minister confirm that if an offer is made that does not involve spending £300 million of taxpayers' money, it will be accepted? If not, will he confirm that he will have to issue an instruction to his permanent secretary to accept a deal that does not represent good value for money for the taxpayer?
Mr. Byers: If that were done under the Railways Act, an approach would be made to the administrator, and it would be for him to consider it. Today, Network Rail has adopted a different approach, which goes to the shareholders, and I hope that that has clarified matters for hon. Members.
Sir Robert Smith: Following his earlier answers about who will make the final decision, will the Secretary of State provide clarification? If Network Rail's bid is successful, will not it still need a licence to operate? Is not the licence decision for him to make, and therefore does not he make the final decision?
Mr. Byers: I will need to go to the court to apply for the administrator to be discharged from his responsibilities. I will then have the responsibility of allocating the network licence.

Points of Order
Angus Robertson: On a point of order, Madam Deputy Speaker. I am afraid that I must draw your attention to one more case of Parliament being bypassed on a very serious matter. A press conference was held at 3 o'clock this afternoon at the Ministry of Defence at which massive job losses at the Clyde naval base and others in England were announced as part of the warship maintenance review. Journalists were also informed that thousands of other naval workers will have their jobs privatised.
Members of the House received only limited official notice of that devastating news by letter from the MOD half an hour after the media were briefed on the subject. This is not the first time that I and other colleagues have had to bring such matters to your attention, Madam Deputy Speaker. Under the powers available to you, can you do anything to bring home to the Government their responsibilities to Parliament and to make a full statement to the House?
Mr. Mike Hancock: Further to that point of order, Madam Deputy Speaker. May I point out that as a constituency MP, I still have not received any written confirmation from the Ministry of Defence of its action, but I have a copy of the planted question that was asked at 3.30 this afternoon? Although I can accept that the reason for us not having a statement is to shield the Minister from hostile Labour MPs, I find it deplorable that the House and I as a constituency MP have not been given the chance to question the Secretary of State about the 350 job losses in my constituency and the way in which the matter will be handled.
I would hope that, following the Speaker's pronouncement that he was against this sort of thing, you, Madam Deputy Speaker, would seek advice as to whether the Secretary of State could be asked to come to the House tonight to explain his actions and to answer the questions put to him by Members on behalf of their constituents.
Madam Deputy Speaker (Sylvia Heal): Mr. Speaker has made it clear on a number of occasions that he expects important announcements to be made in the House first. He has, however, also said that it is for Ministers to determine whether such announcements are made by oral statement or written answer. In view of the information that I have just received, I certainly think that this is a matter that the Speaker would want to look into.

Orders of the Day

  State Pension Credit Bill [Lords]
  [Relevant documents: The Minutes of Evidence taken before the Work and Pensions Committee on Wednesday 27th February relating to the Pension Credit, HC 638-i.]
  Order for Second Reading read.
  Madam Deputy Speaker (Sylvia Heal): I should inform the House that Mr. Speaker has selected the amendment in the name of the Leader of the Opposition.
  5.28 pm
  The Secretary of State for Work and Pensions (Mr. Alistair Darling): I beg to move, That the Bill be now read a Second time.
  I want to set out the purpose of the Bill and how it fits with the wider pensions reforms that we have made. The pension credit marks the end of a fundamental unfairness in the social security system. Right from the early days of the modern welfare state, if people did what successive Governments asked them to do and made provision for themselves, the state could penalise them for their efforts. That was wrong.
  Every one of us has met pensioners living on modest incomes who often struggled to put aside money for their retirement and who feel that they were let down. They have found that they are little or no better off than those who had saved nothing. To oppose the Bill is to perpetuate that unfairness and to deny extra help to around half of all pensioners. When we vote tonight, we should remember that through the Bill, 5 million pensioners stand to gain an average of £400 a year, with some gaining up to £1,000 a year.
  Mr. Steve Webb: Will the Secretary of State confirm that the minimum income guarantee was introduced and the rates announced without the benefit of the State Pension Credit Bill, that the rates of the minimum income guarantee are therefore independent of the Bill, and that the only thing that the Bill introduces is a savings credit that will benefit nothing like the number of people he has just mentioned?
  Mr. Darling: The minimum income guarantee and, as I shall show later, the guarantee element of the pension credit are essential parts of the policy. The hon. Gentleman is right that we introduced the minimum income guarantee first; we did so because in 1997 we had to tackle the fact that the Conservatives had left a whole generation of vulnerable people and vulnerable pensioners living in poverty. However, the pension credit has two elements: the guarantee element and the reward for saving.
  The hon. Gentleman appears to have been seduced by the hon. Member for Havant (Mr. Willetts), and they have climbed into the same political bed—at least in terms of pensions. Just so that the hon. Member for Northavon (Mr. Webb) is clear, let me repeat: if he gets his way when he votes against the Bill tonight, he will deny half the pensioners in this country an average of about £400 a year. That is the position that the professor has got the Liberal Democrats into, and good luck to him—and to the rest of us if that is what they want.
  598
  During tonight's debate, we will hear arguments that rather than individually assess people's income and ensure that we get help to those individuals who need the help most, it might be better to focus on groups. On that point, the Opposition should pay attention to what the Bill would achieve. Of those who will gain from the Bill, about two-thirds are women, half are over 75, and more than a quarter are over 80. Those who want to help older pensioners in general, as well as those who are less well off and those who have modest savings in particular, should realise that the Bill achieves both those objectives. The Bill will ensure that for the first time pensioners who have saved for their retirement are rewarded for their thrift and effort, which does not happen under the system that we inherited.
  We need to put the pension credit in the context of our wider policies on pensions. I will explain how it builds on the partnership between the state and the funded sector, and how it builds on the reforms that we have already made. I will then show why the Bill is necessary and why the reasoned amendment tabled by the Conservatives—and, it appears, their new friends—is wrong and unfair.
  With the pension credit, the poorest third of pensioners will gain on average an extra £8.20 a week. By contrast, the same money spent on increasing the basic state pension across the board, as proposed in the amendment, would result in a gain of only £3.20 a week—£5 a week less. That is the difference between our proposals, which will help those who need that help most, and the misconceived approach adopted by the new alliance of the Conservatives and the Liberal Democrats. With the pension credit, the least well-off pensioners will gain more than two and a half times more than if the money were spread thinly by raising pensions across the piece.
  Critical to the long-term success of pensions in this country is the partnership between the public and private sectors—partnership between what the state will do for a person and what a person should do for himself. I do not believe, as some have suggested and may well repeat this evening, that relying wholly or mainly on the state would be right. Apart from anything else, the demographics are against us. Such a strategy would impose on our children and grandchildren a burden that they would not be able to pay. Furthermore, I believe that people must have the right to choose funded provision in addition to their state pension, if that is right for them. The fact that more people are retiring with good second pensions explains why over the past few years pensioner incomes have risen faster than incomes of those in work.
  On the other hand, it would be wrong to adopt the approach favoured by the Conservatives of moving to a private system in which one's entire pension depends on the uncertainty of the stock market.
  The problem with that plan is that, by the Conservatives' own admission, it creates an immediate funding gap of £5 billion, with a cumulative debt of £600 billion in 35 years' time. It places on one generation the burden of providing entirely for themselves and of supporting current pensioners.
  I expect that we will hear a great deal from the hon. Member for Havant about increasing the basic state pension. That argument will be advanced—and by the Conservatives of all people. We saw through that ruse when the hon. Gentleman made a similar proposal two years ago. He believed that the winter fuel payment was

  599
  an unnecessary complication and wanted to get rid of it, but he now wants to pay it to people in hot countries as well. Whatever he says, we should bear it in mind that, in effect, he still wants to privatise the basic state pension, as we saw from last week's newspapers. Strangely, the reasoned amendment is silent on that aspect of Government policy—perhaps to keep his new friends on board tonight.
  The pension credit builds on the partnership between what the state does and what the funded sector does; that partnership is absolutely right. The system that we inherited in 1997 had too many gaps in that partnership, and too many people were missing out. The necessary incentives in the Bill were not in existence. The first problem, as I have just explained to the Liberal Democrat spokesman, was that more than 2 million pensioners in the fourth largest economy in the world relied on inadequate levels of income support. The minimum income guarantee has increased the incomes of 2 million of the poorest pensioners by at least £15 a week over and above inflation. Clause 2 sets out the way in which the pension credit will build on that approach and lift pensioners out of poverty.
  The second problem that we had to tackle was that too many people were heading for poverty in retirement, either because they could not afford to save or because they did not have access to a good second pension. We therefore introduced the necessary long-term reforms to make saving possible, helping more people to build up a good second pension on top of their basic state pension. The Bill ensures that such additional saving pays. People on moderate and higher incomes tend to do better in the longer term in funded pensions. For those without access to company schemes—about half the work force—we wanted to increase choice in the funded sector, which is why we set up stakeholder pensions, nearly 700,000 of which have been sold.
  Clause 3 makes it clear that the pension credit will complement stakeholder pensions by rewarding people who save even modest amounts, which has been warmly welcomed by the pensions industry. People on lower incomes are generally better off in state provision. From 6 April this year, the new state second pension will enable 18 million people on low incomes to build up far better pensions than under the state earnings-related pension scheme. That figure includes 2 million carers and 2 million disabled people who will benefit for the first time.
  Lynne Jones: My right hon. Friend said that his proposals have been warmly welcomed by the pensions industry. It welcomes the extra assistance for today's pensioners to reward them for their saving, but there is concern that the proposals do not send a clear message to pensioners of the future that it always pays to save. Is that not the major flaw in the Bill? It does not give a clear message or provide the certainty of a stable system for younger people. The system is so complicated that—
  Madam Deputy Speaker: Order. Interventions must be brief.
  Mr. Darling: As my hon. Friend the Member for Birmingham, Selly Oak (Lynne Jones) knows, I hate to
  600
  disagree with her but, however much it pains me, I must do so. When I said that the pensions industry welcomed the measure, I meant it. I had in mind the Association of British Insurers, which said:
  "The ABI welcomes the Government's proposals for a Pension Credit as an important step in addressing the issues which may currently discourage those on modest incomes from saving for their retirement".
  Scottish Widows, Legal and General and the National Association of Pension Funds have all said something similar.
  It is true that some people in the industry take the view that rather than have something like the pension credit, which rewards people for every pound they save, depressing the amount the state gives will force them to go and buy pension products. I am sure that my hon. Friend does not subscribe to that view; if she does, she has moved her ground substantially. I always thought that she took a dim view of the pensions industry; it will find it very odd indeed that she is attempting to gallop to its rescue.
  The important point is that the pension credit removes for the first time—this has been widely recognised—the disincentive in the present system whereby someone with moderate savings can find that they are no better off than somebody who has made no effort whatsoever. That is why I find it odd that perhaps not my hon. Friend but many Opposition Members are against the Bill.
  Linda Gilroy: Does my right hon. Friend recognise that one of the most powerful messages that young people hear comes from their family—from their grandparents, who tell them that it does not pay to save? As from October 2003, every grandparent who has been thrifty enough to save will be rewarded and will be able to tell their grandchildren that it definitely pays to save.
  Mr. Darling: That is an important message. Many people at the moment can find that, if they save only modest amounts, they get absolutely nothing for it. That cannot be right.
  I always hesitate to quote people who support the Conservative cause, but I was struck by the words of Lord Fowler, who was of course a Secretary of State for Social Security for—if I remember rightly—some six years. He said:
  "To be frank, I should have preferred it if my government had introduced the pension credit."—[Official Report, House of Lords, 18 December 2001; Vol. 630, c. 165.]
  He knows a thing or two about social security, and recognised something that most Secretaries of State in that Department have recognised: that there is something fundamentally wrong with a social security system if doing what the Government ask means a kick in the teeth. I find it odd that this generation of Conservatives seems to be reverting to type, especially since most of those who will gain from the pension credit are what one might call vulnerable people. The conversion in Harrogate to the cause of the dispossessed and poor does not appear to have lasted very long.
  Paul Flynn: My right hon. Friend prayed in aid the briefing supplied by the Association of British Insurers. Has he read page 3, which says:
  "Most importantly, under the current proposals it is not true to say 'the Pension Credit will make sure that it always pays to save'"?
  When the Bill is considered in Committee, will he address clause 3, which seems almost incomprehensible and does not guarantee that future pensions will be respected and of good value?
  Mr. Darling: If I remember rightly, one amendment that the ABI wants to be made in Committee concerns changes to disregards and capital. However, for somebody who receives the basic state pension but saves more than that, it will pay to save. That is a big leap forward. I am not saying that the Bill cannot be improved and that we cannot do even better. Indeed, a number of those who made representations, such as Age Concern, asked us to do a lot more. Age Concern is a bit like the Liberal party: whatever one does, one can never do enough.
  Mr. Webb indicated dissent.
  Mr. Darling: That is the case; the hon. Gentleman knows that, for reasons of which he is certainly aware. Although it is nice that Age Concern has welcomed the Bill, I hope that it recognises that we have done a lot for pensioners. A balance must be struck when deciding how much can be spent on any measure, but the general principle behind the pension credit is right. I find it odd that Opposition Members should be against a measure that removes what I regard as a fundamental unfairness of the social security system.
  Right on cue, my hon. Friend the Member for Birmingham, Selly Oak intervened as I was about to talk about redistribution, which might cheer her up. I was talking about the state second pension, which is of course also creditable under the Bill. I was about to make the point that, when it is introduced, it will benefit some 18 million people on low incomes. I find it difficult to understand how people who claim to be concerned with helping low earners and those with broken work records can be against the state second pension. It is one of the most redistributive measures that any Government have introduced.
  Let us be clear about what the state second pension does. Somebody who, for example, takes five years out of the labour market to care for their children or an elderly relative can be credited with the state second pension as though they were earning £10,800 a year. That never happened in the past. People who take time out to do the right thing by their children or an aged relative will be assumed to be earning £10,800 a year—yet the Conservatives and Liberals are against that. People on low earnings who build up 40 years of state second pension will get at least double what they would have received under SERPS. That is a long overdue redistributive measure.
  We have implemented reforms to tackle poverty, we are making saving possible and we are building on the partnership between the state and the funded sector. We now need to ensure that it pays to save—and that is what the Bill does. As I said, the pension credit will address a fundamental unfairness in the system. For the first time,
  602
  we will be able to say to people that even if they save modest amounts above the basic state pension they will be rewarded for their efforts.
  I want to explain briefly how the pension credit will work. The detail is set out in the consultation paper that was published in November and, of course, in the explanatory memorandum to the Bill. The Bill works in two ways. First, it replaces the minimum income guarantee as the means to provide a floor beneath which we believe pensioner incomes should not fall. The pension credit will bring pensioners' entitlement up to a guaranteed minimum next year of at least £100 a week, or £154 a week for couples. Clause 2 provides for a higher guarantee for carers and for pensioners with severe disabilities.
  Secondly and critically, the pension credit will provide an additional top-up to reward pensioners aged 65 or over who have saved for their retirement. Clause 3 will ensure that pensioners aged 65 or over who have a modest occupational pension or modest savings in the bank will get more as a result of their thrift. Those with income from paid work will also be rewarded for their efforts. The pension credit provides the incentives that are missing from the present system. Pensioners will generally qualify if their incomes are up to £135 a week for single people or £200 a week for couples. On any view, many pensioners are among the vulnerable and least well off in our society.
  Mr. David Kidney: I have no doubt that the new savings credit will be very popular with my constituents, but let us return to the comments of the Association of British Insurers and of the National Federation of Post Office and BT Pensioners. Both have raised with me the assumption that the savings credit will cut in only once the full basic state pension has been reached, and that those with a lesser entitlement—often women—will lose the first bit of their savings in reaching that level. Is any change in prospect in Committee to address that criticism?
  Mr. Darling: We believe that it is right that people should first use their money to pay contributions to the basic state pension. It would be curious if somebody who had chosen not to pay all such contributions then asked us to apply those they had paid to a pension credit, rather than in the first instance to the basic state pension. The basic state pension is of course contributory, but that is the argument.
  I am glad that my hon. Friend recognises that the main thrust of the Bill is to reward saving among very many older people, especially those whom he rightly identifies as likely otherwise to be poor in retirement. Let us remember that the majority of the beneficiaries under the Bill will be women, who particularly benefit from the minimum income guarantee. I suspect that many Members will have met women at their surgeries who have paid a half stamp, for example, and have found that their pensions are a lot lower than they expected. For such people, the minimum income guarantee is very helpful.
  Such people are vulnerable, so given everything that the hon. Member for Havant said on television yesterday to Sir David Frost, it is very odd that as soon as he gets

  603
  back from Harrogate he reverts to type. Liberals in my constituency will certainly find it odd that their party has jumped into bed with such a disreputable crew.
  Mr. Paul Goodman: Will the Secretary of State explain why he has not yet mentioned the take-up of pension credit? Will he confirm that up to 750,000 pensioners did not receive the minimum income guarantee? What firm evidence does he have that the take-up of pension credit will be higher?
  Mr. Darling: My speech has a beginning, a middle and an end, and I have not yet reached take-up. I shall do so shortly, when I will deal with the point. Suffice it to say that I have never regarded the figure of 750,000 pensioners as realistic. I note that the authors of these findings warn the reader to treat them with great caution. There is a huge variation in the findings on take-up. I shall deal with take-up and the important point that the hon. Gentleman has either deliberately or inadvertently stumbled upon.
  I shall deal with the criticisms that are made in the reasoned amendment. [Interruption.] I thought that the hon. Member for Havant liked a debate. Did I not read in the newspapers last week his assertion that if he, the hon. Member for Northavon, who is the Liberal Democrat spokesman on these matters, and my right hon. Friend the Member for Birkenhead (Mr. Field) were the first three speakers in the debate, the intellectual argument would be won. That is rough on the rest of us. I am sure that the rest of us have something to say. The hon. Gentleman is being touchy if he gets upset when we engage in a robust debate.
  James Purnell: My right hon. Friend mentioned events at Harrogate and the conversion of the hon. Member for Havant (Mr. Willetts) to the cause of poverty. Does he remember the hon. Gentleman saying only two years ago:
  "The tax guarantee goes to the heart of what we Conservatives believe… Cutting back the growth of social security must be at the heart of the agenda for the next Conservative Government"?
  Does that not show that the real agenda for the Conservatives is to cut benefits for pensioners?
  Mr. Darling: The Conservative spokesman is famous for having two brains. I think that the Conservative party speaks with two voices on pensions. It tells us that it wants to increase the basic state pension, yet we know that it is committed to privatising it. Look at what happened. [Interruption.] It always upsets Conservative Members when they are reminded of their true policy.
  Andrew Selous: Will the Secretary of State give way?
  Mr. Darling: In one moment. I should like to make a wee bit more progress.
  I shall explain why the criticisms made in the reasoned amendment are wrong and why I believe that our approach is better and fairer than the Opposition alternative.
  604
  Let us remember that the pension credit gives the least well-off pensioners an average of £8.20 a week, whereas the amendment would give them about £5 less. The Conservatives and their new friends raise three main arguments. They say that the pension credit will extend means-testing, increase complexity and undermine saving. I shall deal with each of those matters briefly.
  First, let us confront the argument about means-testing head on. If we are serious about tackling individual pensioner poverty, we must undertake some form of income assessment. That is how we help vulnerable people. I turn again to Lord Fowler. He said:
  "In making policy on pensions … there are two broad choices that any Minister and any government can make. One can give general benefits to everyone irrespective of need. The disadvantage of that is that one obviously gives benefits to many people who by most—virtually all—definitions do not need them … Alternatively, one can try and target benefits to those who need them … we should get away from the emotiveness involved in describing that process as means testing."—[Official Report, House of Lords, 18 December 2001; Vol. 630, c. 164.]
  He went on to regret the fact that it was our Government rather than his who introduced the measure.
  I think that Lord Fowler has a point. If we want to tackle pensioner poverty and ensure that people who need help get it, we must have an individual assessment of that person's income. There is nothing new about that. The tax system does it, as does the benefit system. I do not believe that the argument stands up that we can more effectively tackle poverty by targeting extra help on the over-75s or the over-80s.
  It is true that on average pensioner incomes decline as people get older. However, as I have said, half of those who gain from the pension credit are older than 75, and a quarter are older than 80. It is a fact that there are poor 67-year-olds, just as there are better off 82-year-olds. The only way we can be sure that we help the people who need help is to have some form of assessment of somebody's income.
  Mr. Andrew Dismore: Half the population of the Burnt Oak ward of my constituency are on means-tested benefits already. Within a mile, there are wards where there are more millionaires than anywhere else in Britain. I have often heard people in Burnt Oak complain that they worked all their lives, put some money aside and have nothing to show for it, compared with those who were on benefit. I have yet to hear that complaint from people who live in millionaires' row. Does my right hon. Friend accept that the pension credit will provide extra assistance for people who live in Burnt Oak, who need it, and that there is little point in helping the millionaires in Mill Hill?
  Mr. Darling: There is a fairly straightforward argument, and I expect that again my hon. Friend and I will part company. If there is a limited amount of money to spend, the question arises whether it is better to spread that money thinly regardless of whether people need help, or to do more to help people. This year, for example, the state pension will increase for everybody by £3 a week. It will increase by £6 a week for some pensioners on the lowest incomes. It is worth bearing it in mind that 80 per cent. of gains in pension credit will go to pensioners with incomes of less than £149 a week. These people are by no means well off.

  605
  That illustrates what a progressive measure the pension credit is. It is doing more for people. Those who are concerned about whether we should assess people's incomes are not squeamish when it comes to the tax system, and they should not be squeamish when it comes to the benefits system.
  Lynne Jones: Given what my right hon. Friend has said, have the Government abandoned their initial aim when they embarked on welfare reform, which was to reduce means-testing?
  Mr. Darling: Our objective, throughout the time that I have been responsible for this policy, is to get help to those who need help most. I say in the nicest possible way to my hon. Friend that that is one of the reasons why I joined the Labour party.
  Kevin Brennan: Does my right hon. Friend agree that it is absurd to use the emotive imagery of the means test of the 1930s and the National Assistance Board poking into families' and pensioners' business after the second world war? We are talking about the pension credit, for which a pensioner will be assessed every five years.
  Mr. Darling: My hon. Friend is right.
  When Conservatives say that they are against means-testing, we must understand that they are against giving money to poor pensioners. Despite everything that we heard at Harrogate this weekend—I dare say that compassionate Conservatives will be among us for some time to come until there is a move to the next phase—we must bear it in mind that if the House is serious about doing something for pensioners on low incomes, it is necessary to identify those people in the first place, and then, critically, to ensure that we have the resources and the means to help them. The Conservative party is still committed to reducing the share of public spending to about 35 per cent. of gross domestic product. The two approaches do not square.
  Several hon. Members rose—
  Mr. Darling: I seem to have struck a raw nerve. I shall try to give way to as many hon. Members as possible without abusing my position. I give way to Lord Fowler's successor, the hon. Member for Sutton Coldfield (Mr. Mitchell), who I understand is working even as we speak on the half-baked policy to privatise the basic state pension.
  Mr. Andrew Mitchell: Does the right hon. Gentleman recall saying in his 1998 Green Paper:
  "People who have worked all their lives should not have to rely on means tested-benefits when they retire"?
  Does he think that the Bill takes him nearer or further from that goal?
  Mr. Darling: The hon. Gentleman will know, if he read the rest of the paragraph, that that statement was in the context that I believed—I still believe—that not enough people were saving enough towards their retirement because they did not have the means to do so.
  606
  That passage led to our doing two things—extending the basic state pension and introducing the state second pension.
  I understand that the hon. Gentleman will he going along to the next Conservative party team meeting. These meetings are held on Tuesdays at 10.30 pm. If anyone wants to go along, I should say that no doubt the professor—the hon. Member for Northavon—will be there, and maybe others. They will find out more. [Interruption.] They are all flocking in. It will be an extremely crowded telephone box.
  Surely it is the policy of all Governments to encourage people who can save for their retirement to do so. We should make sure that that happens. It should surely also be an objective of the Government to put in place incentives to encourage people to save. We do that through the tax system. The hon. Member for Sutton Coldfield will know that there is tax relief for saving towards pensions. The Bill introduces a further incentive. If someone goes that extra mile and saves money, he or she will get an extra incentive for having done so. As the hon. Gentleman has taken over the seat formerly represented by Lord Fowler, perhaps he should have a word with the noble Lord, unless he thinks that his views are completely misplaced and misconceived. I would be surprised if he did.
  David Cairns:: My right hon. Friend is right that a five-year assessment is infinitely preferable to the weekly means-testing assessment that was carried out until recently, but can he guarantee that as people's circumstances change in the course of the five years, they will be entitled to a reassessment, which it is to be hoped will lead to their being given even more generous sums? Can he confirm that it will be offered to them not grudgingly but as part of the pension service after their initial assessment?
  Mr. Darling: Yes, I can. I shall shortly come to take-up and how we will deal with it. As hon. Members have said, five-year assessments will apply from the age of 65. People whose circumstances have changed and who are entitled to more will be able to come back, but as the vast majority of pensioners' circumstances do not change, I am reasonably confident that most people will not be troubled that often.
  Several hon. Members rose—
  Mr. Darling: The hon. Member for Havant, who speaks for the Conservatives, has been urging me not to take any more interventions. I will therefore give way to perhaps two more hon. Members and then make some progress.
  Mr. Mark Simmonds: Is not the real issue about means-testing the fact that many pensioners find it demeaning to go through the process, and that there is a direct causal link between means-testing and a lack of take-up?
  Mr. Darling: With respect, that is complete rubbish. I do not find it demeaning, any more than I hope the hon. Gentleman does, to fill in a tax return once a year. A calculation is made of how much money we have and how much we are due to pay in tax. The new system,

  607
  which I shall set out shortly, will be very easy for pensioners. When they apply for the basic state pension, we will calculate their entitlement to pension credit at the same time.
  What is clear from this debate—it has been clear for some time—is that the Conservatives are not against means-testing per se. It has been about in the social security system ever since it was started. What they really object to is a measure such as this, which puts more money into the majority of pensioner households. They have made it clear that they and their friends, the Liberal Democrats, are against this measure. That is great from our point of view, but it is very unfortunate for pensioners.
  Mr. Tom Levitt: On the same topic, it is probably true that some pensioners have perceived the process of applying for benefits as intrusive and bureaucratic. They have believed that it is very difficult to get benefits and that there is a high risk of being turned down, but in future they will surely see that if they have a state pension and any amount of modest savings, it will be in their interests to make their circumstances known in order to claim their entitlement. Does my right hon. Friend look forward to the time when the pension credit can be paid automatically, based on income tax data?
  Mr. Darling: That would be a very happy situation, although given what I had to tell the House last Wednesday about information technology systems we may be further away from that than I would like. It appears that there is some common ground in the House because both the Conservatives and the Liberal Democrats accept that there is a correlation between age and people becoming poorer. They accept that something needs to be done to help pensioners on low or modest incomes. The difference between us is that I think we have to treat individuals as individuals. There are poor 67-year-olds and better off 82-year-olds. All of us know the difficulty that we would get into if we decided that people can be poor only once they reach the age of 80. What would we say to a poor person who was in their mid-70s—wait five years and it will be all right? That seems a nonsense position.
  Another argument that we will no doubt hear from the hon. Member for Havant relates to complexity. When someone claims to have a simple solution to pensions, people should watch their wallet. People lead complex lives. They may change jobs several times. They may take time out of the labour market to care for children and so on. Pension provision is necessarily complex to meet the complex individual circumstances of people's lives. Even the basic state pension, which some people think is a simple concept, is based on a complex set of rules and calculations.
  What is important is that there are choices and options. A one-size-fits-all policy to pensions would not work. Many of the people who claimed to have found a simple solution often found that it was neither workable nor affordable in the long term—two essential ingredients of any pension policy.
  Tonight, the Opposition position on the pension credit is ridiculous. They say that they would keep the pension credit for people who have already retired, but bring back the savings disincentives for people saving for their future. That is not just complex—it is absolute nonsense.
  608
  That brings me to another argument that the Opposition advance. The Conservatives, and their new friends, are setting themselves against the very reform that will make saving pay. Their approach would do nothing to remove the disincentives in the present system. Somebody with savings that took them above the basic state pension, but below an income of £100 a week, would be no better off than their neighbour who had not saved at all. That seems absolute nonsense.
  I want to say a brief word about the pension service because the question of entitlement has been raised on many occasions. The pension service will provide a better way of delivering services. As I have said, when people apply for their pensions, we will find out whether they are eligible for the pension credit. Once they reach the age of 65, when their incomes tend to be fairly stable, we will set the awards for up to five years. That is a real change, which will be widely welcomed.
  Mr. Bill Tynan: Is there any way in which the pension service could be used to identify those who are on pensions at present and whether they would be due for pension credit? If not, they are going to escape through the net, which suggests that there will be a difficulty with take-up.
  Mr. Darling: I certainly agree with my hon. Friend. People who are now retired will also be entitled to the pension credit. As he is aware, one of the improvements that we are making is to move to a system that is more telephone based, which appears to be more popular with pensioners, who can get in contact with people far more easily. We certainly do not want to have to force them to go to old DSS-style offices, which they would not particularly want to do.
  The final stage of the reforms is to strip away some of the regulation and red tape that has built up over the years. The House will know that we will have the Pickering and Sandler reviews in the summer. We plan to publish proposals later this year to make it easier for people to save.
  The pension credit is a substantial reform. As I have said, it will benefit around half of all pensioners. It complements the reforms that we have made to make saving possible, by rewarding people for their thrift. It puts right a long-standing grievance. The result is that it is fair and promotes saving.
  The House has a choice between our approach and that of the Conservatives, and their new friends. Our policies are workable and affordable. They build on the partnership between the state and funded sector. Be in no doubt that the Conservative policy is to privatise the basic state pension.
  Our policy is fair and tackles pensioner poverty, whereas the Opposition—all of them—will vote against a measure that helps vulnerable people. Our policies will remove once and for all the unfairness in the current system. The Tories and their new friends want to keep that unfairness.

