Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Stallard: My Lords, before the Minister sits down, I have a further question to ask him. The noble Viscount did not mention the reason for the 1992 clarification. That clarification was to preserve the openness of the green belt. That has suddenly become inappropriate. Apparently, the Government do not

20 Feb 1995 : Column 993

preserve the openness of the green belt. That is an about-face. Why was that decision taken? The Minister said nothing on that point.

Viscount Ullswater: My Lords, the clarification in 1992 was given in order to help overcome something which the people who were interested in developing in green belts were finding very difficult. Then, subsequent to that, a revision of PPG2 was undertaken in 1994. I do not accept that the clarification given in 1992 was sufficient to demonstrate that no clarification after some 40 years of PPG2 being in existence was the end of the matter. Therefore, a full revision of PPG2 was undertaken, with a great deal of consultation resulting from research which was carried out in 1993. The answer is that which was published last month.

The Earl of Lindsay: My Lords, I beg to move that the House do now adjourn during pleasure until a quarter past eight.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.7 to 8.15 p.m.]

Pensions Bill [H.L.]

House again in Committee on Clause 114.

The Earl of Clanwilliam moved Amendment No. 184:

After Clause 114, insert the following new clause:

("Level of pension to be limited on basis of other taxable income

. After section 43 of the Social Security Contributions and Benefits Act 1992 there shall be inserted the following new section—
"Level of pension to be limited on basis of other taxable income.

43A. Notwithstanding the provisions of this or any other enactment, there shall be an upper limit on the total amount of retirement pension payable to any person, such limit being determined on the basis of that person's other taxable income as specified in the following Table—
Other taxable income Maximum level of pension
Under £12,000 100%
£12,001—£14,000 80%
£14,001—£16,000 60%
£16,001—£18,000 40%
£18,001+ 20%.").

The noble Earl said: In moving Amendment No. 184 I wish to speak also to Amendment No. 200. The Committee may be relieved to hear that Amendment No. 200 states that the section shall not come into force until 6th April 2010. There is therefore no immediate danger of any revolution with regard to that amendment.

It is a fact that state pensions are regarded by some not only as an article of faith but also as a statutory right, and that everyone is entitled to a state pension which they have paid for throughout their working lives. The fact that they have not paid for it throughout their working lives, but have merely paid for other people's pensions is beside the point. It is perceived that they

20 Feb 1995 : Column 994

have a right to this provision. People understand that the state pension is graduated according to the contributions that have been paid.

No one should misunderstand me. I fully understand that there is a strong feeling that the pension is considered to be a right. Nevertheless, the real world marches on and it is accepted on all sides of the political spectrum, with the exception of those who have a conviction that the economy will grow faster than the population will age, that the state pension will be an increasingly intolerable burden on the working population in 20 years' time who may be asked to pay not the 10 per cent. of National Insurance contributions that they are now required to pay but probably 20 per cent. or more. It is a general misconception that the economy will grow faster than the population will age. This amendment is designed to relieve that pressure on the working population. This is only a parting shot across the bows of those who will retire from 2010 onwards. This is therefore a probing amendment.

The figures in the amendment are perhaps not entirely accurate. I have prepared some alternative figures to those which appear on the Marshalled List. It is possible that the starting range could be anywhere from £12,000 onwards. Where the figures on the Marshalled List show large and sudden drops of income, that could be relieved by reducing the range by 2 per cent. per £100 or 2 per cent. per £500. According to the Inland Revenue statistics and economics office, 89 per cent. of people who are in receipt of pensions have less than £12,000 a year. Therefore only 11 per cent. of the pensions population would be affected by an amendment to their income that would reduce from the figure of £12,000 onwards. As I say, the £12,000 figure could start at any point one wanted, but it would reduce the pressure upon the working population. I beg to move.

Baroness Turner of Camden: I am obliged to the noble Earl, Lord Clanwilliam, who was kind enough to tell me in advance about the amendment that he intended to move. I do not believe that he was at all surprised to learn that we on this side of the Chamber would have great difficulty in supporting it. The reasons are clear.

We do not want to see a further erosion of state pension provision, which we believe the amendment would bring about. That is not to say that we are opposed to a partnership between public and private provision. I strongly supported the legislation introduced in the mid-1970s which was designed precisely on that basis. I agree with the concept of two-tier pension provision—a basic pension payable to everyone irrespective of their income and a second-tier pension provided either by SERPS or a good occupational pension scheme.

In my view, the amendment of the noble Earl, Lord Clanwilliam, undermines that system still further. It may be argued that we have to cut down on state provision because of cost or demographic changes, but in my view pension provision is a form of contract between the generations. Once, perhaps, that contract was filled by the extended family, which was expected to look after old people. However, we have long passed that stage.

