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Westminster Hall

Tuesday 31 October 2000

[Sir Alan Haselhurst in the Chair]

Pensioner Poverty (London)

Motion made, and Question proposed, That the sitting be now adjourned.--[Mr. Touhig.]

10 am

Mr. Paul Burstow (Sutton and Cheam): I start the debate by noting that not as many hon. Members are present in the Chamber to discuss pensioner poverty in London as I would have liked, but let us hope that more will come and join in the debate as we proceed. It is an important topic and one that we should spend some time discussing, not least because next Wednesday the Chancellor of the Exchequer will make his pre-Budget statement to the House. In July, the right hon. Gentleman announced an additional £43 billion of investment in public services through the comprehensive spending review, a great deal of which I welcome--especially the investment in health and education. However, not a penny more was announced for pensioners--in a year when their basic state pension has risen by only 75p. We know that the Prime Minister has got the message about the anger that pensioners feel about that miserly increase, but the question is whether the Chancellor can now assure us that the Government have understood it.

As a London Member of Parliament, I make no apology for making London the focus of this morning's debate. I am not saying that pensioner poverty elsewhere is any less of an issue. Indeed, some of Government's own indicators show that that is clearly not so. However, one indicator of pensioner poverty overshadows all others. More pensioners die in London as a result of the cold than anywhere else in the United Kingdom. According to the warm homes campaign, on average 5,486 London pensioners die prematurely each year due to the cold. Research recently published in the British Medical Journal found that London had the worst record for cold-related deaths anywhere in western Europe. Even when compared with Scandinavia where the winters are longer and harsher, London comes out worse.

Research makes it clear that the cold will continue to cause thousands of deaths every winter unless effective steps are taken to improve protection against it. When reading such facts alongside the results of the 1996 English house condition survey, which shows that one in five pensioners lives in poor housing and that a higher concentration of that poor housing is in the oldest parts of London--mainly inner London--we begin to see how such conditions make matters worse.

An important part of the picture is not only poor housing but isolation. One in three of London's older people lives alone, which is above the national average. In its report on isolation and older people, Age Concern London stated:

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Those who are most likely to live alone are elderly women. Moreover, older people in inner London are more likely to live alone than their outer London contemporaries. The Sutton seniors forum is an active pensioners group in my outer London constituency. It holds meetings each month at which more than 200 to 300 seniors discuss a range of issues. From a survey of its members, the forum found that 10 per cent. of pensioners never received visits from friends or members of their family and that as many as 50 per cent. of those pensioners were visited only occasionally. The chairman of the forum, David Dombey, said that that was

Organisations such as Age Concern London and others do much to highlight the issues and to develop and promote good practice on the ground. I want to focus on one of the causes of isolation, which is pensioner poverty--the subject of our debate. It does not take a genius to link London's appalling death toll with fuel poverty and its concentration among the older population. According to the 1996 English house condition survey, 52 per cent. of single pensioner households have to spend more than 10 per cent. of their income to achieve satisfactory indoor heating. The only way to tackle fuel poverty and poor housing, and to cut winter deaths, is to raise pensioner incomes.

This is not the first time that I have highlighted pensioner poverty in the House. I was fortunate enough to secure a debate on the issue early last year. Since then, the Select Committee on Social Security has cast its critical eye on pensioner incomes. Its report puts on record many key facts that should inform this debate and many others in this place on the subject.

There is no such thing as a typical pensioner. Statistical averages mask at least as much as they inform. The Select Committee found that the bulk of pensioners were in the bottom half of incomes, and that there was a widening gap between the relatively few rich pensioners and the rest. The majority of pensioners during the past 20 years have not become well off. The poorest have seen their incomes rise by less than half the rate of the better-off. The gap between the better-off and less well-off pensioner has much to do with age and length of time in retirement.

Older pensioners, even those fortunate enough to have a second pension such as an occupational pension, have fallen behind people who have retired more recently, let alone the wider population. Index-linking the basic state pension and occupational pensions to prices has eroded their value, and will continue to erode them. Using evidence from the National Pensioners Convention, the Select Committee's report identified a difference of £54 a week between the incomes of a recently retired person and someone aged over 75.

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Beyond that gap is the fact that the oldest pensioners tend to be women. Half of women pensioners in London--310,000--receive less than the full rate of basic state pension. Of those, 186,000 receive a pension of only £40.50 a week, and a further 93,000 receive even less. That is due to broken contribution records. As a result, many women rely on their husbands' contribution records to claim a full spouse basic pension set at 60 per cent. of the full personal basic pension.

I am sure that the Minister will point to the minimum income guarantee and the Government's take-up campaign. As I meet older people in my constituency, I take every opportunity to encourage them to avail themselves of that provision. However, figures from Age Concern England show that as many as 120,000 pensioners in London are entitled to the minimum income guarantee, but are not receiving it.

In 1998, a Department of Social Security report called "Helping Pensioners: Contextual Survey of the Income Support Pilot Areas" drew on 10 pilots in various parts of the country and found that 40 per cent. of pensioners would definitely make a claim. However, it also found that 36 per cent. would not make a claim in any circumstances, for reasons such as stigma, uncertainty and an unwillingness to deal with the Benefits Agency. Therefore, we can begin to question a strategy that relies so much on the minimum income guarantee.

The people who do not claim and will not claim are, according to the Department's own research, the poorest of our pensioners. They will derive no help from MIG. The non-claimers are older pensioners; six out of 10 non-claimers are over 75. It seems strange that a take-up campaign should fail to look for entitlement to benefits such as attendance allowance, which extends a person's entitlement to a minimum income guarantee.

