Pensions Bill

We all look forward to the hon. Gentleman’s rewriting of the history of that issue. I know that he was a supporter of breaking of the link to earnings, so perhaps he will provide his justification for that later. It certainly had the effect of reducing public spending—obviously so—but it created the legacy of pensioner poverty that we had to address when we came to office, and in relation to which we have made significant progress. In 1997, one in four pensioners faced the indignity of living below the poverty line. Many had to live on as little as £69 a week. Change to put that right was our first priority, and rightly so. Since 1997, 1 million pensioners have escaped from relative poverty, and more than 2 million from absolute poverty. We are spending £10.5 billion a year more—nearly 1 per cent. of gross domestic product—on pensioners than we would have done had we continued the policies that we inherited in 1997. We have increased the basic state pension by significantly more than inflation, equivalent to more than £350 a year extra for a single pensioner. The poorest third of pensioner households will, on average, be £2,000 a year better off in 2006-07 than under the system of 10 years ago. As a result of all those measures, pensioners are, for the first time in a generation, less likely to be poor than any other group in society. Our second priority was to improve confidence in the private pensions market, which is why we acted to clear up the pensions mis-selling scandal and why the Pensions Act 2004 created the new pensions regulator, the Pension Protection Fund and the financial assistance scheme. However, despite those important changes, real and obvious challenges remain for the long-term future of our pension system. That is why, as I have already said, my right hon. Friend the Prime Minister established the Pensions Commission in 2004 to assess what further reforms might be necessary to meet them. The commission identified four major issues. First, people were not saving enough for their retirement. Secondly, by 2050, there will be 50 per cent. more pensioners than today, while the ratio of those in work to those in retirement will have halved. Thirdly, as a result of a historical legacy, the current state pension system is, as we all know, complex and delivers unfair outcomes, especially for many women and carers. Finally, if we maintain current indexation policies, the basic state pension will be worth only £35 in today’s earnings terms by 2050 and more than 70 per cent. of pension households could be eligible for pension credit.