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6.28 pm
Mr. Paul Burstow (Sutton and Cheam): I apologise to the one or two hon. Members who have been unable to speak in this debate.
This has been a very useful debate. Liberal Democrats make no apologies for focusing on the derisory 75p increase in the basic state pension which is to come into effect in April. All I want to do is to seek clarity on the stance of the official Opposition and of the many Labour Members who signed the early-day motion to which my hon. Friend the Member for Northavon (Mr. Webb) referred.
I shall try to address a few of the points made in the debate, starting with the comments of the hon. Member for Kingswood (Mr. Berry), who rightly said that the supposed demographic time bomb is a myth. The royal commission on long-term care and, indeed, the Select
Committee on Health, have comprehensively scotched that argument. If there was a time-bomb at all, it went off in the 20th century, and we managed to afford the costs of it. It is important to bear in mind the fact that we not only afforded a massive increase in the number of pensioners but were able to put in additional resources to improve the basic state pension. We should not forget that fact, to which my hon. Friend the Member for Northavon drew our attention.
The Minister referred in his opening remarks to the fact that we had changed our policy since the general election in respect of our manifesto commitment on the uprating of the basic state pension. That is true. It is fine and appropriate to consider policies and to keep them under review. It is a strange proposition that at no point should a party re-evaluate its position. The position that we have outlined sets us clearly apart from the other parties on the issue of pensioners and how to improve their circumstances.
We have made it clear that we want a new £3 age addition to the basic state pension at 75, and we want to build on and increase to £5 the miserly 25p age addition at 80. Those are the first steps in improving the lot of the poorest of our pensioners.
We should consider how to index the basic state pension to the basket of costs that pensioners face in reality. The hon. Member for Islington, North (Mr. Corbyn) and others referred to the costs that are not properly factored into the calculation of the retail prices index, which is the current basis for uprating.
The Minister spent quite some time talking about averages. He talked a lot less about the poorest of our pensioners. As we have established in this debate, although it is undoubtedly true that average pensioner incomes have increased, the figures ignore the situation of the long-term retired, whose incomes have declined because all too often they are uprated in relation to prices rather than earnings--whether occupational pensions or the basic state pension. Inflation has eroded the value of pensions, and has left pensioners in an increasingly difficult and hard-pressed situation.
Where do the Conservatives stand? Very few of them stood in this debate. [Hon. Members: "Where are they?"] They obviously had engagements elsewhere. Perhaps they were consulting pensioner constituents to find out their views. In a speech lasting 14 minutes, their spokeswoman, the hon. Member for Beckenham (Mrs. Lait), did not elucidate their policy or give the official Opposition's view of whether the basic state pension uprating this April is adequate. My hon. Friend the Member for Somerton and Frome (Mr. Heath) was right to pose that question, but the Conservatives did not answer it. They do not seem to want to say what their policy is.
My hon. Friend the Member for Southport (Mr. Fearn) rightly made the link between health equalities and the level of pensions. That was drawn out by the Government's own report--the Acheson report--in September 1988, which made it clear that there is a definite link between low incomes and poor health outcomes, to which several hon. Members referred.
The proposition that we have put to the House tonight is that the 75p increase in the basic state pension is derisory. It will do nothing to meet the real costs of living with which pensioners are confronted every day. For most
pensioners, the pension increase will be consumed by, for example, the council tax increase. The poorest pensioners will be hit the hardest. Indeed, 870,000 people who are entitled to claim the so-called minimum income guarantee do not claim it. The hon. Member for Gainsborough (Mr. Leigh) referred to the Government's research on take-up. A factor that he did not mention, which I think is highly relevant, is that 36 per cent. of the people who responded to the Government's research said that they would not claim the benefit: they would refuse to take up a means-tested benefit and would thus continue to live in poverty. The Government must consider that seriously. It is right that we urge people to take up the minimum income guarantee, and I hope that the campaign that the Government are about to launch is a success.
Another 600,000 people are disqualified from the minimum income guarantee because they have savings of £8,000 or more. My hon. Friend the Member for Southport rightly talked about this new category of poor pensioners who live in properties which their income is no longer sufficient to maintain. That is a serious challenge for all hon. Members to think about: there is now no reward for thrift. The Government made matters worse when they decided to abolish the tax credit on dividends, as a result of which many pensioners lose £75 per annum.
The largest group of pensioners who are missing out on the income guarantee are older women who, as a result of broken contribution records, often do not receive full basic state pensions. Currently, 1.5 million pensioners need income support. In the Green Paper that the Government published last year, they said:
For some 1.4 million people, the minimum income guarantee will make no difference--those 600,000 who are disqualified because of the capital thresholds and those who have not claimed the benefit. That means that the minimum income guarantee is no guarantee at all.
All the evidence shows that the poorest pensioners are the oldest pensioners. For example, by the Government's own definition, 80 per cent. of the over-80s live in fuel poverty. We want far more money to be put into the basic state pension. A more effective way of targeting money would be to target it on the basis not of means but of age. That is why we believe that the extra 25p that is added to the basic state pension at the age of 80, which has not been uprated since 1971, should be raised for the first time for many years to at least £5, and that there should be an age addition at the age of 75 of at least £3.
The hon. Member for Bethnal Green and Bow (Ms King) referred to the proposal for 1p on income tax for education on which my party has campaigned. She was the first person in the debate to mention that, but to listen to her, one would have thought that it had been the substance of many speeches by Liberal Democrats. It is not our policy to use the 1p on income tax for education to fund pensions.
The hon. Member for Coventry, South (Mr. Cunningham) questioned us about our proposal to use the surplus on the national insurance fund. My hon. Friend the Member for Northavon outlined in some detail how that would work, but
I shall recap. Currently, there is an accumulated balance on the national insurance fund of £15 billion. Every year, £1 billion is added to that surplus. Our proposals for age additions would cost about £0.5 billion per annum--modest increases targeted to help those most in need. That is the difference between our approach and the Government's.
The hon. Member for Bethnal Green and Bow was right to say that the country could afford to do more for pensioners through the basic state pension. That applies to the current generation of pensioners, but how will future pensioners fare? The Government's solution is to scrap the state earnings-related pension and put in its place the state second pension. The first full state second pension will not be paid until 2047. Eighteen-year-olds might have some hope that a state second pension will come to their aid when they retire, but only once they have been in the work force for 40 years, and only if they pass the relevant qualifying tests for credits.
The Government are introducing the state second pension at such a slow rate that it makes snails look positively fast. By 2025, the state second pension will put in people's pockets an extra £1.30 a week. After 40 years in the work force, will the state second pension lift its beneficiaries out of the means test, which is what the Green Paper said it should do? The answer is no. The minimum income guarantee will very quickly overtake the combined sum of the basic state pension and the state second pension.
"People who work all their lives should not have to rely on means tested benefits."
On the Government's own figures, at least another 1 million people will require means-tested income support by 2050.
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