The Select Committee also highlights the difficulties faced by ethnic minorities in terms of pensions, which is an especially appropriate topic in a debate focusing on London. Sadly, there is a dearth of information about the extent of pensioner poverty among ethnic minority groups. Given that London will see an 80 per cent. increase in ethnic older people between 1996 and 2006, it is vital that more research be undertaken by the Department to ensure that the take-up campaigns are properly tailored to deliver the extra help that is needed, especially if the evidence from the Minority Ethnic Black Elder Strategic Alliance is correct. Last year, it reported that 67 per cent. of black and other ethnic minority elders received a pension, compared with 88 per cent. of their white peers. The only way in which we can help the poorest pensioners--those who miss out on the minimum income guarantee--is by giving a substantial boost to the basic state pension.

The Government's own research shows that that is what people want. According to research report No. 83 on pensions and retirement planning, almost no one wants the state to withdraw from pension provision. On the provision of a basic foundation pension, the research found that the fairness, universality and dependability of the basic state pension counted for a lot. The research bears out the views of many of the members of the Sutton seniors forum and many other pension campaigners across London. The research document states:

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The basic state pension is set to rise next April by at least £2.25, but that will do little or nothing to arrest the long-term decline in its value. I want to make it clear that, unlike the Conservatives, Liberal Democrats are not calling for the winter fuel payments, free television licence or Christmas bonus to be scrapped to pay for an increase in the basic state pension. Those payments and concessions should continue, because they are making a difference.

The November issue of Saga Magazine reports that, when the details of the pension plans proposed by the right hon. Member for Richmond, Yorks (Mr. Hague) are explained in detail to its readers, 72 per cent. reject them out of hand. It is worth bearing in mind that pensioners have seen through the Conservatives' plans and understand that they are not being offered new money, but that this is the first case of robbing Peter to pay Peter. When the plans are boiled down to their core, we find that pensioners would receive just 42p on top of the £2.25 inflation increase next April. A real increase is needed. Pensioners need extra cash, not smoke and mirrors.

This year, Age Concern published work that it had commissioned from the Family Budget Unit, which set out to measure objectively the level of pension required to achieve a low-cost but adequate standard of living. The point is that a pension should do more than simply keep pensioners alive; it should add life to those years and enable older people to take part and pride in their community, not feel shut out and isolated. The FBU research suggests that a single pensioner needs £90 a week and a couple needs £135 to avoid living in poverty. I hope that the Government will incorporate that approach in their strategy for tackling pensioner poverty. The research seemed to persuade the Select Committee.

I am delighted that the Minister has taken down from the shelves the Department's copy of the Liberal Democrat manifesto for the 1997 general election. I am sure that reference will be made to it. It is correct that the position taken by the Liberal Democrats at the previous election is not dissimilar to that taken by the Government in the past three years, particularly on targeting extra help through the minimum income guarantee. However, I think that we put our hands up and admitted that we got our policy wrong. We have reviewed it; it is right to keep policies under review.

We increasingly take the view that targeting extra help through the basic state pension is the right way forward. Given the erosion of its value, an across-the-board increase is needed now to halt the decline. That increase should be at least £5 on top of inflation. However, given the clear evidence that old age and poverty go hand in hand, the Government must go further. Targeting extra help on older pensioners through the basic state pension is far more cost-effective than relying on means-testing. Evidence about fuel poverty reinforces that view. The 1991 English house

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condition survey found that eight out of 10 people over 80 were living in fuel poverty. The 1996 house condition survey suggested that that figure had improved. The winter fuel allowance may have improved it further, but not enough.

Age additions are not new to our social security system. Since 1971, pensioners have received, at the age of 80, the princely sum of an extra 25p on their basic state pension. Twenty-five pence was worth something in 1971, but today it does not even pay for a first-class stamp. In his evidence to the Social Security Committee, the Minister of State, Department of Social Security, who has responsibility for pensions, rightly described that 25p as a festering sore on the social security system. However, the Government would be wrong if they concluded that they should scrap that provision; instead, they should increase it substantially to at least £10 a week. Six out of 10 of those eligible for but not claiming the minimum income guarantee are 75 and over; there should be a new age addition at 75 of at least £5 a week.

Those proposals are affordable, and the Select Committee has shown one way in which they could be paid for--by applying some of the £3 billion surplus in the national insurance fund. Indeed, the Department of Social Security research note No. 83 is also helpful on that matter. Most participants in that research favoured raising the basic state pension to between £80 and £120 a week for a single person. When asked about the cost, working participants said that they were willing to pay more in national insurance to fund a pension increase of £10 a week, or even a £20 to £30 increase.

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley ): The hon. Gentleman knows perfectly well that the surplus in the national insurance fund might cover the costs of his proposals in the first year, but would not do so in the long term. What would the Liberal Democrat policy be on that? Where would the money come from for long-term increases?

Mr. Burstow : I am happy to deal with that point. We would reintroduce a new tax rate of 50 per cent. for those earning more than £100,000, which would unlock additional resources. Those people who have done well in our society should pay a little more in tax to allow our pensioners to have a decent income.

Mr. Bayley : The hon. Gentleman says that that additional taxation could be used for the pensioners--but would it be used for them, in fact? If it were, it clearly could not be used for other spending plans, such as education or health.

Mr. Burstow : The hon. Gentleman needs to get down from the shelf the document that was discussed at our conference in September, if the Department has a copy. That document shows the way in which our various proposals for additional spending on education and pensions would be funded. All too often, the Government conveniently confuse our proposals to increase to 50 per cent. the tax rate for those earning more than £100,000 in order to fund pensions with our proposals for a penny in the pound on income tax to

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fund education. Those tax increases are not the same; the proposals would achieve different things and would earmark specific funds for specific purposes.

Mr. Bayley : The hon. Gentleman is extremely generous in giving way.

How much money would be raised by his 50p-in-the-pound income tax proposal, and how much would be spent on increasing pensions?

Mr. Burstow : The hon. Gentleman knows from the figures published in our alternative Budget earlier in the year and from our detailed costings that that tax increase would generate sufficient funds to cover the cost of the age additions and the £5 across-the-board increase. That proposal is based not on costings plucked out of the air but on detailed costings checked by the Library. If the hon. Gentleman would like to see those costings, I would be happy to pass them to him later.

