Pensioners

Oral Answers to Questions — Work and Pensions – in the House of Commons at 2:30 pm on 19 July 2010.

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Photo of John Robertson John Robertson Labour, Glasgow North West 2:30, 19 July 2010

What assessment he has made of the likely effect on pensioners of his proposed changes to the welfare system.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Since the general election a number of changes have been announced to benefits and pensions. The most significant for pensioners was our decision, after 30 years of decline in the pension's real value, to restore the earnings link with the basic state pension.

Photo of John Robertson John Robertson Labour, Glasgow North West

I thank the Minister for his answer, but he is well aware that the earnings link will not help pensioners as of January, when they start to pay their increased VAT. That increase amounts to almost £8 billion over the life of a Parliament, so when will the hon. Gentleman stick by his party's promise during the general election campaign to fight any VAT rise? What will he do to protect those elderly people who, through no fault of their own, will be left with enormous debts, thanks to this Government?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I am not sure whether the hon. Gentleman is aware that the Office for Budget Responsibility estimates that the country's structural deficit is now more than £12 billion larger than it was thought to be at the election. I do not know where he would have got that £12 billion from. As for pensioners, not only will we ensure that we restore the earnings link, but in April 2011 the full value of the cash increase in the state pension will go through to the poorest pensioners on pension credit.

Photo of Angela Eagle Angela Eagle Shadow Minister (Treasury)

Does the Minister agree that if the pensions in payment today had been linked to the consumer prices index rather than to the retail prices index for the past 20 years, pensions would be 14% lower than they are now? Does not the proposed shift in the definition of price indexation represent a huge raid on pension benefits, which gets worse and worse as time goes on and makes all current and future pensioners poorer?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

It pains me to suggest that the hon. Lady is being selective in her use of statistics, but if she looks at the increase in pensions as a whole-the basic state pension and additional pensions-she will see that we have linked the basic state pension to earnings, which over the course of 20 years, for a typical person retiring this year, will add £15,000 in extra state pension compared with price indexation, which was the policy of her Government.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee, Chair, Work and Pensions Committee

In a written statement, the Minister said that the Government would force occupational pensions to be linked to the consumer prices index instead of the retail prices index. What powers do they have, or will they have, to take to make that happen?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I am grateful to the Chair of the Select Committee on Work and Pensions for her question, as this matter has not been well understood. Statute provides a floor above which occupational pension schemes have to operate. In other words, we will not force occupational pension schemes to cut their increases; we simply provide a floor, which used to be linked to the RPI and is now linked to the CPI. Schemes remain entirely free to go beyond that if they wish.