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Mr. Campbell-Savours: My right hon. Friend gave some interesting statistics earlier that may surprise many people outside the House. Will not the figures for 1996-97 be substantially higher than those that he gave? Are there any projections about what those figures will be? All hon. Members want the state pension to be increased substantially, but the amount of correspondence
that we receive on the level of the base pension has diminished. We need more accurate statistics that show the truth of what is going on in the country.
Mr. Rooker: My hon. Friend is right to say that the figures will have changed from those that I quoted. However, the new pensioner income series figures for 1997-98 will be available before the end of the month, and the Department of Social Security will publish a paper on pensioner incomes shortly afterwards.
I will not go into the details, but a pensioner in my constituency made an inquiry of me last Friday evening. I had not met the gentleman before but, in the course of our conversation, I happened to see the pension forecast made for him just before he retired in May last year. His basic state pension was £66.75. He had a full, 100 per cent. national insurance pension after working in the engineering industry. The salaries that he had received were not massive, as he was not involved in highly skilled work. He had almost £6 in graduated pension from the system operating between 1961 and 1975, and his SERPS pension was well over £50.
My constituent's income was therefore more than £120--almost double the basic state pension. That is typical of three quarters of the people who are retiring now: they do not retire only on the basic state pension, as they also have the benefit of SERPS and the other pension. I shall deal with those receiving only the basic state pension shortly.
Average pensioner incomes have risen in the past 20 years, but the gap between the poorest pensioners and the most well-off has widened significantly. The incomes of the least well-off 20 per cent. of single pensioners have risen by only 28 per cent. in real terms, whereas the incomes of the richest 20 per cent. of pensioners have increased by 76 per cent. in real terms.
The main reason for the improvement in many pensioners' incomes has been the growth in incomes from occupational pensions and from investment. In 1979--three years before the left-wing firebrand's remarks referred to by the hon. Member for Northavon--43 per cent. of pensioners had occupational pensions. By 1996-97, that figure had risen to 65 per cent. Occupational pensions have been a massive success in this country, and the credit for that goes to all the parties and individuals involved. The contribution from Governments can be seen in the tax advantages associated with the schemes.
Since 1979, there has been an increase in real income from occupational pensions of 162 per cent. That is a very substantial increase, and the average amount of investment income received by all pensioners has doubled in real terms. The proportion of pensioners dependent on means-tested state benefits was 40 per cent. in 1996-97, including 28 per cent. of those who were recently retired. So about a quarter of today's pensioners are coming out of a lifetime of work on to the means test. That is a serious situation, which no Government can ignore. There is an overwhelming case for ensuring that we take effective action in respect of those pensioners, and that is what we have tried to do.
I suppose, when I look around the Chamber, that very few understand more than I do the feelings about the links between the basic state pension and prices rather than earnings.
Mr. Campbell-Savours:
The Rooker-Wise amendment.
Mr. Rooker:
It has nothing to do with that.
When that link was introduced by the previous Labour Government--much to their credit--it operated for only four years, and was calculated wrongly for three of those four years. However, there is no doubt that it gave pensioners a real increase in the basic state pension.
Of course, there was no state earnings-related pension then: SERPS effectively started accumulating only from 1978. We were in a different situation. Nobody could have given the kind of total incomes that pensioners receive today, even in the values of 1979.
There were many years in which the basic state pension did not increase at all--1956, 1957, 1959 and 1960. It should have gone up in May 1964, but it did not; it should have gone up in November 1970, but it did not. I do not want to make a party political point, but a Conservative Government were in power on every one of those dates. So it was not the norm to have an annual increase and in some years--it happened in 1975 in particular--there were two increases because the Labour Government needed to make up the gap that had occurred before they came to power.
There are various beliefs that pensions have risen every year, that they have always been linked to earnings and that the basic state pension has always been enough to live on. Those are all myths; they are untrue.
Mr. Webb:
Does the Minister accept the point that I made based on the Library's figures? History shows that, since the war, the pension has not simply been earnings-indexed but has risen as a share of average earnings from 14 to 20 per cent. The Minister may be saying that pensioners should be grateful for an annual increase but, since the war, Governments have done better than providing earnings indexation over a period of decades. Why is that so impossible now?
Mr. Rooker:
That completely ignores the example that I gave from my constituency of someone who has just retired and has SERPS of more than £50 a week. Of course, those figures are based on the basic state pension--anyone can make those calculations, because we know the figures. They are universal, as long as people have the full 100 per cent. Succeeding Governments--and the graduated pension, from 1961 to 1975, was introduced by a Conservative Government--attempted to build on the basic state pension so that people received an amount that related to their earnings. That was an important element, but is never taken into account in statistics based on the basic state pension.
I accept the hon. Gentleman's point, but it is valid only if the basic state pension is total pensioner income. I refuse to accept that. One must consider the total pensioner income in the round, which is why Richard Crossman and Sir Keith Joseph, along with previous Ministers, attempted to make that break, to build on the basic state pension. Therefore, it is inevitable that there is fluctuation when prices are compared with earnings,
because one is looking at a moving target, based on individual circumstances. So, although I accept the hon. Gentleman's figures, I do not think that they paint a true picture, or do any service to pensioners--either pensioners of the future, who are thinking about saving for a pension, or today's pensioners.
