Previous Section Back to Table of Contents Lords Hansard Home Page

After Clause 19, insert the following new clause--


(" .--(1) Section 150 of the Administration Act shall be amended as follows.
(2) In subsection (1), after "prices" insert "or earnings".
(3) In subsection (2)--
(a) for "Where it appears to the Secretary of State that the general level of prices" substitute "Where it appears to the Secretary of State that the general level of prices or earnings", and

27 Oct 1999 : Column 316

(b) in subsection (2)(a) after "beginning" insert "and, in the case of the first of the sums specified in section 44(4) of the Contributions and Benefits Act and the sum specified in column 3 of paragraph 5 of Part IV of Schedule 4 to the Contributions and Benefits Act, not less than the percentage by which the general level of earnings is greater at the end of the period than it was at the beginning".").

The noble Baroness said: In moving the amendment I shall speak also to Amendment No. 3. Both amendments are tabled in my name and that of Lady Turner. I shall discuss them together, although we shall wish the House to express its opinion on each separately.

Amendment No. 2 is designed to restore the link with average earnings for the annual uprating of the basic state pension. I want to try to interest the House in the far-reaching effects of the present situation and how we deal with it today. Last night, this Chamber was crowded. There was an excited debate in which Members from all sides of the House said that we were "making history". I wish to point out in all seriousness that if Amendment No. 2 is not carried today, we shall be destroying history. That is not an exaggeration because we shall be destroying--I use that word advisedly--the centre of the social insurance schemes in this country; namely, the basic state pension.

What astonishes me is the equanimity with which the Liberal Democrats in this House have visualised this development. After all, two of their giants helped to mould the social insurance system in this country in the past century. First, of course, was Lloyd George, who, I believe in 1906, although I am subject to correction, introduced a five shilling old age pension. He was warned by a Conservative Peer in this House that that would ruin the empire. We do not use exactly that word today, but the assertion will be made, in a slightly different form, that it will "ruin the economy" if we restore the earnings link. I await with interest alarming figures from the Minister to make our blood run cold about the danger we all face economically if we go back to what was Labour's policy in 1974.

The second great Liberal figure was Sir William Beveridge, to whom millions of people must have offered prayers of gratitude, because he took a hotchpotch of private provision, a bit of state help here and a bit of charity there, and moulded it into a comprehensive state insurance system under which everyone in work was compelled to contribute in order to receive a benefit as of right when they retired.

That vision of social cohesion has helped to make our national character. I am desperately afraid that, unless we return to that vision, we shall have the exact opposite--the splintering of society and the breaking up of pension provision into different private schemes or occupational schemes for those who can afford them or who are lucky enough to have them. It will be rather like the Tories' privatisation of the railway system, giving us dozens of bits of responsibility, so that we do not get a comprehensive national transport plan.

I must begin by reminding the Government of what they wrote in their manifesto before the last election. That manifesto declared that the

27 Oct 1999 : Column 317

Government would continue to provide a basic state pension, not means tested, as of right, for everyone who had contributed. The manifesto added that the Government would also ensure that all pensioners shared fairly in rising national prosperity. It cannot possibly be said that the present system is achieving that. I am astonished at the way the Minister returns time and time again to that pledge. "Oh yes", she says, "it's the building block of our pensions provision." But if we continue to increase the basic pension in line with prices rather than earnings, in 20 years' times it will have shrunk to 7 per cent of average national earnings. Are you going to tell me that that is to allow pensioners to share fairly in rising national prosperity?

Let us take this year as an example. Pensioners are muttering. Indeed, they are becoming almost as angry with this Government as they were with the Tories, despite the Government's many excellent moves to help them, such as the £100 fuel allowance, free eye tests and the attempt to introduce a national plan of concessionary fares. Those provisions are excellent. However, they are not means tested, but needs tested. Thus pensioners keep their dignity. But they are increasingly angry when they see the contrast between price indexing and earnings indexing.

The figures this year show that inflation has gone up by 1.1 per cent. We all applaud that, of course. However, what it means to the pensioner--and this has already been announced by the Government--is 73 pence per week on top of their pension. In the meantime, the wage earner has had an increase of 4.9 per cent, maybe more. I never like to exaggerate.

