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Mr. Simon Hughes: As this is the last relevant parliamentary debate to be held before the Chancellor makes his announcement on Wednesday and before the subsequent debates on its social security aspects, is the view of the all-party group on ageing and older people that it would be preferable for fewer people to be in receipt of means-tested pensions or pension top-ups and for more people to receive a higher non-means-tested basic allowance? That is certainly the view that pensioners of all parties have put to me. Everyone understands that they may have to fill in a tax return and pay tax, but surely it would be a bad result if this week's announcements meant that more people were means-tested.

Mr. O'Hara: I hesitate to speak for other members of the group, but my view is that there should be a more generous basic pension, across the board, even if it cannot at present be increased in line with earnings.

To help pensioners to share in the prosperity of our country--a laudable aim in the Government's manifesto for the previous general election--is not an act of charity. When pensioners were earning, they contributed to that prosperity. They worked and, in many cases, fought to lay the foundations for the prosperity that we enjoy. What better argument could there be for the Government to show a little more generosity towards older pensioners--those aged between 75 and 80--in the settlement to be announced in the autumn statement?

5.28 pm

Mr. John Butterfill (Bournemouth, West): None of the parties can look back on their record on pensions with any great credit. The Liberal Democrats made an attack on the Conservatives' record when we were in office. Under Baroness Thatcher, it is certainly true that we broke formally the link with earnings, although during our period in office the increase was slightly higher than inflation--about 10 per cent. higher. Furthermore, we introduced the winter fuel allowance--[Interruption.]--

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Yes, we did. I point out to the Minister of State, Department of Social Security that the real link with earnings was first broken when his party was in office--under a Lib-Lab coalition--although the Minister himself, to his great honour, was extremely critical of his Government when he was a young Back Bencher; the figures were fiddled and he said that the earnings link had been broken.

The problem is that all parties in the House, knowing that it would never be possible to give pensioners a full pension that would sustain them throughout their retired lives, have somehow connived, particularly at election time, to hint that that might some day be possible. No one has done that more than the Liberal Democrats with their series of wholly unsustainable and inadequately costed proposals that they know that they will never have the opportunity to implement. They know that all they are doing is putting out fodder for their Focus magazines.

Mr. Webb: We have tabled interminable questions on these issues. The revenue from a 50p rate in a full year is £3.1 billion. The cost of our proposals--I can show the hon. Gentleman the written answers--net of savings on tax on means-tested benefits is £3.1 billion. What more can we do than that?

Mr. Butterfill: I prefer the figures that my hon. Friend the Member for Beckenham (Mrs. Lait) gave. Even if the hon. Gentleman were correct, he is saying that his proposal is affordable. Even if were affordable in the short term, it would not be affordable, as he well knows, in the long term. Indeed, the present system is not sustainable in the long term. Anyone who has studied the issue sensibly and for a length of time--many Members on both sides of the House have done so--knows that the present system is not sustainable in the long term because of a demographic time bomb. People are living longer and not a state in the western world is capable of sustaining a system that is wholly unfunded in the way that ours is. It is a pay-as-you-go scheme that will never be affordable in the long term.

Mr. Flynn rose--

Mr. Butterfill: I give way to the hon. Gentleman, because he knows much about these matters.

Mr. Flynn: I refer to a booklet entitled "The Age of Entitlement" that was published by the hon. Member for Havant (Mr. Willetts). He refers to the myth of the demographic time bomb, which was used by the Conservative party when it was in government to wreck the national insurance system. In addition, the evidence given to the Select Committee on Social Security made it clear that the funds in the national insurance system now are enough to restore the link for the next five years and will be enough for the period after that if national insurance funding increases by just the rate of inflation.

Mr. Butterfill: The hon. Gentleman studies these matters carefully and he will know that there are many conflicting views. The majority view, which is expressed by all sorts of experts on the subject--I have read as many publications as the hon. Gentleman--is that the present

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system is not sustainable. Even if it were, it would be sustainable at a level of pension that would never be adequate for people to live on without additional savings of their own or the provision of means-tested benefits by the state. That is the point that I want to make. We must try to get away from the politicking and down to the reality of what can and should be done by all of us on an all-party basis to provide a sustainable decent standard of living for pensioners in future.

There are three groups in society. The young have inherited a wonderful economic climate and will have the opportunity during their lifetimes to make themselves rich beyond the aspirations of any of us here. Most of us probably represent the middle group and then there are the significantly elderly--particularly those aged over 75--who fought in the last war and grew up in a period of austerity. They did not have the opportunities that we, and certainly the young, have had to save for their retirements. If we are going to make a change, we should single out the elderly and accept that we have an inter-generational responsibility to pay them, as of right, a decent pension.

