Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I beg to move,

That the draft Social Security Benefits Up-rating Order 2005, which was laid before this House on 1st February, be approved.

Photo of Mrs Sylvia Heal

Mrs Sylvia Heal (Deputy Speaker)

With this we may consider the draft Guaranteed Minimum Pensions Increase Order 2005.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I am satisfied that both orders are compatible with the European convention on human rights.

The uprating order will, as usual, increase most national insurance benefits by the retail prices index amount of 3.1 per cent. and most income-related benefits according to the Rossi index, by 1 per cent. The guaranteed minimum pensions increase order sets out the amount by which contracted-out occupational pension schemes must increase members' guaranteed minimum pensions which accrued between 1988 and 1997. Where the annual increase in the RPI exceeds 3 per cent., the guaranteed minimum pensions indexation requirement is capped at that level under the primary legislation. This year's order therefore provides for an increase of 3 per cent.

This year's uprating adds nearly £3 billion of extra Government spending, tackling poverty by helping those most in need. Of the £2.1 billion extra for pensioners, over half a billion pounds—£580 million—is above-inflation spending.

Since 1997, our total annual spending on financial support for children has increased by over £10 billion in real terms. That is in stark contrast to the 1980s and 1990s, when child benefit was frozen for three years and pensioners received only inflation-level increases, even as social security spending spiralled out of control.

When the Conservative party was in power, unemployment twice hit 3 million and the numbers on incapacity benefit trebled to 2.6 million. By 1997, one in five families had no one in work and one in three children were growing up in poverty. There are now more people in jobs than ever before. Unemployment is at its lowest for 30 years, with long-term youth unemployment 90 per cent. lower than in 1997. We now spend £5 billion less on unemployment benefits than we did in 1997. With almost three-quarters of the working-age population in work, our employment rate is the highest of any of the G8 countries.

Already our new deal for lone parents has helped nearly 300,000 lone parents into work and helped to increase their employment rate to 55.8 per cent.—a 10 percentage point increase since 1997—with 200,000 fewer lone parents claiming income support and nearly 1 million lone parents now in work. However, we need to do more. We know that work is the best way to lift families out of poverty and nine out of 10 lone parents tell us that they want to work, but to enable them to do that they need to have affordable and accessible child care.

We are committed to providing over 2 million sustainable child care places by 2010 and a Sure Start centre in every community across England—an increase from 600 to 3,500 over the same period.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

As the Secretary of State will know, this afternoon is an opportunity for thinking big picture about the approach to the welfare state. He mentions child care. Governments usually say that parents should decide what is best for their children. However, he has set a 70 per cent. target for lone parents getting back into work. What if 70 per cent. of lone parents do not come to the answer that he wants them to come to?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I would not say that we have set a target of 70 per cent. What we have pointed out is that the European Union average is 70 per cent. We have said that one part of our objective of raising the employment rate from 74.9 per cent. to 80 per cent. would be moving another 300,000 lone parents into work. I really believe that lone parents, if they get the right help and support, are pleased to do that. I will have more to say later about how we intend to tackle that, without interfering with the issue of choice for lone parents.

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

I was under the impression, the last time the Select Committee on Work and Pensions visited Brussels, that there was a European target of 70 per cent. of lone parents to be in the work force, to which the Government had signed up. Can the Secretary of State elucidate on that point?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

There are so many targets in so many places, sometimes we all get a bit confused. The Lisbon process looked to get 70 per cent of working-age people in the European Union back to work. We achieved that some time ago. I am not aware of a specific 70 per cent. target in the European Union. If there is such a target, it has been met, because that is the average throughout the rest of the European Union. For various reasons, we have more lone parents in this country than most other European Union countries, but I see no reason why we cannot achieve that level.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

As the Secretary of State said, there are many targets but, to confirm the point that was made by Mr. Webb, I think that what we are talking about is the target in the Secretary of State's own departmental five-year plan. That is a target and that is where the 70 per cent. appears.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

Good, I always welcome clarification from people who read our documents very carefully—

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

Has the Secretary of State read the document?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I wrote it.

Child care is not enough on its own. Lone parents need support in looking for work and they need to know that they will get a clear financial gain from work. Building on the success of the new deal for lone parents and work-focused interviews, the work search premium, which we are currently piloting, means that lone parents who have been on benefits for a year or more are offered an extra £20 per week for up to six months in return for agreeing actively and consistently to look for work.

Our in-work credit, which we are also piloting, means £40 per week for a year for those who move into work of more than 16 hours a week. That is paid on top of any out-of- work benefits that the lone parent may be entitled to and so represents a clear financial gain from work.

From this April, we are pulling together all the existing support for lone parents into an integrated package. The pathways to work for lone parents pilots will run in five districts: Bradford, Dudley and Sandwell, Leicestershire, north London and south-east London. Those pilots encapsulate our approach of rights and responsibilities, guaranteeing child care support, a clear financial gain from work and the ongoing help of trained professional advisers, all in return for a responsibility to engage more intensively with our employment advisers.

The ongoing professional support from trained personal advisers has been key to our success in increasing the lone parent employment rate. That new single package of initiatives gives our advisers the tools that they need to offer lone parents clearer, stronger and more comprehensive support than ever before. Additionally, for those with older children who are at secondary school, we will pilot automatic payment of an activity premium, on top of all existing benefits, conditional on taking up agreed activity to help them to move into work.

Photo of Mr David Taylor

Mr David Taylor (North West Leicestershire, Labour/Co-operative)

The Secretary of State referred to the pilot in my county. Can he tell the House at what stage he would envisage it being rolled out to other parts of the country because I fully expect and hope that it will prove to be a success in the terms that he has described?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

We do not have any plans yet on the pathways to work for lone parents beyond the introduction of the pilots. We will see how the pilots go. In terms of pathways to work for people on incapacity benefit, we already have plans to roll that out to a third of the country.

From April, child tax credit will be increased in line with the growth in earnings while the maximum eligible child care costs covered by the working tax credit will increase from £135 to £175 per week for one child, and from £200 to £300 per week for two or more children.

We are extending paid maternity leave, so that instead of the 14 weeks of 1997, it will rise from six months to nine months in April 2007.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

Before the Secretary of State leaves the subject of tax credit and working tax credit, are he and his Department making any representations to the Treasury and to the Inland Revenue about the continuing problems that families face, especially as supposed overpayments of working tax credit and child tax credit are being reclaimed by the Inland Revenue? Is he aware of the distress that that is causing families? Is it causing them to approach the social fund? What is his Department doing to tackle the problem?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

We are in close liaison with the Treasury over the issue for obvious reasons—it links with our joint objectives on tackling child poverty. The Treasury's view is clear. As in all tax matters, adjustments are made in the following tax year without putting a burden on individuals. Indeed, there is the opportunity to discount the overpayment if that would bring unnecessary concern to individuals. That approach is no different from how every previous Government approached such issues.

The maximum maternity pay and child benefits for mothers at home with their first baby will have risen by £5,000 in real terms since 1997. Therefore, we are committed to supporting parents both in fulfilling their parenting role and in fulfilling their aspirations in the workplace. With our record investment in the new deal and Jobcentre Plus, we have transformed the UK labour market. There are now 2 million more people in jobs than in 1997 and we have seen increased employment rates for lone parents, ethnic minorities, the low skilled and people aged 50 and over.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

The Secretary of State is being characteristically generous in giving way. He mentioned fulfilling family responsibilities and career aspirations, and a classic case would be that of a woman who wants to go back to work and thinks that a family member—perhaps her sister—might be the best person to look after her young child. She can pay a complete stranger to do so and get thousands of pounds from the taxpayer, but if her sister puts in substantial hours each week caring for that child, there is no state support whatever. Does he think that the right balance to strike?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

Such matters always have to be kept under review, and some—including many Labour Members—hold the view that family members should be included in the scheme and given such support. That said, Members have to accept that although we have made huge progress, certain issues still need to be looked at, so that we have a fairer system and meet the goal of providing proper child care, to allow parents to return to work.

For the fifth successive year, we are freezing non-dependant deductions to relieve the pressure on low-income parents who are housing their adult children. As a result of our roll-out of pathways to work for incapacity benefit claimants, together with the proposed reforms that I laid before the House when we published the five-year strategy, sickness and disability need no longer mean permanent withdrawal from work. In the pathways areas, six times as many people are getting back-to-work help, and twice as many are recorded as entering jobs as in the rest of the country.

Overall, new claims for incapacity benefit are down by one third since 1997, and the employment rate for disabled people seriously challenges the old stereotypes. For the first time, a disabled person is more likely to be in work than out of work. Combined with our disability discrimination legislation, such changes are transforming disabled people's rights and opportunities—a far cry from 1997, when, after 18 years of Conservative Government, they effectively had only two civil rights. Both those rights were granted reluctantly, after at least 14 attempts by Back Benchers from all parts of the House to introduce relevant legislation.

Most Conservative Members may wish to abolish the new deal, and talk incessantly about cuts, but Mr. Boswell—unfortunately, he is not in his place—recently demonstrated his enthusiastic support for our policies while performing the only known constructive cut implemented by a Conservative politician in living memory. He formally cut the ribbon on a new Jobcentre Plus in his own constituency, and we were very pleased to see him there.

We are determined to ensure that everyone has the opportunity and incentive to work. We know that work helps to lift people out of poverty and to prepare for their retirement, but it is also the best pensions policy. Through the Pensions Act 2004, we have taken steps to bolster confidence in pension saving, helping people to make informed choices about saving more and working longer. The ground-breaking Pension Protection Fund, which will operate from this April, will revolutionise the security of occupational pension saving for some 10 million members of defined benefit schemes, and the financial assistance scheme will offer some help to those who have lost the most in the past. We are the first Government to take action to deal with the problems of thousands of pensioners who were deprived of their savings and lost their occupational pensions along with their jobs.

Although in many cases, the trustees of such schemes are not yet able to provide detailed information on the scale of individual losses, we have always wanted to make clear as early as possible the position of older workers, who have the least chance to make up the shortfall. Even though we are still collecting information, we now know enough to reassure those who will be within three years of their scheme pension age on 14 May 2004 that they will get no less than 80 per cent. of their core promised pension.

We have already committed ourselves to reviewing the financial assistance scheme after three years, and Government funding is already fixed for the current spending review period, up to and including 2007–08. But as with all our spending plans, we will review FAS funding in the next spending review, alongside other spending priorities.

Photo of Mr Frank Field

Mr Frank Field (Birkenhead, Labour)

I very much welcome my right hon. Friend's statement and thank him for it, but my welcome will be as nothing compared with that offered by many of our constituents. However, can he give us a little more information on the review that, I am thankful to say, he now seems to have taken on? We were originally promised a review of the scheme's structure, but is he now saying, in the light of the commitment offered to those about to reach retirement age, that there will be a funding review after three years? That would open the way to using the unclaimed assets of banks and building societies—and with that in mind, will he make available in the Library a document outlining how far the Government have got in negotiating with those important bodies?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I thank my right hon. Friend for his comments. He is absolutely right: this news has been well received throughout the country by those closest to retirement, who were extremely worried. On his latter point, I suggest that he attend the next Treasury Question Time and ask about unclaimed assets. We will begin our review during the next spending review—it will commence in 2006, ready for the next three-year period—and as part of that process we will look at FAS finances.

Photo of Mr Richard Burden

Mr Richard Burden (Birmingham, Northfield, Labour)

I, too, welcome today's announcement, which is certainly good news for workers and retired workers at Kalamazoo, for the Cheney pensioners, for UEF employees and for members of the Birmingham Mint scheme. However, will my right hon. Friend give a little more detail on the financial review, which is indeed very good news? If it is to meet the needs of people who are a little more than three years away from retirement, it will have to start sooner than in three years' time. Otherwise, there will be a time lag between their reaching retirement age and their receiving the kind of support that those affected by today's announcement will receive. Will the review at least start within that time, even if it cannot conclude within it?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I can assure my hon. Friend that the review will start in 2006.

Perhaps I should say a little more about the FAS scheme before moving on to other issues. It will apply to pension schemes that started wind-up from 1 January 1997 until April this year. That was made clear in a previous statement, but it is as well to record it here. Depending on the pension age for their particular scheme and the date that wind-up started, members getting the 80 per cent. that we are announcing today will currently be aged anywhere between 57 and 73, so today's announcement gives real extra security to the significant number of people who are already in, or close to, retirement, and who face the most serious situation and, often, the biggest losses. Even after applying the minimum payment rule of £10 a week, we would expect some 15,000 scheme members to be included.

Photo of Ms Sandra Osborne

Ms Sandra Osborne (Ayr, Labour)

I add my voice to those who acknowledged the review's importance. On 22 January 2002, I initiated a Westminster Hall debate on behalf of the UEF employees who lost their pensions when the company went into receivership, and I very much welcome the substantial help that the Government are delivering—as promised—for pensioners whose need is most pressing. However, will the monthly payments made to them through the financial assistance scheme be index-linked, as their pensions would have been?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

No, they will not. I appreciate that the scheme to which my hon. Friend refers would have been index-linked, but many FAS schemes are not. We cannot make such a commitment, but we are making it clear that the money will be paid as a pension rather than as an annuity; indeed, it was clear on talking to my hon. Friend's constituents that that was a very important issue. Their feeling was that the Government should bear the risk, and that we should not allow any of that money to be diluted by diverting it elsewhere; rather, all of it should be directed towards assistance payments to them. However, I am afraid that I cannot give a helpful answer on the index-linking issue.

