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David Cairns (Greenock and Iverclyde): : My right hon. Friend is right that a five-year assessment is infinitely preferable to the weekly means-testing assessment that was carried out until recently, but can he guarantee that as people's circumstances change in the course of the five years, they will be entitled to a reassessment, which it is to be hoped will lead to their being given even more generous sums? Can he confirm that it will be offered to them not grudgingly but as part of the pension service after their initial assessment?
Mr. Darling: Yes, I can. I shall shortly come to take-up and how we will deal with it. As hon. Members have said, five-year assessments will apply from the age of 65. People whose circumstances have changed and who are entitled to more will be able to come back, but as the vast majority of pensioners' circumstances do not change, I am reasonably confident that most people will not be troubled that often.
Mr. Darling: The hon. Member for Havant, who speaks for the Conservatives, has been urging me not to take any more interventions. I will therefore give way to perhaps two more hon. Members and then make some progress.
Mr. Mark Simmonds (Boston and Skegness): Is not the real issue about means-testing the fact that many pensioners find it demeaning to go through the process, and that there is a direct causal link between means-testing and a lack of take-up?
Mr. Darling: With respect, that is complete rubbish. I do not find it demeaning, any more than I hope the hon. Gentleman does, to fill in a tax return once a year. A calculation is made of how much money we have and how much we are due to pay in tax. The new system,
which I shall set out shortly, will be very easy for pensioners. When they apply for the basic state pension, we will calculate their entitlement to pension credit at the same time.What is clear from this debate—it has been clear for some time—is that the Conservatives are not against means-testing per se. It has been about in the social security system ever since it was started. What they really object to is a measure such as this, which puts more money into the majority of pensioner households. They have made it clear that they and their friends, the Liberal Democrats, are against this measure. That is great from our point of view, but it is very unfortunate for pensioners.
Mr. Tom Levitt (High Peak): On the same topic, it is probably true that some pensioners have perceived the process of applying for benefits as intrusive and bureaucratic. They have believed that it is very difficult to get benefits and that there is a high risk of being turned down, but in future they will surely see that if they have a state pension and any amount of modest savings, it will be in their interests to make their circumstances known in order to claim their entitlement. Does my right hon. Friend look forward to the time when the pension credit can be paid automatically, based on income tax data?
Mr. Darling: That would be a very happy situation, although given what I had to tell the House last Wednesday about information technology systems we may be further away from that than I would like. It appears that there is some common ground in the House because both the Conservatives and the Liberal Democrats accept that there is a correlation between age and people becoming poorer. They accept that something needs to be done to help pensioners on low or modest incomes. The difference between us is that I think we have to treat individuals as individuals. There are poor 67-year-olds and better off 82-year-olds. All of us know the difficulty that we would get into if we decided that people can be poor only once they reach the age of 80. What would we say to a poor person who was in their mid-70s—wait five years and it will be all right? That seems a nonsense position.
Another argument that we will no doubt hear from the hon. Member for Havant relates to complexity. When someone claims to have a simple solution to pensions, people should watch their wallet. People lead complex lives. They may change jobs several times. They may take time out of the labour market to care for children and so on. Pension provision is necessarily complex to meet the complex individual circumstances of people's lives. Even the basic state pension, which some people think is a simple concept, is based on a complex set of rules and calculations.
What is important is that there are choices and options. A one-size-fits-all policy to pensions would not work. Many of the people who claimed to have found a simple solution often found that it was neither workable nor affordable in the long term—two essential ingredients of any pension policy.
Tonight, the Opposition position on the pension credit is ridiculous. They say that they would keep the pension credit for people who have already retired, but bring back the savings disincentives for people saving for their future. That is not just complex—it is absolute nonsense.
That brings me to another argument that the Opposition advance. The Conservatives, and their new friends, are setting themselves against the very reform that will make saving pay. Their approach would do nothing to remove the disincentives in the present system. Somebody with savings that took them above the basic state pension, but below an income of £100 a week, would be no better off than their neighbour who had not saved at all. That seems absolute nonsense.
I want to say a brief word about the pension service because the question of entitlement has been raised on many occasions. The pension service will provide a better way of delivering services. As I have said, when people apply for their pensions, we will find out whether they are eligible for the pension credit. Once they reach the age of 65, when their incomes tend to be fairly stable, we will set the awards for up to five years. That is a real change, which will be widely welcomed.
Mr. Bill Tynan (Hamilton, South): Is there any way in which the pension service could be used to identify those who are on pensions at present and whether they would be due for pension credit? If not, they are going to escape through the net, which suggests that there will be a difficulty with take-up.
Mr. Darling: I certainly agree with my hon. Friend. People who are now retired will also be entitled to the pension credit. As he is aware, one of the improvements that we are making is to move to a system that is more telephone based, which appears to be more popular with pensioners, who can get in contact with people far more easily. We certainly do not want to have to force them to go to old DSS-style offices, which they would not particularly want to do.
The final stage of the reforms is to strip away some of the regulation and red tape that has built up over the years. The House will know that we will have the Pickering and Sandler reviews in the summer. We plan to publish proposals later this year to make it easier for people to save.
The pension credit is a substantial reform. As I have said, it will benefit around half of all pensioners. It complements the reforms that we have made to make saving possible, by rewarding people for their thrift. It puts right a long-standing grievance. The result is that it is fair and promotes saving.
The House has a choice between our approach and that of the Conservatives, and their new friends. Our policies are workable and affordable. They build on the partnership between the state and funded sector. Be in no doubt that the Conservative policy is to privatise the basic state pension.
Our policy is fair and tackles pensioner poverty, whereas the Opposition—all of them—will vote against a measure that helps vulnerable people. Our policies will remove once and for all the unfairness in the current system. The Tories and their new friends want to keep that unfairness.
This Bill is essential to tackle poverty and to reward thrift. It will benefit 5 million pensioners by an average of £400 a year. That is what Labour Members will vote for; that is what Opposition Members will vote against. I commend the Bill to the House.
Madam Deputy Speaker: Order. I remind all hon. Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench speeches.
6.8 pm
Mr. David Willetts (Havant): I beg to move, To leave out from 'That' to the end of the Question, and to add instead thereof:
- 'this House declines to give a Second Reading to the State Pension Credit Bill [Lords] because it involves a further move towards the mass means-testing of the pensioner population; believes that it will greatly increase the complexity of the pension system both for today's pensioners and for future generations, will result in many pensioners missing out on their entitlements, and will serve to erode incentives to save; and believes that the additional expenditure would have been better directed towards the basic state pension, particularly for older pensioners.'
The purpose of the debate on our reasoned amendment is to try to get the House to address what I think is the historic significance of the proposals that the Secretary of State for Work and Pensions is bringing before us today. He is announcing the end of the basic state pension as a determinant of the income of pensioners. In future, the amount that a pensioner receives will be determined by the minimum income guarantee, now renamed the guarantee credit, and the formula for determining the savings credit above that.
Throughout most of the 20th century, there was a belief in all parts of the House that the basic state pension would be an important part of provision for people in their retirement. The Secretary of State's measures today say farewell to that. I thought that his speech could have tackled that central issue with rather more seriousness than he was willing to demonstrate, especially given his party's history on the subject.
Under the strategy proposed by the Secretary of State, more than half of all pensioners will find themselves facing marginal rates of benefit withdrawal of 40 per cent. or more. It is important that the House has the opportunity to take a view on that strategy and to consider whether there might be a better alternative that nevertheless tackles the needs of poor pensioners.
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