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Mr. David Willetts (Havant): I congratulate the Secretary of State on the scale of the proposals that he and the Chancellor have set out for the tax and benefits system in 2003.
Will the Secretary of State confirm that he will abolish the working families tax credit, which he launched only last year? Will he further confirm that he will abolish family premiums in income support, and that he will introduce a new integrated child credit, a new employment credit and, for good measure, a new pension credit? That is ambitious for a Government who recently lost 1 million tax files and cannot pay the correct pension to people who are retiring today because of the continuing problems with the national insurance computer system.
On Monday, the Minister of State, whose frankness on the subject is often refreshing, said that the benefit computers "are rubbish".
Mr. Speaker: Order. Please let the hon. Gentleman speak.
Mr. Willetts: We will accept our share of responsibility. [Interruption.] However, Labour Members should do something in return. They should reflect on the implications for the incredible set of changes that they propose to implement in the next two years. All the policies about which we have heard yesterday and today will put the tax and benefits system under yet more strain. It is no good devising fancy schemes if they are unworkable. The Minister of State's words show that they are unworkable. Even the Chancellor recognises that.
Last weekend, the Chancellor gave briefings to say that he was furious that his pension plans had been undermined by a series of administrative disasters at the DSS. Other Ministers are the poor bloody infantry, who will take the blame when things go wrong, as they surely will when the Chancellor tries to change the working families tax credit, the employment credit, the child credit, and the pension credit in one year.
When it is a matter of defending the measly 75p on the basic pension, the Prime Minister and the Chancellor are safely ensconced in a chateau miles away from their lines, while the Secretary of State and his colleagues spend a year trying to defend the indefensible. But now that headquarters has decided on a retreat or, as it calls it, special transitional measures, the Secretary of State and his colleagues get to make the announcement. All the Secretary of State is left with is his complicated pension credit, which is overburdening a system that is already far too complicated. Complexity with a purpose is used to disguise the abandonment of the Government's failed policies. We want sensible measures that reward saving, and it is no good Ministers claiming that they are helping pensioners with their savings, when the money to finance
those measures and others comes from the £5 billion a year tax on pensioners' savings, which is the biggest stealth tax of the lot.We have heard a lot about joined-up government from Ministers. Why does the Secretary of State not join up the different, inconsistent policies pursued in his own Department? May I ask him about the position of two single men aged 65 with a basic state pension? One has his pension topped up with an occupational pension of £30 a week. The other pensioner tops up his pension by doing part-time work that earns him £30 a week. He might even have been encouraged to carry on working, with all the urging from Ministers. Will the Secretary of State confirm that, after today's proposals, for the first time the net income of the man with the occupational pension will be higher than the income of the pensioner with part-time work? That is not joined-up and is not even fair. How do the Secretary of State and Labour Members defend that direct consequence of the proposals that have just been announced?
Will the Secretary of State confirm that the changes will mean a massive extension of means testing? The proportion of pensioners on means tests fell from 57 per cent. to 37 per cent. under the Conservative Government, but millions more families and pensioners now face a combined rate of tax and benefit withdrawal of 40 per cent. or even more. In tackling one grievance, the Secretary of State is creating another. We all know that pensioners do not want to have make complicated claims for means-tested benefits, even if they are given fancy new names such as the minimum income guarantee and the pension credit. Ministers are sending out 2.3 million letters to try to get more pensioners to claim the minimum income guarantee but, in spite of all their take-up campaigns, have had to admit that, so far, only 24,000 more pensioners have got the MIG. Ministers ought to learn the lessons of that failure rather than invent another complicated means-tested benefit.
How will the benefit work exactly? Will it be claimed through the tax return or through a benefit claim form? It is no good the Secretary of State saying that everything can be done on the telephone, because the experience of those making phone calls to try to claim the minimum income guarantee is that that leads to complicated paper-based transactions. We need to know how that benefit is to be claimed.
The Secretary of State talked about abolishing the capital limits and got a cheer from some of his colleagues. However, do they realise that every £1 of income from savings will now be taken into account as part of the minimum income guarantee? Does the Secretary of State agree with the Under-Secretary of State for Social Security, the hon. Member for City of York (Mr. Bayley), who only in June said in a written answer that the current arrangement
- provides a straightforward method of calculating the weekly contribution which people with capital in excess of the lower limit--
- are expected to make from those resources to help meet their normal living expenses. Because no tariff applies to savings below the lower limit, the rule is most generous to people with relatively low savings.
-
The Secretary of State is getting rid of that arrangement, claiming that there is a supposed 20 per cent. notional rate of interest in the current rules. However, the Under- Secretary of State said:
The system is not based on any imputed rate of return--[Official Report, 14 June 2000; Vol. 351, c. 653W.]
