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6.29 pm
Mr. Patrick Nicholls (Teignbridge): I did not agree with everything said by the hon. Member for Rochdale (Ms Lynne), which probably comes as a relief to her as it does to me, but she did highlight one especially important area to which I shall return--the position of those who are either on a retirement pension without any other form of income, or on a retirement pension plus income support.
As the debate unfolded, I was struck by its unusual quality. At one stage--much though I love this place--I thought that I would be able to go home early. I came in expecting the cut and thrust of social security debates of past years, but, lo and behold, we were greeted with an assurance at the outset--just to emphasise that the Conservatives set the policy and Labour then adopts it--that there would be no Division. I thought, "That's okay--presumably, we'll all go home early," but it has not worked out that way, and I have a feeling that it will not.
The result is that, instead of having to defend the Conservative position--it has already been conceded--it is legitimate for me to spend a moment or two examining, not the alternatives--it is accepted that there is no alternative to the Conservatives--but the glosses that have been added by Opposition Members.
That is why I so enjoyed the contribution of the hon. Member for Islington, North (Mr. Corbyn), and I say that without a trace of sarcasm. I debated with the hon. Gentleman over several years when we were both members of the Select Committee on Social Security--he thinks I am barking and I know that he is, but the one thing that one can say about him is that he is a man of principle. He brings the unfashionable notion of socialism into the Chamber and puts forward a prospectus for a way of life which, although completely and utterly nuts, is at least consistent. I suspect that, if we looked at his election addresses from every election that he has ever fought, we would see a man who is completely consistent.
It is worth while spending a few moments considering the hon. Gentleman's speech, because it was one of substance--no one would accuse the hon. Member for Peckham (Ms Harman) of having made a speech of substance, on this or any other occasion. His speech had some elements that caused some Labour Members to start twitching--it was like hearing those tunes of glory and sounds of battle in which Labour Members once passionately believed, but which have been Mandelsoned out of them.
The hon. Gentleman's key phrase was a statement that is breathtakingly wrong, but sometimes even Conservative Members let such remarks go by the board--presumably because there was so much wrong in the hon. Gentleman's speech that it was difficult to pick out a specific point. The highlight came when he said that the Conservative Government had given money to the rich. The silence among Opposition Members says something about Labour's house training, because when I have used that line in previous years, they have responded, "Oh, but you do give money to the rich." They do not do that now, having been properly stalinised.
The Conservative Government have never given anything to the rich. What they have done--and not before time--is allow the rich to keep more of their own money. When trying to work out how to look after the poorest members of our society, we must never forget
that, when a taxpayer earns his money legally, he owns that money 100 per cent. and every single 1 per cent. deduction taken by the state takes away his money.
The idea that we are in some way giving to the rich--still a popular idea on the Labour Benches--does not accord with the truth. When I said that to the hon. Gentleman, his response was untypical--he had to use the elitist line, "I don't know what university you went to." I suppose that is what happens when one is called Jeremy. I did not go to university, so I cannot take part in an exchange like that.
However, I do know some things. I believe that, in 1986, the hon. Member for Birkenhead (Mr. Field) asked the Treasury what proportion of the total tax take was contributed by the top tax payers. One never knows with that hon. Gentleman, but it was such a mistake that I suspect it was done deliberately out of mischief. The answer he got was not one of which the hon. Member for Islington, North would approve--and where he comes from, if facts are disapproved of, they become non-facts--because it showed conclusively that, when tax rates are reduced, the total amount of tax paid by the rich goes up.
Those who have been raised to believe stalinist demonology will ask, "How can that be?" I can tell them how. If people are taxed so much that they end up paying 89 per cent. on earned income and 98 per cent. on unearned income; if an old lady who has the temerity to receive a little income from a building society is told that she has to pay a 15 per cent. investment income surcharge; and if a Government are so strapped for cash--as the Labour Government were in 1968--that they have a special top rate of tax on the higher band of 104 per cent., one starts to discover what people do when faced with taxation like that.