The Minister cannot say that that is a fulfilment of manifesto pledges; it is not what pensioners believed they were voting for. They believed and trusted that at last Labour would return to its 1974 policy of indexing their pensions in line with growth of earnings. Of course, the rate has varied from year to year because one year price rises may be higher. That is not very often the case, but in some years they will be. Broadly speaking, however, we know that unless there is high unemployment, which keeps wages down, wages tend to rise above prices. The figures show the effect cumulatively. If Lady Thatcher had not abolished in 1980 the earnings link which Labour had introduced, the basic state pension for a single pensioner today would be some £93 per week. Imagine what that would mean to pensioners: a little bit of breathing space; a little feeling that they are not the pauper pariahs of society. They do not want the pension means tested. They want something they have earned as of right.

I hope the House realises what it will be saying if it votes down Amendment No. 2. It will be saying, "We are content that in 20 years' time the basic state pension should be worth 7 per cent of average national earnings." I am sorry, but I believe that this Government's policy, like that of the previous Conservative administration, is designed to allow the state pension to wither on the vine. Increasing numbers of people have a choice between private or company insurance on the one hand and a charitable safety net on the other. In making that choice the

27 Oct 1999 : Column 318

Government are not only humiliating pensioners; they are saying that the whole state insurance system is out of date. We are always being told that we must think of the future and not be dragged down by our ideological past. To the pensioner, this issue is not ideological; it is very practical.

Lord Higgins has breathed some very sympathetic noises and sensitivities which made me hope at one stage that he would be on our side. I realise that he is a prisoner of his own party's history and that that might be slightly inhibiting. However, perhaps he was listening to Lord Mackay of Ardbrecknish who told us that he had done his best while the Tories were in power to get the policy which is being advocated today for war widows adopted. I hope that Lord Higgins, who is a humane man, will break out of his prison and join us in the Division Lobby when we vote today.

Amendment No. 3 is slightly different because it asks for an immediate increase in the state pension to £75 per week from the £67 which it is at the moment. On what is that based? It is based not on some fancy figure which we produced out of thin air but on the Government's own figure. The Government say they will abolish poverty and thus ensure that no single pensioner should get less than £75 per week. That is all very well but, if it is good enough for those who have not saved, why is it not good enough for those who have--for those who have contributed all their lives?

I shall not bother the Minister with the dozens of letters I have received about means testing to which, of course, the minimum income guarantee, which the Government offer, is subject. People may say, "Well, what have I been up to all these years, scraping and saving to get my own house and stand on my own feet? Now I find that I am not a penny better off." Indeed, in one of our earlier debates the Minister got dangerously near to saying, "It is absolutely fine that that should happen because we have discovered that many of those million pensioners who have been quoted as not drawing the income support to which they are entitled have in fact been saving too much. Of course, they must be penalised, mustn't they?"

I have had a long correspondence with the Minister about the cost of this provision. In our previous debates I pointed out that, based on the Government Actuary's own figures, the National Insurance Fund has a surplus of £5.89 billion. No doubt unintentionally, in her first reply the Minister misled the House. She misled me because she said that the Government Actuary insisted on a balanced basis--that an amount must be achieved by the contributions in order to keep the fund in funds. That figure was, as the Minister told us, nearly £8 billion. She then added, as though this condemned the whole situation, that the surplus was only about £5 billion. The general impression given was that the surplus paid for the balance. When I got home I started to think about those figures and found that the £5.89 billion is over and above that prudent figure demanded by the Government Actuary.

In later letters the Minister admitted that our figures were correct. But she said, "Ah, but you see, there are all sorts of different uses to which we could put the

27 Oct 1999 : Column 319

money. You have got to take into account our state second pension." How can we? That is not mentioned in the Bill. There is no means of judging it. There are many glossy consultation documents but, of course, they are only consultation documents and the proposals might be changed. The Government may change their mind.

