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Mr. Frank Field (Birkenhead): I congratulate the Secretary of State on safely delivering the Green Paper, and on the nature of his statement. I extend those congratulations to his colleagues in the Department. His proposals for carers pensions will also be welcomed in the country. I have two questions. Will the state second pension be funded or unfunded? If it is unfunded, does he recall that the previous Labour Government introduced a non-funded scheme which the Conservative butchered not once but twice? Given those circumstances, what guarantee can we give our constituents that, in 40, 50 or 60 years' time, the pension commitment that he has made today will be delivered?
My second point concerns the numbers on means testing. He said that, without his announcement today, in future about a third of pensioners would end their days on means-tested assistance. What reduction in that proportion will occur because of the Government's announcement?
Mr. Darling:
First, I am grateful to my right hon. Friend for his welcome. I should also like to thank the Minister of State, my hon. Friend the Member for Southampton, Itchen (Mr. Denham) for all his work on pension development, which is much appreciated. I am also grateful for what my right hon. Friend said about carers.
My right hon. Friend asked two questions. First, the state second pension is an unfunded, pay-as-you-go scheme. He raised the general prospect of a future Government dismantling it. As I understand it, the present Conservative policy is to move completely to a funded scheme--that is, if the Tories have not abandoned the basic pension-plus that they announced before the election. The state second pension is sensible and workable as well as affordable, and recognises that a funded scheme is not an appropriate option for people on low earnings, because they can never put in enough to get a decent income in retirement. Therefore, the state has to give them money to put into a funded scheme or, alternatively, as my right hon. Friend proposed, the better-off must subsidise the less well-off within a particular pension fund.
We must recognise that a funded scheme is not appropriate for people on low incomes, and that the state has a role to redistribute wealth to ensure that such people get a decent pension in retirement. That is affordable and
workable. If any party proposed as a central manifesto commitment to privatise the system at massive cost--at a time when there will be the most pensioners and the fewest workers to support them--its proposal would be rejected at a general election, just as the Conservative party's proposal was rejected at the previous general election.
My right hon. Friend asked about means-tested benefits. My objective is to ensure that people who work throughout their lives do not retire on means-tested benefits. One can never exclude the possibility that, for one reason or another, people will not hit that target; that is the reason for the minimum income guarantee. However, I believe that lifting as many people as possible off means-tested benefits should be a central objective of Government policy. [Interruption.] I thought that Conservative Members were against means testing, but now they are saying that they are not. I believe that our policies will ensure that we lift people who work throughout their lives off means-tested benefits. That approach should be supported, not criticised.
Mr. Steve Webb (Northavon):
I thank the Secretary of State for his courtesy in making available a copy of the statement to the Opposition earlier this afternoon.
A detailed document such as this Green Paper requires close scrutiny, but Liberal Democrats' initial impression is that it is a small step in the right direction down a very long road. I suppose one could best describe it as the most radical package since the previous one. At the end of the 1970s, we had the state earnings-related pension scheme; at the end of the 1980s, we had personal pensions; and at the end of the 1990s, we have stakeholder pensions. To guarantee that another Secretary of State does not produce another radical package in 10 years, the right hon. Gentleman should secure a cross-party consensus on pensions. Will he work with us and other people of good will to construct such a consensus?
The Secretary of State shied away from making pension contributions compulsory for people on £10,000 to £20,000 a year. He will recall that the Conservatives also tried using incentives, albeit for personal pensions. Of the 5 million people who took out personal pensions, 2 million are no longer putting in a penny of their own money--there is no additional private saving. Why does he think that his proposals will be better? Surely requiring people who can save to save is more effective than crossing one's fingers and hoping that they will.
The right hon. Member for Birkenhead (Mr. Field) put his finger on the problem when he mentioned today's working poor. The Secretary of State has said, "Lots of people will get bigger pensions, but no one will get a smaller pension." If the poor are to have more and the rich are to have the same, the money will have to come from tomorrow's taxpayers.
Successive Governments have ripped up pensions promises. The Conservative Government ripped up SERPS, but they were none the less re-elected, so the Secretary of State's belief that such actions will not be electorally popular does not wash--parties do not announce such plans in their manifestos, but carry them out anyway. Promising today's poor money from
tomorrow's taxpayers will not provide a secure basis for pensions policy. I would not want my income in old age to depend on the generosity of tomorrow's taxpayers; I wonder whether the Secretary of State would.
The proposal to link the so-called guarantee to earnings is welcome. The Secretary of State has promised to do that in the long term, but will he do it in the short term? The people who enjoy the guarantee are already 75 or 80, so how long will they have to wait? Will he pledge to implement the proposal immediately? We welcome the guarantee, but he knows that it does not apply to those hundreds of thousands of people who do not claim their entitlement and to those hundreds of thousands of thrifty savers who, with only £8,000 of life savings, are told that they are not entitled to the money. Finally, will the Secretary of State reassure the House that he will not rest on his laurels, but will find more money for today's pensioners, particularly the oldest pensioners?
Mr. Darling:
I am grateful to the hon. Gentleman. He mentioned today's pensioners, but I made it clear that the statement and the Green Paper were about pensions in the future. We have always made it clear that the significant increase in help for today's pensioners, which we announced in the comprehensive spending review, was never meant to be the last word on the matter. Today's statement deals with pensions structure and the options that will be open to people in the future.
Having lectured us on the need to be prudent with our money, the hon. Gentleman demanded that we uprate the minimum income guarantee immediately. He cannot have it both ways. We have made it clear that our long-term objective is--consistent with the prudent management of public finances--to uprate the guarantee in line with earnings.
The hon. Gentleman asked about affordability. Being a professor, he is no doubt a clever man. When he gets to the appropriate part of the Green Paper, he will see that the amount of money that the state will spend over the next 50 years as a proportion of gross domestic product will go from 5.4 to 4.5 per cent. of a larger GDP. The amount that we are proposing to spend is affordable, as he will see from the Green Paper. We are ensuring that more help goes to the lower paid, who need it.
The hon. Gentleman made an important point about incentives. I am not sure whether the Liberal Democrats are in favour of compulsion right across the board.
Mr. Darling:
The hon. Gentleman nods, so let us assume that he is. He has thought a lot about those things, and he must face up to the fact that the very poor can be compelled to save every last bean and they will still not have enough for a decent pension. On the other hand, a lot of people are now saving far more than the minimum--especially people at the top end of the income scale--and compelling them to save even more seems perverse.
Mr. David Rendel (Newbury)
indicated dissent.
Mr. Darling:
The Liberals do not think that that is perverse. I bet they do not say that at by-elections in some parts of the country.
We propose to give people an annual statement in which they can see where they stand. Most people have no idea what awaits them when they reach pensionable age, and the statement will help. The incentives and additional rebates that people can take into a funded pension will help also.
I made it clear in my statement that, once stakeholder pensions are established, it is my intention to ensure that we amend the system further, so that, if people stay in the state system, they will lose money, and they would be far better off in a funded scheme. That is very important, because I firmly believe that people who can afford to save should save more, and funded schemes will always be better than unfunded schemes. People will be better off as a result.
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