  609
  This Bill is essential to tackle poverty and to reward thrift. It will benefit 5 million pensioners by an average of £400 a year. That is what Labour Members will vote for; that is what Opposition Members will vote against. I commend the Bill to the House.
  Several hon. Members rose—
  Madam Deputy Speaker: Order. I remind all hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.
  6.8 pm
  Mr. David Willetts: I beg to move, To leave out from 'That' to the end of the Question, and to add instead thereof:
  'this House declines to give a Second Reading to the State Pension Credit Bill [Lords] because it involves a further move towards the mass means-testing of the pensioner population; believes that it will greatly increase the complexity of the pension system both for today's pensioners and for future generations, will result in many pensioners missing out on their entitlements, and will serve to erode incentives to save; and believes that the additional expenditure would have been better directed towards the basic state pension, particularly for older pensioners.'
  The reasoned amendment is in my name and in the names of hon. Members from a range of other political parties.
  The purpose of the debate on our reasoned amendment is to try to get the House to address what I think is the historic significance of the proposals that the Secretary of State for Work and Pensions is bringing before us today. He is announcing the end of the basic state pension as a determinant of the income of pensioners. In future, the amount that a pensioner receives will be determined by the minimum income guarantee, now renamed the guarantee credit, and the formula for determining the savings credit above that.
  Throughout most of the 20th century, there was a belief in all parts of the House that the basic state pension would be an important part of provision for people in their retirement. The Secretary of State's measures today say farewell to that. I thought that his speech could have tackled that central issue with rather more seriousness than he was willing to demonstrate, especially given his party's history on the subject.
  Under the strategy proposed by the Secretary of State, more than half of all pensioners will find themselves facing marginal rates of benefit withdrawal of 40 per cent. or more. It is important that the House has the opportunity to take a view on that strategy and to consider whether there might be a better alternative that nevertheless tackles the needs of poor pensioners.
  Kevin Brennan: Does the hon. Gentleman agree that a far more significant date in the development of pensions was when his party broke the link between the basic state pension and earnings, which put us in the position that we are in today?
  Mr. Willetts: If the hon. Gentleman is so worried about the breaking of the earnings link, why does not his party reinstate it rather than move towards means-testing?
  Mr. Levitt: I am sure that the hon. Gentleman can grasp the intellectual difference between an income
  610
  guarantee and a pension guarantee. The pension guarantee will remain universal to pensioners, but those who have as their income only the pension, or the pension and a very small amount, will be rewarded for the thrift that has produced a little bit extra. It represents an acceptance that the pension is not by itself sufficient for somebody to live on.
  I remind the hon. Gentleman that both the minimum income guarantee and the pension credit will indeed be index-linked, so more and more people's pensions will be put back on to that basis.
  Mr. Willetts: I am afraid that I did not entirely grasp the hon. Gentleman's point. He seems to be trying to say that there is a big difference between the pension credit and the minimum income guarantee, but the figures given by the Secretary of State, which, he claimed, showed the marvellous effects of the pension credit, included the effects of the so-called guarantee credit, which is the old minimum income guarantee. Labour Members cannot have it both ways.
  James Purnell: Some Labour Members found the remarks that the hon. Gentleman made over the weekend difficult to stomach. He claimed to be on the side of the poor, yet from 1979 to 1992, when he advised Conservative Governments, the income of the bottom 10 per cent. fell by 17 per cent. in real terms—not a relative, but an absolute, fall. Will he apologise for that?
  Mr. Willetts: No, and I do not recognise the figures that the hon. Gentleman quotes.
  I want to talk about the problem that has been created since 1997 as a result of the extension of means-testing under the minimum income guarantee. It has created a gap in that the value of means-tested benefits is now much higher than the value of the basic state pension. That is why the Secretary of State goes on about all the people who find themselves being penalised for having saved. It is a consequence of the increase in the value of the minimum income guarantee relative to the basic state pension. Now, apparently, the problem created by the extension of means-testing is to be solved by even more means-testing. I invite hon. Members to consider whether there is an alternative strategy that nevertheless targets help on poorer pensioners.
  Paul Flynn: Will the hon. Gentleman give way?
  Mr. Willetts: Yes, because the hon. Gentleman has a long record of concern about these issues.
  Paul Flynn: Indeed, and a long memory of the hon. Gentleman. He will not remember, but in 1948 the basic pension was 24 shillings and there was an occupational disregard of 10s 6d and an employment disregard of 20 shillings. The system continued in those terms for a long time, with some modifications, until the occupational pension disregard was abolished in 1980. That is the reason for the Bill. Does the hon. Gentleman recall who abolished it, and will he give us a mea culpa?
  Mr. Willetts: The reason for the Bill is the spread of means-testing that has taken place since 1997, and that is the point on which I want to focus. The consequences of

  611
  means-testing are clear from the evidence around us. Before we rush into yet more, let us consider the problems caused by that which already exists. I should like to consider first the impact of existing and proposed means-testing on present-day pensioners and then its impact on pensioners in the future.
  David Cairns: On the extension of means-testing, can the hon. Gentleman confirm that it is Conservative policy to keep the winter fuel payment as a universal benefit; or does he agree with his hon. Friend the Member for Daventry (Mr. Boswell) who, on 27 November, told the all-party disability group that it would be better to target fuel poverty by doing away with the payment and moving towards means-testing? Would not that be an extension of means-testing?
  Mr. Willetts: My hon. Friend the Member for Daventry (Mr. Boswell), who speaks powerfully on these issues, assures me that his comments were misinterpreted. When he speaks at the end of the debate, he will have an opportunity to make clear exactly where we stand.
  I accept, however, that means-testing will be part of the social security system—as it has always been. I do not pretend that we can suddenly get rid of it. I invite Labour Members to contemplate the implications of moving to a regime where almost 60 per cent. of pensioners will be on means tests. The question is whether we should embrace such a massive extension of means-testing. There will, of course, always be some means-testing.
  I should now like to make some progress with my speech and consider the implications of the Government's proposals for pensioners. One of the problems with means-testing is that it breeds complexity, and complexity means declining and low take-up. The Secretary of State dismissed the figures on take-up, but his Department produces them annually. I shall not go to extremes but simply take his estimates for the mid-point in the number of pensioners who are entitled to the minimum income guarantee but do not claim it. The number was 500,000 last year, while the latest statistics suggest that it has increased to almost 600,000. That is the mid-point in the range.
  The figures that we are given by Ministers always assume 100 per cent. take-up. In the real world, there is not 100 per cent. take-up, or anything like it. It is no good for the Government to try to sell us policies that assume 100 per cent. take-up. Every Member knows that that is simply not valid—that is not the situation for pensioners.
  Lynne Jones: Does the hon. Gentleman also acknowledge that a problem of an over-complex system is that it would be easy for future Governments, who might be less generous to pensioners, to cut back on the benefits and pensions paid to elderly people? That is exactly what happened in the past.
  Mr. Willetts: I certainly accept that one of the problems of a complicated system is that it is difficult to ensure its long-term viability. For example—to re-enter the debate that went on before the last general election—there are questions about all the special payments introduced by the Government. I think that pensioners
  612
  would have been better off if those payments had been consolidated in the value of the basic state pension. That would have been a better way to help pensioners rather than creating a large number of special payments. Of course, those payments exist and we understand why pensioners do not want to lose them, but had I been in the Secretary of State's shoes, I would much rather have put the money into the basic state pension.
  One of the things I regret is that the Government could have achieved much more were they not so preoccupied with gimmicks, special schemes and extra new payments. That is not the best way to help pensioners. In a recent report on the consequences of the Government's proposals, the National Association of Citizens Advice Bureaux states:
  "CAB evidence is that both the benefit and tax systems are complicated and intimidating to those lacking in financial literacy skills … The complexity of benefits and the claiming process is one reason why millions of pounds worth of benefits go unclaimed by people on low incomes … more needs to be done to ensure that all low income groups can claim the credits or benefits to which they are entitled."
  NACAB is telling us that the system is too complicated.
  Furthermore, the Pension Provision Group, in a long and thoughtful set of comments on the Government's proposals, states:
  "Ensuring take-up of Pension Credit is better than for existing means-tested benefits would be difficult."
  The group acknowledges that there will be a problem of low take-up of the pension credit—it is a pity that Ministers do not.
  We want the Government to address that problem. Charities for elderly people say the same thing: there is a problem of take-up of the minimum income guarantee, despite the millions of pounds that Ministers have spent on advertising it, and there will be similar problems in the take-up of the pension credit.
  Mr. Tynan: On take-up, does the hon. Gentleman not accept that stigmatising pensions by regarding them as a means-tested benefit rather than a right is off-putting to those who need them most?
  Mr. Willetts: I appreciate the sincerity with which the hon. Gentleman makes that point, but in the attempt to tackle the problem, income support has been renamed the minimum income guarantee, which will now be renamed the guarantee credit, and with the savings credit it will form part of the pension credit. The frequent renaming and re-badging of benefits does not help pensioners, and it is one of the main reasons why take-up is, if anything, getting worse. It is another example of the way in which this Government's Blairite preoccupation with renaming and new initiatives is not in the best interests of the people whom they claim to want to help.
  I want to discuss the faith that Ministers put in the new pension service, which will be introduced shortly, and the five-year entitlement as a solution to the take-up problem. The Secretary of State briefly referred to the pension service, which I hope will prove to be a success. However, it will be concentrated in a relatively small number of centres, and we are told that pensioners will be supposed to communicate with it on the internet and by telephone. It will be difficult for pensioners physically to visit a local branch of their pension service, because there will be so

  613
  few of them. I doubt whether the pension service will be able effectively to increase benefit take-up, which is currently going down. I hope that it will succeed, but we need more evidence as to why it will succeed than the Secretary of State has so far provided.
  The five-year entitlement, which is guaranteed once a person has claimed it, will not help if people do not like the prospect of claiming the benefit. It is no good saying that pensioners will be able to claim it for five years, given that it is the very prospect of providing the necessary detailed information that puts pensioners off in the first place. The Institute for Fiscal Studies said:
  "There is little in the plans for the pension credit that suggest that less information will be needed to establish benefit entitlement than in the past."
  The Secretary of State says that the entitlement will be held constant for five years, but pensioners' circumstances will not remain constant for that time. They will change all the time, and interest rates will go up and down, so the income from their building society accounts will change. Moreover, their personal circumstances and the value of their savings may change.
  The right hon. Gentleman says that he will try to prevent changes in bureaucracy for five years, but he cannot prevent changes in pensioners' circumstances. If pensioners approach the pension service, detailed recalculations of entitlements to benefit will be necessary; if they do not, but their circumstances have deteriorated and their income is lower, they will get less credit than they are entitled to. I therefore fail to see how the five-year blanket fixed payment will solve the problem that the Secretary of State claims to understand. There is a problem with take-up now, and there will still be a problem under the pension credit.
  The problem relates not just to pensioners today but to incentives to save in the future. Again, Ministers' claims for the pension credit's effect on the incentive to save are far too optimistic. I would much rather believe the Institute for Fiscal Studies, which says:
  "Overall, the effect of the pension credit on the financial incentive to save is left unclear, for the relative magnitudes of the different effects we have disentangled are not known."
  In other words, there will he no improved incentive to save for some pensioners, but for others such an incentive will indeed exist. The IFS is not willing to commit itself on whether the number of pensioners with an incentive to save will, on balance, increase, and I am surprised that the Secretary of State is quite so confident in that regard.
  Mr. Chris Pond: On future savings and pensions, I wonder whether the hon. Gentleman can offer some independent financial advice to my nine-year-old daughter. In the event that there were to be a Conservative Secretary of State for Work and Pensions by the time she reached retirement age, and given the hon. Gentleman's current policy of replacing state provision with private provision, how much does he recommend that she start saving weekly now to ensure at least the equivalent of today's basic state pension by the time she reaches retirement age?
  Mr. Willetts: The hon. Gentleman is straying into dangerous territory. He will know that one of the main groups of people taking out the stakeholder pension—which was supposed to tackle pensioner poverty—
  614
  is grandparents, who buy them for their nine-year-old grandchildren, for example. If he regards that as a serious contribution to the improvement of pensioner poverty, I suggest that he study the subject in rather more detail.
  The question whether the pension credit will reward pensioners who have saved is a subject on which the IFS is unsure, and on which the Financial Services Authority has given a clear warning. In the context of stakeholders—the point is relevant to pension credit as a whole—the FSA says:
  "The economics of stakeholder pensions are predicated on their sale without the need for personal investment advice."
  The hon. Member for Gravesham (Mr. Pond) is interested in encouraging us to give such advice, but we are not registered to do so. The FSA continues:
  "Whilst the introduction of Pension Credit does not of itself make these (simple) products more complex, it does have the effect of making the decision whether to buy more complex. This could mean more people needing to take advice before reaching a decision. But this advice has to be paid for and many who may need it may be disinclined to be prepared to do so."
  The FSA is warning that, because of the complexity of the pension credit's impact, it cannot be sure that people will be better off buying a stakeholder pension, and recommends that they seek advice. The IFS and the FSA offer the same warning: that matters are not necessarily as straightforward as Ministers like to claim, and that the pension credit will not necessarily provide all pensioners with an unambiguous incentive to save more.
  Mr. Levitt: If a pensioner has an income from investments or an occupational pension, it will surely be sufficiently high to take them above the pension credit level. If not, the pension credit will supplement that income. In both cases, there will be an incentive to save, and those whose income is below the pension credit level would also have an incentive, because they will qualify for extra help on reaching that level. Who has the disincentive?
  Mr. Willetts: The subject is not as simple as that, which is why the FSA is warning people to take advice. We hear about the 40 per cent. rate of pension credit withdrawal—the higher rate tax level—but once housing benefit and council tax benefit are included, pensioners could face marginal rates of up to 91 per cent. People might well think that a 91 per cent. rate of benefit withdrawal does not offer much of a reward for saving. Labour Members need to contemplate the impact of those measures, which would extend such marginal rates up the income scale.
  Miss Anne Begg: When the hon. Gentleman began his working life, did he decide that it would probably be in his best interests to save for his retirement, not knowing that he would reach the heady heights of Government office, earn lots of money and thereby be able to save? Like most of us, he probably decided at that early stage that it was probably sensible to save, not knowing whether he would be able to continue to do so, or to save as much as he anticipated. Most people in that situation would decide that it was better in the long term to save—either because they will be able to save a great deal for their retirement, or because they will be able to save a bit and therefore benefit from the pension credit.
  Mr. Willetts: Again, I wish that matters were as simple as that. The savings gap—the gap between the amount

  615
  people are actually saving and the amount that they need to save to enjoy a reasonable income on retirement—is estimated at a massive £27 billion a year. That is the problem that we have been debating—with the notable exception of the Secretary of State, who has remained silent as occupational pensions for new members have closed. We pressed Ministers on this issue for years, on the introduction of the stakeholder pension. For example, we asked how much money one needs to build up in a stakeholder fund to be confident that it will yield an income sufficient to get above the minimum income guarantee. That straightforward question—it is the $64,000 question—is one of the first that any independent financial adviser would want to consider, but we have never received a straight answer from Ministers.
  The answer could be $64,000. It could be even more. If means-testing spreads further up the income scale, it will affect the behaviour of the next generation. It is no good arguing that nobody will he affected and that people will carry on as if nothing has happened. Ministers cannot claim that this is a massive change in the way in which pensioners are helped without also recognising that it might have an effect—not always a desirable one—on the behaviour of the next generation of pensioners. That is what I ask Labour Members to consider.
  Mr. Jim Cousins: If the hon. Gentleman wishes to sweep away all the complexities and rely on the basic state pension, what relationship does he think that that pension should bear to average earnings, now and in the future?
  Mr. Willetts: Let me turn to that issue, because I now wish to set out a possible alternative approach. We would begin by acknowledging the most powerful point that the Secretary of State makes, although he did not put it especially succinctly today. He says that in the old days the basic state pension was well targeted on poverty because most pensioners were poor. However, he argues that pensioners now have a greater diversity of incomes, so the basic state pension is less well targeted on poverty. That is the kernel of the argument that the Secretary of State uses against those of his colleagues who wish to restore the earnings link and in favour of means tests. That point reflects the reality of greater diversity of income among pensioners and it is the challenge to us to think afresh about the problem.
  Beveridge's great insight was that if one could define categories of benefit recipient carefully enough, measures could be well targeted on poverty without means-testing. In his day, the basic state pension was well targeted, but now it is less so. The Secretary of State says that means-testing is the only alternative, but we know that, by and large, older pensioners tend to be poorer pensioners. The correlation is not perfect, I accept, but it is broadly true. The figures are striking. Couples who have recently retired have, on average, an income of £384, compared with the under-75s on £359 and the over-75s on £283. Similar figures apply to single pensioners—those who have recently retired are on £210; those aged under 75 are on £184 and those over 75 on £158.
  The hon. Member for Northavon (Mr. Webb)—my new friend, as the Secretary of State described him—made the fair point, sotto voce, that those figures are the reason
  616
  why the Government introduced free television licences and restricted them to the over-75s. The Government argue that that provision was well targeted because older pensioners tend to be poorer. The reasoned amendment does not propose a precise age range, because that would need to be decided, but if we paid a higher rate—not to all pensioners, as the Secretary of State claimed, but to older pensioners—it would be reasonably well targeted on poverty without more means-testing.
  Despite the imperfections in that scheme, which I freely admit, we could at least be confident that all pensioners would receive the payment. I am not confident that all pensioners will get the pension credit. The Government cite a load of figures for the pension credit, but they all assume a 100 per cent. take-up. That is a bogus assumption.
  Mr. Cousins: That is interesting, but I am still waiting for an answer to my question. What should be the relationship between the basic state pension—if the hon. Gentleman wants to rely on that as a means of delivery—and average earnings? Should it be 25 per cent., 10 per cent., or perhaps 4 per cent.? That is what we need to know.
  Mr. Willetts: I do not propose that we bring back the earnings link. I propose a significant increase in the basic state pension when people reach an age at which we know they are likely to have a lower income. That is what Members on both sides of the House propose as a better way to tackle the problem than yet more means-testing, and it has much to recommend it.
  Mr. Dismore: Will the hon. Gentleman give way?
  Mr. Willetts: No, I wish to make some progress. There is a logic to the reasoned amendment and I invite the House to consider that alternative strategy. I hope that it will win the day in the Division at 10 o'clock. However, if the pension credit is implemented despite our concerns, I would not take it away from pensioners—
  The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): Ah.
  Mr. Willetts: I am pleased to get a hum of approval from the Minister. I would not take the pension credit away, but I wish that we had the alternative strategy that I have outlined.
  I would now like to consider three particular points on the proposal. The hon. Member for Stafford (Mr. Kidney), who is no longer in his place, made a valid point about incomplete contribution records. I asked the Secretary of State a parliamentary question on that point nearly a year ago and I was told that some 2.9 million pensioners were in receipt of a partial pension. Many of those are women. We should remember, when we hear the claims of how marvellous the pension credit will be for pensioners, that 2.9 million pensioners—nearly a third—do not get the full value of the basic state pension. For them, their savings will have to go towards increasing the basic state pension to the full value and they will not get the 60 per cent. top-up—or whatever Labour Members fondly hope that those pensioners will get.
  We have not yet discussed the interaction between the pension credit and nursing homes. One of my frustrations with the Secretary of State and his Department is that they

  617
  have a blind spot about nursing homes and their costs. That is why the Government got into a muddle over the winter fuel payment, which they wrongly claimed was being paid to all pensioners when it was not paid to pensioners in care homes. We need to know how pensioners in care homes will be affected by the pension credit. The Minister in the other place said that
  "people in residential care or care homes will enjoy both the savings element and the guarantee element"—
  of the pension credit. That was a good start. Unfortunately, she continued:
  "Whether local authorities go on to recover all or part of that in increased charging will be for them to determine in consultation with the Department of Health."—[Official Report, House of Lords, 18 December 2001; Vol. 1858, c. 191.]
  So the Bill is a device to enable local authorities to extract more money from pensioners in receipt of the pension credit. The Pension Provision Group made that point clearly when it said:
  "Unless changes are made to the existing Department of Health guidelines, the immediate beneficiaries of Pension Credit paid to pensioners in residential care could be local authorities."
  That could also include any pensioner who receives any assistance with care costs, including domiciliary care. Any income that they get from the pension credit will be taken into account by local authorities when deciding how much to charge those pensioners. The Secretary of State did not mention that point and I hope that the Minister will do so later, because it is very important.
  We are all waiting with bated breath to know what decision the Government will reach on another aspect of the pension credit—the treatment of earnings. Considerable confusion still exists on that point, even after days of debate in the House of Lords. We thought that the Government believed it to be important to encourage people to carry on in work, if at all possible, with new flexibility. However, let us consider the case of two pensioners, both aged 67, who live side by side in a block of flats. One has a £30 a week pension from Tesco to boost the basic state pension and the Secretary of State claims that that person will get help from the pension credit. The other pensioner has only the basic state pension and goes out to work at Tesco and earns £30 a week. Is the pensioner who works to earn £30 a week to be entitled to the same level of support as the pensioner with the occupational pension? That is a point on which we have regularly pressed Ministers in another place. We have not yet been told whether the calculation of the pension credit will treat earnings in the same way as it treats income from savings.
  Mr. Darling: That is an important point, and I specifically said that we propose to treat income from work in the same way as money from occupational pensions or savings. I mentioned that, although, clearly, the hon. Gentleman may have been distracted at the time.
  Mr. Willetts: I welcome that. We shall want to check the detail in Committee, but it seems that the only logical position is to treat earnings in the same way as one treats savings. I presume that that means that pensioners will not claim the working tax credit. There is no upper age limit on the working tax credit, and I am sure that the interaction of the working tax credit and the pension credit—one of the many credits that the Government regularly throw in front of us—will be considered by the Committee in great detail.
  618
  I want to return to the issue of whether the pension credit will tackle the pension crisis that confronts us as every day passes. That crisis is caused by a number of factors: the closure of occupational pension schemes to new members; a catastrophically low level of saving; a spread of means-testing; increasing complexity, which means that financial advisers are more and more reluctant unambiguously to advise people that it is in their interests to save; and stakeholder pensions not reaching their target group—sales are very low, and very few of them are to people in the £10,000 to £20,000 income range. The Government's advertising campaign to increase people's knowledge and awareness of the stakeholder pension might be thought of as a success. We know from research, however, that the only consequence of people knowing more about the stakeholder pension is that it leaves them even more confused and uncertain than they were before they started.
  We have a low level of saving, and the only solution from Ministers is more means-testing. I invite the House to consider whether means-testing is helping to get us into this mess, and therefore whether more means-testing is really the best way to get us out of it.
  6.42 pm
  Mr. Jim Cousins: I thank you for calling me, Madam Deputy Speaker, although I am a little surprised to be called at this point.
  I am happy to support the Bill on the basis that it will add to security and increase fairness, particularly for the many pensioners—or, as I ought to say, for the many people over 60—who have now and will have in the future small savings and small pensions other than the basic state pension. They in particular have not benefited fully from the introduction of many of the Government's measures in the minimum income guarantee, because their small savings, earnings and work pensions take them above the limit. The fact that this state pension credit proposal will vastly extend the coverage and reach of the pension credit compared with the minimum income guarantee illustrates how many of those people there are.
  I am also encouraged to support the Bill on the basis of the failure of the hon. Member for Havant (Mr. Willetts) to answer my question. If the alternative to the state pension credit and the minimum income guarantee will be the basic rate of state pension, we need to know what will be the relationship between the basic state pension and average earnings. The fact that the hon. Member for Havant could not answer that point illustrates the need for the state pension credit proposals.
  Mr. Willetts: We do not know that about the pension credit either. We do not know what the long-term uprating formula will be for the pension credit.
  Mr. Cousins: That is a very interesting point, which I intend to try to address.
  My difficulty with the Bill relates to whether it forms a permanent part of the pension system. Is it something on which people can rely, that they can plan for, and that they can build in to their expectations, or is it a short-term fix to deal with the limitations of the minimum income guarantee that I have just set out? One of the most important aspects is the uprating system. The Government have made it clear that the guarantee element of credit

  619
  will be uprated in line with earnings for this Parliament. The crucial question, however, is the relationship between the savings credit and the guarantee credit. Because of the way in which savings credit is placed on top of the guarantee credit—if that were calculated as we currently understand it—there would rapidly be an enormous increase in the number of people who have an entitlement to pension credit. The reach of savings credit—because of the way in which it sits on top of the guarantee credit—would advance faster than the rate of increase in earnings. If that were sustained and built into the pension credit as a permanent feature, it could be an enormous strength, but it could also be a source of enormous weakness, as it is very vulnerable to future changes in assessment and eligibility.
  One of the objects that we ought to seek to achieve with the pension credit is to make sure that the relationship between the savings credit and the guarantee credit is in the form that is now proposed. Unless we can secure that, there is a danger that the benefits of the pension credit system would be rapidly changed by a future Government. Conceivably, it could rapidly change even if there were not a change of Government, because these schemes are vulnerable to changes in policy.
  The big protection against a change in the way in which the savings credit is assessed would be a scheme of such robustness and popular support that no future Government—whether of the Labour party or another party—could seek to change it. That is precisely what has happened to the winter heating allowance. It was introduced and it has now become embedded in our system. Pensioners understand it, it carries huge popular support, and it cannot now be changed. The official Opposition have given up on their attempts to change it.
  Lynne Jones: Is not the problem with the winter fuel allowance that there is no built-in annual increase in its value? Is there not a danger that the same thing will happen to the winter fuel allowance as happened to the pensioners' Christmas bonus if it is held at £200 or not increased every year?
  Mr. Cousins: My hon. Friend is right, but it is a matter of fact that it has gone up like a rocket. If we could achieve the same for the pension credit, I would be tremendously happy. Let us look at the some of the elements of the state pension credit proposal in the time that I have left.
  The state pension credit is a sort of third way proposal. People have argued for many years about means-tested benefits on the one hand and universal benefits on the other. The state pension credit is a huge breakthrough in thinking. It is an income-tested benefit that, from the start, will cover more than half the population, and if the relationship between the savings credit and the guarantee credit continues in the way that I have described, it will rapidly cover most of the pensioner population. It is a third way measure in that respect. It breaks through the arguments that we have had for many years in relation to universality and means-testing. However, it has some unfortunate deficiencies. The rate of the benefit is linked to 40 per cent. so these proposals will levy a withdrawal rate on relatively low-income pensioners that equates to
  620
  the higher rate of tax. That worries me, because it will cause problems and will reduce pensioners' enthusiasm for the credit.
  The maximum sum is capped in a way that many pensioners will find confusing. Unlike tax, the pension credit will continue the systems of attributed income. It will be a much better system of attributing income than the ones that we have had hitherto, but it will be a continuation of them. That fact will also undermine the credit's credibility and popularity. Most important, the minimum income guarantee attributes income even from small private sector pension plans of which there will be many in the future. The state pension credit will continue such attribution, so I see little point in the House having a huge argument about what age people should be able to keep their private pension funds without the need to draw down the pension if the lowest income pensioners with the smallest private pension funds are to have income from those pensions attributed to them from the outset.
  If the state pension credit could integrate tax and benefits in the way that many of us have hoped for for many years, that would be a huge step forward. Unfortunately, my noble Friend Baroness Hollis made it clear on Second Reading in the other place that that would not occur and that a crucial difference between tax and benefits was to be maintained. The pension credit will be subject to a household measure of income whereas tax is subject to an individual measure of income. That difference will particularly affect women who have smaller pensions both in their own right through the state and through work. I hope that we will be able to change that feature of the Bill. The issue of women who have incomplete contributions that bring them a pension that is smaller than the basic state pension has been mentioned already. I hope that it will be pursued.
  During the passage of the Bill, the Government could introduce a savings disregard to the pension credit. Such an important measure could lift people through some of the difficulties that I have described. If the Government were willing to conceive of the pension credit as free standing from the payment of pensions so that the savings credit could be paid from the age of 60 to both the men and women who are entitled to it, that again would be a huge breakthrough in establishing the pension credit as a permanent feature of our system.
  The Government must seek to embed their pension reforms so that future Governments cannot tamper with the benefits. The discussion on how that can be achieved goes far beyond this debate. However, I wish that the national insurance fund were a proper trust fund that was defended by trustees with a statutory responsibility to protect it from being raided in the way that it has been by successive Governments. We should do much the same for the state pension credit. It is an important and potentially powerful innovation, but it will be compromised if the benefits cannot be embedded in the system.
  People will support the pension credit if they understand it and know that the benefits are embedded in the system. For it to become popular, it must, as far as possible, be a tax-like benefit and not like a traditional means-tested benefit. The Government's proposals have not yet achieved that aim, which would be consistent with their plans. If we could go further and embed the benefits

