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Lord Goodhart: The Minister's response was predictable--indeed, I predicted it when I moved the amendment. Let me get out of the way the issue of the paper by my honourable friend, Professor Steve Webb. My party's policy is to maintain a basic pension that includes age additions for older pensioners. We would top that up not with the excessively complicated S2P, but by requiring everybody to contribute to a compulsory stakeholder pension, with contributions from employees and employers.

However, that is a debate for another day. We are talking about the S2P. If we can influence matters before the S2P comes into effect, we would prefer to do without it and move to the system that we propose. However, once the S2P has started to operate, we shall be faced with a fait accompli and we might well feel it necessary to carry on with it.

To return to the main issue, of course I entirely accept what the Minister said about the difference between rich pensioners and poor pensioners within the same age group being far greater than the difference between the age groups. That is an obvious truth. However, she did not answer my point that in fixing the level of pension one has to take account not just of how to help the poorest pensioners--which must unquestionably be an important aim--but of

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how to maintain public confidence in and support for the whole pension system. That cannot be done unless the Government give more than they currently propose to those who are above the MIG level. We propose to achieve that through age additions. We shall shortly hear from the noble Baroness, Lady Castle, in favour of a considerably more expensive scheme to link the state pension to earnings.

The Minister did not answer that point. We feel strongly about this, but it would be ridiculous to vote on it at 10 past 10 at night. However, we are very likely to have to return to the issue on Third Reading. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 71:


    After Clause 37, insert the following new clause--

CATEGORY B RETIREMENT PENSION: RATE AND REVIEW

(" . With effect from 1st April 2001, the weekly rate of the category B retirement pension specified in Part I of Schedule 4 of the Contributions and Benefits Act shall be increased to the level of the Minimum Income Guarantee.").

The noble Baroness said: In moving this amendment in the name of myself and my noble friend Lady Castle, I shall speak also to Amendment No. 72, with which it is grouped.

The first amendment deals with the minimum income guarantee. The Government have admitted that it is simply not possible to live on the basic state pension. On 3rd April, my honourable friend the Minister in the other place, Mr Jeff Rooker, said:


    "We know that the basic state pension is not enough".

So the Government have introduced the minimum income guarantee at £78 for a single person. It is still not as much as the basic state pension would have been had that pension been increased in line with the wages index which was the original intention under the Castle Plan introduced by the last Labour government. That would now be in the order of £98 or £99 per week.

Nevertheless, it is an acceptance by the Government that that is a minimum income for everyone, and that any single person between the ages of 60 and 74 cannot be expected to live on less than £78 per week. But there is one drawback. It is means tested. As we know, many people, particularly older ones, simply will not go through what they regard as a humiliating experience, filling out forms, declaring their resources, meagre as they may well be, in order to claim that money which the Government acknowledge is really theirs by right.

The Government are now investing thousands of pounds, or perhaps it is a million or so--I do not know what the figure is; perhaps the Minister will enlighten us--on persuading older people that they really should claim the MIG. I do not know how successful that campaign has been. But if the Government were to treat the MIG as the level applicable to everyone and then build up from there, it would be a major step towards dealing with pensioner poverty. I hope that the Minister will not again tell the House that there are

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lots of well-off pensioners. There are certainly more older people who have occupational pensions--we should applaud the success of the occupational pensions movement--but as I have said repeatedly in this House, many of those pension schemes are based on the assumption that they top up the basic state pension.

The noble Baroness has described the basic state pension as the building block. But it is crumbling, as we all know. It needs to be radically improved. Everyone agrees with that, even noble Lords opposite. Of course, better-off pensioners will lose improvements through taxation. I am a pensioner. I have an occupational pension. I lose my entire state pension and more to the Inland Revenue. It is given with one hand and taken away with the other. I do not complain about that. We are not talking about very wealthy people. They are just people who have put aside money during their working lives in order to save for the future. I do not want my situation to be used as an excuse not to pay a decent basic pension to other pensioners, most of whom believe very strongly that having worked all their lives--and let us remember that this is the war-time generation who believe that they made sacrifices at that time--they are entitled to a better deal.

I hope that the Minister will not again talk about how well off many pensioners are. It so happens that I have recently had sent to me a submission by an organisation representing Post Office, BT and Civil Service pensioners generally. It says:


    "There is a widespread but erroneous perception that all occupational pensioners are comfortably off on large index-linked pensions".

But it says that:


    "The majority, nearly 60 per cent., of occupational pensioners represented by our organisations have second pensions of less than £5,000 per year, equating to less than £100 per week. Indeed, between 30 per cent and 40 per cent have occupational pensions of less than £3,000 a year or less than £60 a week".

