Amendment of the Law

Debate between Iain Duncan Smith and Albert Owen

Tuesday 29th March 2011 Commons Chamber

[Albert Owen (Ynys Môn) (Lab)]

On the subject of pensioners, was the Secretary of State as disappointed as I was that the Chancellor did not have the guts to mention in his Budget statement that he was reducing the winter fuel allowance from £400 to £300? His decision not to continue with the £400 payments comes after he said they would be protected and permanent in future. Some 12 million pensioners will be upset by the Government’s policy not to continue with them at a time when bills are going up year on year.

[Mr Duncan Smith]

I am interested that the hon. Gentleman raises the matter, because it was originally mentioned in the comprehensive spending review. We have stuck to the last Government’s plans on the winter fuel payment. In fact, I was intrigued by the issue so I looked up what the right hon. Member for Edinburgh South West (Mr Darling), who is in his place, said when he was Chancellor. He said a lot of straightforward things, and I congratulate him on that. He said about the winter fuel payments that they

“were temporarily increased to £250, and £400 for the over-80s…I will guarantee this higher winter fuel payment for another year.”—[Official Report, 24 March 2010; Vol. 508, c. 263.]

When we look at the Red Book produced at the time, we find that there was no allocation for any more winter fuel payments. We stuck to the last Government’s plans. Perhaps the hon. Member for Ynys Môn (Albert Owen) should ask his right hon. Friend why he did not plan for more. We did exactly what we said we would do.

The real problem is that 7 million people are not saving enough for the retirement that they want, and few will be able to rely on a guaranteed income in retirement, because the numbers saving in defined benefit schemes in the private sector have more than halved in the last 20 years. In fact, less than half of the entire working-age population is currently saving in a pension at all.

Our plans automatically to enrol all workers in a pension scheme will make a real difference—we have continued the work started by the previous Government—but my hon. Friend the Minister and I do not think that auto-enrolment will work unless it pays people to save, which is why we have determined finally to get to grips with the state pension. As all hon. Members know, not only is the state pension extremely complex, leaving millions of people unsure as to what they will receive in retirement, but it completely fails to reward those who make the effort to save but who do not quite get there.

Too many people reach state pension age having scrimped and saved all their life to find that others, who have not saved or who have made no effort to save, get the same income as them through pension credit. The Budget is about rewarding those who do the right thing, which is why we will shortly publish a Green Paper on state pension reform, with an option for a single-tier state pension, which will provide a clear foundation for saving. We currently estimate that it will be set at around £140 a week, which is above the level of the means-tested guarantee credit, but we must send out the clear message across the welfare and the pension systems that people will be better off in work than on benefits, and better off in retirement if they save.