I beg to move,
That this House
condemns the Government's extensive delay in appointing a new Minister for Pensions at a time of pensions crisis;
further condemns the Government for pursuing a strategy of mass means testing of pensioners;
notes that the Department for Work and Pensions will have satisfied its PSA target even if a million pensioners are still missing out on their entitlement to Pension Credit by 2006;
further notes that the Pension Credit will be run on a computer system described by the previous Secretary of State as 'very decrepit';
believes that the Pensions Green Paper was an inadequate response to a range of pensions problems, including the large number of people of working age who are facing financial insecurity in retirement, particularly many women;
further notes the continued insecurity of many members of defined benefit pension schemes and the lack of protection for working age scheme members when schemes are wound up;
calls on the Government to address these issues as a matter of urgency;
and further calls on the Government urgently to simplify the state pension system and to ensure that the basic state pension provides a firm foundation for income in retirement, with particular reference to the needs of older pensioners.
There are those who might feel that our motion today in unduly critical of the Government. Therefore, in a constructive spirit—the way in which we always approach these issues—I want to offer an olive branch to the Government, and to say that, given that the Prime Minister has clearly been seeking unsuccessfully for the last eight weeks to find a suitable candidate for Minister for Pensions, I am today prepared to step into the breach. I should say that I have not yet cleared that with my right hon. Friend Mr. Kennedy, but we shall have negotiations later on.
Someone needs to get a grip on pensions. The word "crisis" appears in the motion for almost every Opposition day debate, but in few cases can there be a better fit than the pensions crisis. The House need not take my word for this. The chairman of the occupational pensions advisory service—an august body—Malcolm McLean OBE said only last month:
"Although the Government...seem to want to play it down, there is from my and an OPAS perspective, something of a crisis in pensions at the moment."
He continues with a whole litany, of which this is an excerpt:
"The pensions system we have is ridiculously complicated"
—it is certainly that—
"and not easily understood by the majority of the population. Trust in pensions has been eroded| employers are closing down good . . . schemes . . . and replacing them with often inferior . . . schemes . . . Is it any wonder, therefore, that some people might be starting to lose heart?"
That is the backdrop for this debate—and it makes it all the more lamentable that the Government have failed, in eight weeks, to appoint a Minister to take responsibility for pensions.
Does the absence of any reference in the motion to the massive tax on pensions, along with the fact that the hon. Gentleman wants to be Pensions Minister in this miserable Government—he is backed in that aim by his leader, who obviously wants to remove him from his own shadow Administration—constitute proof that the Liberal Democrats support the idea of taxing pension funds to death?
I am intrigued by the suggestion that I have gone native before I have gone over.
If the right hon. Gentleman checks the record I think he will find that both his party and mine voted against the dividend tax credit and have opposed it. I think he will also find that neither his manifesto nor mine pledged to find the £5 billion to replace it. I felt—unlike certain parties—that to oppose something but not to say that we would undo it would not be helpful to this debate.
A Green Paper on pensions was published shortly before Christmas. It assumed that the state pension scheme was sorted out, and tried to bolt on to it a new private pension system. That is like trying to fit together two pieces from different jigsaw puzzles: no matter how hard you try, without the right basis, a fit will never be possible. The problem is that it is not just the private pension regime that is flawed; the state pension regime is fundamentally flawed.
The basic state pension is woefully inadequate. Its value is just three quarters of the level of the means test. Who would have thought that the basic pension described by the Government as the foundation of income in old age would be allowed to sink so low? No one would accept a building constructed on such an insecure foundation.
Women are hit particularly hard. A typical man with a basic pension under the state earnings-related pension scheme receives £92, while a typical woman receives £66. One might imagine that this is some relic of previous generations, but in fact the gap has not closed one jot in a decade. Successive Governments have failed to address trends that are long-term features of the pension system. The Green Paper contains a whole chapter on the position of women and a raft of descriptions of the problem, but the Government have not advanced one practical solution.
Things need not be like this. The basic pension could be the foundation of income in old age, if the Department for Work and Pensions took a lead from the Chancellor. As I often say, the Chancellor has got it exactly right. He has said that poor pensioners tend to be old pensioners, and he gives free television licences not to all pensioners but to the over-75s. In his most recent Budget, deciding that he wanted to help poor pensioners, what did he do? Did he put extra money into the means test? No, he increased the winter fuel payment. For whom? For the over-80s.
Why is it that, although the Chancellor has recognised that old pensioners are poor and is helping them, whenever we say as much to the Department for Work and Pensions it says, "That wouldn't be well targeted." They cannot both be right. Perhaps the Minister will tell us whether she disagrees with the Chancellor.
Can Members imagine how much could have been spent on pensions for the over-75s if the money going into the mass means test of pension credit had been devoted to them? According to a written answer, had the Government adopted the pensions rather than the mass means-testing route, not just a few pence, not just a few pounds, but £19 a week could have been spent on those pensions for the over-75s. It is the pensions route that we would have adopted, and that, I believe, is what pensioners want: a decent pension, not a mass means test.
It is not just the basic pension that is inadequate. The basic pension was so useless that the Government invented a second pension, which is useless as well. It is called, imaginatively, the state second pension, and it takes 40 years to be completely useless, because the first people to accrue a full pension under it have just left university. If they work for 40 years and receive the basic pension and the state second pension at the full rate, they will be so poor that they will need a means test. That is how good the state second pension really is. It takes 40 years to build up to an amount of money that does not lift people above the poverty line. Can that be the ambition of the Government for generations to come?
Not only do we have a useless basic pension and a useless second pension, but the Government have invented a third, called the pension credit, which is due to be introduced in October to make up for the fact that the first two are useless. However, that will be even worse.
The Government have had some problems with their credits recently. The computers have not worked, but help is at hand. The new pension credit scheme will be introduced not on a new computer—so we can relax—but on the existing computer. The only problem is that the previous Secretary of State described, in a rather appropriate way given the nature of the benefit, the computer that will be used in October as "very decrepit". If that does not fill hon. Members' hearts with horror in the light of the credit system, I do not know what will. That computer will have to bear the burden of millions of pension credit payments. I suggest to hon. Members that they get those hotline numbers ready—they will be needing them.
It is not just administrative chaos that we shall face. The Public Accounts Committee has said:
"we have repeatedly expressed concerns about the Department's computer systems and the impact of their weakness on customer service".
This is not techie stuff. It is about real people who need real money and who may not get it because the computer is too old to do the job properly.
The system is not merely going to be run on a dodgy old computer, it is also extraordinarily complex. The House will be aware—I apologise for going over ground with which hon. Members will be familiar—that the new pension credit has two components: a guarantee credit and a savings credit. Obviously, pensioners will be looking at that and calculating their entitlement to savings credit, but they will need to be aware of the full complexity of it. So here we go!
The savings credit is available to pensioners, but not to women aged 60 to 64; although they are pensioners, they can get the guarantee credit but not the savings credit. Therefore, there are two bits to the scheme: one applies to some pensioners but not all. The reward one gets for saving is 60p in the pound for any private pension above the basic pension level but below the income support level—except that that will be called the guarantee credit level, except that, if one does not have a full basic pension, part of one's private pension has to fill up to the basic pension before the 60p in the pound award cuts in, and above income support levels the 40p in the pound taper cuts in until one ends up with zero. [Hon. Members: "Encore."] That was the shortened version. When hon. Members read the transcript, they will find that that was a succinct summary of how the system will work.
The serious point is: who will claim the thing? Who will know, if they have not previously been entitled, that they may be entitled? We can relax, because the Government will write to everyone. The Government will write to all pensioners not currently on income support—except that, because the system is being introduced in October they do not have time to write to everyone, so they will write to one in five pensioners randomly. Presumably, one pensioner will have the letter, and they may understand it and apply. The next-door neighbour, I assume, unless particular villages will get one and the next village will not, will not have the letter, so they will not hear of the thing, unless they read the newspapers.
However, it is all right because the system is being introduced in October and people have a year to claim. If the House reflects on that for a moment, hon. Members will realise that people have a whole year to claim the thing because it is so complicated the Government do not think they can possibly get everyone to claim it on the day they are entitled to it. This is money for poor people, yet the Government have to give them a year to claim it because they know they cannot possibly deliver it on time. What are those relatively poor and needy pensioners who are the priority for the Government supposed to do for the year while they wait for their letter, because the letters may not be delivered until next June? That is the system on which the Government pin the centrepiece of their attack on pensioner poverty.
The Department for Work and Pensions has been set a target. It has one of those public service agreements, and a sort of report card. I do not know who it hands it in to and I do not know what happens if it fails. I do not know whether the Government will say, "We will not let you pay any pensions this week because you have failed." It will just carry on, I think. Perhaps the Government will not appoint a Minister for Pensions, and will make the other Ministers do the work.
If the Department fails its public service agreements, what happens? It has been set an objective. By 2006, 3 million pensioner households have to get the pension credit. That sounds pretty good. By 2004, the Government think that 2.8 million could have it. That does not sound too bad but they think that 3.8 million are entitled, so the Government will get a tick in the box, a "Well done" and a pat on the head from someone for missing 1 million pensioners. That will be a success. That is the extent of the Government's ambition for their strategy.
