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Mr. Willetts: First, I want to confirm that we have no plans to change winter fuel payments, which will continue. The Government intend to reduce the amount in 2005–06 and 2006–07, but we propose no changes to the regime. Secondly, I want to help the Secretary of State in respect of our policy on the basic pension and the pension credit. What has changed as a result of Government policy is that pension credit means that we now have the mass means-testing of pensioners. As the basic state pension rises in value, fewer pensioners will need to claim the pension credit. Therefore, the case for an increase in the basic state pension is much stronger when so many pensioners are trapped in means-testing. We propose a practical way of tackling a problem faced by many pensioners today.

Mr. Darling: The hon. Gentleman knows about these things, so he must be aware that we have spent about £10 billion more in pension provision, nearly half of which has gone to the poorest third of pensioners. I am pretty sure that he agreed some years ago that helping pensioners on low incomes and getting them out of poverty meant that more money must be targeted at them. An across-the-board, earnings-linked increase does not help pensioners at the lower end of the income scale. That is why we introduced the pension credit, which has helped to lift pensioners out of poverty.

The Conservatives are entitled to say that that is the wrong policy, but there is no doubt that the pension credit helps something like 3 million pensioners now, and that many of them receive as much as £40 a week extra as a result of all of the things that we are doing. That must be right, given that one of the Government's policy objectives is to get pensioners out of poverty.

Mr. Willetts: We too are keen to help pensioners who are entitled to the pension credit but who do not claim it. We estimate that there are more than 1,000 such pensioners in the Secretary of State's constituency who would be helped by our policy.

The right hon. Gentleman talks about means-testing versus universality. That is a real debate: we have discussed the matter many times in the past and no doubt will do so again. However, the Government have announced a variety of special payments, such as the council tax rebate, which are not means-tested. Those payments are universal, so it is very odd for him to denounce us for a policy that helps all pensioners.

Mr. Darling: It has always been the Government's policy to have a mix when it comes to payments to pensioners. Some, like the winter fuel payment, are universal: some, like the minimum income guarantee, are more targeted; and others, like the pension credit, are designed to help pensioners with modest savings. The hon. Gentleman has referred to administrative problems, but he has given the House the distinct impression that he is against tax credits of any kind. Over the past eight years, I have never heard a
 
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Conservative Member speak with any enthusiasm about the extra help offered by tax credits to families, to people going into work and thus moving off benefit, or to pensioners. Whenever Conservative Members talk about this matter, one's distinct impression is that something will have to give when it comes to the tough and painful decisions that must be taken to secure £35  billion in savings, and it is just possible that that something could be the tax credits.

Mr. Maude: On that point, would the Secretary of State advise people on low incomes to save through a stakeholder pension, given that any benefits from that pension would be lost as a result of the extensive means-testing that pervades the system?

Mr. Darling: That is not right. I advise anyone who can save to do so, but the pension credit was designed specifically to change the crazy benefits system that we inherited. Under that system, after a certain point people found that every pound that they earned was docked from their benefit. The right hon. Gentleman's analysis would be correct were it applied to the old social security system. The pension credit was designed to ensure that people knew that they would get a reward for saving. Many people in receipt of the pension credit accept that it has made a big difference. Whatever else the Tories do, I hope that they do not go back to the old-fashioned means test, which trapped people in a way that was grossly unfair and very bad for the long-term interests of the country.

Mr. Ivan Henderson: Does my right hon. Friend agree that the Opposition have not said how much it will cost pensioners to take out insurance policies to pay for their NHS operations? That would be a huge burden, and pensioners who could not afford such policies would end up at the bottom of future waiting lists.

Mr. Darling: Again, my hon. Friend is absolutely right. It is interesting that, whenever one confronts Conservative Members with their party's policies, they emit howls of protest. Yesterday, my right hon. Friend the Chancellor mentioned in passing that the Conservatives propose to make £35 billion in cuts. Their reaction suggested that the Government were making that claim, whereas it is what the shadow Chancellor has promised.

