| Previous Section | Index | Home Page |
Mr. Rendel: Will the hon. Gentleman therefore confirm that the Conservatives will make it their official policy to agree with the Liberal Democrats that an extra £3 should be given to over 75-year-olds and an extra£5 to over 80-year-olds, which will reduce means- testing?
Mr. Davies: I entirely agree with the hon. Gentleman that, where the country can afford it, it is absolutely right to increase the state retirement pension, for which people have paid through their national insurance contributions, and not to discriminate particularly invidiously against people with small savings or to extend means testing. That has been quite the wrong approach. We shall propose our own policies for the next election--and for the next Government--which will be diametrically opposed to the direction in which the Labour party has been taking us over the past two years. I give that assurance unambiguously and clearly.
As if that were not enough, the Government have used the tax system to discriminate against retired people and those with small savings in a way that would have been
quite unimaginable--indeed was so until it happened. The Government have found a way of forcing people who are below the income tax threshold on their aggregate income to pay 20 per cent. tax on their small savings income. That particularly impacts on small savers and retired people.
I understand that, as a result of the Government's vicious decision to force people whose total income is under the threshold that Parliament has fixed--below which people should not pay any tax on their income--to pay tax, 300,000 non-taxpaying pensioners and a further 330,000 non-taxpayers will lose an average of £75 a year each, and 80,000 pensioners will lose more than £100 a year, and they can ill afford that. That is utterly unforgivable. The Government have cynically done that--perhaps in the belief that retired and older people are so stupid that they will not realise what is going on. If that is what the Government think, they have another think coming.
With a great many bells and whistles, it was announced in the Budget that we would have a new 10p starting rate of income tax, but we were not told that it would not apply to savings income. So, those who have retired, and therefore do not have earned income--they may have very modest savings--will not benefit from the 10p rate. That is vicious discrimination against savers in general, and retired people in particular. If the Government do not think that the country will notice, they are in for a very nasty shock.
Mr. John Cryer (Hornchurch):
I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing this important debate. I wonder where all the Tory Members are. The words of the hon. Member for Grantham and Stamford (Mr. Davies) ring a little hollow, given the empty Benches behind him.
All hon. Members have referred to their constituencies in this debate. Both my constituency of Hornchurch and the borough of Havering have a very high proportion of pensioners. Like other hon. Members, I see pensioners in my surgeries and meet them in the street, and they write to me and call me, so I feel able to represent their views quite effectively.
The biggest complaint that I receive undoubtedly concerns the reliance on means testing. Without any shadow of doubt, the Government have moved in the right direction. The Budget was marginally redistributive. The cut in value added tax on fuel was important, although, personally, I would have abolished it completely. Free eye tests are also important, as is the minimum income guarantee.
However, the number of people who are dependent on means-tested benefits, particularly income support, is generally rising. In my constituency, the number of
pensioners in privately rented accommodation who are dependent on income support is 500. The number who are council tenants is nearly 2,000. That is unacceptably high.
I know that the Government and my hon. Friend the Minister have often said that their principal aim on pensions is to remove reliance on means testing. I read the pensions Green Paper when it was released a short time ago, and have some specific questions about exactly how the state second pension--the replacement for the state earnings-related pension scheme--and the stakeholder pension will work.
The Green Paper claims that, as a result of the state second pension, there will be enormous increases over SERPS for low-income earners when they retire, but does not explain exactly how that will work. I would be interested in knowing the exact mechanism for guaranteeing such increases. Where will the savings and investment come from? What kind of figures are we talking about? How many pensioners will the state second pension remove from reliance on income support? I would be very interested in that, given the constituency that I represent. What time scale will apply to the state second pension? How soon will pensioners start to benefit from it?
I worked in the pensions industry during the 1980s as an underwriter, and saw the mis-selling. "Mis-selling" is just a euphemism; what took place was fraud--with the previous Government's blessing, by the way. Having seen that, I cannot envisage how the figures will stack up in the stakeholder pension scheme. There will be no compulsion, or even pressure, to ensure that employers contribute or help to set up the schemes, and that is the vital missing part. If the schemes are to be successful, there must ultimately be some compulsion on employers to take part and contribute to them.
I do not know how low-income workers will be able to contribute sufficiently to stakeholder schemes to give them a decent income when they retire. Such schemes generally concern people not on very low incomes, but on relatively low incomes. What actuarial analysis lies behind the potential stakeholder schemes?
I should like the Government to move toward the type of nationwide occupational schemes in Australia, which force employers to contribute and to take part in setting up the schemes. Even if we moved towards that, the problems on retirement of the very poorest pensioners and wage-earners would not be solved. I have always believed that the answer for the poorest pensioners and lowest wage-earners is ultimately the national state pension, to which we all contribute throughout our lives. That must be the saviour for the poorest pensioners. As many hon. Members have pointed out, if the increases in the state pension had been in line with earnings, and not just prices, since the link with earnings was abolished in 1981, the lowest pension would be about £90, rather than the current pretty miserly one.
As I said, the biggest complaint made by pensioners who come to my surgery is about means-testing. There is an almost visceral dislike of means testing among pensioners, which is entirely understandable. The Government have launched many schemes to find out why pensioners are not taking up their entitlement to income support. About 700,000 pensioners refuse to do so.