For today's pensioners, we have taken radical action to tackle pensioner poverty, which was the real pensions crisis that we faced when we came into office in 1997. From April, the retirement pension will go up by £2.45 a week for single pensioners and £3.95 a week for couples.

Photo of Mr Kevin Brennan

Mr Kevin Brennan (PPS (Rt Hon Alan Milburn, Chancellor of the Duchy of Lancaster), Cabinet Office; Cardiff West, Labour)

Before my right hon. Friend entirely leaves the issue of the financial assistance scheme, may I ask him a question? He said in reply to my hon. Friend Sandra Osborne that it would benefit 15,000 pensioners who are three years away from receiving their pensions. Does he agree that 15,000 people will benefit, who would have received nothing without the financial assistance scheme? Does he acknowledge that many of us would like that sort of substantial assistance to be made available after the three-yearly review to people who are coming through to retirement at that time?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I agree that this is good news for people who thought that they would receive no assistance whatever from 1 January 1997. What we are doing is in tune with many other achievements in government that had seemed to drift past, such as trawlermen's compensation. That was sought for 25 years; the men received nothing from the Conservative Government, but we provided it. Coal miners who had vibration white finger provide another example of a case in which we awarded compensation for the first time. Still another example is the Aberfan fund. The Coal Board took money from Aberfan families to clear the tips that killed their children, and nothing was done in 18 years, but we restored it after just three months in government. We have a good track record in dealing with these claims. [Interruption.] Conservative Members should know which Government provided financial assistance and compensation. Those groups received nothing but a closed door and a shake of the head from the Conservative Government.

I pay tribute to my hon. Friend Kevin Brennan for his work, particularly in respect of Allied Steel and Wire. He played an important role in ensuring that this scheme was established and that a certain level of assistance was made available. As soon as we know the full position, and once the regulations have been laid, we will allow six months for this group of people to make their claims. We can then move on to extending the scheme to people beyond the current group. At that stage, when the full information is before us, we can have a useful further exchange.

Since 2000, pensioners have seen a 7 per cent. real terms increase in their retirement pension as a result of our above inflation increases. Overall, between 1996–97 and 2002–03, average net pensioner incomes grew by 19 per cent., while average net earnings grew by 12 per cent. The poorest pensioners have seen their incomes grow at similar rates to those of the richest pensioners. For example, incomes of the poorest fifth of pensioner couples have grown by 14 per cent. compared with the incomes of the richest fifth, which have grown by 11 per cent.

Photo of Mr David Taylor

Mr David Taylor (North West Leicestershire, Labour/Co-operative)

The Government's achievements in tackling pensioner poverty have been remarkable and laudable, but is not most pensioner poverty focused on older women? Is it not the case that more than nine out of 10 men eventually become entitled to the full basic state pension in their own right, based on their own contributions, while fewer than one in eight women are so entitled? Would it not be a good idea to extend the full basic pension to everyone of pensionable age by extending the contribution credit system to allow for those who have had part-time or low-paid jobs, or caring and other domestic responsibilities?

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

My hon. Friend is probably aware that of the 2.7 million pensioners living in abject poverty when we came into government, two thirds were women. That is reflected in the figures on pension credit. Of 3.2 million individuals receiving pension credit, 2.1 million are women. He is right that this issue must be resolved. Various ways have been proposed to achieve that, including the patching up system that he suggests. We are determined to tackle the problem, which cannot be allowed to continue. It is a scandalous situation, and we need to look further into which proposals to adopt in order best to tackle the problem.

Both next year and in the spending round to 2008, the pension credit will rise by average earnings. By 2008, there will be 600,000 fewer pensioners in poverty than there would have been if we had followed the policy of the Conservative party and only uprated the guarantee in line with prices. The guarantee credit will rise so that no single pensioner need live on less than £109.45 a week and no couple on less than £167.05 a week. More than 3.2 million pensioners are now in receipt of pension credit, with take-up strongest among the very poorest.

Photo of Mr Michael Weir

Mr Michael Weir (Spokesperson (Environment & Food; Health; Rural Affairs; Trade & Industry); Angus, Scottish National Party)

In view of the Minister's figures on pension credit, what is his estimate of the take-up among those entitled to it in the coming financial year? One of the main problems with it is that a significant number of people do not take up their entitlement.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I was about to make the point that the guarantee take-up rates are running at 80 per cent., and for single women in this group, the take-up could be as high as 90 per cent. What we have done until now is publish the take-up figures for all the different elements—guarantee credit, savings credit and the combination of the two—in one figure. We are all keen to ensure that the poorest pensioners receive this money to lift them out of poverty, so we are concentrating on that particular element. There is every indication that we are being extremely successful, and are ahead of our own aspirations for attracting the poorest pensioners to pension credit.

As a result of all the tax and benefit measures introduced since 1997, the average pensioner household will be £1,350 per year better off in 2005–06 than it would have been under the 1997 system, while the poorest third will be £1,900 per year better off. In total, an extra £10 billion will be spent on pensioners in 2005–06 compared with the 1997 system—£7 billion more than an earnings link would have given them, with almost half of the £10 billion extra spending going to the poorest third of pensioners.

As well as targeting our help at the poorest, we have also done more for all pensioners than an earnings link would allow. We have made remarkable strides in tacking the pernicious pensioner poverty that we inherited in 1997, and we will continue to make it our priority until we have eradicated it. We reject proposals that would see the poorest pensioners fall back into penury.

By supporting people in work and providing financial security for those who cannot work, we have lifted 2.1 million children and 1.8 million pensioners out of absolute poverty since 1997. Our uprating measures continue our commitment and progress towards a fair and inclusive society of opportunity and independence for all. I commend the orders to the House.

3:07 pm
Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

I welcome the debate and I am grateful to the Secretary of State for setting out the Government's proposals on the uprating of benefits, which we will not oppose. We always wait to see whether the Liberal Democrats decide to oppose the increase in the value of the pension, but perhaps they are not going to repeat that mistake this year—[Interruption.] I am being urged not to provoke the Liberal Democrats to carrying out such a perverse act.

We welcome the extra benefits and there is added drama to today's debate. The Secretary of State has chosen to debate the pension uprating on the day that the Conservatives launch the pensioners chapter of our manifesto. Of course I realise, Madam Deputy Speaker, that it would be out of order to take the House through all the imaginative proposals in that document—[Hon. Members: "Go on."]. I am being tempted, but must resist. I would, however, like to question the Secretary of State on some of the points that he raised. As Mr. Webb rightly said, we have an opportunity to find out the strategy behind the various specific announcements.

It is frustrating when the Secretary of State makes grand and sometimes refreshing statements outside the House about how everything needs to be changed because matters cannot carry on as they are, yet comes before the House with a wholly conventional uprating statement in which it is difficult to detect any movement towards the necessary reform.

Of the pension credit, the Secretary of State said that

"we should not talk in euphemisms. It is a means test."—[Hansard, 13 October 2004; Vol. 425, c. 302.]

He also said that it would be "crazy" to say that it did not act as a disincentive to some people. He has also said:

"The Government still has a take-up problem on pension credit."

Those reflections show that the Secretary of State realised that there was a problem with mass means-testing. The Government are taking the benefit system in that direction, so it is sad that none of those reservations could be detected in his statement today.

New estimates for benefit take-up rates were issued recently. Does the Secretary of State agree that it is unacceptable for the rates to remain so low? The figures go only as far as 2002–03, but they show a take-up range among pensioner couples for the minimum income guarantee, as it then was, of between 55 and 70 per cent. Does he accept that that is very low indeed? He often tells us not to worry because the poorest pensioners are claiming, but does he also accept that the figures for the eligible non-recipients are very worrying too? In 2002–03, 62 per cent. of ENRs—that is, pensioners entitled to means-tested benefits but not claiming them—were below the poverty line of 60 per cent. of medium income, as set by the Government. The problem is that poor pensioners do not claim the benefits to which they are entitled.

In light of recent remarks by the Deputy Prime Minister, will the Secretary of State—or the Minister for Pensions, when he winds up the debate—comment on the extraordinarily low figures for the take-up of council tax benefit? Does he realise that one reason why pensioners in particular feel the burden of council tax so badly is that many do not claim the council tax benefit to which they are entitled? The take-up range of that benefit among pensioners is, according to the Government's latest estimates, between 56 and 62 per cent. That is shockingly low.

For owner-occupiers, many of whom are pensioners, the council tax benefit take-up is in the range of 37 to 42 per cent. I should be happy to be corrected, but I believe that that is the lowest take-up rate for any known benefit. It is very poor indeed, so what are the Government going to do to improve people's access to that benefit? One reason behind our proposal for a council tax rebate is that it is clear that means-tested benefits are not getting through to many of the pensioners and others who need them. There was no fresh thinking this afternoon in respect of the problem of take-up.

Outside the House, the Secretary of State has also said:

"We have to bite the bullet and look at the state pension system, certainly for the longer term, so that if you do a lifetime's work it will deliver a pension above the basic level of means-tested support."

Again, today's announcement on the uprating of benefits does nothing to achieve that strategic objective. There is a general consensus in many parts of the pensions debate that people should have a pension above the basic level of means-tested support, but nothing that the Secretary of State said today takes us any way towards that.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

The hon. Gentleman's strategy for getting pensioners off means-testing is intellectually coherent, as it is to raise pensions in line with earnings, and to raise the means test in line with prices. This afternoon, the Secretary of State confirmed that the pension credit will rise with earnings until 2008. Will the hon. Gentleman confirm that his party would increase the pension credit by less than that?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

I am grateful to have the opportunity to make it clear that we accept that the pension credit should rise with earnings according to the time scale and on the basis that the Government have set out. When I costed our original proposal on increasing the basic state pension in accordance with earnings, I was careful not to make any assumptions that involved taking money from the pension credit uprating. We would also increase the pension credit in the way that the Secretary of State set out in his speech today.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

Consensus!

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

It is certain that the Opposition would not reduce pensioner incomes below the pension credit uprating that the Secretary of State set out. I am grateful for the opportunity to make that clear.

I want to ask the Secretary of State about his thinking on the future of the pension system. He has made bold and radical statements outside the House, but hon. Members would be pleased to hear him say something in the House about the future, and about the possibility, for example, that a citizen's pension will be introduced. It was reported in The Sunday Times that he was considering ideas for a citizen's pension payable to each individual pensioner, male and female alike, on the same basis. Is that true? If so, would it be an entirely individualised system? It would also be interesting to hear what the Liberal Democrats have to say about that.

Moreover, it would be very interesting to hear from the Secretary of State, or the Minister for Pensions, what are the Government's thoughts about a citizen's pension. A system under which every pensioner received an individualised state pension would be very expensive indeed. In a written question on 7 September last year, Sandra Gidley asked for an estimate of the cost of extending the full basic state pension to all people of pensionable age, regardless of their national insurance contributions. The Minister for Pensions replied that the gross cost in 2005–06 would be £7.3 billion, and the net cost £5 billion. He said that that would rise over five years to a gross cost of £11.9 billion and a net cost of £8.1 billion. Is that what the Secretary of State is contemplating?

If the right hon. Gentleman is thinking of something slightly less expensive—and we have read about a figure of £3 billion in this context—does he envisage that some money could be saved by paying to couples a pension that is worth less than two individual pensions? That would mean cutting pensions for some couples. Married women who chose to pay the full rate of national insurance contributions in return for a full pension in their own right would get less money than at present. Is that what the Secretary of State proposes?

I believe that a lower rate for couples has been proposed by the Pensions Policy Institute and by the Liberal Democrats.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

indicated assent.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

The hon. Member for Northavon nods, but that proposal would mean that we would have to be very careful about the definition of a couple. In other parts of the benefits system, we are familiar with all sorts of very difficult questions that arise in connection with cohabitation and the penalties incurred when people are in a relationship. Similar questions will arise in respect of pensioners.

The great solution presented by the citizen's pension therefore raises many practical questions. The Secretary of State has floated the idea often enough outside the House, so I was disappointed that we heard nothing more about it today. I hope that at some point the House will be able to debate the matter, and I would be grateful if the Minister for Pensions will share his thoughts with us in the wind-up. I am sure that we would all enjoy that.

