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I have made that point a number of times, and time and again I have heard about affordability. As I have said in such debates before, when my children were young my son would occasionally ask for another ice cream. My wife would say, “But mummy can’t afford it.” What she was saying was not that she could not
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afford another ice cream, but that she chose not to pay for one, because she did not want him to have one. Affordability is something that we can decide. We can decide that something is necessary and make the necessary payments for it.

The basic state pension is far too low. It should not be means-tested and it should never have had the link with earnings broken. I want our Government to start building towards a much more decent state pension for the future.

John McDonnell (Hayes and Harlington) (Lab): I rise only because my hon. Friends have been so moderate in their language. I want to get on the record the strength of feeling on the matter. I do not think that the Government have recognised the grievance and anger that pensioners in our communities feel. I still find it astounding that after 11 years of a Labour Government 2 million pensioners are living in poverty, partly because they cannot find their way through the labyrinthine system to the income, benefits and credits to which they are entitled, in order to take them out of poverty.

When Labour was in opposition and Mrs. Thatcher broke the link, I can remember campaigning on the streets, exposing what would happen. My hon. Friend the Member for Luton, North (Kelvin Hopkins) has demonstrated that the income going to pensioners has eroded over time—now they are losing out on £30 a week at least—and that that has impacted on their standard of living, exactly as we predicted. I do not know what other hon. Members have experienced in their constituencies, but I have met pensioners who at times forgo turning on their heating in winter, even with the fuel allowances, who do not live on diets that we would expect the average person to enjoy, and who are cutting their quality of life as a result of not receiving an adequate income. Part of the reason, exactly as has been explained, is that we are forcing such pensioners on to means-tested benefits.

7.45 pm

When we raised the issue with the Chancellor of the Exchequer, now the Prime Minister, the argument was, “Well, tax credits are there, and even though it’s complicated, there’ll be advisers in the Department for Work and Pensions who’ll be able to assist them in claiming those benefits.” But those advisers are not there, because we have just sacked 30,000 of them. That assistance is no longer there for many pensioners, who struggle to understand the system and as a result struggle to gain the necessary income.

I do not understand what is preventing us from making an announcement to address the issue. I would like that done tonight, and if not, at least for the Minister to give us a time scale over the next six months. The arguments might be about financial costs, but the estimate is £300 million to £400 million a year. The surpluses in the national insurance fund have already been mentioned. It is ironic that we can find up to £100 billion overnight to bail out banks that have speculated, received massive bonuses and made significant amounts from profiteering, yet we cannot find a relatively insignificant sum for pensioners—I do not even want to talk about what we are spending on wars, in Iraq and so on. Those are the issues that pensioners put to us when
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we are on the stump: that we can find resources for non-productive expenditure, but that pensioners always seem to be last in line.

I would like to hear the clear message from the Minister tonight, which we can take back to the National Pensioners Convention and other pensioner organisations, and to pensioners in our constituency, that we will redress the wrong once and for all, and do so expeditiously. Otherwise, people will feel a sense of betrayal. We said in opposition that we would address the issue, but 11 years’ wait is too long. We have tried the patience of our supporters in the pensioners movement who put us into government in 1997 and have supported us since. I hope that we get a clear message.

I congratulate my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins). If he presses this matter to a vote, I will march proudly through the Lobby in support of new clause 16 and in support of pensioners in this country.

David Taylor (North-West Leicestershire) (Lab/Co-op): My hon. Friend congratulated our hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), who brought to the surface the fact that the tax credit argument does not work, because of the high level of non-take-up, particularly at the older end of the spectrum. Is my hon. Friend attracted by the idea of the Government announcing tonight that they will increase the additional pension at 80, which currently stands at 25p a week, by £8 or £10 a week, as an inexpensive interim gesture of good will? That would be affordable and would help to hold the fort for some of our oldest pensioners.

John McDonnell: I am indeed attracted to that idea, because I suggested it in the Budget debate last year and the year before.

On the issue of non-take-up, I have met the staff of the Public and Commercial Services Union who administer such schemes. Part of the problem—I return to this—is that we have identified a consistent level of non-take-up over the past five years of between 38 and 40 per cent. That is a result of the complexities of the system, but hon. Members should also not underestimate the stigma that is still attached to means-tested benefits. People do not want to sit down and display all their private income and private doings. As has been mentioned, we are talking about a generation who have a fierce sense of pride. They are right to be proud of what they have gone through, in constructing the welfare state after the second world war and giving most of us the opportunities that we have taken, from a decent education system, a decent health system, housing and so on. They have a sense of pride in what they have achieved and they do not want to be demeaned by being forced through the means-testing system. As has been pointed out, we now face the prospect of 60 per cent. of them being forced into that process if the system continues as it is.

I appeal to the Government tonight to give us a definitive statement. Let us expedite this matter and put it to rest. Let us right the wrong that the previous Conservative Administration inflicted on our community.