Mrs. Jacqui Lait (Beckenham): Will the hon. Gentleman give way?

Mr. Burstow : As we have had a debate on this issue, I will be happy to take one more brief intervention before I conclude my remarks.

Mrs. Lait : I am most grateful. I do not want the hon. Gentleman to feel that he is under a pincer attack. Will he clarify whether the Liberal Democrats plan a one-off increase in the basic state pension, which would continue to be linked to prices, or whether they plan to link the basic state pension to another figure?

Mr. Burstow : The hon. Lady will know that we propose to use the work done by the Family Budget Unit to provide a much more transparent method that would enable pensions to rise in relation to the growth in the economy. It would provide an affordable, low-cost pension package that would relate to the various extra costs that pensioners face and ensure that pensioners were given sufficient income to play an active part in the community and enjoy some leisure time. The figures suggest a pension of £90 for a single person and £135 for a couple. Anyone who reads this speech can do the sums and I am the first to admit that our proposals will not reach that stage in one go. The increases are not viewed as a one-off increase for ever. We need a less blunt mechanism than indexation to prices, which has brought rough justice over the past 12 months and has caused much anguish, anger and fury among pensioners. We know from our surgeries that pensioners viewed 75p as an insult. It was the product of an indexation system related solely to prices and not flexible enough to take account of the overall growth of the economy.

Mr. Deputy Speaker : May I issue a gentle reminder? I remind hon. Members that today's subject is pensioner poverty in London, and it would be better if we focused more on that.

Mr. Burstow : Thank you for that reminder, Sir Alan.

I was concluding my remarks by referring to further evidence of pensioner poverty in London. I was arguing that directing extra help to the basic state pension would

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eliminate any danger of a low take-up. Clearly, take-up would be universal. There would be no stigma and administration costs would be low. That is not just my view of administration costs; it is also the view of the Minister of State, Department of Social Security, as expressed in the House earlier this year. He said:

I began by referring to the Chancellor's pre-Budget statement next Wednesday. The Chancellor has an opportunity to demonstrate to pensioners that the Government have not only got the message, but have understood it. One in three of London's pensioners lives in poverty. There are 300,000 pensioners in London--20,000 more since the last general election. Pensioners deserve more than a subsistence pension. Tackling pensioner poverty is the only way to stop the scandal of preventable premature death from cold of 5,400 of London's elders.

10.22 am

Dr. Jenny Tonge (Richmond Park): I shall remember today with some sadness because my post this morning included a letter from the Benefits Agency about my retirement pension. It tells us all that I am nearly 60 and tells me about the handsome and princely sum of £48.41 to which I shall be entitled as my state pension. I have not read the detail so I do not know how it was calculated. I am one of the lucky ones because I have an occupational pension as well as a pension from Parliament. I certainly do not include myself in the category of pensioners in poverty in London, but it was interesting to receive that letter on the same day as speaking in this debate.

I was a GP many years ago and used to witness pensioner poverty in London on a daily basis. It is still there. We used to call it the burnt legs and bacon sandwich syndrome. Pensioners still live in fuel poverty and single bar electric fires with dangerous wiring are still about. That is what causes the burnt legs syndrome, when the rest of the body is freezing cold; pensioners do not have enough money or energy to make meals other than, perhaps, a bacon sandwich and a cup of tea. I have checked with my hon. Friends, who confirm that that is still a common finding in many parts of London.

I admit that that is not such a common finding in my very affluent constituency, but some elderly people in their 80s and early 90s live in extremely valuable houses in Richmond Park on the minimum income. They have a very poor life style, in a house that drives them crazy because it is crumbling around them while they are

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unable to do anything about it because they do not want to move out of the neighbourhood or because they are terrified of not having something to leave to the children. If they can hang on as long as possible, they know that they will be reported in the local paper as having left a little bit to their children, which is desperately important to older people. Very old people want to be able to leave their mark when they die; they want to be able to say, "Well, I have done something in life and I can leave something to my children." Although the burnt legs and bacon sandwich syndrome is not prevalent in Richmond, there are other problems.

I came across someone recently who was living on £129 a week, which is extremely difficult to do, but whose house was worth in excess of £400,000. Some people, even though they are extremely poor and on a limited income, try to scrape out of that meagre income a contribution to a club for the elderly so that they can get out and meet other people, which is essential to prevent their becoming isolated. Some may go the adult education college in Richmond upon Thames, which provides many courses and activities for older people, but it is expensive. I want the Government to tackle that problem, because these courses are so important for people living in poor circumstances in the London area, yet they are getting more and more expensive. Taking courses and participating in activities helps people to have a useful and vibrant old age, but the increasing cost of some of the education courses means that many elderly people cannot take advantage of them. Do the Government make that connection?

My hon. Friend the Member for Sutton and Cheam (Mr. Burstow) mentioned the problem of income support. We know that 200,000 pensioners living in London receive income support, and it is estimated that a further 62,500 people are eligible for it but do not claim it. In London, 18 per cent. of people over the age of 60 claim income support; the figure for England as a whole is 15 per cent. People need to be encouraged to claim that extra benefit and we must consider the reasons why they do not do so. Many have been brought up to feel that they must be self-sufficient and that they must not depend on charity; they do not want to go to the state for more help than they already have. Some may not claim extra benefit because they do not know about it or because their eyesight is too poor or they are too feeble and frail to fill in the necessary forms.

Several people, especially men, who had failed to claim their winter fuel payment came to my surgery last winter--I do not know why men are so un-sharp about these things. When they went to their local post office to inquire about it, they found that it was no longer available to them. They had to go through a great rigmarole to be able to receive the payment. The Government should tackle that problem. Some people are not getting their winter fuel payment because they do not know about it in time, or because they have been ill and unable to claim it.