When we point that out to the Government, they say, "Yes, but you don't want to target poor pensioners." Well, excuse me, but who are these 1 million people who are entitled to the MIG or the savings credit? Are they the rich? The poor will miss out because the Government have designed a scheme so complicated that many people will not claim—but everybody claims their pension.
Like all of us, I am listening to the hon. Gentleman's speech with a great deal of interest. Does he agree that it is very worrying that the take-up levels for the MIG, which were sneaked out in an answer on the last day before the Whitsun recess, show that there has been no improvement in take-up over income support levels? So the Government's claims that things are going to get better are not borne out by last year's facts.
The hon. Gentleman is right. There is a myth that circulates in government, and as with many such myths, some of those who believe them are decent people—they are simply misguided. The point is that such non-take-up levels are inherent in mass means-testing. Simply providing a few more leaflets, a few more phone calls or a few more newspaper adverts will not sort the problem out. Fiendishly complicated schemes that are constantly changing and do not meet people's existing needs will always have the property to which the hon. Gentleman refers.
Does the hon. Gentleman agree that the situation is getting worse? Some 600,000 did not claim what they were entitled to in 1997. That figure has risen to 700,000, and this year it is predicted that it will rise to 1.6 million. Even by 2006, the figure will still be 1 million. Is that not the scale of the problem?
The hon. Gentleman is right to point out that the scale of the problem is simply vast. The fact that 1 million people who are by definition poorer pensioners are not getting what they are entitled to cannot be acceptable.
It is not just the state scheme that—through an inadequate basic pension, a useless second pension and hopeless means-testing to top up the two worthless pensions—is failing. The private sector pension regime is also failing.
Is it not disingenuous to describe the pension credit as a means-tested scheme, thereby associating it with schemes from the 1930s, for example, given that any test of resources will not have to be made weekly, as the hon. Gentleman knows? Will he tell the House how often any assessment will have to take place?
The key question is how the system is perceived by those for whom it is designed. If pensioners were given a choice between a system in which they have to give all the information about their incomes and personal circumstances and report substantive changes in those circumstances, and a simple system involving a higher basic pension for older pensioners, I have no doubt which they would prefer.
Given that the hon. Gentleman is reluctant to answer the question asked by my hon. Friend Kevin Brennan, I shall remind him that the answer is once every five years.
I think the Minister will find that although that is the theory, the practice will be very different. For example, let us suppose that a pensioner couple are in receipt of the pension credit and one of them dies. Will the surviving partner have to wait for five years for reassessment? No, they will pick up the phone and report the change. Let me put another point to the Minister. If such people are to be reassessed only every five years, the Department will have to make an assumption about what is happening to their income during each of those five years. Let us consider the example of someone who has a company pension. Will the Department assume that that pension goes up in line with inflation each year? If the Department does, as I assume it will, someone who has a company pension that is not uprated in line with inflation will not get enough benefit. Will they have to ring the Department—assuming that they have worked out what is happening—and say, "You're not paying me enough because you haven't compensated me for the non-indexation of my company pension"? This is the new streamlined system that we are looking forward to. I hope that the Minister will clarify this question, because remarkably, I have yet to receive a straight answer to it.
As I said, it is not just the state system that needs attention; the private sector needs urgent—
I had better not, as there is an eight-minute limit on all contributions other than those from Front Benchers. I hope the hon. Gentleman will forgive me.
The Government were going to ride to the rescue of the private sector with the wonderful stakeholder pension, which was going to reach the parts that other pension schemes cannot reach. What has happened? Stakeholder sales are down by 22 per cent. on the previous year. Half of all sales in the first quarter of this year were not new; they were money being shuffled from one pot into another. The Minister doubtless has some wonderful figures on the billions going in, but what she may not mention is that a lot of it was already in pension schemes; it is simply under a different label. Nine out of 10 stakeholder schemes designated by employers have no money in them. I am not an expert on pensions, but I should have thought that having money in a pension scheme was a prerequisite of a good scheme, on the whole.
"are not getting to the people who need them most. About half of all sales were transfers . . . the rest were sold to wealthier people".
Those whom the ABI calls "wealthier people" are seriously wealthier people.
This does not apply to stakeholder pensions alone: the bedrock of pension provision has been the final salary company pension. Final salary schemes are disappearing so fast that there may be none left by the time the Government appoint a pensions Minister. Who knows? Nearly half of all companies offering a final salary scheme closed it to new members last year, and many more are thinking about doing so next year.
Many people have real anxieties about the threat to their company pensions. They have read stories in the papers, admittedly quite limited, about companies going bankrupt without there being enough money in the pension scheme to pay all the pensions. The current combined pension deficit of the top 100 schemes is £65 billion, which makes us enormously vulnerable. If one of those large firms were to go to the wall, hundreds of thousands of people could find the pensions that they have worked and saved for wiped out—and they could do nothing about it. That is why the issue is so urgent, and why the Government's delay is so culpable. People are really anxious, and the Government have failed to deliver.
The hon. Gentleman makes a compelling argument. The problem with the closure of final salary schemes and with what is happening in the public sector is often not talked about—the legacy of early retirement. The Conservative party's answer was always to get people off the books and force them—I use the term intentionally—into early retirement. We now have to pick up the pieces from that legacy. If people had worked to the normal retirement age, many of the problems in the public and private sector would not have come home to roost. Does the hon. Gentleman agree?
The hon. Gentleman is right to highlight that as one of several factors that have contributed to the deficits, including the plunging stock market, greater longevity and the £5 billion change to advance corporation tax. A raft of factors has affected the deficit, of which the hon. Gentleman's point is certainly one. The critical point is that with substantial deficits, if a scheme goes belly up, the retired members get the first crack and the people who have worked all their lives in the scheme—and are perhaps within a year of retirement age—receive next to nothing.
Pensions issues are part of a major debate and I shall make a couple of brief points. We must ensure that people are better protected. Mr. Field proposes to introduce a Bill that attempts to achieve that. There are no easy gains. If the pot of money is inadequate, giving more to one group means giving less to another. I have spoken to retired occupational pensioners who are unsurprisingly nervous about the whole agenda. We need some way of balancing the elements more fairly than we do now, which might require some cap on the entitlements of retired pensioners, some multiple for pension protection and more for those who are nearly at pension age and, frankly, cannot do anything about the problem. That is the avenue down which we should be going, and although the Government may have some sympathy with that proposition, they have made no proposals. They have to get on with it.
It has been suggested in the press recently that the Government want to introduce insurance for company pensions. That is an interesting idea, to which we should respond constructively. The idea is that, just as one insures a car against an accident, one insures a company pension in case the company goes bankrupt. The problem is that the Government have, hitherto, refused to say that they would stand behind such a scheme. Unless they do, we could end up with the insurance scheme going bankrupt as well. That would be the cruellest irony of all: to charge people insurance on their pensions, and then, when the company goes bankrupt, not to pay them because the insurance company cannot cope with the scale of the problem.
If and when the Government establish such an insurance scheme—I hope that it will be soon—and if the scheme incorporates borrowing powers from the Treasury, there is no reason why it would go under. The unemployment insurance scheme of the 1930s never went under. Does the hon. Gentleman agree that one good use of the unclaimed, as opposed to the orphan, assets would be to support people who have already lost or partially lost their pensions? The sum of more than £13 billion could be used to make good their pension losses.
As ever, the right hon. Gentleman makes a creative contribution to the debate, which should help to put it at the top of the agenda. There was obviously a big "if" in his question—a scheme would work only if it had borrowing rights against the Treasury. However, the Treasury has hitherto said, in writing, that it will not stand behind such a scheme. Ministerial spokespersons have been quoted in the press recently as saying that that is central to their plans. I hope that instead of reading that in the press we will hear it from the Minister. Where has the Department got to, and will the Treasury stand behind such a scheme? If so, we would look at it constructively. If not, it could be a delusion.
I hope that the hon. Gentleman will forgive me, but I am about to complete my remarks.
We have only scraped the surface of the vast array of pension problems today, but we wanted to put the issue on the agenda. In my absence, my hon. Friends demanded that we include it as one of our topics today, because it affects so many of our constituents. Some 10 million retired pensioners, and 20 million workers, feel increasingly insecure about their pensions. It is time that the issue was top not only of the Liberal Democrats' agenda, but of the Government's agenda.
I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
"recognises that the UK has the largest stock of private pension saving in Europe and a tradition of pension partnership at the workplace which leaves it well placed to rise to the challenge of longer lives;
welcomes the conclusion of the Work and Pensions Committee that the UK pensions system is "basically sound";
further recognises that there are pressures on pension systems at the moment and supports the Government's proposals, as outlined in the recent Green Paper, to renew the UK pensions partnership, to introduce further measures to bolster the UK system which better focus regulation on contemporary anxieties, and to increase security without increasing the overall costs of running pensions;
strongly endorses the Work and Pensions Committee's judgement that "current policies have been successful in reducing pensioner poverty";
further recognises that this is of particular benefit to women;
welcomes the state second pension which will provide lower earners, disabled people and carers, some 18 million people most of whom are women, with a better pension;
believes that good pensions policy must be built on a foundation of the basic state pension, which has increased in real terms for three years in a row;
and looks forward to the Pension Credit reform in October which will ensure that those with modest savings are properly rewarded for the first time."
