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5.8 pm
Mr. Roger Berry (Kingswood): I suppose that recently many of us have been reflecting on the previous century. One of the great unsung achievements of that century is the fact that the number of people of retiring age has increased dramatically. In the century's first census, in 1901, about half a million people were over 75; at the century's last census, the figure was more than 4 million. The increase is hardly surprising. In 1908, when the old age pension was first introduced, for people over 70, average male life expectancy was a mere 48 years.
The previous century witnessed a dramatic improvement in longevity. That is something to be celebrated. We often forget that major achievement of the past century, which has left us with about 11 million pensioners in this country--about one in four of the electorate. The majority lead active lives, participating fully in the community and living independently with their friends and neighbours.
It is shocking when people talk about the demographic time bomb, as if there were a problem with more people living longer than we can afford. Not only is that an inaccurate description of current plans for funding retirement, but it is deeply offensive to 11 million people and their friends and relatives.
The situation that the Government inherited, as set out in the Government amendment, is characterised by two obvious facts. First, the number of pensioners living in poverty was increasing--the figure stood at one pensioner in four at the time of the election. Secondly, pensioners had a growing dependence on means-tested benefits. The new Labour Government had to address those two key problems.
I congratulate the Government on their significant achievements in addressing the needs of today's pensioners. The minimum income guarantee has resulted in record increases in income support of three times normal levels. There is a commitment that those levels will rise in line with earnings. The Government are also committed to a take-up campaign. It is slightly overdue, but no doubt that is because they are determined to get it right. I have close relatives who are almost certainly entitled to income support and I am concerned that accurate information should be made available. It is better to spend a little time on the take-up campaign and ensure that it works, but it has to be a priority. I hope that the Government will consider retrospective payments to those who have missed out so far because they have known nothing about the minimum income guarantee.
I welcome the free eye tests for pensioners, the increase in the winter fuel payments and the free television licences for those over 75. In case anyone has any doubts, the Liberal Democrats welcome them too. The hon. Member for Northavon (Mr. Webb) and I share a parliamentary boundary. We also happen to have all or part of our constituencies within the area covered by South Gloucestershire county council. Last year, the Liberal Democrats on that council voted for a resolution that included the following:
However, along with my hon. Friend the Member for Coventry, South (Mr. Cunningham), I admit that I signed early-day motion No. 73, the words of which are exactly the same as the motion today. The motion may have been tabled for reasons about which one could speculate, but as a matter of fact, I believe that April's 75p increase is inadequate. I believe that there should be a real-terms increase in the basic retirement pension. If I did not believe that, I would not have signed the motion. Having done so--and not taken my name off the motion--I still believe that. My position would otherwise be rather difficult.
I believe that 75p is not enough--first, because that is overwhelmingly the view of the public. My constituents who have contacted me and stopped me at the post
office--pensioners have discovered that this is an effective way of getting their point across to their Member of Parliament--have made it clear that a real increase in the pension, and not just one to match inflation, would be warmly welcomed. I have no doubt also that every organisation representing pensioners would welcome a real increase in the basic retirement pension. I am convinced that every trade union would take the same view, not least because their members are future pensioners.
I would go so far as to say that if the Government had decided to increase the basic state pension by slightly more than inflation, I suspect that there would not have been much opposition from Labour Back Benchers. People would not have said, "In principle, this is the wrong thing to do." I suspect that there might have been a fair amount of support.
Secondly, at present, a real increase in the basic state pension is the only way to help the poorest 750,000 to 1 million pensioners who are entitled to income support but do not claim it. It is the only way to improve their incomes and to relieve their poverty.
Thirdly, increasing the basic state pension would reduce the number of people dependent on means testing, which is a clear objective of Government policy. Fourthly, it would increase saving. Everyone has acknowledged that means testing penalises saving. That is why the Government, rightly, are reviewing the capital limits. We all know of many people who, because of their modest savings, are just above the income support level and cannot access significant improvements in their income unless the basic state pension improves.
The final reason why I signed the motion--and why I have left my name on it--is that its proposals are entirely consistent with Labour's election commitment. At the election, we said that the
Mr. Edward Leigh (Gainsborough):
It is always a pleasure to follow the hon. Member for Kingswood (Mr. Berry), who does his career no good by speaking from his heart; I am glad that he, for one, will stick to his guns on the motion that he signed.
