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6.39 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley): The hon. Member for Northavon (Mr. Webb) gave a passable impression of a "desiccated calculating machine" as he bombarded us with statistics and with facts and figures. It was just the kind of passionate, almost addictive, number crunching that Nye Bevan would have held in disdain.

I have no doubt that the hon. Gentleman is well informed. The problem with his argument is its assumption that other people, both in the House and outside, are less well informed than he is. His argument demands total credulity: it asks us to believe every word that he says now. It also demands collective amnesia: it asks us to forget everything that the Liberal Democrats have said before.

The motion states that uprating the basic state pension in line with the retail prices index is inadequate, yet, as my right hon. Friend the Minister of State said earlier, just over two years ago the Liberal Democrat election manifesto said:

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    Moreover, the Liberal Democrats gave a perfect description--in glowing terms--of the minimum income guarantee that the Labour Government have introduced. They said that they would

    "Guarantee everyone an acceptable minimum standard of living in retirement. We will create an additional top-up pension for pensioners below the Income Support level. This will be indexed to earnings".

As most hon. Members know, the Liberal Democrats made those promises in a manifesto which--despite the ability of some of them to play with figures--displayed their inability to do basic sums. It contained spending pledges that would have cost some 5p in the pound in additional income tax, or some £600 per family. The Liberal Democrats promised to raise revenue, and to fund their pledges across the broad spectrum of Government expenditure, by putting 1p on income tax--should it prove necessary: they did not even give a guarantee that they would do that. We have heard confirmation this evening that not a scrap of the money raised from that 1p would go to pensioners. Every bit would support the Liberal Democrats' education plans--plans, incidentally, which have been funded to a far greater extent by this Labour Government.

Mr. Chris Pond (Gravesham): My hon. Friend will have heard the hon. Member for Northavon (Mr. Webb) suggest earlier that Governments since the war had done more than link pensions to earnings. He may wish to stress that the present Government have done much more than that: indeed, the earnings link in itself may have been the easy option. Has he the shadow of a suspicion that, had this Government simply linked the basic pension to earnings, we would today be debating an Opposition motion demanding that we introduce a minimum income guarantee and increase it in line with prices?

Mr. Bayley: My hon. Friend is well versed in these matters, and he is absolutely right. Had we restored the link with earnings, the increase in spending on pensioners from the social security budget would have been less than it will be in the lifetime of this Parliament. By the end of the current Parliament, this Labour Government will be spending some £4 billion more per year on pensioners.

As my hon. Friend suggests, had we restored the earnings link--as the Liberal Democrats now imply that we should have--there would have been the same cost inflation. That is what Liberal Democrat policies would have brought about. The problem is that the Liberal Democrats produced a manifesto in which their sums did not add up, and they have now added yet more expenditure by promising more to pensioners, without explaining how--[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. Hon. Members must not shout at each other across the Floor.

Mr. Bayley: If the Liberal Democrats wish to increase expenditure, they owe it to the public, and to pensioners in particular, to explain how they are going to do that.

Pensioners are bright. They are too bright to be taken in easily by a bit of flexible arithmetic. During the last Parliament, I went to a public meeting to talk to the York

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pensioners association, which I had established. It was one of the first things that I did after being elected. I went to the meeting days after the Labour party had decided, in policy terms, to opt for targeting rather than raising the basic state pension in line with earnings--which had been our policy hitherto, as hon. Members know.

To be blunt, I expected a pretty rough ride. After I had said my piece, a woman pensioner stood up and said, "I am glad you said that, Mr. Bayley. When the Labour party promised the earth, I rather wondered where they would find the money." When a party makes promises without explaining how they will be funded, it has no credibility.

My hon. Friend the Member for Kingswood (Mr. Berry) did not argue that the Government should restore the link between the basic state pension and earnings, but he did argue that they should do more than provide price indexation for pensioners as a whole. Similar points were made by my hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Bethnal Green and Bow (Ms King).

All my hon. Friends recognise that the Government are doing substantially more for the poorest pensioners through the minimum income guarantee, but we are also doing more than simple price indexation for all pensioners. We are doing more by means of services such as eye tests, and the concessionary fares proposal that my right hon. Friend the Secretary of State for the Environment, Transport and the Regions will introduce in legislation during the current Session; but we are also doing more by introducing, for instance, the winter fuel supplement, which applied to all pensioners.

Initially, the winter fuel supplement was to be higher for pensioners on low incomes. It was to be £50 for pensioners receiving income support, and £20 for other pensioner households. However, partly in response to arguments such as those advanced by my hon. Friend the Member for Kingswood--for instance, the argument that all pensioners should receive increases that are more than merely price indexed--this year we were able to announce a fivefold increase in the value of the winter fuel addition to £100. That is nearly £2 per week, in addition to the 75p. It is entirely wrong to suggest that the Government are leaving all pensioners with a mere 75p; we are providing additions for all pensioners on top of that.

