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Tom Levitt: Surely the hon. Gentleman accepts that when resources are finite, it is necessary to focus them on where they will produce most benefit in order to meet a target. That means focusing most help on the pensioners who are most in need. How can the hon. Gentleman justify the alternative philosophy—relieve poverty and make the poorest pensioners better off by giving more money even to the richest?

Mr. Webb: I am slightly puzzled by what the hon. Gentleman has had to say. Perhaps he has not been listening. The poorest pensioners in the land today—this is a statement of fact—are those who are entitled to, and not claiming, pension credit: 1. 7 million of them. If the hon. Gentleman can tell me how putting extra money into pension credit helps any one of the poorest pensioners in the land, I should love to hear it. But clearly it does not: it does nothing at all for those people. The central plank of the Government's strategy does nothing for them. What does do something for a good many of them is using the basic state pension which they do all claim. We propose to focus on the older pensioners—those over 75—the majority of whom do not claim. We are focusing on the poorest pensioners by using age as an indicator.

Tom Levitt: I acknowledge that some pensioners have a difficulty with claiming anything to which they are entitled. They need help. Surely the hon. Gentleman accepts that take-up levels for pension credit are far higher than they ever were for income support in the days when pension credit did not exist. I hope he will take this opportunity to pay tribute to those in my
 
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constituency, in the Gamesley ward, who have ensured that 97 per cent. of all pensioners are claiming the benefits to which they are entitled.

Mr. Webb: I suspect that the proportion of those entitled to pension credit who claim it is lower than it was under income support. I do not know why the hon. Gentleman mentioned that ward—perhaps there is a by-election—but what about the people whom he claims to represent who are not covered by this complicated system? He seems to think that just a few more advisers or another helpline will crack it, but it is endemic. It is systemic. It is part of the structure of these benefits that they have high non-take-up rates. Another advertising campaign or another leaflet will not solve the problem.

The one thing that these people all claim is their pension. That is the only genuine—now I am going to use the word guarantee, and I mean guarantee. Putting the money in the pension guarantees that it will reach the people who are entitled to it.

One blueprint, then, is mass means-testing. The second option, the Conservative alternative, has some threads in common with our proposal, and I have some sympathy with elements of it. Using the basis state pension as a mechanism is clearly better than using mass means-testing. My difference with the hon. Member for Havant is this. We know that, because of a decision made by the Conservatives 25 years ago, the basic state pension has declined dramatically relative to the earnings that it attempts to replace. Retirement pensions are about replacing what people used to earn; if a pension is becoming a smaller and smaller percentage of average earnings, it is doing less and less of a job. The hon. Gentleman's decision to re-link pensions to earnings at a pathetic level, making them useless, by definition freezes the pension at that percentage of average earnings. It does nothing to raise it to a better level.

Therefore, for a long time to come under his proposals, large numbers of pensioners would still need to claim means-tested top-ups. I think that he proposed a figure of £7 by the end of the Parliament. That is a small step in the right direction, but the pensioners who lost the most from the Conservatives breaking the earnings link— they were perhaps 60 when Mrs. Thatcher, as she then was, broke the link—are now in their 80s and cannot wait for the hon. Gentleman to get round to bringing the pension up to a decent level. They will no longer be around then, and a figure of £7 by the end of the Parliament is no good for someone in their 80s who is getting a pathetic pension. That is why we want to concentrate on the "old" elderly as a first priority. That is my difference with the hon. Gentleman on how one improves the basic pension, which is a legitimate area of debate.

Let me explain my second concern about the Conservative approach. The hon. Gentleman wants to encourage private savings, which is obviously a good thing. He talks about the lifetime savings account, which is still not terribly well defined. We do not know much about it, but we do know that it is an instant access savings account. People can take their money out any time they want, so if they get a big credit card bill or they want to go on a nice holiday—Conservative Members
 
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might want to pay their children's school fees, for example—they just dip into the fund. An instant access savings account is apparently the solution to the pensions crisis and to the fact that not enough money will be ours, guaranteed, in 30 years' time.

I do not follow the logic. The hon. Gentleman thinks that if people know that they can have their money, they will put it into the account. Well, they might, but they might also take it out, so I do not see how such an account would solve the problem.

We are having a constructive debate, and I have a further query that the hon. Member for Eastbourne (Mr. Waterson) might be able to answer when he winds up. The hon. Member for Havant has this "buy one, get one free" notion, which is quite a good slogan. "Bogof" is the phrase he uses—at least, I think that is what he said. The idea is that the state matches savings pound for pound. However, given that he proposes no overall increase in taxation, that money must come from somewhere. Either he intends to take some of the pension tax relief to pay for his incentives—I do not think that he plans to change pension tax relief, unless there is something he has not told us—or to take some of the national insurance rebates. That sounds quite redistributive, but he has not been very up-front about who would lose. If one matches the savings of small savers and pays for that from somewhere else, one has to take money off someone, somewhere. The hon. Gentleman has been a bit coy about where that money would come from. I presume that it would come from higher earners, because they get the big rebates, but funnily enough we have not heard anything about that. There is a sense that we are getting a little more of a fleshed-out Conservative policy, but it is still extraordinarily vague. I hope that we will get more detail from him this side of the election.

