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5.54 pm

Miss Geraldine Smith (Morecambe and Lunesdale): My constituency has a higher-than-average proportion of pensioners included in the population. This is so because many retired people, having lived and worked all their lives in industrial towns and cities, like the prospect of living out their retirement in a seaside location that is in close proximity to the lake district.

The available of all types of housing at relatively low prices provides them with an incentive to take the plunge and move into the area. The net result is, as I have previously stated, that the area has a disproportionate number of elderly people. That being the case, I am sure that the debate will be followed with a great deal of interest by many of my constituents.

As the large concentration of pensioners within my constituency contains sizeable elements of all social groups, it has provided me with the opportunity to see at first hand over many years the stark contrast between the quality of life enjoyed by those pensioners who have retired with a decent occupational or personal pension, and the misery and despair suffered by those condemned to exist on the basic state pension. While many of the better-off have rightly been able to enjoy the freedom that retirement has given them, for the poorest pensioners the golden years of retirement have turned into an eternal nightmare.

There is little doubt that the previous Tory Government's decision to break the link between earnings and pensions considerably swelled the ranks of pensioners living in poverty. The progressive devaluation of the basic state pension has dragged many hard-up pensioners into the welfare benefit system. That progressive slide into poverty, which has afflicted so many elderly people, has completely devastated their lives.

Many pensioners are confused about, or entirely unaware of, the benefits to which they are entitled. That is in no small way thanks to the insidious suggestions

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constantly propagated by Opposition Members that anyone who receives a state benefit is a scrounger. Many impoverished pensioners who are aware of their entitlement to income support are too proud to apply for it. I therefore welcome the Government's decision to introduce guaranteed minimum levels for pensioners. I welcome also the Government's long-term commitment to increase guaranteed minimum levels in line with earnings, thereby ensuring that even the poorest pensioners share in the growing prosperity of our nation.

Clearly defined minimum income levels will provide a focal point for many pensioners who are unsure of their entitlements and will prove to be of great assistance to the Government in their efforts to ensure that all pensioners receive the income to which they are entitled. I welcome also other measures that the Government have taken, such as assistance with fuel bills, concessionary travel and free eye tests. Above all, I believe that the extra £21 billion investment in the national health service and the improvement in service standards that it will bring will be welcomed by people throughout the country, with the exception, perhaps, of some of those who sit on the Opposition Benches.

Radical proposals for the future of pensions are contained within the Green Paper. The first question that we must ask ourselves is whether the system really needs such reforms or whether we can tweak it to make it more responsive to the needs of our people. Within the current system, we have the basic state pension, which covers nearly all employees and the self-employed. We also have secondary pensions in the form of state earnings-related pension schemes, occupational schemes and personal schemes, which are compulsory for most employees. However, only the personal pension option is open to the self-employed, albeit on a voluntary basis. There are also numerous private schemes available to those who wish, or are able, to make additional pension provision above and beyond the compulsory pension level.

The system as it stands fails to provide adequate security in old age for many. It fails entirely those who earn less than the lower earnings limit of £3,300 a year. They are not even entitled to the basic state pension, let alone any form of secondary pension. They are therefore totally dependent on welfare benefits in old age. Other low earners who earn between £3,300 and £9,000 are also poorly served by the current system. The high administration costs and charges of private funded schemes make them an unattractive proposition for such people. Unless they are fortunate enough to belong to an occupational pension scheme, they will have to rely on state provision and will be left behind as the nation grows richer.

Even those in the middle income bracket are not adequately catered for by the current system. The ever-increasing flexibility required by the modern labour market and the growth of small and medium companies is leading to a downturn in occupational pension provision, and many people are left only with the options of SERPS, which is declining in value, or high-cost private schemes. The self-employed are probably worst served. A large proportion of them are on low to middle incomes. Their only option is a high-cost personal scheme to top up their basic state pension.

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All in all, it is apparent that the current system is failing a huge number of people for a variety of reasons. It is equally apparent that radical reform is essential. The Government's plans for a low-cost, high-return stakeholder pension will provide a bridge between the state and private provision.