For the intermediate group--that includes most of us; certainly anybody between the ages of 40 and 65, and perhaps those between the ages of 40 and 70--we should say that the present system will continue. We should tell them, "You should have been able to save something for your retirement. It is reasonable to assume that you might do so and, therefore, you will not be entitled to more than the present system provides." For those who fall through the net, there should be the prospect of some means-tested safety net.

Most people under the age of 40 view with horror the idea of having to live on a state retirement pension--and quite rightly so. They know that they must save for their old age and are quite prepared to do so. We should make that far more possible for them. At the moment, a series of incentives--many of them introduced by my party--is proving inadequate to persuade people to save.

The Government stakeholder pension scheme benefits nobody. The poorest group of people, whom the Government are keen to encourage, will find it better to be on the minimum guaranteed income and, frankly, it would be pension mis-selling to sell them a stakeholder policy. The richer group have better savings vehicles that are not encumbered by the ludicrous rules that currently apply to pension saving. Therefore, only a small group of people in the middle could benefit from stakeholder pensions, but they are not those whom the Minister of State and his party wanted to target.

Eventually, the answer must be to look at what has happened in other states, such as Australia, Argentina and Singapore. We need a compulsory retirement scheme into which everyone will have to pay. The young should be told that there will not be anything else and that they must save for their retirement. Then, we should concentrate on looking after the group of people to whom we all have an obligation--those who were not able to save during their working lives--and pay them a decent pension.

5.37 pm

Mr. Michael Jabez Foster (Hastings and Rye): Given that about a third of my electorate are retired, my concern is that we need to do better--even than we have already. I know, however, having gone around the constituency

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just recently, that many of my constituents already recognise just how much better things are than they were three years ago.

I do not think that people will forget that, in 18 years, the previous Government badly short-changed pensioners. Many will recall the hardship that pensioners suffered without relief. Even when the economy was going well during the many years of rising prosperity, there was nothing for pensioners beyond a basic increase in line with prices. That makes it clear where the Conservatives have been coming from. That record will not be forgotten; pensioners were not born yesterday.

When I faced the electorate in 1997, not one of my political opponents proposed anything more than an uprating of pensions in line with prices. That was true of the Liberal Democrat candidate, as it was of everyone else. However, because things have gone well, the Government have done better than could possibly have been envisaged. Benefits such as the minimum income guarantee, the uprating in line with wages, fuel payments and free television licences for older pensioners could not have been expected in 1997. Those things are appreciated, but I acknowledge, as I am sure many hon. Members would, that pensioners need and want more.

I have spoken to a number of pensioners over past weeks and found that, on analysis of their incomes, very few regard themselves as worse off under the Labour party. In fact, I have found quite the reverse. Pensioners get excited at public meetings, but when I had the opportunity to offer to write a cheque for the difference to anyone who was worse off, no one came forward. That is not to suggest that the pensioner's lot is sufficient, but they are better off under Labour than they were three years ago, and certainly better off than they would have been under the policies of the other two major parties.

My concern centres on the way in which things could get worse--indeed, they could only get worse if the Conservatives were to have the opportunity they seek--for the one third of my pensioner constituents who are on or near the level of the minimum income guarantee. They would lose from the minimum income guarantee no longer being upgraded according to wages, as well as on the winter fuel payment and free television licences. Happily, most of my constituents have seen though the Conservatives' hall of mirrors and are unlikely to fall for it. It is by one's deeds that one is judged and the Tories have a long way to go, especially among our experienced constituents, who remember them for what they did, not for what they say.

For all their good will, the Liberals never promised more than Labour has provided--how could they, when they reject the means by which the Labour Government have delivered an economy that is able to create options to pay more? If the Liberals early spending commitments had been implemented and their refusal to back the new deal had been accepted, we would be looking, not at a budget surplus this year, but at a deficit that would make it impossible to help those to whom we want to give priority.

It is important that we abandon the dangerous idea, often mentioned by hon. Members, of linking pensions with national insurance contributions. I had the Library calculate current pensions based on 40 years' national insurance contributions at the basic rate. The result would be a pension of £40 a week--of course, that pension

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would be upgraded according to inflation, but it is significantly less than is already paid. When the Tories talk about privatisation, with private pensions replacing the state system, we must remember that pensioners have made a wider contribution to our society, for which they should be rewarded; that contribution is more than merely the national insurance contributions they made, which would pay far less than even the current meagre pension.


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