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9.46 pm

The Minister for Pensions (Mr. Ian McCartney): I shall try to deal with hon. Members' questions as I go along but if, by the end of the debate, I have not done so I shall write to them and place my letters in the Library so that those who have taken part in the debate can see the answers.

I thank my right hon. Friend the Member for Birkenhead (Mr. Field) and my hon. Friends the Members for Stafford (Mr. Kidney), for Bassetlaw (John Mann) and for Hemel Hempstead (Mr. McWalter) for taking part in the debate. It has given us an opportunity to set out the four key stages of the Government's policy: saving the basic state pension from the Conservatives, who would have liked to have privatised it; reforming SERPS by creating a second state pension to help the low paid and the carers of disabled people for the first time ever; the creation of the pension credit so that it pays to save; and giving people a choice through the stakeholder pension, with a second tier for those on moderate and higher earnings.

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When I listened to Conservative Members in this debate I felt astonished, because for 18 years they failed virtually every pensioner organisation in Britain. They left us with a complete mess and were contemptuous of older people. Hon. Members will remember what those in charge of Conservative policy thought about pensioner poverty and treating people with dignity. Edwina Currie, the former Health Minister, told pensioners:

That was the Tory strategy for pensioners in Britain; and it got worse.

Mr. Boswell: Will the Minister give way?

Mr. McCartney: Why?

Mr. Boswell: I simply want to ask the Minister a question—it does not refer to the former colleague to whom he has just referred. Will he tell the House whether pensioner incomes rose or fell under the Conservative Government?

Mr. McCartney: When the Conservatives left office there was the biggest gap in equality of pensioner incomes in the history of this country.

Mr. Barker: Will the Minister give way?

Mr. McCartney: No. The hon. Gentleman has been jumping up and down like a jack-in-the-box. He and the hon. Member for Huntingdon (Mr. Djanogly) have been like Pinky and Perky.

As my right hon. Friend the Secretary of State highlighted, in our first four years we cleared up the sorry trail of misery created by the Tories over 18 years. We simply rolled up our sleeves and put right the injustices of our inheritance. We tackled the legacy of pensioner poverty; dealt with the inherited SERPS debacle; and put right the mis-selling scandal, ensuring that compensation was paid to the thousands of people who were conned by Tory Members into leaving their occupational scheme.

Put simply, the Tories failed those who needed help most. At least 2 million pensioners were living on or below woefully inadequate levels of income support. Many more were living in fuel poverty. That was the reality of the 18 years of Tory rule. The Tories did nothing for women who stayed at home to look after their children or elderly relatives. Those women could not build up decent pensions and were left to be in poverty when they retired. They deserved better and the Tories did nothing for them.

The Tories left us with a system where there were huge disincentives to save. Why should people have saved for retirement when all they would have found was that they were no better off, or in some cases worse off? People saved for nothing under the Tories. Nor was a framework in place to offer good-value alternatives if individuals could not access an occupational pension scheme.

In the teeth of Tory opposition, we were not prepared to ignore those issues and to condemn many pensioners to a life of poverty. That is why during our first term in office we reviewed the pension system to replace it with one that is modern, inclusive and fair to everyone. Our strategy is simple: we want to ensure that all pensioners

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have a decent income in retirement. Therefore, we have taken action to help all pensioners, while giving priority to the least well-off.

The basic state pension will remain the foundation of income in retirement. Nothing the Conservatives said today showed that they would commit themselves to that, too. It is an essential building block of pensioner income, but we should not look at it wistfully through rose- coloured glasses. It provides a basic income in retirement—nothing more, nothing less. That has always been the case.

The system has flaws. That is why we are modernising it. In the process of modernisation, we want to take steps to ensure that we do not penalise married women who paid the reduced stamp, and that low-paid workers who did not earn enough to pay national insurance get access to the second state pension. We want to ensure that we have a system where people retire with dignity and a guarantee of income.

That is why we introduced above-inflation increases in retirement pension this year and next—£5 a week for single people, £8 a week for a couple—and from April 2002, there will be further increases of £3 a week for single people and £4.80 for couples. We introduced the minimum income guarantee for the poorest pensioners in our society, free television licences for the over-75s worth £104, and winter fuel payments worth £200. All those were opposed by Conservatives.

Mr. Lilley: Will the Minister confirm that the value of the extra money paid to pensioners is less than the £5,000 million a year that the Government are extracting from pension funds, so that pensioners overall are net losers from the Government?

Mr. McCartney: That is absolute nonsense. Furthermore, the right hon. Gentleman is one of the most culpable because he was the Secretary of State for a long period during the last Conservative Government, who extended means-testing while putting more people below the poverty line. He stood back and watched as community after community faced high unemployment and 50-year-olds were put out of work. As well as losing their job, they lost the opportunity in that part of their earning life to have a decent pension in retirement. He should hang his head in shame for what he did as a Minister.