The granting of pension credits to carers, something that has already been mentioned, is an imaginative idea that at long last gives recognition and comfort to that often-forgotten legion who play such an important role. The assistance provided for low and middle earners to attain a decent second pension will also be welcomed by millions.

I am not at all surprised that the Conservative motion totally opposes the measures that the Government have already introduced and those proposed in the Green Paper. The concept of the fairer, socially just and inclusive society that the Government are determined to build, and of which these measures are an integral part, is just as abhorrent to Tory Members as was the concept of a welfare state to their predecessors before its introduction just after the war.

6.2 pm

Miss Julie Kirkbride (Bromsgrove): I am delighted to follow the hon. Member for Morecambe and Lunesdale (Miss Smith), who made a somewhat emotional appeal on behalf of pensioners and their incomes. I am sure that her pensioner constituents will take great interest in what representations she makes to her Government to restore the link between the basic state pension and earnings, because she clearly implied they should do so. I look forward to her doing that.

The hon. Member for Bradford, South (Mr. Sutcliffe) made a similarly emotional appeal on behalf of pensioners and sought completely to rewrite history by suggesting that the previous Conservative Government did nothing about pensions. Labour Members often like to rewrite what happened under the previous Government, so I take this opportunity to remind the hon. Gentleman of that Government's enormous success. Some £800 billion is now invested in the private pensions industry and occupational pensions. Many of our citizens can look forward to their pension and their retirement with a great sense of certainty and security.

I remind Labour Members that that is a massive achievement because, when we introduced proposals for more private pension provision, they ran scare stories similar to the one that they ran about our reform of the basic state pension just before the last election. They said that we were trying to privatise pensions and abolish state pensions and that that was a terrible idea. Yet that was one of the greatest success stories of the previous Conservative Government.

Let us look to the future. In the United Kingdom, we can look forward to the national economy's balance sheet being such to enable us to afford pension provision. I readily agree that we might need to do more for poorer pensioners, but that balance sheet has been greatly helped by what happened during 18 years of Conservative Government. When we compare ourselves with our European Union counterparts, we realise that they will have great difficulty in being able to afford to meet the

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demands of their growing aging population and the many people who will look to the state to pay their earnings-related pension contributions.

Mr. Field: The hon. Lady is telling us about the achievements of the previous Conservative Government, which clearly do not relate to occupational pensions, which have been developing for the whole of the century. The previous Government's initiative was personal pensions. Will she tell the House how many people are drawing personal pensions and by what amount?

Miss Kirkbride: I do not have that information to hand. I am sure that the right hon. Gentleman, having been a Minister, knows the figures much better than I do. I am trying to draw attention to the fact--with which I am sure he will agree--that the great impetus given to providing for oneself, whether by occupational or personal pension, has been an enormous success from which we shall all benefit, because it will be possible to afford the pensions of the growing elderly population of which we shall be a part in future. It is important that Labour Members recognise how important that impetus has been--they would clearly like to forget about it.

We take exception to what happened when Labour got into power. The Chancellor introduced changes to advance corporation tax which have greatly diminished the value of pensions not only for future but existing pensioners, who will find that their pensions will increase at a lower rate because their pension funds will not be as valuable as they would otherwise have been. Labour Members say that they made those changes because they enabled them to reduce the level of corporation tax. We welcome that reduction, but its success in affecting the amount that industry invests has yet to be shown, and there has been a massive reduction in the amount of corporate investment. That change has yet to bear any fruit. We still insist that it was an unwise move that will affect us all.

The changes to ACT have a bearing on the problem of poorer pensioners. They, by definition, do not pay income tax, and they are now placed in the wicked position of being unable to reclaim the tax on their dividend contributions. It is an absolute disgrace that a party whose Members have, in their most recent speeches, made an emotional appeal on behalf of pensioners does not to allow the poorest pensioners to claim back their tax, while others, including myself and, perhaps, my colleagues, are able to do so.

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