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Vernon Coaker: Has the hon. Gentleman considered whether part of the problem with the take-up of benefits may be thatfor perfectly understandable political reasonsboth he as a Liberal Democrat spokesman and the hon. Member for Havant (Mr. Willetts), who speaks for the Conservatives, always use the term "means-tested" in a derogatory way? Does he not think that that might sometimes influence pensioners, for whom, rightly, means-testing has certain connotations? Does he not think that if he talked instead about "targeting" benefits, that might encourage people to take up those benefits?
Mr. Webb: I understand the point that the hon. Gentleman is making, but I have some doubts about whether even my oratorical powers could affect benefit take-up rates. The key point is that resistance to means-tested benefits does not come from me. Actually, I am moderately comfortable with filling in long complicated formsit is the sort of thing I do in my spare timebut that is probably not the sort of thing that many older folk want to do. They regard such questions as intrusive.
I freely accept that means-testing every five years is better than means-testing every week. Clearly, that change has the potential to be a step in the right direction. However, the principle that we all want for our old age is to know what our income will be, rather than depending on the whim of a Minister. We want to know with certainty, and that is possible only with a definite firm foundation from the state, reliable indexation rules and a good second pension on top to get us clear of means-testing altogether. We do not want to have to rely every year on documents such as those before us now, which nobody really understands, yet which can have a dramatic effect on people's living standards.
Mr. Webb: The hon. Gentleman has heard me speak before on such subjects, so he probably knows that we do not regard targeting as synonymous with means-testing[Interruption.] There are perfectly good reasons for that, as I shall explain.
There is a strong relationship between poverty and old age, especially advanced old age. Our ideas may not be perfect, but neither is targeting through means-testing, because of all the people who miss out, and the disincentive effect on savings. We are talking about not a choice between a perfect system and an imperfect system, but a choice between two imperfect systems.
We say that if we target primarily by age, while keeping a safety net for the recently retired poor, we cover most of the poor, including many of those who do not get their means-tested benefitsthat is, half a million on one count alone. We would get through to those people with a guaranteed take-up, no administrative cost, and no disincentive to saveindeed, quite the contrary, because people's savings build on their guaranteed state pension. That seems to us a better trade off than mass means-testing
Mr. Webb: I shall, but first I shall finish the point that I was makingand then I must give way to the hon. Member for Regent's Park and Kensington, North (Ms Buck), because I have already said that I would.
To give an idea of the scale of the failure that the Government are building into the proposals, I must remind the House that Baroness Hollis said that one in three of the people entitled to the proposed pension credit would not claim it in the first year. She said that take-up would build up as people became familiar with the credit, and I hope that she is rightbut that still means that one in three of the 5.5 million pensioners will miss out on what they are entitled to. That is planning for failure, and it is no way to guarantee pensioners a decent standard of living in old age.
Ms Buck: Will the hon. Gentleman cost the proposal to provide an income at the level of the minimum income guarantee for all pensioner households, which is effectively the corollary of what he suggests when he says that the entitlement should be available to everybody?
Mr. Webb: The gap between the pension proposed in the regulations before us£75.50and the MIG figure, which is more than £90, is not very different from the pension rises that we proposed in our costed manifesto, which contained a £3 billion package of increases in pensions financed by the proceeds of the 50p rate of income tax on incomes over £100,000 a year. We asked the Treasury what money would be raised by such a rate of income tax, and were told that it would be well in excess of £3 billion. Our political choice would be that those most able to do so should pay for pension rises, which would go predominantly to older pensioners. That would enable us to fill the gap between the basic pension and the means-tested pension.
We do not propose that the pension rate would be the same for every pensioner at every age. We are saying that we want to get as many pensioners as we can clear of the MIG level, starting with the oldest pensioners. That is our strategy.
Mr. Webb: As the right hon. Gentleman knows perfectly well, that is not what my party leader said[Hon. Members: "Oh!"] He may be aware that we have set up a review commission, of which I am a member, to consider the future of the public services, with a broad remit to examine both the role of the public and private sectors, and funding levels. That remit is wide, and there is an open debate going on within the party. The options of higher spending, lower spending, and a greater role for the public or the private sector, are all on the table at the start; otherwise, why bother with the review? However, our policy stance is that we are clearly committed to higher pensions across the board, particularly for older pensioners. That remains our position.
Mr. Darling: The hon. Gentleman is not in a position to make a promise that his party would increase pensions, either for pensioners as a whole or for some pensioners, at the same time as saying that all those promises are up for grabs. Even the Liberals cannot get away with going into the next election saying that they will increase spending here, there and everywhere, yet also cut taxes for everybody else. That does not make any sense; it has no credibility.
Miss Begg: I am sure that the hon. Gentleman would agree that the national insurance fund funds not only pensions but unemployment benefits and a range of other contributory benefits. At the moment unemployment is very low; more people are working, so more people are paying into the fund. However, although I hope that that will remain the case, it may not. In five years' time the position might be reversed. Is the hon. Gentleman really saying that we should spend all that money today and have nothing to spare in the piggy bank for tomorrow? I do not think that that would do great things for pensioners tomorrow, when the fund will have been spent.
Mr. Webb: If we were suggesting blowing the entire national insurance fund I should agree with the hon. Lady[Interruption.] No, I did not suggest that. The £2.5 billion that I am talking about is excess revenuethe amount above which the Government budgeted, presumably on the sober, cautious basis to which the hon. Lady referred. As I pointed out earlier, at the year ending March 2001 the national insurance fund was already 40 per cent. of the annual benefit expenditure. Next year, that figure is set to rise to 52 per cent. How high are we going to let that amount rise? The proportion of benefit expenditure is constantly increasing. It would be irresponsible to blow the lot, but at some point we might say that national insurance revenues are going well and they should be spent on pensioners.
Mr. Willetts: I was struck by the fact that the Secretary of State, who does not feel able to intervene on the subject of the current state of occupational pensions, intervened twice on the subject of Liberal Democrat tax plans. It is a pity that he devoted more effort to intervening on that subject than on the most important social change currently taking place.
I do not agree with the figures given by the hon. Member for Northavon (Mr. Webb) but I support his philosophy. As he knows, we have in common the view that there is a difference between means-testing and targeting. Does he agree that when he pointed out that difference it was disappointing that so many Labour Members laughed as though they thought that was manifest rubbish? In fact, the crucial insight of Beveridgethe most important single insight in the Beveridge report, about which at least one Minister sitting on the Treasury Bench has written eloquentlyis precisely that under a smart social security policy we can target without means-testing, if we identify categories of claimant carefully enough. That is a powerful point and it is a pity that the Government do not recognise it.