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Mr. Matthew Banks: What about the environment?
Ms Harman: One of the shadow Chancellor's proposals for the windfall levy to help the young unemployed is an environment task force. One of its jobs could be to insulate the homes of elderly people. At one and the same time, that would give useful work to young people who are wasting on the dole, would cut pensioners' heating bills and would improve the environment.
Almost 1 million pensioners fall through the net altogether.
Sir Norman Fowler (Sutton Coldfield):
I am sorry to interrupt the hon. Lady's flow. Will she tell us what Labour's policy is on uprating the basic pension, because Opposition Front-Bench Members declined to do so the last time we debated this subject? Is it true, and can it be confirmed, that the Labour party has now abandoned its long-standing pledge to uprate pensions in line with earnings?
Ms Harman:
We have set out our policies clearly in our document "Security in Retirement", which was passed
We will only make promises that we can keep, which is why we have told pensioners that we will cut their fuel bills by reducing VAT on gas and electricity. We have said that we will keep the basic state pension as it is now, not means-tested, and that we will uprate it at least in line with prices. We have had to say that we will not promise to finance a commitment to increase it in line with earnings, not least because the Government have destroyed the public finances. We set that out very clearly in our document "Security in Retirement".
Almost 1 million pensioners fall through the net altogether. They are entitled to income support, but they do not claim it, and lose £14 a week on average. Of those pensioners, 800,000 are women living on their own. They have no state earnings related pension, no occupational pension and no savings: they have nothing.
The Government are making matters worse. The existing 35-page income support form is part of the reason why 1 million pensioners are deterred from claiming their entitlement. Under the misleading title, "Simplification of Procedures"--a document that was sneaked out at the time of the Budget--the Secretary of State announced that yet more obstacles will be put in the way of people who intend to claim income support, including pensioners. The Government are putting more responsibility on claimants for the correct completion of the form, and are requiring more evidence to support claims. The Secretary of State's proposals will deter thousands more pensioners from claiming the money to which they are entitled.
The Secretary of State says that the poorest pensioners do not claim the money to which they are entitled because they choose not to do so: they do not want it. The idea that 1 million pensioners choose to be on average £700 a year worse off is ridiculous. The truth is very different. The message to pensioners from the Government has been clear: "If you claim benefit, you are a scrounger; if you are a pensioner, you are a burden." One million proud pensioners have got that message loud and clear, do not claim their benefit, and suffer hardship as a result.
We argue that the proposals in the Government's Social Security Administration (Fraud) Bill for cross-matching local government and Government data between Departments should be used to get help to pensioners who do not claim their entitlement, yet the Government have refused to accept that. They are prepared to cross-match data to combat fraud, and we support that, but not to help the poorest-paid pensioners who are losing out.
Not only are the 1 million pensioners who do not receive the income support to which they are entitled worse off, but the Government have imposed VAT on fuel, cut in half the value of the state earnings-related pension scheme, and put pensioners in fear of having to sell their homes to pay for long-term care.
The Secretary of State has boasted again about second-tier pensions and occupational pensions, but the fact remains that 12 million people at work today have no occupational pension. Many of the 6 million people whom the Government encouraged to take out personal pensions, especially those on modest incomes, have found that such
pensions eat up up to a third of their savings in charges. Many of those who came out of occupational schemes at the Government's urging have found that they are very much worse off, and have been missold personal pensions. Millions of people at work today face poverty in retirement.
The Secretary of State should spend less time lording it over everybody else in Europe, and a little more worrying about people at work today who do not have a proper second-tier pension, and who will therefore fall back on means-tested benefit and have a very low standard of living when they retire. That is why we need a new framework of value-for-money second-tier pensions that fits the changing world of work, where more women are working and there are more part-time workers and small employers. That is why we are proposing a new form of funded second-tier pensions for those who do not have access to an occupational pension, through our plans for a stakeholder pension.
We are also proposing to extend choice through our plans for a flexible decade of retirement. Over the past few years, the pattern of work has changed, and many people now want to retire early. If, at no cost to the public purse and without recourse to it later, people can draw their state pension early because they have shown that they have sufficient savings or an occupational pension, greater flexibility and choice can be provided. We must end the "one size fits all" approach to the welfare state.
