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Mr. Jim Cunningham: I must say that I find it strange that the Opposition now argue for the restoration of the link for pensions, given that they abolished it in the first place. Why the conversion?
Mr. Waterson: Talk about looking a gift horse in the mouth! The landscape in 1980 was different from that of today for all sorts of reasons. Why does the hon. Gentleman take umbrage with a proposal for which organisations have been calling for years and which is, in truth, what most Labour Members want? It can only be because it is a Conservative party policy.
Mr. Browne: May I bring the hon. Gentleman slightly more up to date? His colleague the hon. Member for Havant said only three years ago that restoring the earnings link would be
- "a wild and uncosted policy"—[Official Report, 8 June 2000; Vol. 351, c. 440.]
Mr. Frank Field (Birkenhead) (Lab): Why are the Opposition being so gentle on the Government on that point? The Government cannot maintain the policy. Does the hon. Gentleman recall that the introductory papers on pension credit showed that its final roll-out would put 11p on the standard rate of tax? None of us wants to go into an election with policies that advocate raising income tax by 11p, so at some stage the measure will be scrapped. It is thus proper to discuss the alternatives.
Mr. Waterson: I am grateful to the right hon. Gentleman for his measured and sensible contribution—as usual. As my hon. Friend the Member for Havant and I have explained, it is not our policy to scrap the pension credit. Our policy is that it should wither on the vine as the state retirement pension rises to a proper level that is linked with earnings. That is important not only for the purposes of this narrow debate, but for the wider debate that we will have—especially during our consideration of the Pensions Bill—on whether there is a proper and appropriate platform for people who want to make further provision of their own for their retirement.
Mr. Jim Cunningham: I was not arguing against the link in any way during my last intervention—I am
probably one of the few people here who support the link. I was saying that the Opposition's U-turn after two or three years is strange, in that they have undergone a great conversion on means tests. They are suddenly against them and want to restore the pension link, yet they introduced more means tests than anyone. To get some credibility, they owe us an explanation of their alternative policy.
Mr. Waterson: I thought that I was explaining our alternative, which is to restore the earnings link. If the hon. Gentleman wants to check the figures, an excellent pamphlet published by my hon. Friend the Member for Havant sets out exactly and clearly how our policy would be financed.
Of course, the pension credit changes everything. It would have been more difficult for us to do this U-turn, as the hon. Gentleman describes it, and produce the new policy if it were not for the pension credit. The pension credit rams home the message that it is the Government's firm intention to increase inexorably, year on year, the proportion of the population, especially older people, who are reliant on handouts from the state—it is as simple as that.
There is a further side issue to the point that I made about the platform for people's retirement provision: the amount that people must save during their working lives to be sure that they will not be subject to means-tested benefits. We produced an independently researched figure of £180,000. Ministers take every opportunity to rubbish it and say that it cannot be right, but—another thunderous silence—they have consistently failed to tell us their figure. Sooner or later, they will have to tell the financial services industry because it will want to be sure that it will not mis-sell products in years to come to people who will actually end up being the losers because they will miss out on means-tested benefits.
A fundamental issue underlies those points. The Government's policies create a massive disincentive to save for retirement. Their policies on pension credit and other means-tested benefits fatally undermine anything that they are trying to achieve through the Pensions Bill and other measures.
Sir John Butterfill: Has my hon. Friend heard that it has been estimated that an individual would need a savings pot of about £180,000 to avoid going into pension credit?
Mr. Waterson: That is exactly the figure that we have put into the public domain. Before I sit down and give the Minister every opportunity to respond to all these detailed points—he will have plenty of time—I put a question to him: if he does not accept the figure of £180,000, what is the Government's figure? They must have a figure for internal planning purposes, but they are unwilling to share it with us at the moment. May we know what that figure is?
3.29 pm
The Minister for Work (Mr. Desmond Browne): I thank hon. Members who have contributed to the debate, in preparation for which, in the absence of any
anorak in my wardrobe, I took the opportunity to reread the reports of the equivalent uprating debates for the last three years: I may qualify for an anorak now. Consistent with the tenor and content of those years, this has been a useful and interesting debate, and I am happy to admit that it has been educational to some degree for me, for I never fail to pick up something in debates about social security and related issues. While I do not bring the skills of an anorak to debates of this sort, I try to bring other skills to them and hope to contribute in that way.It is my intention, so far as time permits, to answer the relevant points that have been made, but first I think I should make some key general points that set the context for the debate and which bear some repeating.
