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The Minister for Pensions (Malcolm Wicks): We have had a good debate in which we have heard several serious speeches, although I did write that line 15 minutes ago. I hope that hon. Members will forgive me if I do not mention all the contributions that were made. We heard notable contributions from Labour Members, and I hope that the hon. Member for Havant (Mr. Willetts) will forgive me if I say that I especially enjoyed the analysis presented by the right hon. and learned Member for Rushcliffe (Mr. Clarke).

The hon. Member for Bournemouth, West (Sir John Butterfill) made a useful and thoughtful speech. He reminded us that he is the chairman of the parliamentary pension fund and also told us that he chairs the People's Dispensary for Sick Animals pension fund. If there is ever a black hole in the parliamentary fund, I hope that he will not decide to put some of us down. We are into joined-up governance, but that would be a step too far.

As usual, I enjoyed the contribution made by the Chairman of the Work and Pensions Committee, the hon. Member for Roxburgh and Berwickshire (Sir Archy Kirkwood), under whose chairmanship I had the honour of serving at one stage.

We once again thank Adair Turner and his colleagues on the Pensions Commission for what everyone has acknowledged as a fine and authoritative document. We greatly appreciate the further insights that the report provides, the opportunity that it presents for thorough and evidence-based debate, and the options that it offers for consideration to produce long-term solutions to long-term concerns. However, it is disappointing that in some, but not all, quarters, there has been such an immediate and highly politicised response to the report, despite the fact that both the commission and the Government are calling for a serious and considered analysis of the complexities of the issues at stake today and, more importantly, over the long term.

It was sad that the shadow Secretary of State entertained us a little too much tittle-tattle and one or two polemics that he has been reading over his long summer holidays because he does not usually do that. I am bound to say of the shadow Minister, the hon. Member for Eastbourne (Mr. Waterson), that rather than rising to the occasion, he managed uniquely to sink into it.

The hon. Member for Northavon (Mr. Webb) knows that I always enjoy his contributions. I was interested that he spent some 20 minutes mainly attacking another Opposition party, which we enjoyed, although I was a bit embarrassed to be in the same room as them. However, given that there are three major parties in Britain—one of which comes fourth in a by-election—I understand that at least some of his speech had more to do with electoral psephology in parts of our country than pensions policy.

To those who encourage us to act in haste by taking the sound bites of the report and basing a policy on them—they know who they are—let me point out that
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the report itself states in no uncertain terms:

We will not, therefore, provide a knee-jerk reaction just to make the headlines. Conservatives can knee-jerk if they want to, but we will not. We will not put forward unsustainable policies for political gain, and thus we will not jump to rash conclusions before the commission has completed its work and published its report next year.

We acknowledge that societal evolution over the late 20th century and the 21st century necessitates a concurrent evolution in pensions policy, so we welcome the commission's considered assessments of the challenges of voluntarism, of compulsion, of extending working lives for those who want that and of encouraging greater pension saving. There will be much more such consideration after the consultation and discussion in the next volume of the report.

The problems that women have traditionally faced in accumulating a decent pension income are acknowledged. The report states that we need to look at adjustments to public policy that

We should all bear some responsibility for that.

I shall outline our current strategy and also look to the future. The lack of action and the mismanagement of the state pension system under the Opposition left a terrible legacy. The situation in 1997 was one that we did not want repeated: a Britain in which 2.7 million pensioners were living in poverty and where, pound for pound, pensioners' savings were subject to a 100 per cent. marginal tax rate. Yet curiously those Conservatives who presided over that regime now lecture us on savings incentives despite pension credit now rewarding modest savings. It was also a Britain in which carers, disabled people and many women were excluded from accruing second state pension provision. Urgent action was required, and the Government acted.

Today's pensioners are significantly better off than they were under the last Conservative Government. Reforms to the state system have lifted 1.8 million pensioners out of poverty. Nearly 2.4 million people are getting extra money compared to what they would have got under the previous system, with an average gain of more than £16 a week. We are spending £10 billion extra each year on pensions compared with 1997. Restoring the earnings link would have cost just £3 billion.

Pension credit guarantees an income of £105 a week for single people over 60—it was £69 in 1997—and £160 for couples. These benefits are designed for the people who need them most, which inherently necessitates some form of income or means-testing. Despite constant accusations about the "humiliation" that the Opposition claim such an approach causes, when we asked people in our surveys—because we listen—70 per cent. of pensioners believed that the process was easier than the previous system and 85 per cent. stated that they would recommend applying for pension credit to someone else.
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The Opposition would have us believe that pension credit degrades pensioners. On the contrary, it is poverty that degrades our elderly people. That is why we have made the reduction of pensioner poverty our highest priority. We now have a Pension Service, and many colleagues will have met our excellent staff in the local pension service who run advice centres and do home visits, of which we made more than 500,000, showing that there is a human face to the service. If people do not like the forms—many of us do not—they can apply over the phone for pension credit.

There have been a number of changes and pensioners have fewer changes to their circumstances to report. Whatever the important arguments about the advantages and disadvantages of targeting or means-testing—I know that there are advantages and disadvantages—let us at least acknowledge that what we are doing with the pension credit and the Pension Service is a million miles away from the folk-lore memory of old-style means-testing.

There is an important point about gender and pension credit. Getting on for 3.2 million individuals benefit from pension credit. It is no coincidence or accident that 2 million-plus of those are women. Women have not often accumulated a full national insurance pension because they either brought up children or were carers, which made them less likely to have occupational pensions.

Mr. Willetts: The Minister talks about the pension credit. This is an opportunity for him to set out the Government's plans if they were to have a third term. Will he clearly state, for the record, that if they win they will uprate both the guarantee credit and savings credit by earnings, not prices?

Malcolm Wicks: I thought that the hon. Gentleman was going to talk about the important issue of gender, and I am disappointed. For this Parliament, we have made the commitment to index link with earnings the pension credit. He will have to wait until the election and our manifesto to see what happens.

Many things are already in place that will support future generations. The state second pension, which perhaps we do not hear enough about, is important for low to middle-income earners. It gives people the opportunity for further state pension income, not just for those who are in full-time work, but also, most importantly, for disabled people, carers and many women. Up to 20 million people will benefit from the scheme. Low earners will receive at least double the sum to which they would have been entitled under the state earnings-related pension scheme. We have recognised the need to increase confidence in private pension provision in our Pensions Bill. The financial assistance scheme provides £400 million to help people who face the reality of losing their pension rights. The pension protection fund, very much to the credit of the former Secretary of State, my right hon. Friend the Member for Oxford, East (Mr. Smith), will be regarded in future as a major piece of institutional reform by the Labour Government, ending the scandal of workers who have worked hard all their lives and paid into a final salary scheme losing their pension rights when, through no
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fault of their own, their company goes bust. The pension protection fund will stop that scandal, and we are proud of that.

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