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7.52 pm
Mr. Tom Levitt (High Peak): We began the debate with a contribution from the hon. Member for Havant (Mr. Willetts), who is back in his place. He had a packed audience on his side of the Chamber, and there was an air of expectation. I think that Conservative Members were looking for the man to put "fun" back in "FUN-ded" pensions, but his contribution fell flat and it was more like putting the "dead" back in "fun-DED" pensions. He gloated about what is happening in the stock market. In the last two Prime Minister's Question Times, the Leader of the Opposition—once in person and once by proxy—gloated over what has happened to the stock market. As many of my hon. Friends have said, it is what has happened to the stock market that has most damaged funded pensions in recent times, not the actions of the Government.
Andrew Selous: Will the hon. Gentleman give way?
Mr. Levitt: May I make a little progress, and if I have time at the end I shall come back to the hon. Gentleman?
The irony is that, according to Tory philosophy, everyone's pension entitlement should be dependent on the casino of the stock market. That is how private pensions work. The hon. Member for Havant said that his party's vision is that older people should not be dependent on state benefits. If they should be independent of state benefits, presumably that means that they should be totally dependent on benefits from other sources, so they would be dependent on the whims of the stock market
As the hon. Gentleman knows, the formula of private funded pensions plus the element of compulsion that some of his colleagues have called for would enable the providers of private schemes to have a field day. Many tears were shed by Conservative Members for the
actuaries and investment managers, whereas little was said—in the hon. Gentleman's opening speech nothing was said—about pensioners, their living standards and their expectations.Private funded schemes have suffered because the value of the stock market has gone down. It has gone down so far that a few days ago it was back to 1997 levels. That has been painted as a tragedy, but in another context the economic situation of 1997 was described by Conservative Members as a golden legacy. If we are starting off with a golden legacy at worst, with the stock market already improving, it is to be hoped that this hiccup is almost over.
The stock market fell in recent days not because of actions by Governments, but largely because of fear in the markets as a result of the signals that have been sent from WorldCom, Enron, Xerox and others, from a sky darkened with greedy, fat cat chickens coming home to roost—if I may mix my metaphors. [Interruption.] One takes a risk when mixing metaphors.
The reason why we in this country need not be so concerned as people elsewhere—although we should not be complacent—is because our economy is not a free for all. We have regulated our economy, successfully combated inflation with a healthy target of 2.5 per cent., reduced interest rates to a manageable level, and stabilised the economy. We have recognised that unbalanced distribution of income and wealth is destabilising, and we have combated the forces, such as unemployment, that feed economic instability. The actions that we have taken in the past five years have put us well on the way to conquering poverty at home and in the developing world.
The Conservative party does not want to talk about the economy. The reasons for that are obvious. We have created a situation in which investing in enterprise is safe, because interest rates are reliable, the stock market can operate fairly, and savings can grow faster than inflation. We remember the days of 15 per cent. interest rates, 4 million unemployed, and the scandal of pensions mis-selling, which was worth £34 billion to pension holders and was too long ignored. That exploitation of the gullible by the greedy, connived at by the friends of the Conservative party, damaged people not just for today but for the rest of their lives, especially for their retirement. We remember Black Wednesday, Black Monday, black every day of the week, when the Tories were running our economy.
Bob Spink: Will the hon. Gentleman give way?
Mr. Levitt: I am on a wave, so if the hon. Gentleman does not mind, I may come back to him later as well.
The Tory years were not bad for everyone. It has to be said that there were some winners. Between 1979 and 1997, the average net income of pensioners rose by 64 per cent., compared with the rise in real average earnings of 36 per cent. That sounds good for pensioners, but whereas the top fifth of pensioners saw their incomes rise by 80 per cent. in that period, the bottom fifth saw theirs go up by just 34 per cent. Eighty per cent. of a lot is much more than 34 per cent. on the income of the poorest, which is very little. In 1997, the richest fifth of our pensioners had three times the income of the poorest fifth. Rich pensioners got richer under the Tories, and poorer pensioners got poorer.
