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6.4 pm

Mr. Paul Flynn (Newport, West): During the 10 years of miserable opposition that I suffered, along with my right hon. and hon. Friends, we dreamed about the day when we would reform the pension system on the lines that we preached throughout those 10 years. Indeed, they have been preached during the party's entire history. We said that we would rebuild the pension on the basis of the national insurance principle. I shall say many things in opposition to the Government's policy, but I shall do so with the support of my party's history, my party's present policy as decided at the most recent conference and the approval of two marvellous reports by no fewer than three Select Committees since June, and knowing that we are talking about a policy that has worked brilliantly.

We can go to our constituencies and say that there is a Labour good-news story on pensions. We have provided a good £6 billion more than the Conservatives would have made available if they had been re-elected. I do not understand how the perception of our policies is so badly wrong. Many pensioners believe that we have been mean with pensions. The fault is ours. It cannot be said that what has happened was not predicted. It was predicted in early-day motion 1 this year. Over the previous four years, pleas have been made, with the backing now of 106 Members, to restore the earnings link and start to ensure that the basic pension has a strengthened foundation, not a crumbling one.

To his great credit, the Welsh Liberal, David Lloyd George, introduced the national insurance scheme in 1911. There were moves before that to introduce such a scheme. However, it determined how we would organise our welfare benefit throughout almost the entirety of the 20th century. The 19th century was marked by the

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poor law. It was thought that the way to distribute welfare was to give it to the poor, tapping them on their grey heads and saying, "There is a little handout for you."

It is extraordinary that we appear to be reverting to the principle of the poor law in Government policy. It has been said that there is a young person's view of these matters, and that may lie behind what is happening. When we were in opposition, and especially during the final years, we said that 1 million of the poorest pensioners would be our first priority. They were getting basic pensions and not what we call the minimum income guarantee.

There is nothing new about MIG. It was around 60 years ago, and it existed throughout the life of income support, supplementary benefit and national assistance. It has always been possible for those whose pensions were not at a level that was deemed reasonable to obtain extra money. It was the handout, the charity or the gift from Government. The number of our poorest pensioners has been reduced to 876,000, and we are now talking about 500,000. They are living below a level that the Government have described as the minimum income guarantee.

The Opposition spokesperson, the hon. Member for Beckenham (Mrs. Lait), talked about the take-up of the scheme, which arrived two years late--the Government had been begged to introduce it a long time before. Take-up is disappointing. At the most, it is about 5 per cent., but it is probably about 3 per cent., which is tiny. Why is that the position? I suggest to my right hon. Friend the Minister that he should talk to pensioners. Many pensioners worked throughout their working life, paid all their dues and never claimed any dole or any benefit. That is a matter of great pride for them. When they reach the age of retirement, they are told that if they are to get the amount of money that the Government regard as the minimum that they should receive, they will have to complete a very long and complex form and ask for a handout. That is the difference between what the Government Front-Bench spokesmen are saying and what 85 Labour Members have said and have not resiled from in early-day motion 1. They want the extra amount put on the basic pension, so that it is an entitlement that pensioners can accept with dignity and pride. They do not want it to be a demeaning amount that pensioners have to claim through the income support scheme. The difference is crucial. It is difficult to see why that is not understood by the Government. Investigations have been made throughout this long period into why people entitled to the minimum income guarantee are not receiving it. The evidence shows that pensioners find the scheme demeaning, although it has not been published in great detail.

The majority of pensioners, including those who will come to Parliament tomorrow, want a promise that no party is making to them, which is that in their retirement they will have an increase in their pensions equivalent to the real rate of inflation. That is not a great deal to ask. Is it affordable? I agree with the hon. Member for Bournemouth, West (Mr. Butterfill) about compulsory pension schemes.

It is not just today's pensioners who face these problems. People in their 40s and 50s who were mis-sold personal pensions will get a terrible shock when they reach retirement age and go into the world of annuities. Annuity rates dropped in value by 30 per cent. from the 1990-94

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projections. That is a huge drop. Some of my constituents believed that their total fund was the annual amount that they would receive in their personal pensions, and they had organised their lives accordingly. People understand well their occupational pensions, but few understand the personal pensions that they were wickedly mis-sold.

Millions of young people will be in even greater trouble if we allow the basic pension to wither on the vine. Those not in work will be in terrible trouble, but so will those not paying into any occupational scheme. The hon. Member for Bournemouth, West spoke against the policy of his own party. The most dangerous thing about the Government's policy is that it attacks the principle of the basic pension. If on some dark day in the future there were a change of Government, they would have an open invitation to destroy the basic pension. The Opposition already have a policy of allowing young people to pull out of it.

