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"welcomes the Pensions Report commissioned by the Government; notes that it reinforces the conclusions of the 2002 Green Paper identifying the need for all to work longer or save more; commends the Government's commitment to face the challenges of an ageing society and to tackle inactivity by helping those who want to work; welcomes Pension Credit, benefiting over 3.1 million people, and the state second pension, helping millions build decent second pensions; further welcomes new tax credits making a huge difference to saving incentives for 3 million lower earners; commends steps to restore confidence in pensions
I was enormously disappointed by that contribution from the hon. Member for Havant (Mr. Willetts), given the importance of this issue. It was gossip and innuendo. I had some knock-about stuff and I discussed with my officials whether to use it in the debate, but it would be inappropriate. The hon. Gentleman is a competent politician and he can be proud of his experience on these issues. I respect his long record in the area. However, as he was speaking, the old Scottish phrase came to mind, "If he was chocolate, he'd lick himself." There was so much of the clever sixth form debating society approach, which is totally wrong in the context of the report that we received yesterday from the commission.
I welcome the first report of the Pensions Commission. It is probably the single most comprehensive piece of analysis and evidence on the British pension system that has ever been produced. I want to place on record my thanks to Adair Turner and his fellow commissioners for all the work that they have done. I hope that I can say that with the support of the whole House.
I intend to concentrate on two areas. The first is the position that the Government have reached in tackling the problems that we inherited in 1997. The second is the difference that this Government are making now and intend to make in the future through an evidence-based approach, building consensus where we can, to meet the long-term challenges that we face as a society. I am happy to do that not just for pensions, butin the spirit of the propositions before usin the wider context of our welfare reform agenda.
In 1997, there were 2.7 million pensionersalmost 30 per cent.living in absolute poverty. Many were on an income of no more than £69 a week. In addition, one child in every three lived in poverty; numbers on incapacity benefits had trebled; 585,000 adults and 85,000 young people were long-term unemployed; and there were huge barriers to work for disabled people, single parents and older workers. The cold shadow of poverty had been cast across the generations. Disadvantaged children became unemployed adults who eventually entered an impoverished retirement.
The eradication of poverty has been at the heart of our approach to government and nowhere has that been more important than on the issue of pensions. We have lifted 1.8 million pensioners out of abject poverty. The fact that pensioners were in that situation in the first place was the real and immediate pensions crisis that we faced.
We believe that we are also making a real difference to the lives of the 3.2 million individuals who receive pension credit. I accept the points made by the hon. Gentleman about ensuring that those who are entitled
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to it receive it. That is a different point from saying that the way to tackle that problem is to take pension credit away from everybody. The average pension credit is more than £40 a week, with average arrears more than £1,000. All told, compared with the 1997 system, on average the poorest pensioners are now £1,800 a year better off in real terms. That is a record to be proud of and we should defend it on every occasion.
Mr. Tynan: One of the major issues that has been raised by the Opposition is the fact that 1.7 million pensioners do not claim pension credit. Does my right hon. Friend agree that the longer we continue to talk about means-tested benefits, the more difficult it will be to encourage people to take up their entitlements? Should we not develop a consensus that pension credit is an entitlement, not a means-tested benefit?
Alan Johnson: My hon. Friend makes an important point. Applying for the pension credit is a world away from people's experiences under the previous Government, let alone back in the 1920s and 1930s. People can make a free telephone call. At the other end of the line, a member of the Pension Service staff will do the work. There is no reassessment every week. Indeed, once the settlement is made it lasts for five years, and no prying questions are asked about irrelevant details of pensioners' incomes. We have to get the message across to all pensioners that it is an easy process. However, we should not talk in euphemisms. It is a means test. We want to target resources at the poorest. Our argument is that we could not tackle the terrible crisis of pensioner poverty that we inherited when we came to government without such an approach, and we should not be ashamed of that.
Annabelle Ewing (Perth) (SNP): The Secretary of State mentioned the situation that the Government faced when they came to office in 1997. However, he will be aware that after seven years of a Labour Government one in five pensioners in Scotland still lives in poverty. Does he accept that the only way to end that scandal is to move away from means-testing and to introduce a decent basic state pension?
I do not accept that at all. In a sense, it is the response to the question from the hon. Member for Havant about how long means-testing should continue. It is a fair question, but in my view we have to target resources at the poorest pensioners, precisely because some still live in poverty, as the hon. Lady points out, in Scotland and the other parts of the UK. However, to suggest that the solution to that is a higher basic state pension is a delusion. It is a delusion mainly because 50 per cent. of women do not have the national insurance contributions that would get them even to the
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level of the basic state pension. I shall say more about the basic state pension, which is important, but to suggest that it can provide a simple answer to abject pensioner poverty is a delusion.
Ms Karen Buck (Regent's Park and Kensington, North) (Lab): Given the centrality of the means-testing issue, it is perfectly reasonable that we discuss it, but does my right hon. Friend agree that it is also fair that we judge the comments of the Opposition by their record in office? Will he confirm my understanding that the decision to break the link between earnings and pensions in 1980 resulted in the basic state pension being £26 lower in 1997 than it would otherwise have been? Is not it reasonable to use that point to test the validity of Conservative criticisms?
Alan Johnson: It is wholly reasonable to point that out. It is also reasonable to point out that the hon. Member for Havant said that a return to the earnings link had not been properly costed and would leave a hole in the public finances.
Mr. Steve Webb (Northavon) (LD): The Secretary of State made the perfectly correct point that simply putting up the state pension, while it continues to be based on contributions, will be prejudiced against women. The weekend newspapers reported that the right hon. Gentleman was rather positive about the idea of a citizenship pension based on residence rather than on contributions. Can he give us a sense of his approach to that? Does he have an open mind? Is he positive about it or does he rule it out?
The issue is how to tackle the problem that we want women to undertake caring responsibilities while their national insurance contributions cannot possibly match up, bearing in mind the fact that retirement age for women will move from 60 to 65. There is a real argument for me to look carefully at that matter
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