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Lord Goodhart: I am most grateful to the noble Baroness. As to the use of age as a cohort, is it not the case that, because of women's greater life expectancy, a much higher proportion of the oldest pensioners are women and, therefore, an age addition helps not only the older pensioners but helps women disproportionately to men?
Baroness Hollis of Heigham: That is perfectly true. But the opposite is also true: we would probably do more to help poverty by giving all women pensioners, of whatever age, an increase of, say, £10, than to concentrate on the age cohort targets. It is arguable.
I have some serious information for the noble Lord. I respect the fact that the diagnosis is connected with age and with gender, and I accept the fact that because women live longer than men they are more likely to be single. I do not disagree at all with that diagnosis; the noble Lord, Lord Goodhart, and his honourable friend, Mr Webb, are correct. However, whenever one goes for a broad-brush approach such as a cohort--as we have found, for example, in urban renewal projects and the like--if one seeks to concentrate money on poor areas to overcome the problem of individuals claiming it, the difficulty arises that more than half of all people live outside poor areas. Exactly the same is true of the noble Lord's amendment and age additions.
Perhaps I may give him some figures on which he might care to reflect. The gap between age cohorts is far smaller than the income disparities within each age cohort. Let me give the facts. Let us take, for example, a single pensioner. The quintile--the bottom fifth of income--for single pensioners under the age of 75 is £70; for those over 80, it is £65. That is the gap for single pensioners. For couples the figures are similar: £133 for under 75s; £113 for those over 80. That is medium, quintile income; the net income before housing costs of pensioner units. So, by age, a gap between £133 and £113 in the bottom quintile for couples; and a gap between £70 and £65 for the under 75s and over 80s for single pensioners. That is the only difference one would pick up through age cohorts.
But when one looks within each age cohort, one sees that for couples under 75--the ones that are getting £133--the top fifth would be getting £457. Extend that to the over 80s: for the bottom quintile couples it is £113, the figure I have given, but, for the top fifth, £348 is the median income. It is the same for singles. As I said, the bottom fifth of under 75s would have a median income of £70; but the top fifth would have £224. As to the over 80s, the bottom fifth would get £65; the top fifth £195. In other words, the inequalities within each age cohort approximate to a ratio of three to one, but the gap in median incomes between each age cohort is 20 per cent, 40 per cent or 60 per cent, according to how one calculates the figures.
The policy of the noble Lord will not work. All it does is to pay some money to older pensioners who need it; it gives a lot of money to older pensioners who, given the figures, do not need it; and it ignores the poverty in younger pensioners, who need it but who will get nothing at all. There is more poverty within each age group than there is between age groups; therefore, as a result, any measure designed to tackle the poverty of pensioners by attaching more money to age will not be enough to help lift the poorest out of poverty; it will give a lot of money to those who do not need it; and it will neglect the poverty among poor pensioners, who will still need to claim MIG. The statistics do not sustain the noble Lord's argument.
I shall be very happy to send him a copy of the statistics--I am sure that the noble Lord and his honourable friends will want to look at them--but, given my explanation, I am afraid that his amendment will not work.
Perhaps I may give another example. Only 40 per cent of those over 80 are entitled to claim MIG; 60 per cent are not. Under the noble Lord's proposal, he would give them all a hefty lift. In other words, the greater inequality is within each age group rather than between age groups. I would suggest that the noble Lord's basic assumption is, therefore, invalid.
It would still be the case that the majority of those over 75 and over 80 would be above the poverty line as measured by access to MIG. Equally, even given these proposals, four-fifths of over 75s and over 80s who were previously on MIG, would still need to remain on it because the noble Lord's allowance would not be sufficient to float them off. I suggest that that is not the right way to help.
As I said, it could equally be argued that the money should be added for women. One would then have exactly the same problem; there would be greater discrepancies within genders than between genders age for age, quintile for quintile.
