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House of Commons

Thursday 10 May 2001

The House met at half-past Eleven o'clock

PRAYERS

[Mr. Speaker in the Chair

PRIVATE BUSINESS

City of London (Ward Elections) Bill (By Order)

Order for further consideration, as amended, read.

To be further considered.

Oral Answers to Questions

TREASURY

The Chancellor of the Exchequer was asked--

Pensioner Incomes

1. Mr. Eric Joyce (Falkirk, West): If he will make a statement on the impact of his budget on the incomes of pensioners. [159873]

The Chancellor of the Exchequer (Mr. Gordon Brown): As a result of our personal tax and benefit changes in Budgets since 1997, pensioner households will be on average £600 a year better off. The basic pension has increased from April by £5 a week for single pensioners and £8 a week for couples. I can also confirm that we value the winter allowance, the Christmas bonus and free television licences for over-75s and that they will be retained. We will reject options that put at risk the basic pension.

Mr. Joyce: Does my right hon. Friend agree that the interests of pensioners in my constituency could only be grossly damaged by the Tories abysmal plans for pensions--

Hon. Members: Order.

Mr. Speaker: Order. The hon. Gentleman's question is out of order.

Mr. Michael Portillo (Kensington and Chelsea): Does the Chancellor of the Exchequer really believe that pensioners--people who have lived a very long time--are going to be fooled by a pension increase that he gives them just before a general election? Will not pensioners' enduring memory of this period of office be that they were given a miserly 75p by the Chancellor of the Exchequer? Was that not only one of a series of major gaffes that the Chancellor has made, and is it not the case that he has

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started this election campaign with a series of gaffes on tax and public spending that have left his economic policy in disarray?

Mr. Brown: What the electors of this country remember is that the right hon. Gentleman was in the Treasury when VAT was put on fuel. Let us consider what has really been happening in the past few years. First, there was the winter allowance, which Conservative Members opposed. Secondly, there were free television licences for the elderly, but Conservative Members opposed them. They also wanted to abolish the Christmas bonus, and they do not want the pension credit.

This morning, the shadow Chancellor said on television, "You are perfectly right that if people choose to take the option to move out of paying into the national insurance fund, there would not be as much money to pay current pensioners. So we have to fill the pump, and we can do that by a variety of ways, but for a start by selling gilt. Some of you will have spotted that if people are moving out of the national insurance fund there will be a hole in it. Yes, that is true."

So now we know that not only do Conservative Members oppose the winter allowance, free television licences, the pension credit and the Christmas bonus, they are putting at risk the very basic state pension by their proposals to allow people to opt out of the basic pension and to privatise it. They would run up massive borrowing and debt. They are not competent on pensions, and they are not competent to run the economy.

Mr. Portillo: No one will believe that nonsense from the Chancellor, but people will remember him as being completely insincere, completely ineffective and completely irresponsible. He is the Chancellor of the Exchequer who was elected to deal with the welfare state, and he was the man who said that he would reform welfare. However, now that the Opposition have made a proposition to make future generations of pensioners much better off and remove the liability on future generations of taxpayers to pay taxes into the future, all he can do is try to make cheap political points.

It is the Conservative party that has the courage to look to the future and the idealism to aspire that future generations of pensioners should be better off. He is the Chancellor of the Exchequer who, by taxing the pension funds and by drawing ever more people into means-tested benefits, has ended up with 700,000 more people living in poverty.

Mr. Brown: It is very interesting that at the last Treasury Question Time of this Parliament, the shadow Chancellor cannot answer the question that has been put to him--[Interruption.] This morning, when the shadow Chancellor was asked on television how he would finance the basic pension in future years as a result of proposals that would allow thousands, perhaps millions, of people to opt out of the basic pension, his only answer was, "Well, we would have to discuss that with financiers. It might be bonds. It might be any system."