  621
  in the system, the credit would become popular and enable the Government to secure their objectives in a way on which people could rely.
  There is little point in a constant stream of innovations for pension products and pension planning devices—whether devised by the state or the private sector—if people cannot rely on their being permanent features that will enable them to plan over 30 or 40 years. Our objective must be to make the state pension credit proposals in the Bill into something on which people can rely in the longer term as a permanent feature of pension planning. I hope that we will succeed and—
  Madam Deputy Speaker: Order.
  6.55 pm
  Mr. Steve Webb: It might be helpful to the House if I clarify what we shall vote on and describe what is and is not in the Bill. The State of State's speech might—I am sure inadvertently—have misled the House into thinking that certain provisions are in the Bill when they are not.
  The Secretary of State said that a typical pensioner would be £8 a week better off, and he seemed to imply—I may have misunderstood him—that that was because of the Bill. From April, the minimum income guarantee will be £98 and the promise is that—as a result of inflation or, possibly, earnings indexation—it will be £100 from April 2003. Even if one puts a charitable interpretation on the difference between the two figures and counts it as a gain, it involves an increase of £2 for pensioners on the minimum income guarantee. The Secretary of State said that the increase would be £8, so something does not quite add up. I think that he is counting things that have already happened, and including the increase in the minimum income guarantee from last April when it was £92—or possibly even the increase from the April before that.
  The minimum income guarantee has gone up significantly, but the Bill has had nothing to do with that. The £98 and the £100 for next year have already been announced. Whether we pass or ditch the Bill, the figure for next April will still be £100. None of the gains and none of the figures for the minimum income guarantee that the Secretary of State quoted are attributable to the Bill.
  I may be wrong but, as I understand it, the Bill does not contain the stuff about the capital limits. All that the capital limits stuff does is change the imputed rate of income on savings through the income support system, and that can be done by regulation anyway. That provision is not in the Bill. So if we got rid of the Bill or had never had it, what would we lose? The answer is the savings credit.
  I want to focus on whether the savings credit will achieve the two things that are claimed for it. Will it reward today's pensioners for having saved in the past and will it encourage tomorrow's pensioners to save for their old age? Both claims are fundamentally questionable.
  First, and most obviously, the savings credit will not reward those people who have been thrifty if they do not claim it. The Secretary of State poured scorn on his Department's figures for non-take-up of the minimum income guarantee. I accept that they are estimates, but Baroness Hollis told the other place that one in three pensioners entitled to the pension credit would not take it
  622
  up when it is introduced. If half of all pensioners—that is 5.5 million—are to receive the credit, 1.5 million or more will miss out on their entitlement in year one. What sort of scheme is it if it rewards people according to the lottery of whether they take it up? It will not be an entitlement like the pension. If we delivered the cash with the pension, we would guarantee that it reached the people who are entitled to it, but these proposals are a lottery, and one in three of those who have saved will not receive the credit.
  As the hon. Members for Newcastle upon Tyne, Central (Mr. Cousins) and for Stafford (Mr. Kidney) pointed out, women with incomplete contribution records will not receive the credit in full. Not only are they penalised for having brought up children by receiving a grotty pension, but they will be penalised again through receiving a grotty savings credit. The first part of any savings that they have been able to muster will be used to bring them up to the basic pension, and they will receive a reward only on what is left thereafter. The system will penalise not only the one in three who do not claim, but women who have taken care of children.
  The modern social security system provides benefits for having cared for children, but it did not begin to do so until the late 1970s. Women retiring now had their child-bearing years before such protections were introduced. When the hon. Member for Stafford intervened on the subject of women with incomplete contribution records, the Secretary of State gave a rather feeble response and asked, "What if they did not choose to contribute?" It is not a question of not choosing, because those women brought up their children when the social security system did not value child rearing. Not only are those women punished by receiving a grotty pension when they retire, but they will punished again by receiving a poor savings credit.
  James Purnell: The hon. Gentleman is doing a good job of trying to get his party off the hook as regards what will be a popular measure. What will he say when faced on the doorstep by a 67-year-old with a basic state pension who earns less than the minimum income guarantee, if he is going to oppose the pension credit? It seems to me that the hon. Gentleman is supporting the MIG and the increases, but if he does not support the savings credit, those concerned will lose all their private income from a pension or earnings. Would he continue to take that away, pound for pound?
  Mr. Webb: We have never at any point opposed the MIG, or said that the additional support for low-income pensioners is not welcome. However, if we are to spend the £2 billion implied by the Bill and by related measures, is the best way to do so through a lottery—with a one-in-three chance that those who need it will get it—and by penalising women with incomplete contribution records, or is it better to guarantee the money to the people who need it most and who may, indeed, have saved as well: the older pensioners? It is a question of priorities. Who would be the better person to get it?
  Mr. Dismore: Will the hon. Gentleman give way?
  Mr. Webb: I will in a moment, but I would like to make some progress.
  The proposed pension credit, or savings credit, is not a reward for saving at all. People who have not saved a penny voluntarily get the pension credit. How can that be,

  623
  if it is a reward for saving? The state second pension—as the Secretary of State has called it—is creditable. In other words, if people do not make any voluntary savings at all but accumulate a state second pension or SERPS pension, they get a top-up; not for voluntary or additional saving, but because they are automatically in the system.
  When the legislation was proposed, we said that the basic state pension and the state second pension were not adequate because they did not keep people clear of the basic means-tested poverty line. At the time, the Government said that that was nonsense and that the proposal was quite enough. However, before the pension had even been introduced, it was reformed. That has to be some sort of record; pension schemes normally last about 10 years before they are reformed. The Government said that a top-up was needed—in other words, "The second pension is not good enough; we need a third one." People will get a basic pension, a SERPS or a state second pension or perhaps a graduated pension. However, all of that is not enough and the Government will give them a pension credit on top.
  The sense that the Government's pensions policy is being made up on the back of a fag packet is irresistible. They make it up as they go along, spotting the blunders one year and trying to amend them for the next. The savings credit is a lottery for those who will not get it; it penalises women; and it gives people money who have not saved in just the same way as it does those who have. In what sense is that an incentive to save?
  Mr. Tynan: Does the hon. Gentleman not realise that some people cannot afford to save money and that their full income is used to survive? The pension credit will mean that if they have a small occupational pension scheme, they will be given extra money so that they can improve their living standards.
  Mr. Webb: I do not disagree with anything that the hon. Gentleman has just said. The savings credit is not a significant reward for those who have saved; more fundamentally, it is not an effective incentive to those currently of working age.
  The House should consider the sort of person at whom the Bill is aimed. Let us suppose that someone has just turned 40. Life, perhaps, has just begun, but that person has also begun to panic about pensions. What effect will the scheme have on someone who is 40? He has 25 years—a relatively long time—to think about saving for a pension. He is on relatively small earnings but could, if he sacrificed something, put perhaps £50 a month into a pension—although as the hon. Member for Hamilton, South (Mr. Tynan) says, a lot of people could not afford that.
  According to the Secretary of State, the 40-year-old is supposed to ask what he will get for £50 a month. First, he must assume the return on the fund. His adviser says that he will get 3 per cent. above inflation, through a mix of equities and gilts. In 25 years' time, he will have about £22,000. What sort of annuity or pension can he get with that? The second thing he must do is guess what the annuity rate will be in 25 years' time. It might well be lower than today, if one thinks that today's 65-year-olds will not live as long as those in 25 years' time. However, let us assume that the rate is the same; so he will receive 6 or 7 per cent on a £22,000 pot.
  624
  What sort of pension will that give? The answer is £1,400 a year, or £27 a week. The 40-year-old has done all these calculations, but then remembers that there is a pension credit or savings credit. He must guess what his pension will be, without knowing what the minimum income guarantee will be in the future or whether it will be price-indexed or earnings-indexed. We know the situation until the end of the Parliament, but the Government's own forecasts do not assume necessarily that the MIG will be earnings-linked or indexed beyond then. He must guess about indexation and work out the difference between the two things.
  For the sake of argument, let us assume that the provision is the same as at present; between £77 and £100. That is a gap of £23. Our 40-year-old has a £27 pension, the first £23 of which gets him 60p in the pound, or £13.80. However, the last £4 takes money off, at 40p in the pound. That is £1.60 off, so he will get a £12 pension credit.
  At the age of 40, this person is supposed to consider whether to save £50 a month in the hope of getting £12 a week above income support. How many people will do that calculation, make all those guesses and assumptions and sacrifice £50 a month? To give a concrete example, £50 a month could pay for a subscription to a nice sports club. For the next 25 years, that person could go swimming, or to the gym. He has a choice between doing that, and putting that £50 a month aside for 25 years in the hope of receiving £12. Does anybody seriously think for a minute that people will do those sums and, because of the Bill, save more? It is complete and unutterable nonsense to suggest that this Bill is an incentive to save.
  Mr. Cousins: Could I press the hon. Gentleman in the way that I pressed the hon. Member for Havant (Mr. Willetts)? If the blue-yellow front amendment is carried tonight, what can that same 40-year-old assume about the relationship of the basic state pension to average earnings when he retires?
  Mr. Webb: I will come to that point; if the hon. Gentleman feels that I have not addressed it, I encourage him to intervene again and I will do so.
  All of this assumes, as the hon. Gentleman was hinting, that the scheme is still there in 25 years' time. Typically, second-tier pensions last about 10 years or so. The graduated pension lasted 10 or 15 years, while SERPS lasted about 10 years before the Conservatives cut it. The state second pension was reformed by the Government before it had even come in.
  What chance is there that the state pension credit will even be there in 25 years' time? What chance is there that any sane person in middle age will plan for their retirement on the basis of a scheme that is so complicated that they cannot work out what they will be entitled to? It is simply nonsense. [Interruption.] The heckling from Members sitting behind the Secretary of State shows that they have lost the substantive argument.
  The Secretary of State is fond of saying that the Bill proposes "a 60p in the pound reward for saving". It is a 60p in the pound reward for small saving, or for £23 a week of saving, to be precise: the gap between the pension and the means test. If people save more than £23, they will not get a 60p in the pound reward. Someone who saves £40—£2,000 a year of pension on top of the £3,500 basic pension, which is not much to live on—will not get 60p in the pound of pension credit; they will get 15p in the pound. That is the effect of this system.

  625
  Unless one is clever enough to calculate one's pension to match exactly the gap between the pension and the means test and get the maximum credit, one does not get 60p in the pound at all. It suits Ministers to imply to people that when they save, they will get a 60p in the pound top-up. But they will not; if they save £40, they will get a 15p in the pound top-up. As ever, the measure has been grotesquely oversold.
  Lynne Jones: Does the hon. Gentleman agree that the only way to get complete security is to have the basic state pension set at the same level as the minimum income guarantee? In that way, people will know that they will keep everything that they have saved.
  Mr. Webb: I have a lot of sympathy with that point. Let me come back to the point made by the hon. Member for Newcastle upon Tyne, Central about our proposals. At the last election, when we proposed the 50p income tax rate on those earning more than £100,000 a year, the Treasury estimated a yield of well in excess of £3 billion. From that, and with money to spare, we proposed raising the pension in tiers according to the age of the pensioner. For those over 75, we proposed putting £10 a week on the pension. The Government are spending £2 billion on the Bill and related measures, and have told me that they could have put £15 a week on the pension for every person over 75. If we add our proposed £10 to the Government's £15, that £25 would bring the pension for everybody over 75 up to the level of the minimum income guarantee. As the hon. Member for Birmingham, Selly Oak (Lynne Jones) rightly says, that is the incentive to save. Every penny saved on top of the basic pension that brings people up to the minimum income guarantee is pure gain. It is not taxed at 40 per cent.—it is not taxed at all That is the incentive to save.
  Kevin Brennan: Will the hon. Gentleman give way?
  Mrs. Annette L. Brooke: Will my hon. Friend give way.
  Mr. Webb: I shall give way to the hon. Gentleman and then to my hon. Friend.
  Kevin Brennan: I shall be grateful when the hon. Gentleman eventually answers the point made by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) as to whether it is the policy of Liberal Democrats—the Tories' little helpers tonight—to link the pension to earnings over time.
  Mr. Webb: Earnings indexation of perhaps a couple of per cent. a year more than inflation—[Interruption.] Of course we do not know what it would be, but we have to make an assumption. If that figure were added to a pension of, say, £75 a week, that would be £1.50 a week in the first year. I am talking about a rise proposed in our manifesto not of £1.50 but of £10 a week, and the £2 billion that the Government are spending would be another £15 a week on top of that. That is vastly in excess of earnings indexation.
  We are not proposing across-the-board earnings indexation—we did not in our manifesto and we are not tonight. We are proposing something that goes much further, and would achieve what the hon. Member for
  626
  Birmingham, Selly Oak referred to for the over-75s. I freely admit that that would not apply to all pensioners. One reason why that is so difficult is the chasm that the Government have opened up between the basic pension and the means test. There is a huge and growing chasm, and our priority is to get the pension up, particularly for the over-75s, to the level of the means test. The critical advantage is that people's savings would not be taxed at 40 per cent., as the Bill proposes—it would not be taxed at all. They would get the full benefit, and that is the real incentive to save.
  There is one other incentive to save built into our proposals and the amendment.
  Mr. Dismore: Will the hon. Gentleman give way?
  Mr. Webb: I did promise to give way to the hon. Gentleman in a moment, and also to my hon. Friend the Member for Mid-Dorset and North Poole (Mrs. Brooke) but let me first pursue this point.
  Suppose that, as the hon. Member for Hamilton, South said, someone cannot afford to save a lot, but can save a small amount. At the age of 65, if they convert that money into an annuity, it has to last the rest of their life. The insurance company has to cover itself against the possibility that that person will live to 90 or 95, so annuity rates are very poor at present. However, if that annuity had to last someone of 65 not for the rest of their life but until they were 75, at which point a decent basic pension at the rates we are talking about cut in, it would be worth double what could be bought under the present system. Instead of people saving and then buying an inadequate annuity that would not lift them clear of the means test—in which case they would not bother—they would have the opportunity to save for an annuity of twice the size. That is another savings incentive built into this scheme.
  Mr. Dismore rose—
  Mr. Webb: First I will give way to my hon. Friend the Member for Mid-Dorset and North Poole.
  Mrs. Brooke: I thank my hon. Friend for giving way. Does he agree that the very best way to help pensioners is to have a system that is clear, easy to understand and sufficiently generous? Labour Members claim that if the Bill is not supported tonight, pensioners will suffer, but the Government are not proposing the best way in which to help our pensioners, particularly the most vulnerable.
  Mr. Webb: My hon. Friend is right. The sums that we are talking about, added to the basic pension for the over-75s, would make a real difference and would give thousands and thousands of pensioners the opportunity to be clear of means-testing altogether.
  Mr. Dismore rose—
  Mr. Webb: In a moment.
  I can guarantee Labour Members that, given the choice between tapers, thresholds and credits or a decent pension, I know which every one of my constituents would want.
  Mr. Darling: Some time I must find time to visit the academic institution from which the hon. Gentleman

  627
  comes—he seems to be making up his policy on the hoof. Can he explain one thing to me? He says that by taking the £2 billion from the pension credit and adding it to another £3 billion that has been conjured up from somewhere—we know not where—he would tell the over-75s, "Have another £15 a week." I understand that part of his argument, but what does he say to someone who is 67 and is poor?
  Mr. Webb: As the hon. Member for Havant (Mr. Willetts) said, we all agree that there must be a continuing role for a safety net. There is no disputing that—there must be a continuing role for means-testing. I hesitate to use a new Labour phrase, but we are talking about whether means-testing should be for the few and not for the many. That is the difference between us.
  Mr. Dismore: Will the hon. Gentleman give way?
  Mr. Webb: Yes, the hon. Gentleman has been very patient.
  Mr. Dismore: I am grateful to the hon. Gentleman for giving way to me at last. Under his theory, a millionaire in Mill Hill would get an extra £25 a week but someone on minimum income guarantee in Burnt Oak in my constituency, where half the people are on means-tested benefits, would not get one penny more—even though the paperwork might be clearer. How can the hon. Gentleman justify giving so much more money to people who do not need it while the people who really need it do not get a penny more because they are on minimum income guarantee?
  Mr. Webb: The hon. Gentleman has not been paying attention. The minimum income guarantee does not come under the Bill, so rejecting it will not take a penny off his pensioners who claim the minimum income guarantee. They would continue getting whatever they got under the previous arrangements. The millionaires in his constituency pay 40 per cent. tax so we would claw that back from the richest pensioners.
  Mr. Dismore rose—
  Mr. Webb: Perhaps the hon. Gentleman would do me the honour of listening to my reply before he intervenes again.
  What does the hon. Gentleman have to say to the one in three pensioners in his constituency who have been promised largesse by the Government but will not claim it because the system is so complicated? That is the question that he has to answer.
  We have heard that this is means-testing with a human face. People aged between 60 and 65 will be subject to means-testing, as at present, every week. Any change in circumstances has to be reported, so for 60 to 64-year-olds, it is business as usual. However, the hon. Member for Newcastle upon Tyne, Central referred to the over-60s. The savings credit does not apply to the over-60s. Hundreds of thousands of women will have heard the Secretary of State saying on television or on radio that the Government want to reward thrifty
  628
  pensioners. Some 62-year-old women might think of themselves as pensioners and they might think of themselves as thrifty, but the Secretary of State does not count them until they are 65. That is another group missing out on the Government's proposals.
  As for whether these measures are an incentive to save, the House does not have to take my word for it. The Pension Provision Group is an organisation set up by the Secretary of State's predecessor, consisting of the great and the good of the pension world, to provide independent expert advice on pensions. The group, to which the Government apparently listen, said of the pension credit:
  "The Government's wish to reward savers through the Pension Credit scheme could have the unintended effect of reducing … the amounts some people save."
  Help the Aged said:
  "In terms of promoting independence and dignity … a Pension Credit is no substitute for a decent state pension."
  The Minister was quite rude about Age Concern although he has representatives of the organisation on his taskforces. I do not know what they think about that. Age Concern says:
  "For future pensioners, we are not convinced that the Credit, as proposed, is likely to do a great deal in terms of encouraging people to save".
  That is what it is for—it is the only reason why it is in the Bill.
  The Government have been known to speak well of the IPPR, which said:
  "In theory, the Government strategy has some merit"—
  I love a good theory, and I bet the scheme looks very good on a whiteboard at the Department of Work and Pensions, but—
  "In practice, it falls short of eliminating pensioner poverty and providing an environment whereby people can understand their entitlements, save and be rewarded for doing so."
  The theory is lovely. The bar charts look great. The practice falls short.
  We have been told that people will be reassessed only every five years, so that is all right, but it is not all right if they get worse off in those five years. Let us suppose, hypothetically, that their Railtrack shares are worth less—or worthless. Their capital falls, so their imputed income falls and their entitlement rises. They have to make a fresh claim to get all the money that they are entitled to.
  The Secretary of State said that pensioners' circumstances do not change much—but if they have investments or the husband dies, they do. Earnings can fluctuate in retirement. The idea that people will be reassessed once every five years and be left alone between times is a myth.
  If the Secretary of State wants to intervene to tell us what estimate he has made of the proportion of people who will have to claim again within the five-year period, I will be delighted to give way, but of course the Government have made no such estimate. This will not work in practice.
  Mr. Tim Boswell: Does the hon. Gentleman—or my hon. Friend—agree that it is a remarkable thing that until now the benefit system has been predicated on a weekly need to be and the tax system on an annual capacity, but now the Government are overleaping both by suggesting that five years is the

  629
  appropriate period? Not only will people whose income has fallen get less than they should, unless somebody flags it up for them—as is to be done on the internet, apparently—but people who have received a windfall will not have it taken off them unless they choose to disqualify themselves.
  Mr. Webb: The hon. Gentleman is right to point out the anomalies in the Secretary of State's proposals.
  The Secretary of State touched on the new pensions service. I note that it is a pensions service, not a pensioners service, because it is driven by the Department's desire to save some money by doing as much as possible through call centres, although most pensioners would like to see a human being and do not want to talk about complex personal financial details down the phone or fill in a complicated form.
  We have had no joy in getting a response from the Department to a serious question. The Department wants everything to be done by phone as first preference. There are to be some house visits, presumably for the infirm, which is fair enough, but what if someone wants to talk to a real human, face to face? Will that be possible, without notice, and if so where? The suspicion is that face-to-face interviews in the local benefits office will no longer be possible. If there is a monthly surgery at the local Age Concern or citizens advice bureau, that is okay, but it is not the service that pensioners want.
  The Secretary of State had a bit of fun about my choice of bedfellows, but I could not help noticing that his bedfellow was Lord Fowler, who was Secretary of State for Social Security for many years under Mrs. Thatcher. The Labour party did not seem to have much time for his opinions then, and he is applauding the Government today only because they have adopted a mass means-testing, Thatcherite approach.
  The savings credit neither rewards those who save today nor encourages people to save for tomorrow, and I urge the House to reject it outright.
  7.24 pm
  Paul Flynn: Like all hon Members, I am familiar with the problems that the Bill is intended to solve. We have all had bewildered pensioners at our surgeries saying that they saved and made sacrifices to pay into a small works pension all their working lives, on low incomes, but find that in retirement their pension is not worth a penny to them because it is at a level that does not allow them to take an income from it but disentitles them to other benefits. There is clearly a problem, and the Government are to be congratulated on trying to solve it, but there are clear arguments against the Bill.
  I warmed to what my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said about national insurance. It is one of the rewards of being in this place that if we keep saying the same thing year after year, eventually people will listen. It was heartwarming to see the IPPR report, "A New Contract for Retirement". To our astonishment—and its own—it advocates raising the basic pension to the level of the minimum income guarantee.
  The minimum income guarantee was a piece of branding. All Governments have indulged in that, as with national assistance changing to supplementary benefit and
  630
  then income support. They have always found new labels that they hope will be more acceptable. The minimum income guarantee is the old income support, topping up the basic pension, but it was a good presentational move. If we have a criticism of the Bill, it is that it errs on the side of presentation. I dread the future, when pensioners come to our surgeries because the presentation made them think that they would get the true benefit of all their pensions but they have found that the true position is very different.
  The head of the IPPR said:
  "An enhanced basic pension is the best way to tackle pensioner poverty and to provide an environment in which people can plan with confidence and he rewarded for saving."
  He also said:
  "These conclusions were as much a surprise to us as they will be to others who believe that as a centre left think tank we would support targeting of resources on those in most need."
  In general, we do support that, but targeting resources is an imprecise activity. The winter fuel payment is targeted on those of us of an appropriate age, as it arrives in royal palaces and elsewhere. It is difficult to get targeting right.
  We should consider the state of the national insurance fund. My hon. Friend the Member for Newcastle upon Tyne, Central asked why on earth it is not a fund that is separately run, with managers who can invest and be paid according to the fund's profits. That would be far better. If the national insurance fund were a true fund, so that the pensioners who had paid in could get their reward, we would be in a very different situation. At present, people on low incomes are being defrauded of their money. The basic unfairness is that those on the lowest income pay the largest proportion in.
  Furthermore, there is another new wheeze. Although Conservative Members complain a great deal about the effect of green taxes, in fact £1 billion has been lost to the national insurance fund because of allowances made to industry by cutting their national insurance contributions to compensate them for those taxes.
  Let us consider the state of the national insurance fund. Is it on the rocks? Is it in trouble? In fact, it is in a very healthy state and has been for some time. The balance at the end of 2000 was equivalent to 41 per cent. of the benefits payments throughout the year. There is an in-built safety level of 16.7 per cent. of the contributions made, which has to he guaranteed in case there is a slump, with rising unemployment, but in 2000 the figure was 41 per cent. and things have improved steadily since then.
  The 2002 report shows an opening balance of £19 billion and an income for the year of £59 billion, or £2.4 billion more than the estimate, but the closing balance is expected to be 47.7 per cent. of benefits payments, or £24 billion—a huge surplus again. The 2002 report gives a forecast for next year and states that receipts are expected to exceed payments by almost £3.4 billion, producing a closing balance that would he 52 per cent. of benefit payments—a surplus of £27 billion. We are entitled to ask about that enormous unneeded surplus, which would be enough to make a substantial increase in the basic pension.
  Some of my hon. Friends have objected and said that the means test is okay, that it is a relic of the past that has no effect, but it has a profound effect. As has been said,