My hon. Friend the Member for Harwich (Mr. Henderson) refers to Conservative plans to pay half the cost of an NHS operation when a person goes private, but that is not the same as half the cost charged by BUPA, for example. The Opposition's policy would take more than £1 billion out of the health service, but my hon. Friend will have noticed the reaction among Conservative Members when he mentioned that. It was not justified outrage so much as worry that they had been found out. Over the next few weeks, I expect that we will be talking about Conservative policies—the £35 billion in cuts, for instance, or their plans for private health—in every constituency in the country. No doubt, the Opposition will want to justify what they propose.

Mr. Paul Goodman (Wycombe) (Con): What about transport?

Mr. Darling: I shall be very happy to talk about transport, and to point out to pensioners the new free
 
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travel provisions announced yesterday, which I think that they will greatly appreciate. I shall also make the fundamental point that we must take the shadow Chancellor at his word and that a cash freeze will be imposed on all Departments, apart from the two that he mentioned. As a result, transport will be one of the victims, because the one thing that it does not need is an expenditure cut.

Mr. David Watts (St. Helens, North) (Lab): Does my right hon. Friend agree that people will be very sceptical about the Opposition's claim to provide a better deal for pensioners and transport, for example, given that both sectors were in decline for 18 years? Does he agree also that people will compare our package for pensioners since 1997 with what happened under the previous Conservative Government?

Mr. Darling: Yes, and that brings me neatly to my next point: people have to make a choice and a judgment in this matter. They can look at what happened in the 18 years up to 1997, or they can consider what has happened in the past eight years. As far as the economy is concerned, I am sure that people remember very well the very high interest rates and mortgage rates that characterised those 18 years, as well as the repossessions and the huge levels of debt. The hon. Member for Havant said that my right hon. Friend the Chancellor's predictions had been wrong, but people will recall that they have been right. His critics have been wrong, year after year.

The Conservatives talk about borrowing. There are two points to make. As my right hon. Friend the Chancellor said yesterday, borrowing is set to reduce. When we compare the amount of borrowing in this country with the borrowing in our competitor countries, our record is very good because we have far less of it. Conservative Members might want to reflect on the fact that 10 years ago—it is curious that none of them mentioned this—their equivalent borrowing was £90 billion. [Interruption.] The hon. Member for Wycombe (Mr. Goodman) mutters, but people are entitled to reach a judgment as to whose stewardship of the economy would be better for them. They will choose between a Government who have had eight years of stability and 50 quarters of growth, and who have increased investment in public services, and the Conservative party, whose entire economic policy collapsed in ruins in 1992. Again, I remind the House that when the Conservatives were in power, 75 per cent. of all new expenditure went on debt and the cost of unemployment. Not much more needs to be said about their record.

The Chancellor set out our Budget choice, which is to lock in stability—not to put it at risk—and strike the right balance between affordable tax cuts and the essential long-term investment that this country needs. As our economy is strong and continues to grow, he could do more to help hard-working families and pensioners. At the same time, in response to the huge challenges we face, in common with other countries, from the developing economies in China and elsewhere, he has provided additional investment in education, skills and science.
 
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That is our choice and what we are laying before the country. There is another choice, of course, which is to repeat the mistakes made by past Conservative Governments—the same mistakes that the Opposition propose today. Far from investing, they have promised—this is not a claim—to cut £35 billion over the next six years. Worse than that, they have promised to spend money they have not got and to give tax cuts they cannot afford. Inevitably, that would lead to more spending cuts, increased borrowing and higher interest and mortgage rates. That is the indictment against them. They would undermine the stability that we have built up over the past eight years that is enabling us to help people while investing in education and infrastructure, which we need for the future of this country.

The contrast between the two parties has never been so great. We have given more help for pensioners. To listen to the hon. Member for Havant talk, people would think that we had done nothing for pensioners. We have increased the money that is going to them. In 1997, I think they got £69 a week. By 2007, that will be £119, which is in addition to the winter fuel payment and other payments. Equally, we are giving money to families who need support. Again, the Chancellor set out clearly how, with the money available, he could do more through the tax credit system to raise the effective rate of income tax for many low-income or middle-income families, which must be in their interests as well as the interests of people in the country as a whole.

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