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New Clause

Lords amendment: No. 16, before clause 36, to insert the following new clause--Report on cost of pension uprating in line with general earnings level--


" . The Government Actuary or the Deputy Government Actuary shall report to the Secretary of State his opinion on the effect on the level of the National Insurance Fund, and the effect which might be expected on the rates of contributions, in each year up to and including 2005-06 of annual increases in the basic pension by the percentage increase in the general level of earnings; and the Secretary of State shall lay a copy of the report before Parliament."

The Minister of State, Department of Social Security (Mr. Jeff Rooker): I beg to move, That this House agrees with the Lords in the said amendment.

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Lords amendment No. 16 requires the Secretary of State to lay before the House a report from the Government Actuary setting out medium-term projections of the effect on the national insurance fund, and contribution rates, of uprating the basic state pension in line with earnings. The Government have no objections at all to publishing the figures as requested. Indeed, the information is effectively an amalgamation of the figures that are already contained in two reports that the Government Actuary publishes.

The first is the uprating report which is published early each year. That report contains information showing the effect on the balance in the national insurance fund, in the current and forthcoming year, of the Government's proposals for uprating of benefits and re-rating of national insurance contributions.

The second is the quinquennial review, which shows longer-term projections. That report gives snapshots up to 2060-61 and includes a table showing the level of contributions required to keep the national insurance fund in balance. The figures are given both for earnings and for price upratings.

The information is therefore not new, but I caution the House that there are all sorts of caveats on projections for more than a couple of years ahead. The surplus is the difference between two huge figures each year, but, subject to the normal caveats that I have mentioned, the Government are happy to accede to the amendment and to ask the House to accept it.

Mr. Webb: The background to the amendment is the long campaign by Baroness Castle to persuade the Government to restore the link with earnings. During this Parliament, the noble Lady has pressed the Government hard, and the Government have twice attempted to buy her off. The first occasion was under the previous Secretary of State, when she threatened troublesome amendments at a Labour party conference. She was told then that there would be a review, and she withdrew her plans. The review duly came and went, yet there was no significant change to the basic state pension, which retained its link to prices.

Baroness Castle then tabled an earnings-link amendment in proceedings on this Bill in the House of Lords. I am not an expert on the finer points of procedure there, but Labour peers said that the noble Lady had been "mugged". I am not sure what that means, but there was clearly some attempt to block that amendment. Later in the proceedings, this rather modest amendment was accepted.

In debate with Baroness Hollis, Baroness Castle said that


There has been plenty of evidence of that this year. In April, the Government raised pensions by 75p. Last week, in his comprehensive spending review, the Chancellor of the Exchequer handed out £43 billion yet did nothing for the basic state pension, and this amendment should be seen in that context. The Government were elected on a manifesto pledge that pensioners would share fairly in the rising prosperity of the nation. The CSR was about carving up that prosperity, but not a penny could be found for pensions.

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The amendment provides that, until 2005-06, the Government should publish estimates of the effect on the national insurance fund of earnings linking as well as price indexation, and Baroness Castle made a passionate speech about the Government's disregard for the principle of social insurance. However, the Government accepted the amendment, which should have made us suspect that it would have no effect. Baroness Hollis gave the game away when she said that


The Minister of State said the same thing when he moved the amendment--that two bits of information would be placed between one set of covers. That will not change the fact that the Government do not believe in the long-term future of the basic state pension as a true foundation for income in retirement.

What will be the effect of the annual report provided for in the amendment? A copy of the report will be placed before Parliament, but does that mean that there will be a chance every year for the House to debate the level and uprating of the basic state pension? I suspect that it does not. I suspect that the report will simply disappear into the Library of the House after publication and that it will not change any element of the Government's policy. I am sure that Baroness Castle intended the amendment to secure a real change in what the Government are doing with the values of the pension.

5.30 pm

We are concerned that the amendment does not go far enough. It requires information that is currently published to be published under a single cover instead of two. I am disappointed that Baroness Castle was unable to go further and table an amendment that would not merely have required the reporting of information on the level of the basic state pension, but would have put pressure on the Government to increase it forthwith.

The Liberal Democrats have advocated specific rates of increase, which the Chancellor should have brought forward in the comprehensive spending review last week. We have argued that there should be an across-the-board increase of £5 for all pensioners but that the older pensioners, who have suffered the most from the breaking of the earnings link, should see larger increases. We have suggested £10 at the age of 75 and £15 at the age of 80. That is a structural idea, which would go beyond the amendment and would involve the Government in not merely reporting facts but doing something about the real value of the state pension.

When Baroness Castle said in the Lords that the Government had abandoned the principle of state insurance altogether, she was right. The Government argue that anything except money on the state pension is acceptable. When we said that we would increase the pension for the older pensioners, Baroness Hollis responded in another place that that would not be well targeted; yet the winter fuel payments are even less well targeted than any addition to the basic state pension, which is the subject of the amendment.

We are disappointed that Baroness Castle was able to get only this amendment through in another place. We believe that the amendment was accepted by the Government only because it lacks any teeth. We hope that

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we will get some assurances from the Government that although the Chancellor may have wanted to keep his powder dry in the comprehensive spending review, we will see not just a few extra reports under a single cover but some serious increases in the basic state pension. Pensioners not only expect that, but have a right to it.

Mr. Deputy Speaker: I remind the House that we are debating the amendment before us, not amendments that were tried in another place and did not succeed.

Mr. Paul Flynn (Newport, West): I am baffled by the speech of the hon. Member for Northavon (Mr. Webb), because I have no idea why the Liberal Democrats did not table their own amendment if they thought that the one selected was not strong enough. Baroness Castle's amendment went through on Wednesday, and there has been plenty of time since then to table others.

I applaud the Government for accepting the original new clause in the other place and for accepting the strengthening of the new clause by adding the words


To me, that means that we will have a chance to debate--and, I hope, to vote on--the level of the basic pension.

Mr. Rooker: Just so that I can disabuse my hon. Friend of that idea, let me remind him that amendment (a) to amendment No. 16 has not been selected.

Mr. Flynn: I accept what my right hon. Friend says. Life is full of disappointments. We must go back to our original position--the Government are at least accepting what was moved in the other place, which is something of a breakthrough.

We already know what the Government Actuary will say. He gave evidence on 28 June to the Social Security Committee inquiry into pensioner poverty. When asked to express his view on the result of restoring the link with earnings, he said that it could be increased for up to the next five years without any additional increase in national insurance contributions. The money is already there.

Other evidence has been given in answers to the written questions tabled by my hon. Friend the Member for Bethnal Green and Bow (Ms King), to the effect that without any increases in national insurance contributions beyond inflation, the link can be restored up to 2011. Not only would that not require any additional contributions--


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