New Clause 2
Pensions Bill
4:00 pm
Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)
I beg to move, That the clause be read a Second time.
Welcome back to the Chair, Mr. Taylor. We come to one of the big issues in our deliberations. I make no apology for going through the new clause in some detail, because it deals with a crucial issue for the Committee and for the legislation before us. It replaces the possibility of oral evidence, so I am going to be the Punch and Judy man, giving the Pensions Policy Institute’s views on means testing and the Government’s views on means testing, in a kind of seaside show. We could have had the real thing had the Government taken a different view. However, we have the promise of another seminar, on 20 February, and Members will be keen to put that date in their diary—while tickets last. I, personally, am really looking forward to it.
Means-testing matters because it is on the increase. We are discussing a system under which we have large-scale means-testing, despite the fact that the current Chancellor said when Labour was in opposition that it was his party’s aim to reduce means-testing. Almost 50 per cent. of people now retiring are means-tested. I am on common ground when I say that if we carry on as we are, the figure will rise to 70 or 75 per cent. by the middle of this century. There is a sort of consensus that that cannot be allowed to continue; it was very much a theme of the Turner report.
The Minister extolled the virtues of means-testing in a previous sitting, saying that it put money into people’s pockets and that it was therefore a good thing. However, it is a bad thing for all sorts of reasons. It does not necessarily provide help to those who need it most. For example, about 1.5 million people who are entitled to pension credit do not claim it, despite large expenditure on advertising campaigns, and indeed, the sterling efforts of the Pension Service. I have visited my local service, and it has pushed the boat out on home visits and so on. I am sure that that has happened throughout the country.
People do not claim pension credit for a number of reasons. They may think that it is all too complicated or intrusive, or that they could not possibly qualify. If one reads across to the means-tested benefit with the worst claim record, council tax benefit, elderly constituents of mine who own their own homes, so they are capital rich but cash poor, do not imagine for a moment that they could claim council tax benefit.
There is a problem because a large proportion of people who are entitled to means-tested benefits will never claim them. When pension credit was introduced, in a massive act of cynicism, the Treasury itself calculated that 1.4 million people would never claim it. The Treasury has a shrewd idea about the limits of means-tested benefits.
Means-testing also makes it difficult, if not impossible, for people and their financial advisers to predict whether it is worth their while saving for retirement. That is a key issue. There is much discussion, quite rightly, within and outside Government about the buzz phrase “financial accountability”. Everything is relative, I suppose, but one of the gloomier aspects of those seminars that seemed to stretch over last summer was the average person’s dismally low ability to think through their financial options, particularly on pensions. I do not have the survey with me, but a recent study showed that if anything, the problem is becoming worse among younger people. The new generation that is coming up ought to be worried because they will live longer and save less, but they have even less understanding of the system. Means-testing makes it difficult, because it is a disincentive to save. That is why we support measures that are part of a package to boost the basic state pension. We concluded before the last election—I do not want to get into this debate again—that the only reliable way to get help to the poorest pensioners was to do just that.