When it comes to the contributory principle, I am a Blairite. I believe that rights and responsibilities go together. People pay money into the national insurance fund and in return receive a benefit as a reward for their contributions. That seems to me an admirable principle. At the next election, the Conservative party will be the only defender of the contributory principle for pensioners, which the other two parties propose to abolish. I think that those other parties will find their position distinctly uncomfortable as a result.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

It is very good to debate the wider issues, but I want to return to my previous question. The hon. Gentleman replied that both the means test and the pension would be linked to earnings, but his grand vision is to reduce dependence on means-testing. Because the pension is smaller than the means-testing, increasing both by the same percentage would mean that the absolute gap would grow. How does he reconcile that?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

We do not want any pensioners to worry that the uprating of their benefits under a future Conservative Government would be any lower than what the Government propose today. We want the basic state pension to increase in line with earnings, which is why I have focused on take-up. Improving take-up would help those 1.6 million pensioners entitled to the pension credit who do not claim it. They are the people who need to be helped above all. Our policy reaches the pensioners that the other parties' policies do not reach, by extending the benefit, on a universal basis, to all pensioners who have made their contributions.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

The debate is thoroughly enjoyable and linking the pension credit and the basic state pension with earnings will avoid the arguments about floating loads of people off means-testing. However, does the hon. Gentleman accept that his commitment to raising the basic state pension in line with earnings is for only four years? It would take 14 years to get the basic state pension to the level of the pension credit, so does that not mean that he will have to retain a version of the pension credit—for which he has professed his enthusiasm this afternoon—far beyond 2008?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

We have set out our plans for increasing the basic state pension at the same rate as the increase in earnings during the lifetime of the next Parliament. Provided that we can continue to identify the necessary savings—I am confident that we can—we would continue to increase the basic state pension at the same rate as earnings with the aim of reducing gradually the spread of means-tested benefits. Under the Secretary of State's approach, the problem will get worse and worse. We would, initially, at least stop it from becoming worse, and we would then want to improve the situation. We envisage continuing to identify savings to enable us to continue to increase the basic state pension at the same rate as earnings. In the manifesto produced at the end of the first Conservative Parliament—a marvellous prospect—we would set out proposals to show how we would continue to fund the increase in the basic state pension at the same rate as earnings rather than prices. If the House wants to discuss that today, I would very much enjoy that debate.

Photo of Mr David Taylor

Mr David Taylor (North West Leicestershire, Labour/Co-operative)

The hon. Gentleman was in confessional mode a few moments ago and confession is good for the soul, if not for opinion poll ratings and electoral prospects. Will he confess to the House that his party would abandon the state second pension and, with it, the opportunity for millions of low-paid workers, disabled people and women to build up a decent pension? Does that show a commitment to the contributory principle?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

There is a problem with the state second pension—or S2P—which is not unlike the problem with the basic state pension that we are trying to tackle. If means-tested benefits are linked to earnings in the long term, it is not clear that S2P would help many people, because many would be on pension credit.

We do not require any savings on S2P to deliver our earnings link for the basic state pension in our first term. I have made it clear that, during our first term, we would look at the future of S2P and whether it should be at a flat rate. I should be interested to hear from Ministers what their thinking is. At one point, they said that it would become a flat rate, but they seem to have lost their nerve. We would also consider whether we can incorporate S2P into a higher basic state pension. We would like to do that, but these are technical matters and we would not need to do that to finance our increase in the basic state pension during our first term.

Photo of Mr Kevin Brennan

Mr Kevin Brennan (PPS (Rt Hon Alan Milburn, Chancellor of the Duchy of Lancaster), Cabinet Office; Cardiff West, Labour)

Given that all parts of the United Kingdom are expected to contribute to the savings that the hon. Gentleman says he can use to create the new benefit for pensioners and, as a believer in the contributory principle, why is he limiting the new council tax benefit to England?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

Council tax is a devolved matter for Scotland and Wales. We have set out carefully costed proposals for the earnings link of the basic state pension to show how that can be delivered. It does not involve savings on S2P, taking money from an earnings-linked pension credit to put into a price-linked pension credit, or any savings affecting Wales or Scotland particularly. We announced our costings 18 months ago and they still stand.

Photo of Miss Anne Begg

Miss Anne Begg (Aberdeen South, Labour)

I want to be clear about what savings the hon. Gentleman is talking about. Is he talking about the £35 billion of savings that the Conservatives hope to make throughout all Departments and that when they have found those savings, pensioners may receive extra, but only after all those savings have been made?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

We announced our policy of increasing the basic state pension at the same rate as earnings, not prices, in autumn 2003—before the David James exercise—with carefully identified savings. We said that the new deal is not working and that remains my view. Abolition of the new deal and replacing it with something more effective is one saving. Others were also identified. The figures in our original proposal stand and are independent of the David James exercise. They do not depend on that exercise and were set out clearly when we announced our policy. I am grateful for this opportunity to make it clear that the savings never required money to be taken from an earnings-linked pension credit and putting it into some other form of benefit. I was careful not to assume that.

Photo of Mr Kevin Brennan

Mr Kevin Brennan (PPS (Rt Hon Alan Milburn, Chancellor of the Duchy of Lancaster), Cabinet Office; Cardiff West, Labour)

Is the hon. Gentleman saying, therefore, that part of the savings that he says his party will collect and use to pay for the new council tax benefit that they are proposing only for England will generate a Barnett consequence for Scotland and Wales, which the Scottish Parliament and the Welsh Assembly can use in any way they please?

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

Council tax is a devolved matter. We strongly support the proposals that have been put forward by our Scottish and Welsh friends. We know what they want to do. The council tax is an English matter and the basic state pension is a UK matter. I am happy to make that clear.

I hope that we might hear from the Minister and the hon. Member for Northavon their thoughts on the citizen's pension. It is so easily endorsed as a marvellous solution to all our problems in the pensions system and I would very much like to have some practical answers to questions about how it would work, whether it would be a completely individualised payment, and whether it would be at a lower rate for couples. If the rate for couples is to be lower, on what basis will that be because it is not obvious how that could be done?

I want to ask the Secretary of State for more information about what he said about the financial assistance scheme. We warned all along that £400 million would not be enough. The Government were lucky to get away with their announcement of £400 million when it was perfectly clear that that was completely inadequate given the scale of the crisis. That is why we supported the suggestion of Mr. Field—he is no longer in his place—of using the unclaimed assets of banks properly to replenish these funds.

It is useful to have the Secretary of State's belated announcement of how the scheme would work, but it will be an ad hoc arrangement. In his written statement this morning, he merely set out the basis for people aged more than 62—he gave a slightly wider age range in his speech. People who are not yet in the final three years before retirement now have several more years of uncertainty before they know where they stand. Does that not tell him that there is something wrong with the fundamental design of the FAS and that it would have been better to have considered properly replenishing the funds of the pension schemes involved? Why was he unable to give any indication today of his thinking about how he would help the majority of people who have already seen their pensions wound up and who are already concerned about their financial future? It is not acceptable to leave people who are more than three years from retirement in a state of complete uncertainty about how the FAS may or may not assist them. I hope that we shall hear some more information about that from the Minister of State.

It would also be helpful to have an update on the latest estimate of the number of people affected by pension wind-ups. If the Minister can provide a list of a large number of company pension schemes that are covered, it should presumably also be possible to offer an update of the figure of 65,000, which has been around for some time. It would be useful and interesting to hear his latest assessment of the total number of people who are likely to be eligible. As the 65,000 estimate has had to be revised, are the Government hinting at having to increase the scale of the £400 million total, too?

What about the interaction between the financial assistance scheme and the Pension Protection Fund? Can the Minister tell us more about that? What would happen, for example, if a scheme wound up before April 2005? It is possible that there could still be large schemes in those circumstances. At what point does the FAS stop and the PPF take over? The Minister has caused considerable confusion on that point over the past six months, so it would be helpful to hear his comments about that.

I hope that it will not be too outrageous if I speak briefly about the other motion—on guaranteed minimum pensions, often regarded as a technical subject for nerds and anoraks—[Interruption.] We will not name names. In practice, the subject affects large numbers of people who contracted out of the state earnings-related pension scheme—now the S2P—into a funded company pension scheme and who may find that there is not even enough money in the company pension scheme to pay the guaranteed minimum pension to which they believed they were entitled as their minimum insurance, so to speak, when they contracted out. Ministers sometimes talk as though there was no pension insurance before the PPF, but the guaranteed minimum pension is in fact a type of insurance for people who contracted out of the state system.

People who contracted out and whose company pension schemes are winding up are experiencing many problems in securing the basic GMP. I hope that the Minister will comment briefly on that when he winds up. He will recall that in one of our least exciting parliamentary question and answer sessions, I put a question to the Secretary of State on 9 June 2004[Interruption.] It was indeed a classic.

My question was about deemed buy-backs, which occur when schemes have insufficient assets to secure the guaranteed minimum pension and the Department is asked for full reinstatement of the state pension. There is a strong feeling in the industry that the process of securing the deemed buy-back is slow and cumbersome. When the Under-Secretary of State for Work and Pensions answered me in June, he said that the Inland Revenue had received expressions of interest in deemed buy-back from 59 schemes, 33 schemes had formally requested calculations and eight of those had been issued with the necessary calculations. The crucial sentence in his answer was the final one. He stated:

"As yet no-one is receiving reinstated benefits."—[Hansard, 9 June 2004; Vol. 422, c. 478W.]

May we have an update on that?

There are rumours that one or two real human beings have actually received a payment under the deemed buy-back arrangements. If that were happening, it would be marvellous, but the Minister owes the House a fuller explanation of how deemed buy-backs are working, as well as an explanation of the workings of the GMP. The guaranteed minimum pension is not delivering the security that it was supposed to deliver. Does the Minister agree that it is outrageous that the Inland Revenue issued guidance that schemes could discharge their GMP liabilities by purchasing annuities that would provide an income well below the level of the GMP? In other words, the guaranteed minimum pension has turned out to be neither a guarantee nor a minimum for people who are having to manage on much lower incomes. How can the Minister defend those arrangements?

What about the idea that has appeared in the pension press that people who have contracted out will be asked whether they have taken out additional voluntary contributions and that, if they have an AVC, it will be included in the calculation of their pension income and they will only be able to buy back into the state system if, even with their AVC, they are still below the level of the GMP? Those are important questions that are at least as relevant for the victims of pension wind-ups as the scale of the FAS. They can appear technical and are easy to gloss over but, between consenting adults, we should all welcome a bit more information from the Minister today.

I have a few brief questions on some other aspects of the benefits system that are relevant to the uprating statement. We did not hear about the Child Support Agency. We were all fascinated to learn that the chief executive of the CSA was no longer in place. The Secretary of State gave the Select Committee on Work and Pensions the distinct impression that that was so. But the chief executive is still in place, so perhaps the Minister can tell us how the search for his successor is going? When might we see the outgoing chief executive leave the CSA and a replacement arrive? We shall be interested to hear about that.

I hope, too, that we might hear more about the Government's views on the problem of the 1 million-plus young people who are not studying, working or training. Although the Secretary of State always praises the new deal, if there are now more than 1.1 million young people who are not working, studying or training—a higher figure than in May 1997—surely that suggests, even to those on the Government Benches, who always go out of their way to speak so complacently about the new deal, that there is a problem. Will the Minister for Pensions reflect on why even more young people are part of the lost generation—neither working, nor studying, nor training—than in May 1997? Is it perhaps the case that the arrival of employment zones is a recognition by the Government that the new deal is not working, and that employment zones are intended as an alternative to the new deal and pilot a rather different approach? We would greatly welcome hearing from him on that.

I will not trouble the Minister by inviting him to comment on the announcement last week on the new basis on which the retail prices index would be calculated, although that is also relevant to uprating. I have given him enough technical questions and I hope that, when he responds to the debate, he can find the time to answer them.

3:35 pm
Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

Normally, when I see this annual event coming up on the parliamentary calendar, my heart sinks somewhat. We used to have an entire day of parliamentary debate on the two orders each year, but we started to notice that the debate ran out of steam about halfway through the day. I notice today that there does not appear to be a single Back-Bench Labour MP trying to speak in the entire debate, even though we are talking about £100 billion or so of public expenditure.

None the less, the debate provides an opportunity, as we observed earlier, to reflect on strategy for reform of the welfare state somewhat more broadly. It has already been a rather revealing afternoon in that respect. In a sense, we are contrasting the three approaches to the issue. The one thing that has emerged this afternoon from the comments made by Mr. Willetts is the issue of linking the pension credit to earnings and the basic state pension to earnings. That seems to me inconsistent with the assertion that 1 million people will be lifted off means-tested benefits. I wonder whether we can get some clarification on that at some point.

The motions are about the rate of benefits next year and therefore we must start with some discussion of adequacy in benefits. The infamous person coming from Mars to look at our deliberations would see that we were talking about a very thick volume full of different rates for different sorts of people and would assume that those rates were based on something. In fact, they appear to be based on what they used to be, plus a bit. There is no objective, external basis on which we pay certain amounts to different groups. I have heard the Minister for Pensions on the radio saying that this is something that he did not go in for in a big way. However, I wonder whether, in the quiet watches of the night, the Secretary of State might reflect on the fact that, year after year, we have been paying people on, for example, incapacity benefit increases of 70p, 80p and 50p, and their position has been falling further and further behind that of pensioners on pension credit and families with children. There must surely come a point in that process when we say not that enough is enough, but that enough is not enough. In other words, the process of just adding, in this case, a very small percentage increase to incapacity benefit leaves those benefits too small.

