National Insurance Contributions Bill

Part of Orders of the Day – in the House of Commons at 7:24 pm on 17th December 2007.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 7:24 pm, 17th December 2007

The hon. Gentleman should realise that this is the first Government ever to cut the link between age and poverty. People over 60 are now no more likely to be in poverty than any other cohort in society. That is an achievement of which this Government can be extremely proud, and the hon. Gentleman should applaud that achievement.

It is not true that pensioner poverty has not been tackled. We have spent a great deal of money on tackling it and we have made a big difference to the poorest pensioners, who have seen the largest gains. The hon. Member for Rochdale should at least admit that we will spend £15 billion a year more by 2020 under the pension reforms. As I have said, 57 per cent. of pensioners will pay no income tax from 2008.

Mr. Heald made one of his usual contributions, which I always enjoy. He and I have been in the House a long time and spent a lot of time on Select Committees together bantering about our different views of politics and how society should be run. However, I have never known him be so cheeky as to pray in aid Barbara Castle. He also talked about SERPS—the state earnings-related pension scheme—and professed great outrage that it had been cut so often, but he failed to remind the House that the Tories introduced the largest ever cut in SERPS in the Social Security Act 1986. That was in between cutting the link with earnings and telling people, as they descended into poverty, with child poverty doubling and pensioner poverty soaring, that if it was not hurting, it was not working. I congratulate the hon. Gentleman on his sheer brass neck.

On the Government proposals to claw back money by introducing an upper accruals point early, the flat-rating of SERPS was one of the recommendations of Adair Turner's Pensions Commission, and it had cross-party consensus when it was published. There was a statement in the House and the Conservatives said that they agreed with it. The Bill will essentially achieve that, but all those who have spoken tonight have said that they are against it. What are we to believe? The hon. Gentleman mentioned increases in national insurance contributions, but the biggest increase was in 1985, when the Conservatives abolished the upper earnings limit for employers. That was done by Nigel Lawson.

I know that Barbara Castle, who was a doughty fighter for social justice, a fantastic Labour Minister and a particular heroine of mine, would have congratulated the Government on their work in attempting to abolish pensioner poverty. She would also have noted with interest the effect of the state second pension and the pension reforms. Many people underestimate the radical nature of those reforms. The Bill is in essence a paving Bill that will ensure that the reforms to the pension system can be put in place. When they are completed they will reduce the number of years of contributions required before individuals qualify for a full pension from 44 years for men and 39 years for women to 30 years for everybody. That is a substantial and progressive change that Barbara Castle would have been proud to introduce herself. I am sure that she would have congratulated this Labour Government on doing so.

Another aspect of the pension reforms with which the Bill will assist is the crediting in of those people caring for older people and those with disabilities, as well as children, for the first time. That is something that Barbara Castle campaigned on all her life. Indeed, she used, as a main reason for the original introduction of SERPS, the broken earnings records of many women. The changes involved in the state second pension and other pension reforms will, for the first time, ensure that women are not disadvantaged by broken earnings records. Crediting in will start in 2010, and we can look forward to the once unthinkable achievement that 90 per cent. of women, like 90 per cent. of men, will qualify for the basic state pension in their own right by 2020. Barbara Castle campaigned for that all her life and she would be extremely proud that it is to happen.

Mr. Walker smelt rats and talked about stealth taxes, as did the hon. Member for Putney. However, if they agree that there should be a balanced package as part of the pension consensus, it is unfair to try to claim that the bits that increase tax are bad while failing to mention the bits that return that income in the form of the tax changes that are part of the package. It is important to consider the package as a whole. I reject the view of many Opposition Members that the measure is part of a stealth tax. Actually, it is part of an extremely balanced package that will enable the pension reforms that I have just mentioned to be brought into effect at the same time as the changes in personal tax rates. That will lead to our having the lowest rate of income tax in 75 years and will mean that we get 200,000 children out of poverty and 600,000 pensioners out of paying tax. We must continue to pursue that aim and the Bill will enable us to do that.

The hon. Member for Putney talked a lot about stealth taxes.

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