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Kevin Brennan: Will the hon. Gentleman give way?

Mrs. Annette L. Brooke (Mid-Dorset and North Poole): Will my hon. Friend give way.

Mr. Webb: I shall give way to the hon. Gentleman and then to my hon. Friend.

Kevin Brennan: I shall be grateful when the hon. Gentleman eventually answers the point made by my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) as to whether it is the policy of Liberal Democrats—the Tories' little helpers tonight—to link the pension to earnings over time.

Mr. Webb: Earnings indexation of perhaps a couple of per cent. a year more than inflation—[Interruption.] Of course we do not know what it would be, but we have to make an assumption. If that figure were added to a pension of, say, £75 a week, that would be £1.50 a week in the first year. I am talking about a rise proposed in our manifesto not of £1.50 but of £10 a week, and the £2 billion that the Government are spending would be another £15 a week on top of that. That is vastly in excess of earnings indexation.

We are not proposing across-the-board earnings indexation—we did not in our manifesto and we are not tonight. We are proposing something that goes much further, and would achieve what the hon. Member for

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Birmingham, Selly Oak referred to for the over-75s. I freely admit that that would not apply to all pensioners. One reason why that is so difficult is the chasm that the Government have opened up between the basic pension and the means test. There is a huge and growing chasm, and our priority is to get the pension up, particularly for the over-75s, to the level of the means test. The critical advantage is that people's savings would not be taxed at 40 per cent., as the Bill proposes—it would not be taxed at all. They would get the full benefit, and that is the real incentive to save.

There is one other incentive to save built into our proposals and the amendment.

Mr. Dismore: Will the hon. Gentleman give way?

Mr. Webb: I did promise to give way to the hon. Gentleman in a moment, and also to my hon. Friend the Member for Mid-Dorset and North Poole (Mrs. Brooke) but let me first pursue this point.

Suppose that, as the hon. Member for Hamilton, South said, someone cannot afford to save a lot, but can save a small amount. At the age of 65, if they convert that money into an annuity, it has to last the rest of their life. The insurance company has to cover itself against the possibility that that person will live to 90 or 95, so annuity rates are very poor at present. However, if that annuity had to last someone of 65 not for the rest of their life but until they were 75, at which point a decent basic pension at the rates we are talking about cut in, it would be worth double what could be bought under the present system. Instead of people saving and then buying an inadequate annuity that would not lift them clear of the means test—in which case they would not bother—they would have the opportunity to save for an annuity of twice the size. That is another savings incentive built into this scheme.

Mr. Dismore rose

Mr. Webb: First I will give way to my hon. Friend the Member for Mid-Dorset and North Poole.

Mrs. Brooke: I thank my hon. Friend for giving way. Does he agree that the very best way to help pensioners is to have a system that is clear, easy to understand and sufficiently generous? Labour Members claim that if the Bill is not supported tonight, pensioners will suffer, but the Government are not proposing the best way in which to help our pensioners, particularly the most vulnerable.

Mr. Webb: My hon. Friend is right. The sums that we are talking about, added to the basic pension for the over-75s, would make a real difference and would give thousands and thousands of pensioners the opportunity to be clear of means-testing altogether.

Mr. Dismore rose

Mr. Webb: In a moment.

I can guarantee Labour Members that, given the choice between tapers, thresholds and credits or a decent pension, I know which every one of my constituents would want.

Mr. Darling: Some time I must find time to visit the academic institution from which the hon. Gentleman

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comes—he seems to be making up his policy on the hoof. Can he explain one thing to me? He says that by taking the £2 billion from the pension credit and adding it to another £3 billion that has been conjured up from somewhere—we know not where—he would tell the over-75s, "Have another £15 a week." I understand that part of his argument, but what does he say to someone who is 67 and is poor?

Mr. Webb: As the hon. Member for Havant (Mr. Willetts) said, we all agree that there must be a continuing role for a safety net. There is no disputing that—there must be a continuing role for means-testing. I hesitate to use a new Labour phrase, but we are talking about whether means-testing should be for the few and not for the many. That is the difference between us.

Mr. Dismore: Will the hon. Gentleman give way?

Mr. Webb: Yes, the hon. Gentleman has been very patient.

Mr. Dismore: I am grateful to the hon. Gentleman for giving way to me at last. Under his theory, a millionaire in Mill Hill would get an extra £25 a week but someone on minimum income guarantee in Burnt Oak in my constituency, where half the people are on means-tested benefits, would not get one penny more—even though the paperwork might be clearer. How can the hon. Gentleman justify giving so much more money to people who do not need it while the people who really need it do not get a penny more because they are on minimum income guarantee?

Mr. Webb: The hon. Gentleman has not been paying attention. The minimum income guarantee does not come under the Bill, so rejecting it will not take a penny off his pensioners who claim the minimum income guarantee. They would continue getting whatever they got under the previous arrangements. The millionaires in his constituency pay 40 per cent. tax so we would claw that back from the richest pensioners.

Mr. Dismore rose

Mr. Webb: Perhaps the hon. Gentleman would do me the honour of listening to my reply before he intervenes again.

What does the hon. Gentleman have to say to the one in three pensioners in his constituency who have been promised largesse by the Government but will not claim it because the system is so complicated? That is the question that he has to answer.

We have heard that this is means-testing with a human face. People aged between 60 and 65 will be subject to means-testing, as at present, every week. Any change in circumstances has to be reported, so for 60 to 64-year-olds, it is business as usual. However, the hon. Member for Newcastle upon Tyne, Central referred to the over-60s. The savings credit does not apply to the over-60s. Hundreds of thousands of women will have heard the Secretary of State saying on television or on radio that the Government want to reward thrifty

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pensioners. Some 62-year-old women might think of themselves as pensioners and they might think of themselves as thrifty, but the Secretary of State does not count them until they are 65. That is another group missing out on the Government's proposals.

As for whether these measures are an incentive to save, the House does not have to take my word for it. The Pension Provision Group is an organisation set up by the Secretary of State's predecessor, consisting of the great and the good of the pension world, to provide independent expert advice on pensions. The group, to which the Government apparently listen, said of the pension credit:

Help the Aged said:

The Minister was quite rude about Age Concern although he has representatives of the organisation on his taskforces. I do not know what they think about that. Age Concern says:

That is what it is for—it is the only reason why it is in the Bill.

The Government have been known to speak well of the IPPR, which said:

I love a good theory, and I bet the scheme looks very good on a whiteboard at the Department of Work and Pensions, but—

The theory is lovely. The bar charts look great. The practice falls short.

We have been told that people will be reassessed only every five years, so that is all right, but it is not all right if they get worse off in those five years. Let us suppose, hypothetically, that their Railtrack shares are worth less—or worthless. Their capital falls, so their imputed income falls and their entitlement rises. They have to make a fresh claim to get all the money that they are entitled to.

The Secretary of State said that pensioners' circumstances do not change much—but if they have investments or the husband dies, they do. Earnings can fluctuate in retirement. The idea that people will be reassessed once every five years and be left alone between times is a myth.

If the Secretary of State wants to intervene to tell us what estimate he has made of the proportion of people who will have to claim again within the five-year period, I will be delighted to give way, but of course the Government have made no such estimate. This will not work in practice.

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