Examination of Witnesses (Questions 140-159)
MR JOE
HARRIS, MR
TONY LYNES
AND MR
NEIL DUNCAN-JORDAN
10 NOVEMBER 2004
Q140 Mr Goodman: You have a particular
concern about the level of assumed interest on savings which is
10.4%. Would you just like to air that concern?
Mr Lynes: This is something which
people have been complaining about for a very long time. The 10.4%
is only half of the rate of interest that they used to assume.
The justification for this is to say that we are not assuming
that you are going to get 10.4% return on your savings, but we
are assuming that as well as spending whatever income you do get
from your savings, if your savings are above a certain level,
you are also going to spend part of your savings to meet your
day to day living expenses. In the context of a means tested benefit,
that may not be an entirely unreasonable proposition but again
people simply do not understand it. If they are told that they
are assumed to be getting 10.4% on their savings and they are
getting 3 or 4%, they think it is unfair and one wonders whether
this unfairness is really justified by the amount of money that
is saved.
Q141 Mr Goodman: Given that we do have
pension credit, just leaving out of the equation for the moment
long term reform, what improvements to it would you like to see
to deal with these problems as far as they can be dealt with,
within the framework of the pension credit?
Mr Lynes: What I have already
said is relevant. I do not think it is too late for the Government
to have another look at the legislation and make the whole thing
easier to understand. I think that is the single biggest thing
that would help.
Q142 Miss Begg: Can I clarify exactly
what the National Pensioners' Convention's attitude is towards
means testing? Are you saying that pensioners should not be means
tested at all?
Mr Lynes: Yes.
Q143 Miss Begg: Where does that leave
housing benefit, council tax benefit and, if you do not have a
pension credit, income support for those poorer pensioners who
do not qualify for the basic state pension?
Mr Harris: We are against means
testing. We believe that the whole idea of the basic state pension
originally was to take people out of poor relief. It roughly calculated
what it cost to have indoor relief in a workhouse. The idea was
that people were not called paupers any more. They got a pension
instead. We think the idea of a pension should be to remove people
from means testing. Most people, including I am sure our Members
of Parliament, would regard a pension as something which is certainly
above anything to do with the threshold for means tested benefit.
Our attitude is quite simple. If it does not do that, why call
it a pension? That is rather an over-simplification but what it
brings in its trail is what we have been getting in this pension
credit system, which is that once you have a pension which is
below income support—remember, £79.60 compared with
£105—and people have to be means tested because only
if they are poor can they get the top-up, you have to prove you
are poor and you introduce more means testing, more means testing
and more means testing. We are against it from that point of view.
Q144 Miss Begg: What about the pensioners
who do not qualify for the state pension?
Mr Harris: Pensioners who do not
qualify for the state pension should now be brought into being
qualified for a state pension. In our pensions manifesto which
we produced at our last Pensioners' Parliament, we asked for this.
Everyone should be credited in.
Q145 Miss Begg: No National Insurance
contribution link at all?
Mr Harris: The national insurance
contribution can continue but as it does in other regards, like
in SERPS and so on, it is possible to credit people in. People
who have been unable, either because they have not had jobs with
sufficient money—that applies to women a lot—or who
have been led into not contributing when they perhaps they could
have done should be credited in. Indeed, if that was the case
and everyone got a full state pension and it was above that threshold,
we would be okay.
Q146 Vera Baird: Am I understanding that
your recommendation is that there should be—let me read
what I think it says in your manifesto—a BSP at the level
of guarantee credit immediately for all men and women of pensionable
age?
Mr Duncan-Jordan: Yes.
Q147 Vera Baird: We are talking about
a citizens' pension?
Mr Duncan-Jordan: In effect, you
could call it that. It has been called a national pension in the
past and various different things. The key point is we do not
believe today's pensioners can wait for reform in the way in which
Adair Turner may be talking about or this Committee or anyone
else may be talking about. We have people now who ring up, write
to us and come to our meetings who are in desperate need of a
pension of £105 a week now. We believe it can be afforded
straight away. What we cannot do is only give it to those who
have made full contributions because that would still leave a
large number of women missed out and those who did not have a
full contribution record for whatever reason. You have to give
it universally. The figures are there to show how much that would
cost and where the money could come from.
Q148 Vera Baird: Can I come to the costings
later and let me understand at its fullest what you are saying?
There should be a citizens' pension now for everybody who is retired?
Am I understanding that would be on a non-dependency basis?
Mr Duncan-Jordan: Yes. The manifesto
is clear. £105.45 a week for every pensioner, regardless
of their contributions. If you want to call that a citizens' pension,
that is fair enough, but this is an immediate demand to meet an
immediate need. Whether in future that has to be changed or in
10, 15 or 20 years' time we have to look at it, that is something
separate but our campaigning organisation is to achieve change
now, not in decades.
Q149 Vera Baird: I understand but your
manifesto also says that you recommend extending National Insurance
contribution credits for those who have not been able to build
up full contribution records because of low pay or carrying responsibilities.
How do those two interact? Why do you need to be crediting more
people into NI if you are going to give them a pension irrespective
of their contribution rate?
Mr Lynes: It is a difficult issue
for the NPC and for everybody else. What we are saying is that
there are large numbers of people who are not getting a full state
pension at the moment and who ought to be because they paid their
contributions when they could reasonably be expected to. That
needs to be put right.
Q150 Vera Baird: Is there going to be
some way of quantifying when somebody has paid a contribution
when they could reasonably be expected to? How are you going to
make that quasi-moral judgment?
