House of Commons
Monday 19 April 1999
The House met at half-past Two o'clock
PRAYERS
[Madam Speaker in the Chair]
PRIVATE BUSINESS
HFC Bank Bill
Considered; to be read the Third time.
Oral Answers to Questions
SOCIAL SECURITY
The Secretary of State was asked--
Pensions
1. Mrs. Jacqui Lait (Beckenham): What estimate he has made of the proportion of the working population who have provided only for the basic state pension and have incomes between £9,000 and £20,000. [79728]
The Secretary of State for Social Security (Mr. Alistair Darling): All employees who earn above the lower earnings limit automatically accrue pension rights above the basic state pension level, through the state earnings-related pension scheme or a contracted-out equivalent. So all employees in the earnings range mentioned will have made some provision above the basic state pension.
Second pension provision is not compulsory for the self-employed. About half the self-employed are making secondary provisions and some of the rest may have accrued rights from earlier employment.
Mrs. Lait:
I am grateful to the Secretary of State for that reply, but it implies that he is not prepared to set a target for the sale of stakeholder pensions. Given the derision with which individual savings accounts were greeted on their introduction because of their complexity, does he agree that the prime purpose of introducing a new pension system--including stakeholder pensions--is to reduce complexity and not add to it, which is what stakeholder pensions have done?
Mr. Darling:
I answered the question that the hon. Lady asked, but she is now asking a different one. The Government believe that some 4 million to 5 million people will benefit from stakeholder pensions. The difficulty is that if an individual is not eligible to join an occupational scheme, which is usually the best possible option, the only alternative is a personal private pension. That is not appropriate for someone on low earnings or,
Mr. Archy Kirkwood (Roxburgh and Berwickshire):
Some 65,000 pensioners are newly eligible for the minimum income guarantee, but they must have an income of less than £75 and capital of less than £8,000. Is the Secretary of State satisfied that the Government are doing enough through the pilot projects in hand to ensure that those who are now newly eligible for the minimum income guarantee will get it?
Mr. Darling:
The hon. Gentleman raises a good point. We want to ensure that all pensioners who are entitled to support get it, and that is one of the reasons why we have run pilot projects to encourage take-up, such as the telephone take-up campaign, which has proved very successful. We want to ensure that those who are eligible for the minimum income guarantee of £75 a week for a single pensioner and £116.60 for a couple get that help. I readily accept the hon. Gentleman's point about the capital and income limits, which is why we said that we wanted to consider that issue--which can cause problems--when we published the Green Paper in December. For the sake of completeness, I should add that all pensioner households will get the five fold increase in the winter fuel payment this winter of £100, which will be paid before Christmas.
Mr. Quentin Davies (Grantham and Stamford):
It speaks volumes that not a single Labour Member wishes to take part in the major question about pensions on the Order Paper today. Is not it unbelievable and nauseating that this Government, who affect concern for pensioners, and poorer pensioners in particular, find a way to force poor pensioners to pay tax on their savings income, even if their total income is below the income tax threshold? Not content with that, the Government have also found a way to prevent pensioners with savings income from benefiting from the 10p rate.
Mr. Darling:
The hon. Gentleman should be aware that my hon. Friends support the Government's actions on pensions and are only too happy on this occasion to leave the field clear for Conservative Members to ask their questions. That is what Question Time is all about. I repeat the point, which I made a few moments ago to the hon. Member for Beckenham (Mrs. Lait), that the structure of the pension reforms that we have introduced, including the minimum income guarantee for the poorest pensioners, has been widely welcomed. We are spending some £2 billion more on the poorest pensioners--money that was not there under the Conservative Government--through the minimum income guarantee and the increase in the winter fuel payment, which will greatly help many of them. The 10p starting rate of tax will affect all taxpayers, which will be widely welcomed by pensioners and others. The Government are happy to be judged on what they are doing for today's pensioners and for ensuring that, in the long term, pensions are at long last based on a sound and stable footing.
Social Security Policy
2. Mr. John Wilkinson (Ruislip-Northwood): When he last met the Commission of the European Union to discuss social security policy in the European Union. [79729]
The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): My right hon. Friend the Secretary of State and I met Director-General Larsson on 1 March 1999.