Occupational pensions are only part of the story. We must consider the background, pensioner incomes and pensioner needs in general. Pensioners get income from six different sources: state retirement pension; income from investment; occupational funded pensions; income- related benefits; disability benefits; and earnings. Ninety-eight per cent. of all pensioners receive the state retirement pension. I believe that the Government's policy for the state retirement pension and the undertakings that have been given are right. I would not favour the restoration of the link with the rise in earnings, because we have done more since 1998—£3 billion more—for the poorest pensioners than a simple restoration of the link with earnings would have done.
In 1997, after 18 years of Tory government, four workers in 10 were still making no voluntary provision for their entitlement over and above the state pension, which was then only £68 a week. Two million pensioners were living in poverty. In the past two years alone, we have increased the state retirement pension by £8 for a single pensioner and £12.80 for a couple. Many over-75s claim a free television licence, which is worth £2 a week, and the winter fuel allowance for all pensioner households and men over 60 brings in an extra £200, which is equivalent to £4 a week, at a time of the year when fuel costs are highest.
The second category was investments. In 2000–01, 70 per cent. of pensioners had income from investments. That sounds great. It sounds as though they are looking after themselves. They are playing the market, taking the risk and investing in their future. Or are they? Of those people who had income from investments, 57 per cent. had incomes from investment of less than £10 a week, so presumably those investments are largely post office and building society accounts. They are exactly the people who were penalised by the benefits system. For every £1 that they received, they lost £1 in benefit entitlement—in marginal cases, they would lose more than £1 for every extra £1 from their investments. But not any more. Many have been picked up and helped by the minimum income guarantee, and 5 million people will get help of around £8 per week—up to £13.80 per week—from the pension credit when it is introduced next year. Nobody will have to live on less than £100 a week when the pension credit comes into effect.
I was interested to hear the speech of the hon. Member for Sutton Coldfield (Mr. Mitchell), because one of his predecessors said in another place that pension credit
- "is long overdue, and my hope is that it will provide support for some of the most deserving people in this country."—[Official Report, House of Lords, 18 December 2001; Vol. 630, c. 165.]
On the third category, 60 per cent. of pensioners receive income from occupational pensions. Of those, more than half had an income from occupational pensions of more than £50 a week, and one in six had an income from occupational pensions of more than £200 a week. Clearly, those pensions have taken a long time to build up, with a lot of money put into them as an investment. Not everyone is offered or can afford occupational pensions. So we introduced stakeholder pensions, of which 815,000
have been sold so far. Stakeholder is holding its own in the market and is clearly going to be a success, as even Conservative Front-Bench Members have conceded in unguarded moments.About a third of pensioners received income-related benefits in 2000–01. Many, but not all, of those would formerly have been on income support, but can now get the minimum income guarantee. I should say for the record, "Telephone 0800 028 11 11 for more information, and get your claim in now." Some 800,000 people claimed the minimum income guarantee last year, and the Department for Work and Pensions has details of another 100,000 who did not qualify then, but qualify now because of the relaxation of capital rules. That is very welcome for them.
Income-related benefits are necessary because the system as it stands fails too many people, particularly: women who paid a reduced married women's stamp, often because they had been wrongly advised to do so over the years; women with broken contribution records owing to their commitments as parents; 2 million disabled people unable to work full time or permanently; 2 million carers—often women—dedicated to family members, but unable to care for themselves; and 4.5 million workers—again, often women—who do the dirtiest, most miserable and often most thankless jobs on full-time incomes of less than £10,800 a year. Since April, those people have had available the state second pension, which will build on the experience of the state earnings-related pension scheme—SERPS—in the past. For the categories that I mentioned, we will assume an income of at least £9,500 a year and credit them as such into the state second pension to ensure that they will have more then they could expect under the previous system.
The fifth category of income is disability benefits, which are received by about one fifth of pensioner households. They will not be taken into account as they are supposed to meet the added costs of dealing with disability.
Between 1979 and 1997, investment income rose by 103 per cent.—
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