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Mr. Tim Boswell (Daventry): Does the hon. Gentleman—or my hon. Friend—agree that it is a remarkable thing that until now the benefit system has been predicated on a weekly need to be and the tax system on an annual capacity, but now the Government are overleaping both by suggesting that five years is the

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appropriate period? Not only will people whose income has fallen get less than they should, unless somebody flags it up for them—as is to be done on the internet, apparently—but people who have received a windfall will not have it taken off them unless they choose to disqualify themselves.

Mr. Webb: The hon. Gentleman is right to point out the anomalies in the Secretary of State's proposals.

The Secretary of State touched on the new pensions service. I note that it is a pensions service, not a pensioners service, because it is driven by the Department's desire to save some money by doing as much as possible through call centres, although most pensioners would like to see a human being and do not want to talk about complex personal financial details down the phone or fill in a complicated form.

We have had no joy in getting a response from the Department to a serious question. The Department wants everything to be done by phone as first preference. There are to be some house visits, presumably for the infirm, which is fair enough, but what if someone wants to talk to a real human, face to face? Will that be possible, without notice, and if so where? The suspicion is that face-to-face interviews in the local benefits office will no longer be possible. If there is a monthly surgery at the local Age Concern or citizens advice bureau, that is okay, but it is not the service that pensioners want.

The Secretary of State had a bit of fun about my choice of bedfellows, but I could not help noticing that his bedfellow was Lord Fowler, who was Secretary of State for Social Security for many years under Mrs. Thatcher. The Labour party did not seem to have much time for his opinions then, and he is applauding the Government today only because they have adopted a mass means-testing, Thatcherite approach.

The savings credit neither rewards those who save today nor encourages people to save for tomorrow, and I urge the House to reject it outright.

7.24 pm

Paul Flynn (Newport, West): Like all hon Members, I am familiar with the problems that the Bill is intended to solve. We have all had bewildered pensioners at our surgeries saying that they saved and made sacrifices to pay into a small works pension all their working lives, on low incomes, but find that in retirement their pension is not worth a penny to them because it is at a level that does not allow them to take an income from it but disentitles them to other benefits. There is clearly a problem, and the Government are to be congratulated on trying to solve it, but there are clear arguments against the Bill.

I warmed to what my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) said about national insurance. It is one of the rewards of being in this place that if we keep saying the same thing year after year, eventually people will listen. It was heartwarming to see the IPPR report, "A New Contract for Retirement". To our astonishment—and its own—it advocates raising the basic pension to the level of the minimum income guarantee.

The minimum income guarantee was a piece of branding. All Governments have indulged in that, as with national assistance changing to supplementary benefit and

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then income support. They have always found new labels that they hope will be more acceptable. The minimum income guarantee is the old income support, topping up the basic pension, but it was a good presentational move. If we have a criticism of the Bill, it is that it errs on the side of presentation. I dread the future, when pensioners come to our surgeries because the presentation made them think that they would get the true benefit of all their pensions but they have found that the true position is very different.

The head of the IPPR said:

He also said:

In general, we do support that, but targeting resources is an imprecise activity. The winter fuel payment is targeted on those of us of an appropriate age, as it arrives in royal palaces and elsewhere. It is difficult to get targeting right.

We should consider the state of the national insurance fund. My hon. Friend the Member for Newcastle upon Tyne, Central asked why on earth it is not a fund that is separately run, with managers who can invest and be paid according to the fund's profits. That would be far better. If the national insurance fund were a true fund, so that the pensioners who had paid in could get their reward, we would be in a very different situation. At present, people on low incomes are being defrauded of their money. The basic unfairness is that those on the lowest income pay the largest proportion in.

Furthermore, there is another new wheeze. Although Conservative Members complain a great deal about the effect of green taxes, in fact £1 billion has been lost to the national insurance fund because of allowances made to industry by cutting their national insurance contributions to compensate them for those taxes.

Let us consider the state of the national insurance fund. Is it on the rocks? Is it in trouble? In fact, it is in a very healthy state and has been for some time. The balance at the end of 2000 was equivalent to 41 per cent. of the benefits payments throughout the year. There is an in-built safety level of 16.7 per cent. of the contributions made, which has to be guaranteed in case there is a slump, with rising unemployment, but in 2000 the figure was 41 per cent. and things have improved steadily since then.

The 2002 report shows an opening balance of £19 billion and an income for the year of £59 billion, or £2.4 billion more than the estimate, but the closing balance is expected to be 47.7 per cent. of benefits payments, or £24 billion—a huge surplus again. The 2002 report gives a forecast for next year and states that receipts are expected to exceed payments by almost £3.4 billion, producing a closing balance that would be 52 per cent. of benefit payments—a surplus of £27 billion. We are entitled to ask about that enormous unneeded surplus, which would be enough to make a substantial increase in the basic pension.

Some of my hon. Friends have objected and said that the means test is okay, that it is a relic of the past that has no effect, but it has a profound effect. As has been said,

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between 500,000 and 600,000 people are put off, presumably by the means test. That figure is robust and has not been denied. It has been around for a long time, and there is a very good reason for it. This is a generation thing that might not be easily understood, perhaps, by those of a different generation who have not experienced the ignominy of claiming benefits.

A generation of people are proud to say that they have worked from the time that they left school at 14 and have never been on the dole or claimed any benefit. When they get to retirement age, they say, "I've paid my dues and done everything that I should", and they view claiming for income support as the act of a scrounger. In their view, those who claim it humiliate themselves. That view is deep-seated. They will not take such a step, having spent a lifetime of self-respect on their own earnings. A large group of people are in that position.

I have heard no one deny that the Bill will result in an increase in the number of people who claim means-tested benefit to 5.4 million, which amounts to half the pensioners involved—a very high figure. We should not regard that as trivial or automatic. There will be great resistance to claiming the pension credit, however it is given.

I have been impressed by the evidence from the various bodies. In particular the National Pensioners Convention has made a serious case. Although it supports many of the wishes expressed in the Bill, it wants the Bill to be simplified and changed in many ways. I hope that, in Committee, the Government will show a little humility about the Bill's deficiencies.

It was heartening to hear tonight that earnings will be taken into account as a disregard. That is profoundly important because pensioners now aged 60 or 65 seem a great deal younger than those of their parents' generation and, to have a healthy time, the most beneficial and therapeutic thing that they can do is work, but there is an enormous disincentive in the scheme to stop that happening.

The official Opposition are in a position of great weakness because of their atrocious period in government. I reminded them tonight that much happened in 1980. Lord Fowler, who has been mentioned, was the man who wanted to wreck the state earnings-related pension scheme, but could not do so because the insurance industry did not want the low earners to be landed on them. That Government encouraged people to leave very good-value occupational pension schemes and to enter the extremely poor-value private personal pension schemes.

I vividly remember Baroness Thatcher telling me, when I asked her a question when she was in government, that I was against personal pensions because, as a socialist, I was against choice. Unfortunately, people had to make a choice under a bribe; they were told to leave the scheme and that they would have £5,000 if they remained in SERPS. They were told, "Don't be a SERP" and not to accept that amount. How many of those people now bitterly regret that they abandoned their good-value occupational schemes to enter money purchase schemes?

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