Mr. Wilkinson: Did the Secretary of State and the Minister discuss with Mr. Larsson the potential effect of a withholding tax on savings incomes of European Union nationals in other countries on the profitability of financial institutions, which has already been hit by the Government's changes to advance corporation tax? Should not Ministers have impressed on Mr. Larsson the importance of supporting privately funded pension schemes, especially as many of the countries in euroland have an unfunded liability for pensions of more than 100 per cent. of gross domestic product?
Angela Eagle: Mr. Larsson is aware of the United Kingdom opinion on the withholding tax, but it is clearly for my right hon. Friend the Chancellor of the Exchequer, via ECOFIN, to present the main arguments on the issue. However, I can tell the hon. Gentleman that the bulk of the meeting with Mr. Larsson was spent in discussion on employment, employability and equal opportunities in the European Union.
Means-Tested Benefits
3. Mr. Peter Viggers (Gosport): What percentage of amounts paid out by his Department are subject to means testing. [79730]
The Minister of State, Department of Social Security (Mr. Stephen Timms): In 1997-98, 34 per cent. of social security expenditure went on means-tested benefits. In 1979, the figure was 16 per cent.
Mr. Viggers: Is the Minister aware that, in a recent debate, I pointed out that the combination of the means-tested guaranteed minimum pension, housing benefit and council tax benefit meant that people had to save a staggering £80,000 to be better off than those who had done nothing at all to save for their retirement provision? The Minister has not previously replied to that point, but will he comment on that figure? Will he confirm that what the Government now propose is the greatest ever extension to means testing and the greatest ever disincentive to saving for one's retirement?
Mr. Timms: The figure that the hon. Gentleman quotes is inaccurate. It is important that people get the full benefit of their work and savings when they retire. That is why we have designed the state second pension as we have.
I do not agree that the minimum income guarantee, which took effect last week, should rise in line with prices only--the implication of what the hon. Gentleman said. Although that would lead to there being fewer people on means-tested benefits, it would also mean lower incomes
for 2 million low-income pensioners, of whom there are 1,500 in Gosport. If that is Conservative party policy, I hope that one of the hon. Members on the Opposition Front Bench will seek an opportunity to explain it. The Government's policy is that even the least well-off pensioners should be able to share in the benefits of rising national prosperity.
Mr. Harry Barnes (North-East Derbyshire):
The Conservatives do not have a leg to stand on when it comes to means testing, but the left wing of the Labour party has two solid legs. Will the Welfare Reform and Pensions Bill and various other proposals before the House at present extend means testing? Some Labour Members would be very disappointed by a move in that direction.
Mr. Timms:
I have said that the state second pension has been designed to avoid means testing. People should be able to look forward in retirement to an income that is above the means-tested threshold. The state second pension has been designed so that all people who work and contribute throughout their lives will have, on retirement, a retirement income above the minimum income guarantee level.
Furthermore, carers--people who have been out of work as a result of caring responsibilities--and the long-term disabled with broken work records are for the first time being credited into the state second pension. As a result, they, too, will have an income in retirement above the minimum income guarantee level. I hope that my hon. Friend will warmly welcome those proposals.
Mr. Iain Duncan Smith (Chingford and Woodford Green):
The Minister has failed to answer a point raised, strangely, by hon. Members from both sides of the House. The Government say that they want to raise pensioners' incomes and to break dependency, but the minimum income guarantee, which is linked to the means test, will drive more and more otherwise independent people down into dependency.
Independent figures show that one person in five is dependent on income support at present, and that the number will rise to one in three by the early part of the new century. Is not that a travesty and a defeat for a Government who say that they are going to break dependency, but who in fact will make more people dependent and raise the cost of welfare?
Mr. Timms:
The figure would be one in three if we continued with the policies that we inherited from the Conservative Government. That is where we are heading, and that is why we made our proposals for reform. The state second pension will reduce the proportion of pensioners who are in receipt of means-tested benefits. The hon. Gentleman should explain to the House and to all those pensioners on income support why his party apparently wants to increase the minimum income guarantee only in line with prices. What does he have against people on income support? The Government's view is that even the least well-off pensioners--those on income support--should be able to share in the benefits of rising national prosperity.
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