I very much welcome the opportunity that today's debate gives the House to discuss pensions. We cannot discuss the issue too often—I agree with Mr. Webb about that. It is an issue of vital concern to all our constituents of all ages.
We have had many statements, new legislation, Opposition debates and many debates in Committee on the issue. No doubt we will have more as this Parliament progresses.
I wish very gently to take issue with some of the language used by the hon. Member for Northavon. I understand that in some cases he was telling jokes, but I take issue with the tone of his remarks, of the motion and of his press release. The all-party Work and Pensions Committee recently had this to say in its serious report on the future of UK pensions:
"We agree that the use of the term crisis is unhelpful. Whilst not wishing to minimise the real anxieties about certain aspects of state and private provision, we feel that it is important to recognise that the system of pension provision in the UK as a whole is basically sound."
I very much agree with that conclusion.
I am grateful to the Minister for giving way because it allows me to put on the record the fact that my hon. Friends the Members for Sutton Coldfield (Mr. Mitchell) and for South-West Bedfordshire (Andrew Selous) and I voted for an amendment to that report—which was not agreed—to conclude that there is a pension crisis.
I do not assert that there are no challenges or problems facing pension provision in this country. That would be nonsense. Indeed, we would hardly have just conducted the biggest and most widespread consultation on the future of occupational pensions in 30 years if that were the case. But we work from the premise, as the Committee says, that the system is basically sound and must be made to work better and more effectively. So the Green Paper does not advocate starting with a blank sheet of paper and designing a system from scratch that is fundamentally different from the one we have now. Nor, to my knowledge, do Opposition parties suggest that we should do any such thing.
I make a plea to hon. Members to deal calmly and sensibly with the challenges that we face, so that we can get our pensions framework in a fit state to ensure stability in the future. That is what is needed above all. Pensions are a long-term business and the policy changes that we introduce now must be capable of lasting for years, not just satisfying the headline writers tomorrow, as the press releases from the hon. Member for Northavon are designed to do. Headlines only last for a day. The pension framework we choose must last for decades if it is to do its job.
When my right hon. Friend the Secretary of State for Work and Pensions made his statement to the House on the Green Paper, he identified three challenges that we have faced since coming to office in 1997: affordability, pensioner poverty and expectations. Rising longevity compounded by a trend towards early retirement has challenged the affordability of pension systems across the industrialised world.
However, the UK is in a stronger position to meet this demographic challenge than most other developed countries, not only because our dependency ratio is expected to increase by half as much as the European average, but because our system is much more affordable and we are concentrating on making it fairer.
Our commitment to alleviating pensioner poverty is vital, given the legacy that we inherited. The 18 Tory years that preceded this Government saw a vast widening in income disparity between the wealthiest and poorest of our pensioners. The income of the bottom fifth of pensioners in those years rose by 34 per cent., but that of the top fifth by 80 per cent. One in three of our pensioner population—that is, 3.5 million people—were living in poverty during those years.
That was not accidental, but the result of policy choices. The previous Tory Government cut the value of the basic state pension by £20 a week in real terms, slashed the value of SERPS not once but twice, and perpetrated the "horrors" of pension mis-selling—a phrase that is not mine but which was used by Mr. Willetts in a recent speech. It is an apt phrase for a fiasco that cost £13.5 billion, which still haunts the industry's reputation today. I therefore do not apologise for this Government targeting pensioner poverty. To accept the income distribution among pensioners left to us by the Opposition would have been absolutely wrong.
The other challenge may be characterised as the rising expectations of our citizens, as they reach an ever longer and healthier retirement, to continue with the lifestyles that they have forged. The Green Paper highlighted that perhaps three million such people are not saving enough for their retirement, and that many millions more may not be saving enough to provide the pensions that they want. Additionally, it drew attention to the pressure facing occupational schemes and the much-publicised spate of closures and changes in provision in the private pension sector.
During our Green Paper consultation, we held 35 events. About 2,000 people took part in them, and we have received more than 800 written responses. We are grateful to all the many groups who have shown the interest and taken the time to contribute. They include unions, employers, members of the public, actuary and consultancy firms, voluntary and consumer groups, the occasional political party think-tanks, financial institutions and representatives of industry bodies. All have played their part in helping us to build the long-term solutions that will enable people to work longer and save more for a prosperous retirement.
Will my hon. Friend say whether the list of respondents to the Green Paper included the author for a group called "No Turning Back" who said in 1993 that basic state pension provision should be a function of the private sector? The author was one Iain Duncan Smith—whatever became of him, and of that policy?
I am the wrong person to ask about what became of the policy. However, I shall ask Mr. Heald, who will speak for the Opposition, a question or two about that. To my knowledge, the "No Turning Back"group did not respond, although I stand to be corrected, given the volume of responses that we have received. If I am incorrect about that, I shall inform the House.
I am not personally a member of the "No Turning Back" group, but does the Minister agree that the gap between rich and poor pensioners has widened since 1997? The Pensions Policy Institute is an independent body, and it has produced a document called "The Pensions Landscape" that is highly thought of. On page 14, it states that the gap between rich and poor pensioners has widened: the income of the bottom 20 per cent. of single pensioners as a percentage of national average earnings is exactly the same now as in 1997, but the income of pensioners at the top of the scale has grown and the gap has therefore widened. Does the Minister accept that analysis?
As I have said, we are seeking to alleviate pensioner poverty. I do not agree that no progress has been made, as there has been a fall of 60 per cent. in absolute poverty among pensioners—not a claim that the Conservative party could have made when it was in power.
The House will want to know when the response to the Green Paper will be published. The best answer that I can give is that it will be published shortly. We will shortly come forward with our response. I hope that hon. Members appreciate the restrictions that exist on these matters. One other word might give a clue—we will respond soon.
The hon. Member for Northavon talked about pensioner poverty. Our first priority when we came to office in 1997 was to tackle pensioner poverty. We have done so by targeting increasing resources on pensioners and giving the poorest the most. As a result, pensioner households are, on average, £1,250 better off in real terms than they were in 1997, and the poorest third of pensioners are £1,600 a year better off. Absolute pensioner poverty is down by 60 per cent. We will spend an extra £8 billion a year on pensioners as a result of those measures.
There is more to do. I am the first to accept that, but we are making progress, and we intend to make more. The pension credit is one way in which we shall do so.
The Select Committee report, which I have already commended, said:
"We commend the Government on their commitment to tackle pensioner poverty and their achievement in reducing it on 3 of the 4 measures in the Annual Report but believe that there are still too many pensioner households in poverty and call on the Government to continue to increase their income in relative and absolute terms."
That point is similar to that made by the hon. Lady. We are committed to doing that, but the policy of both the Liberal Democrats and the Tories is to end the targeting of help on the poorest. Indeed, they would remove help from the poorest and instead distribute it to all on the basis of age. That would redistribute resources from some of the poorest pensioners to the better off. The hon. Member for Northavon admitted as much in the upratings debate on
In contrast to what the hon. Gentleman said about pension credit, it is our contention that it helps women and tackles poverty. We expect women to receive around two thirds of the spend on pension credit, and more than half the people entitled to it will be single women, two fifths of whom will be over 80. Pension credit helps women because, as the hon. Gentleman himself has said, many women pensioners are among the poorest. He must explain how removing an average of £400 a year from the poorest half of our pensioners will help to alleviate poverty and help women. He must explain how removing up to £1,000 a year from the poorest pensioners will do that. It simply will not.
The hon. Gentleman had some fun talking about computers, which he suggested were decrepit. It is, of course, true that my right hon. Friend the Secretary of State for Transport used that word; I do not dispute that. In due course, old and outdated systems will have to be replaced. The systems are old and outdated, but the fact is that they work. Every day, they pay the pensions and benefits of 3 million to 4 million people. The fact that they are old does not mean that they do not work. In due course, they will be replaced.
In the hon. Gentleman's press release, and in his speech, he said that applying for pension credit is fiendishly complicated. I know that he is a professor, but for most people, picking up the phone is pretty easy. In terms of applying for social security entitlements, picking up the phone, giving a few details, then receiving through the post a completed form that one need only sign and return is not bad. No doubt one of the officials in a pension centre can assist the hon. Gentleman by explaining to him how easy it really is. It is not the fiendishly complicated system that he suggests.
I accept that there is some complexity in the calculation of pension credit, but that is also true for the calculation of basic state pension. Fortunately for the poor of this country, we do not require people to do their own calculations before they are entitled to receive money. If we did, we would all, I suspect, be a lot poorer, although perhaps the hon. Gentleman would be a lot richer.
I do not want to take up all the time available for the debate.
The hon. Gentleman also said that the Government planned to exclude 1 million people from pension credit. We want everyone to claim pension credit. The three million target is a figure for take-up in the first year, not a ceiling. We want everybody to claim.
If the hon. Gentleman stopped characterising pension credit as a crude weekly means test and started telling pensioners how easy it was to claim, instead of suggesting to them that it creates stigma, I would be more willing to listen to his concerns about take-up. He is desperate for the policy to fail because he knows that it is popular. I believe that it will be a great success.
