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Earl Russell: I wish to add a few points to the debate. First, if the Minister will forgive me, I wish to comment briefly on age-related additions. I want to borrow a point which the Minister herself contributed to our debates a couple of years back. She argued that the extent of poverty on benefit depended in large measure on how long you had been on benefit; that things wore out and they needed to be replaced.
If you are an 80 year-old pensioner, you have been on benefit for quite a long time. Your overcoat is probably worn out and you probably need new shoes. The carpets are probably threadbare. The car probably needs replacing, if, indeed you can still keep your insurance. You may have costs which are a great deal higher than those of a younger pensioner on the same income.
The point about the car insurance draws attention to the fact that in many ways older pensioners may have higher costs than younger ones. My father-in-law, to his utter fury, has just had his car insurance withdrawn at the age of 90, although his previous motoring offence was in 1941 when he was discovered to have only one of his headlamps covered with brown paper during the blackout!--which he still wakes up hot at night about. If you lose your car insurance--he fortunately got his back from another firm almost instantly--if you want to shop you have to spend money on taxis. If you want to go to the doctor, you have to get someone else to take you. These things add considerably to costs. Therefore the expense of being
My second point follows the question of the noble Baroness, Lady Castle of Blackburn: "More than what?" The Minister gave a figure of £6.5 billion more than the previous government. First, is that calculated over three years since the comprehensive spending review, or over five years as the period of the Parliament? Secondly, is it calculated in money terms or in real terms? Thirdly, does it or does it not take account of the £3 billion undershoot in public spending in the first year of this Government? That is £3 billion under the Conservative targets to which they pledged themselves. These things are, I think, material.
The next matter I want to ask about is the minimum income guarantee in which the Minister has placed a great deal of faith in the course of these exchanges. I am not used to trusting in MIGs so I am perhaps entitled to ask for some clarification. First, what are the means of delivery of the minimum income guarantee? What methods do the Government suggest to ensure that this guarantee is made effective? How is the money to be got to the people who are entitled to it? Secondly, how many people have actually been helped by the minimum income guarantee since this Government first announced it? Is it any more than were getting means-tested help on top of the state pension before the guarantee was announced? In fact, has the minimum income guarantee made any practical difference and, if so, how can we quantify it and how is it visible?
I have one final point. Like the noble Lord, Lord Brett, I have been listening to voters recently. I know that the points the noble Lord makes about the other things which have been done for pensioners are true. However, these things carry with the voters no weight whatsoever. What is more, they blame not only the government but the whole profession of politics. A great many of them told me not merely that they would not vote for the governing party again but that they would never vote again for any party whatsoever. This is a dangerous disconnection between politicians and public. For good or ill, we live in a democracy. According to The Times today, in some constituencies among those who actually cast their votes as many as one in three may be pensioners. They have, or they did have, a high marginal propensity to vote. So we ignore them at our peril. The Government might be wise to listen. Whatever The Times today may suggest, I do not think that an extra increase next year will come in time. As my honourable friend Mr. Foster once told the then Mr. John Patten, the Minister should not think that jam tomorrow will get them out of a pickle today.
Baroness Hollis of Heigham: The purpose of the amendments is to provide for uprating of the basic retirement pension by at least the growth in general earnings or retail prices--whichever is the greater--during the preceding year. I say more in sorrow than
I hoped for a debate in which we could show through information that I could share with the Committee--and information which I imagine the noble Lord would not dream of disputing--that age-related rebates would not serve to reduce poverty in the way that the noble Lord suggested. I take the points about expenditure. We are not arguing that aspect at the moment. Income is the main push, in the sense that there remains greater inequality within each age band rather than between age bands. It is the same problem as more people living in poverty outside poor areas than there are in poor areas.
The noble Lord admits his proposal is an ineffective way to proceed but says that unless we accept it, he will go for an earnings link--which is something with which he has disagreed for all his time in your Lordships' House. I wonder about the grounds on which the noble Lord can justify pursuing a policy that statistics show will not achieve what he wants.
Earl Russell: The Minister could show that the suggested measure was imprecisely targeted but she could do that with a great many other benefits. There is a case for arguing that imprecise targeting is better than no targeting at all.
Baroness Hollis of Heigham: If only 40 per cent of 80-plus pensioners are on MIG, which is relatively generous in offering high earnings-related sums, the noble Earl would have us target a lot of resources at less than half the population in the age cohort who, as defined by income support eligibility, are not poor. Apart from being imprecise, the benefit would miss 60 per cent of the target.
Lord Goodhart: The logical conclusion of the Minister's argument is that everything would be shifted onto MIG and there would be no basic pension. What is the correct level at which to preserve the value of the basic pension and state second pension? We feel that a proper age addition is required even if it is not targeted as precisely as MIG would be. The fact that 40 per cent of 80-year-olds qualify for MIG is a sign that the pensions of 80-year-olds are too low.
Baroness Hollis of Heigham: Although one would end up with an unacceptable situation--reductio ad absurdum--that is not an assertion that one would go down that path. The more absurd it is, the less likely that is to happen. I do not accept the thin end of the wedge argument.
Under the proposal, age-related rebates would give money to people who, in the top quintile, are enjoying household incomes of more than £400 per week simply because they are over 80--but would not offer similar support to people under 75 whose income might be one quarter of that sum. That is what I find objectionable about it. It is not that it targets imprecisely; unlike MIG, it does not target at all.
That is why I find it odd--I shall not put it otherwise--that the noble Earl says that we should go down a path that at best, in his words, targets imprecisely and, on my account, does not target at all. If we do not, he will support something that he has always persistently--and in my view properly--described as "inappropriate"; that is, the earnings link. The noble Earl has ended up in a very odd position: he is saying that we must accept something that does not work, otherwise he will force on us--or seek to force on us through any support that he can give--something that, up to now, he has always said would not work and should not be done. I find that an undesirable position for Front Bench spokesmen to find themselves in. I am happy to give way, if the noble Earl wishes.
