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The Minister for Pensions Reform (Mr. Stephen Timms): The consultation on the commission's first report ended in January. It expects to publish its final report before the end of the year. We are looking for a long-term solution to the provision of adequate income in retirement, building on recent improvements. We will be encouraging wide discussion ahead of the report and will continue the debate and consensus-building after the report is published, for as long as we need to.
I hope that the Minister read the Secretary of State's comments to the Financial Times as carefully as my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) did because he would have seen the Secretary of State admit that the Government have not begun to set their collective mind towards reaching a consensus on the
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way forward, even though he says that he wants the country to do so. Should not the Government get a bit of a move on, bearing in mind the collapse in savings, the collapse in final salary schemes and the accelerating collapse in pensioner morale?
Mr. Timms: Actually, retirement income has risen faster than earnings in recent years, with the largest rise in the incomes of the less well-off, reflecting our priority of tackling poverty in retirement and the big problem left behind by the previous Conservative Government. We need to make decisions now to avoid difficulties in 15 or 20 years' time, given in particular the rapid, and extremely welcome, rise in longevity. It is right to take the time to build up a consensus so that we agree on the right way forward. I hope that even the hon. Gentleman might contribute to that.
Mrs. Madeleine Moon (Bridgend) (Lab): Will the Minister, as part of his consideration of the consultation on the Pensions Commission, examine the plight of carers such as Mrs. Hill of Aberkenfig in my constituency, who had provided care for her daughter for 41 years but who, on reaching retirement age, lost her invalid care allowance and then had to provide the care in return for only her pension? Can we consider how carers can benefit as they carry on caring into pensionable age?
Mr. Timms: My hon. Friend raises an important subject. As she knows, the Government's introduction of the state second pension made significant progress in allowing carers to build up a second pension, but the question of pensions for carers needs to be considered in the debate as we seek a long-term solution to the pensions challenge.
Mr. Julian Brazier (Canterbury) (Con): We all welcome a reduction in pensioner poverty, but does the Minister accept that the price paid through means-tested benefits is an aggregation of benefit withdrawal and tax at the margin for more than half our pensioners, which has sent a message to the next generation that it simply is not worth saving? Does it not worry him that the savings ratio has more than halved under the Labour Government and that 45 per cent. of people now in the work force are no longer willing to make a contribution toward their own retirement?
I hope that the hon. Gentleman will tell people who raise such matters with him that it certainly is worth saving for retirement and that if people have got the impression that it is not, they are mistaken. Under the previous Government, many pensioners were left behind and were in difficult circumstances in 1997for example, a lot of single pensioners were on income support of less than £70 a week, whereas all are now entitled to at least £109 a week. In designing future systems, we must not allow acute pensioner poverty to rise again. However, I repeat: it is worth saving for retirement and I hope that the hon. Gentleman will tell people that if they want an income in retirement of more than £109 a week, they need to save.
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The proportion of retired people whose income after housing costs is less than 60 per cent. of median income has fallen from 28 per cent. in 199697 to 20 per cent. in 200304, even though median income has risen sharply in that period. The proportion in the south-west is less than the national average, standing at 19 per cent.
Julia Goldsworthy: Is the Minister aware that this year the average South West Water water and sewerage bill increased by 13 per cent. whereas pensions increased by only 3.1 per cent.? The vast majority of pensioners have seen pension increases swallowed up by rising utility and council tax bills. Is it not time that the Government recognise that the only way to ensure dignity and security for older people is through a decent basic state pension, not through an intimidating and complex means-tested pension credit system, on which an estimated 90,000 south-west pensioners are missing out?
Mr. Timms: As my right hon. Friend the Secretary of State said, there has been a big increase in the take-up of pension credit. That is the major reason, although not the only one, for the dramatic fall in pensioner poverty that the IFS identified. We must continue to work to increase the take-up of pension credit, but good progress has been made, which I think the hon. Lady will welcome. I understand that, during the current debate, many people will make the case for increasing the basic state pension. The problem with that is the cost of doing sothat is why the link was broken in the first place. However, I hope that we will debate all the issues fully in the coming months.
Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): I thank my hon. Friend on behalf of the 5,500 pensioners in my area who are in receipt of pension credit, about 4,000 of whom are, I believe, also in receipt of the minimum income guarantee. Many of them stopped me during the election campaign to tell me that it had transformed their lives.
