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2.43 pm
Ms Sally Keeble (Northampton, North): It is a great pleasure to follow the right hon. Member for Hitchin and Harpenden (Mr. Lilley).
Compulsion is an interesting issue. It has often been pointed out to me that the quid pro quo of compulsion is sanctions. What happens if people do not take part in the compulsory scheme? Are they to be denied benefit when they are old? It has consistently been shown that the British public will not tolerate pensioner poverty. Pensions policy must not only tackle absolute pensioner poverty, but make sure that pensioners can lead comfortable and satisfied lives, which implies a reasonable level of income, services and so on. There has never been a satisfactory response to the question of what happens to those who do not take part in a compulsory scheme. Are we to apply sanctions when those people are at their most vulnerable? I have not read the right hon. Gentleman's leaflet, but I shall do so.
After the Conservative party conference, two approaches became apparent. Is there to be a graduated system of state support that targets and progressively wipes out pensioner poverty and provides people with increasingly comfortable lives in their old age and good options, or is there to be a single flat-rate system, which is regressive and might give money where it is not needed? That money might be clawed back through the tax system, but such a system would put many people back into an unacceptable level of poverty.
It is clear from the debate this afternoon that the choices are not quite so stark. It is important that we consider carefully what the Conservative Opposition spelled out. Although the hon. Member for Northavon (Mr. Webb) made an immensely amusing speech, he did not tackle some of the key issues. He did so in the previous debate on the subject, and his proposals then fell into the same hole as the Conservative proposals today.
The Conservative spokesman said that his party would continue with the pension credit for as long as it took for the flat rate to catch up. The pension credit is means-tested, and the means test or any other kind of assessment cannot be abolished as long as the pension credit is retained. That was the point raised by the hon. Member for Northavon last time. The Conservative Opposition might be offering something different, but it is not the ending of the assessment of pensioners' income and the provision of additional benefits.
If we take £77 as the basic state pension and either £98 or £102 as the means-tested level, so to speak, and we assume an inflation rate of about 3 per cent.—it could be a little more or less, depending whether it was based on prices or earnings—it would take at least seven years to catch up, assuming that the means-tested levels were capped. The present system would have to continue for at least the lifetime of one Parliament. The Opposition should be honest about that when they spell out options to the public, on which they will have to decide. Decisions about pensions are critical and, as other hon. Members have pointed out, they must be kept in place for a long time because of the time span between paying in pension contributions and retirement.
I have no doubt that the first approach, the one adopted by the Government, is the right one, with money being paid to those who need it most. We need to
make sure not only that pensioners are not poor—nobody wants to see pensioners living in absolute poverty—but that they have comfortable lives with dignity and good services. They should be able to make good choices about their quality of life not just for a couple of years after they stop working, but possibly for another 20 years or so. The only way that that can be achieved is through proper targeting.We all know the state of pensions in 1997. In my constituency people who had worked virtually all their adult lives were still left poor, particularly the women, mostly because they did not have the employment and contribution history to qualify for pensions, and they did not have the same occupational pensions.
Mr. Heald: The hon. Lady will have heard the Secretary of State say that in 1997 there were people managing on £68 a week. Those were people who were not claiming means-tested benefits. Today, there are people managing on £77 a week because they are not claiming means-tested benefits. Only proposals such as we are putting forward tackle that problem. The pension credit does not. According to the Government's own figures, by 2006 1.4 million pensioners will not be claiming it.
Ms Keeble: I take the point about the difficulty of getting people to claim their entitlement. I intended to deal with that. People should not be on just the basic state pension. They should have access to a range of other benefits, including the minimum income guarantee and the targeted benefits that have been described. The increase in personal tax allowances for pensioners and the introduction of a 10p starting rate in tax have certainly been important for my local pensioners, many of whom have income and employment profiles that differ from those in big city communities.
Now we have the pension credit, too. It is completely wrong to scare people off from claiming it by likening it to means testing—I agree with my hon. Friend the Member for Hamilton, South (Mr. Tynan) about that. The approach taken to assessment of income is exactly the same as that taken in respect of claiming the child tax credit, whereby every family with children gets child benefit, and its income is assessed to decide whether extra income is needed. The procedure does not take place every year, but after five years or if circumstances have substantially changed—for example, if people get married, which is fairly straightforward to declare.
The working of the pension credit introduces important changes that take into account the consultations that took place on the proposals. I had such a consultation session in my constituency, where pensioners expressed concerns that have since been addressed. For example, they wanted to keep their nest eggs, which are mostly not huge amounts of more than £10,000, but around £5,000. They do not want that money to be touched by any kind of means-testing, because they want it to pay for their funerals. The assessment considers factors such as income from savings and it can be done on the phone, which is important. I particularly congratulate the Pension Service on its outreach work. I have run street stalls with the Pension Service and Age Concern. Of course, some people will have criticisms, but we are encouraging
pensioners to apply for the benefit and making it easier for them to ensure that they can get the extra money to which they are entitled. Take-up in the Northampton area has been quite good, which has a lot to do with the innovative work of the Pension Service.I accept that there is more to do to ensure that people can enjoy the living standards and life chances in retirement that we would all want for ourselves. We need to tackle a range of issues such as annuities and the problems of occupational pension schemes, as well as council tax and house rentals, about which large numbers of pensioners complain. I am particularly concerned about pensioners' housing. We should support schemes similar to an equity release scheme to enable them to realise some of the value of their property in order to carry out home improvements and thus to live in their own homes in comfort for a longer period. It is also important to ensure that people are not ripped off by home income plans and equity release schemes, which represent a growing sector of the market.
The flat-rate approach is an illusion, because any flat rate that the country could afford to apply across the board would not be enough for people who rely solely on this benefit to live on. It will always be necessary to have the option of increasing income over and above the flat rate level. Any system that is to provide an enhanced income will have to include measures to allow for its proper assessment. Otherwise, it becomes completely insupportable in tax terms; and I have no doubt that my constituents would be the first to complain in the event of large tax increases.
Lynne Jones: Has my hon. Friend studied the proposals by the Institute for Public Policy Research suggesting that the basic state pension could be set at the same level as the means-tested pension credit if the state second pension were to be done away with; and that it could be done over 30 years if the retirement age increased to 67? In that context, it is not correct to say that it is impossible to set a reasonable level of basic state pension without substantially increasing taxes.
Ms Keeble: I shall look carefully at that publication. My hon. Friend mentioned a progressive increase in the retirement age over 30 years, but we need to consider the matter over a shorter term than that. I do not see how one can get from £77 a week to £98 or £102 a week in a few years without a very big tax increase, which will not be supported. Moreover, most people would recognise that taxpayers' money has to be spent in the most cost-effective manner—that is, where it is most needed. There is no way round that, unless, as the right hon. Member for Hitchin and Harpenden suggested, one develops a system that makes it possible to feed money in at the savings end to get the equation right in terms of support for pension schemes. I fail to see how one can have a flat rate that is comfortable without having a very big tax increase. Furthermore, in any flat-rate system the pensioners who would be most likely to miss out are women, who often have the most interrupted employment patterns, the most difficulty in making up contributions, lower earnings and longer life expectancy. We have to be careful about holding out a flat-rate approach as a panacea.
We should consider how much pensioners' expectations have changed in terms of making choices. The speech from the Conservative Front Bench was completely opportunistic and targeted at getting the so-called grey vote. People should remember which party gave them the pensions mis-selling scandal—people paying into a Government-sponsored, Government-advertised scheme that sold them down the river—and the botched handling of the abolition of the widows' state earnings-related pension scheme.
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