The hon. Gentleman referred to letters and said that it would take us a year to ensure that everyone who claims receives their payment. The payments will be backdated, so we need to ensure the sensible administration of the system, otherwise he will complain that it is not working. We shall be writing to every pensioner. There will be an advertising campaign. People will get to know about the pension credit—perhaps through their MP telling them—and they will be able to claim. Those who claim up until October 2004 will have their entitlement and their payment backdated to the start of the pension credit.
I do not want to take too much more of the House's time but I want to say a few words about the policies of the official Opposition. I was interested to note that, in a recent speech, the hon. Member for Havant launched a six-point plan for pensions. The speech was a bit of a mishmash but interesting none the less; it was notable both for its admissions and for its omissions. For example, the hon. Gentleman accepted that means-testing would remain: "I am a realist", he said. However, the Opposition are committed to getting rid of the pension credit, so how will they make the calculations for the means test? Will they abolish the five-yearly assessment and the simple phone call needed to make a claim? Are they committed to a return to pound-for-pound withdrawal of benefit on a weekly means test? Will they bring back their 40-page form, asking elderly gentlemen if they are pregnant? Admittedly, they asked the elderly ladies as well. When they say that means-testing will remain, are those their commitments?
As for the omissions, the Opposition should really have launched an eight-point plan. Two of their most important policies are not even mentioned. We know, for example, that the Opposition plan to privatise the basic state pension. Lately, they have gone quiet about that plan, but the letter from the hon. Member for Havant to the hon. Member for Sutton Coldfield makes it clear. I am glad that the hon. Gentleman is in the Chamber. The letter states:
"The vision of moving to a funded alternative to the basic state pension is a powerful and compelling one which you and I share."
We have not heard much about that from the Opposition lately. In fact, as stock markets have fallen and we have read more headlines about the deficits in funded pensions, they have gone quieter and quieter about that plan, but it remains their policy.
The other policy that dare not speak its name relates to the 20 per cent. across-the-board public expenditure cuts to which Mr. Flight is committed. He said:
"I have been digging through current spending, finding opportunities for cuts. It's too early to say how much but it could be up to 20 per cent."
The Leader of the Opposition was said to be "relaxed" about that target. What will the right hon. Gentleman cut? What damage would a 20 per cent. cut across the board inflict on pension provision?
Perhaps that is why the Opposition are committed to abolishing contracting out, as the hon. Member for Havant said in his interesting speech—[Interruption.] If Mr. Luff would stop chuntering, I might be able to conclude my remarks—[Interruption.] Obviously, he cannot stop chuntering, so I shall continue.
The Opposition seem to be committed to the abolition of contracting out, because they have to make some savings somewhere. However, that would represent an £11 billion raid on private pension funds. Perhaps the hon. Member for North-East Hertfordshire will be able to tell us whether his party has a policy commitment to get rid of contracting out.
The rhetoric of the hon. Member for Northavon suggests that he wants to help women to achieve decent state and private pension provision, but his policy of abolishing pension credit and replacing it with age additions would penalise today's poorer women pensioners. He has admitted that.
I am coming to the close of my speech.
The hon. Gentleman's policy of abolishing the state second pension would disadvantage today's working women who are carers or in low-paid jobs, who have broken work records or who are disabled. Currently, they are accruing a better second-tier unfunded state pension than SERPS ever offered them. His policy document admits that the state second pension is redistributive. His answer? Abolish it. I am forced to conclude that his rhetoric about helping women is hollow, because his policy prescriptions would do the opposite.
Only the Labour party is committed to tackling pensioner poverty and ensuring the long-term future of occupational pension provision in this country by carrying forward the necessary reforms, building on what is good in our system. I commend the amendment to the House.
I thought the Minister was rather defensive on a number of issues, and well she might be. It is all very well to trot out the old Labour lie about 20 per cent. cuts, but what we want to cut is tuition fees. We want to cut the bureaucracy that Labour has introduced that means we now have more administrators than beds in the NHS. We want to cut pensioner poverty. We want to take action, not just speak words.
You know, Mr. Deputy Speaker, it is a shocking thing that, with the pensions crisis that this country is facing at the moment, all we get from the Government is consultation. It is a consultation culture. We counted 38 consultations, but when we asked the Government how many consultations they had on pensions, they said they could not answer the question because of disproportionate costs. That shows what they are doing. They have this problem, which has emerged largely as a result of their own action. All they do is talk, talk, and have consultation after consultation—a consultation culture and no action.
As my right hon. Friend Mr. Redwood rightly said, through the Chancellor's £5 billion a year pensions tax, first imposed in 1997, the Government have taken tens of billions of pounds from British pension funds and British pensioners. It is no wonder that since Labour came to power, the gap between the richest and poorest pensioners, as shown in independent evidence, has grown substantially. One has only to look at the crisis of Equitable Life to see the body blows that there have been to morale for pensioners and pension scheme members throughout the country.
There is more to come. In the mid-1990s the Government used to criticise us because there were 600,000 people who did not claim the help to which they were entitled. Now it is 700,000 and, as Mr. Webb rightly pointed out, that is set to rise to a staggering 1 million in 2006.
Would the hon. Gentleman recognise a simple point of mathematics—that if more people are entitled, it is very possible that more are not claiming the amount to which they are entitled? Is it not the case that the party that he represents, when it was in government, ensured that as few as possible were entitled to as little as possible?
How sad it is for someone who campaigned for better circumstances to be so self-satisfied and complacent about this issue. How can a Labour Government seriously say that their target for 2006—three years' time—is to be 300,000 worse in terms of take-up by the poorest pensioners in this country than we are today?
Given that the increased complexity of the Government's means-tested benefits system has meant that hundreds of thousands of elderly pensioners have not received their dues on time or have not received them at all, does my hon. Friend agree that the plight of those poor pensioners is thrown into stark relief by the fact that many Ministers whose Department's public service agreement targets have been missed have been promoted and many other Ministers whose Department's targets have been met have yet been sacked?
Yes; my hon. Friend makes an important point. And is it not surprising that the Department of Trade and Industry document about rewards for failure did not cover Government Ministers?
It is pensioners and pension scheme members throughout the country who are being hardest hit by the Government's policies. One only has to think of the workers at Allied Steel and Wire, who are coming to London to march following the effective winding-up of their schemes, and those at Blyth and Blyth in Scotland, following the announcement last week, and those at 50 other companies, to see that action is needed to reform the law on the winding-up of pensions.
We had a debate about that earlier this year but we have seen no detailed proposals. It has been left to Mr. Field, as usual, to come forward with constructive proposals that we can all support and debate.
Will the hon. Gentleman remind the House who introduced the provisions under which pensioners from Allied Steel and Wire are not entitled to anything as a result of the company going bust?
It is correct that a Conservative Government introduced the measure in 1995 but the hon. Gentleman should be aware that the protection offered then to a 40-year-old working man if a company became insolvent was about 78 per cent. of his pension scheme entitlement and the protection for a 60-year-old working man was more than 95 per cent. Such levels of protection have collapsed because the Government have allowed the protection available under the Pensions Act 1995 to become deeply eroded.
I have only limited time.
It is shocking that only the Opposition secure or propose debates on pensions issues. The Government have not initiated a substantial debate on pensions policy since
The right hon. Gentleman asks whether the White Paper will be published before this summer recess; let us hope it will be.
The Prime Minister's website sets out a list of Ministers. It shows the Secretary of State for Work and Pensions and says that he has overall responsibility for his Department. There is a marvellous picture of the Minister for Work and his duties are set out. There is then the heading "Minister for Pensions". The name and photograph are blank but that Minister's responsibilities are outlined: basic pension; state earnings related pension; state second pension; stakeholder and private pensions; occupational pensions; the national insurance fund and national insurance recording system; pension credit; Pension Service; minimum income guarantee; and the inter-ministerial group for older people. One would have thought that those responsibilities were associated with an important job that could not remain vacant for two months. It is clear that the Prime Minister is happy to appoint Mr. McCartney as chairman of the Labour party for the party's internal convenience, but when it comes to the deep needs of pensioners in our country, he is prepared to leave things and let them ride. The Government think that it is more important to appoint new junior Ministers in the Home Office or other Departments than to appoint a Minister to deal with the important pensions matters that affect so many of the most vulnerable people in the country.
In a moment.
I wish to press the Minister a little more on the Chancellor's plans to introduce a new index for inflation: the harmonised index of consumer prices, which is the European measure of inflation. He wants to introduce that because he wants harmonisation with Europe ahead of a possible decision that this country should enter economic and monetary union—the euro.
However, the harmonised index of consumer prices, known as HICP and pronounced "hiccup", is a much lower measure of inflation than the retail prices index. One reason for that is that HICP does not include council tax, which has increased by 60 per cent. in recent years. Had HICP been applied since 1997, pension increases over the past six years would have been half those that took place under RPI. In paving the way for the euro, the Chancellor is possibly damaging the future income levels of pensioners who rely on the basic state pension.
During Question Time on
"The Chancellor said that he was considering making such a change and, as he does so, he will no doubt examine carefully the impact that it might have on pensioners and upratings. The hon. Gentleman must make his representations to the Chancellor".—[Hansard, 14 April 2003; Vol. 403, c. 604.]
