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The Secretary of State for Social Security (Mr. Alistair Darling): Madam Speaker--[Interruption.] I beg your pardon, Mr. Speaker. The pension credit will guarantee a minimum income of £100 a week plus an added payment to reward those with savings.
Dr. Iddon: In general, will the single pensioner with minimal capital with a small occupational pension who qualifies for the pension credit be better or worse off than a single pensioner on the basic pension who receives all the passported benefits including housing benefit, council tax benefit and the minimum income guarantee? Does my right hon. Friend agree that to encourage people to take up occupational pension schemes, they must be seen to be better off as a result?
Mr. Darling: I agree with my hon. Friend. Pensioners will be better off. First, the pension credit, which we are introducing from 2003, will mean for the first time that if people do what successive Governments have asked them to do and save for their retirement, they will receive a cash top-up to reward them for their effort. That is crucial if we are to get more people to save. We must be clear that there is a real incentive to save. I am glad that last week so many insurance companies and the Association of British Insurers welcomed the pension credit. They recognised that it will help people to save.
Secondly, where someone has an occupational pension or a small sum at the bank, he or she should receive some help from the state. Under the system that we inherited, one which the Tories want to perpetuate, someone could obtain help only if he or she was very poor. There are about 5 million pensioners who have modest occupational pensions or a small amount of money at the bank. For the first time, the pension credit will help them to ensure that it pays to save.
Miss Anne McIntosh (Vale of York): Does the right hon. Gentleman now regret introducing the element of means-testing into pensions? What will he do about pensioners who are approaching 75 years of age who have been told that they must buy an annuity, possibly costing about £250,000? If they were to die, they would lose that capital sum.
The hon. Lady raises the question of means-testing, in common with the rest of her colleagues. The only way in which we can do much more for poorer pensioners is, first, to ascertain who they are. That means that an assessment of their income is necessary. Secondly, we must then pay them more.
Under the policies that the hon. Lady and Conservatives generally are advocating--I am assuming for this purpose, although it is not a universal assumption, that she finds herself in support of the Conservative Front Bench--the poorest pensioners would lose out. The Conservatives want to return to the system where miserly increases are given to all pensioners, which does nothing for the poorest pensioners. Pensioner poverty has no place in the fourth largest economy in the world. That is why we are increasing the amount of money that goes to the poorest pensioners by £20 from next April.
Mr. Frank Field (Birkenhead): Does my right hon. Friend accept that, according to his pensioner credit document and assuming that every pensioner who is eligible claims the pension credit, in 2003 half of all pensioners will still have an income of £136 a week or less? Does he also accept that his document assumes a national insurance pension increase of £1.50 a week in 2003? Does he agree with me that a re-elected Labour Government will find such an increase unacceptable and will substantially increase it?
Mr. Darling: As my right hon. Friend knows, the pension credit is to be introduced from 2003, and its effect will build up over the years. We shall have to wait and see what we do about pension increases in 2003. We have announced increases for next year and the year after as we move towards the credit. The principle established by the credit, which was welcomed by one of my Conservative predecessors, the right hon. Member for Sutton Coldfield (Sir N. Fowler), as a reform that should have been introduced some time ago, will make a change, because for the first time ever people who save and make sacrifices during their working lives will be rewarded for doing so.
Mr. David Willetts (Havant): The Secretary of State claimed on the television yesterday that 2.5 million letters have been sent to pensioners asking them to take up their entitlement to the minimum income guarantee. How many successful new claims for the minimum income guarantee have resulted from his take-up campaign?
Mr. Darling: I am glad that someone was watching the television programme yesterday, because half way through it occurred to me that there would not be that many viewers on a sunny Sunday afternoon. Clearly, there was at least one. For the sake of completeness, I can tell the House that my mother was also watching.