Mr. Goodman: Will the Minister give way?

Mr. McCartney: Can the hon. Gentleman sit down for a moment? He phased me—I thought Mr. Bean was standing up in front of me. I apologise. I will get back to him.

We are spending nearly £3 billion a year more on pensioners than it would have cost to restore the earnings link in April 1998. This year, 2001–02, we are spending around £4.5 billion extra a year in real terms on pensioners as a result of policies since 1997. In 2002–03, that will rise to £5.5 billion extra a year, to answer the right hon. Member for Hitchin and Harpenden (Mr. Lilley).

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I give some examples of how that additional money has been spent. At April, nearly 2 million of the poorest pensioner households will be at least £15 a week, or £800 a year, better off in real terms as a result of the measures that we have taken since 1997. Our policies are helping those who are most in need of that extra spending. A total of £2 billion is going to the poorest third of pensioners, five times more than the earnings link would have given them. That approach is narrowing the gap between rich and poor.

It was a rough-and-ready solution to a real problem, but it has worked. In the three years since the introduction of the minimum income guarantee, we have paid £12 billion to the poorest pensioners in our society. I refuse to apologise for such a policy.

Mr. Goodman: Will the Minister give way?

Mr. McCartney: I will give way later. Be quiet. [Interruption.]

Mr. Speaker: Order. The Minister is not giving way.

Mr. McCartney: I have never in my life been frightened of a Conservative, however big.

In this debate, Conservative Members have placed great emphasis on the means test. Either they want to cut the minimum income guarantee and reduce income by £15 per week for the poorest pensioners, or they want to make a huge increase in the basic state pension. However, the latter option is not Tory party policy. What is their policy? Are they going to cut pensions by £15 per week for the poorest pensioners? It is just another example of Tory Members thrashing around on policy.

We shall soon be publishing our proposals on the pension credit, which will remove stigma and needless complexity, combat poverty and promote security—which is critical. Half of all pensioner households will be entitled to the credit, which will signal the end of the weekly means test. We shall modernise the way in which we deliver help to pensioners, simplify the rules and significantly reduce the information that they have to provide initially. We shall enable pensioners to receive their entitlement with much less intrusion and hassle.

The pension credit is the next stage of our strategy to deal with disincentives for people to save. Introduction of the credit will reward people for saving for their retirement. The credit will provide a guaranteed income level below which no pensioner should fall. It should be worth, in 2003, about £100 for single pensioners and £154 for couples. This is the first time that people with modest savings will not be penalised for thrift. Those who qualify for the pension credit will receive a cash top-up for the pounds that they save. When they were in government, Conservative Members' priority was to tax moderate and small second pensions at a rate of 100 per cent. and give tax rebates to the most wealthy in society. That is not our priority.

There was a gap in the market for low-cost, secure, flexible and good quality pensions. Consequently, we introduced the stakeholder pension, which has been widely welcomed, even by the Tory house magazine. The personal finance editor of "The Sunday Torygraph" said:

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Last year, there was no facility for people in the target group to have such a pension. Two thirds of employers are now on board, and hundreds of thousands of individuals who did not have appropriate pension cover now have it. The policy is a success, and it will continue to be a success.

We have a continuing monitoring and evaluation plan to assess the impact of stakeholder pensions as well as information from the pensions industry. We shall continue that assessment. Conservative Members have said nothing today to change my mind that stakeholder pensions were the right policy to introduce, or to make me doubt that the policy will ensure that, in the next few years, hundreds of thousands of people who had no access to pensions under the Tories have such access.

Despite the Opposition's attempt to rubbish our pensions strategy, it is clear that it is their policies, not ours, that are in disarray. Their policies are unworkable, unattainable, unsustainable and very unpopular, even among Conservative Members. Their policies are a continuing catalogue of disaster.

There is no confusion about where the Government stand on pensions. Pensioner poverty increased under the Tories, but the Government are reducing it. The Tories mis-sold pensions, but we ensured that their victims were compensated. The Tories had the state earnings-related pension scheme, but we are modernising it. The Tories tried to cheat widows by not allowing them to inherit SERPS, but we have put that right. The Tories wanted to abolish winter fuel payments, but we have increased them to £200. The Tories wanted to deny over-75s a free television licence, but we have introduced a scheme to provide them with one. The Tories introduced charges for pensioner eye tests, but we abolished the charges. The Tories increased VAT on fuel, but we reduced it to the lowest possible level. The Tories also opposed the pension credit.

Worst of all, the Tories coldly condemned millions of older workers to the dole. They abandoned them. They rejected them. They threw them on the scrap heap. The Government are against age discrimination, and we shall legislate against it.

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