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Social Security

When the hon. Gentleman gives me answers to my questions, I will stop using them. We now spend over £10 billion a year more on pensioners than we would have been doing if we had simply continued the policies that we inherited in 1997. Pensioners’ incomes have risen across the board, with the poorest benefiting the most. We have lifted 2 million pensioners out of absolute poverty and 1 million out of relative poverty. On average, pensioner households are about £1,400 a year better off in real terms than they would have been under the 1997 system. The poorest third are about £2,000 a year better off, which represents a significant increase in people’s average incomes. We have now reached a position in which pensioners are no more likely to be poor than the population as a whole. We have broken the historical correlation between being old and being poor. It is genuinely remarkable that that has been achieved at a time of economic prosperity when the wages of the population in work have been increasing significantly. We now need to maintain that achievement, and through the Pensions Bill, which has completed its Committee stage, we will legislate to ensure that the progress that we have made for today’s pensioners is locked in for future generations. The Bill provides an enduring pensions settlement and a solid platform on which people can save for their retirement in the form of a basic state pension that will be wider in coverage and more generous than previously because it will be uprated in line with earnings. The link to earnings will result in a pension that, by 2050, will be worth more than twice as much as it would have been without reform. We are also tackling inequalities in the current system, especially those faced by women and carers, through the introduction of a modernised contributory principle that recognises and rewards social contributions alongside work. Today, about 30 per cent. of women reaching state pension age receive a full basic state pension. Our reforms will mean that that figure will increase to about 75 per cent. in 2010, and to 90 per cent. by 2025. We are tackling the problem of complexity in the current system through a radical simplification of the state pension and by streamlining the private pension regulatory environment, thus making it easier for people to plan and save. Additionally, because it is crucial that we do not burden our children and grandchildren with the cost of a population spending longer and longer in retirement, we will gradually raise the state pension age to 68 by 2046, thus ensuring fairness between the generations and helping to secure the long-term financial stability of the system. The Bill will eliminate the existing gender gap in the state pension system. It will lock in the reduction in pensioner poverty. However, we will truly eliminate inequality in retirement only when we tackle inequality in working life. That is why our welfare reform programme and our aspiration for an 80 per cent. employment rate are so important. Ten years ago, nearly 6 million adults in this country were dependent on benefits, and with that dependency came poverty. Over a period of 20 years, the proportion of children in low-income households more than doubled. One in five families had no one in work, one in every three children was living in poverty, and in the late 1990s, the UK had one of the highest child poverty rates in the industrialised world. Today, that rate is falling faster in the UK than anywhere else in the EU. Since 1997, 800,000 children have been lifted out of relative poverty and 2 million out of absolute poverty. Tax credits now benefit nearly 6 million families and 10 million children. From April, families with children will be, on average, £1,550 a year better off in real terms than in 1997, and those in the poorest fifth will be £3,450 a year better off—a truly remarkable increase. That support goes hand in hand with the other measures that are designed to give working families the support they need. In 1997, the standard rate of maternity allowance and statutory maternity pay was only £55 a week; this year, it will be increased to £112.75 a week, as will statutory paternity pay. In 1997, paid maternity leave lasted for 18 weeks; from April, it will increase from six to nine months, and by the end of this Parliament we aim to extend both statutory maternity pay and maternity allowance to a full year. It used to last for 18 weeks; it is now to last for a full year, which will make a genuinely significant difference to working parents. At the same time, we intend to introduce an additional period of paternity leave for employed fathers and we shall offer all parents unprecedented flexibility in dividing maternity and paternity leave between them, allowing both parents to play a greater role in the first year of a child’s life. Of course, there is more to do if we are to eradicate child poverty. We shall continue to consider what more the Government can do to help those who are most in need, but ultimately it is the opportunity to work that provides the only long-term sustainable anti-poverty strategy. That is why the Government’s approach has always been about maximising opportunities to work. It is why we have created a national minimum wage and tax credits, invested in Jobcentre Plus and the new deal, and maintained a strong economy in which everyone shares in the benefits of record economic growth. Today, more people than ever before are in work: employment has increased by more than 2.5 million since 1997. It has increased in every region and every country of the UK, with the biggest increases in the neighbourhoods and cities that started in the worst position. We have had real success in extending employment opportunities to those who were previously left behind. For example, since 1997 the employment rate for lone parents has increased from 45 per cent. to 57 per cent., and there have been significant increases in the rates for disabled people, ethnic minorities and older workers. Nearly 1 million fewer people are on benefits, and the number on incapacity benefits is falling, not rising. The UK has one of the strongest labour markets in the world and has the highest employment in the G8, ahead of Japan, France, Germany, Italy, Canada, Russia and the United States. The contrast with the situation that we inherited is stark: claimant unemployment has decreased by 43 per cent. in the past 10 years, long-term unemployment has decreased by 73 per cent., and youth long-term unemployment has almost been eradicated. Pathways to work now covers more than 40 per cent. of the country and we shall roll it out nationwide by April 2008, in time for the new employment and support allowance. Pathways is a success: independent evaluation carried out by the Institute for Fiscal Studies suggests that pathways reduces the percentage of new claimants still receiving an incapacity benefit after 10 and a half months by more than eight percentage points and increases the percentage in employment by more than nine percentage points. No other programme in the world has delivered results on that scale for that client group. Our Welfare Reform Bill will build on that success, delivering on our commitment to reform incapacity benefit while ensuring security for those who cannot work. Together with our city strategy, it will offer a new approach to delivering employment services to some of our most disadvantaged communities.