Mr. Bercow:
Will the Minister give way?
Mr. Rooker:
If the hon. Gentleman's intervention is as good as his previous one, then yes.
Mr. Bercow:
I am grateful to the right hon. Gentleman for giving way. I hope that he will agree that, notwithstanding the importance of improving provision, it is of the essence that the existing system should be efficiently administered. Following the breakdown of NIRS2, which deprived thousands of pensioners of their legitimate entitlements, does he recall the "Dear colleague" letter of 11 September 1998 from the Secretary of State which said that the problem would be resolved in the next couple of weeks? However, on 28 January 1999, the right hon. Gentleman was forced to admit that it would be many months before the problem was completely resolved. Has it now been resolved, in each and every case?
Mr. Rooker:
No. As I said in answering a question last week, the latest information from the Benefits Agency is that 83,000 cases are outstanding and we expect all to be settled this year. NIRS2 has been bad for pensioners--some have not been paid correctly, although some have been overpaid. That massive computer system--bought on the cheap by the Conservative Government--is crucial to many of our reforms. Bereavement allowances, state second pensions and stakeholder pensions all depend on the success of NIRS2, as does pensions forecasting.
There is no quick fix for the computer system, and delays, though regrettable, are inevitable. A quick fix would be irresponsible given the high dependency on the system of many policies, benefits payments and contracted-out rebates. We hope to settle the 83,000 cases--some underpayments, some overpayments--by the end of the year.
Let me turn to the costs implied by the hon. Member for Northavon in his speech; of course, no costs were mentioned in the Liberal Democrat motion, which makes no proposal. Increasing retirement pensions--and, we should not forget, linked benefits--by the average earnings index would cost £1 billion net in 2000, and £8 billion in 2010. I answered questions on this subject within the last week and in November, so I almost expect an intervention at this point. The single pension will go up to £67.50 a week in April but, if it had been linked to earnings or prices--whichever was higher--since 1979, when the link was broken, it would be £97, a difference of almost £20. The cost of bridging that gap in one go would be £13 billion net, including the additional cost of benefits linked to the retirement pension.
We have just under 11 million pensioners. By 2030, there will be almost 14 million, so the gross cost of even a modest change in April would be £30 billion a year by then. Much of that money would go to well-off pensioners. I do not claim that those on the average are well off, but they are much better off than people on
income support, who would benefit less. That cannot be right. We do not apologise for using the basic state pension as a building block. No one is expected to live on that pension alone. For anyone who has no savings, there is other provision, such as the minimum income guarantee.
One of our traditional aims has been to concentrate help on the least well-off, while managing the system so that those who can do things for themselves do so without Government involvement. Since the second world war, the lack of a consensus on pensions has meant that no Government have been able to build for the long term. I do not say that people cannot trust Governments--that would be wrong, and unfair to Governments of both parties. However, the more provision people make for themselves via funded schemes and occupational pensions, the more secure they are bound to feel, given the history of pension provision.
By 2001-02, we shall spend £4 billion more in real terms on pensioners. We make no apology for that, as much of the money will be targeted at the poorest pensioners. Some 1.5 million pensioners are benefiting from the increase to the minimum income guarantee by £160 a year in real terms. Pensioner couples aged more than 80 and on income support will be £455 a year better off, in real terms, after this April's increase--that is more than £8 a week. The actions that we have taken will ensure that as many people as possible receive that extra benefit. We have not merely based our actions on research, but have piloted schemes to find the best way of organising the take-up of that benefit.
We are examining the rules on capital. Some of the points that the hon. Member for Northavon made about capital and savings are right. Our commitment is that, before the end of this Parliament, we shall have done something about capital limits, which have been frozen for so long. That is unfair on many pensioners--whether the limits are £3,000, £8,000 or £16,000. We shall deal with the matter--it is in the package.
However, it is true that part of the package is not about the least well-off--we make no apology about the winter fuel payments. To put that money into people's hands before Christmas, we needed a cut-off date in September, in order to pay £100 per pensioner household--indeed the amount will now be paid to all men and women aged over 60. If we had undertaken means-testing for the payments, it would have cost us £100 to organise each payment. That is why we acted in that way. The money is not targeted in the sense suggested by the hon. Gentleman, because we consider that it forms part of our policy of ensuring that the wider pensioner community should benefit from the economic performance of the country.
The same argument applies to television licences--free to the over-75s, but not means-tested. That is a further demonstration that we are spreading more of the country's income around the pensioner community.
I realise that the time for debate is short, so I shall come to a conclusion. The minimum tax guarantee and other measures have taken 200,000 pensioners out of tax, and two thirds of pensioners pay no income tax at all. The VAT cut on fuel affected everybody, but fuel is a disproportionately high part of pensioner expenditure, so pensioners also benefited from that cut.
One of the most despicable and cheapskate policies of the Conservative Government was the removal of free eye tests for pensioners. We have reintroduced those tests.
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