There is also the problem of reduced retirement pensions--I would come into that category. If the state pension were my only pension, it would be a great problem for me. I would have to do something pretty swiftly about income support. Of course it is not, but if

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it were and I did not know what to do to increase my income, the stuff that I received this morning would not be much help. It is difficult to read. It says:

As has already been pointed out, there is an excess of winter deaths in London as a result of pensioner poverty. That is a disgrace. I urge the Government to do something nationwide about not just fuel poverty but the insulation of houses. Our housing stock in London is poor and badly insulated. The emphasis must be on winter warmth and insulation and not just handouts from the Government, which is how old people see it. The Government have done some things; I recently saw Thora Hird, bless her, on television. I am a great supporter of TV adverts. Most people in this country, even the poorer pensioners, have television sets. The Thora Hird campaign is great and I hope that it is successful.

We must ensure that isolated people are aware of what is available and are getting the help that they need. GPs, social workers and health visitors are useful people but they often do not have enough time to address these problems. Post offices are often the centre of the universe for old people. Whether they live in a tiny village in London--we are always told that London is a collection of villages--or out in the country, the weekly trip to the post office to collect their pension is something that old people make the effort to do. They may have to send someone else, but that is their point of contact. More information should therefore be available in post offices.

I have another suggestion. One of the most useful people in London for the elderly is the milkman. He calls at every house and delivers all sorts of goodies. Why can he not also deliver some information to elderly and isolated people? When my elderly mother was alive and living just around the corner from me, the milkman would give me a regular update. If I had not seen her for a couple of days, he would tell me how she was getting on. The milkman knows whether elderly people take their milk in. He knows the level at which they are living and whether they can pay their bills. Let us have a campaign using such people.

We should always remember that elderly people--I include myself in that category--become increasingly hard of hearing and their eyesight fails. As one gets older one realises that the old senses are failing a bit. However much one tries to wear contact lenses and kid oneself that it is just like it used to be, it ain't. Things get more and more difficult to read and extra help is needed and that help must be sensitive. Nothing will answer the problem more than upgrading the basic amount of money that people receive. I should like the Minister to address that problem and to answer one question. I am a great believer in people receiving all benefits. I am in favour of winter fuel payments and free television licences for the over-75s. They do not discriminate between people and make them have to admit that they are poor and are therefore entitled to some help.

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Surely the best way of dishing out a better standard of living for pensioners in poverty in London is to give them a rise in their basic pension and to leave their fuel payments and television licence payments intact. Those who are rich and can afford things--I place myself in that category, in a few years' time--will be taxed accordingly. Surely the simplest approach would be to introduce a blanket rise in benefits and to deduct tax. I should like the Minister to respond to that.

The Government seem to be planning to give everyone winter fuel payments, but we are told that only the poorest pensioners will receive extra help with their pensions. I do not understand why the system cannot be simplified. Winter is approaching, and we have already experienced the most fearful conditions for elderly people to cope with this autumn. I urge the Minister to ensure that the Chancellor of the Exchequer takes extremely swift action.

10. 35 am

Mrs. Jacqui Lait (Beckenham): I begin by wishing the hon. Member for Richmond Park (Dr. Tonge) a happy 60th birthday for when it arrives. It must be a defining moment when a letter falls through the letterbox stating how much the basic state pension is. I throw into the pot the thought that perhaps the hon. Lady did not elect to pay the full national insurance stamp but is probably on the married woman's earned income allowance. I am sufficiently young to have been able to make that choice, and I contributed for a full basic state pension. However, that raises an issue that all women pensioners will face as they approach their 60th birthday.

Dr. Tonge : I am glad that the hon. Lady emphasises that point. I should have said that I too made that decision, having other arrangements. However, people in that category do not realise during their working life what is happening to them. They are often poor or single parents or have small children to look after. They may not make a conscious decision but want to make a saving so that they have more money to spend each week, and are then even poorer when they become elderly.

Mrs. Lait : The hon. Lady is correct. Any Government will have to face that issue. I am sure that she, like me, already receives letters from people complaining that they did not know what they were doing or were not given the option. It is 20 years since people were given the option. Memories fade: who knows? However, I fear that, as a result, a category of ladies will not receive what they expect to receive. Many would have expected their husbands to live sufficiently long, but even as a result of better health provision they may not.

I am interested in the comments of, and especially the analysis and research cited by, the hon. Members for Sutton and Cheam (Mr. Burstow) and for Richmond Park. I find it slightly ironic that all three of us who have spoken so far represent outer-London seats. We would all agree that although pockets of deprivation exist in the boroughs that we represent, we represent areas that contain relatively wealthy pensioners. However, that does not preclude the problems of isolation that have been reinforced by some of the care in the community changes. As families fragment and people become older, care packages in the home do not make up for people

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popping in. I have long been critical of the fact that the care package that provides the district nurse, meals on wheels and the home help does not compensate for normal human contact. I have long felt that a much more sophisticated way of helping elderly people who are isolated in their homes is necessary.

It is worth while paying tribute to the many voluntary organisations involved, which include not only Age Concern and Help the Aged, and I am sorry that hon. Members have not already done so. In practically every borough, significant groups help elderly people and provide the clubs and facilities that so many of them need. Such help goes well beyond the two big established lobbying charities, and those groups do a wonderful job helping the elderly. In fact, they act almost like the milkman because they know whether an elderly person is missing his or her visit to the hairdresser or chiropodist. Such charitable organisations provide basic services and provide them well--but under increasing pressure.

Under the Government, social services budgets have increasingly been cut. Only last night, the authorities in Bromley held, for the first time in many years, a special meeting to discuss bed blocking by elderly people. The problem is not the fault of elderly people, nor was it their fault throughout the summer. It is happening because social services departments do not have sufficient money to provide the correct help for people who leave hospital and whose health deteriorates at home.

I understand that, in the last year, 150,000 nursing home beds throughout the country have been taken out. That is mainly because the Department of Social Security and the Department of the Environment, Transport and the Regions have not increased the standard spending assessment effectively so that boroughs can properly fund the beds that are required to help elderly people, first, to recover and, secondly, to live out the remaining years of their life. It costs elderly people roughly a minimum of £500 a week to stay in a nursing home. As for the standard spending assessment and what social services departments are prepared to pay for nursing homes, we are lucky if that hits more than £300 a week. The huge deficit cannot always be taken up by people who require such care.

