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Mr. Andrew Robathan (Blaby): Not "decimated".
Mr. Webb: Yes, literally decimated. The Government's majority would be reduced from about 170 to about 17.
Sir Sydney Chapman (Chipping Barnet): The definition of "decimation" is reducing by a tenth, not to a tenth.
Mr. Robathan: Exactly, Professor.
Mr. Webb: I am prepared to argue that it means reducing to a tenth, but I will not press the point.
The crucial question is, how will Her Majesty's official Opposition vote? We wait with bated breath to find out. Given that, had they been in power, 75p is all that pensioners would have got, one would expect them to vote against the motion. So on the ground that the Conservative party does not actually have a pensions policy, it should abstain. However, on the ground that the opportunist thing to do would be to rip up what it used to do and to say the opposite, it should vote with us; so there are all those possibilities. This afternoon, we look forward to finding out what the Tories will do.
The motion is about far more than the uprating. It is about whether the basic state pension has a future at all. The critical point is this: in a year when the Government had spare cash not just for everything else, but for pensioners and, indeed, for pensioner incomes, they thought of every way to spend it except putting it on the state pension. If they will not put it on the state pension in a year when they have plenty of money, will they ever if times are hard? If we do not stop the rot now, there will be no pension left to save.
To give an idea of how extraordinary the position in which we find ourselves is, I consulted the Library about what has happened to the state pension not just in the past 20 years, but since the war, relative to average earnings and relative to the poverty line. The results were astonishing and cast new light on what has been happening in the welfare state since the war.
When the pension came in, it represented about 14 per cent. of average earnings. That rose to 19 per cent. in the mid-1960s and stayed at around 20 per cent. until the early 1980s, when Mrs. Thatcher got her hands on it. Now it is about 15 per cent. In 30 years or so, it will be just 7 per cent. Why does that matter? It matters because pensions are about smoothing the transition from paid employment to retirement. If pensions lose touch with the earnings that they replace, they will achieve nothing.
I give one example. I have said that pensions were about 15 per cent. of average earnings. Hon. Members earn a minimum of £47,000 a year. Fifteen per cent. of that is roughly £7,000. Could any of us imagine retiring on £7,000? Clearly not. Of course, the pension in absolute terms is not £7,000: it is £3,500.
That is what we are increasingly condemning our fellow citizens to. It will get worse, not better because, by the time the Government state second pension comes in, the basic state pension will be half of income at the poverty line, or, in today's money, about £39 a week. The Government like to describe the state pension as the foundation of income in old age, but it is clearly a sinking foundation.
Not so long ago, the Labour party used to think that pensions should have something to do with earnings. This morning, I was leafing through Hansard from 13 April 1983. I came across the Labour spokesman's views. Succinctly and powerfully, he said:
Today, we are considering not just the value of the pension relative to earnings. Often, the Government will say that the pension is unaffordable. In last Tuesday's debate, they came up with some huge figure--tens of billions of pounds--on linking the pension to earnings and said that that was clearly unaffordable, but the answers that I have from the Library show that, in the 30 to 40 years after the war, successive Labour and Tory Governments not only linked the pension to earnings, but did vastly better. The pension rose from 13 per cent. of average earnings just after the war to 20 per cent. in the early 1980s--hugely better than earnings indexation.
Those 30 to 40 years were not years of unparalleled boom, yet successive Governments found the money to do that. How can it be that a prosperous country such as ours cannot find the money to do it now, when successive post-war Governments did? Could it be to do with political priorities and the fact that, incredibly, the basic pension is still not a priority?
We must consider a second aspect of the pension's value--its value relative to the poverty line. Although the Minister is very fond of saying that the pension was never intended to be enough to live on, when it was introduced--when it was worth 108 per cent. of the national assistance line--it was exactly that. If one had only a pension, one was not entitled to a top-up, because the pension was supposed to be enough to live on.
For most of the post-war period, the pension has been worth about 95 per cent. of the poverty line, or just a shade below. In the past year or two, however, there has been a drastic fall in its value. For someone who is newly retired, the pension is now worth 86 per cent. of the poverty line; amazingly, for an 80-year-old, it is 79 per cent. of the poverty line--which is a full £18 per week short of the poverty line. The consequence has been a huge and growing gap between the pension and the poverty line.
How is the gap to be filled? According to Ministers, for most people, it is to be filled by voluntary savings.
Mr. Dale Campbell-Savours (Workington):
I have been listening very closely to the hon. Gentleman's comments. However, I should tell him that--I say this in the Chamber, as it is a contempt of the House to mislead it--last year, from my 69,000 constituents, we received only six letters complaining about the level of the state pension. With the introduction of the pension guarantee, much of the argument on raising the state pension has effectively been destroyed. The hon. Gentleman has now been speaking for seven minutes, but has not even mentioned that.
Mr. Webb:
The hon. Gentleman may be sure that I shall mention it. Furthermore, I think that he has received so few letters on the issue because people do not think that there is any point in sending one. As I said, pensioners do not trust any of us on the issue because they have been let down by so many of us.
The gap between the basic pension and the poverty line has to be filled. However, if it is to be filled by people's voluntary savings, and if they will receive only a
means-tested top-up--which the hon. Member for Workington (Mr. Campbell-Savours) just mentioned--why should they bother to save?
Currently, someone retiring with £40,000 in savings should not have bothered to save that money, as it will buy him or her a pension top-up and payment of rent. The way things are going, if we retire with £100,000, we need not have bothered; expressed as a lump sum, it is only the gap between the basic pension and the poverty line. Why should anyone save in such circumstances?
The phrase in the Government's amendment to the motion that we should support
Why is this year's pension rise so low--only 1.1 per cent? In the year to September, the inflation rate was precisely 1.1 per cent.--whence the pension increase of 75p was derived. The increase will give pensioners another £39 a year, to meet all the price rises facing them. However, let us consider their various bills.
Last April, I tabled a question on council tax increases, and was told that, net of all rebates and benefits, the typical pensioner had to pay an extra £40 in council tax. As the same funding formula will be used this April, the increase could well be similar. Paying that one increase will thus require all a pensioner's pension increase, leaving him or her nothing to pay for other price increases. As the motion states, the 1.1 per cent. increase is inadequate because it does not reflect the rise in pensioners' cost of living. However, the situation is even worse.
Inflation was low because mortgage rates and interest rates were decreasing. The consequence of those decreases has not only been a poor pension increase, but decreasing savings incomes for pensioners. Pensioners were therefore hit with the double whammy of decreasing incomes, caused by decreasing interest rates, and a poor pensions uprating.
"Although pensions being tied to prices might look good for electioneering slogans, it is catastrophic for people who are now aged between 30 and 50 who believe that they are paying into a scheme that will provide them with a decent pension. That will produce major problems in the future."--[Official Report, 13 April 1983; Vol. 40, c. 882.]
What would happen under a Blairite regime to a firebrand left-winger such as that? Surely he would not find a place in the Government; he certainly would not as pensions
Minister. It is a funny old world, as I am sure the right hon. Member for Birmingham, Perry Barr (Mr. Rooker) would agree.
"the Government's commitment to letting pensioners benefit more from their savings"
is ludicrous. The Government are discouraging savings with every step that they take.
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