State Pensions (Hansard, 2 February 1999)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, we have honoured our manifesto commitment to retain the basic pension and to increase it at least in line with prices. We also said that we would give priority to the poorest pensioners. That is exactly what we are doing with our minimum income guarantee.

§ Lord Islwyn
My Lords, I thank my noble friend the Minister for that Answer. However, has she stopped to compare this meagre claim of pensioners with what is happening in Ystradgynlais in South Wales where 750 jobs are to go at Lucas Varity, the very lifeline of that Welsh community? In the meantime, Mr. Victor Rice, the chief executive of Lucas SEI and the man who authorised the sackings, is due to pick up £17 million. Is that not an indication of the re-emergence of the unacceptable face of capitalism? Can my noble friend tell the House what the Government's attitude is over these issues?

§ Baroness Hollis of Heigham
My Lords, much though I might enjoy this in a different forum, it is not for me to comment on the award to an individual former chief executive or director. I believe that most people would find it excessive, to say the least. However, in terms of my noble friend's original Question, it is important to remember that, whatever excrescences there may be as regards extraordinary large awards at a time when other people are losing their jobs, the major problem facing pensioners in this country is the fact that so many of them still have incomes at or below income support level. That is why we are taking action by way of the minimum income guarantee; and that is why we are trying to ensure that this problem is not repeated for future pensioners by making sure that they have access to decent jobs through the New Deal and that, while working, they enjoy a good second pension. That is our policy.

§ Baroness Ludford
My Lords, far from being better off under Labour, is it not true that independent figures show that after two years of Labour government pensioners are worse off when the net effect of all the tax changes is taken into account? Therefore, would it not be a start to tackling pensioner poverty to raise the measly 25 pence a week—barely enough to buy a 1417 stamp—which 80 year-old pensioners receive to at least £5 a week? Surely that would be an excellent start to tackling pensioner poverty.

§ Baroness Hollis of Heigham
My Lords, I assume that the noble Baroness is quoting figures which appeared in the Daily Mail, and which, in turn, may have been mentioned by her honourable friend in another place, regarding what has been happening to pensioner incomes since the Labour Party came to power some 18 to 20 months ago. It is true—and the figures were given by my right honourable friend the Prime Minister and by my right honourable friend the Secretary of State in another place—that poorer pensioner households have, on average, increased their income by £140 a year by virtue of the reduction of VAT on fuel and winter fuel payments. In addition, the poorest pensioners (the 20 per cent. or so eligible for income support) will see their incomes rise by £160 a year from this April, which means a total increase of £300 a year. I should have thought that the noble Baroness would have welcomed this increase in income—indeed, rejoiced over it—for the poorest pensioners in the country.

§ Lord Astor of Hever
My Lords, as we on this side of the House have given a firm assurance that we will not means test the basic state pension in the next Parliament, why have this Government not done the same?

§ Baroness Hollis of Heigham
My Lords, I suspect that the noble Lord can make whatever statement he likes about what his party would do in the next Parliament without necessarily being held to account by the British electorate. However, having said that, I should point out that the Prime Minister and the Government have made it absolutely clear that the basic state pension is a keystone of our pension policy. It will not be means tested. It will rise at least in line with prices. But—and this is a basic point—if we are to ensure that all our pensioners enjoy the prosperity that they should, they need a decent second pension. That is why we are developing a state second pension which will give to those earning between £3,500 and £9,000 a year a pension as though they were earning £9,000 a year. That would do more to lift those on lower earnings and intermittent earnings than anything we have seen since my noble friend Lady Castle introduced SERPS 20 years ago.

§ Lord Marsh
My Lords, I apologise for interrupting this unholy alliance, but it is very difficult to acknowledge the genuine concern that everyone has for the fact that a large number of pensioners on state pensions are receiving an inadequate amount and, at the same time justify, as both Front Benches do, the £7 billion a year going to top rate taxpayers. Does the Minister agree that that is an absurdity?

§ Baroness Hollis of Heigham
My Lords, I am not sure that I understood the noble Lord, though that may be because of my stupidity. Is he querying the tax relief that goes to top rate pensioners from the £7 billion?

§ Lord Marsh
No, my Lords; I am suggesting that it is absurd in this situation that state pensions are not means tested in terms of top rate taxpayers. We acknowledge that there are people who are under-provided for in the state pension scheme, while at the same time we give pension benefits to people who clearly do not need them and who are paying very high rates of tax.

§ Baroness Hollis of Heigham
My Lords, pensioners, including the highest rate pensioners, will pay tax on their basic state pension at something like 40 per cent. The commitment we have made is that the basic state pension is a universal pension available to all, which will rise in line with prices. However, as I said a moment ago, I believe we all accept that for pensioners to enjoy a comfortable standard of living to which they are entitled they need a good second pension on top of that. So far too much of our pension provision has been shaped by images of the person who has a job for 40 years, who never changes that job and who works full time with one employer.
We need to develop new, flexible pension arrangements. We need to include the self-employed. We need to look after carers and those with intermittent earnings. That is the way we are going. However, the assumption that those who pay the highest taxes do not pay tax on their state pension is simply wrong.

§ Lord Stoddart of Swindon
My Lords, will my noble friend confirm that over the past 18 years the basic state pension as a proportion of national earnings has consistently dropped and that if nothing is done to increase pensions beyond the retail prices index the state pension will gradually be phased out? Can my noble friend assure me that something will be done in future years to maintain the value of the state pension in relation to average earnings?

§ Baroness Hollis of Heigham
My Lords, our policy is clear. The basic state pension will rise in line with prices but that alone will not be sufficient, as my noble friend said. By the year 2050 that alone would produce a pension of only 7 per cent. of average earnings. That is why we seek a state second pension and the measures taken together will be worth about £30 or £40 a week more than the sum that a person who earns £6,000 a year would receive at present.

§ Baroness Gardner of Parkes,
My Lords, I accept what the Minister said; namely, that the basic state pension will not be means tested. However, she then said that people will nevertheless receive a guaranteed income. I do not know what that is if it is not another form of pension. I cannot understand how the Minister intends to give that to people without means testing it. Will she clarify that?

§ Baroness Hollis of Heigham
Yes, my Lords. The basic state pension at the moment is £65 a week, which is below the level of what a pensioner would get if he had no capital and was therefore entitled to an income support top-up. The guaranteed minimum pension 1419 represents £75 a week as opposed to £65; that is, the basic state pension plus a premium on top which will be paid automatically to those pensioners who have no capital and no alternative earnings. That way we shall ensure that they are at, and above, income support levels.