We all know the attitude of staff to pensions. They have almost to be nailed to the desk to get them to contribute to pension schemes that are freely given, which require a contribution of 10 per cent. of their salaries. It is difficult to persuade them that they are not immortal and that one day they will grow old and need that pension. They do not want to contribute during the early, furniture-buying, child-rearing days of marriage. In their 40s and 50s, they will have to pay 15 or 20 per cent. of their income on a pension. If the state pension goes, they will receive a derisory pension. That is an important point.

I want to consider the intellectual poverty of the Government's position on pensions. Since June, there have been reports from three Select Committees, which are not manned or womanned by people who present a challenging view for the Government. I have just discussed that with my hon. Friend the Member for Islington, North (Mr. Corbyn). We have been told in clear terms that we will never be allowed to serve on a Select Committee, certainly not the Select Committee on Social Security. The Government trust members of Select Committees to be loyal to them. I would love to read the Government's response to the splendid report of the Social Security Committee on "The Contributory Principle", which says that the Government's preference for means-testing

The whole point of national insurance is to provide help in certain periods of our lives: when we are very young, in the early days of marriage and when we are old. If we have paid into an insurance fund during that period when we can afford to do so, we can have money out at other times. Every party accepts that principle for child benefit, which enjoys almost 100 per cent. take-up. Why? Because there is no stigma attached to it, everyone can receive it and it is entirely untargeted. It is a very popular benefit.

The report from the Select Committee on Scottish Affairs on "Poverty in Scotland" said:

The Social Security Committee report on "Pensioner Poverty" referred to the aims set out in the 1998 pensions Green Paper. It said that

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All those reports are detailed and thorough. They were the result of months of work by the various Committee. Not one of them supports the stubborn, doctrinaire line taken by the Government, which is contrary to the opinion of the Labour party and is difficult to sell to pensioners.

We know that the Government intend to allocate a large amount of money to pensioners. However, after the Budget, the £150 allowance and the policy behind it met a growing feeling of rejection. I went to a meeting of a pensioners' group, and the morning papers were saying that the Chancellor would be popular with pensioners. He was not. Feelings about that larger lump sum were similar to those that people had in the early years of trade unions when rogue employers cheated their workers every week by paying them low wages and then tried to buy back their favour by giving them a turkey for Christmas. The effect of being given a turkey was much greater than being cheated out of £5 a week in their wages. It was a gimmick. When the 75p increase was announced, those pensioners were very angry about it.

Liberal Democrat and Labour Members have expended much energy trying to find out the amount of the national insurance fund. That information is crucial to debates on pensions. Last November, there was a surplus of £8.43 billion. That money belongs principally to pensioners. This and previous Governments have raided the national insurance fund to reduce contributions to employees. Employees have a claim on some of that money, but large sums have been used for that purpose.

The stable employment situation, with the lowest unemployment rate for 20 years, and the Government's other great achievements have ensured that the national insurance fund contains an even bigger sum. That £8.43 billion was not the balance of the fund: it was the unneeded surplus. There was already enough money in the fund for contingencies, as the law states that there should be. Increases in unemployment could have been dealt with using the contingency fund, and there would still have been £8.4 billion available. An increase in the basic pension of £1 a week would cost about £500 million. No one is asking for an unreasonable increase for pensioners to bring pensions up to what they would have been had those pensioners not been cheated by the Tory Government every year between 1980 and 1997. We know that that is not possible: it would be very difficult to achieve.

We argue, however, that increases are affordable. They are just, and they are the best way to reward pensioners for the contributions that they have made. The Treasury supplement was paid for years. Real money went into the scheme. Pensioners who have worked all their lives and have contributed through their insurance contributions and through the Treasury supplement now have to beg for charity and take handouts to get a pension. Increasing the MIG to £90 may provide extra money, but instead of the current one in five persons on means-tested benefits there will be more of them--if the present trend continues that number will increase to one in four by 2050. We cannot say to a whole generation that they must rely on means-tested benefits.

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I appeal to the Government to re-examine their policies. Those policies are deeply unfair, although the Government's heart is in the right place. Their spending is generous, but they are corrupting what has been one of the Labour party's great achievements over the past 100 years: supporting the principle of national insurance. Not only is a large increase fair, affordable and overdue; it should be possible to make that increase now, and it should be announced on Wednesday. There is no excuse for any other action.

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