Strangely enough, it says:


    "In the Civil Service, some 60 per cent of widows receive less than £40 per week in occupational pensions".

It simply is not true that there are lots of well-off pensioners on occupational pensions who would benefit if we were to put into operation what is proposed in the two amendments.

I turn to Amendment No. 72, which again deals with the earnings link. Here, we are talking about social insurance. The welfare concept with which we have lived under successive governments, not just Labour, until relatively recently, accepted the whole concept of social insurance. The result was that we had a system which provided pensions for all, at least at a minimum level, and everyone paid towards the cost. The Government's present policies drive a coach and horses through that concept. The noble Baroness has repeatedly told us that to increase the basic pension for everyone on the lines indicated in the amendment would mean that richer people would get something which presumably they should not. They would, of course, have contributed to it.

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If I have a policy with the Prudential, I do not expect the company to say, when pay-off becomes due, "You can't have it; you are better off than you should be". Any insurance company taking such a line would quickly find itself in court and there would be a massive exodus of policy holders. Unfortunately, that is not possible for the millions of pensioners who believed that in paying their national insurance and taxes for over 40 years they were at least ensuring that they would not sink into dire poverty.

We welcome what the Government have done by way of winter fuel payments and free television licences. But we should talk to pensioners. What they want is cash flow; some real improvements in income. They want such improvements without having to submit to the indignity, as many of them see it, of means testing. Everyone knows how upset and disillusioned pensioners are as a result of the insulting, as they see it, 75 pence increase. The Government now have an opportunity to repair the damage which that proposition has done. It is not only older people who feel upset about it. Their families are upset too on their behalf. I hope now that the Government will promise to do something about the basic state pension. I beg to move.

10.15 p.m.

Baroness Castle of Blackburn: I support the amendment moved by Lady Turner. I shall speak to Amendment No. 72 which, as was explained to the House, deals with the restoration of the earnings link. I say "restoration" advisedly. It is not some new, wild revolutionary idea we are espousing, but part of a pension scheme which the Labour Government of 1974 believed was sustainable, honourable and right.

Like Lady Turner, I should like to know how many people responded to the great effort the Government launched to persuade the reluctant poor pensioners to accept means-tested benefit of MIG. I can, however, tell her what the cost is. It was announced in another place, earlier this week, by the Minister, Jeffrey Rooker. So far, £15 million has been spent on this persuasion exercise. We were told earlier that it would be a marvellous effort; there would be TV advertisements, telephonic approaches and everything possible would be done to ease the admitted pain of applying for means-tested benefits.

I do not know how many Members of the House have seen Dame Thora Hird contributing one of the television appeals. It did not last very long. I have to say that I did not feel she had her heart in it. It was not the robust Thora Hird we all loved and rejoiced in. She said, "Well, you know, you really might be entitled to a bit more". Of course her heart was not in it. I cannot see her enjoying applying for minimum income guarantees. Nor would anybody who has any self-respect enjoy doing that.

I wonder how many Members of this House are applying for the minimum income guarantee. Until they do, they had better not throw away easy phrases about helping the poorest pensioners. As I said before, the very label is a contradiction of all I thought our

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movement stood for; namely, to lift everyone to dignity and to independence. When you come to think about it, the whole principle of the means tested income guarantee is that it is the pensioners' equivalent of a glass ceiling. Women will understand that perfectly well because it says specifically, "Earn a bit more, get a bit more independence and whoosh, we will put a ceiling on what you can earn". That is effectively it. I have had cases brought to my attention when retired people have been reluctant to take on a little bit of a job because it might lift them out of the minimum income guarantee if they were honest enough to declare what they had been managing to pick up.

So it is the very opposite of the sort of society which I thought our movement believed in. I must say that I listened with great respect to the speech of Lord Goodhart. I am afraid I think that he has the wrong answer to the problem he set before us. But it was refreshing to hear someone make a case for the importance of sustaining the value and the accompanying rights of the basic state pension scheme. I have been waiting to hear the Minister make as passionate a case in support of it, yet I have not. It has all been about just helping the poorest pensioners, about targeting, picking them out, making them obvious. For instance, in my early days in the Labour movement we campaigned for free school meals. The kids who benefited from them had to be protected from being shown as those who were so poor that their parents could not pay for their school meals. And how we hated that.