  631
  between 500,000 and 600,000 people are put off, presumably by the means test. That figure is robust and has not been denied. It has been around for a long time, and there is a very good reason for it. This is a generation thing that might not be easily understood, perhaps, by those of a different generation who have not experienced the ignominy of claiming benefits.
  A generation of people are proud to say that they have worked from the time that they left school at 14 and have never been on the dole or claimed any benefit. When they get to retirement age, they say, "I've paid my dues and done everything that I should", and they view claiming for income support as the act of a scrounger. In their view, those who claim it humiliate themselves. That view is deep-seated. They will not take such a step, having spent a lifetime of self-respect on their own earnings. A large group of people are in that position.
  I have heard no one deny that the Bill will result in an increase in the number of people who claim means-tested benefit to 5.4 million, which amounts to half the pensioners involved—a very high figure. We should not regard that as trivial or automatic. There will be great resistance to claiming the pension credit, however it is given.
  I have been impressed by the evidence from the various bodies. In particular the National Pensioners Convention has made a serious case. Although it supports many of the wishes expressed in the Bill, it wants the Bill to be simplified and changed in many ways. I hope that, in Committee, the Government will show a little humility about the Bill's deficiencies.
  It was heartening to hear tonight that earnings will be taken into account as a disregard. That is profoundly important because pensioners now aged 60 or 65 seem a great deal younger than those of their parents' generation and, to have a healthy time, the most beneficial and therapeutic thing that they can do is work, but there is an enormous disincentive in the scheme to stop that happening.
  The official Opposition are in a position of great weakness because of their atrocious period in government. I reminded them tonight that much happened in 1980. Lord Fowler, who has been mentioned, was the man who wanted to wreck the state earnings-related pension scheme, but could not do so because the insurance industry did not want the low earners to be landed on them. That Government encouraged people to leave very good-value occupational pension schemes and to enter the extremely poor-value private personal pension schemes.
  I vividly remember Baroness Thatcher telling me, when I asked her a question when she was in government, that I was against personal pensions because, as a socialist, I was against choice. Unfortunately, people had to make a choice under a bribe; they were told to leave the scheme and that they would have £5,000 if they remained in SERPS. They were told, "Don't be a SERP" and not to accept that amount. How many of those people now bitterly regret that they abandoned their good-value occupational schemes to enter money purchase schemes?
  Mr. Boswell: I thought that the hon. Gentleman started well, but was beginning to deteriorate. Even if he did not like everything that was done under the Conservative
  632
  Government, in view of what he said about the need for older people to work if they want to, I invite him to remember that we abolished the earnings rule, which was a major disincentive to their doing so.
  Paul Flynn: The Conservative party must have done some things right in its 18 years in power, but they were rare events. I do not know whether the hon. Gentleman was in the Chamber when I said in an intervention that the main reason for the Bill was the very generous disregard that applied from 1948, when the pension was 24s—this may date many hon. Members—and people could have l0s 6d in their pension while earning £1, which is a vast amount in today's money. That disregard was built into the pensions system and continued for a long time, until it was abolished by the Conservative Government in 1980. That had a profound affect on the attitude towards pensions and savings.
  I have grave doubts whether the Bill will have an effect on savings, as has been suggested. Clearly, there is a great argument for simplicity in our pension scheme, such as that found in France, where people seem to understand the point of their pension scheme. I find some clauses completely incomprehensible, and someone could earn a fee by translating the meaning of clause 3, which sounds like poor quality gobbledegook. I believe that, in trying to—
  Mr. Deputy Speaker (Sir Michael Lord): Order. The hon. Gentleman has had his 12 minutes.
  7.36 pm
  Mr. Howard Flight: Hon. Members are aware that the reason for the Bill is, in truth, not suddenly to offer substantial incentives to people to save for their own pensions, but because the Government introduced the MIG and stakeholder pensions and suddenly realised that, for a lot of people, there was no point taking out stakeholder pensions because of the MIG. Indeed, people could be misadvised to take out a stakeholder pension if their earnings were very modest.
  The Bill provides that those modestly above the MIG level should have this benefit, and it is hoped that there will be no obvious disincentive to save for those at the lower end of the stakeholder market. As other hon. Members have said, the arrangements, in essence, involve a 40 per cent. tax charge, and its impact can be much greater if people save a lot. The arrangements will really only benefit those who save up to £23 a week.
  There then appear all the categories that the Bill does not address, where it will not help and where it leaves disincentives. It will not help those with less than the full basic state pension entitlement and, for the reasons that the Minister explained, this will particularly damage women because, in the past at least, many have not worked for part of their younger lives while bringing up children. As has been said, the Bill will not apply to women in the 60 to 64-year-old age range. It will not apply to the self-employed, who are often the least well provided for in old age; nor will it benefit those who have saved for a limited time—for example, up to 12 years—who will receive no benefit from the credit as a result.
  I am still not entirely clear what the earnings rule will be, but the point is that the Bill has been spun as a great pension credit and incentive to save, but it will do nothing

  633
  at all for many people and it may represent a major disincentive to save for many people. We need to dig deeper to solve many of the problems that have been unleashed by the principle of the MIG and its extension. Many people have pointed out not only that the credit will be too complex, but that the Government assume there will be only a 67 per cent. take-up.
  Miss Begg: The hon. Gentleman mentions the problems caused by the minimum income guarantee. On reflection, would he get rid of it?
  Mr. Flight: I hope to suggest the solution in the few minutes allotted to me.
  There is nothing about the cost of the credit. Hon. Members will be aware that estimates by the Department for Work and Pensions have put it as high as £20 billion by 2040 and £26 billion by 2050 if it continues and depending on the qualification rules.
  The approach makes a nonsense of the Government's target to change the 60:40 relationship. In addition, I find it disturbing that at a time w hen occupational final salary schemes are being abandoned and alternative money purchase pension provision is going to be less generous, the Government are laying down the principle that the state will make good the lack of provision in people's savings for their retirement. That runs the risk of taking us down the economic path that is damaging the economies of Europe so much, where inadequately funded pension provision has led to taxation on employment, which damages economic growth and, above all, employment.
  The Government should think again. A pensions crisis is engulfing the country and we should be cautious, albeit with the best of intentions Although we want to help those in need in retirement today, if the policy takes us down a wrong and irreversible path, it will not do future generations any good. Both my hon. Friend the Member for Havant (Mr. Willetts) and the hon. Member for Northavon (Mr. Webb) made the point that it is crucial to target those age groups that need assistance.
  People who are 75 today are fitter than those who were 65 some 40 years ago. Most people will want to work certainly to 65 and possibly, as far as I am concerned, to 75. It is the older people who are in the greatest need and a significant increase in the universal pension for those over 75, which would lift everyone off means-testing, would solve many problems. It would provide security for people when they really need it, such as when the nursing home bills start to arrive or an annuity is worth only half of what it was when purchased. It makes sense to address those problems. Although it leaves certain difficulties for those who are under 75, more of them will work in the future and they will be able to use their private sector pension savings in a more focused way during that time.
  Mr. Tynan: If someone is in poverty at 65 or 66, does the hon. Gentleman think that we should not apply a measure to take them out of that? Should they have to wait until they are 75 before the problem is tackled?
  Mr. Flight: My hon. Friend answered that. No one is denying that means-tested benefits will remain in the welfare system for such people, but we need a pension system that works. We do not want to give people the
  634
  wrong incentives. The system must be targeted on groups of people who are most in need. The problem with the proposed measures and the MIG is that they send the wrong signals on pension accumulation. They will end up costing more than will be deemed affordable and do not provide the pension saving incentives that the spin attached to the label implies. At worst, they lock us into a path that will cause us to have the same problems as continental Europe. We want to achieve an affordable and workable compromise. The Liberals and the Conservatives have joined together on this issue to offer a practical path that makes sense for a community in which people will live and work for longer.
  7.45 pm
  Mr. Frank Field: When this measure was first thought of, our constituents' views on their pensions and the pension promise were rather different from their current views on their pension prospects. It is beyond all doubt that when the Secretary of State rose to introduce the measure, he did so in support of a Government who have done more for poorer pensioners than any other Government in our history. However, I want to set out why I will not support the Bill in the Lobby tonight. There is a reasoned amendment, and I hope that we will vote on whether the Bill should receive its Second Reading. I believe that it should not.
  I agree with the Secretary of State that in speaking thus, one allies oneself with people with whom one would not normally agree. It is true that when I was on the Opposition Benches, I spent all my energy, as did other Labour Members, in opposing the Governments of 1979 to 1997, who extended means-testing. I will continue to vote that way tonight. Of course we must be careful with people who push one line of policy in office and another in opposition. However, if the Government can change their mind, presumably Oppositions can do so as well.
  Although there might be a dispute about whether anyone understands the Bill or what its likely effect might be, there is agreement on both sides of the Chamber that taxpayers need to spend more money on supporting retired people. We have not had that point of agreement for many days, and it is much more significant than divisions over the Bill itself.
  There are four reasons why I oppose the measure. First, it breaks a manifesto commitment. In 1997, our general election manifesto highlighted the rising number of pensioners on means-testing, which had increased to one in three under the Tories. We found that an appalling state of affairs and promised to reverse the trend. Early in the life of our Government, we set the aim that when all our pension reforms were complete, the number of means-tested pensioners would fall from one in three to one in five. As has been pointed out, we will not achieve that objective if the Bill becomes law. Instead, the objective will be to increase the number to two out of three of our retired constituents. So breaking a manifesto pledge is the first reason why I will reluctantly vote against the Bill on Second Reading.
  Secondly, we opposed means-testing not merely because we opposed the Tories; we had clear reasons for thinking that it was a damaging policy for the country as a whole. We did not oppose it only for the reasons that were given in the 1930s. In the last debate on this subject, my hon. Friend the Member for Stalybridge and Hyde

  635
  (James Purnell) quoted an essay, which I consulted, about people's fear of the means-test man, as he put it. That fear clearly operates in some instances, but that is not the only charge that one makes against means-testing. As the House has already been told, the Bill will design out of eligibility many of the pensioners whom we would like to gain benefit, so it will not even be an effective means test for targeting help on those in greatest need.
  There was another reason for our opposition to means-testing, apart from our simply being bloody-minded and wanting to oppose the Government of the day. We began to see that means-testing had an effect on how people behaved, and not simply on those who learn to work the system, although one can hardly blame them for that if we design and put in place mean-testing systems, which encourage it.
  As the hon. Member for Northavon (Mr. Webb) explained to the House, people have a responsibility to try to calculate how they can make themselves and their families better off, and they change their conduct accordingly. Means tests undermine most of the attributes that we want from strong citizens, and that was one reason why we pledged ourselves in 1997 to reverse what seemed to be an ever-growing tide of pensioners on means-tested benefits. The Bill therefore goes against a manifesto pledge. We had specific reasons for thinking that means-testing was a bad policy.
  The third reason why I oppose the measure is that I do not believe that it will last. Before you, Mr. Deputy Speaker, were chairing our proceedings, my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said that he was rather surprised to be called at that point in the debate. All I can say is that if surprise leads him to deliver a speech of the quality that he gave us tonight, I hope that he is surprised on many more occasions and engages the House as he did tonight.
  If my hon. Friend was right, and the Bill could last, there could he a case for it, but I do not believe for a moment that it will be on the statute book in 10 years, nor do I believe it should be, given the issues that people who are trying to save for their retirement currently face. The Government's own projections of the cost of the measure show that, when it is fully effective, in today's terms it will cost 8p on the standard rate of tax. Does anybody think that future Governments will see this system grow and prosper with a tax bill of 8p in the pound for every taxpayer? Perhaps some people think that is realistic; I do not think that it is.
  In a few weeks, in the Chancellor's Budget, we will cross a threshold when we debate with the electorate the need possibly to raise taxes to support the health service. That will be nowhere as easy to negotiate as some of my colleagues think, even though we will be fronting a tax rise on the service that this country cares most about—the national health service.
  The fourth reason why I oppose the Bill, therefore, is that whereas people planning for their retirement want as much certainty as possible in the regimes that they have to negotiate, the Bill will add to uncertainty. It will not last. One has only to look at the record of previous Governments, let alone the record of previous Oppositions in responding to Government measures, to realise the likely fate of the Bill, no matter how noble its objective.
  636
  Although we agree across the House about the voters' growing sense of unease about how pensions will be paid for and about how an increasing share of that will come from taxation, the Bill is not adequate.
  I shall end my speech by suggesting how I hope the Government, through their programme, will shape the next move. The real weakness of our system is that people can work for 48 years and not get a pension that takes them out of poverty. The inadequacy of the first tier is the stumbling block to longer-term successful reforms. I hope that, at some stage, the Government will recast the state second pension. Instead of being a safety net benefit, it should be one of which everybody has membership. Instead of operating as a pay-as-you-go system, it should be funded. It should be bound up with the existing national insurance pension. At the end of the day, people participating in both schemes would have an adequate first-tier pension. That would simplify the system and there would be no disincentive to save. People would be able to make their own provision as they thought fit.
  There would be a balance between risking the pension promise through investments and trying to deliver the crucial first-tier pension through a pay-as-you-go system. It does not take much to begin to reshape the Government's measures to give us the basis of long-term, sustainable and successful reform. The Government need soon to respond to people's increasing concern about whether there will be an adequate pension for them when they retire. I hope that they will do so not by throwing away all the measures that they have taken, but by recasting some of them, putting aside this measure and looking at the state second pension. They should realise the potential that it will have if it is funded, if everybody is included, if it is compulsory and if it is linked to the national insurance state pension.
  Several hon. Members rose—
  Mr. Deputy Speaker: Before I call the next speaker, I point out that there is a 12-minute limit on all Back Benchers' speeches, but an awful lot of Members are still trying to catch my eye. It would be extremely helpful if they could take slightly less than their allotted time, in which case fewer of them will be disappointed.
  7.57 pm
  Mr. Andrew Mitchell: I start by drawing the attention of the House to my interests, which are laid down in the Register but which do not abut directly to the contents of the debate.
  This is turning into a most interesting occasion. It has always seemed to me that the House has a duty, in pensions legislation, both to address the needs of today's retired people and clearly to lay down long-term plans because the effects of legislation last such a long time. The comments made about that by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) and the right hon. Member for Birkenhead (Mr. Field) were particularly important.
  I say to the Minister that although I shall certainly support the amendment, I have not yet decided whether, if the amendment is defeated, I shall support the Bill in the Lobby, so I will listen particularly carefully to her response to the debate.
  James Purnell: I have great respect for the hon. Gentleman's views and, in particular, for what he says in

  637
  meetings of the Select Committee on which we both sit. If I remember correctly, last week he said that he thought that the pension credit had a number of valuable qualities. Does that determine that he will support the Bill? I hear that he has been supporting the pension policy of the hon. Member for Havant (Mr. Willetts), who seems to oppose the Bill.
  Mr. Mitchell: The hon. Gentleman is attempting to lead me down a cul-de-sac, and if he listens he will learn why I am in some doubt about how I will vote on the Bill if the reasoned amendment, which I strongly support, is defeated.
  The Bill is certainly muddled and complex, and in many ways it is a waste. That is why I welcome the reasoned amendment, which makes it clear that the Bill has a number of serious faults. It proposes a tremendous increase in complexity and means-testing, and the erosion of the incentive to save. In addition, we have to ask whether better use might be made of the money by targeting it on those who need support.
  I shall deal first with the massive extension of complexity and confusion. The hon. Member for Newport, West (Paul Flynn), who knows a great deal about this subject, is confused, and I, who used to be a Social Security Minister, am pretty confused about the effects of the Bill. It does not begin to pass the doorstep test, nor to live up to the description offered by Baroness Hollis, who said that the Bill is the final piece of the Government's pensions strategy jigsaw. Personally, I prefer the judgment given by Sue Ward, of the Northern Pensions Resource Group, who said that it reduces the Government's strategy to incoherence.
  My hon. Friend the Member for Havant (Mr. Willetts) referred to the Institute for Fiscal Studies, which says that it remains unclear how the credit fits in with the other parts of the Government's pensions strategy, notably stakeholder pensions and state second pensions. Andrew Dilnott said that he could not envisage the state second pension lasting much beyond the introduction of the pension credit. I shall pass over the interaction between the credit and housing benefit and community tax benefit. The Government say that no one will lose out, but the upper capital limits are still in place, so it is simply not clear how that would work. Gordon Lishman of Age Concern says that we constantly get into the position of saying, "We really don't want to start from here." On the ground of complexity, I have grave doubts about the measure.
  Secondly, the reasoned amendment mentions the massive increase in means-testing. The Government should heed the eloquent words of the right hon. Member for Birkenhead. He is right: there will be great complexity and low take-up. Not one third, but two thirds of pensioners are to be drawn into the means-testing net. I cannot understand how anyone can argue that one targets through a means test that draws in two thirds of pensioners. Depending on what the Government choose to say about uprating, it is possible that more than two thirds of pensioners—up to 70 per cent.—will be drawn into that net before long. It is impossible to square that with the Government's commitment to a 60:40 funded pension policy.
  Thirdly, the measure erodes the incentive to save. The highly respected Institute of Actuaries says that the Government's strategy of pension credit, second state
  638
  pension and stakeholder pension means that it is impossible to provide savings advice to those on low to medium incomes. That point was well stated by the hon. Member for Northavon (Mr. Webb). How can serious pension advice relating to savings be given if we do not know by how much the pension credit will be uprated in future, nor whether there will be a consistent, long-term, sustainable result?
  The Secretary of State mentioned the Association of British Insurers, whose members deal with 97 per cent. of insurance business in the UK. The ABI is concerned that pension credit may not encourage three specific groups who have been mentioned to save: the self-employed, those with small savings, and those without full basic state pension. The complexity is itself a disincentive to save. The Bill makes it more difficult to tell people that they will always be better off if they save.
  I pass over the fourth point made in the amendment, which deals with whether the additional expenditure—of course we have no idea what that might be—might be better directed elsewhere.
  The Government are getting into a terrible muddle with their pensions policy. There was some merit in the IPPR scheme in that it was clear, concise and would have put the money into the basic state pension, the advantages of which have been made clear by several hon. Members. I do not support the IPPR approach, but it is with a deep and growing sense of unease that I watch the way in which pensions policy is developing. I believe that we should to an increasing extent have funded basic state pensions for everyone. I want my party to commit to that, and I want the Government to do so as well.
  Recently, the Secretary of State said that he thought that it was impossible to get young people to focus on providing for themselves—I think that he told the Select Committee on Work and Pensions that young people prefer to go clubbing. He may be right, but it is wrong and a conceit of politicians to believe that young people expect the state to look after them in their old age. They do not believe that now.
  Some time ago at Cumberland lodge, I had the opportunity to speak to some Oxford PPE graduates about social security. They had had the pleasure of a visit from a new Labour Minister to talk about new Labour's approach to social security, and they invited me to talk about the old Tory approach. I discussed several aspects of social security, including pensions. For 45 minutes, every question asked by those young people, who were of an age at which I would have regarded anyone interested in pensions as a bit of an anorak, centred on pensions.
  Young people today know that they cannot rely on the state to provide for their old age. It is right that, on as consensual a basis as possible across the House, we seriously reconsider the possibility of providing funded basic state pensions for everyone who is now entering the labour market.
  Mr. Dismore: I have a straightforward question: is the hon. Gentleman advocating compulsory contributions to pension schemes?
  Mr. Mitchell: I have not yet made up my mind finally on whether that is essential, but my instincts are that it should be compulsory.

  639
  I would not say it was a blueprint, but for all its faults the scheme launched by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) was a significant contribution to the debate. Unfortunately, it was launched during the run-up to the 1997 general election and so did not receive the cool and calm scrutiny it merited. The timing was not good and there were specific problems owing to the industry not believing statements about the tax position of the scheme, but it was a step in the right direction.
  The scheme, worked up and refined, was also mentioned in the Conservative manifesto at the last general election, but I would like the debate to extend far beyond the Conservative party. Serious consideration should be given to the opportunities that would accrue were we to start funded pension provision for all those now entering the labour market.
  Conscious of your injunction, Mr. Deputy Speaker, I shall draw my remarks to a close.
  Lynne Jones: Will the hon. Gentleman give way?
  Mr. Mitchell: No, if the hon. Lady will forgive me.
  It would be in the finest traditions of spreading power and ownership widely throughout society—traditions that enthused my party to create a property-owning democracy and to sell council houses—to ensure that there were funded basic state pensions for everyone in future. I urge my Front-Bench colleagues to give serious consideration to a "pension plus mark 3" approach, which would ensure that considerable advantages are available to those who start work now and in future—advantages that have not been available to the present generation.
  8.7 pm
  Mr. Andrew Dismore: I am pleased to follow the hon. Member for Sutton Coldfield (Mr. Mitchell) because my starting point is the same as his. I should say first that I welcome the Bill, because it makes important provision for pensioners, especially the sort of people whom I encounter all the time in my constituency, who tell me that they have a small occupational pension or savings and feel that they have missed out on all the additional help that we have given to pensioners so far.
  The hon. Gentleman spoke first about complexity—an issue that I think is greatly overstated. In the Chamber tonight are a few pensions nerds who are extremely interested in the minutiae of pension schemes. They sit on both sides of the House and include the professor who leads for the Liberal Democrats. To be frank, when I speak to pensioners' groups in my constituency, I find that they are interested not in the algebraic formulae, but in how much money they will get at the end of the day. When speaking to such groups, I give them a copy of the ready reckoner that appeared at the back of the White Paper and which is now found in the policy statement. They know how much money they have put away, or how much their pension income is, so they should be able to work out for themselves how much money they will get. Most are able to do so.
  All the pensioners in my constituency who will be affected by the pension credit are not like those who are represented by some Conservative Members. They do not
  640
  have enormous share portfolios or complicated trust arrangements. They have small occupational pensions, perhaps derived from the public services, or they have been able to put away the odd thousand pounds or two. They know how much money they have—they do not have great complicated problems. They are the people we are trying to help. People with great complicated problems are not those who will come within the pension credit regime.
  Sandra Osborne: I agree with my hon. Friend. Does he agree that those are the pensioners who are most aggrieved about the current position and who feel most strongly that they are missing out, and that they will warmly welcome the pension credit?
  Mr. Dismore: I very much agree. One criticism of the alternative proposal advanced by the IPPR, the Liberal Democrats and now, I presume, the Conservatives, is that the position would be even worse for people who have paid national insurance; they would not benefit from having done so because those contributions would be equalised at the MIG level, whether the basic pension or the MIG is paid.
  Lynne Jones: Will my hon. Friend give way?
  Mr. Dismore: We have a limited amount of time, and I should like to make some progress.
  There is also the question of the great evil monster that we are creating by extending the means test to more people. Frankly, if more people get involved in means-testing, the stigma will be reduced and greater numbers of people will claim. In Australia, the entire pension system is means-tested, but that is not a disincentive for people wishing to make a claim.
  The Government's proposals are much simpler than present arrangements; we are not talking about weekly assessments and intrusive 40-page application forms which, I am pleased to say, have now been reduced. I can understand why people get concerned if, for example, they are asked whether they are pregnant; that question was on one of the old forms. We sensibly envisage a broad-brush approach with a five-yearly assessment and a pension stock-take with the first claim when someone reaches pensionable age. Most pensioners will find that much easier and more straightforward. The complications ascribed to the proposals are erroneous.
  Claiming through a pensions agency will be easier than claiming under current arrangements. However, when replying to the debate, I urge my hon. Friend the Minister to consider the position of pensioners in the south-east. There is no pensions agency office in the south-east at the moment, which could create particular problems for ethnic minority pensioners. In London, 300 different languages are already spoken; if call centres are spread around the world and a call is re-routed to, say, Newcastle it may be difficult for Cockneys to understand the Geordie accent, never mind Geordies trying to understand the more obscure dialects and languages spoken in London. I hope that we can address that. I should also be grateful for confirmation that telephone calls will be charged at local rate; I hope that one day, it will be possible for calls to be free.
  I am pleased that face-to-face interviews will still be possible for pensioners who prefer to deal with their pension arrangements that way. I am pleased that we are

  641
  adopting an outreach approach by going to libraries and pensioners' groups. However, how long will it take to arrange a personal interview if a pensioner applies for one? I am pleased that the Secretary of State, in introducing the debate, dealt with the question of part-time earnings, about which I am very concerned. If we take a more flexible approach to retirement and ask people to continue to work later in life, we must make sure that people are not penalised for working the odd day or two and can gradually ease into full-time retirement, if one can put it that way. I am a great believer in flexibility, but there could be problems with the means test if someone's employment patterns swing from one extreme to the other.
  I am pleased that the Government have accepted the point about downrating for hospital stays to 13 weeks; it is important to adjust calculations in relation to that. We have been assured that housing benefit and council tax benefit claimants will continue to receive their full benefits, but I am concerned about the way in which the mechanics will operate. The Opposition spokesman made an important point about local authority care charges, whether for social services support at home or residential care. I urge Ministers to talk soon to the Department of Health to make sure that we can give clear guidance to people who say, "Well, you've put my pension up, but the council just claim it all back it back again through a council tax rise." They should not be left in that position. If they are in residential care or in receipt of personal social services for which a charge is levied, they should not be penalised through local authority means-testing. As has been said, that would simply mean that we would be transferring a penalty to local authority benefits, which should rightly go into the pensioners' pockets.
  I heed your request, Mr. Deputy Speaker, to draw my remarks to a close. The one outstanding question to which I would like an answer is that of uprating. In the Select Committee, the Secretary of State was pressed hard on uprating; it is important that the Government say whether they regard uprating as the way to proceed.
  8.14 pm
  Mr. Paul Goodman: All Governments face the dilemma of trying to solve the trade-off between poverty and saving. This Government find themselves wrestling with that dilemma now. Obviously one could, if one concentrated exclusively on relieving poverty, create disincentives to saving; or one could, if one wanted solely to create incentives to save, end up with growing numbers of pensioners in poverty.
  The Government's central claim for the Bill is that it will reduce poverty and increase saving; it is on those two claims that the Bill should primarily be judged. The most effective way to begin to make that judgment is to look at the main way in which the pension credit will be delivered—in other words, means-testing. I shall give the House a few simple figures. In 1979, approximately 57 per cent. of all pensioners were means-tested; by 1995, the figure had come down to 38 per cent. The Library estimates that by next year the figure will have returned to 57 per cent; by 2050, up to 70 per cent. of all pensioners could be on pension credit, if it lasts until then. I want to make an important concession to the Government, who contend that means-testing is the best way to help poorer people; their main argument is that that method targets people individually. That is right, and it is a strength of their position.
  642
  However, there is a difficulty. How do the Government's argument and all the abstract arguments flung around the Chamber this evening relate to the experience of the people in, say, my Wycombe constituency which, in places, is not particularly rich; people do not always have, to quote the hon. Member for Hendon (Mr. Dismore) "enormous share portfolios". Some of the people who come to see me find the forms that they have to fill in complex; they find the relationship between one benefit and another extremely complex and do not fully grasp it. Indeed, I am not sure that I or many other Members in the Chamber fully grasp those complexities either. People often do not have a family member close at hand to advise them and are entirely reliant on professional advice. They are therefore experiencing genuine problems in dealing with increased means-testing.
  Moving on to the link between increased means-testing and take-up, I want to quote some of the Government's own figures. The Secretary of State, if I understood him correctly, did not seem to have great confidence in all his figures, although the hon. Member for Northavon (Mr. Webb) shrewdly pointed out that in the House of Lords Baroness Hollis appeared to have great confidence in the same figures. I am therefore curious to know whether the Government's approach is consistent. The key figures for the minimum income guarantee are as follows. In 2001, about 1.7 million pensioners took up the MIG; the highest estimate is that 750,000 pensioners did not take it up. I want to make another concession to the Government for the moment and assume that that figure was in fact not 750,000, but about 500,000. By my figures—perhaps I am wrong—that is almost a third of those who took up the minimum income guarantee. So we are not talking about a small number or a small proportion. To nick, if I may, a phrase from Baroness Thatcher and apply it to Labour Members, we are talking about people who the Labour party likes to think of as its own—yet up to a third and certainly more than a quarter are not benefiting from the MIG.
  The key point is that there is no hard evidence that a larger proportion of those entitled to the pension credit will take it up. The Government estimate—this is their aim—that 67 per cent. of those eligible will take up the pension credit by 2004, but even they admit that that target is "ambitious". Even if they reach the target, by definition, at least 33 per cent. will not take up the pension credit and therefore not benefit at all.
  If I correctly understand the Government's approach from what the Secretary of State said earlier, their basic argument is that they do not want to consider the alternative of targeting by age because that would create anomalies—I agree; it certainly would—and that they are content to carry on means-testing and means-testing, regardless of the proportion of pensioners who do not take up pension credit. That is a huge hole in the Government's argument, and it is where the pension credit fails the first of its two tests—whether it will relieve poverty. For those who take it up, it surely will, but what about the third or quarter of those entitled who will not do so? I do not believe that the Government can or will carry on like this.

