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Mr. Webb: The Minister is talking complete nonsense himself. The group coming up to pension age have many historic problems in their accumulated pension rights, including the married woman's stamp. We have a range of proposals in our campaign for justice in women's pensions that will address those points to ensure that as few of them as possible have to depend on a means-tested top-up when they reach old age.
To come back to the perfectly reasonable point made by the hon. Member for Greenock and Inverclyde, there will be some residual role for means-testing. There are aspects of the pension credit that make the minimum income guarantee more humane, and I am entirely in favour of those. For example, sending people a claim form when they apply for a pension is eminently sensible. It is not a case of throwing the baby out with the bathwater; there are administrative aspects of the Bill that I heartily endorse. But the strategy of mass means-testing is not one of them.
Maria Eagle: The hon. Gentleman just said that his schemes would leave a residual role for means-testing. How many people would remain on the means test under his proposals?
Mr. Webb: That would depend on exactly how much we could increase the basic state pension by. I do not have an exact figure. The Minister will know that before the means-tested benefits system kicks in, the majority of poor pensioners are women and older pensioners.
By loading the increases for older people on to pensioners, we will do the most to get people off the means test altogether.The majority of the newly retired are couples, and couples tend on average—partly because one of them is a man—to have higher incomes, so the incidence of means-testing among that age group is much smaller. We are focusing the money where the means-testing is most intense and on the group that is, on average, substantially poorer, and we are guaranteeing take-up with no savings disincentive. That is a powerful combination.
Annabelle Ewing (Perth): On the extension of mass means-testing, can I remind the hon. Gentleman that in new Labour's 1997 election manifesto, there was a pledge to reduce means-testing for pensioners? Perhaps the comments made by Labour Members should be viewed in the context of that pledge.
Mr. Webb: I do not recall the exact wording of the manifesto, but we all recall the Chancellor talking about an end to means-testing for our pensioners. The semantic hoops through which Labour Members jump to try to get out of that, result in their saying that what is proposed is not means-testing—but I suspect that to the recipients, it will feel very much like it.
Mr. Clappison: With the benefit of some extra spin, we now know that what the Chancellor really meant was an end to "old-fashioned" means-testing.
Mr. Webb: I am sure that that is right.
To return to the amendments, we are interested in the effect of the Government's strategy on the incentive to save, and a report such as that proposed in new clause 5 would have the potential to add something. I have suggested that the scope of the report should be broader than just the effects of the savings credit; it ought to look at the whole strategy. The savings credit is applied to a system in which the 100 per cent. tax rate has been vastly extended in scope and gives a bit back.
Even the Financial Services Authority produced a report—only last week—which said on page 24, paragraph 4.33:
- "the implied 40 per cent. deduction rate will inevitably be a disincentive to save for some now at work."
Everybody seems to agree that the overall strategy is undermining the incentive to save. That is the beauty of targeting by age; we give people more money in their old age for being old and their savings are theirs to keep on top of that, because they are clear of the means test. The more people we can get clear of the means test, the less we will need complicated savings credits, because they will get to keep the money anyway.
The gist of what we are saying is that the Government are trying to claim credit for solving a problem that they have made themselves. That is why an assessment of the effect on the incentive to save, as proposed in new clause 5, would be welcome.
The hon. Member for Hertsmere said that amendments Nos. 4 to 12 were so complicated he would not take us through them in detail, but that they were not complicated
compared with the Government's complicated scheme. I wrestled with the amendments for several minutes and they are indicative of the problem of trying to write any such schemes down; they are inherently complex. A simple system with a good basic pension—particularly for older pensioners—and a savings incentive so that they get to keep their own money, is the simplest and neatest of the lot.Amendments Nos. 1 and 2 seek to remove yet another respect in which the Bill discriminates against a group of women. The House may feel that I am warming to a theme this afternoon, but there are various ways in which the Bill penalises particular groups of women. There will be women up and down the land who hang on to every word that the Secretary of State says. They will have heard him say, "It will pay to save" and that "pensioners"—the term is unqualified—"will for the first time be rewarded for their savings."
What the Secretary of State has not said is that women aged 60 to 64 do not count; they do not qualify. He did not qualify any of his statements to that effect. I challenge Ministers to give me any instance of an occasion when the Secretary of State, having made those sweeping statements, has qualified them by saying explicitly that women aged 60 to 64 will be excluded. I would be happy to take an intervention to hear about a time when he has done that. The Secretary of State has failed to point that out. Obviously, those who read Bills and follow the small print will know it, but women aged 60 to 64 are missing out.
Those women may feel that they are pensioners who have saved. Why can they not be rewarded? The Government's answer concerns equalisation; they have to equalise somewhere because of equal opportunities requirements. However, they have equalised at 60 for the guaranteed credit element of the pension credit. Within the Bill, we have equalisation at 60. When the Government have been forced to equalise, whether on winter fuel payments or concessionary travel for older people, they have equalised at 60, not 65, even though that brings in men aged 60 to 64, who are not state retirement pensioners. Therefore, the precedents exist. There is even a precedent in the Bill for equalising at 60.
When we raised the issue in Committee and came up with a proposal for achieving our aims, the Minister said that it would not work because men of, say, 63 had not had the opportunity of living to 65 to receive a full pension and being assessed on that basis. It was, the Minister argued, discriminatory to assess men at 63 on the basis of the pension that they had accrued up to that point.
Amendment No. 2 therefore proposes an alternative strategy. Instead of assessing those people on the basis of the pension accrued to that point, they would be assessed on the pension that the Department forecast that they would receive at 65. Each year, as men approached 65, the calculation would be done afresh. Such calculations are done all the time by the Government, and we have all seen pension forecast statements. It would not be complicated to provide such forecasts for men aged 60 to 64.
Amendment No. 2 would be non-discriminatory, because the message for women over 60 would be, "You have had your full working life to build up a pension, and
we will assess on the basis of that pension." The message to men would be, "We will assess you on the basis of the pension that we expect you to get at the end of your full working life." That deals with the point about discrimination, which was the Minister's principal objection, and it would bring into the scheme women aged 60 to 64, who are another group of second-class citizens under the Bill.The issue of incentives to save is important. I welcome the spirit of new clause 5, if not the detailed string of amendments that go with it. In our view, a related aspect is that women aged 60 to 64 who have saved should not be excluded. If they were included, the Government would have to agree that the new clause would provide an additional incentive for women to save. Therefore, the Government should welcome our amendments.
Bob Spink: The encouragement of saving is a key area in which the Bill falls seriously short. The pension credit might even depress the savings ratio, which is already dangerously low. New clause 5 is an important addition because it would focus attention on the Bill's impact on the encouragement of young people to save for their retirement. The Bill should not discourage people from saving for their retirement, but it may have that impact.
The Bill should provide an incentive for younger people to change their behaviour. It should encourage them to save more for their retirement and to consider more carefully their post-retirement income and lifestyles. In short, it should encourage them to be prudent. New clause 5 would facilitate the measurement of the Bill's success in achieving that increase in prudence, although we believe that the Bill may discourage prudence. New clause 5 is, therefore, an essential part of the necessary control mechanism for the Bill, without which it would be less effective.
The Government should have no problem accepting new clause 5 as a simple, common-sense feedback mechanism that would illuminate the performance of the savings credit measure and enable the legislators to make any necessary changes in that light. The only reason for the Government to resist this common-sense addition to the Bill is if they lack confidence in the potential effectiveness of their savings credit measure and would be embarrassed to have light thrown on its performance.
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