The Secretary of State got a bit cross with me when I accused him, at the time of the uprating statement, of saying that life on incapacity benefit was comfortable. He denied saying it. I went back to Hansard and I found him saying precisely that. He used precisely the analogy in the newspaper report that he used in Hansard when responding for the first time to oral questions. It is quite clear that it is something that someone said to him: being on incapacity benefit is like falling in a ditch and then one starts to get comfortable. That is precisely what he said.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

At last we get to the origin of the quotation. A representative of the Leonard Cheshire association, who is a paraplegic, said to me and several other people, "The problem with incapacity benefit is that it's like fool's gold. They send you away to lie in a ditch, without offering any helping hand, and after a while, lying in the ditch, you start to feel comfortable in it and so you get used to being on benefits." If people think that that is something that I have said—if they think that I said that £74.15 a week is what people can live on comfortably—I am grateful for what the hon. Gentleman said just now, because I was puzzled about when I had said that. It was not me who said that; it was a paraplegic who was describing his feeling about being on incapacity benefit.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

I am grateful to the Secretary of State, but he will accept that that obviously struck a chord with him, because he has repeated it twice—once in the House, and once to a newspaper. I am trying to make the point that the word "comfortable", even in that context, could not possibly be applied to that standard of living. The question is therefore: how long do we continue to increase incapacity benefit? It is a poor benefit, because every year we increase it by 50p or 70p, while pensioners' benefits, family tax credits and benefits for workers increase in line with earning. Childless people on national insurance benefits are therefore left further behind the majority of the population, including pensioners, working families with children and other working people. That is unsustainable in the long term. The Secretary of State has properly admitted that the pension credit is not a long-term answer, and neither is a retail prices-linked incapacity benefit when everything else is earnings-linked. That cannot continue indefinitely.

Photo of Mr Kevin Brennan

Mr Kevin Brennan (PPS (Rt Hon Alan Milburn, Chancellor of the Duchy of Lancaster), Cabinet Office; Cardiff West, Labour)

Should the hon. Gentleman not concentrate on the fact that 80 per cent. of people on incapacity benefit would like to work if they could? Schemes such as the want-to-work scheme in my constituency pays people £60 a week for the first four months that they take a job, £40 for the next four months and £20 for the next four months. If they cannot hold the job down, they can go back on to incapacity benefit. If we could get those people into work we could uprate incapacity benefit for the people left on it in line with earnings or perhaps even above that.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

No one disputes the fact that large numbers of people on incapacity benefit and other disability benefits would like to work. However, every time that the issue is raised in the House, I am struck by the fact that the same number is always cited. Seven years ago, we were told that 1 million disabled people wanted to work, and that number is still cited today. Either the Government are using old research or they have not made any progress on the agenda for seven or eight years, which is a crime. We do not want people to have to claim the benefits in the order if there is a better alternative, but too many people get stuck on them.

There are anomalies arising from the benefit rates, and I shall deal with two of them. First, the under-25s are in an anomalous position, as people in that age group receive lower rates of means-tested benefits. That derives from an essentially Thatcherite reform which, the hon. Member for Havant will recall—I do not know whether his fingerprints are all over it—said that young people should live with their mums and dads. It used to be the case that householders received more money and non-householders received less, but that was changed so that people aged 25 and over received more money and under-25s received less. Those means-tested benefits carry through into the housing benefit system, so that a 24-year-old who tries to live independently—they may have been thrown out of the family home or their parents may be unable to cope with them any more—receives less help with their housing than a 25-year-old. I cannot see any justification for that entirely arbitrary cut-off, which has been in existence since 1988. I accept that the Government are not going to say that they will do something about that, but that Tory creation is an anomaly. At the time, the Minister for Pensions was probably working for the Family Policy Studies Centre, and I very much doubt that he thought introducing penalties for the under-25s was a good thing. Does he think that it is a good thing now?

Another problem affects single, childless people under 25. Many lone parents are single and under 25 when they conceive. For the duration of their pregnancy they are living on the lowest benefit rate in the entire system, of just over £40. That is the environment in which their child grows before it is born, and I do not accept that that is good for the health or welfare of young women who are about to become mothers. There is another anomaly in the linkage of benefits for childless people to the retail prices index and the linkage of pension benefits and so on to earnings. On her 60th birthday, the income of a woman on income support nearly doubles because means-tested benefits have been linked to prices for so long that they have become devalued. Money has been put into pension credit, so there is a huge jump in the benefits available to someone at the age of 60. It is hard to find a rational basis for determining that the 59-year-old woman needs only £50 or so, whereas the 60-year-old woman needs £105. There needs to be some external look at what different sorts of people with different family compositions, different disabilities and so on need to live on, as a benchmark—not so that we can immediately put everyone's money up to the enhanced level, but to identify the groups who are particularly badly done by under the present structure.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

The hon. Gentleman is waxing eloquent about the cliff-edge effects on benefit changes at 25 or 65. Will he confirm that under his party's approach to pensions, the gap between the income at age 74 and the income at 75 will gradually get greater and greater?

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

Yes, that is correct, on a transitional basis. With pensions, as the hon. Gentleman well knows, one must set a destination—that is, one decent universal state pension payable to all those over state pension age, linked to earnings, sufficient to lift people clear of the means test and based on citizenship rather than on contributions. Clearly, it is implausible to get there in one go, so on a transitional basis we start with those over 75. As he says, that creates as beneficial cliff edge at 75. The difference is that I do not want that to be a permanent feature of the system, whereas the cliff edge at 25 and the current gap between 59 and 60-year-olds are both permanent features of the system. If the Secretary of State can tell me that those are transitional features that the Government will deal with and get rid of, I shall be delighted to hear it.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

I am grateful to the hon. Gentleman for giving way a second time. I understand what he is saying, but moving from 75 to a lower age will get more and more difficult and expensive to do as the gap gets wider. Although he wants to get rid of the cliff edge, it is getting higher as every year passes because the gap between the pension between the ages of 65 and 74 and the pension at age 75 upwards will surely get wider under his approach.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

At the same time, however, there will be growing accruals of second-tier state pension rights as well. As the hon. Gentleman suggested, the goal must be not two grotty state pensions and a failing means test on top, but one decent state pension. That must be where we head.

I return to the adequacy of benefit, especially for childless people. Because the Government rightly accept that children were very important, they have a child poverty target. Although they consider pensioners important, they do not have a goal of abolishing pensioner poverty, as far as I am aware, or perhaps that is another target in the statement that none of us can remember ever reading. There is no target to abolish poverty among childless people, but surely that matters as well. What are we doing about benefit rates for childless people who are left on benefit? Clearly, if they can get into work, that is great and we will support it, but not all of them will. It would be odd to have a big debate about the rates of benefit for next year without any of us raising the question of their adequacy.

I shall use two words that are seldom heard in the House: social fund. People on the social fund are, in many ways, the forgotten masses. I strongly suspect that many of them do not vote and are not floating voters. I do not suppose that any of the polling that any of the parties do flags the social fund as a big issue for target voters in marginal seats. In principle, access to cheap credit ought to be a good thing, yet people have accumulated so much debt that hundreds of thousands of them are not living at the benefit rates in the orders, but below those rates, pretty much indefinitely, because they have previously paid for so-called luxuries such as a cooker or a fridge.

The new Secretary of State has been commendable in the extreme for his willingness to look afresh at issues, but the social fund is one of the longstanding bits of the system that nobody dares poke around at, for fear of what they might find. Should the right hon. Gentleman have the opportunity to implement his agenda in future years, I hope he will have the social fund on his "to do" list.

The hon. Member for Havant mentioned take-up. I think I have asked the Department—I can never remember whether I actually tabled these questions or whether I just meant to—to place in the Library the analysis that underlies the take-up numbers for pension credit that Ministers keep quoting. The Government quote the bits that sound rather good, but do not publish the whole thing. The flip side of an 80 per cent. take-up rate for the guarantee credit and a 65 to 70 per cent. rate for the whole thing must be a take-up rate for the savings credit of 50-something percent., I imagine. I fear that I cannot remember what the Minister may have said about this issue, but will he confirm that the Department will place the whole analysis in the Library, and not just give us bits that suit the Government's argument? In the spirit of openness—he has been good in dealing with my freedom of information requests—I hope that the Government will place those details in the Library.

Tax credits were mentioned. The Secretary of State will be well aware that the only families in this country who do not get tax credits are poor families. The intention is to move children on income support over to the tax credits system. That system has now been running for two years, however, and we still do not know—we did not hear it today—why children on income support are getting the current rates of benefits and not moving over to the tax credits system, so that when the parents move into work, there is no disruption or change to the structure of their financial support. Is the tax credits system still such a shambles that we dare not risk including poor families? Is that really the state of play that we have reached? Why are children in poor families not yet on tax credits and when will they be?

The financial assistance scheme has also been mentioned. The Minister for Pensions responded to a debate only this morning about the APW pensions scheme, and he confirmed that people who work for solvent employers will be excluded from the financial assistance scheme. He said that the door was still open, but gave no indication of an intention to include the workers with solvent employers. I asked him a question in that debate: where there is a parent company, can the regulator go back to the employer and chase them for the underpaid money? Although he finished his speech four minutes before he had to do so, because he had run out of things to say, he did not answer that question. It is not very often that we get two goes in one day at trying to get a question answered. Can the regulator go back to the parent company of a firm such as APW and say, "You've got to fill the gap to make up these pensions"? If the regulator cannot do that, the workers will have no redress bar deemed buy-back. Clearly, that is not fair in relative terms with regard to other people covered by the financial assistance scheme.

On the citizens pension, I welcome the fact that I keep reading in the Sunday papers about the Government's intention to follow the Liberal Democrats' lead. We have been speaking about the position of women pensioners—I have certainly been doing so, and I know that my colleagues have been—over a long period. I am delighted by the Secretary of State's view that plugging the gaps in the contribution system is not the answer, because there are so many gaps and such an approach would make things even more complicated. The end result of plugging all the gaps is the number that one first thought of, or in other words, paying the full pension in the first place.

The hon. Member for Havant rightly pointed out that there are both cheap and expensive ways of dealing with the matter. As a transitional arrangement, we have proposed that the full rate would apply to a single person and that a 160 per cent. rate would effectively apply to a couple. We have also proposed that where two members of a couple would already have more than 160 per cent. between them, there would need to be a transitional protection to ensure that there are no cash losers. We have costed that into our policy costings.

On the earnings link, it was interesting to hear the Secretary of State confirm that the pension credit will be linked to earnings to 2008. I presume that that is the public expenditure planning horizon, but it is not the end of the Parliament. Will the Minister confirm whether he intends to link the pension credit to earnings throughout the next Parliament or whether the guarantee applies only for the first couple of years of that Parliament, after which there might be a change in policy?

One of the things that strikes me most about the position of pensioners is that, while the Government boast that 80 per cent. of those entitled to the guarantee credit are taking it up—that was the figure that was used—that means that 20 per cent. are not doing so. Who are those people? They are the poorest pensioners in the land, by definition. When the Government managed to get 80 per cent. of the poorest pensioners in the land to claim their means-tested benefits, they issued a triumphant press release. I think that that is a cause for shame.

If 20 per cent. of the poorest pensioners in the land, who are all drawing state pensions and could be lifted out of poverty in a guaranteed way by decent payments, are simply not claiming the complex means-tested benefits, those people are living in poverty. I strongly suspect—I wonder whether the Department has commissioned any research on this matter—that they may be a strong link between those people and the excess winter deaths that we shamefully see every winter in this country. The numbers fluctuate, but the very fact that excess winter deaths occur at all is a source of shame at the start of this new century. I strongly suspect that a link exists between the very poor, very elderly and very vulnerable pensioners who fail to claim those means-tested benefits and those who die from the cold in the winter.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

Earlier in my career, I researched hypothermia, and there is nothing about which I feel more strongly. Will the hon. Gentleman accept that many over-80s get a £300 winter fuel payment under this Labour Government?

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

Indeed. The winter fuel payment is £6 a week, so elderly people who have a full basic pension and who fail to take up the pension credit are missing out on £25 a week, which means that the gap is £19. The Minister looks puzzled: the basic state pension is about £80 a week this year; the means-tested benefit is £105; and the gap is £25. If elderly people do not take up the pension credit, they miss out on £25, but the Minister has just told me that that is okay because they get £6.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I did not say that.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

The Minister did not say that that is "okay", but he asked me to confirm that those elderly people get £6. That is true, but they miss out on £25, so there is no cause for self-congratulation. That money would have been better spent in the first instance on the basic state pension, particularly for those people.

Photo of Mr Michael Weir

Mr Michael Weir (Spokesperson (Environment & Food; Health; Rural Affairs; Trade & Industry); Angus, Scottish National Party)

Will the hon. Gentleman accept that the problem is growing, because fuel prices are now increasing in many areas? A recent parliamentary answer to my question about fuel poverty stated that the number of households in fuel poverty is now rising because of increased energy prices. Many people in fuel poverty are pensioners who do not claim their pension credit.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

The hon. Gentleman has made an important point, because fuel bills matter to older people. Many hon. Members will have seen their gas and electricity bills rising substantially.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

Is it Liberal Democrat policy to get rid of the £300 winter fuel allowance?