Mike Penning: I want to talk briefly about what the hon. Member for Hayes and Harlington (John McDonnell) mentioned a moment ago: the question of pride. Sadly, I lost my grandfather last year. He was 93 years of age.
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He had never in his life had what he described as a handout until he became a pensioner. Then, he was expected to go cap in hand and ask for a benefit. Why should that be? This is not just about pride or about opening up one’s documents; it is not just about complicated forms. It is about the simple principle of what that generation paid in and what they are entitled to. I was not a Member of Parliament when we broke the link—I think that I was still serving in the armed forces at the time—but I am proud that my party has accepted where we need to be today.

The delay worries me enormously, however. The actuaries in the Department know full well what is coming. They know full well that, as incomes drop as we get into a difficult economic situation, the gap will close. So, if and when this measure eventually comes through during this Parliament, the cost implications will be even greater. We might even find ourselves in a situation in which more people— [ Interruption. ] The Government Whip makes a comment from a sedentary position. He did not have the guts to have a moan at the Labour Members who had the courage to stand up for their constituents, but he thinks it is quite funny and jovial to have a chirp at a Conservative MP for standing up for the pensioners in his constituency. I am proud of my constituents. I am very proud of my grandfather, who would not go cap in hand to get a mean-tested benefit. He survived in his own way and worked until he was in his early 90s.

Jim Cousins: May I urge the hon. Gentleman not to provoke the Whips Office? There is absolutely no need to do so. The Whips have been entirely reasonable today, and if he provokes them, goodness only knows what will appear in next Sunday’s newspapers. [ Laughter. ]

Mike Penning: As a humble Back Bencher with not much experience in this House, I will bow to the hon. Gentleman’s experience. I will not provoke the Whip in the House again, but privately, behind the Speaker’s Chair, I shall tell him what I think of him.

Mr. Mike O'Brien: In 1997, we inherited a system that worked against the needy, leaving millions in abject poverty. Many were forced to get by on just £69 a week. There is never enough money to sort out all the problems and ensure that everyone is given the resources that they would wish to have, but this Government have made it a priority to help all pensioners through a number of policies, and in particular, to lift the poorest pensioners out of poverty. We have succeeded in lifting 2 million people out of poverty, and that is a significant achievement of which we can be proud.

Today, no pensioner need live on less than £124 a week. The figure is £189 for a couple. In 1997, the state pension did not recognise the important contribution of women and carers. In private provision, millions of employees, especially those on low incomes, did not have access to a workplace pension scheme. They were therefore likely to have to rely only on the state pension in retirement. We are tackling some of these issues with a historic series of social reforms which have to be seen as a whole. We have created the Pension Protection Fund and the Pensions Regulator, and made changes
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so that the state pension provision gives equality to women and carers, and we accept that those will have significant costs to the Exchequer.

An essential part of those changes is to restore the earnings link. My hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) was absolutely right to say that the provisions in the Bill are dependent for their success on the restoration of that link. The figures that I cited earlier were an understatement. It is actually the case that, unless we restore the link to earnings, we will end up with up to 75 per cent.—not 60 per cent.; I was saying that from memory—on means-testing. Restoring the link will reduce the number on means-testing and increase the number who are able to benefit by having the basic state pension as the basis of their retirement income. Those who are on pension credit will be reduced to about 30 per cent. by 2050.

We are hoping to put together a package which, as result of these changes, will ensure that pensioners have a better deal in the longer term. My hon. Friend is absolutely right to say that the Bill should be seen as a whole and that the restoration of the earnings link is an essential part of the package that will ensure that pensioners get a better deal in the long term.

If we had continued the policies of the previous Conservative Government and continued to pay people the kind of appalling basic state pensions that they were paying, we would—if this had been only about money—have had £11.5 billion to spend on something else. However, we chose to spend that extra money—in addition to the money already being spent: a total of £76 billion—on pensioners, because we regard them as a priority. I wish that we could suddenly come up with more, but we cannot. What we have to do is manage this process and put in place a series of reforms to secure a better situation in the long term for pensioners in this country.

We made a legislative commitment in the Pensions Act 2007 to restore the link. We have put beyond doubt our intention to restore it. During the next Parliament, we will re-link the uprating of the basic state pension to average earnings. Our objective, subject to affordability and the fiscal position, is to do that in 2012 or, in any event, by the end of the next Parliament at the latest. That is the bedrock on which our reforms are built, and its introduction is non-negotiable.

We have always said that, in uncertain economic conditions, we need flexibility around the timing of the introduction of the link, and colleagues will understand the circumstances and conditions that I am talking about today. The Pensions Commission has said that a short delay would not unduly affect the outcomes of the reform package. We need to take the right decisions for pensioners, for taxpayers, for the economy and for the long term. We have to balance all these things.