Now, I wonder whether the Minister has begun to realise the extent to which more and more people are realising the growing gap between what the earnings-related contribution brings into the fund and what the basic state price index pension takes out of it. The latest example of the people on whom that has dawned has been issued this very week by the Select Committee on Social Security. I do not know whether the Minister has yet had time to read it, but she will remember that, as regards the present way of financing the basic state pension, contributions earnings related and basic pension flat rate, and of course price indexed, the Select Committee says it is bound to create a steadily increasing surplus in the National Insurance Fund. And everyone knows that it is nonsense to say, "The earnings link was quite right when you introduced it, Barbara. We think that was very laudable of you, but of course we cannot afford it". That is not true. The Select Committee itself has said in its report--I have some of the quotes here but unfortunately I cannot read them to the House--that it was worried by this growing surplus which has come out of the pockets of ordinary people in this country through their contributions. They have paid; but they are not enjoying!

Some of that surplus, to this Government's shame, is being devoted to cutting the employers' contribution. In fact, our own Chancellor of the Exchequer, following the example of the previous administration, gloried in the fact that, in order to offset the cost to business of the climate change levy

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and the aggregates levy he was introducing, he would further reduce the employers' contribution to the National Insurance Fund. He told the House proudly, "Employers will be paying £1.35 billion a year less into the National Insurance Fund". It is a strange time when the Chancellor is boasting in another place of cutting the contribution to the National Insurance Fund, and our Minister is saying it must be sustainable.

The Select Committee faced that point in its report. It pointed to the accumulating surplus and said that it will continue to accumulate as long as the present system of financing our pensions continues. I wish I could read the figures to the House; at this time of night I cannot carry that lot in my head. The committee said that there would be this mounting surplus in the future, but if we wanted a double guarantee, we could increase contributions.

It may be said, "That would be a terrible burden. We will lose votes". But the Select Committee said that the increasing burden would be extremely light, and in making that recommendation it quoted the deputy government actuary who gave evidence to the committee and worked out the sums. It was said that around a 3 per cent increase in contributions would be needed, if we restored the earnings limit, up to the year 2011, and taking it up to 2060 it might be a 7 per cent increase. But in that period earnings are not standing still. By spreading it out at, say, 1 per cent a year, people who are receiving the rise in earnings will not notice it. Or at the very least, they will not object any more than they objected when I increased the contribution by 2 per cent of earnings when I introduced SERPS, the earnings link and the annual upratings, which had never been enforced by law before, and the other benefits of the 1974 Labour government.

I remember the Tories at that time saying, "There will be such an outcry. Look at that increase"--mind, it was shared between employer and employee--"People will never stand for it". They were astonished to find that there was barely a murmur. Because people will pay for those things that they want, and they want a guarantee of security in old age.

Any Member of the House who wants to vote on this issue should first read the Social Security Select Committee report.

I cannot go on too long at this time of night. However, I believe that there is a growing public opinion in this country which is behind the arguments of the noble Lord, Lord Goodhart, and the arguments which the noble Baroness, Lady Turner, and I have put forward for years. There is a growing anger at the widening gap between what people pay in and what they get, and that conclusion of the people is growing.

If at this time the Government choose to take £1.35 billion out of the National Insurance Fund and say that all they can afford is to help the poorest pensioners, provided that they fill in the necessary forms and do not earn too much or say too much, it can only mean--and I say this advisedly--that this

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Government have a long-term pensions policy to destroy the state insurance scheme. That would be the consequence. If the Government do not want us to deduce that it is also the desire of the Government, then we must have a better response from the Minister than we have had so far.

I urge the House not to lose touch with public feeling. The public do not want targeting. They do not want labels which say, "You are the poorest" or "You are in the queue for three meals". They want the dignity for which they thought they were contributing.

Finally, I say to the Government that I want them to succeed, that I want them to continue to succeed and that I want them to win the next election. But the Conservative leader, William Hague, is no fool. He may occasionally sound it, but he is not. He has put forward the idea of taking the fuel allowance and the TV licence allowance and turning them into a cash increase on the basic pension. In my opinion, that would be an absolute vote winner, except that in his case it is a once-and-for-all increase. The government spokesmen have been very good at pointing that out, and I would be the first to shout it from the hustings. The Government's biggest defence would be to say, "Whatever pension we introduce, we will keep abreast of rising national prosperity". I believe that one day, when the Government have perilously been faced with the voting apathy of pensioners, they might perhaps recognise that I and Lady Turner, and others, have been right all along.

10.30 p.m.

Earl Russell: My Lords, the noble Baroness, Lady Castle, should feel flattered. It is not very often that we see at least 50 people on the Government Benches.


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