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

No. We would have preferred to introduce a better state pension, but because the Government have decided to make those payments, we have no plans to get rid of them. A simpler system would be a better system, not least because of the scope for misrepresentation. As the hon. Member for Havant knows, we have no plans to touch winter fuel payments.

Mr. Weir raised the substantive issue of fuel poverty, so it is shame that we have moved on to, "Can we get a good quote for our next leaflet?" Fuel poverty is not the primary responsibility of the Department for Work and Pensions, which is a source of concern. Given the issues about the adequacy of benefits for older people, it would be better if the Department were strongly involved.

This is the eighth annual debate to which I have responded, and those who study my contributions may spot the odd common theme—I shall certainly keep gnawing away until I get answers. I did not expect to get the chance to press the Minister for Pensions today, but I hope that he will respond to my particular point about workers whose firms are still solvent. The Government always say, "That is tough. The firm should find the money." If the regulator cannot force the firm to find the money, however, is it fair to say to the workers, "That is tough. We cannot do anything"?

3:58 pm
Photo of Mr Archy Kirkwood

Mr Archy Kirkwood (Roxburgh and Berwickshire, Liberal Democrat)

It is a great pleasure to follow my hon. Friend Mr. Webb, because this is my first chance to do so. He has pinched a lot of what I want to say, but that is not a great surprise.

These debates are important. Like my hon. Friend the Member for Northavon, I remember the good old days, when the Chamber used to be packed and when hon. Members vigorously engaged with the arguments. The process of social security is so ineffably complicated that it drives hon. Members out of the debate. They may attend to make constituency points because they have leaflets to write, which we all understand, but that leaves the debate at a level that does not do justice to the complexity, importance and development of the subject. This is my 23rd uprating debate—I may have missed one, so it might be my 22nd.

I know that the Secretary of State has got simplification in his sights because he said so at his last helpful appearance before the Select Committee on Work and Pensions. He gave us some comfort by saying that the Department is considering the matter, which is an easy but fundamental point to make.

I have considered some of the information and communications technology processes that the Government and the Department have in prospect as part of the Gershon review, which I support in principle. The Gershon report is not all about job cuts; it also considers the more efficient use of technology to deliver public services. If we do not fundamentally simplify the current panoply of benefits and start from first principles, we cannot harness the power of computer technology to develop more efficient public services. The pensions transformation programme is a good example of that because it has the potential to improve services, and I hope that it will. However, a system that was more easily computerised could generate savings, which could be put into improving benefits. That would be beneficial to everyone.

Simplification is therefore necessary not simply for its own sake but to make anything of the potential of future IT provision. I hope that the Secretary of State will keep that in mind in his five-year plan and start considering annually the simplifications he can make in the uprating statement.

I acknowledge that a huge amount has been done. My hon. Friend the Member for Northavon rightly said that the campaigns against child poverty and pensioner poverty clearly show results. I accept that they have not all appeared in the statistics yet because there is a time lag, but much has been done, which is welcome. However, parts of the system cause concern. My hon. Friend mentioned working age adults without dependant children. They have been left behind and are in danger of being stigmatised in the provision of benefits.

According to my arithmetic, jobseeker's allowance has increased by only £7.75 a week since 1997. The increase for adults on income support and JSA is only 55p a week. I have participated in such debates for 22 years and that is the smallest rise that I have ever known for claimants in that category. If I am right, we need to tackle the matter urgently.

Broad inequality must also be addressed. The work of John Hills and his unit at the London School of Economics shows that, although poverty has been effectively and rightly targeted, we need to deal with the inequality that is beginning to emerge. It happens because people in the upper deciles of income storm ahead. People may say, "That's fine. So they should. Good luck to them." However, it creates tensions in the system because people see others getting access to life chances that they do not have. I believe that frustration about that can drive them to all sorts of untoward activity, including criminality and the informal economy. In some cases, it can lead to mental illness. Some figures suggest that the inequalities for some categories of claimants are getting worse. When the Secretary of State examines the uprating figures, year on year, he should consider the big picture of worsening inequality. He needs to think carefully about the way in which he can deal with that in future statements.

My hon. Friend the Member for Northavon asked for the basis on which the figures were presented. I have discussed the matter with Pensions Ministers over many years and in various circumstances. Many of our sister European nations effectively use modest but adequate budget standards to consider what is needed to provide a sensible income.

The London School of Hygiene and Tropical Medicine recently produced a report that found that adults needed a minimum of £91 a week on which to live. That is almost twice the level of income support available to the family cited. That is the measure of the adequacy, or inadequacy, of the current level of benefits—welcome though the increases may be. I am not saying that we should immediately move to using modest but adequate budget standards automatically. It would be difficult, and impossibly expensive, to do that all at once, but we should make more use of minimum income standard methods of determining what is necessary for a family budget. We have looked carefully at the benefits that the Government are using to measure child poverty in regard to the targets for the period from 2010 to 2020, and they are better than they might have been. However, a proper assessed budgetary standard for child income would have been a more useful tool for measuring the Government's progress.

The Government have a story to tell on incapacity benefit and on pathways to work, and I support all that, but it is disappointing that it will take until 2008 to get that system rolled out across the whole of the United Kingdom. The work done by the New Policy Institute in December 2004, which was funded by the Joseph Rowntree Foundation, clearly showed that economically active people who want paid work but who are not officially unemployed are a big client group, and present a big problem. It is a matter of concern that we are not going to have a UK-wide system to deal with that until 2008.

Although the policy of having an active labour market is right, and has been successfully operated over the past few years, it ignores the fact that the quality of jobs at the lower end of the employment market cannot provide the necessary long-term stability and adequate life chances for families on lower incomes. The Government should look carefully at the statistics that show that people who go into low-paid jobs often rotate through them in a relatively short time in a way that does not help them much. They still suffer poverty, and they are still in difficulties. It is therefore not safe to assume that the problem is fixed simply by getting people into work. Given the statistics on this large section of the community, it is demonstrably not.

I concur entirely with the point made by Mr. Willetts about the lost generation of 1 million young adults. The number of people with poor or no educational qualifications is an issue. I accept that it is not technically a benefit matter, but it plays into the new deal and some of the other issues that we are looking at this afternoon.

I am worried that some of the wider indicators show that, although the benefit system has improved, it is still not adequate for the purpose. The problem of low birth weights, which Mr. Field used to bang on about in earlier times, is getting worse. It is a matter of real concern that the problem is being exacerbated in families on low incomes, and we are storing up problems for the future in that regard.

The number of households in temporary homelessness is a huge issue. We really need to look at the structure of the benefits involved, including some of those dealt with in the uprating statement. In fact, it is time that we started looking at the Rossi index again. People's housing benefit is being restricted for a variety of reasons, including rent restrictions, which we all know about. The costs of housing have increased substantially, and increasing means-tested benefits by 1 per cent. using the Rossi formula might have been a safe thing to do five or 10 years ago, but we need to reconsider whether anything better can be done to protect people who have real problems struggling to meet their housing costs. That need is reinforced by the fact that there is only a 50 per cent. take-up of council tax benefit.

There is evidence to show that low income, bad diet, low birth weight, homelessness and temporary housing all lead to an exacerbation of mental illness. That is not a direct social security responsibility, but there is evidence that things are getting worse, which we cannot ignore.

Some capital limits in the order have been in place since time immemorial—indeed, some of them came in with the 1986 legislation, which I remember—but it makes no sense to leave capital limits to languish to such an extent. They need to be re-evaluated and uprated in some way, even if only occasionally and not annually.

A couple of Members raised the issue of tax credits and I have three questions to ask because I am very worried. The hon. Member for Havant alluded to the problems relating to the recovery of overpaid tax credits. This is a serious matter that impacts on the benefits uprating order, because some people on low incomes are not getting their full entitlement as overpayments are being clawed back at an unconscionable rate. I wonder whether the Department knows how many income support claimants are on a reduced income due to recovery of overpaid tax credits. That would be an important and interesting figure to know.

I also do not believe that ordinary people on the high streets of the towns of Great Britain know that the Inland Revenue has the discretion to write off overpayments. I do not think anybody tells them that.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

It is not used very often.

Photo of Mr Archy Kirkwood

Mr Archy Kirkwood (Roxburgh and Berwickshire, Liberal Democrat)

Indeed, the Inland Revenue does not use that discretion very often, even when it is pointed out. I draw the Secretary of State's attention to the fact that, in evidence to the Select Committee, his predecessor gave us an undertaking to examine the situation relating to data on tax credit overpayments as soon as they became available—they will be soon—to ensure that people are not being landed in severe hardship as a result of that clawback.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

I am grateful to the hon. Gentleman for giving way because I agree with him about tax credits. There are clear examples of people who know that they have been overpaid tax credits, but who, as a result of receiving cash through overpayment, find themselves taken out of housing benefit. They then find it very difficult to get back on to the benefit. There are people who try to set money aside because they fear money has been overpaid, but that takes them over the capital limits. So, there are several interactions between tax credits and the benefits system. Ministers tend to wash their hands of this and say, "That's a disaster of the Inland Revenue's making," but it affects people's entitlement to welfare benefits and it is causing genuine distress.

Photo of Mr Archy Kirkwood

Mr Archy Kirkwood (Roxburgh and Berwickshire, Liberal Democrat)

Not for the first time, the hon. Gentleman makes the point more eloquently than me. I concur with all that. It is becoming an increasing problem—it is not going away and it is not a glitch related to the introduction of a given proposal. Indeed, the evidence available to me suggests that the problem is not getting better at all. If anything, it is getting worse.

I have two other quick questions. As my hon. Friend the Member for Northavon said, the migration of income support and income-based jobseeker's allowance cases on to child tax credit is also a considerable concern. There are 900,000 families to transfer. A few moments ago, we said that from our experience the tax credit system is shambolic, so there is a genuine worry about when those people will be transferred. The Government's position, I understand, is that the date still remains uncertain, but it certainly will not be in 2004–05 and we have yet to receive an exact timetable showing when in 2005–06 the transfer will begin. When that transfer begins, the one thing that must be absolutely guaranteed is that there will be no delays or any other administrative problems, because those families are among those with the lowest income in the land. The House would welcome assurances on that.

Finally on tax credits, the Public Accounts Committee got an undertaking from the Inland Revenue that once some of the data started to become clearer, there would be a case for reviewing the tax credits scheme. I hope that the Department is alive to that inquiry and that it will encourage and support it, because I detect in all parts of the House evidence of concern about tax credits and how they have been delivered recently.

I recognise that a huge amount has been done to improve the incomes of many households across the United Kingdom over the last few years, but a lot more work remains to be done. If we do not make sure that we can provide adequate life chances for a whole section of society, we will end up driving people into criminality, as I said earlier, and driving people into the grey economy and not paying taxes. Worse than that, we will disrupt families, producing mental illness and marriage break-up, the consequences of which the taxpayer ends up paying for. It is money well spent to have proper, adequate benefits that are fit for the purpose and set at appropriate levels on which people can live. The Government still have some work to do before they achieve that.

4:15 pm
Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

It is a great pleasure to take part in this thoughtful debate. I must confess a little surprise to see that no Labour Back Benchers are making speeches in the debate this afternoon. I am in a charitable mood, however, and I will pick up on the Select Committee Chairman's comments that this is becoming such a complex area that it is one in which many Members fear to tread, as they feel that they will not be as knowledgeable as they should be or have all the facts at their fingertips that they feel they should have.

A more important point lies behind that, as the people who take up these benefits—our poorest and most vulnerable constituents—are not well able to navigate the minefield of regulation and rules that surrounds many of these benefits. On a cross-party basis, we should try to simplify much of the social security system so that it is more easily understood. If we do so, we will see higher take-up. Along with simplicity, we need computer systems that are reliable, that work and that get benefit through to recipients in a timely and correct manner. Whether in relation to the Child Support Agency or the tax credit computers, there have been too many instances in which the technology has let down some of our most vulnerable constituents.

I was also interested that the issue of income adequacy was touched on briefly, and I commend the two Members who raised the subject. We need to examine that for people who will be out of the labour force through no fault of their own for long periods. We need to be honest and transparent with our constituents about how we will pay for that, and perhaps identify some parts of current Government expenditure that we want to slim down to make moves in that direction. Collectively, we need to turn our attention to that.

We are covering a wide variety of social security and pension issues this afternoon, and I will inevitably repeat some of the points already made. First, on the pensions side, we understand the Government's arguments about why they felt compelled to introduce the pension credit. A wide consensus now exists among people from many different parts of the political spectrum, however, that that has not been the most sensible way to go. We know that 1.63 million pensioners are not taking up pension credit, which results in many constituents being £25 a week less well-off than they would be otherwise.

We are also aware of the disincentive effect of pension credit. Even the Prime Minister said on 8 February to the Liaison Committee:

"You obviously don't want a situation where the majority of people are on means-tested pensions".

