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Mr. Clappison: There is no mystery about new clause 5, because it refers to
- "the effect of the savings credit on the propensity of individuals of working age to save for their retirement".
Maria Eagle: The point that I am trying to make, although obviously not clearly enough for the hon. Gentleman, is that it is quite difficult to disentangle the incentive of one policy from all the other incentives or disincentives that are flying around. That is the problem with the new clause.
The hon. Gentleman was trying to promote a debate about incentives to save, and in that respect I want to answer some of the points that he made. He rightly said that many people of working age are not saving enough for their retirement. No one would disagree with that. Ministers have said at the Dispatch Box that people are not saving enough. He also referred to the alleged £27 billion savings gap, as did some of his colleagues. He made the point that, if the Bill were implemented in that way, it would act as a disincentive to save for people of working age, rather than rewarding savings, which is what we think it would do.
A tension inevitably exists between the need to ensure that there is a floor below which pensioner incomes do not fall and the need to ensure that today's workers have a clear incentive to save. The Bill provides a mechanism for doing both, by ensuring that we can tackle poverty among today's pensioners. May I say gently to Conservative Members that, after their 18 years in power, our priority when we came to power in 1997 had to be to do something, as part of a decent pensions policy, to alleviate the pensioner poverty with which they left us?
Things have not got worse. The claims made by the hon. Member for Castle Point (Bob Spink) were complete nonsense, and I do not recognise any of the points that he made as being based on any kind of fact whatever. If he could point out his source for the claims that he made, I should be very interested to see it.
4.15 pm
Mr. Goodman: Will the Minister not acknowledge that even the pension credit's supporters recognise that the difficulty with the Government's approach is the extensive reliance on means-testing, that up to roughly a fifth of those entitled to the MIG do not take it up, and that there is no evidence at all to show that take-up will increase under the pension credit?
Maria Eagle: I shall come to some of the points that the hon. Gentleman makes later. Take-up is obviously important. We want to promote take-up to ensure that those who are entitled to benefits take them up. One of the ways in which pension credit represents an improvement in that regard is that the so-called means test—the information that people will have to provide us with—is much simpler and much more straightforward. The weekly means test that currently exists for income support and the MIG will disappear, and people will
normally only have to make a claim once every five years. That will lead to a considerable improvement in take-up, which is what we aim to achieve.The hon. Member for Hertsmere suggested that the Bill will involve a disincentive to save, but the pension credit is about fairness; it will reward thrift instead of penalising it. For the first time, those who have saved a modest amount for their retirement will be rewarded for doing so by receiving the savings credit. That has not been the case in the past. So the Bill will remove a disincentive to save for people who were likely to qualify for the MIG. Instead of losing benefit pound for pound, as happens under the old income support and the MIG systems, they will receive a 60p a week reward for every pound saved in the target income band. That is not a disincentive to save; it is a reward for saving.
No hon. Member has so far mentioned that the capital rule changes that we are making in pension credit are very beneficial. We shall treat capital five times more generously than it is treated under the old income support and MIG-type rules. We have designed pension credit to promote saving in respect of the capital rules. We will abolish the current rule that excludes pensioners with £12,000 or more in savings from any help at all.
Income from savings below £6,000 will be ignored. For savings above £6,000, a notional rate of income, set at half the current MIG rate, will be assumed. Those improvements ought to encourage people and those who have been excluded in the past because of their capital to benefit from the savings reward. All those things are an incentive to save, rather than a disincentive, because they will explicitly provide a reward for savings. That is one of the Bill's main aims, and I contend that that is exactly what the Bill will do.
Of course Opposition Members needed to support their assertions. In doing so, they read out comments made to the Select Committee during the evidence that it took, as well as other sources—briefings and so on—that have been circulated while we have been considering the Bill. However, they did not read out all the quotes from all the organisations—not that I am shocked about that—and there are some other quotes from respectable organisations in the pensions world that agree with the Government that the pension credit will provide an incentive save.
For example, the Association of British Insurers said:
- "The ABI welcomes the Government's proposals for a Pension Credit as an important step in addressing the issues which may currently discourage those on moderate incomes from saving for their retirement."
- "The NAPF welcomes the concept of the Pension Credit and believes that it will go some way to rewarding low income pensioners for their thrift during their working lifetime. It will also assist in creating the right environment for today's workers on low or modest incomes to be able to justify making a commitment to a long term pension saving vehicle."
- "Legal and General is confident that the pension credit has the potential to be a powerful encouragement to save for low or middle income groups."
Mr. Goodman: The hon. Lady is being very fair. Rightly, she says that Conservative Members have a propensity to quote those organisations that believe that the pension credit does not provide an incentive to save. She has just read out quotes from bodies that say that it is an incentive to save. Why will she not therefore support the new clause, which would allow a neutral body to make the judgment?
Maria Eagle: If the hon. Gentleman were to be fair, he would accept that I have said that the powers already exist to enable the Government to do as the new clause suggests. Therefore—
Mr. Brady: Will the Minister give way?
Maria Eagle: If the hon. Gentleman gives me a chance to finish, I might consider giving way to him, as long as he does not throw a cricketing analogy at me.
The Government already have the power and authority to do as the new clause suggests. I have made it clear that we believe in evidence-based policy making and that the House has the power and the duty to hold the Government to account, as I am sure it will.
Mr. Brady: I promise no cricketing analogies. The Minister says that the new clause is not necessary because the Government already have the power that it would provide. I know that my hon. Friend the Member for Daventry (Mr. Boswell) is eminently reasonable, and if she were to give an undertaking that the Government would use those powers and commission a report on an annual basis, we might be persuaded to consider withdrawing the new clause.
Maria Eagle: It might be tempting to give such short answers, as the hon. Member for Daventry (Mr. Boswell) suggests, but it is usually foolish for Ministers to give in to that temptation. We are committed to evidence-based policy and we have the power to find out and do all the research that we need to do to evaluate our policies, and we shall do so. There are some technical problems in respect of isolating propensity to save in relation to one policy, as opposed to everything else that is going on. The point that I am trying to get across is that I am not hostile to the idea of evaluating policy—we are in favour of that but the new clause is a flawed way of doing it.
David Cairns: Would my hon. Friend not agree that the reason why we are having so much debate and so many speeches by Conservatives Members on the issue of reporting is that, when it comes to substantial policies for making the lives of Britain's pensioners better, they have absolutely no alternatives?
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