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14 Apr 2003 : Column 600—continued
Pension Credit
4. Sir Sydney Chapman (Chipping Barnet): What the estimated impact has been on savings of the introduction of the pension credit. [108707]
The Parliamentary Under-Secretary of State for Work and Pensions (Malcolm Wicks): When introduced in October, pension credit will for the first time reward, not penalise, savings, ensuring that those who have worked hard to save modest amounts will gain from having done so. The reward for saving will be up to £14.79 a week for single pensioners and up to £19.20 a week for couples. That is, of course, in addition to the guaranteed minimum income.
Sir Sydney Chapman: That is all very well—[Interruption]—but does the Minister not realise that he is creating a massive means-tested scheme for the elderly, specifically against his party's promise in 1997 and the wishes of the Chancellor? He has also created a massive disincentive to save—those are not my words, but those of the president of the Faculty of Actuaries—and a hugely expensive bureaucracy. Does he not realise on reflection that there is a much less expensive and more effective way to help poorer pensioners?
Malcolm Wicks: With all due respect, I do not think that the hon. Gentleman has understood the scheme. Let us contrast it with what we inherited: pensioners with modest savings had them deducted, pound for pound, from income support, giving out entirely the wrong messages to those who had properly saved. The purpose of the pension credit is to recognise those modest savings and reward them accordingly. Given his interest in savings, I should have thought that he would have welcomed the pension credit.
Mr. Frank Field (Birkenhead): As the Minister suggests that we recall the position that Labour inherited when it came to power, does he accept that since 1997 three quarters of all company pension schemes have either closed to new members or closed contributions to existing members, and that 11 per cent. of those schemes are now in the process of winding up?
If we do not want all our constituents to end up on the pension credit, does not it behove the Government, once they have considered the response to their Green Paper, to introduce some very radical pension reform proposals?
Malcolm Wicks: As the right hon. Gentleman acknowledges, we have published our ideas in a Green Paper, on which we are consulting. I was at a consultancy meeting in the south-east of England this morning, at which we heard from a range of partners and stakeholders. We will introduce our proposals in due course. He is right that there is much insecurity out there, and we need to reassure people that when they save it is worth their while doing so. That is the purpose of the Green Paper and, at the risk of being relevant, it is the purpose of the pension credit.
Mr. Speaker: I call Mr. Brazier.
Mr. Julian Brazier (Canterbury): Does the Minister accept, none the less, that, according to Institute for Fiscal Studies figures, by October three fifths of all pensioners will be eligible for means-tested benefits, and by the middle of the century, with no change in policy, four fifths of pensioners will be so eligible? Does he accept that there is a connection with the halving of the savings ratio since the Government took office, and the fact that almost half of the youngest element of the work force now has no second pension provision?
Malcolm Wicks: As the hon. Gentleman is a good territorial, I knew that his time would come.
Again, the hon. Gentleman is not giving fair acknowledgement to the fact that, with the pension credit, we are at long last trying to reward savings, which is an important element. There is a debate about means testing, but the pension credit involves a very simple incomes test, which ignores, for example, any income from savings below £6,000. That means that 85 per cent. of pensioners receiving the credit will have any income received from their savings ignored entirely. Furthermore, unless they have major changes in life circumstances, once people are receiving the credit they will not have to have their income assessed again for a period of five years. That means that, on average, those getting the pension credit will receive some £400 a year. I am particularly struck by the fact that some of the poorest pensioners, women, will benefit disproportionately, which is right and proper given their circumstances. In fact, 54 per cent. of those entitled to the credit will be single women. That is targeting that should be supported by the whole House.
James Purnell (Stalybridge and Hyde): Has my hon. Friend the Minister had a chance to read the Select Committee report on pensions, which says that nothing is inherently wrong with means-testing, as it reduces the high withdrawal rates—previously, about a third of pensioners lost all their occupational pension and now none does so—and recommends that we should increase
the income disregard so that pensioners can do more work without having any of that clawed back by the pension credit?
Malcolm Wicks: I have read the Select Committee report. Having served under two distinguished Chairmen of that Select Committee, it is always the first thing that I read at night—[Interruption.] A bit of Lib-Labery there. We will consider the proposals most carefully. I emphasise, however, that we are determined to increase the take-up of pension credit. All those on the minimum income guarantee will be moved automatically to the pension credit. We will write to others and there will be a major television and press advertising campaign. I hope that all Members of the House, whatever their feelings about the overall policy, can join in in their constituencies to make sure that the poorest pensioners benefit from the pension credit. We all have a role to play.
Mr. James Arbuthnot (North-East Hampshire): The Minister says that all those on the minimum income guarantee will be put automatically on to the pension credit. There are 670,000 pensioners on the minimum income guarantee who do not actually get it. Why does he think that it will be any different with the pension credit?