I wonder whether he is aware of the fact that nearly half of all pensioners are on means-tested pensions. My hon. Friend Mr. Willetts said that he was a Blairite on some matters relating to pensions. In this case, the Prime Minister is clearly a Conservative. He has recognised what we have been saying for quite some time, so I think we can trade a bit of party-political allegiance in today's debate.

The new deal is still the subject of heated debate between the parties. We have said that we will get rid of both the new deal for young people and the new deal 25-plus. I assume that as rational Members of Parliament we proceed on the basis of evidence when framing policy and deciding what to do. Are Ministers really satisfied with the new deal for young people, given that only 38 per cent. of young people secure unsubsidised employment at the end of it? The statistic for the new deal 25-plus is even worse: only 12 per cent. of those who embark on it secure unsubsidised employment.

As guardians of the public purse, responsible for helping some of the most vulnerable members of society, we should be looking for value for money and ensuring that we have the most efficient policies and systems possible. The statistics I have given are very poor, and we should be able to do better.

Photo of Mr Kevan Jones

Mr Kevan Jones (North Durham, Labour)

I agree that those people are the most vulnerable in society, but in my constituency, youth unemployment is down by more than 85 per cent. What will the hon. Gentleman—or the Conservative candidate who will stand against me at the next election—suggest to those young people as an alternative to that dramatic drop in youth unemployment?

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

I will say something about unemployment shortly, and I will deal with the hon. Gentleman's point then; but he has not responded to my point. The question is not, "Do we or do we not help these people?" Of course we need to help them find work. The question is, "Is the new deal the most efficient and effective way of doing that?" On the evidence that I have given, which has not been disputed either by the hon. Gentleman or by Ministers, I do not think it is. I think we should be grown up enough to admit that although parts of the system work well, those two parts are clearly not working well. Organisations in the sector will tell those who consult them that there are more efficient ways of dealing with these matters.

I entirely agree with what was said by my hon. Friend Sir Archy Kirkwood. Two Fridays ago, a young lady who came to my constituency surgery told me that having applied for various tax credits and returned to work, she faced such a large repayment of money paid to her that she was close to throwing in the towel and leaving the labour force altogether. She is so cross that she has asked me to refer her case to the parliamentary ombudsman. She is not alone: there are many like her. The Government ought to consider an amnesty for those who, through no fault of their own—I do not think there was any fraudulent intention—have been asked to repay large sums. If the Government are honest, they will say that the computer systems were not fully geared up at the start of the process. There is real anguish and worry among our constituents who are caught up in this.

I also agree with what Mr. Webb said about the provision of child care by family members. We should not force our constituents to fit in with some predetermined system that we have come up with here. If we really want to provide a natural solution and help people to sort out their child care problems in the way that they prefer—which involves intimate, personal decisions—it must be right and sensible to allow family members to provide care. Surely we cannot be against that, and we should ensure that it happens.

I commend the Government for making changes for future entrants to incapacity benefit. The Government are absolutely right to change the name to the rehabilitation support allowance. Clearly, the name "incapacity benefit" has the wrong connotations. What the Government are planning to do to get people into work is excellent. However, the numbers keep rising. We must comment on the fact that in August 2004 there were 140,000 more people on incapacity benefit. The latest figure is 2,403,000—that is 140,000 higher than when the Government came to power.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I am interested in the hon. Gentleman's analysis of incapacity benefit and welcome his support for our proposals. Given the figure that he has just mentioned, what would be his explanation of why, under the previous Government, the number of people on incapacity benefit rose threefold?

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

The hon. Gentleman will realise that the United Kingdom economy has been through a period of great transition over the past 15 to 20 years. Certain restructuring needed to take place. It would have taken place under a Labour Government had one been in power at the time. I do not know whether he is suggesting that some of the industries of that time should be carrying on with large state subsidies. Necessary transformations took place. They would have taken place whichever party was in power. If he is fair in his assessment of recent economic history, he will probably agree.

I come back to economic activity and to the intervention from Mr. Jones. We know from labour market statistics released only last week, on 16 February, by the Office for National Statistics that 1,126,000 of our young people aged between 16 and 24 were not in work, not studying and not training in December 2004. That figure is 44,000 higher than when the Government took office. In the trade, they are known as NEETs—not in employment, education or training.

I wonder what all those people do. I wonder where they are. I have to think quite hard of the type of families that those 1,126,000 young people are in. What is their situation? That is a fantastic waste of potential for the UK labour force. We need to make a much greater effort to get those young people into employment.

The Government say that we need migration. It is clear that we do in certain parts of the economy but we need to look to our own resource within this country and to get those young people into the public service jobs that we need and into areas where there are skills shortages. We should make a far greater effort to do that.

The hon. Member for North Durham talked about unemployment. I come on to that willingly. We need to remember that we are in the 13th year of growth, which was set on a good curve in 1992. If he looks at the record, he will find that, between 1993 and 1997, when we were in power, unemployment fell by 908,000. There was a 31 per cent. fall. Between 1997 and 2004, it fell by 607,000. That is a 30 per cent. fall. Therefore, there was a 31 per cent. fall under us and a 30 per cent. fall in slightly more than seven years under this Government. He will see that the curve has carried on and that our record stands up well. We are obviously delighted that all those people have jobs but, as I said, those statistics speak for themselves and they are based on the back of 13 years of growth, established originally under a Conservative Government.

Photo of Mr Kevan Jones

Mr Kevan Jones (North Durham, Labour)

I am glad that the hon. Gentleman has recognised the good job that the Labour Government are doing in getting people back into work, but the fact is that the last Conservative Government wrecked my constituency by throwing people on to the dole, and used incapacity benefit to massage the figures and to write off a generation of people who were still economically active. Will he now admit that the last Tory Government used incapacity benefit in the cruellest way in constituencies such as mine, which led to many people thinking that they had no future in employment at all?

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

The hon. Gentleman is keen to trawl through recent economic history, but as I said in response to an earlier intervention, I suspect that, whichever party had been in power, it would have been necessary to take difficult decisions about restructuring across the economy. Those were indeed difficult decisions, and I am aware that they hugely and painfully affected many people's lives.

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

I have given way to the hon. Gentleman twice, and if he will allow me I will wind up my remarks. For the record, I repeat that there was a fall in unemployment of 908,000—some 31 per cent.—between 1993 and 1997. I am of course delighted that it has continued to fall, but it has done so from the firm base established under a Conservative Government, with growth starting in 1992.

4:30 pm
Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

I am delighted to be able to take part in this debate, although I am saddened that it has not attracted the depth and width of interest that it might have done among Members. It is of particular concern that not a single Government Back Bencher has thought it necessary to make a proper speech on uprating; their constituents will wonder where they were this afternoon.

The social security bill is growing. The Prime Minister said at his party's 1996 conference that that would not happen under a Labour Government, but the opposite has proved the case. There is growing means-testing throughout the entire social security world, and the related expenditure is often self-defeating. As my hon. Friend Mr. Willetts made clear, we will not vote against the uprating, although it remains to be seen whether the Liberal Democrats will, as it has been their habit to do so. However, it is a concern that so few Labour Members have felt it necessary to take part in this debate.

I want to touch on several matters that have been raised. This has, rightly, been a wide-ranging debate, and those of us who have taken the trouble to be present throughout have covered a galaxy of different issues. I am looking forward to the Minister for Pensions' winding-up speech. He has much more time than he might otherwise have had, and he will doubtless be able to dot every "i" and cross every "t", having had a chance to warm up in Westminster Hall this morning.

As is often the case, the Government have produced a high-flown ambition: they want to abolish child poverty. However, they are setting about achieving that, in part, by changing the target. They want to exclude housing costs, which appears to lift about 1 million children out of poverty simply at the stroke of a pen. As Conservatives, we believe that the conventional way—focusing on those below 60 per cent. of median income—should be maintained, and that the Government are wrong to move the goalposts in the middle of trying to implement their high-flown policy.

There has already been some discussion about the myriad failings of the Child Support Agency. In my other role as a member of the Work and Pensions Committee, I have had the pleasure—if that is the right word—of hearing evidence about IT and managerial failings from a series of people, including the Secretary of State, his predecessor and, of course, the much-discussed Mr. Doug Smith, who I believe is still the CSA chief executive. We know that of the 478,000 applications to the new scheme since April 2003, only 61,000 non-resident parents had made a first payment. We also know that there has been a 30 per cent. increase in the number of complaints to the independent case examiner since 2003.

Behind that figure, there must also be many people who have simply given up altogether. There must be many who have given up trying to contact the CSA by telephone, who have given up trying to get any sense out of the person to whom they are talking—if they do manage to get someone on the other end of the telephone—and who have certainly not gone as far as contacting the independent case examiner. When Mr. Smith gave evidence to my Committee, he said that the Child Support Agency had an aspiration to deal with these matters in an average time—between first contact with the parent with care through to having payment arrangements in place—of six weeks. At the time he gave that evidence, it turned out that in the real world, the average was somewhere between 15 and 22 weeks. I am not aware how long it takes at the moment.

The annual report and accounts for the CSA showed an outstanding debt of £720 million in March 2004, with a further £947 million classified as uncollectable. My Committee had a lot to say about that, but I shall not go into all the details on this occasion. We had much to say about the failings of enforcement and—[Interruption.] I am talking about the Select Committee on which I have the honour of serving under the distinguished chairmanship of Sir Archy Kirkwood. Peebles used to be somewhere in that constituency name, but it seems to have got lost in the wash.

I am not just talking about figures, or beating up high-flown officials within the CSA for their apparent ineptitude, as the fact remains that the CSA has failed to collect £750 million owed to some of the poorest families in Britain.

When the Secretary of State came before the Select Committee side by side with Mr. Doug Smith, the body language was fascinating to watch. As the magnitude of the awfulness of the CSA's performance emerged, there was a perceptible growth in the gap between the Secretary of State and the chief executive.

Photo of Mr Geoffrey Clifton-Brown

Mr Geoffrey Clifton-Brown (Assistant Chief Whip, Whips; Cotswold, Conservative)

I would like to acquaint my hon. Friend with my constituency case of Mrs. Little, who tried for months to get the Child Support Agency to take some notice of her claim for her four children. When eventually the CSA took notice of it, it wrote back to apologise for the fact that the computer had broken down. She was told that her claim would have to be dealt with manually and it would be another 20 weeks before she would receive any money at all. Does my hon. Friend regard that as acceptable?

Photo of Sir Alan Haselhurst

Sir Alan Haselhurst (Deputy Speaker)

Order. We are now getting into special pleading, and I urge Mr. Waterson not to pursue that path.

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

I feel for Mrs. Little, but I will resist the temptation to follow that path in too much detail, Mr. Deputy Speaker.

Let us return to the chief executive and the Secretary of State giving evidence to my Committee about the overall performance of the CSA. In his usual skilful fashion, the Secretary of State tried to draw the fire away from the chief executive and himself by announcing at the beginning of the evidence that Mr. Doug Smith would be leaving the CSA—to spend more time with his family or some such reason. That was on 17 November 2004. The transcript was read to me by several BBC journalists, and I accept that no one said expressly that Mr. Smith would be leaving quite soon, but I must admit to being pretty surprised to find that he is still in post, apparently barricaded in his office at the CSA and saying, "I'm not coming out."

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

I distinctly remember the hon. Gentleman being present at the meeting, so perhaps he will recall my saying that the current chief executive would be handing over the reins to the new chief executive, which suggests that the new chief executive has to be appointed before the old chief executive moves on.

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

I am certainly not suggesting that the Secretary of State was trying to mislead anyone, but I was left with the distinct impression that it would not be a lengthy process and that Mr. Smith had had enough, that the CSA had had enough, that its clients had had enough, and that the Secretary of State had certainly had enough. I leave aside any speculation as to what useful tips Mr. Smith might be able to pass on to his successor in handing over the reins. As I understand it, there has not exactly been a queue of qualified applicants for this particular job, but I express my surprise that Mr. Smith is still there, rather than facing new challenges in another job.

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

Does my hon. Friend share my surprise, given the CSA's recent history, that Mr. Smith was awarded a CBE in the new year honours list?

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

It is not for me to second-guess Her Majesty in these matters. In any event, there is no greater honour than being the chief executive of the CSA, and Mr. Smith seems intent on clinging to that for the time being.

I turn to the debacle of the overpayment of tax credits. As my hon. Friend the Member for Havant noted, many hon. Members encounter this matter at their constituency surgeries, and in correspondence. People with delicate family budgets face real hardship as a result of this problem. What is being said to people about their overpayments? That question was asked earlier by the hon. Member for Roxburgh and Berwickshire. How many claimants of income support or income-based jobseeker's allowance are on reduced incomes as a result of the recovery of overpayments? If the Minister does not have the figures to hand, I should be grateful if he would write to us.

What steps are being taken to ensure that income support claimants know that the Inland Revenue has the discretion not to recover overpayment in cases of hardship? I remind the House that it is my party's policy to introduce an amnesty in respect of most cases of overpayment. After all, the overpayments are not remotely the fault of the claimants themselves.

