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Mr. Hayes: Will the hon. Gentleman give way?
Mr. Goggins: I hope that, if I do, the hon. Gentleman will pay tribute to the Government's intention of introducing second state pensions for carers.
Mr. Hayes: I did not intend to mention that specifically, but I want to make a closely related point.
The hon. Gentleman seems to welcome the idea of looking at all of pensioners' income, rather than just income from the state. That is laudable, but is it not very similar to the Conservative party's proposal, made immediately before the election, which was so roundly condemned by people such as the hon. Gentleman and his colleagues? Is there not a degree of hypocrisy in what he is saying? I agree with much of it, but, frankly, I think it very similar to what Conservative Members have been saying for many years.
Mr. Goggins:
My recollection is that it was in the air at the last general election that the whole state system would be privatised if the Conservative party regained power, whereas the Labour party and Government believe that the benefit of a second-tier pension, which better-off people have enjoyed for years in retirement, should be extended to those on middle and low incomes, so that all in society can have an income that is above the income support level. I hope that Conservative Members share that aim.
We must not only create that framework for the future, but act now. As one of the pensioners whom I meet in my local pension forum often remarks to me, "When people talk about pensions policy, they always talk about the long term. I am 84. I need action now." The Government have indeed been taking action.
We know that the value of the state retirement pension has fallen relative to earnings, but we also know that, if we were simply to increase the state retirement pension, those pensioners with the lowest incomes would gain the
least because, pound for pound, they would lose their additional top-up. We therefore have to find different ways in which to help the poorest pensioners.
Value added tax on fuel has been reduced and, last winter, £50 extra was given for those on income support to help with their fuel bills. Free eye tests will be introduced from April and concessionary bus travel has been extended. All those things are important to sustain the quality of life for poorer pensioners. We also have the spending on the national health service and we are keeping inflation down. That is important for pensioners with limited savings.
The Secretary of State said that more could be done and that he hoped to do more. I hope that the Government are able to do more. They should receive support from Conservative Members for doing more for today's poorest pensioners.
At the heart of the policy is the decision to introduce for the poorest pensioners the minimum income guarantee, which has an above-inflation increase built into it--£5 for single pensioners, £7 for pensioner couples. If in future years the Government are in a position to deliver an increase above inflation again, they should be encouraged to do so, but more than just the value of the minimum income guarantee is important.
The rebranding of income support and, before that, supplementary pension--[Laughter.] The hon. Member for Brentwood and Ongar (Mr. Pickles) laughs, but one of the consequences of its being called income support and supplementary pension is that it has put many thousands of pensioners off claiming their entitlement because they feel stigma and shame. We should change not just the name, but the level and the value, and work to ensure that all those pensioners who are entitled to receive it do receive it. Again, the Government must be commended for their work to ensure that more and more pensioners who are entitled to the benefit are able to receive it.
Mr. Rendel:
Does the hon. Gentleman agree that, if we were to give a lump sum in the pension itself to older pensioners, that would be a better and more effective way to ensure that the money got into the pockets of pensioners than insisting on their demanding something through income support?
Mr. Goggins:
There are additions for older pensioners, but--I come back to the point that I made earlier--if we increase the state retirement pension, the one group of people who will not gain are those who depend on income support, because they will lose, pound for pound, their top-up benefit. The people who will benefit are those who already have substantial additional private income. So the Government are entirely right to target the effective support in the way that they are doing.
Savings was an issue introduced into the debate by my right hon. Friend the Member for Birkenhead (Mr. Field), and various other hon. Members have commented. We all know that too many pensioners--many of them come to us in our surgeries and at other gatherings--feel that they are being penalised for having made modest savings; modest in this day and age. As soon as a pensioner has £3,000, he begins to lose support. When he has £8,000, he loses all support.
In their Green Paper, the Government have invited comment, debate and suggestions on how that position can be tackled. They have two choices if they are able to do something in that sector. They can disregard a portion of private income--income from an occupational pension or from savings--or change the savings limits: the £3,000 and £8,000. It would be interesting if the Minister were able to comment on that, but it seems to me that the most cost-effective way in which to tackle the problem and to better target benefit is to change the savings limits, so that people who do save and have something in the bank are not penalised.
While I am making that point, may I ask the Minister also to consider the issue of funeral bonds? I know that there is an issue about whether they can be counted as savings, and that some discretion is exercised within the system over whether to count them as savings or not, but some pensioners in poorer parts of my constituency have put £1,000 into a funeral bond to pay for a dignified funeral. To view that as in some way dodging the system is perhaps taking things too far. I hope again that the Government will be able to consider that matter.
Last week, I attended with a number of other hon. Members the launch of Church Action on Poverty's "Pilgrimage Against Poverty" campaign. At that gathering, my hon. Friend the Member for Stroud (Mr. Drew) said that the
I believe that we will assist substantially those who are at the lowest end of society. We must encourage people into work and ensure that work pays, but we must also change the social security system to assist people. We need to change the structure of the benefit system. The changes to bereavement benefits are a good example, reflecting changes in employment patterns for women, but also equalising the situation for widowers who have dependent children, who need help and who, at the moment, do not receive it.
More than anything else, we need to do what the Secretary of State was calling for at the beginning of the debate: change the culture of the social security system. We have seen the potential for changing that culture with the new deal and with what has happened in the Employment Service. Anyone who has visited the local job centre and spoken to new deal staff will know how their job has been transformed by the opportunity really to assist, to advise and to support people back into work.
That must happen throughout the social security system, particularly the Benefits Agency. I am sure that staff at the agency will welcome that opportunity. We must not just ask, "Do you qualify? Can you fill this form in?" but ensure that people get the right benefits and the right amount of benefit. We must ask, "How can the system support you?" so that we have a proactive system, rather than a passive system.