First, as my right hon. Friend the Secretary of State made clear in the early part of his opening speech, the estimated cost of uprating for 2004–05 is £2 billion. That extra Government spending means £1.2 billion for pensioners, £340 million for disabled people and carers, £360 million for people of working age and £240 million for children.
As my hon. Friend the Member for Newport, West (Paul Flynn) pointed out, this Labour Government have been able year on year to cut the costs of economic and social failure. As my right hon. Friend made clear, with record employment levels we have £5 billion of savings that can be invested to tackle poverty. We have been able to do that by a combination of sound economic management and policies to increase employment, key subjects on which the dogs did not bark among those on the Opposition Benches who are keen to point out in some detail some of the issues that those on our Front Bench did not respond to. The combination to which I referred is why we are able to reverse the legacy of pensioner poverty and why we have made significant progress towards our long-term objective of ending child poverty within a generation and halving it within 10 years. In 1997 the Tories left us at the bottom of the European child poverty league table. We have started to move up significantly, already having moved four places up that table. But we have ambitions to move further, and quickly.
I turn to some of the issues raised in the debate. I shall endeavour to answer all the relevant points, but as I may not have the detailed information to answer all of them, particularly some of the detailed points about the national insurance fund, I undertake to write to hon. Members giving detailed responses. A copy of the letters will also go to the Chair of the Work and Pensions Committee, and a copy will be put in the Library.
I listened with interest to the discussion of the hon. Member for Havant (Mr. Willetts) with himself. The hon. Member for Northavon (Mr. Webb) never ceases to stir from his chair in these circumstances. I suppose that that is the problem of the relationship of teacher and pupil on some occasions.
The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): Which way round is it?
Mr. Browne: It is a sort of Protean relationship, and it changes on occasions, depending on whether they think there is a decent point or not.
In any event, I listened with interest to the discussion by the hon. Member for Havant about measures of poverty and equivalence. I am sure that we will continue
to have discussions as to whether the measure of poverty that the Department has chosen is supported by the policies emerging on tax credits. I know that we shall have debates into the future, because the hon. Member for Havant has got his teeth into the matter and he will not let go for a significant period.The fact is that we are on course to meet or exceed our public service agreement target to reduce the number of children in low-income households by a quarter by 2004–05—of course, on a before-housing-cost basis. We could have had another discussion about that as a measure of poverty.
We are increasing the child element of child tax credit in these measures by £180 to £1,625 a year in April 2004. That is equivalent to a weekly increase of £3.50, benefiting 7.2 million children—more than half of the children in the United Kingdom. Nearly 20 million people, including 10.5 million children, are benefiting from the new tax credits. By 2004–05 total spending on financial support for children will have gone up by more than £10 billion in real terms since 1997, a rise of 72 per cent.
The national minimum wage and the working and child tax credits have made work pay, with guaranteed minimum incomes for those in employment. There are now more than 1.7 million more people in employment than there were in 1997, and around 350,000 fewer children in workless households.
There has been excellent progress on the numbers below the absolute low income threshold: around 1.8 million fewer children are below the 1996–97 measure of 60 per cent median income after housing costs threshold, held constant in real terms, and there are half a million fewer children in relative low income than in 1997, even accounting for strong income growth. That does not seem to me a bad performance for people who may well have got their measure of poverty wrong.
I turn to child support. There is understandable concern across the House about our ability to deliver the necessary reform of the system of child support. One of the great ironies is that this was one area of social policy that was consulted on extensively, and the reforms in order to improve the system attained significant support across the House and in the other place. The hon. Member for Northavon narrows his eyes at me. As long as he does not move his feet, we shall be all right. He perhaps did not agree with that; in fact, I now remember that he had another way of approaching the issue, but that is a debate for another day—or, rather, it was a debate for a past day, because the hon. Gentleman lost it. Anyway, the new scheme is simpler and will work better. The agency is now clearing thousands of cases each week.
I was asked for some information, and I shall give the information that I have. So far under the new scheme more than 100,000 cases have been cleared. Around 10,000 of the poorest families are benefiting from children maintenance premium, and maintenance has been paid in more than 17,000 cases. The poorest families are starting to benefit in real terms from the child maintenance premium: 600,000 children in the poorest families stand to gain a total of more than £150 million a year. It is certainly easier to work out liability under the new scheme, which means that more time can be spent on collecting.
Hon. Members were right to point to my right hon. Friend's candid and detailed evidence to the Select Committee on this issue less than a fortnight ago. He is entitled to credit for the fact that he answered candidly and clearly the questions put to him.
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