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Baroness Hollis of Heigham: The figure represents the extra spend by government. It not a consequence
of any alterations in tax regimes which "de-formed" the spending and investment patterns of private pension schemes.
Lord Higgins: We say simply that there is £6.5 billion of extra spend and that £6.5 billion, roughly speaking, has been taken away from private pension schemes, which are suffering as a result. So, apparently, no net change has taken place at all.
Baroness Hollis of Heigham: The noble Lord has far more experience of Treasury matters than I, but he will know that changes in taxation, such as whether taxes such as ACT are changed or abolished, or whether corporation tax is reduced, do not make his argument any more valid than if he were to say that extra moneys gained from reductions in corporation tax, making our corporation tax lower than anywhere else in Europe, are ploughed back to employers and thus "stolen" from pensioners. The noble Lord knows perfectly well that it is not possible to make an argument for read-across of that kind.
Lord Higgins: I do not accept that for one moment. The reality is that the effects of the changes in the tax regime by this Government have reduced the available funds which private pension schemes previously enjoyed by roughly the same amount as that by which the noble Baroness has told us that the Government have increased payments to pensioners. People in occupational schemes are just as much pensioners as people in state schemes.
I have only one final point, and it is the only one the noble Baroness, Lady Castle, omitted; that is, we have this huge government windfall of £22 billion from mobile phone licences; what are the Government intending to do with it? They intend to reduce borrowing. That will hit annuity rates still further and have an even more adverse effect on pensioners.
Baroness Greengross: Perhaps I may say how grateful I am to the noble Baronesses, Lady Castle and Lady Turner, for giving us another opportunity to debate state pensions. Again, I must still declare an interest in that I work for Age Concern.
First, I recognise that the Government have introduced measures which help people. They are very welcome and have made a big difference to the poorest pensioners. The rise in capital limits for income support from April of next year will especially benefit those with a small amount of savings. In fact, every year since 1988 when the current limits were set, I have written to successive Chancellors suggesting that they do this. So I am pleased that the Treasury listened, even though it took a long time.
However, time and again people say to Age Concern that what they really want is a decent level of state pension and the choice as to how to spend their money. We know now about the anger and disappointment people felt at the 75p increase this year. That is why I agree with the noble Baronesses that both the level of the basic pension and the current uprating system are unacceptable.
Older people were promised that they would share in the rising prosperity of our nation. Not everyone is, despite the good things the Government have done. The poorest benefit from above-inflation increases in means-tested help, and the minimum income guarantee, but only if they claim it. It is good that the Government are launching a take-up campaign to find the 750,000-odd people who are missing out. But if the pension had been raised last year to £75, the same as the MIG level then, a take-up campaign would not have been required.
Restoring the link with earnings would be one popular way of addressing the problem. But I am the first to recognise that it is difficult to turn back the clock. There may be other ways of assessing overall increases in living standards, particularly for the poorest pensioners. Last month, Age Concern published a new report from the Family Budget Unit arguing cogently for minimum income standards for older people and, despite the difficulties, I should like to see the Government investigate the use of budget standards to establish what income levels people need to achieve an adequate standard of living. Such assessments, regularly updated, could provide an important guide as to how much pensions and benefits should be uprated. They could include all types of income as I realise that although the state pension may be £67.50, many pensioners receive more income from additional pensions, savings, the MIG, winter payments, rebates on council tax and so forth. But for working families and single-parent families, and even for older workers, figures are now quoted for their minimum, taking account of the working families' tax credit, the New Deal and so on.
Can the Minister give that idea some thought for those who are already retired? I know she will say that the MIG is one part of an older person's minimum income standard, but this year it starts at just over £78 a week. That is just £4,000 a year. The research by the Family Budget Unit suggested that an older person aged 65 to 74 needed between £99 and £125 a week, which is why Age Concern suggested that the state pension should be at least £90 a week now.
