David Cairns (Greenock and Inverclyde): In view of the time I shall try to limit my remarks to a single aspect of the Government's social inclusion policies—their effect on pensions and pensioners. The challenge of ensuring that everybody is able to enjoy dignity and security in their retirement is at the heart of social inclusion—or at least, it should be. If it is not, nothing is.
In 1997, the incoming Labour Government were bequeathed a pension system that exacerbated inequality in pensioner incomes. The incomes of the bottom 25 per cent. of pensioners fell rapidly in relation to those of the rest of the population, while those just above that level saw any small saving or second pension that they had accrued wiped out by the loss of other benefits. They were often no better off than their neighbours who either could not or would not save. In addition, many employers were in the midst of national insurance contribution holidays that would eventually take £19 billion out of the pension fund. Today, we are reaping the whirlwind that those holidays helped to sow.
In the private sector, the rush to entice employees out of perfectly good occupational schemes and into wholly unsuitable private ones created the greatest pensions mis-selling scandal that this country has witnessed. It has cost the industry about £13 billion to compensate for that fiasco, and that is a further £13 billion that should have been in the pension fund today. It took a Labour Government to sort the problem out. Finally, the previous Administration changed the rules on inherited SERPS—but forgot to tell anyone. That was another scandal that we inherited in 1997.
Our first priority was, and must remain, to alleviate pensioner poverty. There were those who said that all
Column Number: 029pensioners should benefit equally, regardless of their income, but I disagree. To me, social inclusion means giving the most to those who need it most. By introducing the minimum income guarantee—soon to become the pension credit—we have ensured that the poorest pensioners' incomes have risen well above the rate of inflation and the rate of average earnings.
Annabelle Ewing: The hon. Gentleman and I sat on the Standing Committee that considered the State Pension Credit Bill.
Mr. Foulkes: That is when the hon. Lady voted with the Tories.
Annabelle Ewing: No, I am talking about the Bill's Standing Committee. However, I want to ask the hon. Member for Greenock and Inverclyde (Mr. Cairns) what estimate has been made of the likely take-up of the new benefit, given that it involves a massive extension of means-testing.
David Cairns: I am grateful to the hon. Lady, but the policy that she and the Liberals support would target extra resources on the basis of pensioners' ages, not their incomes. A wealthy 73-year-old would therefore receive more than a poor 65-year-old. That is not social inclusion.
The hon. Lady heard me say many times in Committee that take-up was a key element. The Government have estimated a take-up of two thirds in the first year, and that will increase in years to come. That is why we established the Pension Service.
The hon. Lady speaks disparagingly about means-testing, but we must pick out what the Scottish National party's policy would entail. The poor 63-year-olds will have to wait until they are 75 to get the extra help promised by the Liberals and the SNP. How will they get extra help? By undergoing the means test. It will, therefore, be retained, but only for the poor. How on earth is that social inclusion? How does one help to reduce the so-called stigma of means-testing if one's policy enshrines means-testing for the poor, while giving the better-off over the age of 75 extra support, irrespective of whether they need it? That is not social inclusion.
The minimum income guarantee helps the poorest, but we must ask about those with modest second pensions or modest savings above the minimum income guarantee level. Until now, there has been no in-built impetus in the system for them to save, because they have often found themselves no better off than the pensioners next door who made no effort to save.
Mr. Duncan: Has the hon. Gentleman seen the recent analysis suggesting that anyone who retires now with a pension fund of less than £100,000 will accrue no net benefit from all their saving over the years?
David Cairns: I shall deal with the savings gap in a passage at the end of my speech, and the hon. Gentleman is right to highlight that issue. What would not help, however, is the Conservative policy of moving the basic state pension from the state to a funded alternative, an approach that the hon. Member for Havant (Mr. Willetts) has actively canvassed. How shall we improve matters by moving the basic state
Column Number: 030pension into the funded system lock, stock and barrel? I shall return to the relevant passage in my speech later.
From next October, the savings credit will reward many of the pensioners whom I mentioned. On average, pensioners will be up to £400 a year better off. Some 2,700 pensioners in Greenock and Inverclyde are already benefiting from the minimum income guarantee, and more will benefit from the savings credit next year.
To take up the point made by the hon. Member for Galloway and Upper Nithsdale (Mr. Duncan), people are simply not saving enough for their retirement. The pensions system is highly complex, and few people can confidently claim fully to understand it. This is true of both the public and private sectors. The pension mis-selling scandal and the recent downturns in the stock markets have shaken people's confidence in the system, and discouraged them from making early and adequate provision. At the same time, average life expectancy is increasing, which has created a tension in the pension sector not only in the United Kingdom, but throughout the rest of the world.
To tackle those enormous challenges will require a concerted effort that the Government cannot make alone. If we are to ensure the dignity and safety of all tomorrow's pensioners, we need nothing less than a new national consensus on future pension provision, to build a partnership between public and private providers and employers as well as employees. Every political party in Scotland has a duty to spell out to pensioners and future pensioners their exact policies in that vital area. Failure to do so will be seen as an admission that they either have no policies on the subject, or have them but want to keep them secret.
For the Government, the framework is clear. First, we believe in the basic state pension as the foundation for pension provision in retirement. The letter written by the hon. Member for Havant mentioned the ''powerful and compelling vision'' of a funded alternative to the basic state pension. Where would it be funded? In the private sector. The Conservatives are talking about nothing less than the wholesale privatisation of the basic state pension. That is their policy.
