Pensions: Uprating (Hansard, 14 October 1997)

§ Baroness Castle of Blackburn
asked Her Majesty's Government:
Whether, in fixing the 1998 uprating of the basic state pension, to be announced in November, they will honour their commitment to ensure that existing pensioners share in rising national prosperity by linking the uprating to the movement of average earnings, rather than prices, where this is more favourable to the pensioner.

§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, the RPI for September was announced last week, showing an annual rate of increase of 3.6 per cent. In response, the department has said that the state pension will be uprated by this percentage next April. This is in line with our manifesto commitment and should reassure pensioners. Details of benefits uprating will be announced to Parliament in the normal way. Meanwhile, the value of the basic pension is being considered as part of our pensions review, which will report in the first half of next year.

§ Baroness Castle of Blackburn
Is it not unprecedented for a statement of policy of this 393 importance to be sneaked out to the press surreptitiously, as it was in this case, in briefings by officials in No. 10 and the DSS, as we saw in the papers last week? Is it not customary on these occasions for a statement to be made by the Secretary of State to the House of Commons and repeated in this Chamber before the press are given all these hyped-up pictures of windfalls for pensioners? Is it also not customary to issue a press statement? Is the Minister aware that some of us have been trying to find out just what is happening behind the backs of the review body and have been told that there is no statement? Is she not aware that the issue of restoring the earnings link for the uprating is being debated passionately in the review body and that some of us think that it is the key to a proper pensions policy? Therefore, is there any point in continuing our discussions in the review body since the Government have made up their mind without waiting for their own review body's report?

§ Baroness Hollis of Heigham
My Lords, we do not intend in any sense to pre-empt or replace the normal uprating statement. However, we were anxious to make it clear that the Government would honour their manifesto commitment to protect the value of retirement pensions. I wish to emphasise that the uprating statement will be made in the usual way at the usual time. In response to my noble friend, I also wish to emphasise that, as always, this is an uprating decision for one year only. The question raised by my noble friend about the status, nature and size of the uprating is at the heart of the pensions review, aided by the National Pensioners' Convention. My noble friend will know that, far from this being sneaky, it was an issue that she herself raised only recently with the Secretary of State.

§ Lord Henley
My Lords, bearing in mind that what is important for pensioners is the overall level of pensions, not just the level of the state retirement pension, can the noble Baroness tell the House what effect the £5 billion smash and grab raid on pension funds will have on future pensions and future contributions?

§ Baroness Hollis of Heigham
My Lords, I believe that much of the concern about the advance corporation tax has to a degree been overstated. Under ACT, the tax regime deflected money away from capital investment in to paying out dividends. Therefore, we pay twice as much of our GDP in dividends than does the United States. That was part of a Budget which sought to strengthen our investment economy, on which the level of pensions and the health of companies depends. We cut corporation tax in the Budget, and it is now the lowest in Europe. We also introduced a New Deal because, as all noble Lords will know, what matters in terms of the shaping of a pension is the opportunity for decent and secure work rather than tax privileges. Since that Budget the markets have risen by more than 394 16 per cent., so they clearly have confidence in the Government's strategy. Is the noble Lord opposite saying that he and his party will reverse the change?

§ Lord Henley
My Lords, the noble Baroness invites me to answer a question. It is not for me to answer questions; it is for the noble Baroness. However, she did not answer the questions that I put to her. What effect will it have on future contributions and on pensions? The markets would have continued to rise whatever the Government had done. The point is that the party opposite made a great £5 billion smash and grab raid on pensions. That will have a long-term effect on future pensions.

§ Baroness Hollis of Heigham
My Lords, the health, status and level of future pensions depend on the health, status and level of a company's investment, profits and future prosperity. That is what the Budget will ensure.

§ Baroness Lockwood
My Lords, do the Government have any plans to assist the poorest of our pensioners, given the fact that in the period 1979 to 1994 pensioners in the lowest quintile received an average increase of 28 per cent. while those in the top quintile received an average increase of 61 per cent.? Is anything to be done for the poorest group?

§ Baroness Hollis of Heigham
My Lords, my noble friend is right. Since 1979 the gap between the bottom fifth and top fifth of pensioners has more than doubled. Inequality has widened. The top 20 per cent. are more than £100 a week better off while the poorest 20 per cent. are only £15 a week better off. That gap has grown as a result of the extent of occupational pensions. Unfortunately, only half of our workforce is currently covered by occupational pensions. It is therefore important that the future prosperity of our poorest pensioners is built on a decent second pension. That is why we are discussing with the pensions review our proposals for a citizenship pension and a stakeholder pension. All pensioners, not only those in occupational schemes, may then look forward to a prosperous old age. I hope that we have the support of all wings of the House in that endeavour.

§ Lord Marsh
My Lords, is the Minister aware—and I am sure that she is—that this subject has been discussed ad nauseam in countries throughout the world and that she has an extremely competent Minister in Mr. Frank Field, who has controversial views but nonetheless knows a great deal about it? It can be nothing but indecisiveness that is causing the Government to take so long to come forward with a policy. There have been years of discussion. As regards her earlier answers about the effect of the changes relating to tax rebates on ACT, she has the distinction of being the only person seriously involved in this subject who would believe a word of what she said about it.

§ Baroness Hollis of Heigham
My Lords, I hope that we shall enjoy a further extension of the noble Lord's arguments in tomorrow's pensions debate, which 395 provides the opportunity to discuss some of those issues at greater length. However, we are having a pensions review, which is taking several months. That is to be expected. It involves full consultation with the National Pensioners' Convention, as I am sure pensioners would wish. It is important that having, so to speak, crossed the Floor, we have access to the departmental information which was properly denied to us when we were in Opposition. It is too important a subject on which to come forward with a knee-jerk ideological reaction, as the noble Lord encourages us to do. We have seen too much of that in the past 18 years. Our policies will not be shaped in the same way.

§ The Lord Privy Seal (Lord Richard)
My Lords, I am sorry to interrupt at this stage but we have only four minutes in which to take the last Question. Perhaps we should move on, particularly since we have a debate on pensions tomorrow.