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Mr. Graham Brady (Altrincham and Sale, West): I am concerned by the nature of the defence that Ministers appear to be deploying. Is it not true that the perception that the whole savings environment is very complex, off-putting and difficult to engage with already acts as a major disincentive to younger people making proper provision for their retirement? We need a simple approach to promoting saving, not added complexity.
Mr. Clappison: With the best will in the world, it is not entirely self-evident that the provisions of the pension credit will simplify future pension provision.
Amendments Nos. 4 to 12 attempt to achieve the simplicity to which my hon. Friend refers. [Interruption.] Ministers may laugh, but that is no easy task. They are drafting amendments designed to make the Bill more straightforward, and to achieve the Bill's original effect, rather than to alter it. You will be pleased to hear, Mr. Deputy Speaker, that I shall not take the House through their precise nature, although the Minister may well choose to do so. If they do not find favour, I do not intend to press them to a vote, given that the simplicity of this issue is not entirely self-evident.
New clause 5 could not be more straightforward. Let us have an open debate about incentives to save, and access to all the relevant information. I hope that Ministers will respond positively, because I cannot imagine that there is anything they want to keep covered up. Let us be transparent, and bring everything out into the open.
Mr. Webb: I have a lot of sympathy with where the hon. Member for Hertsmere (Mr. Clappison) is coming
The hon. Gentleman's point about the effect of the provision is critical. Beneath the rhetoric, the state pension credit is actually the minimum income guarantee, plus a boost for those who have saved. If we did not have the additional savings credit the Bill would not be necessary, because the MIG already exists. In essence, the Bill merely adds the new savings credit and tidies up the link between it and the MIG.
Under new clause 5, I would want any report to consider the effect on people's propensity to save not of the savings credit, but of the whole of Government policy on income in old age. The savings credit might arguably be regarded as the cavalry: it comes along when the Government have completely messed up the incentive to save, and restores it. The Government and the Minister for Pensions are fond of saying that they are the first Government to reward people for saving, but in fact they are the first to have completely trashed the incentive to save. In a sense, they are penitent sinners on this point, but only partially.
When the Government came to power in 1997, the gap between the basic pension and the MIGor income support, as it was then knownwas about £7 a week. For anyone who could save more than £7 a week, it therefore paid to save. Those who saved £8 a week got the first £7 at the 100 per cent. marginal rate, so they were better off by the extra £1. [Interruption.] Ministers may disagree, but those are the facts. The eighth, ninth or tenth extra pounds all constituted a complete benefit, beyond the scope of the means-tested benefit system. In other words, it paid to save anything more than seven quid.
When the MIG and the other provisions are introduced next year, the pension will be £77 and the MIG £100, so taking the MIG into account, it will not pay to save £23. When the Government took office, someone who saved £23 a week was £16 a week better off for having done so, but under the proposed rates, such a person will be no better off. The Government merely say, "Whoops"
Maria Eagle: The hon. Gentleman seems to be arguing that alleviating pensioner poverty today is providing such a disincentive to save for the pensioners of tomorrow that it should not be done.
Mr. Webb: As the hon. Lady knows, there are two ways to target pensioner poverty. One is using complicated means-tested mechanisms such as that in the Bill anddare I say itin amendments Nos. 4 to 12. The other is using age as a proxy for poverty, because the basic state pension is a guaranteed way of getting money to poor pensioners. Given that the majority of poor pensionersparticularly the poorest in the land, who are entitled to means-tested benefits but do not get themare older pensioners, pensioner poverty can be targeted by raising their pension, rather than by using complex means-tested benefits. The right hon. Member for Birkenhead (Mr. Field), the former Minister with responsibility for welfare reform, the hon. Member for Hertsmere and I all agree with that view.
David Cairns (Greenock and Inverclyde): The hon. Gentleman says that there are two separate approaches to
Mr. Webb: I was with the hon. Gentleman until his final sentence, which I am not sure that I understood.
Our view is thatto echo a new Labour phrasemeans-testing should be for the few, not the many. That is the distinction. Under our proposal, "the few" would be those under the age of 75 who are residually poor. On average, the majority of those under that age tend to be better off, whereas the majority over that age tend to be poorer. One helps the poor in a universal way by helping the old. It is true that some better-off people would benefit, but it is predominantly poorer people who would benefit. If such people are sufficiently well-off to pay tax on the benefit, they would do so. The Government use the language of guarantees, but the MIG is guaranteed to no one unless they claim it. Some 500,000 pensionerspredominantly older pensionersdo not claim it, but they all claim the basic state pension.
David Cairns: The hon. Gentleman will deliver eloquent diatribes against means-testing in debates on the amendments and on Third Reading. However, for the pensioners who are interested in this debate, will he clarify the fact that under his policy, means-testing will still exist, primarily for pensioners between 65 and 70 who are poor, which increases the stigma of means-testing?
Mr. Webb: For the avoidance of doubt, the answer to the first part of the hon. Gentleman's question is yes. The question is whether we means-test half or two thirds of the pensioner population, which is the Government's strategy, or whether we have a residual safety net
Mr. Webb: Absolutely. We want the vast majority of people in old age to have a guaranteed income that lifts them clear of the need for top-ups. What the hon. Gentleman and I will want in our old age is a decent pensionwhether from this place, the state or anywhere elseso that we do not have to claim a top-up every year. Our strategy would reduce the number of pensioners who need to claim top-ups at all to a relatively low level.
Mr. Boswell: As the hon. Gentleman will know from our earlier debates, I am very much on his side on such matters. Is not the logic of the position of the hon. Member for Greenock and Inverclyde that the only way to make means-testing acceptable is to put so many people into it that somehow the effect is diluted? The hon. Member for Northavon is arguing for a safety net for the few that is not spread across the whole pensioner population.
Mr. Webb: That is right. In all such arrangements, we are dealing with a continuum and a trade-off. There is
Mr. McCartney: The determinant for older people is not age but income; that is the case whether they are 60, 85 or 90. Significantly, the hon. Gentleman is saying that the Liberal Democrats' proposals for pensionsfar from helping the very women for whom he says he is campaigningwill result in the vast majority of those now coming up to pension age getting no benefit whatever. Indeed, they would have to stay on the old-fashioned minimum income guarantee with no commitment that they would be made up to the basic state pension. That is not a small group of women, or of pensioners. It is almost equivalent to the current number of pensioners whom we have taken out of poverty in the first four years of the Labour Governmentand kept out of poverty.
Under the hon. Gentleman's proposals, nearly 2 million people would be left on an old-fashioned minimum income guarantee, an old-fashioned means test. He argues that his proposals are about getting rid of poverty, but he would be making sure that poverty remained not just for this generation, but for every generation thereafter. He is talking economic nonsense.