I never let such things go. The House will be pleased to know that about two hours later, my right hon. and learned Friend Mr. Howard took the point up in the Budget debate. He asked the Chancellor and the Chief Secretary about that at column 713 and both failed pointblank to say that pensioners would be no worse off if HICP were introduced.
Will the Under-Secretary or the Minister make a categorical statement at the Dispatch Box about what will happen to the uprating of pensions and other benefits following the introduction of the HICP measure? It is not good enough for Ministers in a Department with responsibility for pensions to shuffle the problem off to the Chancellor who is not prepared to give an answer. Millions of pensioners deserve an answer.
The hon. Gentleman mentions the Chancellor in relation to the measurement of inflation, the RPI. I remind the hon. Gentleman that his party took elements out of the RPI measurement when it was in government. The charge that he levels against the Government Front Bench applies equally to his Government because that change had the same effect on pensioners at the time.
I remember when the hon. Gentleman used to stand up for pensioners. If he thought there was a threat to the uprating of their benefits he would say that it should not happen. Does he agree that it is right for the Opposition vigorously to tackle a measure that would halve the rate of increases that pensioners receive? Does he agree that we are entitled to an answer from the Minister in the Department that is responsible for pensions?
I am grateful that the hon. Gentleman is able and willing to be part of the consensus in the Chamber that is trying to improve things for pensioners and pension scheme members in Britain, unlike the Government who just spend all their time talking about it.
The hon. Gentleman has already had a good go. I want to move on.
The House will know that 375 hon. Members on both sides of the House, including 173 Labour Members, have signed early-day motion 572 which calls for a simpler system of application for a Post Office card account over the counter and fewer barriers to customers obtaining cash from the post office, as they do now. The Government's change to direct payment has been fraught with difficulties, including the revelation that thousands of keypads installed in post offices will have to be torn out or seriously amended. Those with disabilities such as blindness, autism, and Alzheimer's disease, will be severely affected by those changes.
I have received hundreds of letters on that issue and I shall read brief extracts from just two of them. A pensioner from Suffolk wrote to me last month stating:
"I am 83 and have rheumatoid arthritis. I . . . keep active by collecting pension at the Post Office".
The letter went on to say that the pensioner is
"very, very dubious if I would be able to slot my fingers on the right numbers. Meanwhile some bright spark can be watching and noting my number—so no secrecy (or security) even if I manage to mentally retain the number . . . I have no recollection of officially being advised of the alteration of payment, beyond grapevine and advertisements".
Another pensioner wrote to me:
"I am registered blind. I recently went to my local post office and saw the key pad on the counter. I could not read the figures at all and would not have enough sight to use the key pad . . . I understand that a relative or friend can use the PIN number that is given, and draw the benefit on my behalf. I do not want this at all. I am very independent and value my privacy . . . This whole situation is a complete mess . . . We have enough difficulties with day to day living without having all this hassle."
Those are the views of hundreds of thousands of pensioners throughout the country. What reassurance can the Minister, who is directly responsible for the situation, give that their views are being listened to? What will happen about the PIN pads? The Minister has admitted in answers to me that there needs to be an exceptions service, but will it be based in the post office? What will the method of payment be? What is the timetable for the introduction of this vital service? I have asked the Minister numerous questions about that, and the answers have not been clear or satisfactory on any of these key points.
Some of the most vulnerable people in our country want to know how they are to receive their income in future. Will the Minister tell them? The Government's record on pensions is, unfortunately, one of which they cannot be proud. They are the Government of the pensions tax, the Government of the savings gap, and the Government of wind-up, HICP and poor take-up. They have failed millions of British pensioners, who are falling behind and will receive worse pensions than their parents for the first time in living memory. What is the Government's response? Is it just the consultation culture, rather than the action that is needed for true reform?
We want a system where no one is held back but, equally importantly, no one is left behind. We want a fair deal on pensions for everyone. We intend to support the motion in the Lobby this evening. I invite Labour Members who believe in standing up for pensioners and pension scheme members to send a message to the Government that they must listen, in the interests of present and future pensioners, to the consensus that is emerging on the Opposition Benches and among some on the Labour Benches. What is needed is not more talk, but urgent action.
Several hon. Members rose—
I was interested in the tirade from Mr. Heald. I remember when he was in government, and the attitude of his Government. He made much of the fact that there had been a number of consultations between the Labour Government and various pensioners groups—he gave us the total numbers involved. That was in contrast to his Government, who never consulted anybody about anything and merely inflicted changes on people.
Much more has to be done for pensioners, but we should not lose sight of the fact that the Government have done a considerable amount for them already. I remember the debate in the Chamber one Friday morning about the winter chill allowance. The hon. Gentleman and some of his hon. Friends sabotaged the argument, which resulted in a Minister going. From our point of view, he was an effective Minister in that area, despite being a Tory Minister. That individual happened to be on the receiving end because he was sympathetic to the idea of doing more for pensioners, but his hon. Friends were not so keen on that, so he ended up on the scrap heap of history.
I also remember the debate about the £10 that used to be given to pensioners once a year as a handout. The Labour Government started to put that right by means of the winter chill allowance, which is worth about £200 a year. That is a positive step to help pensioners and alleviate pensioner poverty.
Under the Tories, some local authorities granted free bus passes whereas others did not, and there were disparities. The Tory Government did nothing about that, but the present Government have taken a step in the right direction and at least pensioners now only pay half fare. In the west midlands, pensioners get free bus travel. A start has been made, but a lot more needs to be done.
There is some concern about the Green Paper. I do not think that people want to work beyond a retirement age of 65. Obviously, some may want to work on, and it may be in the interests of the economy for them to do so, but by and large most people like to think that they will retire at 65.
The pensions crisis began under the Tory Government. I worked in factories then, so I have first-hand knowledge. I was involved in the trade union movement when it encouraged people to stop in the state earnings-related pension scheme. When in government, the Conservative party encouraged people to go into private occupational pension schemes. It tends to be forgotten that those schemes were often introduced to offset a wage deal. We should not lose sight of the fact that the seeds of the present pensions crisis were sown under the Conservative Government. When they were in government they used to give us chapter and verse on the misdemeanours of previous Labour Governments. What they sow, they also reap.
Mr. Heald said that I champion pensioner causes. One of the causes that I am involved in at the moment concerns occupational pension schemes. I think that a pensioner trustee should be elected by pensioners' groups on to the boards, so that they can look after the statutory interests of the scheme and represent pensioners who have paid into the scheme, but who seem to be forgotten when dividends and other matters are considered. Next week, I shall be pursuing a Bill to do that. I hope that the House will let it go through, but I have a funny feeling that it may not.
The hon. Member for North-East Hertfordshire also said that if the Conservatives were to come to power they would cut tuition fees. They introduced them, then they ducked the issue by setting up the Dearing inquiry. They never took a decision: they left it to the incoming Labour Government to deal with.
There is a serious problem with pension funds. It is known that at least 100 companies have serious difficulties in financing their pension schemes, especially those providing staff pensions. Having said that, I must give the Government a little credit. About two years ago they set up what I would have called the financial services regulator. The regulator has had only one or two years, and the House may want at some future point to examine the work of the regulator and see what remains to be put right.
The Rolls-Royce pension fund has liabilities that are more than the value of the company. We heard from people from Rolls-Royce a couple of weeks ago. The regulator knows that the company is sitting down with the trade unions to address the problem, and it is prepared to find extra resources. I am not criticising Rolls-Royce, because it is trying to look after the interests of employees in the pensions area.
As for the criticisms of the Government, I remember the debates about VAT on fuel. The Conservative Government wanted to go for the maximum rate, but when we came to office we reduced it as far as we could within European regulations and agreements. The present Government should be given credit for that. They should also be given credit for providing free television licences. When we attack the Government, we tend to forget that they have done some positive things.
The other policy with a big effect not only on us, but on pensioners, is free eye testing. I can certainly remember that some hon. Members were not too happy about the abolition of free eye tests, which we have brought back. From a health perspective, that must be a very valuable thing.
There are some concerns among pensioners. I take the point about post offices and especially cashpoint services. The Government are trying to address the matter, but I know that many pensioners prefer to go to their local post office and draw cash. We know that there are safety elements, but there is still a culture of people who much prefer to see cash than to use smart cards. That issue will be gradually overcome, and I notice that the numbers are diminishing.
I am one of those people who believe in the pensions link; I always have and I always will. I know that there are arguments against it—
I shall try to please Mr. Field by being as brief as possible, but I hope that he will forgive me if I begin my speech by congratulating Mr. Webb on his entertaining and incisive speech. It reminded me of the happy occasion on Second Reading of the State Pension Credit Bill when my party, his party and the right hon. Member for Birkenhead voted together to raise the basic state pension for over-75s. That would have aided older pensioners, who tend to be poorer, and among whom there are very many women. The hon. Gentleman was right to point out that targeted help does not always mean means-tested help—a point that I wish to refer to later if I have time.
Obviously, the Government cannot possibly take all the blame—I hope to strike a note of consensus here—
Indeed, but they cannot take all the blame for what the Select Committee on Work and Pensions described in its latest report as the crisis of confidence in the pension system, and what my hon. Friend and I would describe as the crisis in the pension system. Surely, the Government cannot take all the blame for the fall in the stock markets, the switch from good, defined benefit schemes to less good defined contribution schemes or the challenges posed by an ageing population.
