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Rob Marris: Will the hon. Gentleman switch focus to the first line of the amendment to which he has put his name, which discusses reducing regulation? He has had five hours to think up an answer to this: will he tell the House three regulations that he thinks should be revoked?
Mr. Willetts:
We have made it clear that we will reverse many regulations. I will not fall for a desperate
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attempt to divert me from my critique of this Government's failure to tackle inactivity and unemployment. I want to discuss the failure of the new deal for lone parents, which several hon. Members have discussed. The Chancellor may be one of the few people who reads with relish the evaluations of the schemes that he invents, but it is a pity that he does change his policies in the light of the evidence.
I shall quote an evaluation of lone parent work-focused interviews, which are an important part of the new deal for lone parents, published earlier this year. The research report by outside academics states:
"The Introduction of Lone Parent Work Focused Interviews brought about no detectable change in exit rates from Income Support for eligible new or repeat claimants".
That is the evidence about the failure of the Chancellor's schemes, which is why we are so sceptical.
Finally, I shall discuss the pensions crisis and the amount that we, as a nation, are saving. I pay tribute to the Secretary of State for Work and Pensions, who has taken a novel and refreshing approach to his job. He has given up defending Government policy, and I wonder whether the Chancellor knows exactly what his colleague gets up to. I am not sure that the Granita pact permits the Secretary of State to make these statements, because I thought that it meant that the Chancellor determines such matters.
On the pension credit, the Secretary of State has said:
"we should not talk in euphemisms. It is a means test."—[Official Report, 13 October 2004; Vol. 425, c. 302.]
At a conference, he admitted that the Government
He has wholeheartedly endorsed all the arguments put by Conservative Members.
This is the Secretary of State's most ambitious statement of the lot:
"People feel there is no reward for playing by the rules, and one of the critical areas is pension provision. We have to bite the bullet and look at the state pension system, certainly for the longer term, so that if you do a lifetime's work, it will deliver a pension above the basic level of means-tested support."
That is it. We would not abolish the pension credit, but we want to see a pension with a value higher than that of means-tested support. We welcome the Secretary of State's conversion, but it would be great to hear the Chancellor endorse his colleague's analysis of what is wrong with our pensions system.
Conservative Members look forward to a constructive and reasonable debate about how we can gradually get pensioners off means-tested benefits, create incentives to save and tackle the problem of the 1.7 million pensioners who are entitled to pension credit but do not claim it. The objective should be to get a basic pension with a value higher than that of the pension credit, which is why we endorse the imaginative thoughts advanced by the Secretary of State for Work and Pensions. It is slightly unfortunate that those thoughts are not yet official Government policy, but given that the Chancellor is aware of his Secretary of State's strong views, it is only a matter of time.
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6.43 pm
The Secretary of State for Work and Pensions (Alan Johnson): The debate has been interesting and informative. At the outset, we found out that the right hon. Member for West Dorset (Mr. Letwin), the shadow Chancellor, has been a long-time advocate of independence for the Bank of England setting interest rates—it was fascinating stuff. He presumably argued the case at dinner parties all over north or south London, and perhaps he grabbed strangers on long train journeys to tell them that it was the thing to do. When he entered the House as a Member of Parliament and went through the Lobby, however, he voted against independence for the Bank of England.
The Chancellor ate the shadow Chancellor alive, but left a little bit over for cold sandwiches tomorrow.
Mr. James Gray (North Wiltshire) (Con): Will the Secretary of State give way?
Alan Johnson: Not yet; I will later.
The hon. Member for Twickenham (Dr. Cable), who is just taking his seat, gave a winsome and ruminative little speech in which he acknowledged the success of our economic stewardship, but expressed scepticism, if not disparagement, about the research and development tax credit. He continued his party's vicious and sinister vendetta against the Department of Trade and Industry. He might like to know that when I was a Minister at the DTI and that policy first emerged, I went to tell my staff, because I thought that they should know about it. I said, "Look, if there's a Lib Dem Government you're going to lose your jobs." They took that as a guarantee of job security, which was not what I intended to convey.
