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Mr. Clive Soley (Ealing, Acton and Shepherd's Bush) (Lab): The case to which my right hon. Friend referred, which has received so much publicity, needs to be spelled out in a bit more detail so as to alert people to the need to read more carefully what is in their newspapers. The story sounded largely untrue when I saw the figures involved, and it transpires that the lady involved is withholding her council tax because of an objection to certain aspects of the European Union. She has been supported in that by the United Kingdom Independence party, which has involved Max Clifford in handling the publicity. She is also receiving £10,000 from the Daily Mail for her story. Had the story in the press that she was receiving only £312 a month been true, she would clearly have been receiving less pension than she was entitled to, and would also not have had to pay any council tax anyway. So nearly all that story was untrue—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman is an experienced Member of the House. This is becoming a statement rather than a question.

Mr. Smith: I, like the rest of the House, got the thrust of what my hon. Friend was saying. I am not in a position to comment on some of the alleged aspects of the circumstances that he has drawn to our attention, but what I said previously still stands. Notwithstanding all that, and whoever is representing or supporting that pensioner, she is entitled—like anyone else—to the entitlements that are properly her due.

Mr. David Willetts (Havant) (Con): The Secretary of State said that he would not comment in detail on that case. We have just heard the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) claim that that woman has received £10,000 from the Daily Mail and that she is employing Max Clifford. The hon. Gentleman made a variety of allegations about an individual pensioner facing a problem with her council tax. Does the Secretary of State agree that it is most regrettable that those remarks have been made about an individual who, as far as we understand it, is wrestling with council tax demands that she finds it difficult to meet?

Mr. Smith: I wonder whether it is wise for the hon. Gentleman to repeat the circumstances that he said should not be aired in the House, and whether the deputy Chief Whip of the Conservative party should have raised the matter in the first place. It would be best to get back to pension credit and its uprating.

Mr. Soley: On a point of order, Mr. Deputy Speaker. I am sorry to intervene, but I must make it clear that what I said was not in any way a criticism of the

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pensioner, because she wanted it to be known that her objection was to paying towards an aspect of the European Union. That is the issue.

Mr. Deputy Speaker: That is not sufficiently a point of order for me to comment on the matter. The hon. Gentleman has put his point on the record.

Mr. McLoughlin: Further to that point of order, Mr. Deputy Speaker. I ask you to invite the Secretary of State to reflect on the words that he has just used, and on the fact that I talked about pensioners in general. I never mentioned a specific pensioner. It was the Secretary of State who referred to individuals.

Mr. Deputy Speaker: That was no more a point of order than that of the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley). It is on the record, however.

Mr. Smith: I have taken careful note of what the hon. Gentleman has said, Mr. Deputy Speaker, and I am confirmed even more in my judgment that it would be wise to get on with the more general subject of the uprating of pension credit.

In April, in keeping with the Government's earnings link for poorer pensioners, the guarantee will rise again by more than £3 a week so that no pensioner need live on less than £105 a week and no couple on less than £160 a week. Already, more than 2.6 million people receive pension credit, with an average household award of £43.50 a week. That number is growing with every passing day. It is worth reminding the House that the poorest pensioners were expected to live on just £68.80 a week in 1997, and under this Government they will get an extra £36 every week. From April, the Government will spend £9 billion extra on pensioners as a result of measures introduced since 1997. That is almost £6 billion more than if we had just linked the basic state pension to earnings.

Our policies have not only been more generous than the earnings link, but also more progressive—£7 of every £10 of pension credit goes to helping women, many of whom have been penalised by a basic pension that short-changed them on the time taken out of work to bring up children. With the introduction of pension credit, almost 1.9 million pensioner households will qualify for more help, or qualify for help for the first time, with their council tax or rent.

The poorest are gaining more under our plans. Those who urge us to scrap pension credit and use the funds to increase the basic pension must realise that their plans would cut the incomes of poorer pensioners by £30 every week. The progress that we are making stands in stark contrast to the Opposition's approach. Our approach is fair and fiscally prudent. Theirs is unaffordable, unsustainable and, above all, unfair.

We will also give people more choice about when they retire, by giving a much better deal to those who choose to take their state pension late. For the first time, people will be given the chance to build up a lump sum by deferring their state pension. I can tell the House today that that will be calculated using an interest rate at least

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two percentage points above base rate, which would mean 6 per cent. today. Therefore, from next year, a woman with just the basic state pension of £77 a week could start building up a lump sum worth £8,500 if she kept working at 60 and drew her pension just two years later, or a lump sum of £23,000 if she put off retiring until 65.

