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The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle): I agree with the hon. Member for Daventry (Mr. Boswell) about one thing, and that is that we have had an interesting debate that has illustrated, among many other things, a massive gulf between our own aims as a Government and the views of the ragbag of opposing parties that are supporting the reasoned amendment. In contrast to them, we are determined to provide all pensioners with a decent and secure income in retirement, by concentrating on promoting fairness, rewarding thrift and targeting the most help on those who need it most, the poorer pensioners. The widening income gap which was our inheritance from 18 years of Tory pension policy makes that the right thing to do.
Meanwhile the Torieswe have heard this again this eveningare committed to privatising the basic state pension and washing their hands of any obligation to ensure fair and adequate pensions for everybody in retirement. The hon. Member for Sutton Coldfield (Mr. Mitchell) called it pension plus mark 3. He is writing the policy, so he should know.
We have had the usual demonstration of rank opportunism from Liberal Democrat Members. That is familiar to all of us who encounter the cynical campaigning methods of Liberal Democrats at a local level. I am sure that Conservative Opposition Members will agree with me about that. They steal some Labour policies and add a dash of uncosted aspiration while agreeing with Tory criticisms. Yet again they are trying to appeal to everyone by claiming that they can conjure better outcomes out of the air with the same amount of money. That is the usual sleight of hand that we expect from them.
We had the most incredible flight of incomprehensible mathematical fantasy from the hon. Member for Northavon (Mr. Webb). Perhaps that is why the hon. Member for Winchester (Mr. Oaten) says that the Lib Dems are positioning themselves to the right of Labour while Lord Ashdown bemoans them being stranded to the left of Labour. The right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) says that they are not left of Labour and not right of Labour. It will take all of the higher degrees of the professor, the hon. Member for Northavon, to sort that one out. Of course, the confusion is part of the trick. We still do not know whether they are committed to cutting tax or increasing it. How can anyone believe a word that they say?
Our approach is the correct one. We want to keep the basic state pension as the foundation of security in retirement but we want everyone who can save towards a second pension to do so. The pension credit assists us in achieving that aim by rewarding those who have saved,
That is in contrast with the Tories, who spent 18 years targeting billions of pounds to induce people to opt out of state provision, only to stimulate massive mis-selling of private pensions. It is not what I call looking after the vulnerable; it is more like looking after the wide boys.
I shall answer some of the points raised in the debate in a minute, but before I do I want to look at why we need to help poorer pensioners most; it goes to the heart of the points about the means test, and we have heard a lot about that. It is due to the record of the Tory party after its 18 years in charge of pension policy. We are still trying to right the wrongs that it created. Labour Members are not going to forget that it is an appalling legacy.
Over those 18 years, the newly styled party of the vulnerable over on the Conservative Benches deliberately, and as a result of their smash-and-grab ideology, dismantled vast swathes of state support for pensioners. My hon. Friend the Member for Stalybridge and Hyde (James Purnell) set it out excellently. The Tories impoverished one in three of our pensioner populationthat was 3.5 million people.
That was not the accidental result of impersonal market forces and global economics. It was the deliberate choice of the Conservative party. It expected a pensioner to live on £69 a week. It cut the value of the basic state pension by £20 a week in real terms and offered no compensating measures. It slashed the value of SERPS not once but twice, while spending billions of pounds bribing people out of it and rewarding the mis-selling of inappropriate private pensions to almost 3 million people. It was responsible for slashing the value of inherited SERPS in half and then not bothering to tell anyone, a debacle that it has left us to put right. It left 10 million women who were without proper provision with no alternative but poverty in old agenot much help for the vulnerable there. It introduced VAT on fuel at 8 per cent. and tried to increase it to 17.5 per cent. As a result
Maria Eagle: By 1997, there was an ever-widening gap in pensioner incomes, with the bottom fifth of pensioners[Interruption.] Conservative Members do not want to hear this, but Labour Members are not going to forget. The bottom fifth of pensioners saw their income rise by only 20 per cent. in 18 years, while the top fifth had a 70 per cent. boost, and they were better off to start with. The richest 10 per cent. of pensioners had five and a half times more income than the poorest 10 per cent.
It was not just pensioners who were impoverished by the last Tory Government. The number of people living in poverty trebled: it went from one in 14 of the population to one in four. The number of children living in poverty increased from one in 10 to one in three. It was the worst and most shameful record in the industrialised world, and I am not surprised that the Conservative party does not want to hear about it tonight. That was its record.