My hon. Friend has requested a decision on the earnings uprating in the pre-Budget report, and we have discussed the importance of keeping an eye on affordability and on the fiscal position, and on taking the right decisions for pensioners, for taxpayers, for the economy and for the long term. I understand the keenness to hear the date of the introduction of the earnings link. Let me put beyond doubt our commitment to reinstate the link. That is not just my guarantee; there is a legal obligation, and we will stick to it. [Hon. Members: “When?”] I have already said that it is our objective, subject to affordability
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and the fiscal position, to do this in 2012 or, in any event, by the end of the next Parliament. That is what Ministers have been saying very clearly, and I have gone further today by making it clear, as a result of the contribution by my hon. Friend the Member for Newcastle upon Tyne, Central, that we see the restoration of the link not just as something that is desirable in itself—because that lot got rid of it, we want to restore it—but as part of a broader package of which it is a foundation stone.

Kate Hoey: I understand what the Minister is saying, but referring to the point raised by my hon. Friend the Member for Luton, North (Kelvin Hopkins), will the Minister tell us in a simple way what he means by affordability?

8 pm

Mr. O'Brien: My hon. Friend has been a Member long enough to know that what happens in the Budget and, for that matter, the pre-Budget report is that the Chancellor looks at the public finances, the state of the economy, what income he has coming in and what extra expenditures, if any, he is able to provide. He has to make a judgment—

Paul Rowen: Will the Minister give way?

Mr. O'Brien: Just a moment; let me deal with my hon. Friend’s question. The Chancellor has to make a judgment about the appropriate time to take certain steps. In this case, unlike any other I can think of for the moment, we have made a statutory obligation, binding the hands of the Government at a future date, to take a step that they must take. We have taken that unprecedented step because we regard it as so fundamentally important to the structure of the pensions reform programme that we are undertaking.

Paul Rowen: Will the Minister tell me why, if the national insurance fund is in surplus, there is a problem with affordability? Surely he could deliver it now.

Mr. O'Brien: Although the national insurance fund gets money in, it would not be sufficient to deal with the particular expenditures going out as a result of the change. That will have to be provided by the taxpayer. There is a surplus in the theoretical national insurance fund, but once it is spent, it is gone. It is just gone; that surplus will be spent fairly quickly. Although there will be some money coming in, the amount will not be sufficient to pay this off. In the end, it has to be a political judgment taken by a Government to say that it is a sufficient priority for them to ensure that, year on year and in the long term, pensioners are better off. We need to identify the time for that in the context of the overall state of the economy and the way in which public finances are going. We need to see how we can put all that together as part of a package. Our package involves the state changes coming into place in 2010, after which we will put in place further changes in the private sector in 2012. They are important changes.

Mr. Drew rose—

Lynne Jones rose—

Mr. O'Brien: I give way to my hon. Friend the Member for Stroud (Mr. Drew), and then I must make some progress.

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Mr. Drew: I thank the Minister for giving way. We all heard the point made by my hon. Friend the Member for North-West Leicestershire (David Taylor) that the group who will inevitably lose out the most are older pensioners, because for all sorts of reasons they will not see the benefit of the retying of the earnings link. Is there some possibility, given the surplus in the national insurance fund, of targeting that older group, not necessarily through the Bill? The Government ought to be considering that group. I wonder what my hon. and learned Friend has to say about that.

Mr. O'Brien: As my hon. Friend is aware, we have made the provision of help for older people a key part of our expenditure. In the recent Budget, announcements on the winter fuel allowance prioritised pensioners because of the circumstances arising from increased fuel costs. The Budget means that next year’s winter fuel payments will increase to £250 for households with someone over 60 and £400 for those with someone over 80. That is a significant contribution to older people’s winter fuel bills.

As my hon. Friend will be aware from his own constituents, we have also made it a priority to introduce funding to ensure that older people have free bus passes from 1 April. It is also the case that we have introduced things such as free eyesight tests and free TV licences for the over-75s and we have outlawed age discrimination. We have taken a whole series of steps showing that this Government regard older people and pensioners as a priority—not only in financial terms, but by making changes to how our society operates and dealing with discrimination against older people in the work force. I am working at the moment on another small but symbolic step to ensure that we have an older people’s day to show our respect for their role and contribution to our society. All those things are part of our commitment.

John McDonnell rose—

Lynne Jones rose—

Mr. O'Brien: I give way to my hon. Friend the Member for Hayes and Harlington (John McDonnell), and then I propose to move on.

John McDonnell: We are still trying to tease out the Government’s thinking on why they will not move on this measure. Will the Minister explain—or even give a reference or place information in the Library—the Government’s calculations and assessment of the impact of this level of expenditure on the overall economy? What macro-economic impact would it have if the new clause were accepted? Most of us believe that it would actually have a directly beneficial economic impact not just on individuals but, by increasing demand and thereby expenditure, on the overall economy. At the same time, will the Minister give us some indication of the actuarial calculations of how many existing pensioners will not benefit from any change of policy by 2012 or 2015 because they will no longer be alive?

Mr. O'Brien: The additional cost of earnings uprating of the basic state pension from 2010 in 2007-08 prices is as follows: in 2010, £0.8 billion; in 2011, £1.5 billion; in 2012, £1.6 billion; in 2020, £2 billion. Those expenditures will have to fit within the overall context of the Budget that the Chancellor has to look at.

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