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8.40 pm

James Purnell (Stalybridge and Hyde): People of my age are not really all that interested in pensions. In fact, I only recently found out quite how uninterested they are. Having spent the weekend with the hon. Members for Havant (Mr. Willetts) and for Northavon (Mr. Webb) at Ditchley park for a conference on pensions policy—on reflection, perhaps that does not make me all that typical of thirty-somethings.—the following Sunday evening, at a dinner with friends and flushed with the excitement of discussing actuarial projections of the forthcoming population bulge, I decided to try to interest my fellow diners in the implications for pensions policy. There was a short embarrassed silence, after which the conversation immediately returned to football.

The issue of pensions should be at the centre of modern politics, however. When Labour came to power, about 2 million people were earning less than £70 a week. From next April, the minimum income guarantee will ensure that they earn £100 a week. It is often said that politics does not make any difference to people, but that £30 will make a genuine difference. Although it may not seem an enormous amount to broadsheet column writers, who often spend more than that on lunch each day, for the people of my constituency, it will often eliminate the difference between being able to shop properly and buy presents for their grandchildren or being able to heat their homes.

Given the lack of interest on the part of journalists in tonight's debate, it is unlikely that every single word of it will be repeated in the papers, but people did not always find pensions policy uninteresting or difficult to understand. When the Beveridge report was printed, about 200,000 copies were sold. I read that people queued around the block in Kingsway to get copies from HMSO. Beveridge himself became a broadcasting celebrity and could be heard on radio even more often than the hon. Member for Henley (Mr. Johnson) today. Of course, Beveridge would probably be gyrating in his grave if he could see what successive Governments have done to his plans. He expected almost everyone to benefit from the basic state pension, with national assistance reserved for the very few. Successive Governments of both parties have engineered a situation in which, for the past 25 years,

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about 1.7 million people have been claiming means-tested benefits—a significant number, at just under one sixth of all pensioners. Beveridge expected the basic state pension to provide subsistence, but I defy anyone in the House to try to live on £72.50 a week these days.

Why has this happened? It would be easy to play the game of party politics and try to assign blame to one side or the other, but the problems were inherent in the system that Beveridge bequeathed to us. He never defined the level of subsistence even in theory, and in practice, successive Governments have been unable to afford to provide a basic state pension at a level that would offer subsistence. Governments have therefore faced a choice of either leaving the poorest pensioners in poverty or targeting money at them. The more generous the means-tested benefits, however, the more pensioners will be affected and the more we risk the problem identified by my right hon. Friend the Member for Birkenhead (Mr. Field) in terms of disincentives to save.

Mr. Webb: The hon. Gentleman is making a thoughtful contribution, but he elided the gap between targeting those most in need to means-testing. Does he accept that an alternative method of targeting those in need is targeting the oldest pensioners, the vast majority of whom are among the poorest? That would avoid the problems of means-testing.

James Purnell: That is an interesting point, and I am interested in other ways of targeting those most in need. However, a Government could not rely purely on the policy that the hon. Gentleman suggests, because it would omit people outside a specific age group and perpetuate the problem of benefiting richer pensioners, although they are few.

What did Beveridge plan for our society? He expected most women to stay at home and their husbands to be employed and thus to provide for them. He failed to provide for the growing number of carers, and for people who are unemployed, take career breaks, change jobs and have been unable, through state or private provision, to build up sufficient income for retirement.

Those basic problems have plagued Ministers with responsibility for pensions since 1945, and many of the resultant reforms have failed. I do not know how many people today remember Boyd-Carpenter's reforms to the second state pension, which involved different levels and an earnings-related element. How many people remember the Labour Government's attempt in the 1960s to introduce a minimum income pension, which was much like our minimum income guarantee?

Many Ministers have come up against the stark reality of pensions policy—

Mr. Butterfill: I was interested in the hon. Gentleman's comments about Beveridge. I am sure that he knows that Beveridge proposed building up a fund at the outset and making no distributions until an adequate amount had been accumulated. The post-war Labour Government rejected that recommendation, and that created many problems for subsequent Ministers.

