Social Security

There must be a better way of doing it. I will take part in the campaigns that the Minister will lead. We have the communications alliance now, which gives a chance to publicise the meetings and get pensioners along, but we must find a better way than the simple uprating campaigns that have been only partially successful in the past. This debate provides a chance to look at many of the defects in the system. We must consider the figures that are not uprated; this is a serious matter. We rightly concentrate on the benefits that will be increased, but some figures are not uprated annually at all. In particular, I refer to the capital limits for entitlement to means-tested benefit. The amount of capital that a pensioner can have without benefit entitlement being affected was fixed at £6,000 in 2001—a great deal more than it was in the past. Seven years later, it remains £6,000. A constituent of mine, Mr. Cliff Knight, who is a doughty campaigner for pensioners and is a local historian, is finding that the ageing process comes with many companions and that he needs many services that he never previously required. The example is interesting and I want to go into detail about it. He was refused a grant to buy a stair lift. The means test for disabled facilities grants is based on the housing benefit rules. Although the weekly needs of a disabled pensioner are assessed at £186.55 for housing benefit purposes, increasing to £194 this April, the figure for calculating entitlement for a disabled facilities grant is £171.40, which was the housing benefit rate for 2005-06. Surprisingly, that makes a huge difference. The failure to increase the sum since 2005-06 makes a difference of £8,812 in the amount of grant payable. That is staggering. It means that many people, who are entirely deserving of the grants, are floated off them by the failure to uprate the amount in line with inflation. We must examine that—a large cohort of pensioners has been badly dealt with because of that problem. There is plenty of good news from the Government. It has been gratifying to be a Labour Member in a successful period for pensions. Last year's Pensions Act embodied two fundamental and welcome changes to entitlement to the basic state pension. First, the earnings link, which was severed in 1980, is to be restored so pensions will increase, as they did before then, at least in line with the increase in average earnings. The second welcome change especially affects women. The number of years of contributions that is needed to qualify for the full rate of pension is currently 44 for men and 39 for women. That will now be reduced to 30 years for both sexes, thus putting right an old injustice. However, the order reflects neither benefit because the change in the contribution conditions will not come into force until April 2010 and the earnings link will not be restored until at least 2012 and possibly not until 2014. In both cases, the delay is hard to defend, especially given the surplus in the national insurance fund. If current trends continue, we will be in the extraordinary position whereby the surplus in the national insurance fund will be enough by 2013 to fund a Northern Rock rescue, should such a calamity recur. For many years, I used to get up early to table early-day motion 1, asking for the restoration of the earnings link. If we had restored it in 1997, it would have been affordable because the subsequent increases in inflation have been low. That should have happened—it would have been a great advantage to us. Breaking the earnings link had a dramatic effect on the basic pension. Most of the damage was done under the Tories. The basic pension fell from 23.7 per cent. of average earnings in 1981 to 17 per cent. in 1997. That is sad, bearing in mind my comments about the value of the basic pension as something to which people feel they are entitled and are proud to take. Take-up is virtually universal. Sadly, the process has continued, with a further drop under the present Government from 17 to about 15.4 per cent. The valued pension is therefore being reduced all the time, thus increasing the amount people have to claim. Single pensioners are now about £47 a week worse off than they would be if the link had never been broken. That is a large sum of money. Everyone— including all the Opposition parties, I believe—agrees that the link must now be restored. Do people understand what it means? Everyone, especially those on small incomes, fears that their income will not keep up with inflation. They are going to find themselves with a reducing power to spend. They want the link as it gives a great deal of security, and if it is not there they rightly object. The link is justified and will be hugely popular for the party that introduces it. However, pensioner organisations do not understand why they have to wait at least another four years until they have it. By 2012, the pension will be 14 per cent. of average earnings, and each year's delay beyond that date will reduce it still further. It is not just today's pensioners who will suffer from the delay; it will also mean a permanent reduction in the value of the pension as a proportion of average earnings for generations to come and a permanent increase in the proportion of pensioners forced to rely on means-tested benefit. At the very least, the Government should now give a definite commitment to restore the link by 2012, leaving open the possibility of earlier action. On contribution conditions, the second fundamental change embodied in the Pensions Act 2007 was the reduction in the number of years of contributions required for women eventually to qualify for a full or nearly full basic state pension. Those who stand to benefit most are those who, wisely or not, chose to pay the reduced married woman's contribution and those who paid full contributions when they could but had substantial gaps in their contribution records for the years when they were bringing up children or caring for disabled members of their family. However, until 1978 the years devoted to child care or other family responsibilities did not count towards the state pension. Barbara Castle introduced the home responsibility protection, or HRP, the effect of which was that those years were to be left out of the pension calculation. That meant that a woman with, say, a 10-year gap in her contributions record during which she was caring for children or a disabled relative could still qualify for a full pension—an act that we all accepted as absolutely right. However, HRP did not start until 1978 and did not apply retrospectively. There are therefore still a large number of women over pension age whose child-rearing years occurred at least in part before 1978 and who still receive reduced pensions as a result. To their credit, the Government have recognised that. The May 2006 pensions White Paper said:"““Women's pension entitlements are, on average, catching up with men's. But there remains a critical cohort of women over the age of about 45 now who did not fully benefit from HRP. They have significantly poorer contribution records—despite the fact that most of them will have made important and valuable contributions to society.””" The admirable solution proposed in the White Paper and embodied in last year's Act was to reduce the number of contribution years needed for a full pension, but only for those reaching pension age in 2020 or later. However, most in the critical cohort referred to in the White Paper are already over pension age now. It is the older women who are worst affected, because more of their child-rearing days occurred before 1978, when HRP started. A woman now aged 80 would have been 50 in 1978, so would probably derive little or no benefit from HRP, and will almost certainly receive a reduced pension as a result, yet the new and more generous rules will not apply to her. Moreover, it is plainly unfair that a woman born on 5 April 1950, and now aged 57, should receive a much smaller pension in April 2010 than a woman with the same contribution record who was born a day later. However, that is the effect of the change in the contribution conditions as it stands now. As April 2010 approaches, people will become increasingly aware of the cliff edge that we will face at that time. It is difficult to believe that the Government will not be compelled by public opinion and the deep sense of injustice that will be felt to backdate the change, so that existing as well as future pensioners benefit from it. I urge the Minister and the Government to make a decision, rather than leaving it to the last moment, so that women already receiving reduced pensions can at least look forward to a better pension from 2010 onwards. The national insurance fund is a fascinating subject with which I have bombarded Pensions Ministers in a number of Governments for rather a long time.