My right hon. Friend the Member for Dumbarton (Mr. McFall) spoke eloquently about the need to meet the challenge of the huge investment in science and skills that is taking place in the Asian economies. He used his enormous expertise and experience in this field to warn us of some of the problems that we will face.
My right hon. Friend also talked about means-testing, comparing its use as a means of targeting pension credit with what went on under the previous Government—never mind going back to the '30s. Let me make this absolutely clear to the hon. Member for Havant (Mr. Willetts), because he invited me to do so. When we came into Government we found that 2.8 million pensioners were living in abject poverty. The Conservatives are experts on pensioner poverty, but unfortunately experts on creating, not alleviating, the problem. Those 2.8 million pensioners needed help and assistance immediately. The hon. Member for Havant argues, in effect, that we should have told them—many were in their eighties, and two thirds were women—that the problem with giving them the kind of income increase that they really needed was that it could create a savings disincentive in future. I find that argument incredible. In government we have tackled the real pensions crisis, and we should be proud that we have reduced absolute poverty for pensioners by two thirds and taken 1.8 million pensioners out of poverty.
I do not accept that a 32-year-old accountant in the City who is looking at a lump of money and deciding whether to go to Lanzarote for a fortnight, spend it on a new car or put it into a savings scheme says, "Hold on—
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there's this thing called pension credit that may well affect my savings in years to come." In fact, it would be a good thing if people looked that far ahead.
Andrew Selous (South-West Bedfordshire) (Con) rose—
Alan Johnson: I will take interventions from Members who were in the Chamber during the debate.
I do not accept that we are looking at marginal tax rates of 40 per cent. Under the previous Government, the marginal tax rate on benefits was 100 per cent.—pound for pound withdrawal. But when we introduce a system whereby there is, for the first time, a 40p in the pound withdrawal rate so that people are not penalised for their savings, we are told that it is a tax. It is a strange tax that pays people money—an average of £41 a week with £1,000 arrears to 3.2 million pensioners—but it is certainly one of which we will be proud to take ownership.
Mr. Flight: May I point out to the Minister that our proposals do not involve abolishing the pension credit? How does he explain the fact that there has been a huge increase in the number of people without private sector pension savings? It has gone up to nearly 11.5 million people—virtually half the labour force—and has risen very substantially since the pension credit.
Alan Johnson: I shall deal with that shortly. The hon. Gentleman made a thoughtful contribution and I shall tackle his point. Let me address his first point. The policy of Her Majesty's official Opposition is to restore the earnings link. Several hon. Members said that we should accept that, if we are to work, perhaps in a bipartisan way, genuinely to tackle the problems that the Pensions Commission set out, we must ensure that pensions are fair, equitable, attack pensioner poverty and sustainable, not only now but in future.
At the beginning of the debate on the Queen's Speech, my right hon. Friend the Member for Newport, East (Alan Howarth) intervened on the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) to say that Conservative policy on restoring the earnings link would mean a commitment of £98 billion in 2050. The right hon. and learned Gentleman replied:
"I think that . . . pensioners are more interested in the real difficulties that they face today than in what might happen in 2050."
I despair. If the Conservative party does not consider the sustainability of its policy, it betrays future generations of pensioners and taxpayers.
Of course, the Conservative party removed the link with earnings. The hon. Member for Havant said only two years ago that restoring the earnings link would be an expensive error, but more recently he said that withdrawing the link had been a mistake. However, when it was pointed out to the Leader of the Opposition that he was a member of the Cabinet when the earnings link was withdrawn, he said:
"It was the right thing to do then, and restoring the link is the right thing to do now."—[Official Report, 23 November 2004; Vol. 428, c. 17.]
When will it be the right time to break the link again? It is already unsustainable, not only in 2050 but in four years. There is a gap of £500 million in Conservative funding plans. Conservative Members say that they will sustain the link for four, not five years.
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