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Pensioners
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Mr. Llew Smith (Blaenau Gwent): On occasions, we rightly debate what we sometimes describe as minority issues. However, this debate concerns not only the plight of 10 million pensioners, but the problems that face all of us--problems facing Members of Parliament, but, more important, those facing people outside Parliament who have not been as fortunate in the wages and pensions that they receive and will receive.
Next spring, if the Government insist on linking pension increases to prices, a single pensioner will receive an additional 75p a week, bringing his pension up to £67.50, while a couple's pension will increase by £1.20 to £107.90 a week.
If we as a Government allow that to happen, we shall be in the obscene position of having Cabinet Ministers who earn in excess of £94,000 a year lecturing senior citizens on why a 75p rise is adequate, why £67.50 or £67.70 a week is an adequate sum on which to live. I do not know whether that is the third way, but I do know that it is wrong. I suspect that few Labour Members would be willing to defend it and I am sure that pensioners will be outraged. I do not believe that the Government would act like that and I am confident that the settlement will be more generous, but the question is how generous? The Government will have to build on the positive initiatives of the past couple of years, including the reduction in VAT on fuel and the additional winter fuel allowance.
Today's debate is about beginning to rectify a wrong, that wrong being pensioner poverty. One of my predecessors, Nye Bevan, was fond of reminding us that
The Government claim that, by raising income support, they are helping the poorest pensioners, but that is not so, because although the poorest pensioners live below the level set for income support and are entitled to income support, for a variety of reasons they fail to claim it. It has been estimated that as many as 860,000 pensioners are in that position. That is not all: as many as 600,000 pensioners below income support level cannot claim, because their savings are taken into account, with the result that the guaranteed minimum does not apply to them.
Another truth is that the value of the basic pension has fallen dramatically as a proportion of average earnings. If pensions had continued to be linked to earnings, as they were until that link was broken in 1980, a single pensioner would now receive £95.05 a week. In addition, the Green Paper "A new contract for welfare: Partnership in Pensions" shows that the combined value of the basic
state pension and the proposed second pension will reach only about 21 to 26 per cent. of the average male wage by the middle of the next century.
When the Labour Government introduced their pensions reforms in 1975, they included a compulsory second tier, the state earnings-related pension scheme, and guaranteed that pensions would rise in line with earnings or prices, whichever was the higher. The two pensions combined were to be equal to almost half the average earnings. That is far better than the proposals in the current pensions Green Paper, which shows that the Government are determined to privatise much of our pension provision, despite the scandal of private pension mis-selling in the 1980s. If anyone doubts that, they should take note of what my right hon. Friend the Secretary of State for Social Security said:
It is possible that the Minister who winds up this debate will express sympathy with the demands of pensioner organisations and myself, but he will quickly follow that by saying that the money to meet those demands is not available--indeed, he might challenge me to state where the money is to be found and who is to pay. Anticipating such a challenge, I shall suggest how the bill for increased pensions can be paid.
I remind the House that immediately after world war two this country faced bankruptcy, yet we still managed to finance the transfer of millions of workers from military to civilian production; to introduce a massive housebuilding programme; to create the finest piece of socialist legislation this century--the jewel in our crown--which established the national health service; and to legislate for a major welfare reform programme. All that and much more was achieved by a country which faced bankruptcy. Now, 50 years later, we are one of the richest countries in the world, so our potential achievements are far greater.
The National Pensioners Convention, Age Concern and Help the Aged campaigned for a 1999 increase to £75 per week for all single pensioners and £116.60 for pensioner couples. That, they emphasised, would be the first step. I am sure that they will agree that those sums are still a pittance, well below the 50 per cent. of male average earnings which, it is normally argued, represents the poverty line.
The Government obviously support means-testing and would probably argue that it is wrong for the richer pensioners to receive as much from the state as poorer pensioners. In my opinion, the answer is not means-testing, but a progressive tax system that taxes at a higher rate those on high earnings when they are in employment. That is the way we should tackle inequality. I shall make some suggestions in that respect later in my speech. For now, I shall simply state my belief that the principle of universality in pension provision is just as important as in other public services.