At the end of the day, the hon. Member for Islington, North is a toff, and he knows that the decent thing to do is to stay and pay your tax, but people do not do that, and they did not in the 1960s when we had that penal taxation system. So what do they do? They go abroad, which strikes a chord with recent events, given that we are about to chase popular composers abroad--we do not want them in this country any more. If they do not go abroad, they start to evade tax--or they employ people like me to help them to work out advantageous tax schemes, so it is not all bad.
Finally, what they usually do is stop working. During the 1960s, when I was an articled clerk, I tried to instruct a local barrister, and was asked by his clerk what day of the week the case was being heard. "Thursday," I replied, to which the response was, "Oh no, he doesn't work on a Thursday--surely you know that?" Being deferential, I apologised, put the phone down and went to ask one of the other clerks what was going on. I was told that the barrister never worked on Thursdays or Fridays because he found it was not worth his while; he only worked on Mondays, Tuesdays and Wednesdays.
It is common ground on both sides of the House that, if we are looking for the money to spend on those who really do need help and those at the bottom of the heap who simply cannot look after themselves, we get that money in one of two ways. Either we do it the way the last Labour Government did it--by printing money or telephoning the International Monetary Fund and having it sent over by the planeload, which is not a particularly good idea, as it tends to put a party out of office for at
least 18 years and probably longer--or we run the economy in such a way that wealth is generated and we ensure that we have a rate of tax that leaves those who are far more capable than I of earning huge sums of money with sufficient incentive to stay in the country and contribute the taxes that make caring a reality.
That is the way forward, yet there was not a single hint of that in the hon. Gentleman's speech. When he talked about giving money to the rich, and when he denied--although I suspect that he knows it is the truth--that the rich pay more when tax rates go down, it reminded me of Macaulay's comment on the reason the Puritans hated bear baiting: it was not because of the damage to the bear but because of the pleasure it gave to those watching. The hon. Gentleman's comments expressed that sort of feeling.
Running through the hon. Gentleman's speech was the single aspect in which his remarks chimed with those of the Labour Front Benchers: the debate about people living in poverty. One of the most bogus accusations from Labour Members--it really is a cheek--is one we hear every time we increase benefits. They say in the next breath, "But poverty is on the increase." They justify that by saying that, if anybody is on any form of assistance, that automatically means that they must be living in poverty.
By their own bizarre logic, the more they press for increased benefits, the more they produce a dependency culture. They tell people who are receiving a helping hand from the state that they are, in fact, living in poverty. The statistic that shows how daft that argument was quoted by the hon. Member for Islington, North--that 24 per cent. of the people in this country are living in poverty. That is patent and arrant nonsense, and the hon. Gentleman is so far down the left-wing path, he is probably one of the few people in the Chamber who did not realise that it is nonsense.
Mr. McLeish:
I wish to explore the hon. Gentleman's claim that the 24 per cent. figure is arrant nonsense. Is he aware that figures published by the Department of Social Security for February 1996 show that 5.8 million people in Britain were claiming income support? The Prime Minister accepts that figure as representative of the poverty level in this country. If we add to it dependants and children, we have a total of about 10 million people who are solely dependent on income support. That amounts to about 20 per cent. of the population. Does he accept the figures provided by the Department?
Mr. Nicholls:
The figures speak for themselves, which is why I cited them earlier. I am complaining about the assumption that people must be in poverty because they are in receipt of some form of state benefit. That assumption produces the nonsense that today people are just above the level of income support and are therefore not in poverty, but tomorrow, when a beneficent Government increases support and they are in receipt of income support, they are suddenly catapulted into poverty. That may be useful demonology that allows Labour Members to claim that a quarter of the population is living in poverty, but it does not reflect the real world and people's experiences.
I have devoted some time to the speech by the hon. Member for Islington, North because it merited some examination. The same could not be said for the speech
by the hon. Member for Peckham (Ms Harman), which--even by her standards--was an extraordinarily lamentable effort. With stunning naivety, she continued to repeat figures after the Minister had passed her a piece of paper that proved that they were wrong. She then suggested that social services could be funded by the national lottery. One can only imagine what would have happened if we had made that proposal--we would have been derided initially and, in due course, the Opposition would have adopted our policy. Mercifully, it is a daft policy and we will not adopt it--so neither will Labour.
