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Mr. Deputy Speaker (Sir Michael Lord): We now come to the debate on pensions. I should like to inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister. May I also remind the House that there is an eight-minute limit on Back-Bench speeches in this debate?
Mr. Webb: Someone needs to get a grip on pensions. The word "crisis" appears in the motion for almost every Opposition day debate, but in few cases can there be a better fit than the pensions crisis. The House need not take my word for this. The chairman of the occupational pensions advisory servicean august bodyMalcolm McLean OBE said only last month:
Mr. John Redwood (Wokingham): Does the absence of any reference in the motion to the massive tax on pensions, along with the fact that the hon. Gentleman wants to be Pensions Minister in this miserable Governmenthe is backed in that aim by his leader, who obviously wants to remove him from his own shadow Administrationconstitute proof that the Liberal Democrats support the idea of taxing pension funds to death?
If the right hon. Gentleman checks the record I think he will find that both his party and mine voted against the dividend tax credit and have opposed it. I think he will also find that neither his manifesto nor mine pledged to find the £5 billion to replace it. I feltunlike certain partiesthat to oppose something but not to say that we would undo it would not be helpful to this debate.
A Green Paper on pensions was published shortly before Christmas. It assumed that the state pension scheme was sorted out, and tried to bolt on to it a new private pension system. That is like trying to fit together two pieces from different jigsaw puzzles: no matter how hard you try, without the right basis, a fit will never be possible. The problem is that it is not just the private pension regime that is flawed; the state pension regime is fundamentally flawed.
The basic state pension is woefully inadequate. Its value is just three quarters of the level of the means test. Who would have thought that the basic pension described by the Government as the foundation of income in old age would be allowed to sink so low? No one would accept a building constructed on such an insecure foundation.
Women are hit particularly hard. A typical man with a basic pension under the state earnings-related pension scheme receives £92, while a typical woman receives £66. One might imagine that this is some relic of previous generations, but in fact the gap has not closed one jot in a decade. Successive Governments have failed to address trends that are long-term features of the pension system. The Green Paper contains a whole chapter on the position of women and a raft of descriptions of the problem, but the Government have not advanced one practical solution.
Things need not be like this. The basic pension could be the foundation of income in old age, if the Department for Work and Pensions took a lead from the Chancellor. As I often say, the Chancellor has got it exactly right. He has said that poor pensioners tend to be old pensioners, and he gives free television licences not to all pensioners but to the over-75s. In his most recent Budget, deciding that he wanted to help poor pensioners, what did he do? Did he put extra money into the means test? No, he increased the winter fuel payment. For whom? For the over-80s.
Why is it that, although the Chancellor has recognised that old pensioners are poor and is helping them, whenever we say as much to the Department for Work and Pensions it says, "That wouldn't be well targeted." They cannot both be right. Perhaps the Minister will tell us whether she disagrees with the Chancellor.
Can Members imagine how much could have been spent on pensions for the over-75s if the money going into the mass means test of pension credit had been devoted to them? According to a written answer, had the Government adopted the pensions rather than the mass means-testing route, not just a few pence, not just a few pounds, but £19 a week could have been spent on those pensions for the over-75s. It is the pensions route that we would have adopted, and that, I believe, is what pensioners want: a decent pension, not a mass means test.
It is not just the basic pension that is inadequate. The basic pension was so useless that the Government invented a second pension, which is useless as well. It is called, imaginatively, the state second pension, and it takes 40 years to be completely useless, because the first people to accrue a full pension under it have just left university. If they work for 40 years and receive the basic pension and the state second pension at the full rate, they will be so poor that they will need a means test. That is how good the state second pension really is. It takes 40 years to build up to an amount of money that does not lift people above the poverty line. Can that be the ambition of the Government for generations to come?
Not only do we have a useless basic pension and a useless second pension, but the Government have invented a third, called the pension credit, which is due to be introduced in October to make up for the fact that the first two are useless. However, that will be even worse.
The Government have had some problems with their credits recently. The computers have not worked, but help is at hand. The new pension credit scheme will be introduced not on a new computerso we can relaxbut on the existing computer. The only problem is that the previous Secretary of State described, in a rather appropriate way given the nature of the benefit, the computer that will be used in October as "very decrepit". If that does not fill hon. Members' hearts with horror in the light of the credit system, I do not know what will. That computer will have to bear the burden of millions of pension credit payments. I suggest to hon. Members that they get those hotline numbers readythey will be needing them.
The system is not merely going to be run on a dodgy old computer, it is also extraordinarily complex. The House will be awareI apologise for going over ground with which hon. Members will be familiarthat the new pension credit has two components: a guarantee credit and a savings credit. Obviously, pensioners will be looking at that and calculating their entitlement to savings credit, but they will need to be aware of the full complexity of it. So here we go!
The savings credit is available to pensioners, but not to women aged 60 to 64; although they are pensioners, they can get the guarantee credit but not the savings credit. Therefore, there are two bits to the scheme: one applies to some pensioners but not all. The reward one gets for saving is 60p in the pound for any private pension above the basic pension level but below the income support levelexcept that that will be called the guarantee credit level, except that, if one does not have a full basic pension, part of one's private pension has to fill up to the basic pension before the 60p in the pound award cuts in, and above income support levels the 40p in the pound taper cuts in until one ends up with zero. [Hon. Members: "Encore."] That was the shortened version. When hon. Members read the transcript, they will find that that was a succinct summary of how the system will work.
The serious point is: who will claim the thing? Who will know, if they have not previously been entitled, that they may be entitled? We can relax, because the Government will write to everyone. The Government will write to all pensioners not currently on income supportexcept that, because the system is being introduced in October they do not have time to write to everyone, so they will write to one in five pensioners randomly. Presumably, one pensioner will have the letter, and they may understand it and apply. The next-door neighbour, I assume, unless particular villages will get one and the next village will not, will not have the letter, so they will not hear of the thing, unless they read the newspapers.
However, it is all right because the system is being introduced in October and people have a year to claim. If the House reflects on that for a moment, hon. Members will realise that people have a whole year to claim the thing because it is so complicated the Government do not think they can possibly get everyone to claim it on the day they are entitled to it. This is money for poor people, yet the Government have to give them a year to claim it because they know they cannot possibly deliver it on time. What are those relatively poor and needy pensioners who are the priority for the Government supposed to do for the year while they wait for their letter, because the letters may not be delivered until next June? That is the system on which the Government pin the centrepiece of their attack on pensioner poverty.
The Department for Work and Pensions has been set a target. It has one of those public service agreements, and a sort of report card. I do not know who it hands it in to and I do not know what happens if it fails. I do not know whether the Government will say, "We will not let you pay any pensions this week because you have failed." It will just carry on, I think. Perhaps the Government will not appoint a Minister for Pensions, and will make the other Ministers do the work.
If the Department fails its public service agreements, what happens? It has been set an objective. By 2006, 3 million pensioner households have to get the pension credit. That sounds pretty good. By 2004, the Government think that 2.8 million could have it. That does not sound too bad but they think that 3.8 million are entitled, so the Government will get a tick in the box, a "Well done" and a pat on the head from someone for missing 1 million pensioners. That will be a success. That is the extent of the Government's ambition for their strategy.
When we point that out to the Government, they say, "Yes, but you don't want to target poor pensioners." Well, excuse me, but who are these 1 million people who are entitled to the MIG or the savings credit? Are they the rich? The poor will miss out because the Government have designed a scheme so complicated that many people will not claimbut everybody claims their pension.