However, I believe that the Government have made two major blunders—one tactical and one strategic—and I hope to have time to refer to both. I shall pass over the tactical blunder briefly—the removal of tax relief on dividends in the Chancellor's first Budget in 1997, which has taken £5 billion a year after pension funds. Like many measures, it seemed a good idea at the time. The Government wished to tax by stealth, rather than doing so openly, but in the recent inquiry of the Work and Pensions Committee, we heard evidence suggesting that that move has been very damaging indeed. I believe that the Minister should apologise for that in his winding-up speech.
The strategic error is perhaps even more serious, and the hon. Member for Northavon referred to it—the rise in means testing with the consequences for take-up, which has led to a fall in incentives to save. I wish to begin exploring that theme with a quote from the Chancellor:
"I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved. The end of the means test for our elderly people."
He said that in 1993, and I think that we can all agree that whatever has happened since, we have certainly not seen the end of the means test. In 1995, when the Conservative party was in government, 38 per cent. of pensioners were on means-tested benefit. Next year, that figure may well be up to 59 per cent.
The right hon. Member for Birkenhead would doubtless remind us that means-testing has pernicious effects on incentives to save, but I want for the moment to concentrate on take-up. According to the Government's own figures, between 1999 and 2000, between 22 per cent. and 36 per cent. of pensioners did not take up the minimum income guarantee.
When the Select Committee on Work and Pensions, on which I have the good fortune to sit, carried out its inquiry into pension credit, the Government made it clear that their expectation of the take up of pension credit—not a target, but an expectation, which they themselves described as ambitious—was some 67 per cent. In other words, the Government expect the non-take-up rate of pension credit in 2004 to be 33 per cent.—a third of pensioners. Despite the Minister's good intentions and the phone service that she mentioned, the Government do not expect the take-up rate to rise. In future, because pensioners will have to apply for the pension credit less frequently, which understandably is a noble aspiration of the Government, it will be even more difficult to assess whether take-up rates are rising or falling. By 2050, some 65 per cent. of pensioners could be on pension credit. In short, an even larger number of pensioners will be on means-tested benefits, with take-up rates possibly as low as 65 per cent. or 67 per cent.
Another problem is that of incentives to save. In any pensions system, there will always be a trade-off between security and the incentive to save, but the problem, which the Work and Pensions Committee touched on in its pension credit inquiry and in its most recent inquiry, is that different elements of Government policy appear to be trying to do completely different things. The Government have added to the basic state pension, as the hon. Member for Northavon said, the state second pension—to replace SERPS, or the state earnings-related pension scheme—the MIG, or minimum income guarantee, and now pension credit and stakeholder pensions, which, when I last looked, were hitting about 2 per cent. of their target group. The state second pension aims to prevent people who have worked all their lives from relying on means-tested benefits in retirement, but the MIG, if the Government continue on this course, will draw more and more pensioners into means-tested benefits when they retire. Government policy is trying to do two completely different things at once.
In the course of the recent Select Committee inquiry, one problem become very clear—namely, that the Government cannot hope to address the difficulties with private pensions unless there is a stable, simple system of public sector pensions that can be relied upon, but because the two completely different major elements of the pension system try to do two completely different things, that certainty is not in place. I refer to the final paragraph of our report on pension credit, which was signed by all members of the Labour-dominated Committee. It said that
"the Pension Credit unquestionably adds further complexity to an already byzantine system of retirement provision, which is causing confusion for pensioners, pension providers and those saving for their old age."
It is sad that after such a long period we still have no pensions Minister to address those problems. There is a widespread feeling in this House and outside it that the Green Paper, whatever else may be said of it, did absolutely nothing to address the fundamental confusions that lie at the heart of the Government's pensions policy. That is why my hon. Friends and I will, with good heart, vote for the motion.
The House is clearly very unobservant. We have had a pensions Minister since the election in 1997—he goes by the title of Chancellor of the Exchequer. While it would be engaging for one of us Back Benchers to hold that position after the reshuffle, they would be the wrong candidate if they thought that they would have a real and effective role to play, although they may show the skills to advance further in the Government.
I welcome the debate and wish briefly to make three points. I hope very much that the Government are reviewing with the utmost seriousness what their next step should be on pensions policy.
If we look back to the position when we were elected in 1997, I doubt whether anyone would have thought that we would be having a pensions debate like this one today, or that so many of our constituents would be facing the worry and anxiety that they now face. Of course it is easy and cheap to lay the blame on various individuals and Governments, but I wish to be as constructive as possible in making three points about the fundamental review that I hope the Government are undertaking.
First, the starting point must be what we thought about pensions, pension security and pension promises in 1997. In those days, we would boast that Britain had the largest, most secure form of funded pension provision not only in Europe but weighed against the whole of Europe put together. We underplayed the importance of the poverty of the state retirement pension because we thought that the strain could be taken up by occupational pensions. For various reasons, we now face a very different situation from that pertaining in 1997, and we can no longer rest on our laurels by saying that the occupational system will somehow take us through.
The second issue about which I hope the Government will be honest in their review is that their emphasis on means tests now seems misplaced. It is quite clear that the message has gone out to all too many of our constituents that savings can damage their retirement income. We cannot explain the collapse in savings in this country in any other way than by saying that people are being very rational and that about 40 per cent. of working people cannot now save to make themselves a penny better off—let alone substantially better off—through forgoing income now and trying to push it into their retirement.
Worse still, the means-testing strategy on which the Government embarked—with the best intentions in the world—is not sustainable. The consultation document published by the Government to ensure that we cheered the announcement of the pension credit shows that, by 2050, if only 65 per cent. of those who are eligible take up the pension credit, it will cost an additional 11p on the standard rate of tax. We are now living in an age of cuts in income tax, not of pushing them or any other taxes up. We know, therefore, that in the longer run, the pension credit cannot survive in its current form. That is the second reason why we need a fundamental review of pension strategy, and I hope that such a review is already well under way in government.
My third point is about occupational pensions. It is a plea to the Government. When they come forward with their review, I ask them please not to insult our intelligence by trying once again to make out that occupational pensions can take the strain. It is possible that, if we are lucky, a few employers will set up new schemes, but no amount of whizz ways of encouraging employers to get their employees into schemes will surmount the pension crisis that we face. The task of introducing the fundamental reforms, which have now been six years in the waiting, will, if anything, help to underpin what remains of occupational pension schemes. Sadly, however, we are not in the game of seeing occupational schemes expand. As my hon. Friend Kevin Brennan knows, we are in the game of pension wind-up. I hope that the Government will introduce proposals for an insurance scheme, so that those who find themselves having their pension promise snatched away will be secure.
When we were elected, 60 per cent. of those who voted were aged over 45. It is quite possible that when we go to the polls in 10 years' time, the majority of those who vote will not be interested in what the Tories did, because we will have been in power for more than 10 years. Furthermore, probably for the first time, the majority of those casting their votes will be pensioners. If that does not concentrate the mind of the Government wonderfully on the Green Paper, I do not think anything will.
I cannot quite bring myself to congratulate the Liberal Democrats on the motion, but Mr. Webb is owed some credit for the way in which he opened the debate. I draw the House's attention to my entry in the Register of Members' Interests.
Many of us are so concerned about the current pension crisis that we have even considered deploying the arcane parliamentary procedure of tabling a motion, to be debated on the Floor of the House that would allow us to cut the salary of the Minister for Pensions. As there is no Minister for Pensions, however, that would be otiose.
For 60 days there has been no such Minister. As was pointed out by my hon. Friend Mr. Heald, Labour's priorities are clearly revealed by the fact that, having replaced the chairman of the party immediately, after 60 days it still does not think the replacement of the Minister for Pensions is important, despite the present circumstances. The Prime Minister is obviously as paralysed when it comes to appointing a Minister as he is when it comes to implementing a proper pension policy. He clearly needs advice.
I can tell the Prime Minister that there is significant talent, even on the Labour Benches, among members of the Select Committee on Work and Pensions. Several of the Committee's members could easily replace the Minister for Pensions if he had a mind to appoint one of them. I do not want to damage the career of James Purnell, but it is rumoured that he is about to take on the task. That would certainly be better than an empty chair.
But the real answer may be to bring back Mr. Field, whom it is a pleasure to follow. I mean no disrespect to the Minister who will wind up the debate, but I am sure that every Member would welcome the right hon. Gentleman's reappearance at the Dispatch Box. He would bring some sanity to pension policy.
The handling of the issue of why there is no Minister for Pensions, and has been no such Minister for 60 days, is symptomatic of the chaos of the Government's pension policy. There have been three reports on what has happened in the world of pensions, but there has been nothing from the Government except the Green Paper. In their amendment, the Government pray in aid the Select Committee's report. My hon. Friend Mr. Goodman accurately warned them about their selective quotation.
"current policies have been successful in reducing pensioner poverty".
The Under-Secretary included that quotation in her opening speech. The full wording, however, is this:
"While current policies have been successful in reducing pensioner poverty in the short term, we recognise there are doubts that they are sustainable in the long term".
