---

Pensions Bill

In 1997, we inherited a system that worked against the needy, leaving millions in abject poverty. Many were forced to get by on just £69 a week. There is never enough money to sort out all the problems and ensure that everyone is given the resources that they would wish to have, but this Government have made it a priority to help all pensioners through a number of policies, and in particular, to lift the poorest pensioners out of poverty. We have succeeded in lifting 2 million people out of poverty, and that is a significant achievement of which we can be proud. Today, no pensioner need live on less than £124 a week. The figure is £189 for a couple. In 1997, the state pension did not recognise the important contribution of women and carers. In private provision, millions of employees, especially those on low incomes, did not have access to a workplace pension scheme. They were therefore likely to have to rely only on the state pension in retirement. We are tackling some of these issues with a historic series of social reforms which have to be seen as a whole. We have created the Pension Protection Fund and the Pensions Regulator, and made changes so that the state pension provision gives equality to women and carers, and we accept that those will have significant costs to the Exchequer. An essential part of those changes is to restore the earnings link. My hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) was absolutely right to say that the provisions in the Bill are dependent for their success on the restoration of that link. The figures that I cited earlier were an understatement. It is actually the case that, unless we restore the link to earnings, we will end up with up to 75 per cent.—not 60 per cent.; I was saying that from memory—on means testing. Restoring the link will reduce the number on means-testing and increase the number who are able to benefit by having the basic state pension as the basis of their retirement income. Those who are on pension credit will be reduced to about 30 per cent. by 2050. We are hoping to put together a package which, as result of these changes, will ensure that pensioners have a better deal in the longer term. My hon. Friend is absolutely right to say that the Bill should be seen as a whole and that the restoration of the earnings link is an essential part of the package that will ensure that pensioners get a better deal in the long term. If we had continued the policies of the previous Conservative Government and continued to pay people the kind of appalling basic state pensions that they were paying, we would—if this had been only about money—have had £11.5 billion to spend on something else. However, we chose to spend that extra money—in addition to the money already being spent: a total of £76 billion—on pensioners, because we regard them as a priority. I wish that we could suddenly come up with more, but we cannot. What we have to do is manage this process and put in place a series of reforms to secure a better situation in the long term for pensioners in this country. We made a legislative commitment in the Pensions Act 2007 to restore the link. We have put beyond doubt our intention to restore it. During the next Parliament, we will re-link the uprating of the basic state pension to average earnings. Our objective, subject to affordability and the fiscal position, is to do that in 2012 or, in any event, by the end of the next Parliament at the latest. That is the bedrock on which our reforms are built, and its introduction is non-negotiable. We have always said that, in uncertain economic conditions, we need flexibility around the timing of the introduction of the link, and colleagues will understand the circumstances and conditions that I am talking about today. The Pensions Commission has said that a short delay would not unduly affect the outcomes of the reform package. We need to take the right decisions for pensioners, for taxpayers, for the economy and for the long term. We have to balance all these things. My hon. Friend has requested a decision on the earnings uprating in the pre-Budget report, and we have discussed the importance of keeping an eye on affordability and on the fiscal position, and on taking the right decisions for pensioners, for taxpayers, for the economy and for the long term. I understand the keenness to hear the date of the introduction of the earnings link. Let me put beyond doubt our commitment to reinstate the link. That is not just my guarantee; there is a legal obligation, and we will stick to it. [Hon. Members: ““When?””] I have already said that it is our objective, subject to affordability and the fiscal position, to do this in 2012 or, in any event, by the end of the next Parliament. That is what Ministers have been saying very clearly, and I have gone further today by making it clear, as a result of the contribution by my hon. Friend the Member for Newcastle upon Tyne, Central, that we see the restoration of the link not just as something that is desirable in itself—because that lot got rid of it, we want to restore it—but as part of a broader package of which it is a foundation stone.