I do not want to repeat the arguments that have already been made about incapacity benefit, but as my hon. Friend Andrew Selous said, some elements in the Government's proposals—such as those to take away some of the stigma associated with the title of the benefit—are to be welcomed. However, the number of people on incapacity benefit has risen significantly under this Government. The present proposals apply only to new claimants, and contain nothing that affects the 2.7 million existing claimants.

Will the Minister confirm that in 1997, 47 per cent. of people claiming incapacity benefit were unemployed, and that that figure has risen to 60 per cent.? Will he also confirm that the number of people leaving incapacity benefit has fallen, and that as a result, the number of claimants has risen by 140,000 since May 1997?

I now turn to questions arising from the new incapacity benefit system. It was stated earlier that under the new system, severely sick or disabled people would receive more money. However, the rates for the new benefit have not been set yet. What evidence will be used in deciding the rates paid under the new regime that will replace incapacity benefit? What assurances can the Minister for Pensions give that sick and disabled people will not lose income under the new scheme? Will the Department set expenditure targets for the new rehabilitation support allowance and the disability and sickness allowance? How long does he envisage that it would take claimants on rehabilitation support allowance to move beyond the basic rate, which is paid at JSA levels, and reach the higher levels equivalent to long-term incapacity benefit?

The separate issue of economic inactivity is one of those dialogues of the deaf, which we seem to have regularly in the Chamber, between Ministers who are happy to crow and issue press releases about the headline level of unemployment, but are reticent in talking about the large number of people in this country who do not find their way into those statistics because they are economically inactive. The crying shame, as my hon. Friends have said, is that more than 1.1 million young people are neither working, studying nor training. When will the Government have a proper thought-out strategy to deal with that lost generation, which is apparently doing nothing and is not included in the unemployment figures?

While I am on the subject of employment and unemployment, it is worth quoting what Labour Market Trends concluded this month:

"while unemployment levels have generally been increasing over the past four years, the rate of increase has been no more than in line with population growth, leaving the trend in the employment rate largely flat since 2000, following stronger growth through much of the 1990s".

That is the context in which all employment and unemployment issues should be considered. The Government do not have some great success story; they are simply talking the credit for a trend that has been flat since 2000, and is based on the successes of the 1990s.

On pensions, the quote given by my hon. Friend the Member for South-West Bedfordshire bears repetition. The Prime Minister told the Liaison Committee recently:

"You obviously don't want a situation where the majority of people are on means-tested pensions".

Presumably on planet Blair, they are not. However, we know that at least half of pensioners are on means-tested benefits and that the proportion is destined to rise inexorably under this Government's policies, subject to one issue to which I shall return.

We know that the latest figures show that one in five of the poorest pensioners are not claiming the means-tested assistance to which they are entitled. During the past three months, only about 30,000 new people have signed up for the pension credit. Despite all the bally-hoo, all the advertising—which I see regularly in my local paper in Eastbourne—and all the efforts of the Pension Service, which is doing an excellent job in my area, the application rate is tailing off. As Gordon Lishman of Age Concern said recently:

"Around a third of pensioners who are eligible for pension credit are still not receiving it."

That is 1.63 million people.

We are all hanging on the final report of the Pensions Commission—the Turner commission—which, sadly, will not be available until after the election. It has spotted the effect of means-testing on pension provision in this country.

Photo of Mr Alan Johnson

Mr Alan Johnson (Secretary of State, Department for Work and Pensions; Kingston upon Hull West and Hessle, Labour)

The hon. Gentleman is behind the game, because the splendid new Blairite shadow Secretary of State sitting next to him has announced that the pension credit will rise at the same rate as earnings until 2008, so the argument about people being sucked into means-testing is meaningless, given that that system would continue under both Conservatives and Labour.

Will the hon. Gentleman confirm that when the Select Committee of which he is a member went to Glasgow to talk to the splendid Pension Service about the main reason why people say that they do not want pension credit, it was told that the reason was not stigma, but because people say that they have enough money and do not need any more? Will he confirm that that was the biggest single reason for people not taking up pension credit?

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

I did not have the pleasure of joining the Select Committee in Glasgow, but that is not the evidence that I receive from my constituency. If the Secretary of State is suggesting that that explains why 1.6 million people are not claiming, he is in cloud cuckoo land.

My hon. Friend the Member for Havant has made it clear that our policy is to match the Government in raising pension credit in line with earnings. That is not to say that pensioners will not be floated off means-testing. The rate may be slower than we had anticipated under our original policy, but that is not to say that we are not trying to get them off means-testing. What is the Secretary of State saying? He seems to be Jekyll and Hyde when it comes to the pros and cons of means-testing.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

Can the hon. Gentleman confirm whether he stands by 1 million as the number of people that his party would lift off means-testing in the next Parliament?

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

Obviously, in view of my party's recent announcement and the Government's equally recent announcement, that figure will have to be changed, but that does not mean that it will be zero. A number of pensioners will still be floated off means-testing in the first Parliament, and ever more will be floated off in subsequent Parliaments. That is fairly clear.

It is difficult to contend with the Secretary of State, because there are two Secretaries of State. There is the sober, solemn character who runs the Department for Work and Pensions and then, as soon as he can get away from the Department, there is the character who leaps into a telephone booth, changes his costume and thinks the unthinkable about the universal citizen's pension or whatever it may be. The Secretary of State said:

"the pension credit and means-testing should be there until we have solved the problem of abject pensioner poverty".—[Hansard, 13 October 2004; Vol. 425, c. 309.]

He also said that there were no plans to continue the credit indefinitely.

We are all hanging on the publication of a set of principles—as they have been described—defining how the Government will approach pension policy in the future, although on another day they tell us that they can say nothing because they are waiting for Turner to report. After the document setting out the principles on which the Government will base their pension reforms is produced, how long do they expect pension credit to be around, for planning purposes? Will it be one year, five years, 10 years or 20 years? I assume that the Government agree with the Turner commission that unless there is certainty on that issue it will be difficult for people to plan for their retirement.

If pension credit is needed until, as the Secretary of State put it, we have solved the problem of abject pensioner poverty, when will the Department judge that target to have been met? We shall be interested to hear about that, because as I said, there seem to be two Secretaries of State—the one who sticks by the departmental line and the one who goes in for blue-skies thinking on some of the big questions about pensions.

On take-up, it is clear that pensioners are missing out on almost £3 billion-worth of benefits. Some charities have described that as unforgivable. About 2 million pensioners, about half those eligible, fail to claim a total of £870 million in council tax benefit. No one tried to disagree with my hon. Friend the Member for Havant when he said that council tax benefit had the lowest take-up of any means-tested benefit in the system. There is a particular problem because take-up is so low among owner-occupiers. We are all familiar with such people. There are many in my constituency— elderly people who own their homes, but do not have much cash or many savings. That is why our party concluded that the only way to deal with that problem, especially in the light of the 70 per cent. average rise in council tax bills since 1997—it is more like 87 per cent. in my constituency, with a little help from the Liberal Democrats on occasion—is an age discount, to halve bills in households with members aged 65 or over, up to a £500 maximum. That proposal came out only a couple of days ago and has been extremely well received.

Finally, I turn to the FAS, as the Government call it, or "farce" as some of us prefer to pronounce it—the financial assistance scheme and the protection of people's pensions. This is really part 2 of a debate on the APW scheme—an unfortunate state of affairs—that we began in Westminster Hall this morning. Is it not typical that, although at that stage we had not seen today's written statement on the FAS, it emerged in the Minister's winding-up speech that although there are, I think, 380 schemes listed in the statement today, APW is not one of them? Why not? Because that is classed as a solvent wind-up. We are talking about people who, as I understand it, have lost 80 per cent. of their pension rights through absolutely no fault of their own.

As my hon. Friend the Member for Havant was saying, this seems to be an exercise in ad hocery. The original announcement in May last year happened in a rush because the Government were facing defeat in the House over the Pensions Bill. We have had various announcements over the intervening months, which have slowly dragged out of the Government precisely how they think the FAS would work. A lot has changed in that time. The Government have quite properly commissioned research, which came up with a figure of 65,000 people. Other high-profile schemes, such as APW and Turner and Newell, have hit the news, and I am sure there have been many others, less well publicised. Only one thing has remained unchanged and unchangeable: the amount originally set for the FAS itself, which was £20 million over 20 years—a total of £400 million. It was clearly inadequate then and has become ever more obviously inadequate in the intervening months.

Of course, there is still uncertainty. We do not know what is going to happen to people who are more than three years away from retirement. We do not know how many people, as opposed to how many schemes, are to share the £20 million a year. We still do not know the precise relationship between the Pension Protection Fund and the FAS. There is the suggestion, which came out very late in the day, that the PPF itself could be retrospective—something that was always stated not to be the case from the time when the legislation started its process. Today, for the first time, we have the Government, in effect and belatedly, finally accepting that their original figure is inadequate, by suggesting that in the next public spending review the figure will be considered again.

One thing that we do agree with the Government about is that the taxpayer cannot be regarded as a bottomless pit, to keep contributing money to compensate people for losing their pensions. At the same time we recognise that those people have a clear moral and perhaps even legal case to be compensated. That is why we revert again to our policy on the use of unclaimed assets—the £15 billion of unclaimed assets reliably estimated to exist in this country. Ireland began by simply taking the interest on those unclaimed assets. Of course, we would require various safeguards as part of our policy to ensure fairness. The Treasury is already well advanced on that process, but for different reasons. The Chancellor wants to get his hands on unclaimed assets to use them for charitable purposes.

Yet again, we plead with Ministers not to set their face against the use of unclaimed assets, but finally to agree to consider them as a possible source of compensation for those people. As I said, only this morning we heard about APW and the very sad situation that those people find themselves in. One thing that I can confidently predict is that they will not be the last. The Government have constantly been trying to catch up with events, rather than sitting down at the very beginning and working out a scheme that will be enduring, successful and achieve the objects required of it.

We will not divide the House on the uprating orders. They raise a host of issues, all of which I expect the Minister for Pensions to deal with in his winding-up speech.

4:59 pm
Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

Although in some respects this has been a quiet debate that has not taken place in a crowded Chamber, a range of important issues have been aired on all sides. I pay tribute to all those hon. Members who spoke, including those who made some useful interventions. I would like to single out Sir Archy Kirkwood, the Chairman of the Work and Pensions Committee and previously the Social Security Committee. He could not quite remember the number of times that he has taken part in such a debate—it was about 20—but I fear that this may be the last occasion on which he does so because, sadly, he is retiring from the House. Both in my current role and when I had great honour of serving on the Select Committee under his chairmanship, I have found his contributions thoughtful, well informed, intelligent and compassionate.

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

I should like to develop that tribute on behalf of the Opposition. I, too, am a member of the Select Committee and have been very happy to serve under the chairmanship of the hon. Member for Roxburgh and Berwickshire. He chairs the Committee in an exemplary manner and I appreciate the opportunity to thank him for all that he has done.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

That was a gracious tribute.

I do not want the House or the massed ranks of my colleagues to think that I am going soft on the Liberal Democrats, as I may speak slightly differently about Mr. Webb. The Government faced a strategic challenge, as too many British citizens were born poor, had an impoverished and diminished childhood—often, but not always, in fragile families. As a result, they achieved little at school and ended up with poor educational attainments. Some, but not all, of those children were at risk from evils in our society, and when they left school, sometimes before 16, they did not take up education, employment or training. That is a problem—it may not be as sizeable as some have said, but that is not the point. The Connexions service in England and the learning and skills councils were established in part to tackle such issues.

As a result of those diminished childhoods, too many of our citizens end up without work or with poor job opportunities. They often have poor skills and are on low pay. That cycle ends with many people becoming impoverished in old age and receiving poor pension entitlements. The challenge for those of us interested in a modern welfare state is a traditional one—how do we break the cycle of poverty and deprivation and try to move towards a cycle of achievement and opportunity for all our citizens? We have not entirely met that challenge, which still faces us, but we have made progress. I am proud of our record on children and the fact that total spending on financial support for children has gone up by over £10 billion in real terms since 1997. I am proud of the fact that, since 1997, families with children will on average be £1,300 a year better off, while the poorest fifth will on average be £3,000 a year better off. It is notable that, in December 2004, nearly 20 million people, including 10 million children, benefited from the new tax credits. I accept that there have been problems with tax credits, but many people have benefited from them.

I noted carefully, as did the Secretary of State, the issues surrounding the overpayment of tax credits. The Department is not responsible for that, but we share concern about it. I shall investigate the adverse impact and interaction with other benefits that have been mentioned, as well as issues about capital that the hon. Members for Roxburgh and Berwickshire and for South-West Bedfordshire (Andrew Selous) raised. I accept that we need to look at that.

The child trust fund will make a meaningful difference to the savings environment in future generations by promoting positive attitudes towards savings. This is not an occasion to debate the Child Support Agency, but my right hon. Friend the Secretary of State has read carefully the excellent report from the Select Committee, to which we will respond in weeks. We are not happy with the performance of the CSA. Those children need support from both parents, wherever possible. We must make progress and we intend to do so. I have mentioned some of what we are doing for children. I cannot deal with the subject holistically as that would mean speaking more about education.