I know, and every member of the Government knows, that many pensioners want us to do more. Many want us to restore the link. As my hon. Friend the Member for Gravesham (Mr. Pond) pointed out, if it were just a matter of spending, it could be said that the Government had done more than meet the cost of restoring the link. An extra £800 million has been added to social security expenditure on pensioners as a result of the introduction of the winter fuel addition and the minimum income guarantee for pensioners--£800 million more than would have been the cost of uprating pensions in relation to earnings over the three years during which we have been in government so far.

Of course, the Government have a choice. If we deemed it right, we could spend the money on an equal increase in the basic state pension for all pensioners; alternatively, we could target more on the pensioners who need help most.

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The Government are serious about reducing poverty. When we published our first poverty report in September, many people, including most of the commentators in the newspapers, were taken aback at the boldness of our commitments and at the transparency of the indicators that we intend to use to monitor our success in reducing poverty. We put ourselves on the line and for a simple reason: we are committed to reducing poverty. If we are going to meet those ambitious goals, we will have to ensure that we target resources on those who need them most: the poor.

Think of the Government's inheritance when they came to office just over two and a half years ago. Pensioner incomes increased significantly between 1979 and 1997, a point that was made by hon. Members from the official Opposition. Indeed, over that period, average pensioner income rose faster than average earnings, yet, at the same time, the gap between the incomes of the poorest pensioners and other pensioners increased dramatically. Our priority is to direct more help to those who have been hardest hit through the 18 years of Conservative pension policy.

Mr. Webb: The Minister refers to those who have been hardest hit. Presumably, the small saver would come into that category. Will he explain why the Government have for three years retained the Tory capital limits--they have frozen them each year? He has promised action by the end of the Parliament. Why do pensioners have to wait that long? A year ago, the Government promised action soon. Why are we having to wait?

Mr. Bayley: The Government have promised to address capital limits. We will do so during the lifetime of the Parliament. The Liberal Democrats, who promise the earth without taxation commitments to pay for their promises, ask for yet another promise. Each year--pensioners understand the policy--the Government have introduced benefits for pensioners over and above price indexation. Each year, we have done things that have reduced the costs that pensioners face and that have increased pensioner incomes. The hon. Member for Northavon is wrong to shake his head because we have reduced the fuel costs that pensioners face; we have provided fuel supplements for all pensioners. During the lifetime of the current Parliament, we will continue to do that year by year. We have made an absolutely fundamental commitment--which, incidentally, the Liberal Democrats did not make--to deal with capital limits during the lifetime of the Parliament. That we will do.

If we increased the basic state pension in line with earnings, every pensioner would gain, except those on income support. Those on income support would lose every pound of the pension rise from their income support payment--from the minimum income guarantee. Instead, by targeting that money on the minimum income guarantee, we are helping the poorest pensioners substantially.

My hon. Friend the Member for Kingswood also raised the capital limits issue. He did so to explain why he put his name to the early-day motion that has been discussed by quite a number of hon. Members on both sides of the House. I hope that my hon. Friend will be reassured by the commitment that the Government have given to address the issue. We are looking at the issue now and we will address it during the current Parliament.

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My hon. Friend the Member for Selby (Mr. Grogan) made a lot of important and useful points about the importance of a take-up campaign to ensure that pensioners who are entitled to the minimum income guarantee take it up, but he made one suggestion that I should like to discuss a bit further: that perhaps the take-up campaign should be run by any organisation other than the Benefits Agency because it was a tarnished commodity and would put people off claiming.

My hon. Friend is aware that we have changed the law to enable organisations other than the Benefits Agency to take information and to process a minimum income guarantee application. If someone is applying for housing benefit, for example, that other organisation could take information from the local authority. That is a welcome step forward, but I counsel against writing the Benefits Agency out of the equation. One of the problems with the Benefits Agency that we inherited was that it was simply a passive payer of benefits, rather than an active part of the welfare system. We need to ensure that the image of the Benefits Agency changes and that it is involved with a wide range of other agencies in spearheading the campaign.

The hon. Member for Southport (Mr. Fearn) made the point that additional help is needed for older pensioners. He asked whether the minimum income guarantee should be changed to achieve that. The minimum income guarantee already provides higher rates of guaranteed minimum income for older pensioners. As most hon. Members will know, for a single pensioner, the minimum income guarantee guarantees an income of £75 a week at current rates, but for a single person aged over 75, the rate is £95.60 a week. For a single person aged over 80, it is £101.30.

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