Health authorities and health trusts are no more flush than social services departments. Whatever the Government's claims about putting extra money into the health service, that money is not going into the intermediate care that is required. Ironically, I expect that over the winter, Bromley and other London boroughs will find that money will be poured into trying to get people out of hospitals to unblock the beds, and that those people will be placed in inappropriate care. The scandal will be dissipated because, instead of a large number of people blocking beds, one or two people will be inappropriately placed--but one or two people do not make news headlines. Twenty to 30 people blocking beds, as occurred throughout the summer in Bromley and in most other health authority areas in London, create a scandal; one or two people who are inappropriately placed do not create the same scandal.

I am deeply cynical about what the Government will do over the winter to ensure that bed blocking is mitigated. We do not want beds to be blocked, but the

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possible result of their action will be the wrong treatment of elderly people who should receive much better care. I lay the blame at the feet of the Government because they have not provided sufficient funds to social services so that they can meet the demands of elderly people as they reach the last years of their life.

Mr. Bayley : I hope that the hon. Lady recognises that the families of those who are discharged from hospital into long-stay care have the choice of where those people stay and that, if the social services are contributing to the care, they must agree that the accommodation is appropriate to the care needs of those people. Why is she creating the scare that people will be discharged to inappropriate places and why does she think that her party's policy would achieve more appropriate placements when it is not proposing to spend more money on the problem?

Mrs. Lait : There is a problem because so many beds have come out of the sector. As I said, 150,000 nursing home beds have come out this year alone because those homes cannot meet their costs. The banks are foreclosing. People are getting out of that industry. It is ironic that county councils have been forced to sell their homes because their beds did not meet the standards required by social services and the health authority for modern day, residential and nursing home care. That is another reason why beds have come out of the sector.

Mr. Bayley : Surely the hon. Lady is not suggesting that the regulatory regime should be lightened so that inappropriate beds that do not provide adequate care are retained?

Mrs. Lait : That is the furthest thing from my thought. I am suggesting that the Department of Health must look much more closely at the standard spending assessment and how much it is prepared to pay to social services departments for those beds. At present it offers money below the cost. Many people can afford to pay the difference, and do. As the hon. Member for Richmond Park said, it causes huge family problems because it requires the sale of the family home. There are other pressures, too.

I am grateful to the Minister for giving me the opportunity to explain our policy on the compulsory annuity. It is an issue that comes right into his Department and it needs to be addressed. At present, many people in retirement have had to take out a compulsory annuity. That annuity, for reasons of which he is well aware, has dropped in value in recent years so that people are getting less per year. Indeed, people on long-standing annuities have seen their value eroded.

Our policy of ending that compulsory requirement for an annuity would, in effect, enable people to have two streams of income when they need any form of long-term care. They can either sell the house or the family can inherit what is in the pension fund. That reduces the antagonism between the generations. It allows people who want to retire to take out, ironically, an annuity or an insurance product to cover the costs of their care, thereby freeing up income to use within the family and avoiding any destabilisation.

The Government must address the issue of the compulsory annuity. I represent an outer-London constituency and, believe me, it is a live one among my

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constituents. They feel that they are being done down by the achievements of low inflation, which we put in place and which has been continued by the Government--but then there is not worldwide pressure on inflation. Other factors are increasing longevity--as a result of improvements in health care over many years--and, ironically, the lack of provision of gilts. The Government could help themselves out of the hole that they are getting into by taking away the compulsory requirement for an annuity.

Having lectured everyone on the new Conservative party policy on annuities, I will return to the subject before I am brought to order.

Mr. Deputy Speaker (Mr. Nicholas Winterton): I have been listening to the hon. Lady with great fascination: she has not yet tempted me to intervene to say that she was out of order.

Mrs. Lait : I would hate ever to stray out of order when you were in the Chair, Mr. Deputy Speaker.

Interesting issues have been raised in the debate so far; I have tackled those of poverty and isolation. The points made about people having greater access to funding for warmer homes fall into the same category of criticism as those about the Government's funding of social services or local government. They have extended grants for insulation, but I am not aware of any publicity for that purpose; a few years ago, under the Conservative Government, there was a lot of publicity for the easy access to grants for heating schemes and much was done to insulate homes. Although a lot more money is going into the present schemes, I suspect that people have not heard about them, as there is little evidence of take-up by the public.

Mr. Burstow : The hon. Lady makes a fair point about the take-up of home insulation grants. In my constituency, publicity was given to one of the schemes at a seniors forum but, despite great interest in it, few took it up because the gateway to the scheme was through income support. If people were not already claiming income support, they were not entitled to the grant. That is yet another barrier, and a justified criticism of using income support as a mechanism for targeting extra help.

Mrs. Lait : I understand that problem. In previous years, the criterion was not income support but how cold someone's house was, which was a much more efficient and effective way to evaluate the need for insulation.

That brings me to the minimum income guarantee; I, too, have seen the advertisements featuring Thora Hird and have heard much criticism of them. Despite all the ads, and the letters that people have received, I have had to ask the people who attend my surgeries whether they are claiming minimum income guarantee, to which they reply, "What is that?" When I ask them whether they have had a letter about it, they reply, "I don't think so." Somehow or other, people who are entitled to minimum income guarantee slip through the net.