  643
  The evidence on saving is ambiguous. Many figures have been bandied around the Chamber during this debate, but like my hon. Friend the Member for Havant (Mr. Willetts), I am content to rest on those from the Institute for Fiscal Studies. It says:
  "Overall, the effect of the pension credit on the financial incentive to save is left unclear, for the relative magnitudes of the different effects we have disentangled are not known. So whether the pension credit will encourage or discourage saving is an empirical question on which future research may be enlightening."
  In other words, the IFS simply does not know. I tend to think that if it does not know, the Government cannot say with certainty that the pension credit overall will boost savings. It is therefore perfectly clear that the Government's pension credit has failed one of the two tests, as we have no reason to think that the quarter or third of pensioners who do not take up the MIG will take up the pension credit. It is also clear that the Government have not really hit their target on saving.
  My hon. Friend the Member for Havant made a series of telling points about the increasing crisis in pensions, with which the Government will now have to deal. Watching the Secretary of State, I got the feeling that he was digging himself deeper and deeper into the pension credit and more means-testing without being able to guarantee that that approach would stand up in the medium term, let alone the long term. The Government have put all their eggs in the pension credit basket.
  The Government like to say that the pension credit is the final brick in the architecture and that, once it has been introduced, the whole Government pensions building will be secure and will stand. However, Conservative Members have very good reason to vote for the amendment, and will do so, as will the right hon. Member for Birkenhead (Mr. Field) and the hon. Member for Northavon.
  As the hon. Member for Northavon said, the pension credit has been rushed in even though the Government are not yet clear about the consequences of the minimum income guarantee. Therefore, it is hard to see the pension credit as completing a perfect whole. It is far easier to see it as a sign of a Government whose pension strategy is in deep confusion. I urge the Government to think again about going down this road before they find themselves in a hole from which they cannot get out. That is why I, my hon. Friends and others will support the amendment.
  8.23 pm
  Miss Anne Begg: I am delighted to be called in this debate and I am aware that many Members still wish to speak.
  I was interested in the comment of the hon. Member for Wycombe (Mr. Goodman) that the pension credit had been introduced with such high speed. Four years is hardly very quick. I say four years because I spent the summer recess of 1999 not swanning off on some foreign holiday, as the popular press seem often to paint Members of Parliament doing, but going round most of the sheltered housing complexes in my constituency, holding a large number of pensioner meetings—I held about 20 in total—and speaking to pensioners about how they felt about the Government's pensions policy.
  644
  The summer of 1999 saw the height of pensioners' unhappiness about this Government's pensions policy. The 75p rise had just been announced, but pensioners had not yet received it. Going to speak to large groups of pensioners—they turned out in some force—was like entering the lion's den. However, there were some things about the Government's pension policy that they liked. The first was, of course, the introduction of the minimum income guarantee.
  It was important that the new Labour Government, having come to power in 1997, tackled pensioner poverty, especially poverty among women pensioners, who were losing out because the pension system was based predominantly on a contributory principle. These women had not paid any contributions, or only very few, or had broken work records. Many working women had paid only the small stamp and therefore did not have full pension contributions.
  The MIG was crucial. The Government should not make any apology for dealing with pensioner poverty by introducing it. It was a good measure that was extremely well liked. People still come up to me to thank the Government for what they have managed to do, although they often do that on the quiet. It is rare at a large meeting of pensioners to find pensioners who have benefited to the tune of sometimes £20 or £30 a week as a result of the MIG. That is not admitted at such gatherings, but pensioners will come up quietly afterwards to admit that they have benefited greatly from the measure.
  There is also the winter fuel allowance, a free television licence for the over-75s and increases in the basic state pension. Obviously pensioners are slightly happier now than they were during the summer when I was talking to so many of them.
  One major problem was identified. There was huge resentment among pensioners whose income was just over the MIG, those who had worked very hard all their lives and perhaps had a small occupational pension or a small income from some savings. They felt—resentment is not too strong a word—aggrieved that their hard work and thrift was not getting any reward.
  In some instances, these pensioners did not understand why the Government should give money to people who had not saved and who had not invested in the future. I was keen to emphasise that that was the right thing for a Labour Government to do and that it was right that we should tackle pensioner poverty. The fact that they felt that somehow they were losing out was not a reason why the Government should not act, and the MIG was absolutely the right approach.
  Obviously there was a problem that needed to be addressed. It was interesting that the hon. Member for Arundel and South Downs (Mr. Flight) talked constantly about the problem caused by the MIG. I think that all Labour Members accept that there are problems caused by it, namely the resentment that many pensioners have felt. I am not quite sure what the hon. Gentleman's solution is. He said that he would tell the House what it is, but I do not think that he did, or else it was so confused that I could not follow it.
  Perhaps the hon. Gentleman's solution was that we should still give means-tested benefit to some people, but I am not sure whether it was to the level of the MIG. He suggested that the Conservatives would give lots of

  645
  money to the over-75s. That is not an answer. It is not a reply to those pensioners who felt that they were being let down and left out because their income was just above the basic MIG levels.
  The Bill is the solution to the problems caused by the MIG. It answers the questions that many pensioners in my constituency were putting to me. Like my hon. Friend the Member for Hendon (Mr. Dismore), I feel that it passes the doorstep test. An Opposition Member claimed that it failed to do so, but it is easy to explain on the doorstep to those who have saved a little and who feel that they are being let down because they are not getting anything back that, with the pension credit, there will be some reward for their saving.
  The real challenge and the big problem with the Bill will be whether there is proper take-up of the pension credit once the Bill is enacted. It will be an incredible challenge to the Government to persuade people that the credit is something for which they qualify and not something of which they should be ashamed, and is something that they will get as of right. It will be doubly difficult if the Opposition continue to harp on, as they have tonight, about how complex it is. If pensioners are told, "This is such a complex measure", of course, they are not going to apply.
  David Cairns: My hon. Friend is being harsh on the Opposition. At least they have turned up and made a contribution. When she is on the doorstep in Aberdeen talking to voters in her constituency, will she undertake to point out to them that not one member of the Scottish National party bothered to turn up to take part in this incredibly important debate, or even sought to intervene
  Miss Begg: I will be interested not only in how the Scottish National party votes tonight, but in how the Liberals vote, because the Liberals are the main opposition in my constituency. Liberals who fight elections for a Scottish Government in Aberdeen next year will have a hard job on the doorstep explaining exactly why their party has voted against the pension credit. I have no doubt that that in itself will undermine their case. If they continue to support the Tories in saying that this is a means test, and it is demeaning to claim the credit, obviously it will be harder and harder to persuade people that they should be claiming it and that it is not like the 1930s means test.
  I support many of the things that my hon. Friend the Member for Hendon has already said. The credit can be sold on the doorstep. It can be sold to today's pensioners on the basis of the fact that it is their reward for saving. That is easy to understand. It is also easy for them to understand that they are getting something back. That is where the resentment came in: they felt that other people were getting something for nothing. They will feel that they are getting something back from the Government, but not in the form of a handout or of a demeaning means test. They will qualify because of their thrift.
  If, as is projected, 70 per cent. of pensioners qualify for the pension credit, the stigma that the Liberals say will be attached to it will not exist. They have said, however, that there must still be some means-tested benefit. If a very small number receive means-tested benefit, there is a huge stigma attached to that—only the very poor get the means-tested benefit. However, if 70 per cent. of pensioners qualify for the credit, that stigma will not exist.
  646
  Another thing that will, I hope, help take-up of the pension credit—again, it is a challenge for the Government—is the new pension service, an agency dedicated to looking after pensioners and their needs, and ensuring that those who reach pension age are properly catered for and have their needs looked into. The hon. Member for Northavon (Mr. Webb) said that the pension is the easy option because everyone gets it, and the means test is difficult because not everyone is subject to it. I do not know what he would say to my constituent who told me that she had found that she did not get a pension because she had not realised that she had to fill in forms that were sent to her—she thought the pension came automatically. It is simply not true that people get the basic state pension as an automatic right. They do not if they have not made contributions or filled in forms as they approach their 60th birthday. Therefore, I believe that the pension credit can be sold to today's pensioners.
  There has been much talk about whether the measure will give pensioners of the future an incentive to save. People I know do not behave in the way described by the hon. Member for Northavon. I do not know of anyone aged 40 who sits down and calculates to the nearest penny how much they will get in 20 years' time. Most people do not make those kinds of complicated calculations. They work on the principle that they hope—as did today's pensioners when they were younger—that it always pays to save. The introduction of the minimum income guarantee provided an incentive to save, but the introduction of the pension credit means that it will always pay to do so. It will pay to save a little, because people will qualify for the pension credit; it will pay to save a lot, because people will he so much better off than if they had not done so at all.
  We cannot know at age 40, 18 or 22, when I started work, what wages we will have for the rest of our lives—or, indeed, whether we will work for the rest of our lives. A person may be hit by a bus and end up paraplegic or have a broken work record owing to continual ill-health or family commitments. We should remember that the pension credit is not the only thing—
  Mr. Deputy Speaker: Order.
  8.36 pm
  Andrew Selous: I welcome the Government's desire to tackle pensioner poverty, but, like many of my hon. Friends and, indeed, some Labour Members, I must put on record the fact that I do not believe that the Bill is the best way to do so. I reiterate the comments of my hon. Friend the Member for Havant (Mr. Willetts), who said that if the Bill is introduced, Conservative Members will ensure that there are no losers through any alternative proposals that we make.
  The Bill introduces a significant increase in means-testing for our pensioner population, and we are entitled to fuller answers from the Government about why that is so. In 1993, the Chancellor of the Exchequer said:
  "I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved. The end of the means test for our elderly people".
  Only four years ago, the Prime Minister said that
  "there are problems if you move to too much means-testing, as you can see with pensioners who do riot take up income support".

  647
  So there has clearly been a seismic shift of opinion on the part of the Government about whether it is worthwhile to means-test, and they have not adequately explained the reasons for that.
  Help the Aged estimates that 2.5 million people are entitled to the minimum income guarantee, but only about 1.7 million of those are receiving it. That is a take-up rate of only 68 per cent., which equates to about 800,000 pensioners. Due to the complexity of our benefits system, last year around 500,000 people did not receive the income support to which they were entitled; that has increased to 580,000. Similarly, 150,000 did not receive housing benefit—that has now increased to 210,000—and 1.07 million did not receive council tax benefit; that has increased to more than 1.2 million. Help the Aged drew attention to the Department for Work and Pensions' own research showing that some of the most newly qualified pensioners are some of the most reluctant to take up the minimum income guarantee.
  We have heard about the problem of what is to happen to the poor 67-year-old pensioner. That is a valid question, and Labour Members are entitled to ask it. However, surely the bigger picture is that if large numbers of pensioners—perhaps hundreds of thousands—do not take up benefits as a result of the proposals, more pensioners overall will be worse off than would be the case if the needs of that 67-year-old pensioner were precisely met by this massive extension of means-testing.
  The current figures are all the more disappointing, given that the Government have recently spent £15 million on an advertising campaign. I do not begrudge spending that money, but it is depressing to note that the results appear to be going in the wrong direction. In respect of certain benefits, take-up is falling rather than rising.
  The Prudential Assurance Company estimates that some 3 million pensioners fail to claim about £1.2 billion worth of benefits each year—a situation that the Bill will make even worse. In May 2000, the then Social Security Committee—I am a member of its successor body, the Work and Pensions Committee—said that urgent steps should be taken to address pensioner poverty through non-means-tested methods, and called for the Government to take that route.
  The Bill will vastly extend means-testing up the income scale, which will blunt the incentive to save for certain sections of our community. It is not true that people will be better off saving in all cases. About one third of pensioners will indeed be better off, but for a further third, the anticipated results are ambiguous; the final third will have a slightly reduced incentive to save. The National Federation of Post Office and British Telecom Pensioners—the headquarters of which is in my own, South-West Bedfordshire constituency—has pointed out that those who make less than a full contribution to the basic state pension will not benefit in any way from the savings credit. Women aged between 60 and 65 will not benefit, and because the self-employed are not eligible for the state second pension, they, too, will not benefit.
  James Purnell: I hope that the hon. Gentleman accepts that such people will benefit through the minimum income guarantee and the guaranteed element included in the Bill.
  Andrew Selous: Indeed, but I was referring to the savings credit, not the minimum income guarantee.
  There is a savings crisis in this country. There is a £27 billion gap between what we as a country should be saving, and what we are saving at the moment. Indeed, it is a tragedy that, in many cases, today's generation of workers will retire on less than do current pensioners, who were lucky enough to enjoy a defined benefit contribution scheme. To fill that gap, today's generation will have to save significant extra sums.
  We have heard today about younger people's attitudes to pensions. It is my personal belief that young people want a real sense of ownership of their pension assets. They want to feel that they own their pension in the same way that they own a house or a car—if they are lucky enough to do so—and that includes inheritability.
  On pensions advisers, even Help the Aged has said that advice for the current generation of workers on saving for the future will be about as reliable as that given by horse racing tipsters, such is the complexity of the landscape at the moment. We salute the Government's intention to do something about pensioner poverty, but our proposals are simpler and clearer, would lead to far greater take-up and would be much more easily understood.
  8.44 pm
  Sandra Osborne: I shall curtail my comments as much as possible, to let other hon. Members speak.
  I believe that this legislation represents a promise kept to a very important group of people—those pensioners who have missed out because of modest pensions or savings. All of us should be aware of how aggrieved they feel—and rightly so—not because of selfishness or greed, but as a simple matter of fairness. However, it was right, as my hon. Friend the Member for Aberdeen, South (Miss Begg) said, to tackle the needs of the poorest pensioners first—the 2 million who were living on or below the poverty line in 1998. That was an absolute disgrace, with a major gap between the richest and the poorest pensioners.
  It was essential first to ensure that pensioners did not have to choose between eating and heating. My parents, who worked in low-paid jobs all their lives, often had to make that choice when bringing up five children. My mother, who is now a widow, has benefited greatly under this Labour Government, and that is as I would have expected. I would have been extremely angry if she had not been able to have that security in her retirement in the time of a Labour Government. It is also right to tackle the problem of the large group of pensioners who are by no means well off, but who deserve a reward for their efforts in saving on what was often a very tight budget.
  I intend to dwell on the issue of fairness, because I felt a sense of déjà vu when my hon. Friend the Member for Aberdeen, South was speaking. She talked about the doorstep test. I remember that test during the Ayr Scottish parliamentary by-election, when the pensioners of my constituency gave the Government a clear message about their feelings on the 75p increase. A simmering discontent boiled up into anger about the fact that that group of pensioners above the level of the minimum income guarantee felt that they had missed out on the benefits that they deserved under successive Governments.

  649
  Many hon. Members have mentioned take-up. I see advantages in the pension service, but I wonder how the link will be made between the national service and the local services. For example, the IPPR has referred to an "advice vacuum". What arrangements will be made to ensure that, for example, welfare rights advice will still be available at a local level?
  I share the frustration of other hon. Members at the position of the large group of women who will miss out on the savings credit. A woman over 65 and one under may have exactly the same income but will end up with different benefits, even if they have the same savings. The same problem applies to those who have not acquired rights to a full basic pension but who have savings. There are 1.4 million people in that category, 1.1 million of whom are women.
  The Government have introduced the state second pension for people with broken work records, and women will now have an entitlement to a pension in their own right. The important role of carers has also been recognised, as has the need for a work-life balance. That is a major breakthrough for women in this society. However, how does the Minister reconcile that recognition of a broken work record in relation to the state second pension, which is completely valid and most welcome, with the fact that so many women of this generation of pensioners who are in exactly that position will lose out under the savings credit?
  I turn to the issue of public confidence in the market to provide an income in old age, because that confidence is rapidly being eroded. I have raised in Westminster Hall the plight of former United Engineering Forgings workers in my constituency who will not receive the returns from their final salary scheme because the company has gone into administration with an underfunded scheme. Those workers will now get nothing like the pension that they were expecting. They took the advice, as many others have done, of successive Governments and invested in provision for their old age. However, that has been ruined by the vagaries of the stock market. It has been said tonight that people do not feel that they can rely on the state for their benefits in the future, but many people are very worried about the ability of the private sector to deliver.
  In the overall context of pension provision, the state pension credit is a big step forward. However, I worry about the overall context, especially in the private sector, and I hope that the Minister will be able to comment on that issue when she winds up.
  8.49 pm
  Hywel Williams: The right hon. Member for Birkenhead (Mr. Field) broke the duopoly that has existed so far in support of this reasoned amendment. I add the support of the Scottish National party and Plaid Cymru, and I note from the names on the reasoned amendment that there are supporters from Northern Ireland as well. There is broad support for this reasoned amendment.
  Plaid Cymru and SNP Members will support the reasoned amendment because the Government's proposals will involve extensive means-testing of the incomes of older people. That means-testing will become a long-term feature of our pensions system, which will lead to complexity in an already complex pension system. If we
  650
  want more targeting on the basis of income, we must have a more complex testing system. After all, that was the argument in relation to the 1986 Act. The Secretary of State has referred to the noble Lord Fowler, and I seem to remember that when Lord Fowler introduced the 1986 Act one of the arguments that he deployed was that the means-testing system would be simplified by introducing premiums. I do not want to rehearse those arguments again, but that is the point—to be more sophisticated, we must be more complicated.
  Means-testing will continue to have severe disincentive effects on take-up. Pensioners will therefore miss out on their entitlement, as many hon. Members have argued. The Government claim that the means test will take place every five years or up to every five years, and that, in some way, that negates the disincentive effect. Pensioners know better, however. They know that the hurdle of the test is the demeaning effect of the means test at the start of the five years. The Secretary of State might disagree with that, but pensioners know that that is the case.
  David Cairns: The hon. Gentleman said eloquently that he does not like means-testing. If he rules out means-testing, what is the impact on the mythical 67-year-old—who has reappeared time after time in this debate—who is poor, who will gain under this system, and who, as the hon. Member for Northavon (Mr. Webb) has said clearly, will not gain under the reasoned amendment? What is his answer to the 67-year-old in Greenock who will benefit under our system but lose out under his?
  Hywel Williams: No one has said that means-testing will disappear. After all, the current system combines a pension that is a universal right and a certain amount of means-testing. There is no way out of that.
  One of the effects that is claimed for these proposals is that they will help young people to realise that they should be saving. The hon. Member for Aberdeen, South (Miss Begg)—who is sadly no longer in her place—seemed to be confident that a large number of younger people were considering saving or were already saving. I have no confidence about that. Younger people will see that it is not clear what the value of saving will be to them decades down the line. All that they will see is that the system is changing, that it is complicated, and that means-testing is increasing.
  There are better ways to target help where it is most needed, to which the hon. Member for Northavon and other hon. Members have referred—targeting money on older pensioners. The hon. Member for Hendon (Mr. Dismore) mentioned that he had no qualms about 100 per cent. means-testing. The Government contend that this extension of means-testing is the best way to target help on those most in need, and they appeal for support to their friends in the pension industry. I refer, however, to my constituent, Mr. W. H. Evans, of Clwt y Bont, who is a veteran of the D-day landings and a tireless campaigner for the rights of older people and for a recognition that older people need to have a proper income. He called to see me at my surgery last week, and was outraged yet again by the miserly 25p increase in his pension as an older person. As he says, it is not enough to buy the first-class stamp needed to send a complaint to the Government. He was outraged, and he knows what

  651
  many hon. Members recognise. It is possible to target help effectively at some of the poorest pensioners by targeting money at older pensioners, many of whom are poor.
  There will be more poorer pensioners in the future. In 2000, there were 584,200 people over retirement age in Wales—20 per cent. of the population. By 2016, the percentage is expected to rise to 23.5 per cent. and the most significant increase will be among the 80-plus age group who are often the poorest pensioners.
  It is particularly apt that I should speak on this issue for Plaid Cymru and the Scottish National party given that I represent the constituency once held by David Lloyd George, the politician who introduced the retirement pension which has been hugely popular, successful and long lived. It is sad but hardly surprising that the recent Age Concern MORI poll shows that the majority of people have no confidence in the Government's strategy to tackle pensioner poverty. That contrasts with the opinion that they hold of the pension introduced by Lloyd George.
  The Government say that their new system of means-testing does not involve means-testing as such. Perhaps it is soft testing or even third-way testing—I do not know what they would like to call it. At every turn these days, we are told that this is the age of the consumer. The customer is king, so what do the potential consumers of this new system say about it?
  The Secretary of State told us a great deal about what the pension industry and Lord Fowler think, but I have a document launched for Welsh political parties at Plaid Cymru's spring conference in Swansea on 16 March. It is entitled "A Pensioners Manifesto for Wales" and it was produced by the Pensioners Forum Wales, which includes representatives of organisations such as the MSF retired members section, the Transport and General Workers Union retired members section, Unison retired members Wales and many other trade unions.
  What do those consumers say of the Government's plans? In point 5 of the manifesto, they call on the National Assembly for Wales—not this august institution—to
  "recognise the financial plight of many pensioners and press the Westminster government to address the provision of adequate guaranteed non-means tested basic income as a matter of urgency".
  That is the opinion of the TGWU, the MSF and many other pensioner groups in Wales.
  The Government's proposals take us further and further from a system intended to provide a universal basic pension and a safety net for those not covered to one in which means-testing is to become the norm. The gap between the minimum income guarantee and the basic pension is widening and it will widen further. The Secretary of State's answer to that is even more means-testing, but Plaid Cymru and SNP Members agree with Age Concern and the Pensioners Forum Wales.
  8.58 pm
  Kevin Brennan: One likes to support the institutions to which one belongs—whether it is one's team, one's alma mater or one's political party. Unfortunately, in my case, over the past weekend, the first two have taken a bit of a knocking, first with what happened at Twickenham and then with the revelation that
  652
  my old college and that of the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Liverpool, Garston (Maria Eagle), had sold places for £300,000. I assure the House that neither of us read law at that institution.
  I am pleased that my party is honouring its manifesto pledge. On this, I part company with my right hon. Friend the Member for Birkenhead (Mr. Field), because we pledged at the last election that we would introduce this measure, which is intended to meet the twin objectives of continuing to help the poorest pensioners while properly rewarding thrift. Tomorrow when I meet the healthy, wealthy and wise project—the grey power project—in Ely in Cardiff, West, I shall be delighted to stand before its members and outline the Government's record on helping pensioners, including the state pension credit proposed in the Bill. I shall also inform them—I am sure that they will be interested—of the new Opposition coalition against the introduction of the pension credit.
  The Bill addresses an issue that all of us will have encountered on the doorstep, as I did while canvassing at the general election: the complaint that it is simply not worth having a modest occupational pension, because it leaves one no better off than someone who has not contributed to a pension at all, and that there is no incentive to save because of the limits on capital. As a candidate for Parliament for the first time, I was pleased to be able to say that we would be doing something about that if re-elected and that I would do all that I could to support that. I gave that pledge on the doorstep and it is in fulfilment of that personal pledge to voters in Cardiff, West that I stand here in support of the Bill on Second Reading, despite the traumatic blows at the weekend that I described earlier.
  I support this Bill, even though I have traditionally taken the view that the best way to deal with the state pension is to link it to earnings and to eradicate the stigma of the means test, because all pensioners should automatically share in economic prosperity. After all, most of today's generation of pensioners believed that the state pension would provide adequate support without recourse to the indignity of the old-fashioned means test. They were, after all, a generation that sacrificed so much so that we could benefit from peace and democracy today.
  I am thinking here of people such as my father—I know some hon. Members have similar backgrounds—an Irish immigrant to this country, who worked as a navvy and helped to build the physical infrastructure on which our current prosperity is based. Elsewhere, that generation has been called "the greatest generation", appropriately. But they are also the generation that remembers the dreaded means test. I think, too of my mother, a miner's daughter from Nantyglo in south Wales, and her stories of the harshness of the means test at the depth of the great depression of the 1930s. I am still attached, emotionally and philosophically, to the earnings-related argument.
  One must give credit to the Government for the ingenious way in which they are approaching this problem and the ingenious mechanism that the Bill represents. In a way, it echoes many of the reforms that the Government are bringing in, which aim to reward work and thrift. The Government have gone some way to meeting an accusation levelled by the Opposition today by ensuring that once a pensioner's position has been established at retirement, there is not the need for a weekly means test, as with income support. Instead, there is a five-yearly

  653
  review of circumstances, with the minimum circumstances for pensioners in keeping with what is necessary for the protection of public finance.
  Any comparison of that with the means test of the 1930s—or even with the post-war National Assistance Board, which poked its nose daily into every detail of a pensioner's personal circumstances—is an insult to those people who had to suffer the heartless indignity of that era. I hope—it may be a forlorn hope—that those who, properly, wish to oppose the Bill will not engage in scaremongering of that kind to try to sabotage the working of the pension credit. There is a case for considering whether, in practice, the name "pension credit" is the best way to describe the change. Pensioners' groups have expressed concern about this, as the word "credit" is associated by many pensioners with debt. That matter should be considered in Committee. I can understand the Government's desire to retain the term as it now applies to several flagship initiatives, but there may be a case for providing another term for use in publicity; perhaps "enhanced pension" to make it clear that it is not a loan that has to be paid back. That would help to change the culture of fear that some people are trying to build up about the credit being a new means test.
  The Bill will bring real and direct benefits to people. An elderly widow with a monthly £100 pension—perhaps half the pension of her deceased husband—currently receives no benefit from that occupational pension. Under the Bill, she will be able to keep 60 per cent. of it. That is in addition to the other benefits that she will already have gained since Labour came to power, including the free television licence for the over-75s and the £200 winter fuel allowance—the Tories wanted to take that away—which is the equivalent of £15 a month tax free. If she lives in Wales, from next week she will have free local bus travel as a result of the policies of the Labour-led National Assembly for Wales.
  Let us contrast all that with the approach of the last Tory Government. They halved the value of SERPS, abandoned the earnings link with the state pension and deliberately forced pensioners on to real means-tested benefits as a result of that decline in value of the state pension. To top it all, they generated the pensions mis-selling scandals of the 1980s. I was teaching at the time and can remember salesmen—they were no better than con men, really—coming into school staff rooms and telling young teachers that it was in their best interests to pull out of teachers' occupational schemes and take out a private pension.
  Instead of responsibility and social conscience, which the Tories are trying to convince us they now have, they ushered in the era of the pensions spiv. For Beveridge, Jim Griffiths and Barbara Castle, they substituted Flash Harry. It is to the Government's continuing credit that they have tried to restore some fairness and sustainability to pension provision. This measure is a major step forward in that mission.
  I look forward to telling the people at tomorrow's grey power meeting in Cardiff, West about today's debate. Some say the pensions credit is complicated, but I do not think that they will find the concept of 5 million pensioners benefiting by, on average, £400 a year a difficult concept to appreciate. The measure will be widely welcomed by pensioners, and I commend it to the House.
  9.6 pm
  Mr. Mark Simmonds: I represent a constituency that contains many less affluent pensioners in urban and, in particular, rural areas. I did not appreciate the comment of the hon. Member for Hendon (Mr. Dismore) that most Conservative Members represent people with large share portfolios. That is absolute nonsense.
  I warmly welcome any proposals that attempt to eradicate pensioner poverty. I have no objection to ending the current iniquitous paradox of the minimum income guarantee system that penalises thrift and saving. Indeed, I should like to see a system that encourages people to put money aside and rewards financial responsibility. I strongly believe in the independence of the individual and a reduction in the reliance on the state, enabling and facilitating people to make choices and take responsibility for their own life.
  The current system, which requires ever-larger numbers of pensioners to claim moneys through means-testing, is considered, not just by hon. Members on this side of the House, but by the very pensioners whom it affects, to be demeaning and degrading. It carries a stigma for many pensioners. Many are frightened by the process. That is borne out by the figures that were discussed earlier. There is a tremendous variance, but if between a third and a fifth of those who are entitled to claim minimum income guarantee fail to do so, there must be something wrong with the system.
  As always with the Government, there is a great divergence between rhetoric and action. As my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), said, both the Prime Minister and the Chancellor have said that they wish to reduce means-testing for pensioners, if not eradicate it altogether. However, not only does the Bill fail to reduce means-testing or to make an attempt to reduce it, it vastly increases the propensity to means-test.
  Between 1979 and 1995, the proportion of pensioners on means-testing fell significantly, from 57 per cent. to 38 per cent. Since 1997, it has increased significantly. According to the House of Commons Library, up to 60 per cent. of pensioners will be means-tested by 2003.
  The two component parts of the pensions credit—the guarantee credit and the savings credit—extend the reliance on the state into the future, which will further act as a disincentive for pensioners to save.
  It is my view that the endless and pervasive intrusion into and manipulation of people's lives by the state is a deliberate attempt by the Government further to weaken the individual's responsibility and enhance reliance on a centrally controlled state. Pensioners, like so many other responsible groups in our country, want to be self-reliant and to be treated with dignity. Extensive means-testing does not fit comfortably with that ambition.
  The uniform criticism of the Bill, among everyone except Labour Members, is of its overriding complexity, which will deter claimants and lower take-up rates. I was astonished when the Secretary of State dismissed as nonsense the fact that there is a causal link between complexity and take-up rates. That is staggering, especially when one bears it in mind that the National Association of Citizens Advice Bureaux has said:
  "The complexity of benefits and the claiming process is one reason why millions of pounds worth of benefits go unclaimed by people on low incomes."