The £75 non-means-tested pension, with proportionate increases for married couples, demanded for 1999 would have been a step forward, but only a single step. The other demand made by the National Pensioners Convention is that the Government should recognise the need to restore the link between wages and pensions--which, as we all
know, was broken by the Tories in 1980--and begin to move toward setting pensions at the levels they would have been in 1999 had the link not been broken. That is obviously fair, given that national insurance contributions are linked to earnings.
The cost of meeting the £75 and £116.60 non- means-tested pension would be £4 billion--a tiny sum compared with the savings that have been made and the moneys now available. I shall suggest a few areas in which the money could be found to ensure that pensioners receive the income and the justice they deserve. Many of the figures I shall use were provided by the House of Commons Library statisticians. They emphasise that we can meet our manifesto commitment to ensure that pensioners share the benefits of increasing national prosperity. We have rightly placed considerable emphasis on fulfilling our manifesto commitments and I am sure that we do not want to break that one.
First, the Government Actuary estimates that there will be a surplus in the national insurance fund of approximately £5.9 billion in 1999-2000. Secondly, the breaking of the link between pensions and wages has resulted in massive savings. Answering a question in the other place in February 1998, Baroness Hollis said that those savings now totalled £10.1 billion a year. Since 1980, when the link was first broken, savings of about £85 billion have been made--at the expense of senior citizens.
Thirdly, about £4 billion is spent--and therefore wasted--each year on the administration of means-tested benefits. Fourthly, many people, including up to 860,000 pensioners, do not claim the benefits due to them. The Government recently announced that for the year1997-98 the savings amounted to between £1.6 billion and £4.1 billion.
Fifthly, budget forecasts show that there is now a budget surplus of about £12 billion. That is almost certainly a conservative estimate, because we know that the economy has expanded far more rapidly since the forecasts were made, and the budget surplus for the years 2000-01 and 2001-02 is likely to be about £20 billion.
Sixthly, if we linked our defence expenditure to the average expenditure of other western European countries we could save about £4 billion.
Finally, the money could be found by changing tax rates. For example, if we taxed incomes over £100,000 at 50 per cent. we would raise an additional £2 billion, and increasing that rate to 60 per cent. would raise an additional £4 billion. It is important to apply the fine socialist principle of the redistribution of wealth by taxing the highest earners at a higher rate.
Redistribution is necessary because under the previous Government--unfortunately, this has continued under the present Government--the gap between the rich and the poor has widened, with the poorest 20 per cent. experiencing no change, or even a decrease, in their real income. Again, pensioners are a significant number within that group; again, they are losing out.
Those are just a few suggestions about where the money could come from to meet pensioners' demands. I emphasise that fact, because I am sure that other hon. Members, including my hon. Friends--and, who knows, perhaps even the Minister when he responds to the debate--may have other suggestions about how the money can be raised. I do not suggest that all the savings
that I have mentioned should go to pensioners, although much of the money thus raised should go to them. We are no longer facing bankruptcy, as we were in 1945. We are an extremely rich country, awash with money that could meet the pensioners' demands.
Of course other issues, too, affect pensioners, and the Government must address those as well, including the costs involved when pensioners enter nursing homes. The Royal College of Nursing has called for nursing care to be free under the NHS to all who are assessed as needing it, wherever it is provided.
Finally, as I switch on my television every night I am confronted with news of the plight of the farming community, yet hardly any mention is ever made of the plight of the pensioners. There are far more pensioners than farmers--10 million of them. All of us, not only politicians but people in the media, too, should concentrate a little more time and effort on highlighting the plight of the pensioners.
"Socialism is the language of priorities".
I believe that there are still some Cabinet Ministers who remain proud of their socialism; that being so, they have a duty and an obligation to prioritise the attack on pensioner poverty. Nye was also fond of the quote:
"This is my truth, now tell me yours."
The truth of pensioner poverty is that, from April this year, means-tested income support for pensioners rose to £75 a week for a single pensioner and £116.60 for a couple; for a couple with a non-means-tested pension, the figure is £106.70, while a single pensioner receives £66.75 a week.
"if people stay in the state system, they will lose money".--[Official Report, 15 December 1998; Vol. 322, c. 771.]
That might be an honest statement of intent, but it signals disaster in terms of providing for future pension needs.
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