Another way forward might be to link future increases in the pension more realistically to the cost of living increases for older people. If the RPI as a way of determining the pension rise does not work--it patently does not for older people--perhaps we need to think of another way. Over the years there has been much talk of a pensioner index. Could the Minister ask her officials seriously to consider something that gave greater weighting to council tax, utility costs or transport costs, things which form such a large part of older people's outgoings, or perhaps the link to GDP, which is one idea on which Age Concern published a report a couple of years ago?
I know that the Minister will refer in her response to the pensioner's credit, which is very good news. It is intended to help those with modest savings and, in particular, those with small occupational pensions, many of whom miss out at the moment. I very much
welcome this aim, though I am unsure as to why it cannot be implemented in April 2001. Perhaps the Minister could enlighten me in that respect.I, along with the vast majority of Britain's older people, believe that an improved basic pension is the most effective way of achieving the goal. As I said, a higher pension is also the best way to improve the income of the very poorest pensioners; namely, those entitled to income support who do not claim. Finally, a commitment to maintaining and improving the basic pension--if one of those ways could be chosen to do so--would give a firm foundation on which future pensioners could build up a decent income in retirement, together with state second pensions and stakeholder pensions. If we could achieve one of these aims, I think that we could say in this country that there is a standard of living for pensioners which we can, if not take pride in, at least be satisfied is really fair.
9.45 p.m.
Lord Brett: I listened to those who have spoken thus far and some points have been made with which I have more than a little sympathy. I agree with my noble friend Lady Turner. Under our arrangements for capping increases in pensions in relation to private sector schemes, I fail to see how it is possible for pensioners to have done so much better than people on average earnings. I also agree with my noble friend Lady Castle. Many pensioners felt insulted by the 75p increase.
I was "on the knocker" in local elections, which was not a pleasant experience when I met anyone who was pensionable. However, it was not a case of people saying, "Oh, this should be related to earnings", or, "We don't like it related to prices"; it was simply the fact that the amount of money produced by the formula was deemed to be insulting. That was the real issue, which never got beyond an argument.
It seems to me that my noble friend Lady Castle was a little unfair in her use of statistics. She did not seem to include other factors that the Government have taken into account during the past three years to assist pensioners; for example, concessionary fares, the change in taxation policy, free eye tests, and so on. Indeed, there is a whole series of things that cannot be left out of the equation.
Going back some years, I remember when the Secretary of State was my noble friend Lady Castle and the earnings related link was introduced. It made every kind of sense then because at that stage the vast majority of people had no provision other than the state pension. Indeed, it was something like two to one in favour of people having a state pension and only one-third--a minority, a privileged elite--having a scheme that was organised through the employer or in some other way. That situation has just about reversed itself now: 25 years later, we have two-thirds of people in occupational pension schemes.
We are not looking at pension policy revision for tomorrow; we are doing so for 25 and 30 years hence. Therefore, it would be wrong to ignore those features.
In that sense, it is a question of asking ourselves what we will be doing in 30 or 40 years' time in a globalised economy as regards ensuring that everyone has an adequate pension. Therefore, in much of what the Government are seeking to do, I can see that they are endeavouring to protect pensioners with lower incomes. I do not want to get into a rich versus poor argument as regards pensionable income over the past 20 years. But, because we have paid people better at the higher levels of our society than those in basic employment, there has been a much greater extension, a stretching, of pensionable pay between those who are more than adequately pensioned (I include myself among them) to those who have a real need. The question we should be considering is: how can we best assist those in need? It seems to me that we should see such features as the minimum income guarantee, the working families' tax credit and, indeed, a number of these other measures as a package.
Although I should like to see the satisfaction on many people's faces if we were to restore an earnings link, we must ask ourselves whether that is the best policy in the long term; in other words, is it a policy that we can sustain? Moreover, is it one that the pensioner of 2020 will actually need? All those considerations lead me to believe that, if we were re-inventing pensions, we would not be looking for an earnings link. We would be looking for a portfolio of pensions, somewhat similar to that being put forward now, with a degree of state provision and a greater degree of private provision.
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