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Mr. Hayes: I have no wish to interrupt my hon. Friend's eloquent argument, except to add to the list of burdens that the Government have imposed on pensioners the withdrawal of tax relief on private medical insurance. Many pensioners have written to hon. Members complaining about that move. It disproportionately hurts pensioners and places an extra burden on the national health service. It really is nonsense and adds to his admirable list of concerns expressed on behalf of pensioners in Dorset, for whom he works very hard.
Mr. Fraser: It was kind of my hon. Friend to make that last comment. Many pensioners who are tightening their belts had sought to minimise the impact of any future
health problems by taking advantage of the tax relief on private medical insurance. Now they are at the mercy of the national health service. I shall not discuss the Government's approach to the national health service, but I am sure that the House appreciates the mess that they have made of it and the burden that they are placing on pensioners who had helped themselves or planned to do so and can no longer afford private medical insurance.
Another constituent, Mr. Bampton, wrote in response to the Government's Green Paper on pensions:
Mr. Chris Pond (Gravesham):
Along with other hon. Members, I was slightly astonished to hear the hon. Member for Mid-Dorset and North Poole (Mr. Fraser) suggest that many pensioners relied on means-tested benefit because they could not or would not save. Many of our constituents would find that rather insulting. Many pensioners who have worked hard all their lives now have an inadequate level of income, not because they have not saved or worked, but because of the actions of the previous Government, who took some £10 billion a year out of the state pensions scheme and made cuts in the basic pension and SERPS, leaving many pensioners reliant on means-tested benefit. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) was candid about the mistakes of the previous Government.
The hon. Member for Mid-Dorset and North Poole also asked why the Government wanted to fix something that was not broke. I think that was the phrase he used. Clearly the system is broke. Social Trends, which was published this morning, shows just how broke.
Mr. Fraser:
Will the hon. Gentleman give way?
Mr. Pond:
I shall not give way, as I know that the hon. Gentleman will say that he said "broken" and not broke. The colloquial phrase is "If it ain't broke, don't fix it".
Mr. Fraser:
If the hon. Gentleman reads Hansard tomorrow, he will realise that when I spoke about people who could not or would not save, I was not referring to pensioners. I simply wanted to put the record straight.
Mr. Pond:
I thank the hon. Gentleman for his intervention, but it does not alter my point.
Social Trends reports that
Labour inherited a situation in which a quarter of the population, including 4 million children, were stranded on a low income. A further study by the Joseph Rowntree Foundation reported that almost one in 20 children go without fresh fruit every day, do not have new and properly fitting shoes or live in damp housing conditions. That is the extent of the challenge faced by the Government. The proposals, including those which we are discussing today, are an extremely effective response to that challenge--to build a fairer and more prosperous society and ensure that all groups share in that growing prosperity.
The changes represent an important part of an overall strategy, the starting point of which is that, while spending on social security increased sharply under the previous Government, it was a reflection not of social generosity but economic failure.
Increasing numbers find themselves without work or opportunities and have to claim means-tested benefits to top up declining wages or national insurance benefits. I fully support the welfare-to-work strategy. The new deal will provide opportunities for young people, people with disabilities, lone parents and older unemployed people.
In my constituency, I recently met a young man who had been given a chance under the new deal to help to build the new district hospital that will serve my constituency and that of my hon. Friend the Member for Dartford (Dr. Stoate). The young man had been unemployed for some time. He was somewhat demoralised and was rather surly at the interview, but the Employment Service and the employer gave him a chance. Within weeks, he had been promoted to a supervisory position and was a highly valued member of the work force.
The single gateway is an important next step. At present, claimants are faced with an array of different institutions including the Employment Service, the Benefits Agency, local councils and the Child Support Agency. Providing a single access point to benefits will reduce the confusion that can lead to people losing out on help to which they are entitled and will allow us to provide every claimant with advice, not only on benefit entitlement but on the opportunities that may be available for jobs, training or child care. In most circumstances, people will be required to attend for interview. In my view, that is a fair requirement that should not be treated as a form of compulsion.
It has always been a condition of receipt of benefit that one completes an application and the condition that one should also attend an interview to seek advice is a reasonable and sensible extension of that principle.
Another element of the strategy is to ensure that, when people make the transition from welfare to work, they and their families enjoy an improvement in living standards. On Tuesday, we debated the working families tax credit, which will ensure that no working family with children will have an income of less than £190 a week. That is a major step forward in tackling the problem of the working poor, who represent the largest single group among the poor.
