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Mr. Paul Tyler (North Cornwall): Does the hon. Gentleman accept that the poorest pensioners are particularly angry because income tax cuts are helping the
better off, most of whom pay no income tax at all? Combined with council tax increases and a small increase in the basic pension, that is particularly frustrating.
Mr. McDonnell: A number of factors increase anger among pensioners, particularly poor pensioners. They feel that there is an unfairness in society that goes against all that we stand for in the House and in the country. I draw on the Prime Minister's speech about British values of fairness and tackling hardship together. The Government's stance runs against all that we are saying about those values.
Forty per cent. of pensioners rely on means-tested benefits. As my hon. Friend the Member for Blaenau Gwent (Mr. Smith) said in an earlier debate, it is estimated that more than 750,000 people do not claim those benefits. Why? Because it is difficult to claim, although I welcome and support the Government's initiative on take-up. Such campaigns will be run in my constituency and elsewhere to ensure that people get what they need.
People do not claim their entitlement partly because of the stigma attached to means-tested benefits. Anyone who has experienced a means test, or has a family folk memory of the means test from days gone by, realises the implications. People suffer a loss of dignity--the indignity of having to go through a means test.
We should recognise the distinction between pension and benefit. A pension is paid in return for either a financial contribution or a service contribution, as with a war pension. A benefit retains the link with beneficence and paternalistic donations. People do not receive it as of right, but are subject to a test. I thought that my party stood for universal benefits as a right.
We should consider an across-the-board increase in benefits. It is argued that they would also go to the richest pensioners, but there is a simple solution to that--tax them. The question is simple: do we target or do we tax? I believe that universal benefits are more efficient for the reasons that have been identified.
Mr. Alan Simpson (Nottingham, South):
It is not just a choice between tax or benefits. It would be perfectly compatible with Labour manifesto commitments to alter the thresholds so that the better-off would not be the beneficiaries, but the poorest off would not lose out. That is what many members of the Labour party and the general public believed we were saying in our pledges that referred to increasing pensioners' share of the nation's wealth.
Mr. McDonnell:
Exactly. The mechanism that we have identified is relatively simple. If we distribute the benefit, we maximise take-up. If we feel that that is expensive, we take it back through redistribution. Targeting puts the poorest pensioners at risk, because they may not receive
It is curious that the Government have accepted universality on the fuel allowance and free television licences, and they have even linked the minimum income guarantee to increases in earnings.
Mr. McDonnell:
As my hon. Friend says, the NHS is a universal benefit for us all. As we have identified in previous debates, the cost of administering a universal benefit is much cheaper than the heavy burden of means-tested benefits.
Mr. Jeremy Corbyn (Islington, North):
Is my hon. Friend aware that the cost of administering the state pension is about 1.5 per cent. of its value, whereas the cost of administrating most means-tested benefits is between 20 and 25 per cent. of their value? Can it not be argued that universal benefits save a great deal of money?
Mr. McDonnell:
I think that the expression is QED.
There has been a debate in the House about the political implications of the Government's actions for voters who put us in power with such a large majority. In an earlier debate, some people said that pensioners could not vote for anyone else. No, they cannot. They would not vote for the Tories, and I am not sure who else they could vote for, but they could stay at home. They may not deliver our leaflets for us, and they may not vote. They feel a sense of betrayal--I do not like using that phrase, but it has been used enough times in the debates that we have had with pensioners groups in our community. Pensioners always looked to the Labour party as the champion of their cause.
There are 11 million pensioners in this country. They consider that they created the welfare state from which my generation benefited, and which gave us life chances that we have used to provide for our families and to give them a good quality of life. We are now denying many of those pensioners that quality of life in their retirement.
We should refer to the Prime Minister's sense of fairness. He talked about fairness in tackling poverty and reward for hard work. We should honour the undertakings that we gave to successive generations of people who voted Labour because they thought that we were their champions. I gave an undertaking to the pensioners in my community that I would do all I could to lift the basic pension at every opportunity. I want to fulfil that commitment today, so I shall press new clause 36 to a Division, and I shall vote for it.
Mr. Robertson:
I want to make a brief contribution to this debate. I suspect that, at the end of it, I may be persuaded to abstain, but that does not mean that I do not have strong feelings on this subject.
At the general election, I went to house after house and met many pensioners who fell into one of two categories: those who said that they did not have enough money to live on--they perhaps did not bother or were not persuaded to claim the other benefits available to them; and those who said that, after years of saving and paying into occupational schemes, they did not feel better off.
My concern is that the minimum income guarantee offered by the Government will not satisfy either of those groups. It will not satisfy many people in the first group, because they will not be persuaded to claim what they regard as a state handout. For many years of their working lives they have paid into the system and are entitled to claim from the state, but they do not see it that way. At a time when the Government Actuary accepts that there is a surplus in the national insurance fund that is likely to grow, it seems mean-minded of the Government not to offer help to those people.
The minimum income guarantee will not help pensioners who have been able to put money away for their retirement. They may have saved money or joined occupational schemes. They will continue to be aggrieved because they will think that they should be better off, but they will not feel better off for having saved because they will be no better off than the pensioners who claim every state benefit to which they are entitled. I do not think that the Government's actions will help either of those categories of pensioners.
I would like more help to be given to pensioners who are retired now. I draw a distinction between those who are retired now and those who will retire in the future. If I am fortunate enough to catch your eye on the next group of amendments, Mr. Deputy Speaker, I shall explain my thinking on that in greater depth. I recognise the enormous projected future costs of the state pension scheme. According to the figures from the House of Commons Library, serious problems will befall us if we do not address that issue.
I want a complete reform of the pensions system for pensioners who are yet to retire. There is no excuse for people of my age who are on a reasonable income not to make provision for their future. However, those who are retired now deserve a better deal from a Government who claim that the economy is in such robust shape. People in manufacturing industry may disagree with and object to that statement, but having looked at the figures and questioned the Secretary of State in the Select Committee, I believe that people who are retired now could get a better deal from the Government.
I shall probably abstain on these new clauses, because they are open-ended and commit Governments to expenditure that I do not believe is sustainable in the longer term. I want reform of the pension system for those who are not yet retired.
Mr. Burstow:
The hon. Gentleman has told the House that he will abstain on both new clauses because they have open-ended commitments. However, his hon. Friend the Member for Buckingham (Mr. Bercow) pointed out that no specific figures are given. I answered him by making the simple point that that will be dealt with through regulation, so the House will be able to decide on the levels year on year. Surely the hon. Member for Tewkesbury (Mr. Robertson) could support such a motion to put down a marker.
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