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Lord Astor of Hever: I am grateful to the Minister for that response. It has reassured me. I understand the limitation of the amendment. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 agreed to.

Clauses 32 to 34 agreed to.

Clause 35 [Supplementary]:

[Amendments Nos. 129 to 131 not moved.]

Clause 35 agreed to.

Clauses 36 and 37 agreed to.

Baroness Turner of Camden moved Amendment No. 132:


(" . The Secretary of State shall each year increase the basic retirement pension by not less than an amount equivalent to--
(a) the percentage increase in the general level of earnings during the preceding year; or
(b) the percentage increase in the retail prices index during the preceding year,
whichever is the greater.").

The noble Baroness said: I return again to the issue of indexing the basic state pension. It can be no surprise to the Government, I am sure, that their 75p increase has outraged most pensioners. MPs have encountered this anger in the recent elections, as have many party workers. The £150 fuel allowance has done nothing to assuage that anger. For most pensioners income is more important than what they regard as handouts. "If we were properly paid, we would not need handouts. We could pay our bills like people in employment". That sentiment has been expressed frequently to me.

As I said at Second Reading, I have yet to meet a rich pensioner. The reason advanced by the Government for their refusal to tackle the basic problem of the state pension is that to give everyone the increase we seek, and which was promised by the previous Labour government when the Castle plan was first implemented, is that it would mean that everyone would have the increase, including rich pensioners. I should like to spend some time dealing with the issue of rich pensioners because it is not

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adequate for the Minister constantly to reiterate the statement that the majority of pensioners are rich without advancing any facts in support of it.

Baroness Hollis of Heigham: In all fairness, I cannot let my noble friend get away with that. I have never said that most pensioners are rich. I have said that most pensioners are not poor. That is very different.

Baroness Turner of Camden : The noble Baroness has used occasionally the term "rich pensioners". Indeed, in the handout that I have, Mr Darling says that it shows that average pensioner incomes as a whole are rising faster than average earnings, and that some have done very well. Just because a few people, mostly recently retired, can afford a once-in-a-lifetime holiday in Florida does not mean that pensioners are well off but simply that some save up--something the Government are intent upon encouraging people to do.

I should like to explain why I am so sceptical about the Government's statement about well-off pensioners. I shall not use the term "rich". How are those figures arrived at? From what baseline? Does it include the value of various benefits paid to people on the basic pension who otherwise could not exist at all? If so, being on benefits scarcely constitutes wealth. Or is Mr Darling also referring to people who receive generous occupational pensions? If that is so, that is interesting. Most occupational pension schemes have been designed on the assumption that they will top up the basic state pension. Most occupational pensions are not fully index-linked to the retail prices index. Indeed, the usual formula, even in what is known as "good" schemes--and I have negotiated a good many of them in my time--allowed for annual increases in line with the retail prices index to a maximum figure of 5 per cent per annum. In the years--this has occurred sometimes in the past 20-odd years--when the RPI exceeded 5 per cent, the pension was nevertheless increased only by 5 per cent. Obviously, over time the value of the pension would erode, particularly in relation to the wages index.

Therefore, the argument that pensioner incomes have increased by more than the incomes of other people in the past 20-odd years cannot be right. The reason is that the structure was simply not in place for that to happen. Therefore, I return again to the matter of the basic pension. Quite simply, there was no structure whereby pensioners who received an occupational pension could have done better than everyone else in employment. There was provision under which pensions in very good pension schemes were increased in line with the retail prices index--never in line with the wages index--up to a maximum of 5 per cent per annum. That was the standard procedure throughout most of industry and commerce.

I return again to the matter of the basic pension. Even the promised £2 a week increase, to be put in place possibly next year, will not compensate for the amount that pensioners have lost. As we know--the figures have been quoted often enough--a single

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pensioner would now be receiving approximately £97 a week. The MIG is now set at £78. Many pensioners who just fail to qualify for the MIG nevertheless are not at all well off. Everyone, including the tiny minority of very well-off pensioners, will have paid for their pensions.

That is what angers so many pensioners. They are the generation who went through the last world war. They believed that with the introduction of the welfare state they were helping to build a society where people would not be neglected, isolated and impoverished in old age. They resent being told that they are well off when their occupational pension is of the order of £7,000 a year, which is about average, and declining in value relative to earnings, without any improvement worth mentioning in the basic state pension.

The genuinely rich, for whom the basic state pension is just so much small change, will be taxed anyway. There is a wealth of information available about poverty among pensioners, and even the Government admit that that is the case, otherwise there would be no point in paying everyone the fuel allowance. Incidentally, that is paid to everyone and it is not means tested.

Further, the MIG will be indexed to earnings rather than prices, although that, of course, is to be means tested. It would be so much simpler if the Government would return to original Labour policy and increase the basic state pension in line with my amendment. There would be a saving in benefits and means testing, which, as we know, is difficult and expensive to administer. The older generation, which deserves better, would cease to feel resentful and excluded. I beg to move.

9.15 p.m.

Baroness Castle of Blackburn: My Amendment No. 133 has the same aim as that of Lady Turner, although it is worded slightly differently. The purpose behind our endless, continuous and continuing campaign to secure the restoration of the earnings link for the uprating of the basic state pension is based on our belief that in a civilised society no section of the community should have to depend on means-testing. The Government talk about social inclusion. What could be more divisive than to say, "Oh, we are going to be kind to the poorest pensioners. Now, madam, you're the poorest; you're all right"? People do not like to be classified as those who need handouts from the taxpayer.

I must drive home a fact which very few people seem to have grasped. The cost of the basic state pension comes out of the National Insurance Fund. All right, the Government like to pretend that it is not insurance any more, but that is what the fund is and what it is called, whereas minimum income guarantee comes out of the pockets of the taxpayer. I believe that it is odd that this Government do not realise that by insisting on the role of the means test of benefit for the poorest pensioner--the targeted benefit which was very much part of the Conservative philosophy under Lady

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Thatcher--they are undermining the desire of so many pensioners to be independent of what they see as the dubious charity of the taxpayer. "Ah, but", said the Minister in our debate earlier this afternoon, "if we had not stepped in with our policy"--by, I forget the year, 2010 or 2015--"one-third of pensioners would be on means-tested supplements". Whose fault is that?

Of course they would continue to be on means-tested supplements while the Government uprate the minimum income guarantee in line with earnings but hold the basic State pension down to the cost of living index which gave us the disastrous 75 pence per week for those pensioners in the last uprating. If the Government hold out any hope of an increase next year, it is simply that they are praying that prices will go up, that the retail price index will save them from another sense of pensioners' outrage about another miserly increase. In any case, when one examines this Government's statistics--and one has to stand back, take a deep breath, put a wet towel around one's head and then the truth dawns--what are this Government expecting? They are expecting--and I think I am correct in saying that the Minister used this figure earlier--that, by the year 2000 and whatever, there will be one in five pensioners still on means-tested benefits. What percentage is there now? It is one in six. So there are going to be more people on means test--however much we argue about the exact figures--by the time the Government have done their pension building in complete form.

Another great statistic with which we are always dazzled is--I do not want to misquote the Minister--that, by the end of this Parliament, the Government will have spent £6.5 billion more on pensioners. I think I am right.

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