Budget Resolutions and Economic Situation

Paul Burstow Excerpts

Friday 22nd March 2013 Commons Chamber

[Paul Burstow (Sutton and Cheam) (LD)]

It is a pleasure to follow the hon. Member for Blaenau Gwent (Nick Smith), even though I do not necessarily share every aspect of his analysis. I want to concentrate on two issues that address the concerns of families, particularly older people, in regard to the desire for greater incentives to save and to plan, and greater peace of mind when it comes to planning for pensions and for social care needs.

Before I do that, I want to pick up on the comments made by the Secretary of State at the beginning of the debate about one of the measures that the Government are introducing and of which he is particularly proud— something that is in the coalition agreement—namely, the introduction of the £10,000 tax allowance, which means that a typical working individual will not pay any income tax on the first £10,000. It is good news that that is being introduced 12 months ahead of schedule. As a Liberal Democrat member of the coalition, I welcome the fact that that idea, which was on the front page of our manifesto, has become the centrepiece of the coalition’s tax reform agenda and has been translated into action that will make a real difference to my constituents, giving them £705 tax back in their pockets to spend on the things that they want to spend it on.

The two reforms for which this Government will be most remembered for making a significant and lasting difference to certainty in old age are the introduction of the single-tier state pension and the recent announcements of the introduction of a cap on reasonable social care costs. I join the Secretary of State in applauding the Pensions Minister for his tireless work developing and then driving through that policy change to deliver us a fairer, affordable and more readily understandable state pension system—one that is simpler and one that creates greater incentives to save by reducing the need to turn to means-testing as a way to deliver the state pension. That increase from £107 to £144 a week is incredibly good news. The announcement that it is to be brought in a year early, in 2016, is further good news. The fact that it delivers security in old age, particularly for women and for self-employed people, is to be welcomed.

That addresses future pensioners. Although the Budget did not address directly the current pension generation, it is worth remembering—as a Member of the House for nearly 15 years, I do remember—that one of the early Budgets of the previous Government resulted in a 25p increase in the basic pension, a miserly sum which certainly angered my constituents at the time. We as a coalition wanted to make sure that that could never happen again. That is why the introduction of the triple lock ensures that there is always a significant and generous increase in the basic state pension, and why we have seen the biggest ever cash rise, which is worth £650 every year to people on the basic state pension.

It is also worth saying that the Government are making real progress on social care reform, something that has long languished in the “too difficult to do” drawer and has not been tackled by successive Governments. As a former Minister, who was responsible for setting up the Dilnot commission, I was convinced by its arguments and argued inside Government for the implementation of its recommendations for a cap on reasonable care costs and a more generous means test. It is worth stressing that in our social care system today, for residential care we have one of the meanest and most pernicious of means tests anywhere in our welfare system, and it is good news that the Chancellor has accepted that we should move on this and start the new scheme from 2016. That is a long overdue reform that will give peace of mind and encourage people to plan and prepare for their future care needs. As I say, it has been a can that has been kicked down the road for far too long. Yet one in 10 of us who need care will be faced with the prospect of lifetime costs of more than £100,000, a catastrophic cost and a lottery that we cannot insure ourselves against. That again is why the introduction of the Dilnot proposals is so important.

I mentioned that the means test is amongst the meanest in our welfare state. At the moment, one’s wealth—everything we have ever worked for—must be run down to £23,250. The fact that that will rise to £118,000 is very welcome indeed. The combination of a cap at £72,000 and that means test gives individuals much more certainty, and ensures that more than half of what a person starts with will be protected, compared with losing 80%-plus under the current set of arrangements. But 450,000 people fund their own care, and they will need to come into this system. There is an essential need, which the Committee scrutinising the draft legislation has identified, to ensure that there is adequate capacity to assess those 450,000 people who will be queuing up at the town halls, wanting to be included within the cap system in the very early stages of its introduction.

Delivering Dilnot is only part of the Government’s plans for social care—some of the biggest changes to the system for more than 60 years. I hope that the Government will take note of the unanimous report of the Joint Committee on the Draft Care and Support Bill, particularly its recommendation of an awareness campaign, which is needed to ensure that people understand how those changes affect them and their families, and that they get the right financial advice at the right time. At the moment, 40% of people self-fund their care, and only 7% of them get financial advice. If they did so, we could probably avoid the taxpayer picking up a bill of more than £1 billion a year, so financial advice is well worth having.

I am proud that the Government are doing things that will give older people certainty to plan, to save and to make a difference in their lives, and that we are reforming our social care system, so long neglected, so long not dealt with. The coalition Government are dealing with it.