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Mr. Bob Blizzard (Waveney) (Lab): Is the hon. Gentleman therefore telling the House that he would simply take money away from the poorest pensioners in order to redistribute it to the better-off ones?

Mr. Willetts: I am happy to reassure the hon. Gentleman that I am not saying that at all. We have no wish to abolish the pension credit—I think that the Secretary of State used that expression, although he did not attribute that wish to a particular person—but we propose to replace it over time with the state pension as it increases in value. No pensioners will lose as a result of our policies, and the poorest pensioners, who are not

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claiming the means-tested benefits that they are entitled to, will manifestly gain from our policies. It is very important that they get the help that they are currently not receiving.

Mr. Blizzard: Is the hon. Gentleman therefore saying that under his proposal, the pension credit would be frozen, the poorest and middle-ranking pensioners would get no uprating, and that that money would be spread among those who are not getting pension credit?

Mr. Willetts: We are not proposing to make any changes to the pension credit. We are simply proposing to increase the value of the basic state pension in line with earnings, which would gradually ensure that an increasing number of pensioners became free from means-tested benefits.

There is a crucial point on which I have previously asked the Secretary of State for clarification, and the intervention of the hon. Member for Waveney (Mr. Blizzard) gives me another opportunity to do so. It would be extremely helpful, particularly for pensioners and those who represent them, if we knew whether the Secretary of State—assuming that there is a third Labour term and he is re-elected to office—intends to increase the value of the pension credit by earnings or by prices. When we know the answer to that question, we can put further flesh on our proposals for pensioners. But the Secretary of State has never told this House that he is committed to increasing the pension credit by earnings in the next Parliament. Again, I invite him to the Dispatch Box, should he wish to give that assurance today. He seems unable to give it, and our assurance in respect of an earnings link for all pensioners and the basic state pension is a manifest improvement on anything that pensioners have received through the previous proposals of either of the two main parties.

The Secretary of State has again failed to take the opportunity to tell us that he is going to increase the pension credit by earnings in the next Parliament. If he will not do so, it is absolutely clear—[Interruption.] A Labour Member shouts "cop-out" from a sedentary position, but the cop-out is the Secretary of State's. The cop-out is that of a Government who still will not tell us what their intentions are for the pension credit in the next Parliament. However, we have set out our proposals for the basic state pension.

Sir John Butterfill (Bournemouth, West) (Con): Does my hon. Friend agree that one of the problems—it is particularly apparent in my constituency—is that many of the people who are entitled to benefits do not claim them because they have no experience of doing so? Many of those who are in the most deprived state are widows who have no experience of claiming benefits. Not only are they intimidated by the paperwork that they must complete—it is very intimidating, as anyone who examines it will see—they are too proud to claim and feel that they should not do so. However, others who have claimed various benefits virtually throughout their lives find it much easier to do so. It is that first group who often constitute the very poorest in our society.

Mr. Willetts: My hon. Friend is absolutely right. Although I do not have the figures to hand, this is an

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important aspect of the council tax problem with which the Government are wrestling. The evidence of the take-up of council tax benefit among owner-occupiers—they have probably not been on income support or the minimum income guarantee in the past—is, from memory, about 30 per cent. I would be happy if Ministers want to intervene to correct me, but the take-up is very low among people who have not previously claimed any means-tested benefits. That is why there is such a problem with council tax at the moment.

Mr. McLoughlin: Do not the Government send out mixed messages when they say that they are trying to target help on the most vulnerable rather than give general increases, yet they have granted a general increase in heating allowances to every pensioner irrespective of income and a free TV licence to people over 75? They cannot argue both ways and claim that they are targeting help on the most vulnerable when they give out extra benefits across the board.

Mr. Willetts: My hon. Friend makes a good point. As I hear the different arguments from Ministers about why the winter fuel allowance is right for everyone; why older pensioners who tended to be poorer should be helped by a free TV licence for over-75s; and why means-tested benefits are also important, I detect completely different arguments in different contexts for different benefits.

Mr. Andrew Smith: For the sake of clarity, is the hon. Gentleman seriously proposing that a Conservative Administration would have no means-tested benefits?

Mr. Willetts: Conservatives are realists. I am a realist and I know that there will always be some means-testing. What we object to is the Chancellor of the Exchequer putting more and more people on means tests, when that should be a necessary but modest part of the benefits system. Means-testing should not be a central part of the Government's policy for tackling poverty and improving living standards. Under the present Government, what has happened—contrary to what the Chancellor said in opposition—is that we have become increasingly dependent on means-tested benefits as the Government's way of trying to help people, but they are simply not working. With more than half of all our pensioners on means-tested benefits, this is not the sort of country in which I wish to live.

Mr. Blizzard rose—

Kevin Brennan (Cardiff, West) (Lab) rose—

Mr. Willetts: I have already accepted two interventions from the hon. Member for Waveney, so I give way to the hon. Member for Cardiff, West (Kevin Brennan).

Kevin Brennan: If I understand correctly, the Conservative party proposes to reduce the proportion of gross domestic product spent by central Government,

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and in doing so to ring-fence the amount spent on education and health. So how will the hon. Gentleman pay for his pension funds?

Mr. Willetts: My right hon. Friend the shadow Chancellor made it clear in his authoritative statement the other day that his public expenditure proposals include our plan to increase the value of the basic state pension in line with earnings rather than prices. We have set out a very carefully costed programme to be financed by a combination of offsetting savings in means-tested benefits, which will gradually be displaced, and the abolition of the new deals, particularly for young people, which are not helping. What we are proposing is a much better system than the one it will replace.

The Minister for Work (Mr. Desmond Browne): In reminding the House of what the shadow Chancellor said, will the hon. Gentleman also remind us that he said that in order to pay for the policy, a Conservative Government would have to take some "painful" decisions. Perhaps the hon. Gentleman could tell us precisely who would suffer that pain? On the new deal, can he explain the arithmetic whereby moneys are released to pay for the policy when the independent evidence shows that the new deal for young people alone saves the Exchequer a significant amount?

Mr. Willetts: The research to which the Minister refers was an extremely sloppy piece of work. [Hon. Members: "Why?"] It was sloppy because it took the receipts from the windfall tax, put them all into a bank account and counted the interest earned on the unspent windfall tax receipts as one of the ways by which the Exchequer benefited from the new deal. That was a ludicrous way of assessing whether the scheme would help young people into work. That is why it is a sloppy piece of research.

We know from the National Audit Office that about 8,000 young people have been helped into work by the new deal for young people—a tiny figure in comparison with the figures that Ministers use. The new deal for young people has not been a good use of public money because most of the young people who got into work would have got into work anyway and they were doing so before the new deal came along. The fallacy of the Labour party is the claim that everyone who got into work since the arrival of the new deal for young people did so because of it. As I said, young people were getting jobs before that: 80 per cent. of young people were leaving benefits and getting into work before the arrival of the new deal for young people. That is why it is a bad deal.

Mr. Blizzard rose—

Mr. Willetts: I have given way several times to the hon. Gentleman and I want to move on to my final point, which is another question for the Minister for Work to deal with when he winds up the debate.

I have read the document before us, and I was rather surprised by what has happened to the administration costs of the national insurance fund. Will the Minister explain why the accounts before us—provided by the Government Actuary's Department—reveal

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Given that we are all committed to reducing the overhead costs of Government, and that Conservative Members are serious about reducing them, can the Minister explain why the Government Actuary has been caught out by two successive 40 per cent. increases in administration costs? I greatly look forward to the Minister's response and I hope that he will tackle the points that I have made in my contribution to today's debate.

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