As the hon. Gentleman knows, the Government have been running a television advertising campaign, and we have just finished writing to 2.5 million pensioners. We have received about 600,000 responses so far, and of those we have processed 60,000 applicants, almost half of whom have been successful. It may also interest the
Mr. Willetts: May I give the Secretary of State the exact figure from a parliamentary answer? Of the more than 500,000 people who Ministers say are eligible but not claiming, 24,746 extra pensioners have received the benefit, which is a 5 per cent. success rate. Does that not show that pensioners do not want to claim the minimum income guarantee? If they do not want to claim that complicated, new, means-tested payment, why on earth should they go cap in hand to claim the pension credit--the new means-tested handout that the Secretary of State has invented? I would be interested to hear from him his estimate not of how many people will theoretically be entitled to the pension credit, but of how many pensioners will claim the new pension credit.
Mr. Darling: If the hon. Gentleman is right that people do not want to claim the minimum income guarantee, it is curious that 600,000 people have so far responded as a result of the campaign, which is about the number that we have always thought may be eligible. That implies that there is not a reluctance to get in touch to find out. All those people have made the effort--most of them by telephone, and the others have written in. Up till now, the problem with the minimum income guarantee has been the problem that we inherited from the previous Government.
If people have too much money in the bank or if they have a modest income, they get no help whatever. The hon. Gentleman has made it abundantly clear that if the Tories were returned to power they would scrap the pension credit. The result of that would be that for ever and a day pensioners who had saved or had earned an occupational pension would not be helped: they would be kicked in the teeth by an incoming Tory Government.
Mr. Willetts: May I explain to the Secretary of State what the figures really show? Of the 600,000 pensioners who phoned the helpline or tore off the slip in the newspaper, only 60,000 made a claim, fewer than half of whom were successful. That means that there have been only 24,000 successful claims.
Why is the Secretary of State trying to repeat the same mistake all over again with his new means-tested benefit? After years of progress on reducing the number of pensioners on means-tested benefits, he will take us back to a world in which more than 50 per cent. of pensioners are entitled to means-tested benefits. That is not the world in which pensioners want to live.
Mr. Darling: The Conservatives doubled means-testing during their 18 years in power. I want to return to the minimum income guarantee before dealing with the pension credit. The fact that 600,000 people responded implies that they are sufficiently interested to contact the Benefits Agency to establish whether they have an entitlement. Of those claims, only 60,000 have been processed so far, of which just under half were successful. I repeat: the two main obstacles to success are having too
The main point about the pension credit is that the fundamental problem with the social security system is that it penalises people who save. If they save too much and do what successive Governments told them to do, and we should remember that the hon. Member for Havant (Mr. Willetts) wants people under 30 to opt out of the basic state pension and to save for their retirement--
Mr. Darling: Well, the hon. Gentleman knows full well that if those people saved only a modest amount, he would not help them at all because he does not accept the need for a credit to reward saving. Interestingly, independent observers--of course, the right hon. Member for Sutton Coldfield is not entirely independent, but he has some experience in this context, unlike the hon. Gentleman--have welcomed the pension credit almost universally as a way to help people to save. That reform, which is the most radical change to the social security system made during the past 50 years, is long overdue. Far from being complicated, it is quite simple. At the moment, people are penalised for their thrift, but in future it will always pay to save. That is something that the Tories can never say.
Mr. Bob Blizzard (Waveney): It is a good job that the hon. Member for Havant (Mr. Willetts) is not counting the votes in Florida--otherwise, we might not have a result before the next presidential election.
I welcome the pension credit, the increase in the minimum income guarantee and the basic state pension, and the £200 winter payment, which was announced last week. My right hon. Friend knows that in calculating the income that pensioners receive in interest from their savings, the formula used assumes--if I may put it this way--a rather high rate of return. Has he any plans to tackle that anomaly?
Mr. Darling: Yes, we do. I announced last week that we shall get rid of that ridiculous tariff income, although the hon. Member for Havant apparently wants to keep it. It is ridiculous to assume that pensioners or anyone else can get a 20 per cent. return on their savings. That is not possible anywhere, so far as I am aware. That is why we will scrap the arrangement.
I am grateful to my hon. Friend for his welcome. There is a clear difference between us and the Conservatives. We are increasing the amount of money going to pensioners through the basic pension and the pension credit and by helping poorer pensioners. The Conservatives, on the other hand, want to penalise saving by taking £200 from every pensioner household and to begin the process of privatising the basic state pension by encouraging people under 30 to opt out.