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Mr. Philip Hammond (Runnymede and Weybridge) (Con): And two changes of Secretary of State.

Mr. Ruffley: And, as my hon. Friend reminds me from a sedentary position, after two changes of Secretary of State.

We also know that take-up of the benefits, which are the subject of the order, is low and needs to be higher. The latest statistics show that in 2002–03 alone, pensioners were failing to claim up to £2.9 billion in means-tested benefits. That low take-up might explain in part why 2 million pensioners are still living in poverty. That is not acceptable, and all politicians of good will find it so and want to come up with solutions to solve the problem.

The Minister told us in December that in relation to council tax benefit take-up, the Pension Service is ringing up pensioners in receipt of pension credit to encourage and help them to apply for council tax benefit and housing benefit, if they are entitled to them, in order to increase take-up. It would be useful if the Minister were to give us more detail than was available in December to explain what targets he has in relation to that statement, and what progress he expects.

As a direct result of the huge failure of many occupational schemes over the past seven years, many pensioners find that they do not have the resources and income for which they were hoping, and find themselves in poverty and relying on the benefits that are the subject of both orders. We know that the Chancellor, in his first emergency Budget of July 1997, raided pension funds to
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the then value of £5 billion a year. Under the Chancellor's watch, we have had a poorly performing stock market in this country relative to other mature, western industrialised economies, longevity has increased, which the actuarial profession—oddly, in my view—did not predict as well as it might have done, and more pension funds are closing. We were reminded, in a reply to my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), that more than 60,000 occupational pension schemes with a total membership of more than 1 million people have been wound up or have begun the process of winding-up since Labour took office in 1997.

Alongside an £800 billion black hole in public sector pension funds, and a £93 billion deficit in the pension funds of major businesses, those figures show that more and more pensioners face an uncertain future, and a future on benefit. Will the Minister give us his views on that, and share with us, as much as he is able to do, the Department's thoughts on the Turner proposals?

Let me remind the House of what the right hon. Member for Birkenhead (Mr. Field) said last year in relation to the issue of pensioners and their incomes:

That bears directly on benefit take-up and on the amount of money that many of the people who will be affected by the orders will take home, either in terms of in-work benefit or help when they are pensioners.

When this debate takes place at the same time next year, I hope that fewer people will be in dependency, and that fewer people will need support, either because they have got back into work or have been able to make arrangements in relation to their pensionable age so that they do not have low incomes and do not have to rely on benefit when they do not wish to do so. However, given the confused approach that the Government have demonstrated in relation to Turner, with the Treasury saying one thing and the Department for Work and Pensions saying another, and the gaping holes in the welfare reform proposals of the January Green paper, the major part of which will not take effect until 2008 in any event, my concern is that we might not see any change in the next 12 months, and that when we debate the issue again, too many of our fellow citizens will too often have to rely on benefits.

1.28 pm

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I welcome the chance to debate the orders before the House, which, like Conservative Members, Liberal Democrat Members will not seek to oppose.

In debates on this order in recent years, Members have complained about and discussed in some detail a perceived lack of overall strategy from the Government on issues relating to benefits and pensions. This year, with the welfare reform Green Paper and the second report of the Pensions Commission, it is fair to say that debate on the future strategy for pensions and benefits finally seems to be taking off. How far it will get off the ground, however, remains to be seen in the coming months.
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As a result of the orders, the UK basic state pension will be increased from £82.05 to £84.25. That is still well below the poverty line, and well below the level of means-tested benefits, such as pension credit, which, as a result of the orders—assuming that they are passed, and it sounds as though they will be—will be £114.05 for next year.

The Government's own figures, to which the Minister referred, show that 20 per cent. of pensioners in the United Kingdom still live in relative poverty. About 1.7 million are not claiming the pension credit—mentioned by the Minister, among others—to which they are entitled. Moreover, figures released last month by the Office for National Statistics suggest that about 2 million more pensioners are not claiming the council tax benefit to which they are entitled. I should like to know what further efforts the Government will make to promote take-up of those two benefits.

While the minimum income guarantee will increase by 4.2 per cent. in line with earnings, pensions will increase by only 2.7 per cent. in line with prices. Given the lack of take-up of some benefits, including pension credit, that approach means a continuing increase in the relative poverty experienced by the poorest pensioners. It should also be borne in mind that if the Government maintain their current policy, means-testing will extend to about 70 per cent.—some say 80 per cent.—of pensioners by 2050.

Owing to the structure of the pension credit system and the extension of mass means-testing, which was mentioned earlier, there will always be a group who fail to take up means-tested benefits. The system is imperfect, and that is one of its chief flaws. The more people depend on means-testing, the larger will be the group who are left in poverty through non-claiming. The growth in means-testing, which is not altered but perpetuated by the orders, also makes the benefits system more complex and gives people a powerful disincentive to save for themselves.

Last year, more than 50 per cent. of people of working age made no pension savings for themselves, relying almost entirely on their partners or the state to support them in their retirement. That is why the Liberal Democrats welcome many of the recommendations in the second report of the Pensions Commission under the chairmanship of Lord Turner. We agree with the report's basic analysis and its long-term vision of the pensions system. We want to work with all parties to build a consensus based on Lord Turner's proposals.

One of the jobs that I did before my election was working for the Britain in Europe campaign, which promoted British membership of the European single currency. There are certain worrying parallels between the Government's approach to pensions and their approach to Europe. The Minister recently announced five tests that he wishes to apply to pensions—there were five tests relating to the euro. The Minister told us earlier that the Government were promoting a great national debate on pensions—such a great national debate on the euro was promoted by the Prime Minister and, indeed, the Chancellor. Ultimately, the euro fell through the chasm between No. 10 and No. 11 and was kicked into
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the long grass, to remain there for many years to come—probably much to the appreciation of some Conservative Members.

Mr. Hunt : Does the hon. Gentleman agree that the outcome of the euro debate was the Government's adoption of a Conservative position? Might the pensions debate have the same outcome?

Danny Alexander: I see that we are trying your patience again, Madam Deputy Speaker, so I shall not respond to that intervention in too much detail. What worries me about the current approach is that, as in the case of earlier policies to which I have referred, the issue may not be resolved for many years because of political difficulties within the Government.

The Pensions Commission's report recommends the introduction of a more generous flat-rate universal state pension, to be paid to those who qualify on grounds of residency in the United Kingdom rather than on the basis of national insurance contributions. I wholeheartedly support that recommendation. Indeed, the Liberal Democrats have made a similar commitment to a citizens pension. We have costed proposals for its introduction in the context of a raised retirement age.

It is sometimes said—and such a conclusion might be drawn from the orders—that the state can no longer afford to pay a decent and universal pension, and people must therefore provide for themselves. While I believe that people must indeed provide for themselves, I also believe that they should benefit from a much larger basic state pension. After all, ours is the fourth wealthiest economy in the world. I believe that if we can forge a national consensus, people will support the measures that will be necessary to pay for a more sensible, coherent foundation for pensions provision.

We support Turner's proposal for a universal state pension at a level that will lift all pensioners out of poverty. I hope that Members throughout the House will join us in rejecting the mass means-testing of pensioners that the orders encourage and would perpetuate, to ensure that every pensioner is given his or her full entitlement.

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