Even more importantly, the national minimum wage will come into effect in April and the Employment Relations Bill, published today, will provide a further element of the strategy to ensure that employment is properly rewarded. I promise that I will not stray beyond the subject of our debate by pointing out that the Bill contains an important new right to parental leave.
I hope that Ministers will consider ways of allowing parents on low incomes to take advantage of that new right, by making at least part of the leave period subject to payment. I believe that, in any case, it is necessary to consider the consequential changes in income support, family credit and the new working families tax credit that may be necessary to accommodate the introduction of parental leave.
The strategy also includes changes to national insurance contributions which are directly relevant to our debate and to which several hon. Members have referred. The changes coming into effect in April are welcome. The threshold for employers' contributions will be aligned with the basic tax threshold and employees' contributions are to be made fairer, with the abolition of the 2 per cent. payable on earnings below the lower earnings limit.
All those changes will make the system fairer but, as some hon. Members, including the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), have suggested, we need to have a debate about the future of the national insurance contributory principle. It is clear that the principle commands widespread public support, which I endorse, but the system has been badly distorted in recent years.
The previous Government increased national insurance contributions dramatically, as my hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) said, increasing the standard rate of employee contributions by 50 per cent. By the mid-1990s, national insurance contributions accounted for almost 70 per cent. as much in total revenue as income tax. They had become a hidden but highly regressive form of income tax.
The changes that are to come into effect in April will certainly help, but I hope that we may go further, perhaps aligning the lower limit for employees' contributions with the basic tax threshold. As the Low Pay Unit has said, it will remain the fact that almost 2.5 million workers earn less than the lower earnings limit and are therefore unable to build up an entitlement to benefits.
More than 1 million people have more than one job and, even if their total earnings are high enough to bring them above the lower earnings limit, the earnings in either job may not, so the current system may not fit with the flexible labour market. Many employees' earnings fluctuate from week to week, sometimes above the limit
and sometimes not; they may pay substantial national insurance contributions but never build up an entitlement. Many women are in that position.
The proposals for increased crediting, to come into effect in April, will help, but I am glad that the Social Security Committee will have an opportunity to consider how the contributory principle might be adapted and whether it fits today's circumstances. My view is that the wide public support for the system is probably justified, but we should review the system's merits and shortcomings.
Some of the elements in the strategy to tackle poverty are important in the short term; not in the long-term future that many people will not see, but here and now. One such element is the biggest increase in child benefit in history. We must underline the fact that, because of the other changes, the poorest families will benefit from that increase.
I welcome my right hon. Friend the Chancellor's suggestion that we need to have a proper debate in the long term about whether future increases in child benefit should be subject to tax at the higher rates. The Select Committee has been considering that, and we need a genuine, adult debate on the issue, to consider whether an already well-targeted benefit could be targeted even more effectively in the longer term, allowing us to make still further increases in the basic rate.
My right hon. Friend the Secretary of State referred, at the other end of the age spectrum, to the Government's plans to provide security in old age. I believe that the proposals in the Green Paper represent a means of providing that security in the long term, especially for the lowest-paid, and I welcome them. The minimum income guarantee offers the more immediate help that the hon. Member for Mid-Dorset and North Poole seemed to think was unavailable. It will help many people on the lowest incomes.
"The Government is talking about things they may do in five years' time. We pensioners need help now. An interim measure. Not more consultation. If you have a fire in the kitchen, you do not call the insurance company first. You call the fire brigade."
The hon. Member for Wythenshawe and Sale, East (Mr. Goggins) said that instant work is being done to alleviate the problems affecting pensioners. I am afraid that he is much misguided. I frequently receive letters from pensioners who say that they need help now and not in five years time when they may not be here.
"the gap between those with high incomes and those with low incomes grew, particularly during the 1980s."
28 Jan 1999 : Column 539
During that decade, the incomes of the poorest increased by only one eighth as much as the highest incomes.
Several hon. Members have referred to the report by the New Policy Institute, which was launched last night and is funded by the Joseph Rowntree Foundation, entitled "Monitoring Poverty and Social Exclusion". It documents the extent of what it calls "Labour's inheritance". It shows that, over the period 1979 to1996-97, average disposable income rose by almost a third in real terms. The hon. Member for Gainsborough (Mr. Leigh) suggested that the increase in wealth in the nation during those years had been shared by all groups, but the report shows that that was not the case. The poorest tenth saw their disposable income rise by less than half the average increase and at the end of 18 years, they had only £2 a day more to spend.
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