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Kate Hoey (Vauxhall) (Lab): It is always good to hear politicians admit that they were wrong, and the Conservative party has admitted that it was wrong to take the link away initially. If there were a Conservative Government in the next two years, would they be committed to restoring the link immediately?
Mr. Waterson: We are, of course, not committed to restoring it immediately, because we are currently in opposition. We hope that, by the time of the next election, the Government will have come clean about when they are going to restore it. I cannot say what will be in our next manifesto; all I can do is refer the hon. Lady to our last manifesto, in which we did promise to restore it. The message is clear. If people had voted in a Conservative Government at the last election, we would already be implementing the measure. Incidentally, I did not admit that we were wrong to break the link; I just said that I would not go into the history.
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Mr. David Drew (Stroud) (Lab/Co-op): I thank the hon. Gentleman for being so generous. Given that the Conservatives made such a commitment in their last manifesto, they have obviously done calculations on the anticipated cost. One has to roll that forward, and it would be useful to know what—
Madam Deputy Speaker: Order. I remind hon. Members that we are discussing new clause 7.
Mr. Waterson: I am delighted by all this close interest in our next election manifesto. When the time comes, the hon. Lady and hon. Gentleman will be among the first to know.
I, however, am talking about this Government and the Turner package. The more we read and reread the final report of the Pensions Commission—one has nothing better to do, I suppose—the more it is clear that all these things hang together, including, as I said earlier, increasing the state pension age. One can see the arguments for that in isolation. However, these matters were not proposed in isolation. They formed a carefully organised package of measures, including restoring the state pension’s link with average earnings.
What makes it easier for Ministers is that we have already legislated on the issue. The great thing about this job is that another pensions Bill is always just around the corner. Section 5 of the Pensions Act 2007 sets out the mechanism to restore the link and how that could be calculated. No further legislation is required and no Government time in the House need be allocated. That being the case, why have the Government been so coy about making the announcement? One has to wonder whether they propose to go into the next election campaign without making it. To follow up the point made by the hon. Member for Vauxhall (Kate Hoey), whatever may or may not be in our manifesto, I have a sneaking suspicion that, one way or the other, the issue will be in the Government’s next election manifesto.
Given that pensioner poverty is on the front pages and an issue in our advice surgeries and mail bags to such an extent—because of the other issues crowding in on the already stretched budgets of pensioners—why do the Government not say something now? That is the point of new clauses 7 and 16, which are almost identical in what they are trying to achieve.
Help the Aged’s briefing on the debate says:
“Help the Aged therefore supports the amendments brought forward by Kate Hoey MP to bring forward the planned date of relinking pensions to earnings.”
There is no credit for us, but there we are. There is a general feeling that the issue needs to be tackled, and tackled soon so that people at least know where they stand. The National Pensioners Convention has made the point that, sadly, some 3 million pensioners will have passed away by 2015. Even if the Government are not going to restore the link tomorrow or the day after, giving people the certainty of knowing when they intend to do it would be welcome.
Sir John Butterfill: If one were feeling very cynical, one might think that the link with earnings, as opposed to prices, rather depends for its efficacy in delivery on whether prices are going up faster than earnings or vice versa. Perhaps the Government cannot make up their mind about which will go up faster and are hedging their bets.
Mr. Waterson: As my hon. Friend says, one would have to be cynical to take that view. I could not possibly comment, save to point out the historical fact that one of the myths surrounding the earnings link is that pensioners were worse off for ever after 1980 because their pensions were not going up in line with earnings, whereas there were years when prices were roaring ahead, until we got them under control.
If there is a legitimate reason for holding up this announcement, it can be only because of the Government’s worries about the economic and fiscal future over the coming months and years. They have done their sums on what all this would cost; those figures are in the public domain and have been for some time. If Ministers now feel that it will not be affordable because of other problems in the economy, they should come clean, as well as telling us why they will not make the announcement at this precise moment.
There is so much consensus on this issue that there is almost identical drafting between our new clause 7 and new clause 16, which was tabled by the hon. Member for Newcastle upon Tyne, Central (Jim Cousins), among others. On reflection, I am more attracted to his new clause than my own. It was my intention, subject to what else might be said in the debate, to withdraw new clause 7, but to seek, if possible, to press new clause 16 to a Division. I will be interested to hear whether the hon. Gentleman is sufficiently reassured by the honeyed words of the Minister not to wish to press new clause 16, but even if he were, perhaps I may say at this stage that I would intend to seek permission to do so myself.
Paul Rowen: 1 August this year represents the centenary of the introduction of the state pension. I can think of nothing better that this Government could give people than for a Minister to be able to announce, when we go to the TUC national pensioners convention in Newcastle in June, that the Government are restoring the earnings link.
