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4.29 pm
Mr. David Rendel (Newbury): First, I wish to associate myself and my party with the tributes to Derek Fatchett, who so sadly died at the weekend.
In talking about pensions, it is always important to respect the fact that two aspects must be considered--the long term and the short term. It should be remembered that some of the things that we could do about the short-term aspects of pensions provision for current pensioners might also help to solve some of the problems that the Government face in trying to rectify the long-term problems.
On the long-term issues, we must remember four things. First, it is important that, in the long term, pensions apply universally. One of the great problems is that too many people, for one reason or another, do not have an adequate pension provision. We must ensure that, whatever policies we introduce for the long term, they are universal, so that everyone has sufficient income to live on in retirement.
Secondly, we must make sure that money invested in pensions--through private pension funds, stakeholder pensions or elsewhere--provides good value for money and a reasonable return on the investment to encourage people, as far as possible, to put aside enough money when they are of working age to look after themselves in their retirement.
Thirdly, it is important that our long-term plans are reliable. One of the difficulties with pension provision over the past few years has been that, all too often, legislation introduced by one Government has been changed later by another Government. That is precisely what happened with the state earnings-related pension scheme, and that is one reason why it has hit so many problems.
Fourthly, whatever legislation is introduced and whatever provision for pensions may exist, it is important that pensions are relatively easy to understand, and that there is good education on how to invest and provide oneself with the best possible pension for the future.
The first problem with pensions is one that neither of the other two main parties has addressed properly--it is the oldest who are the poorest. Almost invariably, the oldest pensioners turn out to be the poorest pensioners. One in three of those over 75 is living in poverty. For a modern society, that is a shameful situation which we need to address as quickly as we can.
The second problem is that it is often the women in our society who are the poorest--first, because women usually live longer, and therefore tend to be the majority of the older pensioners, and, secondly, because many women have tended to rely on their husbands for their pension provision, whether through the state system or through private or occupational pensions; when the husband dies, those pensions are reduced in one way or another, and widows often find that the pension provision with which they are left is too small for their real needs. The abolition of the widows bereavement allowance will not help; nor will halving the additional SERPS pensions next year.
On that issue, I was sorry that the Secretary of State did not have the grace earlier to accept that there is a problem, which the Labour party must face, with what happened in the first year and a half of Labour's time in office. The right hon. Gentleman would be on stronger ground in his accusations about the Conservatives--which are well founded, as there is no question but that the lion's share of the blame for the problems with which he is faced in terms of SERPS lies with the previous Government--if he were prepared to admit that, in the first year and a half of his party's time in government, the letters from the Department were still giving the wrong information, in spite of the fact that the Department was well aware by that time of the situation, since it had, in 1996, changed the booklets that were going out.
There is an issue there. My understanding now is that pressure was put on civil servants in the Department to do something about that, and to change the instructions about what letters were sent out, but the pressure was not enough. No one took a grip of the situation. No one forced the issue and ensured that it was dealt with early enough. As a result, the difficulty went on for much longer than it should have after the present Government took control.
It is a great pity that the Secretary of State is not prepared to admit that. As I say, in talking about the issue, his hand would be strengthened if he were prepared to admit that there was a problem in the first months in which the Labour party was in office.
Thirdly, too much of what the Government are doing will, sadly, discourage people from saving, particularly the fact that pensioners' savings will not be taxed at the 10p rate. In effect, there will often be an unearned income surcharge on pensioners. That will only hinder people and discourage them from providing for themselves through savings.
Fourthly, I come to the minimum income guarantee. Again, to a large extent, the guarantee is a fraud on pensioners because it is not any sort of guarantee of a minimum income for them. The poorest pensioners, those who are not on income support, will not get the minimum income guarantee. They will still live below income support levels--even the lower level of income support that people have been used to.
It is wrong of the Government to claim that, simply by introducing a minimum income guarantee, they will solve the problems of poverty among pensioners. It willnot happen. We know that it will not happen. The Government have to do better than that.
Mr. Duncan Smith:
Does the hon. Gentleman recall that a fellow Liberal Democrat Member, the hon. Member for Northavon (Mr. Webb), who sometimes speaks on pension issues, has raised the point that someone who is retiring who is just ahead of the minimum income level will be rapidly overtaken by the minimum income guarantee because it is in line with prices? Even those who, on retirement, are ahead of the level will get trapped because the return from their income will be less and less compared with the minimum income guarantee; so the Government are setting a huge poverty trap for later on.
Mr. Rendel:
What the hon. Gentleman says is true. I was going to make a similar point later, so I will leave my precise response to his intervention until then. He is right, however. Of course, there is a great problem with the minimum income guarantee. It will not guarantee the poorest pensioners a minimum income.
