Social Security

Debate between Rachel Reeves and Jenny Willott

Thursday 17th February 2011 Commons Chamber

[Jenny Willott (Cardiff Central) (LD)]

Like the right hon. Member for East Ham (Stephen Timms), I refer to the Welfare Reform Bill, although we are debating the uprating orders. With the introduction of the universal credit when the Bill becomes law, the complicated changes that we are processing in these orders will become a thing of the past, which I think we welcome on both sides of the House. It will be much simpler for people to understand their entitlement to benefits, and there will be a much better deal for many people who are in receipt of working-age benefits.

[Rachel Reeves (Leeds West) (Lab)]

The hon. Lady says that we will not debate uprating in the future, but because the Government have reneged on the universal pension, we shall be debating uprating for pensions every year.

[Jenny Willott]

I shall clarify my remarks in case anyone misunderstood me. I said that we will not be debating complicated uprating changes every year. Clearly, there will still be a debate every year, I assume, on the uprating of benefits; I should hate to think they will be frozen in future. I shall talk about pensions later in my remarks.

According to the Institute for Fiscal Studies, the universal credit will mean that 2.5 million families will be better off. They will get more money, which will in time help to reduce the total benefit bill by making it more worthwhile for people to get work and remain in work and off benefits. That should generate support on both sides of the House, as it is something we all want families to do.

As well as an improvement in prospects for those on working-age benefits, as the Minister said, this morning the Government introduced changes that will make a significant difference to pensioner incomes. The level of pensioner poverty in the UK is a complete disgrace in a civilised country. During the shadow Minister’s remarks, it slightly got me that he seemed to criticise the Government for not sticking to the CPI increase for pensions and going for a larger increase in pensions this year. In 2000, the previous Government were happy to see an increase of only 75p in the state pension, which most of us found stingy, measly and completely unforgiveable. At least, this Government are tackling pensioner poverty and are willing to do something serious about it.

Labour’s efforts to lift older members of society out of poverty resulted in a massively complicated, overly bureaucratic system based on means-tested benefits that has left 2 million pensioners still living below the poverty line. Clearly there is something wrong with the current system, so I am delighted that real progress is being made to safeguard the value of the basic state pension. Current pensioners will now be protected by the triple lock, which is welcome. I am delighted that a Liberal Democrat manifesto commitment is being implemented by the Liberal Democrats in government. What we promised we have delivered, and the state pension will increase by earnings, 2.5% or CPI, whichever is greatest. People over the age of retirement will have the protection they deserve. As the Minister said, the amount can be quite significant. We are talking about £15,000 over a person’s lifetime, which will make a significant difference for a large number of pensioners and will, I hope, have an impact on pensioner poverty.

I am glad to see that change. However, I believe that we are still building up problems for future generations of pensioners. Current pensioners’ circumstances will improve significantly, but the ticking pension’s time bomb was not tackled by the Labour Government or by previous Governments. I would like the current Government to take the bull by the horns and ensure that we do not end up with a problem in decades to come. Far too many people are not saving for retirement. Auto-enrolment will help in that regard, but people need to know that it will pay to save. We must reduce the amount of means-testing to ensure that people know that, if they save while they are working, it will benefit them in retirement.

We have an uncertain jobs market. There are no more jobs for life. Occupational pension schemes are closing at a terrifying rate. Many occupational schemes are defined-contribution, rather than defined-benefit, and far less generous. Even with the triple lock, problems will increase. I would be grateful if the Minister told us what the Government plan to do in the long term to tackle the time bomb. The triple lock will make a significant difference, but we need to look at the whole pension system to ensure that we reform it in decades to come so that it is more appropriate to the needs of society.

Clearly, a big issue is the move from RPI to CPI. I understand why people are concerned about that, but I say to pensioners who are worried about the impact on their basic state pensions that they will be protected by the triple lock. As the Minister made clear, the majority of people on public sector pensions will be protected from a potential reduction in their long-term benefits by the triple lock on the state pension, so they will end up better off in the long term. The impact on people will not be as great as many Opposition Members have said it will be.

I can see that benefits come with the change to CPI. It is more stable. It means that we will not face issues such as the one that arose last year when benefits were frozen, which caused significant hardship for many millions of people. CPI is also a more appropriate system as 70% of pensioners own their homes outright. As the Minister said, there is a negative impact for those pensioners as the rate of mortgage interest is taken into account under RPI. They do not benefit in any way from the massive fluctuations that that can generate in their pension increase.