The Government, who we understood were trying to lay off some of the spin, have deliberately taken a quotation out of context and stuck it in the motion. They should at least have the integrity to acknowledge that.
While we are on the subject of the Committee's report, let me add that only two of our 29 recommendations are supportive of the Government. I am delighted to see that the Committee's Chairman is present: he will substantiate that if Ministers require him to do so. All the other recommendations call on the Government to do something. The report speaks of a lack of clarity, and, as my hon. Friend the Member for Wycombe pointed out, if the Government cannot understand that it is for the Government sector first and foremost to provide clarity, the private sector will be able to do nothing.
Before I leave the subject of the report that the Government have so iniquitously misquoted, let me draw their attention to paragraph 130, which deals with the state second pension. It says:
"The Government has not responded to that recommendation".
—that is, a recommendation in an earlier report—
"and we ask them to do so within two months of publication of this report".
The previous report had a three-month time scale. In the report I have just quoted, we asked the Government to respond within two months. Those two months have elapsed and the Government have said nothing. Not only is there no Minister for Pensions but we are not getting a proper response to questions on pensions.
As most people apart from the Government know, there is a crisis in the pensions industry and in the pensions community. It is not all the Government's fault, as my hon. Friend the Member for North-East Hertfordshire said, but the £5 billion change cannot have helped. My right hon. Friend Mr. Redwood, who is after all a banker of some repute, said that the net present value of that change was no less than £105 billion. That is the scale of it. It may have looked like a small change to the Government, but not to anyone else.
The difficulties of the pension credit have been well advertised in the debate. There will be serious difficulties in implementation. If Ministers do not realise that, they soon will. I visited the pensions office that serves my constituents in Sutton Coldfield. It is clear that the colossal increase in the prospective work load will be extremely difficult to handle.
The Government stand condemned by almost everyone, not least the right hon. Member for Birkenhead, for their approach to means-testing. Sometimes, I think that the Government will not be happy until every pensioner is on some form of means-testing. It is the wrong approach. It enshrines dependency. The Government give with one hand and take away with the other and that is wrong.
The complexity with which the Government have approached these tasks is noteworthy. It is almost impossible for an independent financial adviser to give advice with confidence without understanding what the Government will do with state provision. The stakeholder pension has been a complete flop. Not only, as the hon. Member for Northavon said, does the ABI dismiss it, but it has managed to hit practically none of the target group. I think I am right in saying that nine out of 10 of the shell stakeholder pensions set up by companies remain exactly that—shells. No one is putting any money into them.
When my party left Government in 1997, our pensions were the envy of Europe. Under this Government, it is a litany of confusion, complexity and failure. Their noble attempt at the start of their time in government to reverse the ratio of funded to unfunded pension provision, which was 40:60, has failed. The Government will have to make some decisions on pensions. The sooner they make them for the benefit of current pensioners and pensioners to come, the better.
It is coming up to the first anniversary of Allied Steel and Wire in Cardiff and in Sheerness going bust; hence my keener interest in occupational pensions. I was utterly gobsmacked when I discovered that those workers were originally employed by a nationalised industry—although some were employed by a private steel company—that they were compelled as part of their employment contract to participate in an occupational pension scheme and paid into that scheme for decades but then, when the company went bust at the end of that period, they faced the prospect of losing most—80 per cent. or more—of their pension. I was gobsmacked that that could be the legal position in this country in the 21st century, but it is.
I welcome today's announcement—I am sure all hon. Members do—that Celsa, the Spanish steel company, has announced that it will reopen the Allied Steel and Wire plant in Cardiff with 400 of the 800 posts; I hope that many of those who previously had jobs there will again be employed. I commend the National Assembly for Wales, the Government and the local council for helping that to happen.
Nevertheless, many of those workers still see the complex issue of pensions in pretty stark and simple terms. They see that if there is a shortfall in the occupational pension scheme for people who are council employees, it is underwritten by the council tax payer. They see Members of Parliament and Members of the National Assembly having extra sums paid into their pension schemes and having their schemes potentially underwritten by the taxpayer. In contrast, how is the loyalty of Allied Steel and Wire workers repaid? Many of those workers will have worked loyally for the company over many years, and did not take early retirement or early redundancy, often because they were the best of the work force. When the company goes under because the pension scheme and the stock market happen to be at a low ebb, they are left to pay the price and bear the risk.
I welcome the fact that the Government have introduced the Green Paper and that they have been listening on this issue, particularly in the past six months. I want to tell them what I would like to be included in the forthcoming announcement. I want the pension insurance scheme to be introduced, with the Government standing behind it, on the basis of the US Pension Benefit Guaranty Corporation, as suggested in press reports in yesterday's Financial Times and elsewhere.
There are those who talk about moral hazard, but that can be overcome. There can be safeguards in such a scheme. For example, a cap can be put on, so that fat-cat pensions do not get paid out of it. It is also possible to have a system whereby 90 per cent. of the pension, say, is met, rather than 100 per cent. Let us forget moral hazard and other theoretical economic arguments; that system would overcome the immoral hazard that workers face when they pay into pension schemes that at the end of the day, through no fault of their own, are not worth the paper they are written on.
We must take care to understand what happened when the United States set up the Pension Benefit Guaranty Corporation in the 1970s, in terms of existing funds that had yet to be wound up. The US made sure that workers who suffered as a result of the wind-up of those schemes after the companies had gone into insolvency were protected. That is what should happen now, and it is not retrospection. There are schemes, such as the Allied Steel and Wire pension scheme, that have yet to be finally wound up. If the Government are going to legislate in this area to create a body like the PBGC, and if such legislation takes time to introduce—I accept that it does—in the meantime the Government should stand behind those schemes and meet at least the majority of obligations in respect of those that have yet to be wound up. That is a quantifiable proposal that could be costed and met. We have a moral obligation to look seriously into doing that, and I should like the Government to say that they will.
I shall wind up now, because time is very short and I want to hear what the Minister has to say. The issue of pensions—particularly occupational pensions, and the question of whose side we are on—is a key test. Are we on the side of the workers or the fat cats, and who carries the risk when companies go bust? In this case it is the workers who have carried the risk. That is morally wrong, and a Labour Government should be, and I hope will be, prepared to do something about it.
Order. I hate to interrupt the Minister so quickly, but this sounds more like a matter for debate than a genuine point of order. We are short of precious time, and perhaps this is an issue that she can take up at a later date.
This has been a truncated debate on an important issue, but despite its brevity it has been excellent. My hon. Friend Mr. Webb gave his usual masterly tour de force. As he does every time he speaks on this subject, he not only explained the complexities of the pension system in a clear and understandable way, but made it entertaining. He outlined the failures of the inadequate state pension, the nightmare of means-testing, and the Government target through which they set out to miss 1 million of the poorest pensioners—who should be entitled to the tax credit—just as they missed one third of those entitled to the minimum income guarantee. He also outlined the failure of the stakeholder pension.
The Under-Secretary of State for Work and Pensions, Maria Eagle responded by denying that there was a pensions crisis, although nobody else seemed to agree with that. We heard that the Government had consulted widely and at great length, but so far to no avail. We heard criticism of our policy to target directly the poorest pensioners in the older age ranges through an age addition to the pension. The argument was that that would miss some of the younger pensioners whom the means-testing process was designed to hit. However, the Under-Secretary herself admitted that the Government expect to miss 1 million of the poorest pensioners anyway under the existing system. Our system would miss some, as my hon. Friend the Member for Northavon has pointed out in previous debates, but far fewer than the 1 million whom the Government plan to miss under the new scheme.
The Minister went on to tell us how simple the application process was for various means-tested benefits, particularly the pension credit. In that case, why do one third of the people at whom it is aimed fail to claim it? In closing, however, the Minister attacked Conservative policy, so I could find some agreement there.
Mr. Heald started by denying his own party's statements about seeking 20 per cent. cuts in order to cut taxes. I certainly disagree there, but he made three valuable points with which I agree. He attacked the consultation culture, which is often bought at the expense of delivery. He mentioned the fact that the Government are considering taking council tax out of the inflation rate, yet the inflation rate is used for uprating pensions. We believe that measures of inflation should take into account the real and major cost to pensioners of items such as council tax. The hon. Gentleman also made a valid point—I recall encountering it elsewhere in my role as spokesman on disability—about the failure or absence of consultation on the introduction of PIN pads, which many pensioners simply cannot use.
Mr. Goodman made the valuable point that when in opposition, the Chancellor said that he intended to end means-testing completely. Instead, after six years in government, he has massively expanded it beyond anything that we have seen before.
In the few remaining minutes, I shall move on to two linked items from the motion. The new Minister for Pensions, when appointed, will be the sixth in six years. That rapid turnover, and the long delay in appointing a new Minister, suggests the lack of priority accorded by the Government to pensions issues. Similarly, I note a lack of urgency in dealing with the problems of private company pension schemes, which are a matter of great concern to many people. Numerous examples have arisen and been widely discussed in the House and across the country.
The Government urge everyone to pay into private pension schemes, warning that we can no longer rely on the state pension. Yet horror stories about underfunded schemes and schemes that fail to pay out when companies go into receivership are numerous and growing and can only deter people of working age from entering into such schemes. Examples abound: some have been raised today, and others in the past by myself and other hon. Members.
