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Sir John Butterfill (Bournemouth, West) (Con): It is always challenging to listen to the hon. Member for Wolverhampton, South-West (Rob Marris). I wish that he had not taken 35 minutes to speak, but at least he shows us old Labour philosophy: tax the rich and everything will be all right. We might as well go back to the days of 98 per cent. taxation, which I can remember. That was intended to solve everything, but it did not. It was interesting to hear the hon. Member for Glasgow, Cathcart (Mr. Harris), who made a thoughtful speech that was worthy of his distinguished predecessor. However, both hon. Members made the mistake of claiming that means-testing was the best way of delivering to poorer pensioners.
All hon. Members are worried about the predicament of pensioners, who continue to be the poorest group in our society. Many are extremely poor and I share the concern for that specific group with everyone in the Chamber. The poorest pensioners also tend to be the oldest and there is a good reason for that. Those who are 75 and older lived through the last war and grew up in the post-war austerity period. People were unable to save for their old age then and we therefore especially need to look after that group. Pensioners who are over 75 should get a higher rate of pension than the rest of us because they could not save. The younger onespeople of my age who grew up in a period of greater prosperityhave been able to save for our retirement. If we have not done that, it is our fault. However, I repeat that we should especially look after pensioners who are over 75.
I disagree with hon. Members who believe that the higher rate for those who are 75 and over should roll on for ever, because that would begin to include people, like most of us, who do not need it. The higher rate should be fixed for those who were born in 1930 or before because it would thus be targeted at a special group. I shall give way to the hon. Lady.
We also need to look after and provide special treatment for other groups, who, for specific and special reasons, may not have been able to save for retirement. The right hon. Member for Birkenhead (Mr. Field) mentioned them. However, I disagree with the hon. Members for Wolverhampton, South-West and for Glasgow, Cathcart and, indeed, the Chancellor, that means-testing is the best way in which to provide relief for the remaining poor. It is not.
Of course, the fact that universal benefits go to everybody means that a few very rich people benefit disproportionately. However, the tax system already deals with those people. If the hon. Member for Wolverhampton, South-West feels even more
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aggressive, he will probably want to increase their overall tax rate. The position can be tackled through the taxation system; such people pay a lot of tax in any case.
Means-testing has two specific problems. Many people do not go through the testsapproximately 2 million people currently do not receive the benefit. That is a serious number, despite the Government's best effortsand I accept that they have made determined efforts to get people to claim. There is also a profound disincentive to save, which arises out of means-testing. We do not want that downside. Means-testing is expensive and requires many civil servants to administer it. If we scrapped the means test, I doubt whether the "wasted money", in the terms of the hon. Member for Wolverhampton, South-West, that goes to the very rich would even approach the cost of conducting the means test, with all the indignity that it involves for those who have to undergo it.
However we dress up the means test and call it an entitlement, it remains an indignity and I therefore do not believe that it is the right way forward. We should have a non-means-tested increase in our pension provision for everybody, to an amount that gives everyone reasonable dignity in old age, and then provide special help for special groupsthe very old and others.
Mr. Michael Jabez Foster (Hastings and Rye) (Lab): I understand the logic of the hon. Gentleman's argument. At present, however, the basic pension credit is at £105. Is not the logic of his argument therefore that the basic pension would need to increase to £105 before there would not be a disincentive to save?
Sir John Butterfill: No, that would not follow precisely, because if we were making special arrangements for special groups not everybody would need to go up to that level. Of course, such a level is being achieved already through the various benefits that are available. All sorts of other benefits are available for those on low incomes. If we add all those up, the money that we would save by not having all sorts of other special benefits
Miss Begg: The hon. Gentleman seems to be implying that the basic state pension is a universal benefit. We know that it is not1.5 million people do not have complete national insurance contributions and do not get the basic state pension. What he proposes, therefore, misses out that whole group of people. The pension credit and income guarantee are particularly useful for that group of people, who are often on lower incomes than the basic state pension, and who would continue to need to be means-tested anyway.
Sir John Butterfill: The hon. Lady is absolutely right, and I have said that there are other groups to which we would need to make payments. The people who would not otherwise get anything would have to be included in those payments. The point is that we do not need means-testing to do that.
We should also consider the encouragement of pension saving. The hon. Member for Wolverhampton, South-West says that there is no evidence that tax relief encourages people to save. Human nature would lead us to believe otherwise. However, tax relief is not necessarily well targeted at the moment, and perhaps I can refer to that later.
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On the problems with private sector pensions and pension fundsat this point I declare my interest because, as hon. Members know, I chair the parliamentary contributory pension fund and I am also chairman of trustees of the pension fund for the People's Dispensary for Sick Animals[Interruption.] No, I do not think that it is a similar organisation.
A lot of people are making all sorts of allegations as to what is the cause of the private pension crisis. If we go back only about seven years, I remember the Chancellor saying what a wonderful pension system we had, how well funded it was, and how it could easily withstand his £5 billion a year grab. At that time, it did look pretty good, although some underlying problems were about to surface. But the fact was that we had a pension system that was the envy of most of the rest of the world, and it looked very well funded. Two things were wrong with that. First, the investments, which were largely in the stock exchange but were also elsewhere, were growing at an unprecedented rate. People thought that the stock market boom would go on for ever. Why they should think that I do not know, because stock market booms never have done previously, and never will in future. They will always be cyclical. Nothing that any Chancellor, however clever, can do will alter that sad fact.
When the stock market was high, pension funds, including our pension fund and the Treasury, were all getting valuations showing massive surpluses. Employers said, "Oh good, we won't need to put as much money in. We will take a contributions holiday." What my party should have done when it legislated in 1995, and what this Government should subsequently have done, is to say that such pensions holidays should not be lawful. If the scheme actuary says that a certain amount will be needed over time by the employer and the employee, where the employee makes contributions as well, that is how much should go into the fund. However big the temporary surplus, the contributions should continue, assuming that the actuary has got his sums right, which has not always happened.
Had people continued with the sums recommended by their scheme actuaries as opposed to looking at how much was in the piggy bank and thinking that it would be enough for all time, schemes would not be in the trouble that they now claim to be in. We recently had to vote an extra £25 million into the Members' fund, despite the fact that the previous valuation had shown a massive surplus. In fact, that was only a fraction of the saving that successive Governments of both parties have made in failing to put in the amount recommended by the scheme actuary. They thought that the public were getting a good deal, but in the end all these chickens come home to roost.
Successive Governments have created a further problem in attempting to meddle with the investment policies of those charged with looking after the funds. I fundamentally disagree with the structure of the minimum funding requirement introduced by my own party in the Pensions Act 1995. I also disagree with the way in which regulators subsequently, even today, have tried to move people in certain directions of investment. The general trend, fed by the actuarial profession, has
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been to say that the only safe place for pension money is in bondsif schemes are in trouble, they should put more money into Government bonds.
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