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Angela Watkinson: Does the hon. and learned Lady oppose the restoration of the link to earnings for pensions?
Vera Baird: I oppose the absurd notion that current Tory policy bears any relation to the problems in the pension system. It is utter falsity to suggest that it has anything to do with significantly rolling back means-tested benefit. The figures produced by the hon. Member for Havant (Mr. Willetts) suggest that approximately one quarter of pensioners will be brought off means-tested benefit. I doubt whether that is right, but if it is, in many cases pensioners will be brought off means-tested benefit by a matter of pennies.
Those who are not on means-tested benefit will get £7 on top at the end of four years and be £7 richer, but they were richer in the first place, because they were not on means-tested benefit. On the shadow Secretary of State's own figures, three quarters of the people who are currently on means-tested benefit will still be on it at the end of four years. The policy will not roll back means-testing in any way.
Angela Watkinson: Does the hon. and learned Lady accept that pensioner bodies have demanded the restoration of the earnings link for some considerable time?
Vera Baird: Yes, pensioners demanded the restoration of the link 25 years ago, when the Tories scrapped it. Happily, the current climate among pension pressure groups is to re-examine that demand, not to set it aside, and to consider eligibility, which the Conservative party completely ignores. How is the Conservative policy a boon to women pensioners, whose problems were admirably set out by the hon. Member for Northavon? Save for £5, if they happen to be within £5 of the minimum income guarantee, how will it help them? The policy is a fake.
The other flaw in the argument is that it is alleged that the first four years, which will provide £7 extra and bring those who are just below the minimum income guarantee above it, are just the start of the policy. Conservative Members claim that in years to come the basic state pension will keep increasing because it is index linked to wages and, as the hon. Member for Upminster puts it, more and more people will come off means-tested benefit.
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The minimum income guarantee element of the pension credit is also linked to earnings, so it runs side by side with the basic state pension. People will come off means-tested benefit only if the minimum income guarantee is frozen, which means that the income of the other three quarters of pensioners, whom the shadow Secretary of State is content to leave on means-tested benefit throughout, will gradually decrease, and they are, by definition, the poorest pensioners. The Tory policy really amounts to giving more money, and not very much of it at that, to the rich.
How will giving a little bit more money to the relatively rich be paid for? The new deal, which has put 1 million people back in work, including enormous numbers of people in constituencies such as mine, would have to be scrapped. If the Conservatives have any interest in the regions, scrapping the new deal is another risible policy, and it is class-based.
David Taylor: My hon. and learned Friend is lucidly describing the effect of the Conservative policy on pensioners on the minimum income guarantee, which would be the reintroduction of the decoupling of pensions from inflation and wages in the economy of a sort that we last saw 25 years ago. The Conservative policy has an awful echo.
Vera Baird: Yes, my hon. Friend makes a strong point. In terms of public confidence in who will look after the pension system, the bottom line is how much money will be put into it as a whole. The Conservatives often say that there is a need to cut public spending, and I do not think that the public are fooled for one minute by their vote-chasing attempt to deceive them into thinking that if they vote Tory, means-testing will be over and their pride will be restored to them. They know very well that the Tories scrapped the earnings link, that they will keep the poor poor, and that in the end, however they try to tweak their policies, they will never put enough money into the pension system for people to have the proper basis for a contented retirement.
Women have needs that the hon. Member for Upminster has not even considered. They have huge difficulties in getting a full basic state pension. The hon. Member for Northavon mentioned some of those difficulties; let me run through a couple more. Home responsibilities protection is a Labour measure; whatever the hon. Member for Upminster says, I am afraid the Tories did nothing for women caring for children or for older people. HRP gives a credit of a year at a time. A woman who will have to work for 39 years to get her pension entitlement and takes a year off to look after a child will then have to work for only 38 years, and on it goes to a maximum of 19 years. That is an unwieldy way of giving a credit, and for many women it does not work very well. Because it has to be based on a complete year, the woman will lose the first year if she does not have her baby on 6 April; and she will lose the last year as well if he does not eventually go to university on 5 April.
There are more serious problems than that, however. For example, many women go back to work part time when their children start to go to nursery or to school,
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thereby losing their home responsibilities protection. If they fall into the category of working below the lower earnings limit, they neither pay a national insurance contribution nor are they credited with one, even though they are working. A woman who works 30 hours a week looking after children and 16 hours a week on the minimum wage will not get pension credit from either source, however long she carries on working long hours every day.
Then there is the problem of the carers credit. A person gets a carers credit only if they are caring for somebody who is entitled to disability living allowance, which means that they require 35 hours of care. Many people do not require that much time. Many women take a part-time job rather than a full-time job in order to give 10 hours or 18 hours to an elderly relative, or to give 10 hours to each of two elderly relatives, or to share the care of an elderly relative with a sister. They will not get the carers credit, because they are caring for someone who needs only 18 hours or 20 hours' care, or they are sharing it with someone else, and the part-time job is not sufficient to bring them the credit either. They fall between two stools.