In 2001 Chesterfield Cylinders, one of six companies in the country owned by United Engineering Forgings Ltd., went into receivership. The employees, some of whom have worked for the company and paid into its pension scheme for 40 years, are still waiting to hear precisely what will happen, but have been advised that they may receive as little as 30 or 40 per cent. of the pension that they had saved for over their whole working lives. The following year, Dema Glass, also in my constituency, went into receivership and the workers were told exactly the same story: they would eventually receive a tiny fraction of the pensions that they had paid into all their working lives. Many of my constituents have been hit during the past few months by the problems of another company, Coalite Products Ltd., which is based just outside my constituency in Bolsover. Eighty-two of my constituents have been made redundant, and all now face vastly reduced pension payments for the same reason. We heard from Kevin Brennan about similar problems with Allied Steel and Wire.
The common factor is not fraud, as happened with the Maxwell pensioners. People are losing 50 to 60 per cent.—possibly more—of the pensions that they have paid for all their working lives, but it is legal. It is the product of several factors. The fall in stock market values is one, and pension holidays, which companies take in good times without making up for them in bad times, are another. Using funds for early retirement rather than redundancy robs the pension fund for people who are still in work. To add insult to injury, 15 per cent. or more of what is left in the fund often goes to the receivers in the long drawn-out process of winding schemes up.
I raised those issues in a letter of 2001 to the former Minister for Pensions, Mr. McCartney, in oral questions and in debate in the Chamber last year. Two years on, however, there has been no concrete response—nothing, other than saying that measures exist to counter fraud. As I said, this is not fraud: it is legalised robbery. The only concrete proposals from the Government side in those two years have come from the private Member's Bill introduced by Mr. Field. I shall be here to support it on
I close by repeating the cry that we have heard from several hon. Members over the past two hours. The Government must act on pensions very quickly to tackle the pensions crisis and bring two years of dither and denial to an end.
This has been a useful and interesting debate, and I congratulate the Liberal Democrats on introducing it. In a spirit of generosity, I confirm that it is wholly fitting that the Liberals should talk about pensions, although when I told a political colleague that I intended to be generous to the Liberals, I was counselled against it. However, it was the Liberal Government in 1908—some time ago—who introduced the first old age pension, at the generous rate of 5 shillings. It was subject to a means test—and, apparently, a test of moral character. I have no doubt that the great majority of Liberal Democrat Members would satisfy at least one of those tests. Whether they would all satisfy the same test is not for me to judge.
A few years later, the Liberals introduced the National Insurance Act 1911, and it was the greatest of Liberal reformers, William Beveridge, who introduced the historic 1942 report on post-war social reconstruction. That is the Liberals' historical record up to the 1940s. Sadly, search as I might, I could find no further achievements in the following six decades. Indeed, while the winding-up speech from Paul Holmes contained a critique, it did not contain any concrete proposals.
Mr. Webb, who introduced the motion, made a useful speech, much of it an application for the job of Pensions Minister. I am on the working age side of the Department and have some responsibility, together with my right hon. Friend the Minister for Work, for Jobcentre Plus. It can normally find the job that people are seeking, but that may not be possible on this occasion. I shall discuss it with my colleagues, but the hon. Gentleman should not call us; we will call him—or not.
When we took office, the most immediate challenge that we faced was pensioner poverty. We have therefore had a strategy of targeting the poorest pensioners. We do not apologise for that; indeed, we are proud of it. The targeting has meant that the bottom one third of pensioners in terms of income have gained £3.5 billion a year, which is some four and a half times more than the resources that would have been necessary to restore the earnings link, as some suggested we should do. Pension credit will entitle the poorest 50 per cent. of pensioners to £400 extra a year in addition to what they receive at present.
We have heard some textual criticism of the Work and Pensions Committee's report, and dispute about its conclusions, but it is clear what is meant when it says:
"We agree that the current policies have been successful in reducing pensioner poverty."
The renowned Institute for Fiscal Studies, for which the hon. Member for Northavon has some regard—he may even have a pension from it—has said:
"Quite unlike during other periods of strong economic performance over the last 40 years, pensioner incomes across the distribution have kept pace with the growth in non-pensioner incomes. This has been in large part due to big increases in the generosity of state benefits."
There is not enough time to discuss the definitions of poverty, and I do not necessarily accept the figure that the hon. Lady has given. I hope that despite some controversy about pension credits, every Member of Parliament will be part of the strategy to encourage people to take them up, because that is what is important. We should forget the politics and get behind the policy, for the sake of our poorest pensioners.
The other major theme was the future of occupational and private pension schemes. I cannot reply to all the points that have been made, but my right hon. Friend Mr. Field made a helpful and friendly contribution, as usual. It is obviously a week for ex-Ministers to be as helpful as possible.
My hon. Friend Kevin Brennan also dealt with those matters. Different views have been expressed in the Green Paper consultation, on a wide range of issues. We must now find the best solution for all involved, balancing the needs of employers and savers, building on consensus where we can, but accepting that there are difficult decisions to be made.
Indeed, we must find a balanced way forward for all the matters highlighted in the Green Paper. For example, protection of members when a scheme is wound up, and the priority order of scheme creditors, are critical issues. Many people have welcomed the Government's proposals to share out assets more fully when a scheme is wound up. The challenge is to decide exactly how that can be done to benefit both current and future pensioners in the scheme. Revising the division of assets could take both age and length of service into account for future pensioners. That would guard against people joining a scheme near retirement age and ending up at the head of the queue if the scheme winds up.
Many employers feel very strongly about the priority order of creditors. A range of views has been expressed about the best way forward, and the Government must determine exactly what can be done to strike a balance between those options. As my colleague the Under-Secretary of State for Work and Pensions, my hon. Friend Maria Eagle, indicated, we will publish our proposals this summer.
I can tell my hon. Friend Mr. Cunningham that, with consultation about a new kind of regulator currently taking place, the Government hope to build on the work of the Occupational Pensions Regulatory Authority and improve the speed up for such schemes.
We set out options on that in the Green Paper, and we are examining the matter carefully. It is no one's fault, but I am afraid that the timing of the debate and the fact that we are not yet ready to publish our proposals mean that I am not prepared to comment on the matter.
Another important challenge for the Government is to establish a sure foundation on which people can plan for their future retirement. The current hotch-potch of benefits, pensions and credits is incomprehensible. Does my hon. Friend agree that it is impossible that it will stand the test of time?
What is important is that we are giving more money than ever before to the poorest pensioners. That is the key test. We have established a Pension Service to look at the needs of pensioners, and we have published the Green Paper. I think that that shows the Government's good intent.
Mr. Heald, the shadow Minister, raised a number of issues, and I cannot comment on them all. However, he asked about direct payments in particular, and I appeared before the Select Committee on Trade and Industry to deal with that only this morning.
I am sure that the direct payment approach is the right approach. It gives customers—pensioners or benefit recipients—choice as to whether they have a Post Office card account, or a bank or building society account. We are talking to the relevant organisations and to elderly people themselves about the requirements of people with special needs, for whom there will be an exceptions service. I assure the hon. Member for North-East Hertfordshire that we are working and listening very hard to ensure that we get that service right in the future.
Liberal Democrat and Conservative Members have one thing in common—they are both opposed to pension credit. What are the implications of that? The Liberal Democrats make hay with take-up figures, and I have already noted that we must all get behind the take-up issue. If the Liberal Democrats had their way and formed a new Government to follow in the footsteps of the great Government of 1906—I do not know when that might happen, but it might be as far in the future as 2106—the take-up of pension credit would be zero, because the credit would not exist. The implications of that would be grave injustice, and the pound-for-pound withdrawal that exists under the current system would still prevail.
With all due respect, I sometimes think that the hon. Member for Northavon should cheer up. He does not seem to like anything that the Government have done for pensioners—the winter fuel allowance, the state second pension or payment modernisation. He opposes the pension credit—and he probably opposed the invention of the wheel, and of steam wireless, too. He is becoming the moaning Minnie of the House. He is the Victor Meldrew—I beg his pardon, the Professor Victor Meldrew—of the Liberal Democrats. He really should cheer up. He has a proposal—
Question accordingly agreed to.
Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.
That this House recognises that the UK has the largest stock of private pension saving in Europe and a tradition of pension partnership at the workplace which leaves it well placed to rise to the challenge of longer lives; welcomes the conclusion of the Work and Pensions Committee that the UK pensions system is "basically sound"; further recognises that there are pressures on pension systems at the moment and supports the Government's proposals, as outlined in the recent Green Paper, to renew the UK pensions partnership, to introduce further measures to bolster the UK system which better focus regulation on contemporary anxieties, and to increase security without increasing the overall costs of running pensions; strongly endorses the Work and Pensions Committee's judgement that "current policies have been successful in reducing pensioner poverty"; further recognises that this is of particular benefit to women; welcomes the state second pension which will provide lower earners, disabled people and carers, some 18 million people most of whom are women, with a better pension; believes that good pensions policy must be built on a foundation of the basic state pension, which has increased in real terms for three years in a row; and looks forward to the Pension Credit reform in October which will ensure that those with modest savings are properly rewarded for the first time.