Will the Secretary of State confirm that most of the money has gone not into the minimum income guarantee or the basic pension, but into complicated and indiscriminate special payments such as the winter fuel payment? Does he not realise that pensioners find these allowances patronising and intrusive? They would far rather have that money as part of their guaranteed weekly income, and that is what we offer them.
We would implement the Government's uprating and add our reforms on top. [Interruption.] Our uprating would give all pensioners under 75 an extra £9.50 a week if they are single and £13 a week if they are married. Older pensioners would receive £11.60 a week if they are single and £16.10 a week if they are married, with no extra tax and no loss of means-tested benefit. That would be financed by consolidating all the special payments and providing extra money on top, so that pensioners would be better off. [Interruption.]
Mr. Speaker: Order. There is far too much shouting.
Mr. Willetts: I shall quote Baroness Castle, because she understood our package. She said that
- the Conservative leader, William Hague, is no fool.
- He has put forward the idea of taking the fuel allowance and the TV licence allowance and turning them into a cash increase on the basic pension. In my opinion, that would be an absolute vote winner.--[Official Report, House of Lords, 22 June 2000; Vol. 614, c. 546.]
People look to the social security system to help them through the vagaries of life. They have a choice: they can either have the Government's approach of gimmickry, upheaval and confusion, or the Conservative alternative, which is simple, straightforward and comprehensible. Today's statement shows that the Government are creating a yet more complicated tax and benefit system that is like a passable imitation of Hampton Court maze, and millions of decent families and pensioners are trapped in it.
Mr. Darling: Let me start with the point that the hon. Member for Havant (Mr. Willetts) made about carers. It is good to hear that the Conservatives support us. However, he is wrong on one aspect. The Conservatives would never have been able to promise £200 million more
this year and every year afterwards, because they have never had the resources available to devote to disabled people or anyone else. It is only because we took tough decisions at the beginning of this Parliament that we now have money available to help disabled people and pensioners.It is incredible that for the first five minutes of the hon. Gentleman's response he chose to talk not about the increase in pensions or the pension credit, but about our computer systems. He sounded as if he wanted to sell us a secondhand computer to work everything out. He has had some experience of this problem. He rightly complains about the national insurance recording system computer, but he has conveniently forgotten that the Conservative Government signed the contract for that rotten system. We are having to pick up the pieces, as we are having to do elsewhere.
There is another difference between us and the Conservative party. Again thanks to the decisions that we took at the beginning of this Parliament, we now have additional resources to replace the complete computer system for the Department of Social Security. It has been waiting for that for the past 15 or 20 years.
I shall now deal with the substance of the statement, which one would have thought the Conservatives were interested in, and that is the pension credit. It is reasonably clear from what the hon. Gentleman said that he is against the pension credit. So the Conservative party will go into the next election opposing a measure that will benefit 5.5 million pensioners. He has made it very clear that he is against the pension credit for the reasons he stated. The pension credit deals with a fundamental problem in the social security system that has existed for years. If people do what successive Governments have told them to do and save for their retirement, they are punished for doing so. The credit means that those who save for their retirement will be rewarded. That strikes me as a pretty straightforward and, dare I say it, commonsense proposition, and one that is long overdue.
The hon. Gentleman asked me a specific question about two pensioners, one with an occupational pension and one who goes out to work. Presumably he received the copy of the pension credit document that I sent him an hour or so ago, in which we make it pretty clear that we take all income in retirement into account when calculating credit. There is no discrimination in that regard.
As well as rewarding saving and thrift, the credit ensures that we can continue our drive towards eradicating pensioner poverty. The hon. Gentleman says that fewer pensioners were on means-tested benefits under the Tory Government. That is because the Tories did absolutely nothing to help the growing number of pensioners who were living in poverty. When we came to office there were millions of pensioners living in poverty, and the Tories did absolutely nothing about it. If they were returned to office, they would do nothing about it again.
The pension credit deals with two fundamental objectives: to take pensioners out of poverty both today and in the future, and to ensure that the millions of pensioners who have saved a little for their retirement--who have put a little in the bank or the building society, and have a small occupational pension--will be given additional help. We want them to be rewarded for their thrift, rather than being punished for it as they would be under the Conservative party.
The hon. Gentleman mentioned the minimum income guarantee and the Government's take-up campaign. He is right. We have written to 2.5 million people who we thought might be eligible for the guarantee. So far, we have received 600,000 responses to our comprehensive search. That suggests to me--I say this to Tory Members, and also to some of my hon. Friends--that the main problem is not reluctance to claim on the part of pensioners, many of whom are asking whether they are entitled to the guarantee. The reason why, according to our analysis of claims, only half the applicants have been successful so far is quite interesting--
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