Malcolm Wicks: I want to be entirely fair about this, and take-up is always an issue. With all due respect, it was an issue for 18 years in an earlier part of our social and political history. The important point is that the poorest pensioners are more likely than others to take up income support or the minimum income guarantee. The proportion of the total amount available has a higher take-up rate than the number of claimants eligible for it, because the poorest tend to claim it most. However, I am not complacent. That is why I have outlined a range of proposals, including an advertising campaign and our writing to all other pensioners, to ensure that they know about the pension credit and will claim it.
The hon. Gentleman has asked a perfectly proper question, but I repeat the point that we all have a significant role to play in our constituencies in ensuring that many of the most vulnerable and at risk claim the credit, which is worth a significant amount of money to them.
Pensions-related Benefit
5. Tom Brake (Carshalton and Wallington): If he will make a statement on the level of pensions-related benefit take-up. [108709]
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): The numbers receiving the minimum income guarantee have risen steadily by 170,000 since 2000, which is encouraging. We shall continue to streamline the claiming process to encourage pensioners to take up their entitlement.
As my hon. Friend the Under-Secretary has just said, we will write to all pensioners about the pension credit. I hope that, in a spirit of generosity, the hon. Gentleman will join us in our efforts by urging his constituents to claim what is rightfully theirs.
Tom Brake : I thank the Minister for her response. She will be aware that £1.5 billion of pensioner benefits are not currently claimed and that the increase in the take-up of the minimum income guarantee in 2000–01 was just 1 per cent. She will also be aware that the Government's target for pension credit is just 3 million out of 3.8 million pensioners. Does she agree with the Public Accounts Committee that the Government's target lacks ambition? If she does, what does she intend to do about that poverty of ambition? Why should Members believe that the measures that the Government will introduce this time to increase take-up will be any more effective than the measures that they have introduced in the past?
Maria Eagle: I gather from that succession of questions that the hon. Gentleman and his party are against the pension credit. In that sense, he must explain why he is in favour of taking an average of £400 off half of all pensioner households before the next election.
We will make sure that we encourage all pensioners to claim their entitlement. We are doing more than any Government ever have by writing to each pensioner and by making it simpler to claim. Indeed, pension credit will be able to be claimed by making a simple telephone call. It would help us all if the Opposition parties, whatever their feelings about future pensions policy in this regard, stopped putting people off claiming the credit by saying that it is means-testing when it is not.
Mr. Stephen Hepburn (Jarrow): Is my hon. Friend aware that, in the two recent take-up campaigns in South Tyneside, almost 350 pensioners were identified as not receiving the proper entitlement? That represented a loss of income to the borough of hundreds of thousands of pounds. The success of the campaigns was put down purely and simply to home visits. Will my hon. Friend congratulate the campaigns on their success, which were supported by her Department, and devote more money to home visits so that we can make sure that pensioners get what they are entitled to?
Maria Eagle: My hon. Friend is right. In fact, almost 150,000 people have received an entitlement of approximately £20 a week extra as a result of our take-up campaign. That must be good.
My hon. Friend is also right to say that home visits can make a difference. In that regard, the local service element of the Pension Service will be able to ensure that more vulnerable pensioners who otherwise might not take up the credit will have an opportunity to do so. We are putting more resources and efforts into the local service as we move forward to the better service for pensioners that the Pension Service will represent.
Mr. David Willetts (Havant): May I ask the Minister one specific question about these pension-related benefits? Will she assure Britain's 11 million pensioners that any changes to the main inflation index along the
lines proposed by the Chancellor in his Budget last week will not affect the annual uprating of pensions and other benefits?
Maria Eagle: The hon. Gentleman will have to arrange for his Front-Bench colleagues to ask the Chancellor that question, because he knows very well that I am not in charge of making any such arrangements—the Chancellor is. He needs to ask his questions to the right Minister, as I am sure he knows.
Mr. Willetts: This is a question about the uprating of pension-related benefits. It is a very important question, because the Chancellor proposes to change the index from the retail prices index to the harmonised index of consumer prices—HICP— which is apparently called "hiccup" for short. HICP tends to be lower than the RPI. If the Chancellor decides to change to that measure, he could cut the value of the uprating for millions of pensioners. Will the Minister give an assurance that the value of the uprating of pension-related benefits will not be reduced if the Chancellor changes his measure of inflation?
Maria Eagle: The Chancellor said that he was considering making such a change and, as he does so, he will no doubt examine carefully the impact that it might have on pensioners and upratings. The hon. Gentleman must make his representations to the Chancellor, but I can say that since this Government came into office, pensioner income has increased by 20 per cent. That is what I call a proper uprating.
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