After four years in opposition, Conservative Members come to the electorate with pension proposals for people to opt out of the national state pension, that would raid the national insurance fund and put pensions at risk for

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millions of pensioners who are now insecure as a result of those announcements by Conservative Members, yet they cannot tell us how they would fund their proposals.

I will tell the House who the losers are: in Kensington and Chelsea, 12,000 pensioners are benefiting from the rise in the state pension; 13,000 are benefiting from the winter payment; and 6,000 are benefiting from free television licences. The Conservatives cannot be trusted on the economy; they cannot be trusted on tax; and now they cannot be trusted on the basic state pension.

Mr. Portillo: The Chancellor has been peddling this nonsense all morning. Nobody believes him and he might as well give it up as it will not run. In just one respect, however, he was getting near the truth: the next time we meet across the Dispatch Box, I will be answering the questions. I will introduce a novelty to the House in respect of the past four years as I will answer the questions.

In opposition, the Chancellor told us that he would end means testing for elderly people. He has wantonly increased the numbers of people who live in poverty and have to come cap in hand to the state in order to get a living wage and to pay the stealth taxes that he has imposed on them. Our alternative agenda is to allow pensioners to keep more of their money. We will never forget that it is the pensioners money. It is not the Government's money, the Chancellor's money or Gordon Brown's money. It is the people's money and we will allow people to keep more of their own money. We will increase by £2,000 the amount that pensioners can keep before they pay tax. Does not the Chancellor agree that that will be a winning policy with pensioners in this country?

Mr. Brown: What I agree on is that the Conservatives have put in their manifesto a proposal that millions of people could potentially opt out of the basic state pension. That would mean that the national insurance fund would not have the money that was necessary. The Conservative Centre for Policy Studies has calculated that to be £6 billion. The Actuary has calculated it as £6 billion within three years. The question that the Conservatives must now answer is how they will fund the national insurance fund contributions that are necessary for the basic state pension without cutting the basic state pension or running up massive borrowing. When asked this morning whether he could fund the basic state pension, all the shadow Chancellor could say was, "I will have to discuss this matter with financiers. It could be bonds. It might be any system." So Conservative Members, some of whom are making a valedictory appearance, will have to explain--and we will get down to the detail--in every constituency in the country how their opt-out plans can go ahead without raiding the national insurance fund, putting the basic pension at risk or running up massive debts and massive borrowing that would have to be paid for with higher interest rates. Although the shadow Chancellor refuses to answer the question today, and Conservative Members have now fallen silent, they will have to answer that question in each constituency up and down the country.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney): May I suggest that my right hon. Friend ignores the rantings of the shadow Chancellor and spends his energy

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and effort on developing the pension credit? A fully developed earnings-related pension credit could be the future new deal for pensioners in constituencies such as mine.

Mr. Brown: I am grateful to my hon. Friend and I applaud the work that he has done during his parliamentary career in support of pensioners and employment in his constituency. He is absolutely right. The Conservatives opposed our plan for the new pension credit. Nor is it supported in their manifesto. They are against the winter allowance and free television licences; they are against the minimum income guarantee and the pension credit and now they propose putting the basic state pension at risk. If that is the Conservative pledge for pensioners, I doubt whether they will want to give it out to pensioners in any constituency.

Mr. John Redwood (Wokingham): Why should any pensioner trust this Chancellor when he has just stung elderly people in care homes with a new stealth VAT charge which will cost some of them more than the miserly 75p a week increase in the pension? Will he promise to abolish it? Will he support abolition and will he apologise to all the pensioners who will be stung yet again by his dreadful stealth charges?

Mr. Brown: That is completely incorrect. I would have thought that the right hon. Gentleman would have wished to acknowledge the authorship of the opt-out pension plans. After all, he and others wrote pamphlets in the 1980s saying that people should opt out of the basic state pension. He is now controlling the policy of his Front Benchers from the Back Benches, but he, too, will have to answer to his constituents. Why does he put the basic state pension, the winter allowance and the pensioner credit at risk? Each Conservative Member will have to answer those questions.


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