It is that disgraceful disparity that we are tackling. The pension credit is an essential part of how we do that for pensioners. That is why we make no apology for targeting help at the poorest end of the income scale. After the Tory years, it is the right thing to do. It is the only thing to do to help the vulnerable.
By next month, we will be spending an extra £6 billion a year in real terms to boost pensioner incomes and to narrow the income gap between pensioners. We are targeting £2.5 billion of that money directly towards the poorest third of pensioners.
As a result of our policies between 1997 and 2001, policies that the Tories opposed vehemently, the average pensioner household is now £840 a year better off. Those at the poor end of the income scale have benefited by even more.
The hon. Member for Havant (Mr. Willetts) has suggested doing things differently. He has tried taking money from pensioners before. During the last Parliament he condemned the winter fuel payment and the free television licence as gimmicksjust as he called the pension credit a gimmick tonightand pledged to abolish them and consolidate the savings into the basic state pension. That was deeply unpopular with pensioners and within weeks he scuttled back to the drawing board, ending up with a complete hash of a policy. That was the policy on which the Conservatives fought the last general electionto keep the winter fuel payment and the free TV licence or to add them to the basic state pension, with each pensioner having to say which they preferred.
Having developed that policy, the hon. Gentleman complains about the complexity of our proposals. Maybe having two brains, as he is reported to have, simply means that he has to learn every lesson twice. Labour Members are more than willing to teach him the same lesson again. Going into the next election promising to take an average of £400 in pension credits from pensioners is unlikely to be popular with them. I was going to suggest, Mr. Speaker, that you should watch out for the U-turn, but I think that we have already heard it during the hon. Gentleman's speech.
I want to deal with some of the points raised in the debate. [Interruption.] At least I listened to the whole debate, unlike some hon. Members. On means-testing, what Conservative Members call means-testing I call making sure that people who lost out when they were in power get a decent pension. A five-yearly simplified assessment is hardly comparable to a complex weekly means test designed to cover all the variable circumstances of people of working age. The pension credit will abolish the intrusive weekly means test for pensioners. The Tory and Liberal Democrat proposals would not: that assessment would stay if their policy were to be implemented. The assessment that we propose is a decisive move away from treating pensioners in the same way as those of working age.
We heard a lot about complexity, but the system will be simpler, not more complex. For example, 85 per cent. of pensioners will not need to report the level of their savings or capital at all, because there is a £6,000 disregard and no upper limit. Pensioners will have to report only some income changes, and even then, in most cases, only once every five years. Housing benefit and council tax benefit will be ignored when working out pension credit and some of the smaller, sillier income rules in the MIG will gofor example, the remunerative work rules. Charitable and voluntary payments will be ignored, as will student loans and grants.
Many hon. Members talked about targeting. Opposition Members of both parties suggested that targeting by age is a proxy for poverty, but if we spent the £2 billion increasing the basic state pension for those aged over 75, only 32 per cent. of it would go to the poorest third. Paying £2 billion to the over-75s would still leave three quarters of them short of the current MIG level.
Hon. Members said that the pension credit does not benefit women and the very elderly, but it does. Two thirds of the gainers are women, half are over 75 and more than a quarter are over 80. So I do not accept that argument either. Hon. Members from both Opposition parties suggested that we should spend the £2 billion on the basic state pension, but the poorest third of pensioners will gain two and a half times more with the pension credit than with the equivalent spending in basic state pension.
Now we see that the Tories are trying to reinvent themselves as the party of the vulnerable, but the Leader of the Opposition opposed both the winter fuel payment and the minimum income guarantee. He described the winter fuel payment as "cock-eyed" and the minimum income guarantee as
After the wrecking job that they did on pensioners' incomes between 1979 and 1997, they went into the 1997 election campaign pledged to their pièce de résistanceto privatise the basic state pension. They suffered their worst electoral defeat since 1832. Having condemned all our measures to alleviate pensioner poverty and to put right the mess that they had left us in during the previous Parliament, they went into the 2001 election pledged to privatise the basic state pension. They made a net gain of one seat. They are still in favour of privatising the basic state pensionthe leaked letter from the hon. Member for Havant to the hon. Member for Sutton Coldfield shows that they are working on that now. Their big new idea to help the vulnerable is to privatise the basic state pension. Can a leopard change its spots? Can the Tories stand up for the vulnerable? I think not.