Earl Russell: It is only fair that the Minister should have her own proposals subjected to the same scrutiny as ours. No doubt MIG would be precisely targeted if it were ever delivered, but it does not matter how well something is targeted if it is not delivered. What are the means of delivery of MIG?
Baroness Hollis of Heigham: I fully take the noble Earl's point. He is right. My noble friend Lord Brett and other noble Lords have made exactly that point. We know that MIG can identify those most in need and concentrate help on them, but, unless we can deliver the money to them, I agree that it will be ineffective and inappropriate for what we need to do.
That is why we shall be writing to the 2 million pensioners whom we think are eligible; why we shall promote a massive advertising campaign, both nationally and locally, through Dame Thora Hird; why we shall encourage all the voluntary organisations, from the CABs to local authorities and so on, to work with us in a campaign over the summer; and why we shall spread the information through local housing offices and through leaflets that I hope local authorities will send out. This is to ensure that elderly people are aware that this is their right and their entitlement. To get that right and that entitlement, they can complete the forms in the privacy of their own home. They do not need to go into benefits offices; they do not need to queue; and they do not need to stand in a line with unemployed youngsters in front of them and other people behind them. They can do it all over the telephone in their own home, or in their son's or daughter's homes if their son or daughter is on the phone.
We have to make sure that people know about MIG; that, once they know about it, they seek to claim it; and that when they seek to claim it, they do so in a way that is as automatic and stigma-free as we can make it. We believe that we have achieved that. As I said, we are working with local authorities, and I have been talking to them; we are working with CABs, and I have been talking to them. I am very happy to take on board any of your Lordships' experiences of even more effective ways of getting automatic delivery. We do not have all the answers on this.
A year or two down the line, it would be reasonable for noble Lords to hold us to account on how effective we have been in achieving the delivery of MIG to the poorest pensioners, but this is the only way in today's society that we can address need--not by age-related rebates; not by giving more money to women or to single pensioners; not by an earnings link to state pensions. The only way we can really address poverty, target it and ensure that every pound goes to those who need it and not to those who do not, is through the minimum income guarantee. If the noble Earl and other Members of the Committee know of ways of helping us to do that, I shall be delighted to receive help.
Before I address my noble friend's points about the earnings link, the noble Baroness, Lady Greengross, asked me about the pension being index-linked. There is a pensioners' RPI, which is based on the expenditure habits of the poorest one-third of pensioners. Historically, it has not increased by any more than the main RPI. I do not think there would be any advantage to pensioners in that. We track it, but it makes very little difference.
The basic issue is whether it is right to go for the earnings link as a way of addressing pensioner poverty. The earnings link was in place for only four years between 1975 and 1979. As my noble friend Lord Brett rightly said, that was at a time when few people had a second pension. Had I been a junior Member of either House back in 1978 and my noble friend was introducing the earnings link combined with SERPS, I would have been cheering her on because, on the facts as they were then, it was a decent and proper response to the situation of pensioner poverty. That is no longer the case. In all honesty, I suggest to my noble friend that she is simply and resolutely refusing to take on board all the changes that have happened to pensioners' income in the last 20 to 25 years. It as though none of the changes that my noble friend Lord Brett mentioned has occurred. They have and we must deal with the world as we find it, not with the world that my friend was dealing with, properly as she did--and I would be one of her greatest fans in that respect--back in 1978. The reason is that over the 20 years or so since then, the impact of SERPS and occupational pensions on pensioners' income has been substantial.
I repeat, the real growth in average earnings for all of us since 1979 has been 38 per cent. Average pensioner incomes grew from their base by 64 per cent in real terms between 1979 and 1996/97. In other words, pensioner incomes have grown from their base by nearly double the amount of the rest of us from our base. The noble Lord asked, what sort of figures we were talking about in terms of 6.5 billion. It is at today's prices; it is over the whole Parliament; it is calculated on the basis of discretionary policy changes like MIGs, earnings upgrade, winter fuel payment, TV licences, no allowances for forecasting undershoot. I hope that addresses the point that I was asked. It
Most pensioners are not poor. A few pensioners are rich. A significant number, 20 to 30 per cent, are poor and those are the pensioners who have missed out from the growth in rise of pension incomes that we have seen since 1978, 1979 and onwards. In other words, what we have seen is that the growth in pensioner incomes has widened and there has been more inequality within pensioner incomes, with medium income pensions too, than most of the rest of us have experienced.
The gap between rich and poor pensioners has increased substantially since 1979. The median net income of the top fifth has grown by 80 per cent. The median net income of the bottom fifth has grown by only 34 per cent. If you take single pensioners, the gap is even wider. For example, 28 per cent for the bottom fifth--much less than for the rest of us--but 76 per cent, much more than double, for the top fifth.
Faced with that situation, taking single pensioners where the income of the bottom fifth has grown by 28 per cent and the top fifth by 76 per cent, is it right, is it decent and is it proper that the same increase should go to all of them even though some of those pensioners, a fifth, have fallen behind the rest of us proportionately to their base and the top fifth have exceeded the base compared to the rest of us by double? Is it right that we should treat them all the same? Should we give a little to everyone or should we say, what has happened since 1978-79 is that pension incomes have grown substantially for the great majority of pensioners but the 20 to 30 per cent who are on income related benefits have been left behind? I ask my friends in the name of socialism, what should you do? Give a little to everyone, irrespective of their financial need, or concentrate the help on those who need it most.
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