In his response to my intervention, the Secretary of State made the point that he had plans at some time in the future, which is as yet unspecified, to do something about the level of savings--capital--that people are allowed to have before they lose their income support and, therefore, their minimum income guarantee. We have said that we are delighted that he has plans to increase the figure of £8,000. He should increase it by a considerable amount to overcome the problem.
Many elderly people feel that they need considerable savings to ensure, for example, that they do not leave debts behind to their descendants, or burden them with the cost of their funerals. They want to have a little to pass on to their children from what they have earned during their lifetime.
I hope that the Secretary of State will speed up the process, which he has been telling us about for a long time, of reviewing that figure, of deciding on a new figure and of implementing it as soon as possible. It is badly needed.
The Secretary of State failed to respond to the other half of the problem: the 700,000 or so pensioners who are eligible for income support--they do not have particularly high savings--but who, for various reasons, are not claiming and receiving it. Even if he does review the capital allowance, those pensioners will still be below income support levels and living in dire poverty. His minimum income guarantee will do nothing for them.
The Secretary of State has told us that he has plans to reduce that figure, to ensure that more and more of those who are eligible for income support claim it. That, too, is welcome, but he will never be able to remove the problem altogether. He will never be able to ensure that everyone who is eligible for income support claims it. The attempt to reduce the figure is a truly Sisyphean task because, as soon he starts removing one or two from the figure and enabling them to claim their rights, he will find that more and more people are becoming eligible for income support and not claiming it. Therefore, just as some people come off the top of the list, others will join it at the bottom.
I should be prepared to bet that, however hard the Secretary of State works on the problem, the 700,000 figure will never be reduced to anything approaching a manageable level, and that hundreds of thousands of people will be eligible for income support, but will not claim it. Those people will therefore not be eligible for the minimum income guarantee, but will still be living in the most dire poverty. Unless he can overcome that specific problem, the minimum income guarantee will not overcome the more general problems.
I should spend a minute or two considering the Conservative policy--or, as the Secretary of State has rightly said, the Conservative non-policy. One of the tragic aspects of the current situation is that, so far, Conservative Members have told us only that--at some time, one hopes before the next general election--they will produce a pensions policy.
Mr. Leigh:
What is the hon. Gentleman's policy?
Mr. Rendel:
I shall, if I may, describe it in a moment.
Pensions plus seems long since to have sunk without trace. The Conservatives also have to accept that, by breaking the basic state pensions link with earnings, they have caused many of the current problems of pensioner poverty.
As for Labour--as the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) said a moment ago--the minimum income guarantee will rise in line with earnings, thereby creating a problem for the Government as the gap between the minimum income guarantee and the basic state pension grows and grows.
As ever more people are covered by the minimum income guarantee, an inevitable consequence will be more means testing. It is inevitable also that ever fewer people will feel that private pensions are worth it. Increasingly, people who have saved into some form of private pension will discover that they are still below the minimum income guarantee level, but that anything that they have provided towards their own pension has been, for them, simply money wasted. Although they will be saving taxpayers and the Exchequer a bit of money, they themselves will be no better off from paying into their own pension.
There is also a need--which the Secretary of State rather too easily glossed over--for Labour to grasp the nettle of compulsory second-tier pensions. The Government have argued that they do not want to pursue that policy because people do not have a proper vehicle into which to place their pension funds. However, that argument does not answer the question--which is the first one that should be answered--of whether compulsion is required. We believe that compulsion is necessary. Once the Government answer that question and take a decision on it, they will have to ensure that appropriate vehicles are available. Simply saying that such vehicles are not yet available does not answer the compulsion question.
What is the way forward? We have to accept a number of facts. The first one is that the average age of our population is rising, and that the number of people of pension age is growing.
Secondly, we have to acknowledge that people are remaining active for longer. Therefore, when examining long-term pension provision, we have to ensure that people have flexibility--particularly in deciding their retirement age--in pension provision. Some people may be able to remain active and in work for much longer than they do now. If they are prepared to do so, that will help us in providing for pensions. We--and any pension policy that we introduce--should make allowances for that.
Thirdly, we should accept that there is a real need for cross-party consensus in addressing the pensions issue. For some time, I have been asking for consensus, and suggesting that the three main political parties should get together and try to talk through the various issues. Unfortunately, so far, the requests have not met with agreement from the other two parties. Nevertheless, I hope that they will accept the need for consensus on the issue. If we simply continue the cross-party dogfight on the issue and refuse to accept that other parties have a worthwhile point of view on it, we can be sure as hell that legislation introduced now will be overturned by a future Government, whoever they may be. That is no way to deal with long-term pensions for our population.
We shall be letting down our people if we are not prepared to come together and hammer out a cross-party consensus on a realistic and long-lasting pensions policy which, if we introduce it now, will last through future Governments and be properly implemented when those pensions become payable. I make a strong plea for cross-party consensus on these issues. The SERPS fiasco has demonstrated how necessary that is.
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