Kali Mountford: Before the hon. Gentleman moves off the funding of Tory policies, perhaps he would like to advise the House about the funding of his own. Given what he has just said about the rather light presentation made by the hon. Member for Havant, perhaps he would like to flesh out his own presentation.

Mr. Webb: I am grateful to the hon. Lady for that invitation, because that is precisely what I was planning to do. We have taken the view that the fundamental problem for both today's pensioners and tomorrow's is sorting out the basic state pension. Sorting that out would deal with today's extremely poor, who do not claim the means test, but it would also deal with the incentive to save. If we get the pension clear of the means test, anyone who saves a pound would keep it, and it would be worth saving. Tackling the basic state pension is therefore a good answer for today's pensioners and for today's workers, who are tomorrow's pensioners.

Mr. McWalter: Will the hon. Gentleman give way?

Mr. Webb: I should make progress as the debate is only short, but I will certainly deal with the point that has been raised.

How do we tackle the basic state pension? We have argued that we need to start with the oldest pensioners. The pension has fallen so far for so long that we cannot
 
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deal with the whole thing at a stroke, so we would start with the oldest pensioners, who the Minister said tend, on average, to be the poorer pensioners. I am glad that he agrees with us on that. For the over-75s, we propose to raise the basic state pension to the original level of the minimum income guarantee—£105—to link that to earnings and, critically, to pay it on the basis of citizenship, not according to the record of national insurance contributions.

As my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) said when he challenged the Prime Minister today—the House will have noticed that he got no answer—women continue to be the poor relation on pensions. It is unacceptable that at the start of the 21st century, the typical woman—not an extreme, hypothetical case—retires on a basic state pension of just over £50 a week, even though the full pension is £80. How can that be acceptable? We do not think that it is. Society should stop saying that the work that women have done in the past—caring for children and elderly relatives, and doing fairly menial, meagrely paid part-time work—should not be rewarded. Rather, it should be properly recognised in the pension system. It is no good saying that it will all be sorted out in 50 years' time, which is the Government's schedule. They talk about the state second pension, but it will not be fully in place for 50 years. Those women need justice now, which is why we propose a citizenship basis for the pension.

Once we have got the basic state pension structure in place—we want to extend it, but we would have to start with the over-75s—the question arises as to where the £2.7 billion, which would be the net cost in the first full year, rising to just over £3 billion by the end of a Parliament, would come from. My colleagues and I have been considering the entirety of what the Government do. As a whole, they spend some £500 billion on the entire range of activities. If neither of the principal Opposition parties can say that it would have a different priority in respect of 1 per cent. of what the Government do, we might as well all give up and go home. If we cannot say that 1 per cent. of what the Government do would be a lower priority for us, and that spending money on other things would be our higher priority, there is no difference between us. We have looked at what the Government do, and the Liberal Democrat shadow Chancellor, my hon. Friend the Member for Twickenham (Dr. Cable), will present a full and detailed breakdown of the £5 billion figure that we have identified.

Let me give a concrete example. The Prime Minister was mistaken in what he said earlier. He suggested that the £8 billion that we referred to in respect of the Department of Trade and Industry was more than is spent on administration and that it applies to the whole DTI, but he did not understand that that figure is for the entire Parliament, not a single year. Our policy requires that a Parliament run for four years, so the sums add up perfectly well.

Through the DTI, we spend hundreds of millions of pounds subsidising arms exports to dodgy regimes. The Government may think that a good thing; we think that there are bigger priorities. We would not cut the number of paperclips or bureaucrats, but we would cut one of the things that the Government do in order to free up money for something that they should do more of. We
 
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have a list of such things, and that is the basis on which we could fund the first round of pension improvements in the short term.

The citizens pension is the central and first element, and I will touch briefly on the company and private sectors. There is too little confidence in company pensions. Too many people have lost out, and they should be properly protected, as we discussed at the start. We want people to have to opt out of, rather than into, their company pensions. The hon. Member for Stalybridge and Hyde (James Purnell) suggested that, and we think it a good idea.

On personal pensions, there is the idea that National Savings should run a personal pension scheme. It is a brand that people trust and it will not go bankrupt or fleece people with charges. There needs to be a way for people to save with confidence.

Let me draw the threads together. A decent basic state pension would tackle pensioner poverty today and give people confidence to save. If they were clear of means-testing—the chasm whereby saving is not worth doing was created by the Government—the incentive to save would be restored. The state would be doing its bit, and the individual would be free to choose by how much to top up in old age, or how much they want to spend now. That seems the right combination. The future that the Government are offering is not one that most people would want to retire into. Our proposals would provide a much more positive future for the pensioners of today and tomorrow.

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