Child Support, Pensions and Social Security Bill
Lord Goodhart (Liberal Democrat)
My Lords, this amendment is what I might describe as our flagship amendment. It is less technical and covers a broader field than Amendments Nos. 66, 67 and 69. Its purpose is to increase the basic state pension for those over 75, with a further increase for those over 80.
The amounts of the further age addition are not specified in the amendment because they need to be varied year by year. My party will announce our own proposals regarding those amounts when our policy paper on ageing--it includes our policy on pensions--is published later this summer.
We believe that these increases should be targeted on elderly pensioners. The elderly have more needs. They need more heating. They need more warmer clothes. They may have to buy more expensive food in local shops because they are unable to travel to supermarkets and return with a heavy load of shopping.
Many present pensioners over the age of 75 do not have occupational pensions as good as those of younger pensioners. Moreover, occupational pensions are always likely to mean that younger pensioners will be better off than older pensioners, particularly in cases where the pensions are based on final salaries and those salaries have increased as a result of the general increase in earnings.
We recognise that there are demographic reasons which make it excessively expensive to go back to restoring the earnings link for all state pensions. But an increase in pensions for those aged 75, and 80 or more, would be much cheaper and would benefit directly those who suffered most from the absence of the earnings link.
The noble Baroness has said that the best way of helping the poorest pensioners is through the minimum income guarantee. She said in Committee, and will no doubt say again, that the income differences within age cohorts are much greater than the differences between them. That is obviously true, and I have never sought to deny it. That argument strongly favours a minimum income guarantee. But its logical conclusion is that the state pension should be abolished as a universal benefit for all contributors and the money should be diverted into a still higher MIG.
The real question is: what is the right balance between flat-rate universal pension benefits and income-related pension benefits? We believe that the Government have gone too far--or certainly, if matters continue, will soon have gone too far--in the direction of income-related pensions.
It is a fact that workers have been led to believe, and many no doubt still believe, that the national insurance contributions they pay will be used to pay for their own pensions. That, of course, is not true. Current workers are paying for their parents' pensions and, in due course, it is their children who will pay for their pensions. But whether or not that is the case, they believe--I think rightly--that contributions that they have paid give them a right to be treated fairly: that there is the inter-generational obligation of which the noble Baroness, Lady Turner of Camden, spoke in the previous debate.
If pensioners who are not entitled to MIG see the MIG climbing more and more above the basic pension that they themselves are receiving, they will feel cheated out of what they have earned from their own contributions, and will rebel. No government will get support for MIG if pensioners just above the MIG level feel that they are being treated unfairly. That is what the Government need to realise.
With hindsight, it might have been better to have a system in which pensions were paid for out of taxes and the National Health Service was paid for out of national insurance contributions. Indeed, it probably would have been better. But of course, it is far too late to think of that; it would be impossible to reach that position now.
I believe that our proposal for a general increase for older pensioners will be seen as a fair alternative to full index-linking. But if nothing is done, pensioner anger, shown in the reaction to last year's 75p increase will grow, and grow further.
There is another factor. The state second pension will be earnings-linked up to state pension age, but RPI-linked thereafter for any particular pensioner. The state second pension will be flat-rate--partially so at stage 1 and wholly so at stage 2, when it will be based for everyone on a notional income of £9,500 or whatever is the uprated equivalent. It is an inevitable consequence, assuming that earnings continue to rise faster than prices, that S2P will always be smaller for older pensioners than for younger ones, unlike the basic pension, which is the same for everyone and indeed has been increased by the immensely generous sum of 25p a week for those over 80. The effect of that will be that it will also force many pensioners into reliance on the minimum income guarantee late in their life, after they have been in receipt of pensions for perhaps 10 or 15 years. I believe that the fact that older pensioners will receive less than younger ones when both are on a flat-rate pension, and the fact that many pensioners, as they reach the age of 75 or 80, will find themselves having to rely on MIG, will make S2P completely unacceptable.
The noble Baroness may ask, therefore, why we do not link the age addition to S2P rather than the basic pension. That would certainly be cheaper because it would exclude higher earners who opt out of S2P but who are still entitled to the basic pension. That is, indeed, a fair point. If the noble Baroness were to offer to add age additions to S2P, I should promise on the spot to accept that as a fair compromise. However, I doubt that the noble Baroness will do so.
We believe that Amendment No. 70 proposes the minimum amount which is essential if public support for the present pension system is to be maintained. I beg to move.