Another problem is the left-over iniquity of the 25 per cent. rule, which says that even those who have worked sufficiently to qualify for 24.5 per cent. of a basic state pension are, for some bizarre reason that must be left over from the days of book keeping by quill pen, not entitled to a penny piece of it. They have to have 25 per cent. entitlement or they get nothing. That equates to an enormous amount of money. Twenty-five per cent. of £70—the basic state pension—is around £17.50. Over a decade, that robs £8,750 from a person who has worked and paid their national insurance.
Only 25 per cent. of women have a full basic state pension on retirement—enormous numbers of them fall below that level because of all the difficulties. There is no excuse for that.
David Taylor: Would my hon. Friend include on her list of smash-and-grabs on the oldest and poorest pensioners the decision by the previous Government to halve inherited SERPS and then to say nothing about it, leaving this Government to pick up the pieces?
Vera Baird: Again, my hon. Friend makes a clear and strong point.
The report that the Government will produce on women and pensions next year is a big step forward. It will clearly be an assessment not only of pensions policy but, as the Minister said, of all the other aspects that help contribute to women's pension position. It was requested because the Green Paper states that we have introduced the minimum wage, which helps lots of women; we have equal pay for women—of course, we have it only theoretically but are working towards it; more women work; more women spend shorter periods of time out of work caring for children; they are all gravitating towards the Beveridge model of a working person, and they will all eventually qualify for a full basic state pension in the ordinary, national insurance way, or approach such qualification. I overstate the case that the Government make, which is not nearly so glib. Nevertheless, it is necessary to review the position from time to time to ascertain whether such factors are
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genuinely moving matters forward and helping women to get better national insurance contributions and thus progress towards better state pension provision.
It is clear that all the factors that I have outlined, which, by and large, go in the right direction for achieving women's eventual qualification for full basic state pension, are not enough. It is never likely to be the case that women will conform to the Beveridge model of a long working life. They will almost inevitably be the primary carers for children for a long time. Hence one returns full circle to the need for inadequate credits for caring to be rectified. Frankly, even if women are not the primary carers and men take on that role, they, too, will fall foul of the inadequate credits for child care and elder care. It does not matter who does the caring, but it is likely that women will do it.
We must re-examine the current position instead of the one the Liberal Democrats advocate, albeit only for those aged over 75. If all the credits are improved so that it becomes the aim to cover women who are in work, women who are out of work and caring, whoever they care for, and to make the ability to get credits for national insurance open to them all, most people will qualify for a full basic state pension. Do we need to take the extra step that the Liberal Democrats advocate, albeit only at a late age, to scrap the national insurance system, and to start on a different basis to give people a pension for doing nowt or summat?
I am worried about the Liberal Democrat proposal to abandon entirely the national insurance principle. I have concerns about who is a citizen and who is not, how long people have to be resident before becoming a citizen, and how else someone is chosen to qualify. What happens to people who are not citizens? What do they get? Is there any point in going beyond making national insurance inclusive rather than exclusive? Is there any need to scrap what, I believe, is politically dear to people because it gives them a sense of contributing to what they get back? Is there any purpose, in terms of future social cohesion, in scrapping that principle? What is to be gained by it?
The discussion has put eligibility for the basic state pension at centre stage. The main problem with the Liberal Democrat proposal is the way in which it will be financed. I have already referred to my constituency of Redcar. A couple of weeks ago, a happy announcement was made that an American business called Huntsman, which had been in Redcar since 1999, when it bought an ethylene plant from ICI, would invest in a polyethylene plant—a downstreamer from the ethylene plant. The ethylene plant employs 800 people; the polyethylene will secure those jobs because it is a downstream plant for the ethylene plant, and polyethylene is sold throughout the country. Currently, the ethylene is exported and re-imported as polyethylene—that is crazy. The new plant will secure the existing 800 jobs and generate another 120. Huntsman made it absolutely clear that the £16.5 million regional selective assistance grant from the Department of Trade and Industry made the difference between investing in the new plant or accepting that the cracker—the ethylene plant—was becoming less viable and profitable and would, in due course, have to be closed down.
I can tell the hon. Member for Northavon that at least 920 people in Redcar are very pleased indeed that the DTI exists and that it has an industrial development unit
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capable of providing such grants. I would ask him to consider the peril that he would put the regions in if he scrapped the DTI.
When Huntsman proposed making more investment, it was bombarded with offers of grants from many other parts of the EU, notably Rotterdam, and it was essential for us to compete. If the hon. Gentleman is really saying that the way to finance his pension proposals is by scrapping the means to do that, I would point out that he might be paying out to the very old, but he would be attacking the younger generation in order to do so. He would be depriving people in regions such as mine, where unemployment is still very high, of much needed employment, and that would be too high a price to pay. That is the fundamental flaw in his seriously flawed policy.
6.25 pm
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