Mr Lynes: There are two possible
solutions. One is that we simply say, "This is a citizens'
pension. Everybody gets it without any regard for the contributions
that they have paid or they ought to have paid." The other
is to say, "We are going to look at the gaps and see to what
extent it is justifiable to try and fill those gaps." There
are some gaps which I think it would be perfectly justifiable
to fill if we could find a way of doing it. For instance, the
fact that home responsibilities protection only came in in 1978
so there are large numbers of existing pensioners who have not
benefited fully from that. It would be perfectly possible on some
kind of more or less notional basis to say, for instance, if you
had children before 1978, we will credit you with a certain number
of years' contributions.
Q151 Vera Baird: I follow that there
are two models. One is making the National Insurance scheme more
inclusive by giving people credits in working and caring. There
are difficulties with that but it is there; or just saying that
it does not matter about the National Insurance contributions,
which is what I understood you were advocating, and to give everybody
who is at retiring age a full basic state pension now. I see a
conflict between those two which you seem to be advocating at
the same time. I am asking you to help me understand whether there
is a conflict between the two or not.
Mr Lynes: I am not sure I would
use the word "conflict" but there is certainly a not
completely resolved issue there. When you look at the pensioners'
manifesto, which I think is a very important document, you have
to bear in mind that that was not written by a committee of academics
sitting round a table. It comprises proposals which were made
by pensioners' organisations all over the country and if there
are things in it which do not entirely seem to hang together as
neatly as we would wish that is a consequence of—
Q152 Vera Baird: I think it is very easy
to get the thrust of what you are saying, which is that currently
a lot of people are excluded from a BSP who everybody thinks ought
to be in it because the credits in the past have been poor and
there are two ways of tackling it. I understand that. Mr Harris,
if you leave me a couple of minutes to ask about costings, then
please carry on.
Mr Harris: On 4 February, in answer
to Steve Webb, the Minister said that to give everybody over the
age of 65 the full state pension of £105 a week would cost
£9 billion. 1% on insurance contributions produced that figure
but it went to the National Health Service. It can be afforded.
That is the first point. The second point is, to stop the problem
on this, there is no real difficulty about this. The main thing
is, do we have a citizens' pension which is going to be funded
in a different way or do we keep what has been going along very
well, which is the National Insurance fund, and somehow manipulate
that in order to give everybody a pension? This was debated at
considerable length at our Pensioners' Parliament and the idea
was it is simple enough. We keep the basis which is employers'
and employees' contribution to a National Insurance fund. We bring
back Treasury grants to top it up so that we can effect this and
then we only have a problem if someone says, "So and so down
the road did not contribute" and you have to go into it.
Why should he or she get the same pension? That would be the only
element of problem about it.
Q153 Vera Baird: If you are going to
do it on the contribution basis, you are going to have to go retrospective.
You are going to have to credit people into contributions retrospectively
so far back that you will bring everybody who is currently on
a pension somehow into the scheme. What is the point of that?
Mr Duncan-Jordan: We believe that
National Insurance has an important social, cohesive role to play,
if you like. One generation pays for the next and so on. We have
argued that in the past.
Q154 Vera Baird: Can I ask you about
the costings because I am very keen to know whether you have costed
the proposal for the basic state pension on a universal basis
being increased to a third of average earnings over five years,
which I think is your preference? The Government says it would
cost 41.9 billion by 2009 to have a universal, basic state pension
which is a third of average earnings. Is that right?
Mr Duncan-Jordan: We have not
costed that. I am not sure if that figure is the additional cost
or the total cost. Certainly we know that the additional cost
immediately to give everybody £105 would be in the region
of eight or nine billion.
Q155 Vera Baird: At the moment?
Mr Duncan-Jordan: Yes, if we were
to do it today.
Q156 Vera Baird: Increasing it to a third
of average earnings over the next five years, according to the
Government, would cost 41.9 billion. That is not just possible,
is it? It cannot be sustained.
Mr Duncan-Jordan: Is that an additional
41 billion on top of current expenditure?
Q157 Vera Baird: Either way it probably
cannot be sustained, can it, but I think it is additional. It
is impossible, is it not?
Mr Duncan-Jordan: I am not sure.
We have always argued as an organisation politics are about choices
and government of whatever shade has to decide (a) how it raises
money and (b) how it spends money. Our pensioners have determined
the way in which they would like it spent. There are competing
interests for the way in which public money is spent but that
does not denigrate the suggestion that older people have come
up with themselves that that is how they want some of the public
money raised and spent.
Q158 Vera Baird: Tony said that even
if the Government meets its targets for take-up of pension credit
the largest numbers of those who do not claim will still be the
poorest pensioners. I wonder if you have any evidence that that
is right. We have just heard from Help the Aged that in their
view the pension service has been successful "at getting
people with high entitlement onto pension credit but less so where
the amount they are entitled to is around a fiver a week."
Are Help the Aged wrong? What is your evidence?
Mr Lynes: Our evidence comes from
answers to parliamentary questions which certainly show that by
2008 there would be between 400,000 and 500,000 of the poorest
pensioners still not getting the guaranteed credit.
Q159 Vera Baird: How do you say they
are the poorest pensioners? Is it not a very arguable view that
it is the people who feel it is not worth claiming and who do
not bother to claim?
Mr Lynes: When I say "poorest"
I mean that they are people below the guarantee credit level.
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