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Mr. Kevin Hughes (Doncaster, North): Boring drivel.
Mr. Lilley: It may be drivel, but I am quoting the words of the hon. Member for Peckham. She wrote:
- "the taxpayer should not be expected to fund this personal flexibility. In government we will protect the public purse from any increase in expenditure arising from"
- "we anticipate . . . a lower level of basic state pension."
The Government Actuary calculates that, to avoid extra taxation, Labour's plan would require cutting the basic state pension by £20 a week for the rest of people's lives, or by £37 a week for a couple, and that it would plunge up to 2 million more pensioners below the income support level. The Opposition have said that they would not spend any more money under the plan. They would therefore not be able to top up incomes even to the income support level.
There is a third new danger from new Labour: its plans for a pension entitlement, which would mean a new means test for all pensioners. Labour plans to test all pensioners to determine whether they are eligible for pension entitlement. Moreover, I am not the only one who calls it a means test. Baroness Castle attacked Labour's
However, once Labour had established the system to means-test all pensioners, it would certainly not stop there. It would be the start of a slippery slope; and how long would it be before Labour used the means test to claw back the basic pension from prudent pensioners who had saved enough for a decent private personal pension? Does anyone imagine that the Opposition would be able to fund their £30 billion of spending pledges without taking advantage of their means-testing regime for pensions?
Mr. Flynn:
Will the Secretary of State give way?
Mr. Lilley:
No; I will make some progress.
The Government have a fine record of raising pensioners' living standards. Pensioners' incomes are now 60 per cent. higher in real terms than they were under the previous Labour Government. On average, pensioners' incomes have increased every year by nearly as much as they did in all four years of the previous Labour Government.
In 1979, only 43 per cent. of retired people had an occupational pension of their own. Today, 63 per cent. have one, and the figure is over 70 per cent. among the newly retired. The average size of occupational pensions has doubled in real terms over that period, and, as a result of encouraging people to opt out of the state earnings-related pension scheme, we built up £650 billion of funded provision. That figure is not only greater than that in any other country in Europe: it is greater than the amount that all the other countries in the European Community combined have bothered to save and invest to meet their future pension bills.
Ms Harriet Harman (Peckham):
The debate on the future of pensions is one of the most important political issues facing us. Unlike the Secretary of State, I shall attempt to point to some common ground between all hon. Members on the issue. We all agree that we have an aging population, that we need long-term planning for changes and that we need to encourage people to save more for their old age by giving them a stake in their own pensions.
In this debate, I will explain the principles that must underpin any change in pensions policy, why the pension system needs to change after 18 years of Tory government, why we believe that the Government's proposals fail to match up to those principles, and how Labour's approach will provide security in retirement. Those are the principles on which any change to pensions policy must be based.
Pensions policy must strike a fair balance between the generations, and it must fairly balance the responsibilities of the state and the individual, and of the public and the private sectors. It must provide a secure retirement for people on all incomes, and it cannot leave out those on low and modest incomes. The proposals made last week by the Government fail all those tests.
The Government's proposals are costly and risky. They give nothing to today's pensioners and they leave tomorrow's pensioners without adequate income in retirement.
Mr. Lilley:
The hon. Lady refused the opportunity during my speech to answer the question of which is more risky--a basic pension promised by her with no investments to fund it, or a pension guarantee with investments to fund it.
Ms Harman:
It is more risky to be blinded by dogma and to say that everything must be in either the state or the private sector. We are saying that we want a partnership between public and private provision. That is how one spreads the risk and provides the greatest future security. People understand that.
The challenge of achieving fairness for all generations will be met by striking a balance between today's pensioners, today's people at work and tomorrow's people at work. I shall deal first with today's pensioners because the Secretary of State talked at length about pension liabilities, but he did not say anything about today's pensioners. A quarter of all today's pensioners are on the poverty line or below and must rely on income support. Today, 1.6 million pensioners must rely on income support to top up their basic state pension. Another 1 million of them completely fall through the safety net, because they are entitled to income support but do not claim it, losing an average of £14 a week. It is a scandal that so many pensioners who have spent a lifetime at work or in caring for their families are among the poorest people in Britain.
The Secretary of State's pension plan will cost taxpayers a massive £312 billion over the next 40 years, but not a penny will be available for today's pensioners.
Mr. Stephen:
How could pensioners have any confidence in a state pension scheme administered by Labour? When Labour was last in power, it so mismanaged the economy that it could not pay even the Christmas bonus.
Ms Harman:
Pensioners' income has always been better under Labour Governments than under the Tories. Pensioners in the United Kingdom remember that the Tories promised them that they would not impose VAT on their gas and electricity but that, as soon as they got into government, they did exactly that.
Secondly, I will deal with today's work force. Millions of today's workers face financial hardship when they retire because they do not have an adequate second pension. Occupational schemes provide good second pensions, combining the employee's contribution with that of the employer. It is therefore worrying that the number of people in occupational pensions has been falling in recent years. Now, 12 million people in the work force have no access to occupational pension schemes.
Sir Norman Fowler (Sutton Coldfield):
If the hon. Lady is encouraging occupational pension schemes, will she assure us that if--it is a big if--there were a Labour Government, the present tax relief on pensions would remain the same as it is today?
Ms Harman:
The right hon. Gentleman seems to be unaware that the National Association of Pension Funds, which is the organisation that represents the large employers that run occupational pension schemes, said that the Secretary of State's proposals would spell
Twelve million people--
Mr. Deputy Speaker (Sir Geoffrey Lofthouse):
Order. Is the hon. Lady giving way?
Ms Harman:
No. I have given way and answered the right hon. Gentleman's question.
Mr. Deputy Speaker:
The Secretary of State was given a reasonable hearing; the hon. Lady has a right to the same.
"vague concept of a pensions 'Entitlement' which is clearly a means-tested guarantee by another name, with all the drawbacks".
Apparently Labour intends that every new pensioner, and presumably all existing pensioners, would undergo a once-for-all means test. If their total income fell below some unspecified level--presumably set at least at the income support level--they would be topped up to that level by a pensions entitlement. It is not clear, to say the least, whether all pensioners would like to be means-tested, however generous the Labour party's intentions might be.
"the demise of the occupational pension system".
Therefore, the right hon. Gentleman cannot say that the Government's proposals would protect occupational pension schemes when such schemes have shrunk under this Government and the NAPF says that the proposals would spell their demise.
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