As I have said previously, I deeply deplore the failure to give a balanced picture of what the pensions system of this country will be like when the Government's whole network of different pensions is in place. However, one thing that we do know for sure is that unless the earnings link is restored and unless this minimum guarantee is not means tested, there will be a growing cleavage in our society in which some people will be made to feel poor and therefore outside the ring referred to earlier. This is probably one of the most important issues for social cohesion in our society. The Government's policy pauperises pensioners. I know that child benefit does not do so because it is universal and non-means tested. The same applies to eye tests and fuel benefits. Excellent! But why do it for one person and not another? Do not say that we cannot afford it. Of course, the cost grows steadily. But so does the yield from our contributions. What the Government do not seem to realise is that that surplus in the National Insurance Fund will continue to grow because contributors pay earnings-related contributions for a flat-rate, price-indexed benefit. Therefore, that surplus will grow.

I hope, therefore, that the Minister will listen. This is a very serious subject. It is not just one or two of us saying, "Let's have a bash at the Government". We have thought long and hard about it and worked out our tables just as much as the Government have worked out theirs; indeed more.

In all seriousness, I beg the Opposition to let us, in this Parliament, before the end of this Session, tell the Government that they must restore to pensioners the dignity of an adequate pension as of right. If they do not, they will pay an electoral penalty.

4.30 p.m.

Baroness Turner of Camden: My Lords, I rise to support my noble friend. This is the last opportunity we shall have before the Bill leaves this House to restate the case for pensions as of right based on the contributory principle rather than on means testing.

The vast majority of today's pensioners rely on the basic state pension, which is now £66.75 for a single person. As my noble friend said, we know that had it been uprated in line with the earnings index it would now be in the region of £93 per week. What is being offered instead is the minimum income guarantee of £75 dependent on means testing.

I cannot emphasise enough just how much means testing is disliked, particularly by elderly people. Take-up is low and one does not need expensive research to understand precisely why. Benefits that are not means tested, such as child benefit, have a high take-up and rightly so.

27 Oct 1999 : Column 320

Today's pensioners believe that they have paid for a decent pension. This is the wartime generation, people who spent their youth in the Armed Forces fighting for their country and afterwards endured the lean years that in so many ways prepared for later prosperity. Moreover, the oldest pensioners are the poorest pensioners. Because they retired some years ago, even if they had occupational pensions, these are based on earnings much lower than those of someone retiring now.

One in four pensioners qualifies for income support; about 700,000 are entitled to it but do not claim it. Of course, it will be said that to increase the basic pension in the way suggested and, incidentally, in the way that previous Labour governments have always supported, would mean that people who do not really need it would benefit. But those who do not need it are already taxed and the Government will get most of it back; that is even supposing that the really wealthy would ever bother to claim what is hardly small change to them.

Governments redistribute through the tax system. They should not seek to do so through the benefits system. As my noble friend Lord Ashley said so eloquently, "If you do it that way, the poor are forced to pay for the really poor people". Pensioners do not want handouts, welcome as they may be to meet fuel bills and other expenses. They want the income they believe they have earned of right.

Let us not again have the argument that lots of white-collar employees have generous occupational pensions. Some do, but by no means all. Most ordinary schemes, as distinct from "top hat" schemes for senior management, are based on the assumption that they top up the basic state pension. That means that the basic state pension is an important part of pension provision for large numbers of people. Furthermore, the pensions are, of course, paid for by the employees themselves. The unions rightly always describe pensions as deferred pay, so people are getting what they have paid for, both through national insurance contributions and the pay packet.

We are not treating our pensioner population very well. It is not surprising that so many feel resentful. One said to me quite recently, "I worked hard for over 50 years, paid my taxes and national insurance and now I am expected to live on a pittance. What have they done with all my money?" I hope that your Lordships will feel constrained this afternoon to support Amendment No. 2.

Amendment No. 3 has been grouped with Amendment No. 2. As my noble friend has already said, £75 per week is the Government's proposed minimum income guarantee for a single person. That is presumably the minimum amount that is estimated can support a single elderly person. However, as has been indicated, it is not all that generous and, as I said before, it is means tested. Not all pensions are generous. Most are based on the assumption that they are second-tier; in other words, the basic state pension is the cornerstone of pension provision for large numbers of people.

27 Oct 1999 : Column 321

We believe that if we can pay £75 as a basic right to all pensioners and then build in the right to earnings-related increases, we will help to restore a reasonable pension structure for much poorer people. I therefore hope that the House will feel constrained this afternoon to support these amendments.

Next Section Back to Table of Contents Lords Hansard Home Page