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6.17 pm

Mr. Boswell: I wish to express my thanks to my hon. Friend the Member for Hertsmere (Mr. Clappison). His wise advice and acuity immensely impressed me and other members of the Committee that considered the Bill.

We are used to fireworks from the Minister for Pensions. Although we have also had some measured contemplation and a helpful announcement today, I wish to refer to the fireworks. I was fascinated by his distinction between the means-testing of old and what is being introduced now. There are two characteristics of the Minister's proposal for means-testing. It is apparently all right if it is introduced by new Labour and if it is inclusive and means that nearly every pensioner will be involved. That argument will not wash, because there are serious problems with the proposal.

The Minister is impetuous and determined to get decisions out of us, but it is rather unreasonable to ask us to judge the effects of the Bill—they will be apparent not too far off, but in a year or two—before it is even passed. With regard to our decision on Third Reading, we will listen to the rest of the debate before coming to a conclusion. However, the House will not have to wait too long for that.

Our concerns remain those that were set out in the reasoned amendment to Second Reading. I have underlined our five cardinal points and they relate to mass means-testing, the complexity of the system—despite what the Minister said—the fact that many pensioners will miss out on their entitlements, the erosion of incentives and our belief, which the Liberal Democrats have been consistent in supporting, that expenditure would have been better directed towards the basic state pension, in particular for older pensioners. The argument is not about whether we should help pensioners, but about whether any additional money is being spent to best effect.

As the Minister conceded, the Bill is essentially unchanged. However, it would be churlish and inappropriate not to acknowledge the two substantial changes that Ministers made. It is often the case that if there is a consensus of opinion across the House, it acts as a good catalyst for change. In fairness, we managed to make one change in each House. First, the Government made a significant concession on hospital downrating, and we should remain grateful for that. Secondly, the Minister made a statement today on compensation payments, which will be thoroughly welcomed by hon. Members on both sides of the House. He also repeated his concerns about foster carers for children, so we can anticipate how we might benefit their position. Those are all welcome concessions and reflect the way in which we should make progress when we discuss Bills.

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I also hope that Ministers and their officials picked up from the Committee some detailed points for consideration as we get close to making regulations. They may also have spotted some pitfalls relating to the equity of, and the ability to administer, the legislation, which will stand or fall on the regulations and the way in which they are administered.

Frankly, Conservative Members remain worried about extending means-tested benefits to 5 million pensioners. Age Concern is also worried about that. In its general briefing for the debate, it refers specifically to the difficulties of securing take-up of means-tested benefits and the large number—about 5 million—of possible claimants. It goes on to say:

That is the cardinal test of whether the Minister's wishes are fulfilled. Whatever else happens, means-testing will put a great premium on the performance of the Pension Service, which for technical reasons we have not been able to discuss in detail today.

We remain concerned about excessive reliance on 26 call centres and a telephone system. We believe, as I think do other hon. Members, that people still need access to a local service within a reasonable time. More generally, the Select Committee said:

Those remain serious challenges. Whatever the Minister may wish to happen, he and his colleagues have still to ensure that it does happen.

We need to reflect on how the Bill came about. The Minister is occasionally long on rhetoric, but the plain fact is that in trying to solve the poverty problem, the Government have widened the gap between the state basic pension and the minimum income guarantee. They are now having to bridge that gap, but the gap is of their making. That was well set out in the written answer that I received from the Minister on 7 May. He gave a detailed response to my request to give the historic levels of the minimum income guarantee and its precursors, supplementary benefit and income support, and of the basic state pension for the past 30 years. I also asked him to give the ratio between them.

It is interesting that for a long period the differences between the two were small, not generally exceeding 5 per cent. In some cases, they were negative. However, the levels began to climb slightly and in the latter years of the Conservative Government, the income support level was roughly 10 per cent. above the basic state pension. However, since the introduction of the minimum income guarantee, the figures have sharply diverged, and they now show a 30 per cent. disparity. We remain concerned about filling that gap and about the pensions and savings implications to which my hon. Friend the Member for Hertsmere.

We will not resolve those issues today. The Minister and his colleagues have produced what I am sure they want to describe as good news for pensioners, and we do not want to challenge benefits to pensioners. However, we will ask whether the money is being used to best effect, whether it could have been better spent, and whether there will be consequences in the long run.

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We are genuinely concerned that the long-term disincentives to save that are built into the system will have a depressing effect on the savings of young people.

Ministers say, and they have done so again today, that they want to produce an annual pension statement that includes both state benefits and private sector benefits, so that people know where they stand. May I float the suggestion at this late stage that what they need to do is get hold of people like my youngest daughter, who is in her early 20s and just starting her career? It should be made clear to young people where they will stand if they do not get down to saving, and what will be provided by their company pension scheme if—like my daughter—they are still fortunate enough to have one. They should be asked to think seriously about the issue, and made to realise that they are part of the £27 billion savings gap.

Will the pension credit act as a disincentive because its long-term effects and benefits will be unclear?

Mr. McCartney: I am more than happy to help the hon. Gentleman's daughter, who I believe is a solicitor or a barrister. Small practices and chambers rarely provide in-work benefits such as defined benefit schemes or even defined contribution schemes. That is why we introduced stakeholders. His daughter can start now to save for her retirement through a stakeholder scheme, and as she succeeds and moves from one practice or chamber to another in what I am sure will be an upward career trajectory, she can take her pension with her and suffer no loss. We have made the preparations; all the hon. Gentleman need do is persuade his daughter that she should get involved.

Mr. Boswell: The Minister is, if I may put it this way, very seductive, but unfortunately he has identified the wrong target. I have more than one daughter. One is employed by the civil service to look into the sorts of problems posed by person such as myself, or those who decide to litigate against Government Departments. The daughter in question has transferred from a personal pension into a company savings scheme.

To the Minister I say in all fairness and friendliness that the current take-up of stakeholder pensions is worrying, if not to him, then to many people in the sector.

Mr. McCartney: That is propaganda. Stakeholder schemes are very important. In the year after their introduction, 800,000 people who previously had no access or any chance of access to a savings product for their pension got one, and about 85 per cent. of companies that had not provided access registered to do so. That is a significant step forward. The hon. Gentleman is right, in that there is a lot more to do, but let us be clear: we are all in favour of people saving earlier in their lives, so it is in all our interests not to belittle stakeholder schemes, but instead to encourage people to take one out.

Mr. Boswell: I have absolutely no intention of belittling stakeholder pensions, but I should in all fairness point out that they are currently striking only 2 per cent. of the target group. Of the 800,000 already taken out, a significant number—174,000, if memory serves—have been through the transfer of the construction industry pension scheme. The position is generally regarded as not being as promising as the Minister and I would hope for.

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It would be inappropriate to widen a Third Reading debate to cover such issues, but it is relevant to the debate and to the provisions we debated and voted on earlier this afternoon to point out that the price of success in pensions policy is eternal vigilance. We need to keep revisiting the subject to see whether the proposals are working. We have reservations about stakeholder pensions, and we still have serious reservations about the long-term effect of the pension credit on the incentive to save and, if there is no long-term private saving, about the future affordability of the pension credit programme. That rolls on a long way ahead.

This is not just a matter of today's pensioners, important as they are; it is a matter of tomorrow's pensioners and the arrangements that we need to set down now to meet their needs in the future. I have a feeling that when we have finished debating this Bill and when we are no longer around to be drawing our own pensions, today's young people may be paying the price for some of the decisions that we are about to take.

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