Mr. David Willetts (Havant):
I should like to begin by citing some more figures on the balance of social security expenditure--the crucial point on which there have already been exchanges between my right hon. Friend the Secretary of State and his shadow, the hon. Member for Peckham (Ms Harman)--because the figures bear out absolutely what my right hon. Friend was saying.
Of the total social security budget, 44 per cent., £40 billion, goes on benefits for elderly people; 25 per cent., £23 billion, goes on benefits for sick and disabled people; and 19 per cent., £18 billion, goes on benefits to families. Benefits to unemployed people are a relatively modest £8.6 billion. Even adding in the further £4 billion of expenditure for which the Department for Education and Employment is responsible, expenditure on assistance for unemployment people is still overshadowed by all the other programmes that are central to the welfare state.
The Opposition are claiming that there is gold at the bottom of the garden in the form of some extraordinarily high level of benefits paid to unemployed people, out of
which they can finance every expenditure programme that passes through their mind. No matter how successful we are in bringing down unemployment, the money spent on benefits for the unemployed, running at 9 per cent. of the social security budget, could not finance every pet programme that an Opposition spokesman wanted to introduce.
The other mechanism for financing the Opposition's pet programmes--the windfall tax--would be equally damaging to the economy. Sometimes, the situation is unclear--we are told on the one hand that measures will be self-financing and then on the other that they will be financed from the windfall tax. That is confusing. I would welcome an intervention from someone on the Opposition Front Bench to explain that confusion.
Mr. David Shaw:
My hon. Friend has been complimented in the past on perhaps having more than one brain. Does it not require only one brain, or even perhaps half a brain, to understand--although Labour is not admitting this--that, if employers are to be subsidised to take on 250,000 young workers and encouraged to reduce their employment costs, they will, in all probability, get rid of 250,000 older people?
Mr. Willetts:
I agree with my hon. Friend. That is what the Americans would call a no-brainer. That would be one of the effects.
I should like to contrast the range of measures that the Government have in place to help unemployed people into work with the measures advocated by the Opposition. There are two ways of helping unemployed people into work. One is by straightforward incentives. We have made massive improvements in incentives since 1979. The gap between the average incomes that someone could expect in work and out of work is now such that we can be confident that just about every family would be better off in work. That is a massive improvement on the mess of the social security system in 1979.
I welcome the ingenuity of the Department of Social Security in perpetually seeking further ways of ensuring that incentive effects work. We have helped people to carry on with some entitlement to housing benefit for a few days or weeks when they first get back to work. The back-to-work bonus is an incentive worth up to £1,000 for unemployed people getting back into work. There is a national insurance holiday for employers who take on someone who has been long-term unemployed. All those incentives are the right way to go with the grain of the labour market and help unemployed people back to work.
The second way--I am afraid that this is a rather cumbersome expression--is by much more active management of unemployed people. That means not ignoring them and simply allowing them to sign on every two or three weeks and leaving them alone in the interim, but actively managing and encouraging them, boosting their morale and helping them actively to seek work. That is what job clubs are about. They are extremely cost-effective. That is what restart interviews are for and one of the reasons why the pilots of project work in Medway and Humberside are already showing such good results. I welcome the fact that we are going to extend project work to 100,000 unemployed claimants.
Training is oversold as a way of helping unemployed people back to work. Of course training is good if it increases what economists call the human capital of people who have been unemployed or in low-paid work, but it is not a panacea for unemployment. Training is often best deployed with people who are already in work--perhaps low-paid work. As the employer gets to know an employee's aptitudes, he can invest more money in raising their skills and helping them into better-paid employment with that firm.
Too often, training schemes aimed solely at the unemployed play a cruel trick on them. There is sad evidence from research that training schemes can increase an unemployed person's perception of the wage that he should command by more than they increase his skills and qualifications. Paradoxically, they can set him back in seeking work. That is one reason why Labour's much-vaunted attempts to expand training programmes to help unemployed people into work could well have perverse effects.
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