  655
  If the House is to attempt to help those on low incomes, we must surely be honest and look at why people who are entitled to claim benefits—whether the minimum income guarantee or the new credit—are not doing so. Just as the critical test of a successful tax is collectability, for benefits the measure of success must be simplicity and therefore take-up. The Government must take responsibility for increasing the complexity and exacerbating the problem via the contents of the Bill
  I have four specific points that I want the Minister to address. First, I understand that the guaranteed credit will subsume the premium paid to carers and severely disabled people. Will she take this opportunity to make it clear that these very hard-working and vulnerable people will not be made worse off?
  Secondly, in the Bill it is proposed to set up a pensions service, and I believe that there will be only 26 offices. To my mind, that will eradicate the personal contact that has been mentioned, with home visits allowed only in exceptional circumstances. I see the Minister shaking her head, and I hope that she will be able to tell me that I am wrong. Many people who currently have contact with pensions professionals believe that they will not be able to do so under the proposals.
  Thirdly, the Bill contains a change in the analysis to a five-yearly rather than a weekly assessment. That may not eradicate bureaucracy but may make it easier for people to abuse the system. What safeguards and structures will be put in place to ensure that abuse of the kind that happened with individual learning accounts cannot take place?
  Fourthly, what will the pension credit do to close the savings gap?
  The Government's pensions strategy is at best confused. To be more blunt, it is in a mess, from the perfidious and pernicious tax on people's pension funds to the shambles of the stakeholder pensions and the Government's opposition to annuity reform. The Bill further complicates an already over-complex area and increases means-testing for the section of society that least wants it. The solution surely lies in increasing the basic state pension for the specific targets of harder-up pensioners.
  9.14 pm
  David Cairns: I shall endeavour to be brief. I welcome the Bill, and I believe that in my constituency, which is in the top third in the United Kingdom in terms of pensioner numbers, it will be welcomed for the reasons outlined by many of my hon. Friends, such as the sheer sense of iniquity that people have felt about saving all their lives and losing out under the current arrangements, which has been the perception. Those complaints are always accompanied by detailed descriptions of pensioners who live three doors down who have smoked and drank all their lives, but who seem to be better off than our constituents. However, our constituents will welcome the Bill, and so they should.
  Much of this evening's debate, which I should like to respond to briefly, has focused on the role and nature of means-testing. I accept the Government's argument that the type of means-testing outlined in the Bill is
  656
  quantitatively different to the means-testing that has gone before, as well as qualitatively different, given that it will not involve a weekly means test, but an assessment every five years or so.
  I agree entirely with my hon. Friends the Members for Hendon (Mr. Dismore) and for Aberdeen, South (Miss Begg) that extending means-testing to the extent that proposed in the Bill will dilute the stigma—if a stigma can be diluted—so that it becomes less of an onerous burden on people. However, it has become abundantly clear during the debate that, far from abolishing means-testing, the Conservative party would maintain it and increase the stigma of the means test.
  I make no apology for reintroducing our 68-year-old poor friend, who was mentioned by my hon. Friend the Member for Stalybridge and Hyde (James Purnell) and by the Secretary of State himself. Such people are not entirely invented; they exist in all our constituencies. Confronted with the reasoned amendment that suggests that people over the age of 75 should be given extra help, we have repeatedly asked what we should say to our 68-year-old poor pensioner. The answer is that he or she would be means-tested, so the poorer people who need the extra help would be means-tested. How on earth would that remove the stigma of means-testing? How would that progress beyond a time when reliance on means-testing was seen as a bad thing, when the very poorest people were told that they would have to put up with means-testing?
  Under the new scheme, those who are not poor, but who are by no means rich, will be brought into a system that is akin to one that the Borne report, on which the hon. Member for Northavon (Mr. Webb) was an esteemed specialist adviser, referred to as the partial affluence test. I never liked that expression; it would not kid anybody about what is involved in reality, but the proposal is qualitatively different to the old means-testing, which involved rooting around people's houses looking for valuables to offset any income that they might have received.
  I want to focus my remaining remarks on the pension service. Uptake is not just an issue used to scaremonger; it is a genuine concern, and Labour Members are as concerned about it as anyone else. It is important that the system has adequate take-up, and the key to that must be a pro active pension service, which goes out of its way to ensure that people get what they are entitled to. It has to allow people to interact with it in a broad range of ways by telephone, on the internet and by post. We know that the telephone is the Government's preferred route because they tell us that pensioners prefer it. I accept that, but I agree with my hon. Friend the Member for Hendon, who said that if a freephone number were used, so much the better. The number of silver surfers on the Internet will grow in years to come. Although I appreciate that there will not be a network of local offices, the opportunity to interact face to face is important. I would welcome the Minister's reassurance that face-to-face interviews will still be allowed to play a part.
  The pension service must act as a gateway, allowing people to get quicker housing benefit assessments. As we know from the operation of the working families credit, particularly in the new Jobcentre Plus scheme, things all wander along absolutely marvellously until they hit the

  657
  brick wall of housing benefit assessments, when people are not any further forward. Although I welcome what has happened, such things have to be improved in future.
  There was some confusion about the role of the call centres. There will be 26 call centres throughout the country, and it has been said that confusion might arise in understanding cockneys and geordies, so there is a good argument for locating all the call centres in Scotland because everyone understands a Scottish accent. I had hoped that Mr. Speaker would be in the Chair when I made that comment. In my constituency, there are two excellent call centres—those of One to One and the Royal Bank of Scotland—which shows that people are used to interacting with call centres and to the professional service that they receive from them, and there is no reason why they cannot work in the public sector as well.
  I welcome the Bill. It makes an important contribution to those people who feel aggrieved. I hope that we reject the reasoned amendment and stick with the Government's proposals.
  9.19 pm
  Mr. Bill Tynan: I welcome the opportunity to participate in the debate and will be quick because other hon. Members want to speak.
  I believe that life's experiences shape our character. People where I came from would find it difficult to compare their lives with people's experiences in the House of Commons. As a youngster, I was brought up in a tenement close. We had two rooms and a kitchen. There were five in the family. My mother waited for my elder sister to come in to get the tips so that she could feed us the next day. I experienced poverty at first hand. I was fortunate because I was the youngest in the family, which meant that I was able to serve my time as an apprentice toolmaker. That gave me a skilled trade, but I could achieve that only because of my family background and the fact that people were willing to support the family unit.
  Hon. Members have expressed a very negative view of the proposition. It is possible to look at something and see it as being either half full or half empty. If two thirds of the people who will benefit from the pension credit manage to improve their standard of living, that is substantial progress. Like everyone else, I am concerned about the take-up, but the best way to deal with that problem is to stop talking about means-testing. Means-testing was used in the 1930s to ensure that people stayed poor. The new test will ensure that they qualify for additional benefit. That is an important distinction.
  The Bill is part of the crusade on which the Government have embarked. There have been some interesting comments on what direction we should take and what we should do. The Leader of the Opposition said:
  "A nation that leaves its vulnerable behind diminishes us all."
  I agree, but we must remember that selfish individualism over 20 years helped to create a society in which our most vulnerable were left behind. The Opposition have reverted to type on this issue. If we support the reasoned amendment, the Bill will fall and those two thirds whose standard of living would improve will fail to benefit from it. That is an important consideration.
  Poverty is not an academic debate; it is a reality for many of my constituents. During the election campaign, an elderly lady called my office. She had been targeted
  658
  by South Lanarkshire council for arrears that she had accrued on her community charge. Those people who think that the proposals are complex should sit down with such individuals and talk about what is on offer because they would readily understand the position. I spoke to that lady that day. As she was on the old-age pension and had no other means of support, she qualified for the minimum income guarantee, which meant that she no longer paid community charge and went on housing benefit. That boosted that woman and her standard of living.
  We must remember the beneficiaries when we discuss in a forum such as the House of Commons whether the academic debate is too complex or how a proposal can be implemented. It is important to support the Bill. It is a step forward. I ask hon. Members to recognise that there is poverty in this nation and that the Bill will improve the standard of living for more than 5 million people. If we achieve that, Parliament will have done its job.
  9.24 pm
  James Purnell: There are two points on which I should like the Committee to scrutinise the Bill. The first concerns foster carers who, as we know, provide a vital service for children in this country, many of whom have faced the worst that life can throw at a child today—sexual abuse, dysfunctional families, poverty and abandonment. However, foster carers do not get credit towards their basic state pension as they would if they were looking after their own children. If they take time off work to fulfil their fostering duties, they do not receive home responsibilities protection as they would if they were caring for their own children. I urge Ministers to look at that anomaly because it is unfair to an important sector of society.
  Secondly, although I very much welcome what the Secretary of State said about the treatment of earnings, at the moment the amount of earnings that will be entirely disregarded is just £5. If we want to encourage people to have an active retirement, it is at least worth considering whether we should disregard a slightly higher level of income so that people could work for, say, a day a week after age 65 and keep all that income.
  I am glad that the hon. Member for Havant (Mr. Willetts) has returned to the Chamber because I am slightly mystified by his reasoned amendment and I am trying to understand the motivation behind it. I have noticed over the past few weeks that he is trying to position the Conservative party on the side of the poor. Of course the Opposition would say that they are on the side of the poor, but we have to ask ourselves what they would do if they were in government. To establish that, it is worth trying to remember what they did when they were in government.
  Between 1979 and 1983 the Conservatives ended the link between earnings and the basic state pension and viciously cut benefits, while their monetary policy unnecessarily forced 3 million people on to the dole. Where was the hon. Gentleman when all that was happening? In the run-up to the 1979 election, he was advising Nigel Lawson, who was centrally involved in taking those decisions even though the policies were not mentioned in the manifesto. During that first term, the hon. Gentleman was in the Treasury, where he was private secretary to Nigel Lawson and an official advising on monetary policy, so he bears a direct responsibility for those policies.

  659
  After that first term, SERI'S was cut, benefits for widows were halved, £10 billion was taken out of overall pension income and housing benefit was slashed by nearly 50 per cent. The result of all that was that on estates such as Easterhouse people could not afford to take jobs because they were trapped on benefit rates that meant that they would be worse off if they were employed. Where was the hon. Gentleman when all that was happening? First, he was in Mrs. Thatcher's policy unit, advising her on social security policy, and after that he was running her favourite think-tank, the Centre for Policy Studies, and acting as a part-time adviser to her.
  It is worth remembering all that because although I welcome the Damascene conversion of the Leader of the Opposition and the hon. Member for Havant after their visit to Easterhouse, the rest of us know estates such as that and have been working on them for years. While the hon. Gentleman was driving past those estates on the motorway on the way to seminars with the hard right during the 1980s, the people there were being thrown into poverty and out of jobs by the monetary policy that he advised on and having their benefits cut by the Ministers whom he advised.
  Those estates did not magically appear in 2001; they were the direct result of the unnecessary viciousness of Conservative economic policy and of the housing policy that turned them into sink estates. The poor on our estates have been suffering from those policies for the past 20 years. Where was the hon. Gentleman? At every single stage from 1979 to 1992, a time during which the income of the bottom 10 per cent. fell by nearly a fifth, he was advising on and constructing those policies—he was in the vanguard of those policies. Indeed, if one believes the biographies, the policies would have been even more severe if his views had been completely heeded.
  I welcome the Bill because it will help the poor pensioners in my constituency. If the Opposition had any self-respect, they would apologise for what they did in those years before espousing the cause of the poor.
  9.29 pm
  Mr. Chris Pond: I support the Bill. I do not want to be as unkind to Opposition Members as my hon. Friend the Member for Stalybridge and Hyde (James Purnell), but I am a bit disappointed that they will not be joining us in the Lobby tonight. We heard over the weekend about their new-found concern for the vulnerable—no doubt that is why they have taken the Liberal Democrats under their wing tonight. Like Victor Meldrew discovering the delights of skateboarding, the Tory party has discovered a passion for helping the poor.
  I had therefore assumed not only that the Tories would support the Bill, but that they would utter a few words of apology for the £10 billion that they lifted from pensioner incomes during their 18 years in government. One reason why they might want to support the Bill is that it provides an opportunity to give back at least a fifth of the amount that they took away. Much of the remainder has been returned through other measures that the Labour Government have introduced—measures that even this evening the hon. Member for Havant (Mr. Willetts) again described as "gimmicks".
  660
  The reasoned amendment suggests that the resources given to the Bill would be
  "better directed towards the basic state pension".
  I asked the House of Commons Library to tell me what would have happened had the basic state pension been indexed in line with earnings. The answer is that it would have resulted in a sum similar to the basic state pension today—but of course the pension credit and the other measures we have taken will result in a substantially higher level of non-means-tested income for pensioners on the basic state pension.
  Earlier I asked the hon. Gentleman whether he could give financial advice to my nine-year-old on how much she would have to invest each year between now and her retirement to achieve what the hon. Member for Sutton Coldfield (Mr. Mitchell) described as a funded basic state pension, but he did not have the answer to hand. In fact, she would have to start now investing £10 a week until her retirement to achieve such a pension.
  Many hon. Members spoke about means-testing. I am not enthusiastic about means-testing, not least because of its traditional impact in terms of stigma and loss of dignity. However, I have never been against targeting to ensure that those who are most in need receive the help they deserve. The proposals in the Bill provide an effective targeting mechanism, minimising stigma and maximising take-up wherever possible. They include the five-year assessment, simpler claim forms, help through the pension service to complete the application, and making use of information already available to make an assessment without requiring new forms to be filled out. All those measures mean that we will be able to target resources without imposing the traditional stigma associated with means-testing. For that reason, I support the proposals.
  The decisions we make tonight are about long-term pensions policy. We have to make sure that the policies that we put in place can last the test of time. I am extremely disappointed to hear that the Opposition parties will not join us in a consensus to ensure not only that today's pensioners have a decent income, but that we provide some security for future pensioners.
  9.33 pm
  Mr. Tim Boswell: In spite of its delayed start, or perhaps because of it, the debate has proceeded at a cracking pace. I have recorded 20 speeches, all of which—even the Secretary of State's—have added something to the discussion. We do not always hear much of substance from the right hon. Gentleman, but today he made the welcome announcement that earnings will be treated broadly like savings under the legislation. We look forward to hearing the details of that and to discussing other points in Committee. Even those other Labour contributors who might be regarded as trusties all had something of interest to say. My hon. Friends and our newly acquired associates in the reasoned amendment also made telling contributions.
  There is a degree of mutual understanding of the fact that there are some problems, even if only of complexity. I suppose that in his daily life the average, not very well off, older person has quite enough to deal with in terms of difficulties with transport, hospital appointments, local law and order and so on, without worrying too much about the theology of pensions—whether the pension he

  661
  receives, or hopes to receive if he has not yet retired, is sourced primarily from the state and the taxpayer or from private provision. As has been said this evening, what people want is an adequate income. The signs are that they are not getting it now and the position of those who will retire in future may be worse rather than better, which nobody in the House wants.
  I am surprised that the Government have not claimed any credit for the 4.1 per cent. increase in the basic retirement pension this year, or claimed it as absolution from the error of the 75p increase in the past. They are committed to a minimum annual increase, even if it is above the inflation rate. While the increase seems substantial, it is interesting how quickly it is absorbed in my county where, for example, council tax is to rise by about 12 per cent. It is well known that the number of pensioners who fail to claim the council tax benefit for which they are eligible is even higher than those who do not claim the MIG. Those examples put the state pension increase in context.
  I am not sure how often Ministers are let out to talk to ordinary people, but I could not help but be struck when I attended a meeting last week in the House with the Greater London Pensioners Association—not my natural soul mate—by the intensity of its members' feelings about their situation. Words like "betrayal" were bandied about, and were not being applied to the Opposition. One lady gave a trenchant summary:
  "If the Government can give us this pension credit, it can afford to pay us a decent basic pension."
  That was said some time before we tabled our reasoned amendment.
  Let me say, almost at the outset, that we have no problem with the Government's objectives or motives. They have a good stated objective of reversing the proportions of 60 per cent. state provision for retirement and 40 per cent. private provision, although we have doubts about whether they will succeed. We recognise that the Bill would provide additional resources for pensioners of at least £2 billion in the first full year, no doubt mounting to an astronomic figure if the measure lasts the course. The essence of our amendment, however, is that the money could have been spent to better effect; it is being frittered away and is going in the wrong direction.
  Ministers need to come to terms with the fact that not all is well on the pensions front. I happened to pick up the money section of The Sunday Telegraph yesterday. It is stuffed with problems; one article on the front page says that the Government's annuity reforms are "unworkable", and the main headline concerns a row about auditing stakeholder pensions. Turning the page, the personal finance editor on page 2 describes stakeholder pensions as
  "about as useful to future generations of pensioners as a soluble bikini to a keen swimmer."
  Then there is the implosion of final salary schemes under the searchlight of FRS17 and the general current advice that the level of contracting-out rebates on offer makes it sensible for many holders of personal pensions to opt back into the state second scheme. That is all the more reason for the Government to come clean about the function and purpose of the state second pension, created inadvertently through mistaken analogy with SERPS, which was set up for a different purpose, without crucial details about its future course, for example the date at
  662
  which it becomes flat rate. Whatever we say about who is the friend of the pensioner, we can be sure that the Government are friends of a broadly friendless second pension system.
  Of course, we do not mind Labour giving more money to any pensioner, but we do not accept the tangled and complicated way in which it is doing so. No doubt the Secretary of State rather prides himself on being an intellectual—he is not the only one in this place, of course—and no doubt he can understand how his new system works. I might be able to claim that my single brain drifts in and out of understanding of the system, but in terms of the system's basic intelligibility to the electorate on the doorstep, it is an absolute no-go area. The less intelligible the system, the less likely people are to make well-informed choices about their retirement planning, and the greater the shock that they may encounter, as the hon. Member for Hendon (Mr. Dismore) said.
  The Government may well find that the costs of the system will escalate and become unsustainable. It is a very heavy price to pay for a temporary fix to the incomes of some but not all poorer current pensioners—those who manage to take up the benefit and/or who suffer no natural downturn in their income while enjoying the pension credit.
  The operation of the pension service is of growing concern, which has been echoed not just on the Conservative Benches. I do not know whether the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle), has any experience of fighting bush fires, but she now has a second one breaking out with the Public and Commercial Services union. In addition to the concern that it has expressed on security matters in relation to Jobcentre Plus, it has recently circularised members expressing concerns about the local accessibility of the pension service.
  I note that the Trades Union Congress in its evidence to the House of Commons inquiry on pension credit emphasised specifically that the Government should take particular care to communicate the way in which the credit will work to all pensioners. With the greatest respect to Ministers, one cannot do that on the internet when only 10 per cent. of pensioners are silver surfers—although we hope that that number will increase. Pensioners need to be able to get through on the telephone, although they also need the opportunity of seeing a person who can give them advice and, indeed, reassurance on what is to happen.
  Behind all this is a much more substantial fact. The spectre of the means test is being fattened up by the Government's new approach to it. Whatever the Chancellor of the Exchequer may have said in opposition, when means-testing was anathema, it has become the centre of Government pension policy. It spreads its tentacles: two thirds of pensioners very soon and perhaps three quarters in due course will be caught up in the system.
  Mr. Levitt: If the hon. Gentleman believes that it is right to attack poverty by providing more means to those who are most in need, how would he go about identifying those who need the greatest help?
  Mr. Boswell: I think that we have already discussed the fact that there will need to be a means-tested safety

  663
  net, as there is provided by the minimum income guarantee already. The hon. Gentleman will appreciate that it is unreasonable to expect a detailed prescription in the three or four minutes remaining to me, but I can tell him and the House that we are convinced because of one simple fact that the Government are not going about this in the right way. If, even on the minimalist estimates, one in five of those who are entitled to the MIG are not claiming it, how much less likely is it, particularly when income changes, that pensioners will claim pension credit? Nearly everything in policy seems to be going the opposite way from the Government.
  I find it striking that the recent IPPR report concluded after 18 months, though it was rubbished by the Secretary of State in 10 minutes, that
  "a policy framework which relies heavily on means-testing retirement benefits is flawed."
  It also indicated that it had not started with the assumption but that it would be recommending an increase in the basic pension.
  I find it remarkable that so many Members of Parliament from different parties have associated themselves with our reasoned amendment. I cannot remember when that has happened before. I believe that it reflects a number of genuine concerns across the House. First, there is a pensions crisis. It is already apparent but has not come to a head. Secondly, means-testing is not the way to solve that crisis because it involves disincentives to save, and complexity is the greatest disincentive of all. Beyond that, there is the current pressure on funded pension provision: the reduction, for example, of employer contributions; the erosion of income by the Chancellor's pensions tax, and the decline in final salary schemes. The Government may end up with a huge and unsustainable contingent liability to support pensioners' incomes. There is also the issue of whether moneys could have been better spent.
  As my hon. Friend the Member for Havant (Mr. Willetts) said, Beveridge understood that universal benefit, given careful targeting, can meet most specific needs. There is a real problem, especially for older pensioners, many of them female, in achieving adequate income. Help could be given to them without creating a cat's-cradle of means-tested incentive.
  The final drivers to the amendment are perhaps more general. Pension provision, above all aspects of social policy, is long term. I think sometimes of my new granddaughter, who has not yet reached the age of one year. It might be sensible for me to take out a stakeholder pension for her. The signs are that she will have to work up to the age of 70 to provide herself with an adequate pension.
  As politicians, we cannot allow our ego or our own pet nostrums, or political positions, to get in the way of agreed decisions that will affect the quality of life for the next few generations. We need to get on side people of good will, even including, if possible, the Government. We need to get them behind a programme of, preferably, agreed and well-targeted reforms. The Bill does not provide those reforms.
  There is perhaps even one wider consideration that is worth mentioning briefly. The Opposition amendment, which has the support of other parties, is a reasoned
  664
  amendment, and a reasonable amendment too. I have supported the Conservative party throughout my adult life because I believe strongly, as I always have, that the party of Wilberforce, Shaftesbury and Disraeli has had something worth saying on social policy. It has real achievements to its name in this as in other areas.
  I am pleased that this side of Toryism is reawakening. I say to everyone in the House that when we reach out in the spirit of consensus to help disadvantaged people, I hope that they in turn will respond.
  9.47 pm
  The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I agree with the hon. Member for Daventry (Mr. Boswell) about one thing, and that is that we have had an interesting debate that has illustrated, among many other things, a massive gulf between our own aims as a Government and the views of the ragbag of opposing parties that are supporting the reasoned amendment. In contrast to them, we are determined to provide all pensioners with a decent and secure income in retirement, by concentrating on promoting fairness, rewarding thrift and targeting the most help on those who need it most, the poorer pensioners. The widening income gap which was our inheritance from 18 years of Tory pension policy makes that the right thing to do.
  Meanwhile the Tories—we have heard this again this evening—are committed to privatising the basic state pension and washing their hands of any obligation to ensure fair and adequate pensions for everybody in retirement. The hon. Member for Sutton Coldfield (Mr. Mitchell) called it pension plus mark 3. He is writing the policy, so he should know.
  We have had the usual demonstration of rank opportunism from Liberal Democrat Members. That is familiar to all of us who encounter the cynical campaigning methods of Liberal Democrats at a local level. I am sure that Conservative Opposition Members will agree with me about that. They steal some Labour policies and add a dash of uncosted aspiration while agreeing with Tory criticisms. Yet again they are trying to appeal to everyone by claiming that they can conjure better outcomes out of the air with the same amount of money. That is the usual sleight of hand that we expect from them.
  We had the most incredible flight of incomprehensible mathematical fantasy from the hon. Member for Northavon (Mr. Webb). Perhaps that is why the hon. Member for Winchester (Mr. Oaten) says that the Lib Dems are positioning themselves to the right of Labour while Lord Ashdown bemoans them being stranded to the left of Labour. The right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) says that they are not left of Labour and not right of Labour. It will take all of the higher degrees of the professor, the hon. Member for Northavon, to sort that one out. Of course, the confusion is part of the trick. We still do not know whether they are committed to cutting tax or increasing it. How can anyone believe a word that they say?
  Our approach is the correct one. We want to keep the basic state pension as the foundation of security in retirement but we want everyone who can save towards a second pension to do so. The pension credit assists us in achieving that aim by rewarding those who have saved,

  665
  instead of penalising them for saving. It is targeted on pensioners at the poorer end of the income distribution, but will none the less help up to 5.3 million pensioners by an average of £400 extra a year. It enables as to continue to redistribute resources to those who need them most. In short, it is fair.
  That is in contrast with the Tories, who spent 18 years targeting billions of pounds to induce people to opt out of state provision, only to stimulate massive mis-selling of private pensions. It is not what I call looking after the vulnerable; it is more like looking after the wide boys.
  I shall answer some of the points raised in the debate in a minute, but before I do I want to look at why we need to help poorer pensioners most; it goes to the heart of the points about the means test, and we have heard a lot about that. It is due to the record of the Tory party after its 18 years in charge of pension policy. We are still trying to right the wrongs that it created. Labour Members are not going to forget that it is an appalling legacy.
  Over those 18 years, the newly styled party of the vulnerable over on the Conservative Benches deliberately, and as a result of their smash-and-grab ideology, dismantled vast swathes of state support for pensioners. My hon. Friend the Member for Stalybridge and Hyde (James Purnell) set it out excellently. The Tories impoverished one in three of our pensioner population—that was 3.5 million people.
  That was not the accidental result of impersonal market forces and global economics. It was the deliberate choice of the Conservative party. It expected a pensioner to live on £69 a week. It cut the value of the basic state pension by £20 a week in real terms and offered no compensating measures. It slashed the value of SERPS not once but twice, while spending billions of pounds bribing peogle out of it and rewarding the mis-selling of inappropriate private pensions to almost 3 million people. It was responsible for slashing the value of inherited SERPS in half and then not bothering to tell anyone, a debacle that it has left us to put right. It left 10 million women who were without proper provision with no alternative but poverty in old age—not much help for the vulnerable there. It introduced VAT on fuel at 8 per cent. and tried to increase it to 17.5 per cent. As a result—
  Mr. Goodman: On a point of order, Mr. Speaker. Perhaps the Minister will be so good as to tell the House when she will respond to the debate that we have had?
  Mr. Speaker: The Minister is in order. Had she been out of order, I would have let her know.
  Maria Eagle: By 1997, there was an ever-widening gap in pensioner incomes, with the bottom fifth of pensioners—[Interruption.] Conservative Members do not want to hear this, but Labour Members are not going to forget. The bottom fifth of pensioners saw their income rise by only 20 per cent. in 18 years, while the top fifth had a 70 per cent. boost, and they were better off to start with. The richest 10 per cent. of pensioners had five and a half times more income than the poorest 10 per cent.
  Lynne Jones: Will my hon. Friend give way?
  Maria Eagle: No. I do not have time.
  666
  It was not just pensioners who were impoverished by the last Tory Government. The number of people living in poverty trebled: it went from one in 14 of the population to one in four. The number of children living in poverty increased from one in 10 to one in three. It was the worst and most shameful record in the industrialised world, and I am not surprised that the Conservative party does not want to hear about it tonight. That was its record.
  It is that disgraceful disparity that we are tackling. The pension credit is an essential part of how we do that for pensioners. That is why we make no apology for targeting help at the poorest end of the income scale. After the Tory years, it is the right thing to do. It is the only thing to do to help the vulnerable.
  By next month, we will be spending an extra £6 billion a year in real terms to boost pensioner incomes and to narrow the income gap between pensioners. We are targeting £2.5 billion of that money directly towards the poorest third of pensioners.
  As a result of our policies between 1997 and 2001, policies that the Tories opposed vehemently, the average pensioner household is now £840 a year better off. Those at the poor end of the income scale have benefited by even more.
  The hon. Member for Havant (Mr. Willetts) has suggested doing things differently. He has tried taking money from pensioners before. During the last Parliament he condemned the winter fuel payment and the free television licence as gimmicks—just as he called the pension credit a gimmick tonight—and pledged to abolish them and consolidate the savings into the basic state pension. That was deeply unpopular with pensioners and within weeks he scuttled back to the drawing board, ending up with a complete hash of a policy. That was the policy on which the Conservatives fought the last general election—to keep the winter fuel payment and the free TV licence or to add them to the basic state pension, with each pensioner having to say which they preferred.
  Having developed that policy, the hon. Gentleman complains about the complexity of our proposals. Maybe having two brains, as he is reported to have, simply means that he has to learn every lesson twice. Labour Members are more than willing to teach him the same lesson again. Going into the next election promising to take an average of £400 in pension credits from pensioners is unlikely to be popular with them. I was going to suggest, Mr. Speaker, that you should watch out for the U-turn, but I think that we have already heard it during the hon. Gentleman's speech.
  I want to deal with some of the points raised in the debate. [Interruption.] At least I listened to the whole debate, unlike some hon. Members. On means-testing, what Conservative Members call means-testing I call making sure that people who lost out when they were in power get a decent pension. A five-yearly simplified assessment is hardly comparable to a complex weekly means test designed to cover all the variable circumstances of people of working age. The pension credit will abolish the intrusive weekly means test for pensioners. The Tory and Liberal Democrat proposals would not: that assessment would stay if their policy were to be implemented. The assessment that we propose is a decisive move away from treating pensioners in the same way as those of working age.