Secondly, we believe in rewarding rather than punishing people with modest pensions and savings on top. Every other party represented in the Committee supported amendments that would not have based extra help on the income of pensioners, but on their age. We fundamentally disagree with that proposal, which would not mean social inclusion.
Thirdly, we believe in providing a minimum income to the poorest pensioners, an income that has increased by 30 per cent. since 1997. Fourthly, we need radical reform to support occupational pensions. Too many companies today simply walk away from commitments to their employees by closing defined benefit schemes. To deal with that problem requires a thorough review of the complexity and degree of regulation in the savings industry as a whole, as well as long overdue tax simplification. Yesterday's Sandler review and tomorrow's Pickering report should
Column Number: 031provide the basis for a national debate about the way forward for the funded pension sector.
Tough challenges will face us, and I shall pick one out. Should there be an element of compulsion in second pension provision? [Hon. Members
: ''Hear, hear.''] A debate on that would be extremely sensible, and those hon. Members who agree with me might contribute on the subject. For most employees, compulsion already exists in the system via national insurance contributions. As my right hon. Friend the Member for Birkenhead (Mr. Field) has pointed out, every taxpayer pays 4p in the pound in tax to provide pension schemes and entitlements for those who have not, could not or would not make provision for themselves. That is compulsory; we have no say in providing that support through the taxation system. Universal compulsion on second pension provision may not be practical or desired, but a combination of compulsion and incentive may have to be considered if we are to close the savings gap.
Those vital questions cannot be avoided. At the heart of the issue lie the simple principles of dignity and security for those in retirement, and social inclusion for all.
The Chairman: Five hon. Members still want to speak. Far be it from me to suggest for how long they should speak, but if they keep their comments to about five minutes, they should all have time before I call the Minister.
Mr. Alistair Carmichael (Orkney and Shetland): I take your words to heart, Miss Begg, and have carefully noted my starting time.
I want to shift the focus of the debate slightly away from economic social inclusion. Before I do so, I want to pick up on a couple of points that have been made. The hon. Member for Glasgow, Pollok (Mr. Davidson) made a valuable contribution to the debate, as he had something to say. He referred to unemployment statistics in constituencies such as that represented by my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir R. Smith). The unemployment figure in both parts of my constituency is low.
I caution the hon. Gentleman against placing too much stress or extrapolating too much significance from such bare statistics. When jobs in my constituency are lost, it often means people having to move away from Orkney or Shetland—usually on to the mainland. That is part of the constant drip of depopulation which is a crucial factor when considering social inclusion. Many unemployed people in my constituency do not appear in the statistics because they are doing a part-time job, or even more than one such job. Others are self-employed. Some hon. Members referred to the high number of farmers who are self-employed and to their low incomes; and others may be working in seasonal jobs that produce some money in the summer but leave them struggling to make ends meet in the winter months. Poverty is to be found in many different
Column Number: 032forms in all parts of Scotland, and one cannot always find it simply by looking at statistics.
The point made by the hon. Member for Perth (Annabelle Ewing) about the disability living allowance will have to be addressed by the Government. A couple of weeks ago, I attended the annual general meeting of the Orkney citizens advice bureau. The manager's report said that the bureau represented 14 people in appeals against the refusal of DLA last year and lost only one case. A strike rate of 13 wins and only one loss on appeal suggests that something is fundamentally wrong with the mechanics of the allowance. My surgery experience suggests that in the first instance the answer is always no, and that only later is the appeals system allowed to deal seriously with cases.
The debate has so far focused on social inclusion or social exclusion, as defined in economic terms, but that is only part of the story. Geography and transport can often act as tools of social exclusion. Social inclusion is essentially about making opportunities available to all, regardless of means or of geography. The Government have failed to grasp the full concept of social inclusion or exclusion in so far as it is affected by geography.
The Millennium institute of the University of Highlands and Islands is a good example of an education opportunity that is potentially socially inclusive. It allows many imaginative opportunities for people in my constituency to undertake distance learning. However, it depends on good quality access to the internet, which ultimately depends on broadband access. Those who live on the island of Westray in my constituency are lucky during the winter months if they can connect to the internet at anything over 18 kilobytes per second. Come the summer, when the beasts are out in the field and the electric fences have been turned on, connection is impossible. The Government tell us that telecommunication regulation and the broadband can be achieved by using competition as a tool. That may be fine for urban areas, but a one-size-fits-all policy will always fail communities such as mine.
I have spoken at previous sittings of this Committee and in the House about the cost of flights, which greatly curtails access for many of my constituents to many health and education services. That is recognised in virtually every other European Union country that has island communities. France, Greece, Italy, Spain and Portugal all recognise that the cost of flights is linked to economic prosperity and the opportunity for social inclusion. However, when I raised the subject in Westminster Hall recently, the Under-Secretary of State for Transport, the hon. Member for Plymouth, Devonport (Mr. Jamieson), said that the Government's policy was not to intervene. That policy is wrong and should be reconsidered. We cannot continue to adhere to the notion that one policy fits all. The Government have made significant inroads into social exclusion, as my hon. Friend the Member for Caithness, Sutherland and Easter Ross (John Thurso) has said. We now need a little more imagination in order to make further progress.
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