20 Feb 1995 : Column 995

We now have a situation in which it is up to the community to provide for basic pensions. It is because it runs against that concept that I cannot commend the amendment of the noble Earl, Lord Clanwilliam, to the Committee, although I must confess that it is very innovative, given the philosophy that lies behind it.

I believe that we have to maintain a basic pension provision which has been paid for by national insurance contributions. I still support the insurance concept originally introduced by Beveridge all those years ago, which still has validity nowadays. I hope that the Government do not support the amendment. I certainly cannot commend it to the Committee.

Lord Dean of Harptree: The Committee owes a great debt to my noble friend for thinking the unthinkable and speaking the unspeakable. That certainly would not be possible in another place where, understandably, Members have to think about being re-elected. I would be very surprised if my noble friend the Minister warmed to the amendment at this time. Perhaps in a hundred years time the situation will be different. Nevertheless, this is a serious point which is worthy of a short debate, even at this late hour.

In 1948, when the national insurance scheme was introduced and extended to virtually everybody, very few people, apart from those in public service, had occupational pension schemes on which to rely. There were the thin '30s when the possibilities for savings were very limited. The situation now is completely transformed, very much to the good. I am told by my grandchildren that we now have a phenomenon called Woopies (well off old people). That does not apply to everybody, of course, but nowadays a growing number of people retire with the national insurance pension, an occupational or public service pension and also savings which they have managed to accumulate during their working lives.

Therefore, my noble friend is right to ask whether it is really necessary any longer for those comparatively well-off pensioners to be an obligation on the state. The answer to that question is no. How does one achieve that? My noble friend would achieve it by a means test for everybody, which would be extremely unpopular. My noble friend will realise the implications for the re-election of our party at the general election were his proposal to be introduced.

Having said that, this is a serious point. The time could well arrive—probably later rather than sooner—when we ought to reconsider whether the Beveridge approach is still necessary and whether it is appropriate that those who are comparatively well off in retirement should place this great obligation on the state and the large and ever-increasing social security budget, to which my noble friend the Minister has referred on more than one occasion during these debates.

Lord Mackay of Ardbrecknish: This has been an interesting debate. My noble friend Lord Clanwilliam has approached the issue of retirement pensions from a different point of view from the normal one.

In general terms our policy on pensions has three strands. First, we are pledged to maintain the value of the basic state pension in line with prices as a solid

20 Feb 1995 : Column 996

foundation for all in retirement. Secondly, we wish to encourage personal responsibility for additional pension provision through occupational and personal pensions. Thirdly, we wish to focus additional resources on the safety net of income-related benefits to help those without other income.

It is often argued, and my noble friend argued this evening, that the £25 billion that we spend on pensions is poorly targeted. Some people think it wrong that contributors should fund pensions for millionaires and believe that state pensions should be withdrawn from richer retirees. While the proposed measure would clearly save money and target payment to less well-off pensioners, it was only five years ago that we abolished the earnings rule that applied to the basic retirement pension. I can tell my noble friend that we do not intend to introduce such a measure, even by the route he outlines in his amendment. It would be extremely unpopular. A means test of the kind he suggests could act as a disincentive to individuals to provide for their retirement and it would penalise pensioners who have made private provision for an adequate retirement income or who choose to continue working after state pension age.

Other measures in the Bill—and we shall come to some of them later this evening—are being introduced to help to ensure that the basic pension entitlement is affordable as it stands for future taxpayers. We maintain that the basic pension should act as the foundation of pension provision.

My noble friend's methods of dealing with the problem are ingenious, especially the proposal he puts forward to reduce the effect of the "cliff edges". We have tried to think what it might mean financially. Without working up a detailed scheme and making a number of assumptions about future incomes, because it would be difficult to take the future of SERPS into account, if such a scheme were introduced today and applied only to the basic state pension, we think tentatively that savings at 1995-96 prices would be around £900 million out of a budget of £27.8 billion. Taking account of the tax loss, the PSBR effect would be around £600 million per annum. Means testing on the scale envisaged is administratively complex and would be expensive to run.

I am grateful to my noble friend for encouraging me to turn my mind to this particular way of looking at the problem of pensions in retirement, but I believe that the basic state retirement pension is highly valued in this country. We are looking at different ways to address the problem of affordability. In addition, people who receive larger incomes in retirement as mentioned in my noble friend's amendment are liable to pay income tax on that income. Therefore, there is a certain amount of clawback in that regard.

With those few words, I hope that my noble friend will be able to withdraw his amendment.

Next Section Back to Table of Contents Lords Hansard Home Page