It would be most helpful if the Minister could tell us how many people have applied for the minimum income guarantee, especially in London, how many packs have

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been sent out, and how many people are now receiving MIG who previously did not. Until we have those figures, we cannot evaluate its success. Despite the Government's much-vaunted emphasis on helping people through MIG, the amount spent on increases is about £290 million, compared with £1,440 million spent on free television licences and the winter heating allowance. That does not indicate that a large number of people are benefiting from MIG. In fact, most people, whatever their income, get the winter heating allowance, and most will, I hope, for their sakes, get their free television licence. That helps everyone; it helps my wealthy constituents, many of whom are paying 40 per cent. tax in retirement, and it gives some money to those people on the basic state pension with, perhaps, some council tax benefit and housing benefit. That is not the best way to help pensioners. It would be infinitely better to go down our route. Many pensioners have told us that they want their own money in their own hands to take their own decisions about how to spend it. It is ironic that the hon. Member for Sutton and Cheam adopts the Government line to attack us in terms of the increase, but he ignores the fact that people over 75 need more income and will have a greater increase in the basic state pension.

Mr. Burstow : Let me correct the hon. Lady's misrepresentation of the source of my figure of 42p. I relied on the House of Commons Library to analyse the proposals and I understand that the hon. Member for Havant (Mr. Willetts) also relied on the Library to prepare his proposals in the first instance. I went to the same source to check the figures. Will the hon. Lady also confirm that when her party's proposal is boiled down to the minimum, it amounts to only 17p extra for the over-80s?

Mrs. Lait : I am delighted that everyone uses the House of Commons Library. I do, too, and I assume that the Government compiled their figures from the same source. All power to the Library. Pensioners believe that it is patronising to be told what to spend their money on. They much prefer having their own money in their own pockets to spend however they want.

I listened carefully to the hon. Member for Sutton and Cheam and asked questions to clarify what he said. He proposes a basic increase in the state pension to £90 and £135 for singles and couples respectively. It is to be paid for by a 10 per cent. increase in taxation on people earning over £100,000. I was not clear about what happens thereafter: is it linked to earnings or to the nebulous concept of the shopping basket? How will it be paid for? If I understand the hon. Gentleman's answer to the Minister's question correctly, the increased tax for higher earners will pay for the single basic hike only. Thereafter, one must assume that further pension increases will come from further rises in general taxation or from national insurance. Otherwise, there would be the one basic pension increase, which would continue to be linked to prices. Will the hon. Gentleman please clarify?

Mr. Burstow : It would require another full speech to do so, so I shall respond to one important point. It is incorrect to characterise the Liberal Democrat proposal

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simply as prescribing a rise to £90 and £135 pensions. We propose an across-the-board increase in the basic state pension of £5 above inflation, plus an extra £5 at age 75 and an extra £10 at 80. Those figures do not equate to the hon. Lady's, which came from the Family Budget Unit's costings for a low but adequate standard of living.

Mr. Deputy Speaker : Order. I am worried that the Minister is being left out of the debate. We appear to be conducting a debate on the relative merits of Conservative and Liberal Democrat party policy. I have allowed wide discretion on the subject of pensioner poverty in London, but the poor Minister will not want to be left out entirely.

Mrs. Lait : I have no intention of excluding the only non-London Member present today. [Interruption.] I am sorry--there are two non-London Members present. I am trying to help the Minister by clarifying Liberal Democrat policy because, as ever, it is about as clear as mud. I am pursuing the point on behalf of my constituents in Bromley, but it is not much clearer. I accept the hon. Gentleman's correction and clarification and am delighted to hear what he is suggesting. However, he did not say whether the proposal would be covered entirely by the increase in the taxation level for some higher-rate income tax payers and where the money for further increases would come from. I should be most interested to hear him deal with that.

Mr. Burstow : The yield from a 50p rate would provide sufficient funds to cover the £3.1 billion cost of the proposals that I enunciated. We propose to establish an independent body to assess and advise on the level of pension required in future. I recommend that it uses in its calculations the FBU's method of assessing pensioner incomes.

Mrs. Lait : I am pleased to have that answer, as it will enable us to work out by how much income tax must be increased to meet the Liberal Democrats' proposals. As soon as people realise the impact on income tax rates or VAT, they may reassess their attitude to those pensions proposals. We have achieved a great deal in this debate, because we are a little closer to understanding the Liberal Democrats' policy.

Dr. Tonge : Will the hon. Lady deal with her own party's policy and explain why an extra 42p a week would help pensioners?

Mrs. Lait : I have explained our policy at least twice, as I am sure that Hansard will confirm. People want control over their own money; they do not like being patronised and told how they should spend it. Giving people control is one of our clear commitments, on top of any inflation-linked increase. Who knows what will happen next week when the Chancellor spreads largesse around the country? I can see that you are becoming restless, Mr. Deputy Speaker, so I shall return to the issue of pensioners in London. I shall not speak for much longer, because I am sure that all hon. Members want to hear the Minister justify what the Government are doing.

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Poorer pensioners, whom the Chancellor has targeted for extra help, are not receiving that help, because the minimum income guarantee is not reaching the right people and the increases constitute one fifth of the money spent on the heating allowance. The Minister said in Hansard on 12 June that the amount so far is £2.2 billion, not the £6 billion claimed by the Chancellor. Pensioners are not doing well under this Government: relatively more of them are living in poverty. There are problems with bed blocking and isolation in the home. Social services or local government cannot help people to insulate their homes at the rate that many of us would like. There is, therefore, a strong case for the Government to deal with pensioner poverty in London.

11.4 am

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley) : The unusual occurrence of the Chair defending the rights of Ministers in the Chamber is very pleasant, and I am most grateful for that welcome development. I pay tribute to the hon. Member for Sutton and Cheam (Mr. Burstow) for securing this important debate. Like the hon. Member for Beckenham (Mrs. Lait), I extend my best wishes to the hon. Member for Richmond Park (Dr. Tonge) for her birthday, which I hope that she celebrates well. I am sure she will be celebrating her birthday rather than an imminent retirement.