The Government have two defences against the motion moved so ably by the hon. Member for Northavon (Mr. Webb). I do not always agree with what he says, but he always adduces strong arguments in support of
his case. The Government say that they simply cannot afford to restore the link with earnings and that it is better to concentrate resources on those who need them most. Those are understandable arguments.
There is the TINA argument--the old Thatcherite argument that there is no alternative--that we cannot restore the link because it would cost us up to £8 billion over 10 years. No one argues that we would go bankrupt, because we are such a wealthy country, but it is argued that the public finances would be seriously affected.
There is a universality argument: that such would be the reaction of taxpayers to an increase in public expenditure that there would be pressure for the basic state pension to be means-tested; there is also a demographic argument, that we are an increasingly greying population; and there is the argument, to which I am sympathetic, that people's willingness to invest in private pensions would be affected. There is also a ratchet effect argument, but that is so complex, and we have so little time, that I had better leave it for another day.
Everyone seems to accept those arguments, but I am not sure that they are as strong as people make out. The Government actuary, in his quinquennial review, said:
Before the Social Security Committee, the Government actuary said:
The Government argue that they are concentrating resources on the pensioners who are most in need and that there is no point in spreading the butter very thinly all over the place. The Department of Social Security has published an interesting research summary in its report No. 100. It has conducted research into the attitudes of those who should be claiming income support but are not. It says that 48 per cent. of pensioners still appear to be "entitled non-recipients" of income support.
The report says that people who are entitled to the means-tested benefits of the minimum income guarantee are not claiming them because there is "an attitudinal component"--I apologise for the social-security speak that runs through the document, but it is the Government's document and that is why I am quoting it--
"the council therefore welcomes the current Labour Government's commitment to pensioners as demonstrated by its fivefold increase in winter fuel payments, free eye tests for pensioners and cutting VAT on domestic fuel to 5 per cent., the lowest level allowed and notes the current Labour Government's effort to start to address this problem"--
the problem of poverty, that is--
"by introducing a minimum income guarantee for pensioners which will be uprated in line with earnings rather than prices from April 2000."
Liberal Democrat and Labour councillors from my local authority pointed out:
"On present estimates, it will mean that the poorest pensioners will be getting nearly £800 a year more as a couple and nearly £500 a year more as a single pensioner, than they did in 1997".
I am pleased that there is common ground in congratulating the Government on their significant measures to address the needs of pensioners.
"basic state pension will be retained as the foundation of pension provision".
It is difficult to envisage how the basic state pension can be that foundation unless in some way it keeps up with rising living standards. We said also that the basic state pension would increase
"at least in line with prices".
We did not say that it would increase only in line with prices. Along with my colleagues, I signed an early-day motion that was entirely consistent with the policy on which we fought the election.
"Real earnings growth will result in working people being relatively better off in future even if National Insurance contribution rates were to be increased to meet the cost of increasing flat-rate benefits in line with earnings. Based on gross pay and real earnings growth of 1.5% per annum, real earnings relative to prices will, in the year 2060, be approximately 2.5 times the corresponding level in 1999/00. Allowing for higher National Insurance contribution rates and earnings limits, someone on average male earnings would still have real net earnings, after National Insurance contributions, of approximately 2.4 times current levels."
That means that, because our economy is growing so well, we could afford to restore the link and people in work would still be better off.
"The point is that those who are working and contributing would still be a lot better off than they are today even if we were deducting contributions to enable the earnings link to be maintained."
I am not arguing that we should restore the link but emphasising the fact that such is the wealth being generated in our economy that we could do more to help the basic state pension. It may have been right to break the link all those years ago, but we could consider being more generous now. There are also other ways in which we could help with pensions in the private sector to avoid means testing.
"which here is broadly described as the 'stigma' dimension. The pensioners wished to remain independent and self sufficient in older age, they expressed a concern that claiming IS could be a threat to their pride and independence."
17 Jan 2000 : Column 585
The second reason is
Although the Government would argue that we have left behind the workhouse mentality of the 19th century and pensioners who have not made adequate contributions for their futures are not forced into workhouses, pensioners feel forced into some sort of mental workhouse when they are told that they must apply for certain benefits. Many pensioners do not want to do so.
"a process dimension, consisting of objections to, or negative perceptions of, various aspects of the claim process. For some these negative images were based on past memories and images of the history of the social security system. Images of those claiming benefits tended to be negative, viewing claimants as 'spongers' or 'scroungers'."
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