That would only be a first stage in restoring the value of the pension to where it should be. However one looks at it—I quoted these figures in the debate on the National Insurance Contributions Bill last December—the value
of the pension as a percentage of earnings has declined. In 1950 the pension was worth 18.4 per cent. of average earnings; today it is worth 15.9 per cent. When we look around Europe, as the hon. Member for Eastbourne (Mr. Waterson) said, we see that we are the poor relation. Why should we be compared with the likes of Cyprus and Latvia? We consider ourselves to be the fourth largest economy in the world, yet we are unable to give our pensioners a decent state pension. Our state pension is worth only 45 per cent. of pre-retirement earnings compared with 57 per cent. in Germany, 75 per cent. in Poland and 105 per cent. in the Netherlands.
It is high time that the Government restored the link and got the value of the pension back to what it should be. I know that the Minister will reiterate, because we hear it whenever we raise this issue, “Well, there’s pension credit,” but as he knows, 40 per cent. of all eligible pensioners do not claim that. It is also far more expensive to administer. It is much easier to give people what they are entitled to, and have earned, without making them go through what many of them perceive to be a demeaning process of being means-tested to get what they have worked for all their lives.
We should be doing this. We have had a commitment from the Government, but it is open-ended. We want to set a date. As the hon. Member for Eastbourne said, this provision was agreed in last year’s Pensions Bill. The Minister will ask how it is to be paid for. National insurance contributions are in credit at the moment, and there is absolutely no reason why that surplus money cannot be used to restore the link. It can happen now, and I want the Government and the Minister to give a clear indication that it will. If we vote on nothing else tonight, we should divide the House on this new clause to see whether the Government’s commitments and promises are more than warm words. I give notice that if neither new clause 7 nor new clause 16 is pressed to a vote, we will want to press our new clause 21, because we believe that the Government have had enough time to deliver on this commitment, and we want to see it implemented now.
As I said, this would only be the first stage. We want a citizens pension. Instead of setting the bar at which pensioners can have an income at £30 below the poverty line, as is currently the case, that bar should be set at the poverty line. The Government have made a commitment on child poverty. It is a testing target, but in the last two Budgets they came forward with proposals showing that they are delivering. Why can the Minister not deliver on this promise? These people have worked all their lives for us; many of them fought during the second world war to ensure that we could be here now. They deserve that right. It is wrong to say that another 3 million of them are going to die before the promise is kept. It must be kept now, as is appropriate in the state pension’s centenary year. The Minister could not deliver a better speech at the TUC national pensioners convention in the constituency of the hon. Member for Newcastle upon Tyne, Central (Jim Cousins) than to say, “We’ve delivered on our promises.”
Jim Cousins: Let me begin by saying that nothing is more glorious to God than a sinner that repents, even if, as in this case, the sinner is a Conservative. If we have achieved consensus on this issue, now is a good moment to put that into effect.
I pay great tribute to my right hon. Friend the Member for Barrow and Furness (Mr. Hutton), because in many respects the package consisting of this Pensions Bill and the Pensions Bill that preceded it last year is very much his package, implementing the findings of the Turner commission. I have no doubt that he saw the restoration of the earnings link as being a vital part of that package. In his opening statement on these issues, he referred to the long-term damage caused by the eroding effects of our present system of indexation of pensions. The restoration of the earnings link is an absolutely essential component of the credibility of the Government’s new pensions proposals in the Bill regarding personal pension accounts. The credibility of personal pension accounts depends on the restoration of the earnings link so that people are assured that they are not paying money into a scheme whose ultimate effect will be simply to save the Government money, in the form of the benefits that they would otherwise have received.
Another important part of the package is that by restoring the earnings link we build a bridge between tomorrow’s pensioners, who we hope will benefit from the introduction of personal pension accounts, and today’s pensioners, who in every other respect do not benefit from the proposals in the Bill. The restoration of the earnings link must not be delayed. It is essential for the delivery of the Government’s pension reform package, and it must not be subject to the daily volatilities of the political and economic environment in which we all operate.
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The hon. Member for Eastbourne (Mr. Waterson) mentioned that for the Government the reintroduction of the link to earnings would be subject to affordability and the fiscal position. The current situation is a little different from the one that we were in last year. There is more uncertainty about the fiscal position of the Government, and when we see their accounts at the end of the financial year, we will see, rather remarkably, that they have observed their fiscal rules simply because a large number of people who were entitled to means-tested benefits did not claim them, thus saving the Government money. That is a difficult situation for any Government.
The point must be made that the longer the restoration of the link with earnings is delayed, the more today’s pensioners will end up in relative hardship and depending on the complex rules of pension credit. Indeed, the provision in the previous Pensions Act that pension credit should increase in line with earnings, even when the basic rate of state pension does not, has now become a machine that remorselessly, year by year, draws larger numbers into a state of dependency on means-tested benefits. Once they get there, there is no possibility of retrieving the situation. Parliament should not allow that to continue.