  667
  We heard a lot about complexity, but the system will be simpler, not more complex. For example, 85 per cent. of pensioners will not need to report the level of their savings or capital at all, because there is a £6,000 disregard and no upper limit. Pensioners will have to report only some income changes, and even then, in most cases, only once every five years. Housing benefit and council tax benefit will be ignored when working out pension credit and some of the smaller, sillier income rules in the MIG will go—for example, the remunerative work rules. Charitable and voluntary payments will be ignored, as will student loans and grants.
  Many hon. Members talked about targeting. Opposition Members of both parties suggested that targeting by age is a proxy for poverty, but if we spent the £2 billion increasing the basic state pension for those aged over 75, only 32 per cent. of it would go to the poorest third. Paying £2 billion to the over-75s would still leave three quarters of them short of the current MIG level.
  Hon. Members said that the pension credit does not benefit women and the very elderly, but it does. Two thirds of the gainers are women, half are over 75 and more than a quarter are over 80. So I do not accept that argument either. Hon. Members from both Opposition parties suggested that we should spend the £2 billion on the basic state pension, but the poorest third of pensioners will gain two and a half times more with the pension credit than with the equivalent spending in basic state pension.
  Now we see that the Tories are trying to reinvent themselves as the party of the vulnerable, but the Leader of the Opposition opposed both the winter fuel payment and the minimum income guarantee. He described the winter fuel payment as "cock-eyed" and the minimum income guarantee as
  "a huge rise in spending … I can think of nothing to recommend it."—[Official Report, 15 March 1999; Vol. 327, c. 740–41.]
  The Tories' record clearly shows that they did not care about the vulnerable when they were last in office, and they do not care about them now.
  After the wrecking job that they did on pensioners' incomes between 1979 and 1997, they went into the 1997 election campaign pledged to their pièce de résistance—to privatise the basic state pension. They suffered their worst electoral defeat since 1832. Having condemned all our measures to alleviate pensioner poverty and to put right the mess that they had left us in during the previous Parliament, they went into the 2001 election pledged to privatise the basic state pension. They made a net gain of one seat. They are still in favour of privatising the basic state pension—the leaked letter from the hon. Member for Havant to the hon. Member for Sutton Coldfield shows that they are working on that now. Their big new idea to help the vulnerable is to privatise the basic state pension. Can a leopard change its spots? Can the Tories stand up for the vulnerable? I think not.
  The Bill is the right way forward, and any party that truly wants to help the vulnerable would support it. I commend it to the House.
  Question put, That the amendment be made:—
  The House divided: Ayes 191, Noes 299.

  Division No. 202]

  [9.59 pm

  AYES

  Ainsworth, Peter (E Surrey)

  Greenway, John

  Allan, Richard

  Grieve, Dominic

  Amess, David

  Gummer, Rt Hon John

  Ancram, Rt Hon Michael

  Hammond, Philip

  Arbuthnot, Rt Hon James

  Hancock, Mike

  Atkinson, Peter (Hexham)

  Harris, Dr Evan (Oxford W)

  Bacon, Richard

  Harvey, Nick

  Baker, Norman

  Hawkins, Nick

  Baldry, Tony

  Hayes, John

  Barker, Gregory

  Heald, Oliver

  Baron, John

  Heath, David

  Barrett, John

  Hendry, Charles

  Beith, Rt Hon A J

  Hoban, Mark

  Beresford, Sir Paul

  Horam, John

  Blunt, Crispin

  Howard, Rt Hon Michael

  Boswell, Tim

  Howarth, Gerald (Aldershot)

  Bottomley, Peter (Worthing W)

  Hughes, Simon (Southwark N)

  Bottomley, Rt Hon Virginia

  Hunter, Andrew

  Brady, Graham

  Jack, Rt Hon Michael

  Brake, Tom

  Jackson, Robert (Wantage)

  Breed, Colin

  Jenkin, Bernard

  Brooke, Mrs Annette L

  Johnson, Boris (Henley)

  Browning, Mrs Angela

  Jones, Nigel (Cheltenham)

  Bruce, Malcolm

  Keetch, Paul

  Burnett, John

  Kennedy, Rt Hon Charles

  Burns, Simon

  (Ross Skye & Inverness W)

  Burnside, David

  Key, Robert

  Burstow, Paul

  Kirkbride, Miss Julie

  Burt, Alistair

  Kirkwood, Archy

  Cable, Dr Vincent

  Laing, Mrs Eleanor

  Cameron, David

  Lait, Mrs Jacqui

  Campbell, Rt Hon Menzies

  Lamb, Norman

  (NE Fife)

  Lansley, Andrew

  Cash, William

  Laws, David

  Chapman, Sir Sydney

  Leigh, Edward

  (Chipping Barnet)

  Letwin, Oliver

  Chope, Christopher

  Lewis, Dr Julian (New Forest E)

  Clappison, James

  Liddell—Grainger, Ian

  Clarke, Rt Hon Kenneth

  Lidington, David

  (Rushcliffe)

  Lilley, Rt Hon Peter

  Clifton—Brown, Geoffrey

  Loughton, Tim

  Collins, Tim

  Luff, Peter

  Conway, Derek

  McIntosh, Miss Anne

  Cormack, Sir Patrick

  Maclean, Rt Hon David

  Cotter, Brian

  McLoughlin, Patrick

  Cran, James

  May, Mrs Theresa

  Curry, Rt Hon David

  Mercer, Patrick

  Davey, Edward (Kingston)

  Mitchell, Andrew (Sutton Coldfield)

  Davies, Quentin (Grantham)

  Moore, Michael

  Davis, Rt Hon David (Haltemprice)

  Moss, Malcolm

  Djanogly, Jonathan

  Murrison, Dr Andrew

  Donaldson, Jeffrey M

  O'Brien, Stephen (Eddisbury)

  Doughty, Sue

  Öpik, Lembit

  Duncan, Alan (Rutland & Melton)

  Osborne, George (Tatton)

  Evans, Nigel

  Ottaway, Richard

  Fallon, Michael

  Page, Richard

  Field, Rt Hon Frank (Birkenhead)

  Paice, James

  Field, Mark (Cities of London)

  Paterson, Owen

  Flight, Howard

  Pickles, Eric

  Flook, Adrian

  Price, Adam

  Forth, Rt Hon Eric

  Prisk, Mark

  Foster, Don (Bath)

  Pugh, Dr John

  Fox, Dr Liam

  Redwood, Rt Hon John

  Francois, Mark

  Reid, Alan (Argyll & Bute)

  Gale, Roger

  Rendel, David

  George, Andrew (St Ives)

  Robathan, Andrew

  Gibb, Nick

  Robertson, Angus (Moray)

  Gidley, Sandra

  Robertson, Hugh (Faversham)

  Goodman, Paul

  Robertson, Laurence (Tewk'b'ry)

  Gray, James

  Roe, Mrs Marion

  Grayling, Chris

  Rosindell, Andrew

  Green, Damian (Ashford)

  Ruffley, David

  Green, Matthew (Ludlow)

  Russell, Bob (Colchester)

  669

  Salmond, Alex

  Tonge, Dr Jenny

  Sanders, Adrian

  Tredinnick, David

  Sayeed, Jonathan

  Trend, Michael

  Selous, Andrew

  Turner, Andrew (Isle of Wight)

  Shephard, Rt Hon Mrs Gillian

  Tyler, Paul

  Simmonds, Mark

  Tyrie, Andrew

  Simpson, Keith (Mid-Norfolk)

  Viggers, Peter

  Smith, Sir Robert (W Ab'd'ns)

  Waterson, Nigel

  Soames, Nicholas

  Watkinson, Angela

  Spelman, Mrs Caroline

  Webb, Steve

  Spicer, Sir Michael

  Whittingdale, John

  Spink Bob

  Widdecombe, Rt Hon Miss Ann

  Spring, Richard

  Wilkinson, John

  Stanley, Rt Hon Sir John

  Willetts, David

  Williams, Hywel (Caemarfon)

  Streeter,Gary

  Willis, Phil

  Stunell, Andrew

  Wilshire David

  Swayne, Desmond

  Winterton, Mrs Ann (Congleton)

  Swire, Hugo

  Winterton, Nicholas (Macclesfield)

  Syms, Robert

  Wishart, Pete

  Taylor, Ian (Esher & Walton)

  Yeo, Tim

  Taylor, John (Solihull)

  Young, Rt Hon Sir George

  Taylor, Matthew (Truro)

  Younger—Ross, Richard

  Taylor, Dr Richard (Wyre F)

  Taylor, Sir Teddy

  Tellers for the Ayes:

  Thomas, Simon (Ceredigion)

  Mr. John Randall and

  Thurso, John

  Mr. Julian Brazier.

  NOES

  Abbott, Ms Diane

  Clark, Paul (Gillingham)

  Adams, Mrs Irene (Paisley N)

  Clarke, Rt Hon Tom (Coatbridge)

  Ainger, Nick

  Clarke, Tony (Northampton S)

  Ainsworth, Bob (Cov'try NE)

  Clelland, David

  Alexander, Douglas

  Clwyd, Ann

  Allen, Graham

  Coaker, Vernon

  Anderson, Janet (Rossendale)

  Coffey, Ms Ann

  Armstrong, Rt Hon Ms Hilary

  Coleman, Iain

  Atkins, Charlotte

  Connarty, Michael

  Austin, John

  Cook, Rt Hon Robin (Livingston)

  Bailey, Adrian

  Corbyn, Jeremy

  Banks, Tony

  Cousins, Jim

  Barron, Kevin

  Cranston, Ross

  Bayley, Hugh

  Crausby, David

  Beard, Nigel

  Cruddas, Jon

  Beckett, Rt Hon Margaret

  Cryer, Mrs Ann (Keighley)

  Begg, Miss Anne

  Cryer, John (Hornchurch)

  Bennett, Andrew

  Cummings, John

  Benton, Joe

  Cunningham, Rt Hon Dr Jack

  Berry, Roger

  (Copeland)

  Betts, Clive

  Cunningham, Jim (Cov'try S)

  Blackman, Liz

  Cunningham, Tony (Workington)

  Blears, Ms Hazel

  Dalyell, Tam

  Blizzard, Bob

  Darling, Rt Hon Alistair

  Borrow, David

  Davey, Valerie (Bristol W)

  Bradley, Rt Hon Keith (Withington)

  David, Wayne

  Bradley, Peter (The Wrekin)

  Davidson, Ian

  Bradshaw, Ben

  Davies, Rt Hon Denzil (Llanelli)

  Brennan, Kevin

  Dawson, Hilton

  Brown, Russell (Dumfries)

  Dean, Mrs Janet

  Bryant, Chris

  Dhanda, Parmjit

  Buck, Ms Karen

  Dismore, Andrew

  Burden, Richard

  Dobbin, Jim

  Burnham, Andy

  Dobson, Rt Hon Frank

  Caborn, Rt Hon Richard

  Donohoe, Brian H

  Cairns, David

  Doran, Frank

  Campbell, Mrs Anne (C'bridge)

  Dowd, Jim

  Campbell, Ronnie (Blyth V)

  Drew, David

  Caplin, Ivor

  Drown, Ms Julia

  Casale, Roger

  Eagle, Angela (Wallasey)

  Cawsey, Ian

  Eagle, Maria (L'pool Garston)

  Challen, Colin

  Edwards, Huw

  Chapman, Ben (Wirral S)

  Ellman, Mrs Louise

  Clapham, Michael

  Etherington, Bill

  Clark, Mrs Helen (Peterborough)

  Farrelly, Paul

  Clark, Dr Lynda

  Fitzsimons, Mrs Lorna

  (Edinburgh Pentlands)

  Flynn, Paul

  670

  Follett, Barbara

  McAvoy, Thomas

  Foster, Rt Hon Derek

  McCabe, Stephen

  Foster, Michael (Worcester)

  McCafferty, Chris

  Francis, Dr Hywel

  McDonagh, Siobhain

  Gapes, Mike

  MacDonald, Calum

  Gardiner, Barry

  McDonnell, John

  George, Rt Hon Bruce (Walsall S)

  MacDougall, John

  Gibson, Dr Ian

  McFall, John

  Gilroy, Linda

  McGuire, Mrs Anne

  Godsiff, Roger

  McIsaac, Shona

  Goggins, Paul

  McNulty, Tony

  Griffiths, Jane (Reading E)

  MacShane, Denis

  Griffiths, Nigel (Edinburgh S)

  Mactaggart, Fiona

  Griffiths, Win (Bridgend)

  McWalter, Tony

  Grogan, John

  Mahmood, Khalid

  Hall, Mike (Weaver Vale)

  Mahon, Mrs Alice

  Hall, Patrick (Bedford)

  Mandelson, Rt Hon Peter

  Hamilton, David (Midlothian)

  Mann, John

  Hanson, David

  Marris, Rob

  Harman, Rt Hon Ms Harriet

  Marsden, Gordon (Blackpool S)

  Harris, Tom (Glasgow Cathcart)

  Marshall, David (Shettleston)

  Havard, Dai

  Marshall, Jim (Leicester S)

  Healey, John

  Marshall—Andrews, Robert

  Henderson, Doug (Newcastle N)

  Martlew, Eric

  Henderson, Ivan (Harwich)

  Meacher, Rt Hon Michael

  Hendrick, Mark

  Meale, Alan

  Hepburn, Stephen

  Michael, Rt Hon Alun

  Heppell, John

  Milburn, Rt Hon Alan

  Hewitt, Rt Hon Ms Patricia

  Miliband, David

  Heyes, David

  Miller, Andrew

  Hill, Keith

  Moffatt, Laura

  Hinchliffe, David

  Mole, Chris

  Hoey, Kate

  Moonie, Dr Lewis

  Hood, Jimmy

  Moran, Margaret

  Hoon, Rt Hon Geoffrey

  Morley, Elliot

  Hope, Phil

  Mullin, Chris

  Hopkins, Kelvin

  Munn, Ms Meg

  Howarth, Rt Hon Alan (Newport E)

  Murphy, Jim (Eastwood)

  Howarth, George (Knowsley N)

  Murphy, Rt Hon Paul (Torfaen)

  Hoyle, Lindsay

  Naysmith, Dr Doug

  Hughes, Beverley (Stretford)

  O'Brien, Mike (N Warks)

  Hughes, Kevin (Doncaster N)

  O'Hara, Edward

  Humble, Mrs Joan

  Osborne, Sandra (Ayr)

  Hurst, Alan

  Pearson, Ian

  Hutton, Rt Hon John

  Perham, Linda

  Iddon, Dr Brian

  Picking, Anne

  Illsley, Eric

  Pickthall, Colin

  Ingram, Rt Hon Adam

  Plaskitt, James

  Irranca—Davies, Huw

  Pond, Chris

  Jackson, Helen (Hillsborough)

  Pound, Stephen

  Jamieson, David

  Prentice, Gordon (Pendle)

  Jenkins, Brian

  Prescott, Rt Hon John

  Johnson, Alan (Hull W & Hessle)

  Primarolo, Dawn

  Jones, Helen (Warrington N)

  Prosser, Gwyn

  Keeble, Ms Sally

  Purchase, Ken

  Keen, Alan (Feltham & Heston)

  Purnell, James

  Keen, Ann (Brentford & Isleworth)

  Quin, Rt Hon Joyce

  Kemp, Fraser

  Quinn, Lawrie

  Khabra, Piara S

  Rapson, Syd

  Kidney, David

  Raynsford, Rt Hon Nick

  Kilfoyle, Peter

  Robertson, John

  King, Andy (Rugby & Kenilworth)

  (Glasgow Anniesland)

  King, Ms Oona (Bethnal Green)

  Robinson, Geoffrey (Cov'try NW)

  Knight, Jim (S Dorset)

  Roche, Mrs Barbara

  Ladyman, Dr Stephen

  Rooney, Terry

  Lawrence, Mrs Jackie

  Ross, Ernie

  Laxton, Bob

  Roy, Frank

  Lepper, David

  Ruddock, Joan

  Leslie, Christopher

  Russell, Ms Christine (Chester)

  Levitt, Tom

  Ryan, Joan

  Lewis, Ivan (Bury S)

  Salter, Martin

  Liddell, Rt Hon Mrs Helen

  Savidge, Malcolm

  Linton, Martin

  Sawford, Phil

  Love, Andrew

  Sedgemore, Brian

  Luke, Iain

  Shaw, Jonathan

  Lyons, John

  Sheerman, Barry

  671

  Sheridan, Jim

  Tipping, Paddy

  Shipley, Ms Debra

  Todd, Mark

  Short, Rt Hon Clare

  Touhig, Don

  Simpson, Alan (Nottingham S)

  Trickett, Jon

  Skinner, Dennis

  Turner, Dennis (Wolverh'ton SE)

  Smith, Rt Hon Andrew (Oxford E)

  Turner, Dr Desmond (Kemptown)

  Smith, Angela (Basildon)

  Turner, Neil (Wigan)

  Smith, Rt Hon Chris (Islington S)

  Twigg, Derek (Halton)

  Smith, John (Glamorgan)

  Tynan, Bill

  Smith, Llew (Blaenau Gwent)

  Vis, Dr Rudi

  Soley, Clive

  Ward, Ms Claire

  Spellar, Rt Hon John

  Wareing, Robert N

  Squire, Rachel

  Watson Tom

  Starkey, Dr Phyllis

  Watts, David

  Steinberg, Gerry

  White, Brian

  Stevenson, George

  Whitehead, Dr Alan

  Stewart, David (Inverness E)

  Wicks, Malcolm

  Stewart, Ian (Eccles)

  Williams, Rt Hon Alan(Swansea W)

  Stinchcombe, Paul

  Wilson, Brian

  Stoate, Dr Howard

  Winterton, Ms Rosie (Doncaster C)

  Strang, Rt Hon Dr Gavin

  Woodward, Shaun

  Stringer, Graham

  Woolas, Phil

  Stuart, Ms Gisela

  Worthington, Tony

  Sutcliffe, Gerry

  Wright, Anthony D (Gt Yarmouth)

  Tami, Mark

  Wright, David (Telford)

  Taylor, Rt Hon Ann (Dewsbury)

  Wyatt, Derek

  Taylor, Ms Dari (Stockton S)

  Taylor, David (NW Leics)

  Tellers for the Noes:

  Thomas, Gareth (Clwyd W)

  Dan Norris and

  Thomas, Gareth R (Harrow W)

  Jim Fitzpatrick.

  Question accordingly negatived.
  Main Question put forthwith, pursuant to Standing Order No. 62 (Amendment on Second or Third Reading), and agreed to.
  Bill accordingly read a Second time.
  Motion made, and Question put forthwith, pursuant to Order [28 June 2001],
  That the following provisions shall apply to the State Pension Credit Bill [Lords]

  State Pension Credit Bill [Lords]
    Committal
    (1) The Bill shall be committed to a Standing Committee.
    Programming of proceedings
    (2) All proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any other messages from the Lords) shall be programmed.

    Proceedings in Standing Committee
    (3) Proceedings in the Standing Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 30th April 2002.
    (4) The Standing Committee shall have leave to sit twice on the first day on which it meets.

    Consideration and Third Reading
    (5) Proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion at Nine o'clock on the day on which those proceedings are commenced or, if that day is a Thursday, at Six o'clock on that day.
    (6) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at Ten o'clock on the day on which proceedings on consideration are commenced or, if that day is a Thursday, at Seven o'clock on that day.
    (7) Sessional Order B (programming committees) made on 28th June 2001 shall not apply to proceedings on consideration and Third Reading.—[Mr. Kemp.]
    The House divided: Ayes 354, Noes 134.

    Division No. 203]

    [10.15 pm

    AYES

    Abbott, Ms Diane

    Coleman, Iain

    Adams, Mrs Irene (Paisley N)

    Connarty, Michael

    Ainger, Nick

    Cook, Rt Hon Robin (Livingston)

    Ainsworth, Bob (Cov'try NE)

    Corbyn, Jeremy

    Alexander, Douglas

    Cotter, Brian

    Allan Richard

    Cousins, Jim

    Allen Graham

    Cranston, Ross

    Anderson, Janet (Rossendale)

    Crausby, David

    Armstrong, Rt Hon Ms Hilary

    Cruddas, Jon

    Atkins, Charlotte

    Cryer, Mrs Ann (Keighley)

    Austin, John

    Cryer, John (Hornchurch)

    Bail, Adrian

    Cummings, John

    Bai Vera

    Cunningham, Rt Hon Dr Jack

    Bak Norman

    (Copeland)

    Ban, Tony

    Cunningham, Jim (Cov"try S)

    Ban tt, John

    Cunningham, Tony (Workington)

    Ban, Kevin

    Dalyell, Tam

    Ba y, Hugh

    Darling, Rt Hon Alistair

    Be, Nigel

    Davey, Edward (Kingston)

    Be ett Rt Hon Margaret

    Davey, Valerie (Bristol W)

    Be, Miss Anne

    David, Wayne

    Bei, Rt Hon A J

    Davidson, Ian

    Be ett, Andrew

    Davies, Rt Hon Denzil (Llanelli)

    Ber n, Joe

    Dawson, Hilton

    Ber, Roger

    Dean, Mrs Janet

    Bet, Clive

    Dhanda, Parmjit

    Bla man, Liz

    Dismore, Andrew

    Ble s, Ms Hazel

    Dobbin, Jim

    Bliz ard, Bob

    Dobson, Rt Hon Frank

    Bo w, David

    Donohoe, Brian H

    Bra ley, Rt Hon Keith (Withington)

    Doran, Frank

    Bra ley, Peter (The Wrekin)

    Doughty, Sue

    Bra shaw, Ben

    Dowd, Jim

    Bra e, Tom

    Drew, David

    Bre d, Colin

    Drown, Ms Julia

    Brennan, Kevin

    Eagle, Angela (Wallasey)

    Brooke, Mrs Annette L

    Eagle, Maria (L'pool Garston)

    Brown, Russell (Dumfries)

    Edwards, Huw

    Bruce, Malcolm

    Ellman, Mrs Louise

    Bryant, Chris

    Etherington, Bill

    Buck, Ms Karen

    Farrelly, Paul

    Burden, Richard

    Field, Rt Hon Frank (Birkenhead)

    Burnham, Andy

    Fitzsimons, Mrs Lorna

    Burstow, Paul

    Flynn, Paul

    Cabe, Dr Vincent

    Follett, Barbara

    Caborn, Rt Hon Richard

    Foster, Rt Hon Derek

    Cairns, David

    Foster, Don (Bath)

    Campbell, Mrs Anne (C'bridge)

    Foster, Michael (Worcester)

    Campbell, Rt Hon Menzies

    Francis, Dr Hywel

    (NE Fife)

    Gapes, Mike

    Campbell, Ronnie (Blyth V)

    Gardiner, Barry

    Caplin, Ivor

    George, Andrew (St Ives)

    Casale, Roger

    George, Rt Hon Bruce (Walsall S)

    Cawsey, Ian

    Gibson, Dr Ian

    Challen, Colin

    Gidley, Sandra

    Chapman, Ben (Wirral S)

    Gilroy, Linda

    Clapham, Michael

    Godsiff, Roger

    Clark, Mrs Helen (Peterborough)

    Goggins, Paul

    Clark, Dr Lynda

    Green, Matthew (Ludlow)

    (Edinburgh Pentlands)

    Griffiths, Jane (Reading E)

    Clark, Paul (Gillingham)

    Griffiths, Nigel (Edinburgh S)

    Clarke, Rt Hon Tom (Coatbridge)

    Griffiths, Win (Bridgend)

    Clarke, Tony (Northampton S)

    Grogan, John

    Clelland, David

    Hall, Mike (Weaver Vale)

    Clwyd, Ann

    Hall, Patrick (Bedford)

    Coaker, Vernon

    Hamilton, David (Midlothian)

    Coffey, Ms Ann

    Hancock, Mike

    673

    Hanson, David

    McFall, John

    Harman, Rt Hon Ms Harriet

    McGuire, Mrs Anne

    Harris, Dr Evan (Oxford W)

    McIsaac, Shona

    Harris, Tom (Glasgow Cathcart)

    McKechin, Ann

    Harvey, Nick

    McNulty, Tony

    Havard, Dai

    MacShane, Denis

    Healey, John

    Mactaggart, Fiona

    Heath, David

    McWalter, Tony

    Henderson, Doug (Newcastle N)

    Mahmood, Khalid

    Henderson, Ivan (Harwich)

    Mahon, Mrs Alice

    Hendrick, Mark

    Mandelson, Rt Hon Peter

    Hepburn, Stephen

    Mann, John

    Heppell, John

    Marris, Rob

    Hewitt, Rt Hon Ms Patricia

    Marsden, Gordon (Blackpool S)

    Heyes, David

    Marshall, David (Shettleston)

    Hill, Keith

    Marshall, Jim (Leicester S)

    Hinchliffe, David

    Marshall—Andrews, Robert

    Hoey, Kate

    Martlew, Eric

    Hood, Jimmy

    Meacher, Rt Hon Michael

    Hoon, Rt Hon Geoffrey

    Meale, Alan

    Hope, Phil

    Michael, Rt Hon Alun

    Hopkins, Kelvin

    Milburn Rt Hon Alan

    Howarth, Rt Hon Alan (Newport E)

    Miliband, David

    Howarth, George (Knowsley N)

    Miller, Andrew

    Hoyle, Lindsay

    Moffatt, Laura

    Hughes, Beverley (Stretford)

    Mole, Chris

    Hughes, Kevin (Doncaster N)

    Moonie, Dr Lewis

    Hughes, Simon (Southwark N)

    Moore, Michael

    Humble, Mrs Joan

    Moran, Margaret

    Hurst, Alan

    Morley, Elliot

    Hutton, Rt Hon John

    Mullin, Chris

    Iddon, Dr Brian

    Munn, Ms Meg

    Illsley, Eric

    Murphy, Jim (Eastwood)

    Ingram, Rt Hon Adam

    Murphy, Rt Hon Paul (Torfaen)

    Irranca—Davies, Huw

    Naysmith, Dr Doug

    Jackson, Helen (Hillsborough)

    O'Brien, Mike (N Warks)

    Jamieson, David

    O'Hara, Edward

    Jenkins, Brian

    O'Neill, Martin

    Johnson, Alan (Hull W & Hessle)

    Öpik, Lembit

    Jones, Helen (Warrington N)

    Osborne, Sandra (Ayr)

    Jones, Nigel (Cheltenham)

    Pearson, Ian

    Keeble, Ms Sally

    Perham, Linda

    Keen, Alan (Feltham & Heston)

    Picking, Anne

    Keen, Ann (Brentford & Isleworth)

    Pickthall, Colin

    Keetch, Paul

    Plaskitt, James

    Kemp, Fraser

    Pond, Chris

    Kennedy, Rt Hon Charles

    Pound, Stephen

    (Ross Skye & Inverness W)

    Prentice, Ms Bridget (Lewisham E)

    Khabra, Piara S

    Prentice, Gordon (Pendle)

    Kidney, David

    Prescott, Rt Hon John

    Kilfoyle, Peter

    Price, Adam

    King, Andy (Rugby & Kenilworth)

    Primarolo, Dawn

    King, Ms Oona (Bethnal Green)

    Prosser, Gwyn

    Kirkwood, Archy

    Pugh, Dr John

    Knight, Jim (S Dorset)

    Purnell, James

    Ladyman, Dr Stephen

    Quin, Rt Hon Joyce

    Lamb, Norman

    Quinn, Lawrie

    Lawrence, Mrs Jackie

    Rapson, Syd

    Laws, David

    Raynsford, Rt Hon Nick

    Laxton, Bob

    Reid, Alan (Argyll & Bute)

    Lepper, David

    Rendel, David

    Leslie, Christopher

    Robertson, Angus (Moray)

    Levitt, Tom

    Robertson, John (Glasgow Anniesland)

    Lewis, Ivan (Bury S)

    Liddell, Rt Hon Mrs Helen

    Robinson, Geoffrey (Cov'try NW)

    Linton, Martin

    Roche, Mrs Barbara

    Love, Andrew

    Rooney, Terry

    Luke, Iain

    Ross, Ernie

    Lyons, John

    Roy, Frank

    McAvoy, Thomas

    Ruddock, Joan

    McCabe, Stephen

    Russell, Bob (Colchester)

    McCafferty, Chris

    Russell, Ms Christine (Chester)

    McDonagh, Siobhain

    Ryan, Joan

    MacDonald, Calum

    Salmond, Alex

    McDonnell, John

    Salter, Martin

    MacDougall, John

    Sanders, Adrian

    674

    Savidge, Malcolm

    Thurso, John

    Sawford, Phil

    Tipping, Paddy

    Sedgemore, Brian

    Todd, Mark

    Shaw, Jonathan

    Tonge, Dr Jenny

    Sheerman, Barry

    Touhig, Don

    Sheridan, Jim

    Trickett, Jon

    Shipley, Ms Debra

    Turner, Dennis (Wolverh'ton SE)

    Short, Rt Hon Clare

    Turner, Dr Desmond (Kemptown)

    Skinner, Dennis

    Turner, Neil (Wigan)

    Smith, Rt Hon Andrew (Oxford E)

    Twigg, Derek (Halton)

    Smith, Angela (Basildon)

    Tyler, Paul

    Smith, Rt Hon Chris (Islington S)

    Tynan, Bill

    Smith, John (Glamorgan)

    Vis, Dr Rudi

    Smith, Llew (Blaenau Gwent)

    Ward, Ms Claire

    Smith, Sir Robert (W Ab'd'ns)

    Wareing, Robert N

    Soley, Clive

    Watson, Tom

    Spellar, Rt Hon John

    Watts, David

    Squire, Rachel

    Webb, Steve

    Starkey, Dr Phyllis

    White, Brian

    Steinberg, Gerry

    Whitehead, Dr Alan

    Stevenson, George

    Wicks, Malcolm

    Stewart, David (Inverness E)

    Williams, Rt Hon Alan

    Stewart, Ian (Eccles)

    (Swansea W)

    Stinchcombe, Paul

    Williams, Hywel (Caernarfon)

    Stoate, Dr Howard

    Willis, Phil

    Strang, Rt Hon Dr Gavin

    Wilson, Brian

    Stringer, Graham

    Winterton, Ms Rosie (Doncaster C)

    Stuart, Ms Gisela

    Wishart, Pete

    Stunell, Andrew

    Woodward, Shaun

    Sutcliffe, Gerry

    Woolas, Phil

    Tami, Mark

    Worthington, Tony

    Taylor, Rt Hon Ann (Dewsbury)

    Wright, Anthony D (Gt Yarmouth)

    Taylor, Ms Dari (Stockton S)

    Wright, David (Telford)

    Taylor, David (NW Leics)

    Wyatt, Derek

    Taylor, Matthew (Truro)

    Younger—Ross, Richard

    Taylor, Dr Richard (Wyre F)

    Thomas, Gareth (Clwyd W)

    Tellers for the Ayes:

    Thomas, Gareth R (Harrow W)

    Dan Norris and

    Thomas, Simon (Ceredigion)

    Jim Fitzpatrick.