I raised water charges with my hon. Friend's predecessor, who took an interest in the matter. At £100 more than the average, charges in the south-west are by far the highest in the country. Will my hon. Friend take an interest in the outcome of the cross-governmental review of water affordability, on which his Department was represented, in particular the pilot scheme in the south-west of England to examine how benefit checks combined with water efficiency measures and water metering can have an impact on dealing with poverty and low incomes?
Like my hon. Friend and me, many hon. Members will have spoken to people during the election
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campaign whose income before 1997 was less than £70 a week, but is now £109 a week. As she rightly said, that has transformed their circumstances. We certainly must not go back to the days of acute pensioner poverty that was experienced by far too many people. I am certainly glad to take an interest in the proposed pilot study in the south-west, and I pay tribute to my hon. Friend for the long-term work that she has done on the issue. I am pleased that WaterVoice is making a positive contribution to the development of the pilot, and I shall watch its progress with great interest.
The Secretary of State for Work and Pensions (Mr. David Blunkett): The question of the potential impact of compulsory savings on pensions and pension credit is something that the Pensions Commission was asked to look at, and it is studying that at the moment. The more people save, whether compulsorily or voluntarily, the less reliant they are on any form of income-related testing and the less likely they are to be in poverty. The question for everyone is whether it is the role of Government, over and above the basic and second pension, to introduce compulsory savings for individuals or employers, and we shall conduct that debate in the coming years.
Miss McIntosh: We heard earlier that fewer people are taking up the pension credit, and we also heard from my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) that the Secretary of State could possibly seize capital assets as part of a pension plan. Would the right hon. Gentleman consider increasing compulsory savings towards pension plans without putting that to the public at a general election?
Many more people, not fewer people, are taking up pension credit, as the statistics show. It does not help the debate to turn statistics on their head. If 2.7 million households are benefiting, and that was not the case a year ago, it is a plus, not a minus. This debate is critical to people's future retirement income and therefore their living standards and benefits, so if we used the available statistics and merely debated those things about which we disagree, the nation would be a lot better off.
Rob Marris (Wolverhampton, South-West)
(Lab): My right hon. Friend is understandably hesitant about compulsion. Can he assure me that he will be equally hesitant about continuing tax relief for pension contributions, given that it is intensely regressive, with 50 per cent. going to the top 10 per cent. of earners, and 25 per cent. going to the top 2.5 per cent. of earners? I urge him to look at that option while he is looking at compulsion.
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Mr. Blunkett: Obviously, the commission will look in detail at the incentives that we need to provide for people on a range of income levels, but it is also important that we do not distort the debate on taxation and reliefs in general. Indeed, I think that the Chancellor of the Exchequer would be on my back if I did. My hon. Friend has made a valid point, which I have been making myself over the past six weeks. We need to get the incentives right for people who find it difficult to save because of the income that they receive.
Mr. John Redwood (Wokingham) (Con): Does the Minister accept that many people who receive pension credit do so because their private pension funds have been badly damaged by the Chancellor's tax increases? Does he accept that they do not regard as a solution an alternative pension policy that says they must work until they drop or sell their house to pay for their own pension? They do not want forced savingthey want their money back, as the Chancellor took it.
Mr. Blunkett: Perhaps I could lay to rest a misapprehension that Conservative Members have expressed throughout the afternoon when they have said that I have talked about people selling their own house. I was actually talking about realising a very large asset that someone has inherited from a relative. Like annuities, that asset could be realised when they wanted to spend the money. It is important that those people, as well as individuals considering their income in retirement, take that into account. If we could get that right we would all be a lot better off.
David Taylor (North-West Leicestershire) (Lab/Co-op): I acknowledge what the Secretary of State saidthat compulsory saving would reduce the call for pension credit to support income in retirementbut would it not be more effective still to implement the recommendation of the National Pensioners Convention that the basic state retirement pension be set at the basic pension credit level of £109? Would not that simplify everything and raise take-up as well?
Mr. Blunkett: I am not sure whether that would simplify everything. It would certainly ensure that we spent billions more on people who were well above the current pension credit limit, and it would do so at a time when the Government have had to spend £11 billion on compensation over the past 10 years, most of it98 per cent. of it since this Government were electedin sorting out the scandal of mis-selling that cost individuals and the nation a great deal, both in heartache and in hard cash.
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