Every Member of Parliament of our generation owes a special debt of gratitude to today's pensioners--the war generation. The rights that we all enjoy in our democratic system and the right to stand in elections to this place, we owe to those who fought against tyranny and to protect democracy. In London, especially, we remember the war generation who went through the Blitz. After the second world war, those who are now pensioners created the welfare state and rebuilt our country. Many of them feel cheated by the Conservatives. Some did extremely well and retired on much higher incomes than pensioners had in the past, but the gap between better off and poorer pensioners widened remarkably during the 18 years of Conservative Government. The hon. Member for Sutton and Cheam referred to the widening gap between the better off pensioners and the poorest pensioners. That is something that the Government must address, and we are doing so with our policies.

I was pleased to hear the hon. Member for Sutton and Cheam disowning at least part of what the Liberal Democrats said in their manifesto, which stated:

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I want to say a word or two about future generations of pensioners. The hon. Member for Richmond Park said that it was wrong that pensioners had to rely on the minimum income guarantee for a decent standard of living. In an ideal world, people would not have to apply, through a means test, for an uprating in their living standards. Therefore, we are reforming the pensions regime so that future generations of pensioners will have a second pension on top of their basic state pension, which will raise them to a level above the minimum income guarantee.

Now, however, we need to do something for today's pensioners, who did not have those opportunities under the Conservatives, and who retired on low pensions--perhaps below the basic state pension level, as in the example given by the hon. Member for Richmond Park. She said that she was fortunate enough to have been able to save in an occupational pension scheme; she made an informed decision that that was the best way for her to provide for her retirement. The hon. Lady also made the point that many people, especially women, were unable to make contributions to a second pension because they had household responsibilities. A caring Government who want to help the poorest pensioners--those who have been unable to make the national insurance contributions to guarantee themselves the basic state pension--have to introduce special measures precisely for that reason. That is what we have done through the minimum income guarantee. We seek to improve the situation for tomorrow's pensioners.

Mrs. Lait : I hope that the Minister will not leave the subject of the minimum income guarantee entirely, because I asked some specific questions about the effect of the campaign.

Mr. Bayley : I would not dream of saying so little about what is the foundation of the Government's response to pensioner poverty. I will come back to it, but first I want to say a little about the Government's plans to ensure that fewer pensioners in future generations rely on the minimum income guarantee.

We have said that the basic state pension will remain the foundation of our pensions policy. It will, but the state second pension builds on SERPS, the state earnings-related pensions scheme. As a result, 18 million people will have significantly better second pensions than they would have otherwise. The problem of SERPS is reflected in the name: it is earnings related. Those on the lowest earnings received the lowest pensions. The state second pension will double what is received by people on the lowest earnings. As a result of a state second pension, someone earning £120 a week will be £40 a week better off in retirement. People who in the past have not been able to earn second pension credits, such as carers or disabled people with broken work records, will be able to earn up to £50 a week more through the state second pension.

We are introducing stakeholder pensions that will provide a better rate of return for people on middle incomes--about £10,000 to £20,000--as personal pensions were not attractive to them because of the administration charges.

Mr. Burstow : I have listened to the Minister's explanation of the Government's plans. With the

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introduction of the state second pension on top of the basic state pension, will he confirm that many pensioners in the latter part of their retirement will still be led back into means-tested benefits, even once maturity has been reached and the full state second pension is paid out?

Mr. Bayley : The hon. Gentleman must wait a little longer. Next week, the Government will publish the consultation paper on the pension credit. We want to reward pensioners who save, either in a bank or building society or in a pension scheme. That will reward those who have not so far benefited from the minimum income guarantee. Some people will have made their own provision through paying into an occupational pension scheme, a stakeholder pension or the state second pension, and will still receive benefit from the minimum income guarantee. That is because we will propose in the consultation paper to broaden its range, so that those who have been prudent and saved also receive further support.

Mrs. Lait : That comes to the crux of the interaction between the minimum income guarantee, the pensioners' credit--whatever it is; we are glad to know that details of it will be published next week--and the desire to save for a stakeholder pension. Logical people will consider the minimum income guarantee and the potential pensioners' credit, if they are eligible for it, and not save for a stakeholder pension.

Mr. Bayley : The hon. Lady will see the answer that she wants when we publish our proposals. We have introduced the pension credit precisely to provide protection for the poorest pensioners, which a Labour Government are strongly committed to continuing to do, while ensuring that people have a strong incentive to save.

Our first priority when we came into office was to tackle the needs of the poorest pensioners; we did that by creating the minimum income guarantee. The hon. Member for Richmond Park asked me to respond to her proposal that the best way in which to tackle pensioner poverty was to increase the basic rate of the state pension. That policy ignores the startling increase in inequality between the better off and the poorest pensioners, which has taken place in the past 20 years. The Government must do more for poorer pensioners than for others to address that inequality. That is why we have introduced the minimum income guarantee.

Dr. Tonge : With respect, I do not understand one point. If one increases the basic income for pensioners, single parents or any other group, those who have or acquire another source of income will be taxed heavily at the upper end of the scale. The way to help the poorest is surely to improve the basic income, from whatever source, and then to recoup it on tax. Do Governments not do that because they do not like imposing taxes? Is that what you are telling us?

Mr. Deputy Speaker : Order. I am not telling hon. Members anything, although the Minister may be.

Mr. Bayley : By the end of this Parliament, the Government will be spending about £6.5 billion more on

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pensions than was being spent when we came to power. If we were to spread that money equally across all pensioners through the basic state pension, it would provide nothing like the increase that we have been able to give the poorest pensioners. They would be much worse off under such a proposal. Unless there were an income tax rate of 100 per cent., which even the Liberal Democrats do not propose, the richest pensioners would get a much larger increase from the state than they would receive otherwise. If we want to do something about inequality, we must target; there is no alternative. If we do not target, we allow greater inequality.

The minimum income guarantee helps 1.6 million pensioners, of whom 200,000 live in London. The national proportion of pensioners receiving the minimum income guarantee is about 10 per cent., whereas in London it is 13 per cent. The take-up rate is higher, despite the fact that average pensioner incomes in London before housing costs are slightly higher than the national average. Therefore, take-up is an issue, but we have made greater progress in London than in other parts of the country.

