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Mr. Willetts: Let me make it clear that we all believe that every person should secure the benefits to which they are legally entitled. Hon. Members on both sides of the House will do their best to help constituents find their way through the incredibly complicated process of securing the pension credit.
Andrew Selous (South-West Bedfordshire): Does my hon. Friend share the concern of one of my constituents who, when he rang up to find out about the pension credit on behalf of his elderly mother, was told that he had rung the wrong number? He was then transferred to a further three people in the Pension Service, only one of whom was an expert and none of whom could provide
an explanation of his mother's entitlement to pension credit. In view of the length of time that the Government have had to introduce it, does my hon. Friend agree that that is a shambolic state of affairs?
Mr. Willetts: Yes, and it is a subject on which the Secretary of State made a written statement to the House yesterday—and it was indeed dismal news. The Secretary of State said that 1.9 million pensioner households were on the system and being paid the pension credit, but almost all of them had previously been in receipt of the minimum income guarantee and had been automatically transferred. After six months, it appears that only 200,000 extra pensioners are receiving the pension credit. The Secretary of State, having watched—doubtless in horror—the shambles that the Treasury made of the introduction of the child tax credit, had the ingenious idea that he could secure the smooth roll-out of the pension credit, provided that not many pensioners claimed it—the ultimate in bureaucratic mentality. Trains will run on time, provided that there are not any passengers; benefits can be paid smoothly, provided not many pensioners claim them. That is not how we believe the social security system should be run.
Mr. Bill Tynan (Hamilton, South): What would the hon. Gentleman say to one of my constituents who informed me this week that, as a result of the pension tax credit, he will gain £26 a week from October this year? Would he tell my constituent that that should no longer exist?
Mr. Willetts: I am again grateful for the opportunity to make the position clear. The Prime Minister outrageously misrepresented our proposals at Prime Minister's questions earlier this afternoon. Our proposals involve no change whatever in entitlements to the pension credit. Rather, we believe in increasing the value of the basis state pension slowly over time, so that fewer pensioners need to claim the pension credit. It is not part of our policy to abolish the pension credit.
Lynne Jones (Birmingham, Selly Oak): Is not the hon. Gentleman rather misleading the House when he says that the Conservative policy is to allow the basic state pension to catch up with the means-tested benefit? In fact, he would allow that to happen by holding down the means-tested benefit and ending its link to earnings.
Mr. Willetts: The hon. Lady raises an issue on which I hope to receive some clarification from Ministers in the debate. In the course of preparing our own proposals, we attempted clearly to establish the Government's own proposals for the future of means-tested benefits and the pension credit. The Government have several times been asked to clarify whether they believe that the value of the pension credit would increase in line with earnings if, by some extraordinary mischance, they were to win the next election, but they have failed to provide a clear answer. When we know the Government's intentions on the uprating of the minimum income guarantee and the
pension credit, we will be able to make our response. However, we do not yet know the Government's proposals for the future of the pension credit.
Mr. George Foulkes (Carrick, Cumnock and Doon Valley): We now have an opportunity to find out what the Opposition intend. In common with my hon. Friend the Member for Hamilton, South (Mr. Tynan), I have a pensioner in my constituency who is £106 a week better off because of the Government's policies. Pensioners such as him are worried that they would lose out if, by some mischance, the Tories came to power. Will the shadow Secretary of State tell the House whether the Conservatives intend to spend more or less money on pensioners? If it is more, from where will they find the extra moneys?
Mr. Willetts: Yes, we propose to pay more money to pensioners and we shall pay for it by offsetting savings in means-tested benefits and by the abolition of the new deal, which will allow us to increase the value of the basic state pension. Those are our proposals: no pensioners will lose and many will gain from them.
Mr. Willetts: I want to make some progress with my speech. I have already taken many interventions and explained that the main problems with means-testing are complexity and low take-up.
The Prime Minister said today that the Government's approach provided targeted help for pensioners on the lowest incomes, but I am afraid that that is not so. I am sure that Labour Members who are genuine in their concern about poverty will be familiar with the statistics on the take-up of income-related benefits, which show that many pensioners who are entitled to means-tested benefits do not claim them and that many of them are among the poorest pensioners in our society. They are the people who are not reached by a Government who have become obsessed with spreading means-testing. I refer the Secretary of State and the House to table 1.10 on page 22 of the Department for Work and Pensions statistics on the take-up of benefits. I am sure that the Secretary of State is familiar with the document. It shows that approximately 60 per cent. of all the pensioners who do not claim means-tested benefits are in the poorest 20 per cent. for pensioner incomes. Our policy will help them, because our policy reaches the parts that the Government's policies do not reach.
I will not take seriously assessments of our policies that assume 100 per cent. take-up of means-tested benefits as the alternative approach. As one of the fundamental problems with the Government's approach is low take-up, it would be wrong, even absurd, to compare our policy, which would get to everyone, with an alternative approach that, sadly, does not reach many of the pensioners who are entitled to the benefits.
To prove how pernicious the spread of means-testing is, we asked actuaries to calculate how much people would need to save during their working lives to secure sufficient income to float them off means tests in their retirement. The answer is the shocking figure of £180,000. That is why Britain has a savings crisis. That
is why the savings industry tells us that it cannot encourage people to save. The industry is worried about being accused of mis-selling savings products if people retire and subsequently discover that they have lost means-tested benefits as a result of their savings. That is why our policy is not only right for pensioners, but is essential to get Britain back into the savings habit. Unless we can tackle the pernicious spread of means-tested benefits, millions of people will conclude that saving is not worth their while.
Mr. David Heathcoat-Amory (Wells): Unless pensioners are able to save, they will not be able to bear the burden of the council tax. At Prime Minister's questions earlier, the Prime Minister did not deny that the Chancellor was budgeting for a 7 per cent. increase in council tax next year and a 6.5 per cent. rise the following year. Is it not grossly hypocritical for Downing street to announce that it is considering forcing local authorities to have referendums before imposing council tax rises of more than twice the rate of inflation? Why are the Government raising expectations when they know that they cannot deliver?
Mr. Willetts: My right hon. Friend is right. Relations between No. 10 and No. 11 have reached the stage that No. 10 says that it will try to pass laws to stop people doing what No. 11 says is necessary for the public revenues to be secured. As an example of the failure of the Prime Minister and the Chancellor to communicate with each other, it is outrageous.
Huw Irranca-Davies (Ogmore): The hon. Gentleman will no doubt have read the Rowntree report that came out at one minute past midnight today. It says:
- "Calculated after housing costs, more than 1.2 million pensioners will have been raised above the poverty line by policies that include the Minimum Income Guarantee."
- "Without the recent improvements made to the tax and benefits system for those with low incomes, poverty would be much worse."
Mr. Willetts: One of the best refutations of the Rowntree trust was in that widely read document, "Opportunity for all", the fifth annual report that the Government produced only a few weeks ago. Page 200 gives the evidence on the percentage of older people living in low-income households and with persistent low incomes. [Interruption.] Well, they say it is out-of-date—[Interruption.]
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