I can answer those questions for the Government, without using any schemes. The last thing that people want--certainly those in my constituency who might have
worked on the docks all their lives, been through the war and perhaps brought up a large family in difficult circumstances--is to have to go down to the Department of Social Security office to be patronised by someone half their age, patted on the head and told that they can have something to which they should be entitled in the first place. That leads to bitter, deep and long-standing resentment among pensioners.
Mr. Steve Webb (Northavon):
It is a pleasure to take part in a debate on this important subject. My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) has campaigned very hard on this issue, and I congratulate him on securing the debate. It is also a pleasure to speak after the hon. Member for Hornchurch (Mr. Cryer), who raised issues relating to employers being required to put money into stakeholder schemes and made some telling points. I hope that the Minister will respond to them. There may be less pension provision, not more, if employers start opting out of occupational schemes, into which they are putting money, and run stakeholder schemes instead.
In the few minutes available to me, I shall address primarily the future of pensioner poverty--where are we headed? However, a comment made by my hon. Friend the Member for Sutton and Cheam prompts me to remark briefly on where we are now. I asked the Secretary of State for the Environment, Transport and the Regions to say what proportion of pensioners in different age bands--on his definition, not on mine--were living in fuel poverty, which is spending more than 10 per cent. of income on fuel. The figures for younger pensioners were frightening enough, but the figure for households headed by a pensioner aged over 80 was 80 per cent.
That figure for such households was reached through the Department of the Environment, Transport and the Regions' definition of fuel poverty and its own figures. It shows the problem that we face and highlights our particular concern about older pensioners. However, I want principally to address our tomorrow--indeed, all our tomorrows, in 2020 or 2050. Where are we headed?
The Government have said that we start from a situation in which one pensioner in four is dependent not on means-tested benefits, but on income support alone. Hundreds of thousands more receive rent rebates, council tax benefit and so on, but 1.5 million pensioners out of about 6 million pensioner benefit units receive income support. The Government tell us that, on unchanged policies, that figure will be one in three in 2050, but the pensioner population will rise over that period and that figure will increase to 3.5 million pensioners, compared with 1.5 million today.
The Government also say that we need not worry because, if the Green Paper proposals are implemented, the figure will be one in four--but one in four of a bigger pensioner population, or 2.5 million pensioners. The Government say that, if they introduce their policies--leaving aside the possibility that lots more people will suddenly save, and assuming that a mass savings habit does not suddenly start--the figure will still be one in
four, but 2.5 million pensioners will be receiving income support instead of 1.5 million. That figure also leaves aside all the other means-tested benefits.
If I were about to write a pensions policy for the next 50 years, I would not consider an extra million pensioners receiving income support in 50 years, when the whole blasted scheme was working, to be a triumph. I would consider that a failure. The Government say in response, "But we are trying to encourage more people to save for their old age, through stakeholder schemes." I am sure that stakeholder schemes will overcome some of the barriers that people face under the personal pension regime, but there is real danger that, because of the Government's commitment to link the minimum income guarantee to earnings--I reiterate my support for that--the yawning gap between the basic pension and the poverty line will discourage people from saving.
It has been suggested that an annuity of between £15,000 and £20,000 would fill the current gap between the basic pension and the income support line, but that gap will grow quickly--not in line with prices or earnings, but faster than both. The gap between an item linked to prices and an item indexed to earnings rises faster than both; the simple arithmetic tells us that. The annuity that people would need to buy to fill that gap--the stakeholder pension pot--would rise exponentially, which would discourage people from saving.
I believe that the Minister genuinely wants to do something about pensioner poverty and that he cares about poor pensioners. For those who receive it, the minimum income guarantee will be of great value. A crucial issue, therefore, is non-take-up. In its election manifesto, the Labour party used the available figures and said that 1 million pensioners did not claim their income support. It has since emerged that there was a statistical blunder: that was not the Government's fault; they did not know that the figure was wrong. We hear that the figure is between 400,000 and 700,000; I ask the Minister to go back to his civil servants and demand proper figures now.
I have asked for details of those 400,000 to 700,000 pensioners: for example, how many of them are older pensioners? That is germane to assessing the validity of our strategy for helping older pensioners. I am told that I will have to wait for those details until May, when we will finally get some take-up figures. They will be three or four years out of date.
I used to be involved in constructing such statistics. One error made those figures wrong: the Government missed out private widows' pensions when they were working out people's incomes. I do not see why it should take four or five months to put that error right. Parliament is being denied proper information on a key issue for evaluating the Government's pensions policy.
The Government are relying heavily on means testing. Even if the figure is one in four in 2050, it will represent 2.5 million people; if it is one in five, it will represent 2 million people. That is a serious amount of means testing. A crucial aspect of assessing that policy is whether take-up is a big problem. It is shocking that we do not have proper information. I hope that the Minister will go back to his Department and get us proper information.
I want to raise a final point about the future of pensioner poverty. Let us assume that Government policy is introduced; although a mass savings habit does not
develop, there is no mass desertion from saving and we end up with a figure of one in four, which is an average over all pensioners, from those aged 65 to those in the oldest age groups. What will be the proportion for the over-80s or the over-85s? It will not be one in four because we know that the newly retired are, on average, much better off than the very elderly. The figure may be one in four for all pensioners, but perhaps one in six or one in seven for the newly retired. What would it be for the very elderly--one in two?
| Next Section
| Index | Home Page |