    NOES

    Ainsworth, Peter (E Surrey)

    Donaldson, Jeffrey M

    Amess, David

    Duncan, Alan (Rutland & Melton)

    Ancram, Rt Hon Michael

    Duncan, Peter (Galloway)

    Arbuthnot, Rt Hon James

    Evans, Nigel

    Atkinson, Peter (Hexham)

    Field, Mark (Cities of London)

    Bacon, Richard

    Flight, Howard

    Baldry, Tony

    Flook, Adrian

    Barker, Gregory

    Forth, Rt Hon Eric

    Baron, John

    Fox, Dr Liam

    Beresford, Sir Paul

    Francois, Mark

    Blunt, Crispin

    Gale, Roger

    Boswell, Tim

    Gibb, Nick

    Bottomley, Peter (Worthing W)

    Gillan, Mrs Cheryl

    Brady, Graham

    Goodman, Paul

    Browning, Mrs Angela

    Gray, James

    Burns, Simon

    Grayling, Chris

    Burnside, David

    Green, Damian (Ashford)

    Burt, Alistair

    Greenway, John

    Cameron, David

    Grieve, Dominic

    Cash, William

    Gummer, Rt Hon John

    Chapman, Sir Sydney

    Hammond, Philip

    (Chipping Barnet)

    Hawkins, Nick

    Chope, Christopher

    Hayes, John

    Clappison, James

    Heald, Oliver

    Clarke, Rt Hon Kenneth

    Hendry, Charles

    (Rushcliffe)

    Hoban, Mark

    Clifton-Brown, Geoffrey

    Horam, John

    Collins, Tim

    Howarth, Gerald (Aldershot)

    Conway, Derek

    Jack, Rt Hon Michael

    Cormack, Sir Patrick

    Jackson, Robert (Wantage)

    Cran, James

    Jenkin, Bernard

    Curry, Rt Hon David

    Johnson, Boris (Henley)

    Davies, Quentin (Grantham)

    Key, Robert

    Davis, Rt Hon David (Haltemprice)

    Kirkbride, Miss Julie

    Djanogly, Jonathan

    Laing, Mrs Eleanor

    675

    Lait, Mrs Jacqui

    Selous, Andrew

    Lansley, Andrew

    Shephard, Rt Hon Mrs Gillian

    Leigh, Edward

    Simmonds, Mark

    Letwin, Oliver

    Simpson, Keith (Mid-Norfolk)

    Lewis, Dr Julian (New Forest E)

    Spelman, Mrs Caroline

    Liddell—Grainger, Ian

    Spicer, Sir Michael

    Lidington, David

    Spink, Bob

    Lilley, Rt Hon Peter

    Spring, Richard

    Loughton, Tim

    Stanley, Rt Hon Sir John

    Luff, Peter

    Streeter, Gary

    McIntosh, Miss Anne

    Swire, Hugo

    Maclean, Rt Hon David

    Syms, Robert

    McLoughlin, Patrick

    Taylor, Ian (Esher & Walton)

    May, Mrs Theresa

    Taylor, John (Solihull)

    Mercer, Patrick

    Taylor, Sir Teddy

    Mitchell, Andrew (Sutton Coldfield)

    Tredinnick, David

    Moss, Malcolm

    Trend, Michael

    Murrison, Dr Andrew

    Turner, Andrew (Isle of Wight)

    O'Brien, Stephen (Eddisbury)

    Tyrie, Andrew

    Osborne, George (Tatton)

    Viggers, Peter

    Ottaway, Richard

    Waterson, Nigel

    Page, Richard

    Watkinson, Angela

    Paice, James

    Whittingdale, John

    Paterson, Owen

    Widdecombe, Rt Hon Miss Ann

    Pickles, Eric

    Wilkinson, John

    Prisk, Mark

    Willetts, David

    Randall, John

    Wilshire, David

    Redwood, Rt Hon John

    Winterton, Mrs Ann (Congleton)

    Robathan, Andrew

    Winterton, Nicholas (Macclesfield)

    Robertson, Hugh (Faversham)

    Yeo, Tim

    Robertson, Laurence (Tewk'b'ry)

    Young, Rt Hon Sir George

    Roe, Mrs Marion

    Rosindell, Andrew

    Tellers for the Noes:

    Ruffley, David

    Mr. Julian Brazier and

    Sayeed, Jonathan

    Mr. Desmond Swayne.

    Question accordingly agreed to.

    STATE PENSION CREDIT BILL [LORDS] [MONEY]
    Queen's recommendation having been signified—
    Motion made, and Question put forthwith, pursuant to Standing Order No. 52 (Money resolutions and ways and means resolutions in connection with bills),
    That for the purposes of any Act resulting from the State Pension Credit Bill [Lords], it is expedient to authorise—

    (1) the payment out of money provided by Parliament of—

    (a) any sums payable by way of state pension credit;

    (b) any expenditure incurred by the Secretary of State or other government department under or by virtue of the Act; and

    (c) any increase attributable to the Act in the sums payable out of money so provided under any other Act; and

    (2) the payment into the Consolidated Fund of any increase attributable to the Act in the sums which under any other Act are payable into that Fund.—[Mr. Kemp.]

    Question agreed to.

    WELSH GRAND COMMITTEE
    Ordered,
    That—

    (1) the matter of the Budget Statement and its implications for Wales, being a matter relating exclusively to Wales, be referred to the Welsh Grand Committee for its consideration;

    676

    (2) the Committee shall meet on Wednesday 24th April at half-past Ten o'clock and between Four o'clock and Six o'clock at Westminster to take questions under Standing Order No. 103 (Welsh Grand Committee (questions for oral answer)), and to consider the Budget Statement and its implications for Wales, under Standing Order No. 107 (Welsh Grand Committee (matters relating exclusively to Wales)).—[Mr. Kemp.]

PETITIONS

  Fireworks
  10.29 pm
  Dr. Howard Stoate: I have pleasure in presenting a petition signed by more than 2,000 residents of north Kent, most of them pet owners, expressing concern about the recent increase in private firework displays throughout the year. They feel that the suffering that their animals are forced to endure from night after night of fireworks is wholly unacceptable and unnecessary and want legislation to be introduced as soon as possible to restrict the sale of fireworks to the general public to traditional festivals such as 5 November, new year's eve and Diwali.
  The petition states:
  The Humble Petition of the residents of North Kent sheweth
  That the significant recent increase in private firework displays throughout the calendar year is causing considerable unnecessary distress to domestic animals and livestock and undue nuisance to residents.
  Wherefore your Petitioners pray that your Honourable House will take such measures as lie within its power to restrict the use of fireworks by the general public to New Year's Eve, religious festivals during which fireworks are traditionally used, such as Diwali, and the 14-day period around 5 November, and further request that the sale of fireworks by retail outlets be restricted to the same 14-day period around 5 November and religious festivals and to the five-day period up to and including New Year's Eve.
  And your Petitioners, as in duty bound, will ever pray.
  To lie upon the Table.

  Bolton Magistrates Court
  10.32 pm
  Mr. David Crausby: I present a petition organised by my local newspaper the Bolton Evening News, and supported by my hon. Friends the Members for Bolton, South-East (Dr. Iddon) and for Bolton, West (Ruth Kelly) and myself.
  The petition states:
  The petition of residents of Bolton declares
  That they deplore the recommendation of the Greater Manchester Magistrates Court Committee to close Bolton Magistrates Court; that closing the court would be a travesty of justice and prevent them from gaining full access to the law.
  The petition also expresses concern that magistrates from other towns will hear cases involving Bolton issues that they may not understand. It says:
  The petitioners therefore request that the House of Commons urge the Lord Chancellor to intervene on the Petitioners' behalf and block the planned closure of Bolton Magistrates Court.
  To lie upon the Table.

Gerard Morgan
10.33 pm
Mr. David Cameron: I present a petition with 342 signatures on behalf of Mr. and Mrs. Morgan of 53 Queens road in Carterton.
The petition states:
The Petition of Mr. and Mrs. L. S. Morgan
Declares that on 14 December their son Gerard Morgan was convicted of rape at Oxford Crown court; that he was subsequently sentenced to four years' imprisonment: and that he has maintained throughout that he is innocent of the crime for which he has been convicted.
The Petitioners therefore request that the House of Commons take note of the fact that Gerard Morgan believes that he has been convicted of a crime which he did not commit.
And the Petitioners remain, etc.
To lie upon the Table.

Farming (Somerset)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kemp.]
10.34 pm
Mr. Ian Liddell-Grainger: I am delighted to have secured this debate and even more delighted that four Somerset Members are here and that the fifth has sent his apologies—he could not make it.
Why the need for this debate? Last year farming almost stopped in Somerset. It was the year of foot and mouth, and it was a complete and utter disaster. Across Somerset, the whole fabric of rural life fell apart. Cattle could not be moved, tourists could not come to the area and the markets could not open. Nothing happened. Where are we going now?
Just before I came here to speak, I picked up a copy of the latest "Working for the Essentials of Life", which contains some interesting paragraphs, one of which states:
"Our task is now to carry forward those ideas in partnership with everyone who has a stake in farming and the food industries to ensure that English food and farming succeed. Together, we will define a lasting strategy".
It continues:
"The EU must determine its own negotiating stance by 2003",
so that, when we go to the World Trade Organisation, we make absolutely sure that British farming is at the forefront of our thinking. I wonder how we can do that, however, because one of our problems especially in Somerset, is brand awareness.
Somerset has an enormous amount to be proud of there is obviously our cider, and we make our own jam and we have our own apples and meat, including lamb. We have an enormous breadth of goods, but we cannot put brand awareness properly across because our co-operatives are not large enough. I ask the Minister whether the European Union co-operative money can now be made available to create co-operatives to develop brand awareness across Somerset, the United Kingdom and the world. As we have a winner, let us try to push it.
I want to talk about some of the issues facing farming that are causing problems for farmers, now and in future. The first is the tractor vibration directive. People may ask what on earth is a tractor vibration directive, but it states that tractors cannot be driven for more than seven hours because the vibration may cause damage to people's fingers. I checked with the National Farmers Union, which is also an insurance company, and it has not encountered that problem in 25 years. I wonder how people on Exmoor and the levels and throughout Somerset will deal with the harvest, seed time and lambing.
I was told that there is no way around the problem because of a lack of staff. Will farmers seriously be told to put tachographs into their tractors? Will they be told that they have to get off their tractors after seven hours? Who will police the directive? Moreover, why should vibration be a problem with new tractors? Before the directive becomes a law in the eyes of the British and something to be ignored in the eyes of the French, I urge the Minister to stop it as quickly as possible. If it reaches the statute book, I can see nothing but trouble from start to finish, as well as challenges from farmers and the NFU.

679
The second issue, which has affected Somerset massively, is the collapse in the price of organic milk. Organic produce was the great hope for the future. After two years, farmers could take organic produce to the heights of farming. They would receive a premium for their goods, enjoy a continuity of supply and be guaranteed a good income. They knew that they had a saleable asset at the end of the day. What has happened? Milk prices are now 3p below the national average. People cannot continue to farm with those prices; they certainly cannot do so as organic producers.
Yeo Valley, which has sites in all Somerset constituencies, is the biggest producer of organic yoghurt, milk and cream. It is now buying milk at a price that suits it, but which is crucifying the industry. I am always happy to support the Soil Association, but purists in a cut-throat market will find that their throats are cut by the others involved. The supermarkets are now importing an immense amount of supposedly organic goods, and the Soil Association says, "That's fine; we'll okay it." Even though the produce is not organic in the eyes of the Soil Association in the United Kingdom, it is organic outside it. If we go down that line, we could find that the organic industry grinds to a halt because we are determined to remains purists and not to allow ourselves to keep pace with the French, Germans and others, who do certainly do not do as we do.
I want to move on to a somewhat contentious issue—badgers. Everyone understands why the Krebs testing had to stop because of foot and mouth disease. I am delighted to see the hon. Member for Torridge and West Devon (Mr. Burnett) because a lot of that testing took place in his constituency, and it was at the forefront of helping us to understand whether badgers carry tuberculosis. We do not know whether they do, and unless the testing starts again, the problem will be that people will start to take the law into their own hands, as has happened before. We want to prevent that from happening again.
The problem is that we know that something carries TB, but we do not know what it is. Regardless of what some people may say, if the testing is begun again, farmers will be given the hope that a resolution will be found to the problem.
We know that there is a major problem when the largest farms on Exmoor are shut down because of tuberculosis and cannot move their cattle. Tuberculosis is travelling in some form and I urge the Minister to consider that problem carefully. Unless he does that, the future on the levels, Exmoor and throughout Somerset could be bleak indeed. We know what it is like not to be able to move our cattle—nearly 3,500 cattle were stuck on Exmoor. The fact that we could not get the cattle off the land in the constituency of my hon. Friend the Member for Taunton (Mr. Flook) caused enormous damage to the welfare of many animals. I urge the Minister to reinstate testing.
Flooding affects all our constituencies in Somerset. None of us is in any doubt that last year was a disaster for farming in the county. Not only did we suffer the problem of foot and mouth but we lost a huge amount of land because of flooding. The Tone and the Parret burst their banks and an enormous amount of land disappeared under water.
Mr. Adrian Flook: My hon. Friend is right to mention flooding and the Parret catchment area, which
680
covers well over half of Somerset. I am sure he is aware of plans finally to do something about flooding in the catchment area, especially around the River Tone and the vale of Taunton Deane. Is he hopeful that the Government will put the money in to back those plans for the Parret catchment area?
Mr. Liddell-Grainger: I thank my hon. Friend for that complicated question. I agree that the money needs to come from central Government. It is interesting to note that the Parret catchment project proposes to create inland lakes. It is possible that we will have a 15,000 m storage lake that will cover parts of the constituencies of my hon. Friend the Member for Taunton and of the hon. Member for Somerton and Frome (Mr. Heath) and will cost in the region of £75,000 to create.
I have two worries about that. The creation of deep flood-storage reservoirs off the flood plain by intercepting run-off, which is what the project will try to achieve, will affect all our constituencies in Somerset. The retention of shallow flood water in the flood plain through the construction of bunds will have the same effect. Although those are noble ideals, according to the document, the landowners have not agreed to those measures. They have said that they like the idea in principle, but who will fund the landowners? The £75,000 is for the work. At the moment the landowners get subsidies to farm the land in the levels. Who is going to tell them that we want to flood their land not just for a few weeks, but for months, especially in the case of last year, and that the barrage is not built and is unlikely to be completed in the next few years? Farmers in our constituencies will be unable to farm because of water. It is great for ducks—I know that the Minister is an ornithologist—but it is not so good for farmers who want to grow hay and put their cattle and sheep out to graze. That cannot happen if their land is covered in water.
We saw a prime example of that last year and the levels have still not dried out although we have had a good winter and spring. I am worried that although the catchment project is a marvellous ideal, in practice I cannot understand how it will take up the slack in the levels in the long term. The idea is to be eco-friendly. I am sure that the purpose of the project is not to destroy habitat. The Royal Society for the Protection of Birds is concerned that if the water level fluctuates too much, the project could damage wildlife rather than help it. I hope that the Minister will also take on board the fact that this has been a good year for foxes and badgers, which are not exactly kind to nesting birds, especially ones on the edges of lakes that recede. I want him to think about that carefully.
On imports, there has been an enormous restocking of cattle and sheep, for obvious reasons to do with events last year. This week, however, there have been problems. According to the NFU's "Farmer's Facts", which I believe all the farmers of Somerset receive, France has been helping with restocking, and we now have positive tests for tuberculosis. One animal was found to be positive in a routine test, and other results have been inconclusive. The problem is that animals being imported live to take up the slack have diseases that they are bringing into the UK. Surely after conquering and eradicating the frightful disease last year, with the enormous cost not only to the Treasury but to the industry and farmers themselves, we do not want any repeat of the outbreak as a result of people being able to bring animals into the country.

681
Cannot animals be tested in European countries before they are brought into the UK? Would it be possible for those tests to be made available to farmers and to the Department, so that there is no repeat of what happened last year? The scare is that we are now importing 10,000 tonnes of beef from Argentina to Europe, and we all know precisely what has been going on in Argentina. It is all very well to help a country that is bankrupt, but we should not bring in meat that may well be contaminated.
Mr. David Heath: I congratulate the hon. Gentleman on securing this important debate. He is ranging wide, and is correct to do so. Does he agree that there are two essential factors that the Government should consider in the interests of Somerset farmers? The first is biosecurity at our borders for live animals and meat, which he is addressing at the moment, and the second is the need to ensure the sustainability of the dairy industry by achieving an increase in the farmgate price of milk, which is crucial to the future of dairy farmers.
Mr. Liddell-Grainger: The hon. Gentleman makes an extremely useful point as usual, and I agree that our borders are this country's last bastion. Countries in Europe cannot guard their borders; we can guard ours. His marvellous intervention illustrates that the future will be very difficult unless we can control what is coming into the country.
I was sent a Meat and Livestock Commission briefing, although I did not flick through it until I came down to the Chamber. The MLC is looking to increase the share of the domestic market, which is laudable, to ensure that the competitiveness of the industry improves and to develop the market at home and overseas because we still have problems exporting. It also wants to signal to the industry the possible developments and implications beyond the medium term and to work with the Government in lifting constraints on British beef being exported.
That sums up the feeling in Somerset. We need those markets back. We need the Government's help in securing markets for the future. Somerset has always been a net exporter and it always will be. If we cannot secure markets, we will not be in a position to help ourselves to get out of this mess. I am asking the Minister to consider how the Government can help specific areas such as Somerset.
The Minister for Rural Affairs came to address the turning point conference in Minehead. I was interested to note that promotion for the conference and surrounding events to advertise food and other goods from the south-west cost £450,000. In Scotland and Wales such promotion is paid for centrally. Will the Minister consider making available finance from the Department for Environment, Food and Rural Affairs to help the south-west to publicise our goods, rather than the funding coming out of our pockets?
The Minister should remember that agriculture in the south-west is bigger than that in Wales and Scotland. Agriculture in Somerset has increased enormously. The presence of four of the county's MPs, and the apologies of the fifth, who could not attend because of other duties, shows the strength of feeling about the fact that Somerset farming is recovering, but without the Government's help, it will not do so fully. The Minister must remember that if we cannot sell our goods, we will not have an industry.
10.49 pm
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I congratulate the hon. Member for Bridgwater (Mr. Liddell-Grainger) on the way in which he made his case. He has covered a wide range of issues, which I recognise are important to Somerset, its agricultural community, local people and the local economy. I shall try to deal with some of the points that he made.
I should say first that foot and mouth disease had a devastating effect in Somerset, as it did in many other parts of the country and in the country as a whole. The impact and consequences were far-reaching indeed.
I welcome the hon. Gentleman's attention to "Working for the Essentials of Life". It sets out clearly in the prospectus, the aims and objectives of the Department for Environment, Food and Rural Affairs, in which I am proud to be a Minister, and it is an important vehicle in helping us to deliver improvements in rural life and the rural economy.
I strongly support the hon. Gentleman's comments about local brand awareness. There are some wonderful brands in Somerset, as there are in other parts of the country. We should celebrate and market those brands, and emphasise the quality of our regional foods. I hope to say more about that shortly.
The hon. Gentleman mentioned co-ops. In its report, the policy commission on the future of farming and food identified the need to encourage co-ops in this country. We lag behind Europe in co-ops in terms of their nature, sophistication and number, and how common they are in food marketing and agriculture. The commission also called for a food chain initiative—a call that the Government welcome. It provides an opportunity to give farmers more of the added value, bring them closer to the market, and give them a better share overall. More work is clearly needed on issues such as milk.
The hon. Gentleman specifically mentioned the vibration directive. I understand his arguments and I have followed the debate in the farming press. The directive is not yet law, but it is likely to be adopted by the Agriculture Council. However, it might reassure him to know that farmers will have a 12-year transition period before the full application of the directive.
Furthermore, although the current directive refers to seven hours a day continuous use of a tractor, my understanding is that that is not an absolute figure and that hours can be aggregated over the course of a week. More important, the seven hours a day restriction might apply to some tractors in use now, but will not apply to more modern tractors.
Tractor design has improved enormously—I have always been especially impressed by the JCB Fasttrac design. That might sound like an advertisement, but I know that it is a superb design that has produced a tremendous market leader in the form of a tractor that has suspension and a high-speed gearbox and offers tremendous in-cab comfort. Perhaps I should put on record the fact that I was driven around in one at the JCB factory not long ago.
I recognise the problems surrounding organic milk production. I recently held discussions with OMSCO, the Organic Milk Suppliers Co-operative Ltd., which does an excellent job and which the Government are keen to

683
support. We appreciate that when there is overproduction of a commodity, a fall in price occurs. We should take note of the lessons that the example of organic milk offers about how far and how fast to expand production of an organic commodity.
We are discussing with OMSCO ways in which we might assist through the range of support available through DEFRA. I shall talk with my officials to see how we might provide further help, especially on the marketing side. It may well be that the market will stabilise itself in due course, but I certainly appreciate that the current situation is a problem for organic milk producers.
Badgers and TB constitute a difficult subject. It is difficult for the Government because we are lobbied on the one hand by people who believe that the case against badgers is indisputable, and on the other hand by people who argue equally vociferously that the case against badgers is totally unproved; and both groups ask us why are we wasting our time with the Krebs trial.
However, I believe that it is a proper, sound and scientific way of examining the epidemiology of bovine TB. We need that experiment, as it will answer many of the unresolved questions that have been debated for more than 20 years. We cannot go on like that, which is why the scheme has been restarted. The survey is under way—it is the closed season for the culling of badgers—and we recognise that we need to get the scheme back on track. Professor Bourne of the independent scientific group is confident that the disruption of the foot and mouth epidemic will not knock the trial off course.
Mr. John Burnett: I am grateful to the hon. Member for Bridgwater (Mr. Liddell-Grainger) for raising that matter, as tuberculosis is deeply frustrating for the farming community. The Minister and I have debated the matter on a number of occasions. The trials will take some time; can he tell us whether there is any progress at all on licences to move unaffected cattle from affected herds to collection areas or centres?
Mr. Morley: As the hon. Gentleman knows, I am sympathetic to that problem. As I understand it, work is in hand to facilitate the provision of collection centres. I can certainly update him after tonight's debate.
The TB testing programme was knocked off course by the foot and mouth epidemic. It is now being restarted and priority is being given to hot-spot areas. We are confident that we will be able to eliminate the backlog in due course; that will take a bit of time, but we are putting our vets and staff back on to the task.
The hon. Member for Bridgwater spoke about flooding in the Somerset levels, an issue with which I am familiar and in which I take an interest. I have been closely involved in discussions, and welcome the production of the Parret catchment water management strategy action plan for 2002. I have recently received those plans and am reading them with great interest. Of course, the feasibility of the suggestions and their long-term implications have to be examined; that is a prerequisite for any action plan, and my Department will make such an examination. Our engineers will do so, as will the
684
Environment Agency, and we will talk to the various people involved. I want to put on record my appreciation of all the groups that have come together to try to address the issue; they have tried to work together co-operatively by recognising problems rather than taking a polarised position, which is a great step forward.
The Somerset levels are a flood plain, and for generations people farmed there sustainably in recognition of the area's characteristics. In recent years, with the influence of the common agricultural policy and subsidies, some of that farming has become less sustainable. We must look at our agri-environment programmes and things such as the action plan; we must talk to the communities, people and farmers who are involved and look at how we can address the issue in a mutually beneficial way. We must consider the management of conservation and biodiversity and the needs of local farmers and communities to see if we can find a strategy and a way through. The report assists with that.
On animals being imported for restocking, I again reassure the hon. Gentleman that every single live animal currently imported is checked for disease by DEFRA staff. We recently identified brucellosis in one creature because every single animal is blood-tested. I recognise that biosecurity, both on our borders and our farms, is important; that issue was addressed at a recent meeting that my right hon. Friend the Secretary of State held in the Department. To put the record straight, meat from countries like Argentina is not imported from regions with an active disease outbreak. It has to go through onerous procedures of deboning and hanging; if beef is hung for a certain time, the changes in pH will destroy any virus that it might contain. There is therefore no risk to this country from legal imports of beef from countries like Argentina which comply with the regulations. It is not complacent to say that; it makes it clear that there are procedures in place to ensure disease control.
I recognise the point about the need to re-establish markets. We shall help in promoting them. Taste of the West recently received £200,000 of FMD recovery money to help, through marketing support and promotion, speciality foods in Somerset and other areas of the south-west recover from the effects of the disease. I am sure that there are other ways that we can assist. We are happy to talk to organisations such as Taste of the West—which does an excellent job in promoting local foods—and we have constant and regular meetings with farming and rural organisations.
Certainly, there are problems in agriculture. The hon. Gentleman identified a number of them. I believe that we can overcome those problems. Some of the problems in the comprehensive list that he gave will be easier and quicker to resolve than others, but we are committed to doing so. We want a partnership approach to dealing with the problems, and we are making progress in the aftermath of foot and mouth on returning normality and stability to the agriculture sector.
Question put and agreed to.
Adjourned accordingly at one minute past Eleven o'clock.