Most people have higher state pensions than that thanks to the state earnings-related pension scheme and the state second pension, and could therefore build up even bigger sums. On average, men retire with £100 in state pensions, which would allow a man working until 70 to build up a lump sum of more than £30,000, or for a couple, a lump sum of more than £48,000. In the past, lump sums have been the preserve of the fortunate minority with good occupational pensions. These proposals make them an option for everyone. As well as the lump sum, our reforms will offer those who take their pensions late the alternative of a pension for life that is very significantly higher. Someone working an extra five years with typical weekly state pension entitlement of £100 will be able to increase that to £152, with inflation additions on top. The whole thrust of the proposals is therefore to give people new and attractive options to work beyond 65 when they want to.

Mr. Willetts: Will the Secretary of State clarify whether the lump sums that he has just described will be taken into account if pensioners claim means-tested benefits, or whether they will be wholly disregarded?

Mr. Smith: As we have made clear, the principle behind the policy is that people will not be disadvantaged through taking the lump sum rather than the increment. The detail by which we will do that on pension credit will be set out in due course, just as the detail of how we will meet the goal on taxation will be set out by my right hon. Friend the Chancellor of the Exchequer. I hope that the hon. Gentleman and his party, and other parties in the House, will see the merit of these proposals in extending the opportunity of genuine, worthwhile choice to people, and in giving a much fairer deal to those who choose to defer taking their state pension. I emphasise choice—that is what this must be about. Together with our plans to stamp out age discrimination and to allow people to work part time while drawing a pension, these initiatives will encourage many people to work into later life, and all of us will benefit from their contribution.

I stress, however, that working beyond 65 must remain a matter of choice. It is not something that can be forced on the least well off. We therefore reject calls to put up the state pension age. Instead, we want to give everyone the choice to boost their pension by working for longer when it suits them to do so.

The measures before the House will benefit a large number of children, parents and pensioners. They carry forward our reform of the welfare state and our mission to tackle all forms of poverty. Through investment and reform, getting record numbers into jobs and tackling fraud, we are able to target extra resources for children and pensioners who need help most. The orders help us build a Britain that fulfils potential, opens up opportunity and tackles poverty, and I commend them to the House.

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1.48 pm

Mr. David Willetts (Havant) (Con): I am sorry to take away some of the drama from this potentially very significant debate, but let me begin by assuring the Secretary of State that it is not the Opposition's intention to vote against the proposed uprating of benefits. We all still remember the year when the Liberal Democrats did that, trying to deprive their constituents of any increase in their benefits, and we will not make that mistake. Of course, we welcome the uprating that is being proposed, but I want to ask the Secretary of State some specific questions about what he has just said.

First, the Secretary of State talked about poverty and the Government's proposals on child poverty. Is he at all embarrassed, however, by the evidence from the Government's own report, "Opportunity for all: fifth annual report", of the incredible stability in the number of people facing persistent low incomes? Between 1994 and 1997, 16 per cent. of children in low-income families faced persistent low incomes, defined as being below 60 per cent. of median income in three of the past four years. Between 1998 and 2001, the figure was also 16 per cent.

Sadly, there is similar evidence relating to people of working age. Between 1994 and 1997, 7 per cent. of working-age people living in low-income households faced persistent low incomes; the figure was also 7 per cent. in 1998 to 2001.

Why do the much-vaunted increases in benefit expenditure, and all the other measures described by the Secretary of State, seem to be having no impact on one of the things that the right hon. Gentleman says that he cares about, and which the Government have set as one of their objectives—the elimination of the persistent poverty in which people are currently trapped? This is the fifth annual report on poverty, but as yet there is no sign of any movement whatever. Conservative Members would like to hear from Ministers—instead of the usual propaganda—an honest explanation of why they are apparently not moving out of persistent poverty those who have been stuck in that position for far too long.

I can offer the Secretary of State a possible explanation. Many of the benefits for families have been lost to his budget, and are now part of the Chancellor's tax credits. We find ourselves in an odd position: the structure of the tax credits for families does not match the measurement of poverty that the Secretary of State's Department used for the purposes of this document.

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