I accept that this is a generational problem; I accept that 75 and 80 year-olds will always be relatively poorer than 65 year-olds. But this will not be so much because of disparities in income but because they are more likely to be widows and, as the noble Lord rightly described, given their greater frailty, they are more likely to have higher expenditure. That gap is closing and will continue to close given our proposals for the state second pension.
Thus, my first criticism of the noble Lord's proposals is that they will not address poverty in the way he thinks that they will. The bulk of poor people will remain unhelped by his proposals--for example, those poor people who are aged under 75--and equally, in his method, he will be giving still more money to those who do not need it as opposed to those who do and, as a result, the poorest will still need a top-up.
My second criticism of his proposals is that he has identified what I believe to be a temporary problem which will be overcome by the state second pension and our proposals for that and for stakeholder pensions. However, to my dismay, he is proposing to fund those schemes--at least in the Steve Webb paper--by abolishing the state second pension and SERPS. That means of solving a temporary problem--and inadequately--removes the possibility of a permanent and proper solution. I have the paper here and I shall happily quote it to the noble Lord.
6 p.m.
Lord Goodhart: I never said anything about the abolition of the state second pension; it is not part of our proposal.
Baroness Hollis of Heigham: On the contrary, I have Mr Webb's proposals here and that is how he proposes
to fund it. I am very happy to give the noble Lord a copy of his honourable friend's document on which his amendment was based, but let him be in no doubt that that is how it is proposed to be funded. Therefore, to solve a temporary problem, the noble Lord is proposing to remove the possibility of a permanent solution. Indeed, to solve the problem of pensioner poverty at ages 75 and 80, he will add to it at 65. Under these proposals, far more pensioners (both younger and older) will come on to the MIG and then, of course, will have to be lifted off it again. That is not to mention that the natural consequence will be that if you abolish SERPS and the state second pension, you will have to remove contracted-out rebates, which is the equivalent of SERPS for private pensions, which will have a devastating effect on private pension provision. Stakeholder pensions will flop, additional private pensions would stop and many occupational pensions would be scaled back. I just wonder whether the noble Lord and his honourable friend Mr Webb have considered the read-across and what it would mean to occupational pensions, many of which are funded, as he will know, by the contracted-out rebates which bear the read-across from SERPS, which would be abolished under his proposals to fund schemes which would not address poverty as he believes they would.Although I accept the noble Lord's diagnosis of who the poor are, I would suggest that the MIG approach, which identifies poverty wherever it occurs--at 65, at 75, at 80, among women, among men, in London, in Lancaster--is a more decent way of responding to it than are any of the proxy poverty solutions, such as age-related rebates which, as I say, will not help the poorest but will give a lot of money to those who do not need it because income discrepancies are wider within each age band than between age bands. As a result, I hope that, on reflection, he will not wish to pursue this. What my noble friends have made clear tonight--and they are right--is that MIG is the right and decent way to identify poverty wherever it occurs, but we have an obligation to ensure it is claimed easily, transparently and simply so that every pensioner who is entitled to it receives it. In addition, we have a responsibility to those just above the MIG lines, whether through savings or modest earnings or income. That situation will be taken on board in our future proposals for pensioner credit. In that way, we will target poverty where it is, without stigma, without difficulty and without damage while not subverting the possibility of lifting future generations out of poverty, which is what our state second pension and our stakeholder pensions will do.
In the light of that additional information, I hope that the noble Lord will feel able not to pursue his amendments.
Lord Goodhart: The Minister has always been extremely eloquent on this matter. I welcome the support which the noble Baroness, Lady Greengross, gave to this amendment. I am disappointed, but not altogether surprised, at the lack of support from other
Benches. I entirely understand the position that the noble Baroness, Lady Castle, has taken. That is entirely consistent with the viewpoint which she has expressed throughout. So far as the position of my party is concerned, if the Government are unwilling to give any assistance on this particular point, it is very likely that we would--
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