Of course, we ought to seek simplification of tax and pension credits. We may well have an opportunity to consider some of those issues quite soon, which would be welcome. But in the meantime, we have to protect people from being drawn into dependency on means-tested benefits where that is not necessary. Let us recognise that the people who do not claim the means-tested benefits to which they are entitled are often old people—often women—who live on their own in social isolation. It is entirely wrong that we should not move to protect such people.
A commitment to link pension credit to earnings, and to set a date for the announcement before the next general election, not after it, is absolutely necessary. That is the purpose of new clause 16, which will also have another benefit. If it is adopted in the launch period leading up to the introduction of personal pensions accounts, when people read about those accounts in the newspaper and the financial sections of the popular press, they will be reassured that they are reading about a valid, reliable, predictable and sound addition to their ultimate savings and income. If we fail to act quickly, many younger people will for years—perhaps for ever—be put off the new pension system we are trying to put in place.
I welcome the fact that the hon. Member for Eastbourne has decided not to press new clause 7 to a vote, because it would tie the hands of the Government too tightly. It would mean forgoing some of the other benefits in the Bill to which we have not referred this afternoon, such as the introduction of a much longer assessed income period for people who are on pension credit. That provision was in clause 81 of the original Bill—I am afraid I do not know what clause it is in now. I would not want to forgo such provisions, which would be a consequence of the hon. Gentleman’s new clause.
It is the right moment to reconsider this issue. We should reconsider it before the next general election, not after it. Indeed, when the Government originally said that they would consider the issue early in the next Parliament, many people, including myself, assumed that that next Parliament would be rather closer to us than it now seems to be. That is another reason for trying to reconstruct the terms of the debate as my right hon. Friend the Member for Barrow and Furness left it. I offer new clause 16 to the House in the name of myself and my hon. Friends. We have discovered during recent days that as Back-Bench Members of Parliament, we are a very low form of life.
Jim Cousins: It is better than the alternative.
We are a fairly low form of life, and the accusation is often made that we fail to spot issues at the right time, and that we fail to press matters to a conclusion when it is right and proper to do so. I look forward to hearing from my hon. and learned Friend the Minister; I hope that he will completely reassure me. I ought to let him know before he speaks, however, that I have learned during the past few days that if an issue arises and we do not press it to some sort of conclusion, we may be making a grave tactical error. I do not wish to make that mistake. As a Back Bencher, I have two alternatives: to try to cut a deal, or to put down a marker by having a vote. That is my position and that of my hon. Friends right now. I look to my hon. and learned Friend to reassure me and guide me in the right direction.
Kate Hoey: I shall be very brief, because I have lost my voice, but I wanted to add my support to new clause 16, in the name of my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), to which I too have put my name.
It is good to see so much unanimity in the Chamber. The only people who are not part of it are probably the Minister and the Whips on the Front Bench—but I
hope that we shall hear something different. I am sure that the Parliamentary Private Secretary is a great supporter of this idea, but he is in a difficult position. I hope that the Minister will listen to our reasoned proposal—one that sends a signal that we mean what we say. We mean to restore the link before the point when many people who are now pensioners will not be around to see it happen. As has already been said by the hon. Member for Rochdale (Paul Rowen), to do so in this centenary year would be a remarkably well-chosen and well-received statement of this Government’s commitment to pensioners, and all that they have done.
I hope that no one will say that we cannot do this because we cannot afford it. We can afford it, and we can afford to do it soon. It is crucial that the announcement be made as soon as possible, so that we go into the next general election knowing that we have done what we said we would do.
Kelvin Hopkins (Luton, North) (Lab): I, too, rise to support my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), who spoke in moderate and reasonable terms. I only wish that I could be as moderate and reasonable, but I feel passionately about this matter, and I believe that it is time that we put our house in order on pensions.
The point has been made that many of today’s pensioners will die before the link is restored, even if it is restored in 2012, although according to the qualifications even that is not definite. It could happen at the end of the next Parliament—we all hope that Labour will be returned to power—and that could be as late as 2015.
Also, as my hon. Friend said, if the link is restored later, the plateau at which it is restored will be lower, so more people will have been drawn into means-tested components of the pension, which is unacceptable. The earlier the link is restored, the higher that plateau will be.
Lynne Jones: In response to my earlier intervention, the Minister said that if the earnings link was not restored, 60 per cent. of pensioners would be subject to means-testing. That is bad, but surely the current situation is unacceptable, too. We cannot wait until 2012.
Kelvin Hopkins: My hon. Friend is right, but I would go further. I do not agree with means-testing as part of the pension. I want it eliminated entirely, with a quick restoration of the pension for everyone, to at least the minimum poverty level and beyond. We ought to consider restoring the pension for all to the level that it would have reached had the earnings link not been broken. That means that the pension would be roughly 25 per cent. of average earnings—40 per cent. higher than the current level. Even then we would still have one of the lowest pensions in the whole of Europe, and certainly in western Europe. Our basic state pension is disgracefully low. We must do more than just restore the link; we must go beyond it and look towards a much higher, non-means-tested basic state pension.
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