The hon. Member for Richmond Park made an important point, to which the hon. Member for Beckenham also referred. Pensioner poverty is a real issue across the whole of London. Of course, it is a real issue in the inner cities but, if one looks behind the net curtains in Richmond or Beckenham or the suburbs, one also finds poverty. It may not be so concentrated in those places, but one still finds people in difficult circumstances who need help now--that help comes from the minimum income guarantee.

The Government have recently launched the biggest ever take-up campaign for any benefit. Pensioners can claim by phone on 0800 028 1111 to inquire whether they are entitled to the minimum income guarantee. Through calls to the helpline and the return of the tear-off slip on the letters that we have sent out, about 500,000 pensioners have made inquiries about the guarantee. I am afraid that I cannot do as the hon. Member for Beckenham requests and give a breakdown by region at this stage, but we shall give a full report at the end of the campaign. We are only part of the way through the campaign; not all the letters have been sent out.

The hon. Member for Sutton and Cheam raised the important point about the worrying number of excess deaths of older people during the winter. I wish that he had acknowledged some of the things that the Government have done to address that situation; we have taken and plan to take further action. We have cut VAT on fuel and we introduced the winter fuel allowance at the rate of £20 per household, which was increased last year to £100 and is to be increased this year to £150. Also, we are about to publish our fuel poverty strategy.

Several hon. Members have made the point that we should not only provide cash to enable people to meet fuel bills but do more to insulate homes and make them more energy efficient so that the bills are not as high. The Government agree with that absolutely. About 800,000 homes will have benefited from the new home energy efficiency scheme by 2004, with help of up to £2,000 per household to put in better heating systems and

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insulation. Sixty per cent. of those receiving help from the home energy efficiency scheme will be pensioners. Over seven years, the affordable warmth programme will make grants to 150,000 pensioners.

Dr. Tonge : Before the Minister goes on, will he explain who would receive those grants for insulation? Will it be only those on the minimum income guarantee?

Mr. Bayley : No, not only those on the minimum income guarantee will benefit. People can access the system through their local authorities.

Dr. Tonge : Is it means-tested?

Mr. Bayley : Yes, there is a means test on the scheme. I can drop the hon. Lady a note to give her further details.

I listened carefully to the Liberal Democrats' proposals to increase the basic state pension by £5 with an additional £5 for the over-75s and a further £10 for the over-80s. It is a generous scheme, which, as the hon. Member for Sutton and Cheam acknowledged, would cost more than £3,000 million. The question that pensioners are entitled to ask, and which has not been answered today, is where that money will come from. The Liberal Democrats seem to suggest that they were mistaken in making a proposal in their manifesto before the last election that was similar to the Government's MIG proposal. By cancelling the whole of MIG--if that is the Liberal Democrats' proposal--they would only save about £2,000 million; they would still be about £1,000 million adrift. Raising the cost of pensions increases through raising the rate of income tax for people on higher earnings, as they propose, could cover the cost for year one but not in subsequent years. They would have to press ever higher rates of income tax to achieve what they intend. They owe it to pensioners and to the working population as a whole to explain where the money would come from.

Restoring the earnings link would cost the country an additional £20 billion by 2020, a 50 per cent. increase in today's pensions spending. Most important of all, that would not address the needs of those pensioners on low and modest incomes, who have saved through pensions schemes or have savings in the bank and who are precisely the people whose needs we shall address through the pension credit.

As we have already announced, from April next year, people with savings of up to £12,000 a year will be able to benefit from the minimum income guarantee. As a result, some 500,000 pensioners will gain by an average of £5 a week. However, we plan to go further still. We recognise that a system of capital rules for the MIG discourages saving, and we plan to abolish capital limits and to consider instead income from savings, because we believe that that would mean a fairer system.

Mr. Burstow : I am interested to hear that incomes will be considered. Will the Minister be considering tariff income, which assumes a 20 per cent. rate of return on people's savings? I should love to find the bank that pays that rate, as would many pensioners.

Mr. Bayley : As the hon. Gentleman knows, tariff income is not and was never intended to be a rate of

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interest. However, his point highlights the problem of capital limits, which, unlike us, the Liberal Democrats have not said that they would consider abolishing. We believe that it would be fairer not to provide a disincentive to save, although obviously account must be taken of the interest that people receive on their savings. Pensioner credit will go further. It will reward saving on the part of those who have a modest occupational pension. In addition to the minimum income guarantee, for every pound saved, pensioners on the credit will receive additional help. The Government will publish their consultation document on the credit next week.

The changes and our proposals will be subject to consultation, and any legislative changes will have to be presented to the House. Changes therefore cannot be introduced before 2003. However, the needs of pensioners whose income is just above the minimum income guarantee level must be dealt with now, and the Chancellor will announce transitional measures in the pre-Budget report.

I believe that I have covered the issues raised by hon. Members. When we took office, the Government made it clear that our first priority was to do more to help the poorest pensioners, and we have done so, through the minimum income guarantee. At the time of the previous election, in cash terms the basic state pension was £62.45. The current minimum income guarantee level is £78.45 in cash terms, £16 a week more than when we came to power. The Chancellor has already made it clear that for a single pensioner, the MIG level next year will be £90--a dramatic increase in the standard of living for the poorest pensioners.

As a Government, we have taken measures to help all pensioners. All pensioners receive the winter fuel payment, not a week after the event, following seven days of below-freezing temperatures, but as of right, at the start of the winter. It was introduced at £20, was increased to £100 this year, and, as I said, will increase to £150. The hon. Member for Sutton and Cheam believes that more should be done for older pensioners. From tomorrow, we are introducing free television licences for the over-75s. That is a measure that we have introduced for older pensioners, targeting help for them through free television licences.

Through the proposal for pension credit, which will be open to consultation next week, we shall do more for those on modest incomes, who have not hitherto benefited from the minimum income guarantee. Our policies are radical, but they are workable and affordable and will ensure that pensioners in London and throughout the country are able to share in the nation's rising prosperity.

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