James Purnell: That is exactly the case. I believe that Jim Griffiths made the decision because, at the end of 1945, after Britain had won the war, he did not believe

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that a Government could tell people who had suffered for the past 50 years from a system that was partial and left many dependent on charity from the National Assistance Board that they would have to wait another 10 or 15 years for contributions to be built up. I therefore understand the reason for the decision and I doubt whether any hon. Member proposes adopting the system that Beveridge was planning.

Mr. Heald: The hon. Gentleman appeared to be slightly critical of Lord Boyd-Carpenter, who devised opting out, on which all private sector provision since 1958 has been built. Does he not agree that, whether the figure is £600 billion or £700 billion, it is due to the work of Lord Boyd-Carpenter?

James Purnell: I thank the hon. Gentleman for that intervention. I was not criticising Lord Boyd-Carpenter, who established a principle. However, I believe that it was a slightly panicked and inadequate response by the then Government to Dick Crossman's work for the Labour party in opposition, and in practice, it failed to deliver. We had to wait for a Labour Government to introduce SERPS, which tackled the matter two decades later.

Pensions reform is rarely considered a success. The costs are felt immediately, but the benefits are not experienced until a Government have long passed into history. The objectives of pensions policy are mutually contradictory, and there are always losers. Even when a Government get something right, it is often too complicated for people to understand at the time.

Against that background, far from being a failure, the Government's policy will be adjudged by history a significant success. It has been expensive—about £6 billion by next year—but poor pensioners can now be sure that, for at least the rest of this Parliament, the minimum income guarantee will increase in line with earnings. That is a major change from what we inherited. Some who claim to argue on behalf of the poorest pensioners argue for a return to the linking of the basic state pension with earnings, but that would benefit those people less by reducing the amount of money available.

Mr. Boswell: I know that the hon. Gentleman has advised Ministers over the years, as indeed did I at one stage. Will he advise the Secretary of State to extend that guarantee beyond the current Parliament?

James Purnell: No Government can make proposals for a Parliament for which they have not been elected. It is certainly right that we have made the promise for the rest of this five-year term, and we will no doubt consider it again when we write our manifesto.

I do not mind pleading guilty to the charge that the Government have increased means-testing. Faced with a choice between spreading the £6 billion among all pensioners and targeting some of it on the poorest pensioners, through the minimum income guarantee, I would be proud to choose the latter. The important issue is not the number of pensioners whose income is assessed but whether the assessment undermines dignity.

The means test gained a bad reputation in the early part of the 20th century, when it meant frequent visits by the means-test men and detailed interrogations about

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household income, including even a youngster's paper round or anything that an elderly relative who came to live with the family might possess. I believe that George Orwell called the means test an encouragement to tittle-tattle and to the informer. A neighbour's jealousy about a new coat or pair of shoes could lead to a visit from the means-test men. It is not surprising that so many people grew up absolutely dedicated to ensuring that they would never have to rely on the means test, which at that time was genuinely a matter of shame.

The reticence of many pensioners today about claiming their entitlement stems from their memories of those days. Unfortunately, that reticence will not be eased by this debate and Opposition claims that the increase in means-testing is in itself a bad thing. In that sense, this debate will not in any way encourage people to claim the benefits to which they are entitled.

It is important to start to change the language that we use about means-testing. Pensioners are entitled to these benefits, which are no longer a quasi-charitable donation to them in their old age. They have paid for them through their taxes, just as they have paid for the basic state pension. We should tell them that they should claim this income as of right. Moreover, rather than scaring them about means-testing, we should make it clear to them that the procedure for claiming the minimum income guarantee, and the pension credit when it comes into force, has been significantly simplified: the form has been cut from 40 pages to 10, and people claiming the credit will be assessed on their income not every week but only once every five years. They will be asked to provide the information at the time of claiming the basic state pension, so a far larger number will receive the credit automatically.

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