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Mr. Flight: I fully agree with the hon. Gentleman, but is he aware of one of the resulting problems? People who may be old and not that mentally clear go into nursing homes, the costs of which have risen dramatically particularly in the southern half of the country, without
Vernon Coaker: The hon. Gentleman makes a reasonable point about attendance allowance and nursing homes. As I said, points about various benefits can always be made, and that argument has been put to me and no doubt to many hon. Members. We often talk about the fact that many pensioners and others who are entitled to the minimum income guarantee do not claim it. Indeed, I have tabled a question on the matter for Monday's Question Time. My point is that a substantial number of elderly people who live in their own home do not claim the non-means-tested attendance allowance availableor claim the allowance at the lower rate when they are entitled to the higher rate. That benefit is hugely important and should be mentioned when discussing benefits and supports available.
I broadly welcome the social security uprating order, and I am to a certain extent pleased with the way in which the Government are trying to integrate the tax and benefits systems and with the work that has been done on tax credits. I say that because one important thing that a Department for Work and Pensions should do is to try to address a problem that we all recognise: the need for the social security system to avoid creating a culture of dependency. It should create a culture that not only, of course, supports people when they are out of work or in need, but encourages people back into work, because that is the best form of welfare.
One of the most depressing things which I am sure we all experience when we visit some houses, estates, streets and parts of our citiesas well as, indeed, some rural areas; the problem is not just in citiesis seeing generations of people who have become dependent on benefit. Entire families have become dependent on benefit and have been workless for a considerable time. Indeed, whole communities have been workless.
The Government are trying more effectively to integrate the tax and benefits systems, so that work truly pays. One problem with the benefits system is that when people return to work and gain pay, they lose benefits, which means that it is not worth their going to work
In addition, it is clear, as the hon. Member for Northavon (Mr. Webb) said, that the Government view national insurance merely as an alternative tax source. The Government should be more honestif they want to take welfare in that direction, people should be aware of it. Many elderly people still believe that national insurance is national insurance. That is the system under which they paid, and their children are now doing the same to pay for broadly universal entitlements to benefits in their later years.
I want to focus particularly on pensions, the pensions credit and the minimum income guarantee. This is a serious messif Ministers had set out to smash private pensions, they could not have done it better. It is worrying that on several occasions when the Secretary of State has had the opportunity to express his concerns or thoughts about the major rundown in occupational pensions and final salary schemes, he has apparently not done so, although admittedly we await the findings of the Pickering report. Candidly, the alleged target of provision for pensions coming from private pensions savingsincreasing from 40 per cent. to 60 per cent.is becoming a farce.
There are many good things in the stakeholder arrangement. However, the minimum income guarantee and pension guarantee mean that for more than half the people for whom stakeholders were intended, there is no point in saving for one. As has been demonstrated in Canada, people do not want to be forced to sink their precious pension savings in an annuity where the real returns are nearly halved.
Mr. Flight: I thank you, Madam Deputy Speaker. However, the point that I am coming on to is that the Government's response to what is happening in private sector pension provisioning is shown in the increases to the minimum income guarantee made in the order. That takes us, as a nation, in the opposite direction from the one that I think right hon. and hon. Members on both sides of the House want to go in.
The Government looked to stakeholder pensions to boost private sector pension saving, but that is not happening. Instead, we are seeing a very generous increase in the minimum income guarantee. It is well intended because it is designed to deal with the problem now. However, what worries me is that it leads to behaviour that is simply not sustainable. On the assumption that the minimum income guarantee continues
The right hon. Member for Birkenhead (Mr. Field) has said that, by 2005, the costs of such an approach would be the equivalent of something like 5p on income tax, rising to about 11p by 2050. It would cost about £26 billion in today's money. Some 65 per cent. of the population would be dependent on a means-tested pension. Surely that is the exact opposite of the Government's intended pensions policy. I am particularly worried that, economically, it will take us into the very territory that has proved so problematic for continental Europe. Employment taxes are high, growth is relatively disappointing and overall taxation is higher than continental Europe would wish because pensions have to be financed on a pay-as-you-go basis.
Mr. Flight: I am surprised that the hon. Gentleman should make such a crass observation. My point is essentially the same as that made by the right hon. Member for Birkenhead. The policy that addresses the immediate issue of providing an adequate income in old age for those with inadequate private sector pension provision is shaping the future. It will affect behaviour and take us down a relatively unsustainable path. There are other ways to address the issue.
Some Conservatives have welcomed the minimum income guarantee and pension credit increases as a well intentioned attempt to address a current problem. However, targeting would be much more appropriate than means-testing, and we should consider treating older pensioners as a block, which would be better than giving them the ridiculous 25p increase that many of them regarded as a joke. I fear that, unknowingly and with good intent, the Government are presiding over what will become a major problem in the area of pensions. They are adopting an approach that, economically and in terms of the effect on private sector pension saving in particular, is the very opposite of their alleged policy, which we all want: healthy and rising private sector pension saving.
Andrew Selous (South-West Bedfordshire): I wish to look at some of the order's consequences for couples, families and the care of children in particular, and to consider the philosophy and structure that underpins the uprated benefits.
I welcome the increases in individual benefits, but I want to draw the House's attention to the overall collective impact of such benefits, particularly on couples and children. I ask the House to focus on the reason why
Britain bases tax on an individual assessment, with no allowance for the number of dependants whom one income must sustain. The benefits system that we are looking at is based on joint assessment, which carries penalties for marriage or stable cohabitation. Remaining in an undeclared or informal partnership means that each partner is assessed separately for benefits. I shall come on to a couple of examples in a moment, but generally it is the case that openly cohabiting couples have a reduction in their welfare entitlements of about £70 a week. Although the Government, and, indeed, all parties talk about supporting family life and stable relationships, they must realise the penalties in the current system of which the benefits are part.