As regards people of working age, we are again proud of our record. Unemployment is at a 30-year low. The number of people in work is up by 2 million since 1997. There are more than 28.5 million people in work, the highest number ever. Compared with the G8 or the European Union, our employment rate of nearly 75 per cent. is almost at the top of the international league table. Iceland is top at 80 per cent. I do not know whether the Secretary of State has visited Iceland—I refer to the country, not the superstore—but our ambition now is an employment rate of 80 per cent.

Opportunities for people with disabilities will be greatly increased by the measures in the Disability Discrimination Act 1995. That is very relevant to our employment ambitions. By focusing on what people can do rather than on what they cannot do, we are determined to help the many who are currently on incapacity benefit and want to return to work to do so. We are doing that through our pathways to work and new deal programmes. I was pleased to hear the hon. Member for South-West Bedfordshire comment favourably on aspects of our policy in this regard. It is a challenge for all of us to recognise that, although there is much discussion of the appropriate retirement age, too many of our citizens are effectively retired in their 50s, rather than their 60s.

Photo of Mr David Willetts

Mr David Willetts (Shadow Secretary of State for Work & Pensions & Welfare Reform, Economic Affairs; Havant, Conservative)

The Minister referred to the Government's target of 80 per cent. employment in the document which, we discovered today, the Secretary of State wrote. Will he explain to the House how that target was reached? Will he confirm that it is an extrapolation of a long-established trend?

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

It is certainly an extrapolation in the sense that we are doing so well in tackling unemployment and raising the employment rate. We want—I am trying to think of a phrase that might sum it up—we want to go forward, not back, and we intend to go forward. [Interruption.] I thought that was pretty original. If the hon. Gentleman calls that an extrapolation, fine.

The new deal has been a tremendous success, with more than 1.2 million people helped into work through that programme. Sadly, Opposition Members want to scrap that policy. Since 1997, long-term youth unemployment has fallen by two fifths. The new deal for young people has helped more than half a million young people into jobs. We are engaged in making work possible, making work pay through tax credits and the minimum wage, and making work skilled. That is the challenge for us.

Over the long term, the more successful we are in our policies for children and people in work, the more successful we will be in overcoming pensioner poverty. As the Secretary of State said, the best pension policy of all is a job. For the current group of pensioners, the pension credit is a success. It now reaches 3.2 million people and, as has been noted, two thirds of those people are women, partly because they live longer, partly because they do not have full national insurance contribution records—hence the important debate about the future of state pensions—and because in their careers many men have been nowhere near a decent works or occupational pension. The Opposition parties criticise us for using pension credit because it is means-tested. As we have said before, in the short to medium term, it plays a vital role in tackling pensioner poverty. Since 1997, our policies have lifted 1.8 million pensioners out of absolute poverty. Now, through pension credit, 2.4 million people in almost 2 million households are receiving more money than before.

As a result of the measures that we have introduced since 1997, an extra £10 billion will be spent on pensioners in 2005–06. Almost half that extra spending—about £5 billion—is going to the poorest third of pensioners. As we have said, we think that 80 per cent. of those entitled to the guarantee level are claiming, and 90 per cent. of the poorest women are doing so. Many people are £36 a week or more better off as a result of our policies.

Photo of Professor Steve Webb

Professor Steve Webb (Shadow Secretary of State for Work and Pensions, Work & Pensions; Northavon, Liberal Democrat)

If the Minister can quote guarantee credit take-up figures, he must be able to quote savings credit take-up figures. What is that take-up rate?

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I cannot quote those figures off the top of my head. If we have them, I shall write to the hon. Gentleman. We were uncertain whether he had asked the question and whether I had replied, but we will look at the matter to see if we can be helpful.

Photo of Dr Lynne Jones

Dr Lynne Jones (Birmingham, Selly Oak, Labour)

I have just been at a meeting of the all-party group on pensioner incomes. We were given a presentation by the Pensions Policy Institute, which put the figure on take-up of savings credit at 50 per cent.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I cannot say whether that is accurate. We will look at the figures. Until I noticed who my hon. Friend was, I was hoping that she might be rather pleased that, among her poorer constituents, and women in particular, pension credit was doing well. I am sure that she is pleased about that.

Photo of Dr Lynne Jones

Dr Lynne Jones (Birmingham, Selly Oak, Labour)

I would prefer it if we had a citizen's pension ensuring that all pensioners got at least £105 a week.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

On the state second pension—I often feel that we do not talk enough about this—we believe that designing a policy that helps low earners means that 5.8 million people are now building up a state second pension. Particularly notable is the fact that 1.9 million carers are now building an entitlement to a state second pension.

The shadow Secretary of State, whom we wish a long career in that role, is very interested in deemed buy-back, which was a feature of our warm-up debate in Westminster Hall, which had a slightly larger crowd than we have now at some stages, on the APW case. We have spoken about the issue, and although I am a master of detail, it may be that there are some other things about which I could write to him. We think that 800 individuals have so far been offered deemed buy-back. We think that only eight individuals have so far taken up the offer. The majority of the rest are still considering their position. I am taking a good deal of interest in the matter so that we can facilitate movement in this area.

The shadow Secretary of State also asked me about the total numbers that we had unearthed, to put it rather badly, in our research exercise on the financial assistance scheme. The list that we published today indicates that there are at least 380 defined benefit pension schemes whose members should potentially be eligible for financial assistance. There are about 70,000 non-pensioner members in the schemes. The figure is therefore more or less consistent with the estimate that we published last June, suggesting that there were about 85,000 non-pensioner members in affected schemes, about 65,000 of whom were facing significant losses. It looks like our early estimates were broadly correct.

I have talked about today's pensioners, but in terms of today's work force and tomorrow's pensioners, the Pensions Act 2004 is of enormous significance. The new regulator will have sharper teeth than the old regulatory framework, which is a significant development. The Pension Protection Fund is a landmark reform offering security and helping to build confidence for some 10 million pension scheme members in defined benefit or what are sometimes known as final salary schemes. That is a major new part of our welfare state architecture, and one day we will look back with some pride on legislating for it.

Meanwhile, as we know, for groups of workers already in very debilitating circumstances who could not be helped by the PPF because it was not yet there, we have the financial assistance scheme, which has excited considerable interest today. The scheme is important. We will provide those people who are around pension age—some of them are coming up to it and some of them have already passed it—with a core pension entitlement of some 80 per cent. I hope that that meets my pledge to this House that the help for those groups would be "significant" or "substantial". I hope that we have kept our word, and I am sure that we have. The possibility of reviewing the finances in the short to medium term is a further step in building confidence.

In his winding-up speech, Mr. Waterson referred to the important APW case and seemed to imply that support from the financial assistance scheme or the Pension Protection Fund should be generally available to solvent employers. I wonder whether that is a serious suggestion—I am not making a party political point—and whether it is a serious spending pledge on the financial assistance scheme.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I do not see how one can say to a solvent company, "We recognise that you have got a pension problem; the taxpayer will write you a cheque." I put it to the hon. Gentleman that hundreds of companies and pension schemes would knock on our door and say, "The company is doing all right. We are solvent, but we have a black hole in our pension scheme, and we understand that the financial assistance scheme can bail us out." That would be nonsense and a slippery slope to the nationalisation of all financial risk. It is simply not credible.

Moving on—[Interruption.] It is not for the Liberal Democrats to suggest what the Conservative party is suggesting. Perhaps the Conservative party will suggest what it is suggesting.

Photo of Mr Nigel Waterson

Mr Nigel Waterson (Shadow Minister, Economic Affairs; Eastbourne, Conservative)

I am grateful to the Minister for finally letting me intervene. We have not made a spending pledge, because we want to go down the path of using unclaimed assets, which have nothing to do with the taxpayer. My point is simple: why are the Government automatically excluding all solvent wind-ups? APW, which we heard about this morning, is the perfect example, and it is automatically excluded from any help under the FAS. The workers will be just as badly off regardless of whether the wind-up is solvent or insolvent.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I am trying to be fair, and that question and the workers' sense of injustice are both perfectly reasonable. However, those of us who frame social policy and who examine the financial implications and perverse consequences of taking the wrong decision must be tough-minded. Where an employer is solvent, they should take responsibility for supporting the pension scheme. [Interruption.] Someone is mumbling, but I will not be distracted unless they care to stand up.

I have outlined our record on children, jobs and pensioners and discussed the cycle of opportunity and advantage that we should create. I contrast that record with the Conservative position. We are proud of our record on employment, but many people remember the Conservative party as the party of mass unemployment. We will listen carefully and critically to its proposals on council tax, but many people remember it as the party of the poll tax, for which its current leader took special responsibility. [Interruption.] The number of Conservative Front Benchers has expanded, which is good because they need some support.

When the Tories discuss pensioner poverty, we remember that, in 1997, the previous Government expected a single pensioner on income support to survive on £69 a week. From April, we will provide £109 a week, which is an increase of £40. That is the difference between talk and action. When we consider the Conservatives' spending pledges of—is it £35 billion?—and hear about their spending cuts, we will contrast the figures with their desire to tell the electorate that they want to spend more. We shall question time and again the sense of abolishing the new deal, which has given so much hope to our young people and the long-term unemployed and been so successful in enabling lone parents to get back into the labour market.

We shall also question the dogma that the Jobcentre Plus network should be privatised. I shall continue to remind the shadow Secretary of State and the shadow Minister that they declined to give a Second Reading to the Pensions Bill, which introduced the Pension Protection Fund.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I wanted to say a few kind words about the Liberals, but I am happy to give way.

Photo of Mr Andrew Selous

Mr Andrew Selous (Assistant Chief Whip, Whips; South West Bedfordshire, Conservative)

Will the Minister respond to my point about the new deal for young people and the new deal 25-plus? Is he proud of that fact that only 12 per cent. of those who start on the new deal 25-plus get into unsubsidised employment? That is not a good record. There could be a better way in which to spend the money.

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

I do not know that statistic. My colleagues will consider the matter. However, I am pleased that young people, who were thrown into the dustbin of economic change in the past, now have different opportunities. We all know that the first step into training or the labour market often enables people to take more decisive steps.

Like the Tories, the Liberal Democrats have some reasonable ideas about pension reform in the state sector, and we can compare and contrast the different approaches to tackling pensioner poverty. However, I find it difficult to take the way in which Mr. Webb always talks down pension credit. Even when we say, with some pride but no complacency, that we are pleased that 80 per cent. of the poorest pensioners now get pension credit, the response is, "It's only 80 per cent. What about the 20 per cent.?" Hon. Members who talk down pension credit and suggest that people have to fill in the long form, that it stigmatises and is no different from the means tests of old, are part of the problem. They put people off claiming pension credit and are therefore not part of the solution. I want them to be part of the solution because although more than 3 million elderly people receive pension credit and know the answer to Liberal Democrat cynicism, I want the figure to be far higher.

What about the position of the hon. Member for Northavon on the financial assistance scheme? He has always talked down the possibility of such a scheme and been cynical about it. He has told groups of workers and trade unions not to listen to the Government because we would never do anything about a financial assistance scheme. Let me give chapter and verse. In January 2004, in Work and Pensions questions, he asked:

"In fact, is it not true that the Government will do precisely nothing and take many months to do it? Those workers are hoping for a last-minute announcement that the Government will come up with something for them. Would it not have been more honest and generated less false hope to have told them that at the start?"—[Official Report, 12 January 2004; Vol. 416 c. 513.]

He was wrong and we were right in our determination to develop a financial assistance scheme. As soon as possible, it will give 80 per cent. of core pension rights to British workers who have worked hard and, through no fault of theirs, find that their pension hopes have been dashed. We are giving not false hope but real hope to that group. It is time that the Liberal Democrats stopped being cynical and recognised that the scheme is a major advance.

Photo of Mr Peter Bottomley

Mr Peter Bottomley (Worthing West, Conservative)

Does the Minister propose to end his speech without mentioning the British pensioners overseas, who get upratings in the United States but not in Canada or the other Dominions?

Photo of Mr Malcolm Wicks

Mr Malcolm Wicks (Minister for pensions, Department for Work and Pensions; Croydon North, Labour)

Welcome. Is it still cold outside? I am a little old-fashioned—I am replying to the debate. If the hon. Gentleman had made a proper contribution, I could have responded. A court case is coming up soon on the matter and we will examine the judgment. I am sorry—I did not mean to be churlish to my old friend, but we would have welcomed his presence in the debate because it was slightly lonely in here for an hour or so.

This Labour Government are proud of our record on tackling child poverty, seeking to abolish fuel poverty and helping to eradicate pensioner hardship. However, we are not complacent and we are eager to do more. We want to give proper status and respect to those with disabilities and those who are carers. We want to increase employment opportunities for all our citizens and further to support our children and our elderly people. Yes, this is a case of "forward, not back"—I use the phrase again, as it seems to go down well. The Labour Government are proving that we can combine economic competence with social justice. What we are about is a Britain that works and a Britain that cares.

Question put and agreed to.

Resolved,

That the draft Social Security Benefits Up-rating Order 2005, which was laid before this House on 1st February, be approved.