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Alan Howarth (Newport, East) (Lab) rose—

Mr. Willetts: That is especially important as on Monday the Prime Minister had the cheek to say that the Tories did not dare fight the next election on policy or on what they would actually do in government. What about the Prime Minister's own Government, who say that the problem is so difficult that they cannot be expected to produce any policies until after the next election?

Kali Mountford rose—

Mr. Willetts: I will give way to the right hon. Member for Newport, East (Alan Howarth).

Alan Howarth: Does the hon. Gentleman admit that his action plan, which would link the basic state pension
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to earnings but the guarantee element of pension credit—the old minimum income guarantee—to prices would damage the interests of people on low earnings, most of whom are women? Would not his action plan have the effect of widening inequalities and redistributing wealth from the poor to the better off, and from women to men? Is not that one more example of the modern Conservative party's willingness to let the devil take the hindmost?

Mr. Willetts: I am in a very odd position in this. I understand the arguments about what should happen to the pension credit and whether it should be uprated according to prices or earnings in the next Parliament. I have regularly asked successive Secretaries of State to set out clearly and authoritatively their plans for uprating both the guarantee credit and the savings credit by prices or earnings. As yet, I have never received an authoritative answer and I should be interested in doing so.

I am trying to get the Secretary of State to give us some policies today. Even if he will not do that—and I must say that I think we are entitled to expect some policies—I invite him to accept that there is a serious problem in our pension system and that the successive, complacent assertions made since Labour came into office in 1997 are now "no longer operative", as the former US President Nixon once said of his previous statements. Is the right hon. Gentleman going to abandon all those claims that everything is fine and that there is no need to worry because people are saving so much, and dump them in the bin? If he were to withdraw all the assertions made in previous policy documents and say that there is a serious problem, that in itself would bring a breath of fresh air to the debate.

Mrs. Joan Humble (Blackpool, North and Fleetwood) (Lab): Will the hon. Gentleman give way?

Mr. Willetts: I will give way to the hon. Lady, provided that I am not criticised for speaking at too great a length; it is because I am accepting so many interventions.

Mrs. Humble: I thank the hon. Gentleman for giving way. Does he accept that the Turner report acknowledges that the problems being described existed 20 years ago? Those include demography, savings and levels of pension. What was the plan of the previous Conservative Government who were in office at that time? Turner makes it clear that the policy changes should have been implemented 20 years ago. Where were the hon. Gentleman and his Government then?

Mr. Willetts: Of course, these are long-term issues. The Government have been in office for seven and a half years now. They have told us endlessly that either there is no problem or that they have marvellous policies on pensions, but Turner makes it clear that there have been significant mistakes since 1997. One of those mistakes has been the mass spread of means-testing, of which the report is very critical.

Mr. David Heath (Somerton and Frome) (LD): Will the hon. Gentleman give way?

Mr. Willetts: No, as I want to make a little more progress.
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Even if the Secretary of State is not going to give us any policies today, will he say to the House that he recognises that assertions by previous Secretaries of State in previous policy documents simply no longer apply? Does he accept the overwhelming evidence in the Turner report that we have a serious problem? That is the first thing that I want the Secretary of State to do. The second thing that I want him to do is to accept the need for reform. Does he accept that there is a need to change the current direction of policy?

The evidence about the effects of means-testing contained in the Turner report is very powerful. Turner states:

That is the warning over current policy. Where does the Secretary of State stand in the great argument about whether the pension credit should stay? Does he recognise that we need a different approach in the long term? I am not asking the Secretary of State to abolish the pension credit. We do not propose that: we want the basic state pension to rise in value so that fewer pensioners need to claim the pension credit. However, I am asking whether the right hon. Gentleman recognises that, in this territory, the tectonic plates are shifting. We believe that there is a debate going on in Government about carrying on with mass means-testing. It would be very much appreciated if the right hon. Gentleman were willing to share his thoughts on that subject with the House.

Mr. Heath: Does the hon. Gentleman agree that, in the real world, the pensioners who are most unhappy are those who receive a modest private pension? They do not qualify for the pension credit, but the state pension is a significant part of their income. Does he agree that they feel neglected and ignored? My concern about the Opposition's proposals is that although they would restore the earnings link with the state pension—which a previous Conservative Government abolished some time ago—the level that is being proposed would be too low. As a result, such a link could never represent the fair deal that many of us want for the pensioners to whom I have referred.

Mr. Willetts: We could try to increase the basic state pension so as to reverse the spread of means-testing in a variety of ways. There are various thoughts about that, and the Liberal Democrat spokesman on these matters, the hon. Member for Northavon (Mr. Webb), has put forward his proposals. We could have a serious discussion about how far and fast we should go, and about whether we should start with older pensioners. My view is that, given the existence of the pension credit, the best way to make progress is to try and increase the basic state pension—especially as there is clear evidence that most pensioners have very modest incomes. There are not large numbers of very affluent pensioners, on whom such a policy would be wasted, so to speak. Only the top 20 per cent. of pensioners have anything like real affluence.

I recognise all the arguments, but the point is that a consensus exists. As my right hon. and learned Friend the Leader of the Opposition made clear in Prime
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Minister's questions only an hour ago, that clear consensus is shared by the CBI, the TUC, Age Concern, Help the Aged, the National Association of Pension Funds, the Association of British Insurers and the Opposition. We believe that the way forward is to reverse the spread of means-testing. The Turner report provides further evidence, if any were needed, that that is what needs to be done.

Turner criticises widespread means-testing, and I am asking the Secretary of State whether he believes in mass means-testing or not. It is clear that an argument is going on about this inside Government. For Kremlinologists, the most significant moment in Monday's Work and Pensions questions came when a rather unusual figure arrived. The former Foreign Secretary, the right hon. Member for Livingston (Mr. Cook), was in his place, which was a rare honour for Work and Pensions questions. I wondered what he was doing there, but then I realised that it was because of those tectonic plates. The right hon. Gentleman turned up to give a robust defence of pension credit and means-testing. Why on earth would one of the Chancellor's new friends do that?

In fact, the right hon. Gentleman gave a far more robust defence of means-testing than the Minister of State was willing to give at the Labour party conference. The Daily Telegraph said:

The exit routes are being prepared. We are now in the extraordinary position that a former Cabinet Minister, who resigned from the Government because he did not agree with the Prime Minister's policies, comes along to Question Time to defend the Government's policies, and meanwhile the Minister responsible for those policies will not even defend them at the Labour party conference. That is a mad way to formulate pension policy.

We want to hear from the Secretary of State whether he agrees with his Minister that means-testing is a short to medium-term policy only. That is the hint we need—a recognition that they cannot carry on like this. We need a different and better approach. The Opposition believe in more incentives for saving, a higher basic state pension and reversing the spread of mass means-testing, which is the belief of the majority of right hon. and hon. Members. I am confident that it is also the belief of the majority of pensioners and other people, and that is why I moved this motion today.

1.22 pm

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