Even worse than the naivety of the hon. Lady's speech, was its sheer brazen cheek. I thought that she would not dare to mention the flexible decade of retirement, as that would be misleading and she would create a false impression of what might happen. However, she then referred to the flexible decade of retirement. Why? It is because it sounds marvellous. Many people would like to have the option of retiring at 60 rather than at 65. Yet what is the real situation?
When the hon. Lady was pressed on the matter, she accepted--as she was trying to be Torier than thou--that there could be no increase in taxation. In a letter to my right hon. Friend the Secretary of State, she said:
The hon. Lady did not mention that figure. She gave the impression to the outside world not that Labour is just as good as the Tories and would do everything that we do, but that Labour is even better--and she referred to the flexible decade of retirement in that context. One never knows with the hon. Member for Peckham whether it is cheek, naivety or an unattractive combination of the two, but I have to say that her performance was not particularly impressive.
Overall expenditure on social security is absolutely stunning: £15 per person, per day, and £93 billion per year. That is an extraordinary sum by anyone's standards. Even under this Government, the total social security budget was growing faster than the economy's ability to keep up with it. The process of slowing it down had to begin--that is all well and good. At least the latest set of Government reforms will cut about £6 billion from the budget by 2000. Thereafter, the savings should increase to about £15 billion per year.
Some people will say that that is outrageous, and that we should increase taxation for the rich so that we do not have to make savings of that magnitude. However, it is worth while considering who pays retirement pensions. Pensioners often assume that they are entitled to their pensions because they paid into the kitty--it is the problem of the funded and the unfunded schemes. In reality, there are not enough rich people to soak, even if they were prepared to stand around to be soaked.
About 89 per cent. of taxpayers in this country are basic rate taxpayers. Therefore, the moral obligation of maintaining our pensioners will be discharged by the
working population: people who, for the most part, pay basic rate tax. The figures are quite interesting: about 3.8 workers support each pensioner at present, but it is estimated that the ratio will decrease to 2.2 workers per pensioner by 2010. It is perfectly obvious that, if we do not rein in social security spending, the burden will become impossible, and could not be shouldered by the working population. That is why it is so important for the Government to encourage people to have their own pensions, and to make it clear that they cannot be dependent on the state.
The hon. Member for Islington, North said that it would be nice if one could live on the retirement pension. It reminded me of the famous statement by the late Vic Feather, that he would not rest until everyone was earning above the national average wage. It is a great aspiration, but it does not stack up. The hon. Gentleman said that that is what occurs in Europe. The problem is that the Governments of Europe have, for the most part, not faced that consequence. In the not too distant future, they will have to deal with an increasingly greying population without proper pension provision.
That is why the single currency is a problem--people like me can always find a read across to the single currency, while remaining entirely in order. If we enter the single currency and our so-called European partners are faced with the reality of having to pay pensions, they would print money--their money, our money; it is common currency--and the inflationary effects would wreak havoc on pension funds in this country. Although the single currency may seem a rather esoteric and boring subject, pensioners up and down the land should ensure that they have a real stake in that debate.
The position is that about 90 per cent. of retirees have some form of pension other than the retirement pension. That is a good thing, which should continue. The Government can take a great deal of the credit for that situation, which makes us a leader in Europe and the envy of Europe. However, I am troubled by one point, about which I have received a great deal of anecdotal evidence. People do not usually come to my surgeries and say, "I am someone who . . . ," but they do say, "I know someone who is living entirely on the retirement pension"--or, almost inevitably today, on that pension topped up with some form of income support.
"We anticipate . . . a lower level of basic state pension".
She then said that she would have to contact the Government Actuary in order to find out exactly what that would mean. In an attempt to be helpful, the Government unearthed the figures for her. It is estimated that the basic pension would have to be reduced by about £20 a week for a single person and by about £37 a week for a couple. That amounts to a retirement tax of about £1,040 a year.
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