Mr. Christopher Fraser (Mid-Dorset and North Poole):
I welcome the opportunity to speak in the debate because it is fundamentally important to all constituents throughout the country, although I will use some instances in my constituency to demonstrate some of my points regarding the Government's position.
The serious aspect of what we are discussing is the Government's record in power and their failure to live up to their pledges to the electorate, on the basis of which they were given the position of Government in the May election the year before last. High on that list is their failure to reduce welfare spending and to come up with a radical programme--as has been mentioned by my hon. Friends already--which satisfies the test that the Prime Minister announced in his first speech after the election. "Does the system trap people on benefits?" was one of the big issues that was taken up at that time.
The Government's Green Paper on pensions was widely regarded as a missed opportunity, not just by the Conservatives but by those outside the House. The Government's proposals are not so much a radical reform as tinkering at the edges. It is important to repeat that, because they do not deal with the main issues. They propose a modification of the existing system rather than the new approach that we realise is a fundamental requirement.
The aim is simple--to provide security in retirement for those who cannot save enough and to persuade those who can save to do so. The problem is also simple--ever fewer workers will have to support ever more pensioners as people live ever longer. The level of state pension that the country can afford will increasingly become worthless. It has been predicted that, in 50 years, 8 million pensioners could be making ends meet with only the help of income support.
The cause is also well understood. There are many people who cannot or will not save for their old age. The Government have, as usual, promised much--a long-term and radical approach, difficult decisions and a reduction in dependency. In short, they have promised an integral part of a new welfare state for the new millennium. A great deal was expected of their long-overdue pensions Green Paper, which was finally published in December last year.
We should have known better. There is evidence aplenty on the Government's broken promises and their propensity for saying one thing and ending up doing another. In opposition, the Labour party said that TESSAs and PEPs were safe. In power, they have praised those who make provision for their old age. However, they are now abolishing those two popular tax-exempt savings schemes. If they truly admire those who provide for themselves in their old age, why withdraw dividend tax credits for individual non-taxpayers, the majority of
whom are retired people on low incomes who depend on their modest share portfolios to cover household bills? My constituent Mr. Hindle summed up his concern thus:
Why do the Government have a consistent compulsion to fix things that are not broken and to wipe the slate clean and start again in the name of modernisation? It is all the more disgraceful because they are changing the rules on pensions after responsible people have committed their money and decided on a long-term strategy for their retirement.
What of measures to resolve the problems that I referred to earlier? What of measures to address the problem that too few people save enough to look after themselves in retirement? What of those who have to eke out a miserable existence on means-tested benefits courtesy of the taxpayer? To help the poorest pensioners, the Government have proposed a new guaranteed minimum income at an estimated cost to the taxpayer of £2 billion. Pensioners will have to be assessed to determine whether they are entitled to that so-called income. That is an extension of means-testing and perhaps a forerunner of a means-tested basic state pension, as my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) said earlier.
The real difficulty that I have with the proposal is the potentially damaging implication of guaranteeing someone a pension income regardless of their behaviour during their adult life. When that is coupled with the Government's decision to duck the principle of compulsory second pensions, it means that anyone reluctant to save could come to the conclusion that, if the state promises reasonable provision, there is no need to set aside money for their old age.
For those on low incomes, an affordable level of saving will never produce a meaningful second pension. For those who are prudent and put away a little each week, their tiny pension will surely rule out entitlement to not only the guaranteed minimum income, but income-related benefits. Who in their right mind will sign up?
To compound the problem further, the Government have pledged to uprate the minimum income guarantee in line with earnings. The value of the benefit to someone who has never saved will increase more quickly than the basic state pension and other state benefits and, probably, the return on investments. The threshold above which someone could gain by setting up a second pension will get higher with every passing year.
In effect, the minimum income guarantee will extend means-testing and undermine the contributory principle. How can the Government reconcile that with the
Prime Minister's pledge to move away from the benefit culture towards independence of the individual? It does not square, and people are sceptical. How does the Government's approach persuade people on less- than-average earnings to forgo jam today in the hope that they can afford bread in retirement, particularly when they see others on similar earnings enjoying not only jam today but perhaps a holiday or other treats in the secure knowledge that the state will provide the bread when the time comes?
To encourage working people to make provision for their retirement, the Government have proposed stakeholder pensions. Is there any reason to believe that they will be more easily understood by people unfamiliar with savings and investment schemes? Are they likely to be safer or more flexible or represent better value for money than other pension schemes currently being marketed? If so, perhaps they might be more attractive to new savers, but the prospect of paying lower national insurance contributions is hardly an offer than cannot be refused, particularly to a youngster who has recently started work, to whom retirement seems a lifetime away, or to a young couple with a family whose daily needs leave little spare cash at the end of the week. The success of stakeholder pensions is dependent on a big if. At worst, they could threaten or destroy existing private and occupational pension arrangements.
"whole purpose of being in politics is to help the poorest and weakest".
I know that all my hon. Friends and many Opposition Members share that goal and aspiration. Certainly the Prime Minister shares it. He said clearly that, if Labour failed to help those at the bottom of society during the five years of its first term, we would have failed.
"The Labour party promised not to increase taxes. Isn't this a tax increase when those with tax allowances are not allowed to use them?"
He went on:
"As a thrifty pensioner, and my wife a housewife and carer, how do we ever hope to recover from the loss of an invaluable part of our income."
We have talked about some of Labour's manifesto pledges. Another one was to keep the state earnings-related pension scheme for those who wish to remain in it. That has also been broken. The Government plan to abolish it and replace it with something slightly different. However, the son of SERPS is a stop-gap measure, because the Secretary of State hopes that it will become superfluous as the Government's stakeholder pensions are taken up.
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