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Pensioner Poverty

It is a pleasure to serve under your chairmanship, Mr. Williams. I am glad that we have time to debate these important issues at appropriate length. I welcome the publication of the report and the speeches in support of it by my hon. Friends the Members for Bradford, North (Mr. Rooney) and for Blackpool, North and Fleetwood (Mrs. Humble). I have to say, however, that we still have not faced up to the fact that the basic state pension and pensioner incomes are simply a disgrace. Compared with the rest of Europe, they are very low indeed, and more than 2 million pensioners still live below the poverty line. About 10 years ago, a comparison was made of pensions across Europe. At the time, Britain had the absolute rock-bottom basic state pension in the European Union for a single person with no qualifications. The next lowest state pension was in Germany, where people received £150 a week, which was about £60 a week more than in Britain. When I told a group of pensioners, they gasped—they thought that £160 a week was an enormous amount. I said that it was rather less than a Member of Parliament got paid in one day—I had to put it in a context that they would understand. We are still in that situation. I have to say at this point that I regularly sponsor the annual lobby of Parliament by the National Pensioners Convention and I have publicly supported many of the things that it has said, particularly in the pensioners' manifesto that it recently published. The reason why we have got away with a low basic state pension is that so many people have benefited from occupational schemes. Indeed, I am in receipt of an occupational pension, even though I am working. Millions of people are in such a scheme. As a result, the low basic state pension has not affected a high proportion of the population, because people receive incomes from elsewhere. Many people also save privately, and private pensions have been another way of cushioning the impact of our disgracefully low basic state pension. However, occupational schemes are dying; they are being cut off at the knees or are disappearing altogether, and many schemes are preventing new entrants from joining. Occupational schemes will not be there by the time that people such as my children retire, and members of my family who work in the private sector—they are not that well paid, but reasonably well paid—will not have the benefit of an occupational pension, which was something that we could look forward to in the past. Occupational pensions offer guaranteed payments after people retire and even the possibility of retiring early and getting very comfortable payments, but that system is dying and will not be revived. I suspect that the real reason why companies introduced occupational pensions, which were not transferable, was to hold on to workers. I am older than almost everybody here, and when I grew up we had something called full employment. Every factory had lists outside of the jobs that people could go in and get—that was certainly true in the south-east, where I grew up. As a result, companies wanted to hang on to their workers, and one way in which they did that was by providing occupational pension schemes. It was the same in local government and the public sector, where pay has often been quite low and people have been attracted into jobs by the knowledge that they will get a decent pension at the end of it. Attacking public sector pensions will not be to our advantage in the long term. With great respect for what my right hon. Friend the Chancellor said yesterday, we should look at the problem with private pensions, which are disappearing and being broken down. That is the problem—not the public sector pensions. On private savings, we have had the Equitable Life scandal. I am a member of the Select Committee on Public Administration, which has supported the ombudsman in calling for those who were affected to receive compensation because regulation failed to protect them. Light-touch or non-existent regulation has led to hundreds of thousands and possibly millions of people losing out. Every year, 30,000 people die who lost out as a result of the Equitable Life scandal. A high proportion of contributions to private pensions go on advertising and administration. About one third of what would go back to pensioners in a well-regulated state scheme goes to meet just advertising and administration costs, so private schemes are not good value. They are also subject to the vagaries of the stock market and interest rates, so we cannot guarantee that an annuity will be at a particular level, because we do not know what the economic situation will be when the annuity is paid. The future will not, therefore, be a good private sector or occupational schemes. Increasingly, we will have to rely on a state pension for our fundamental income; indeed, for many working people or those who are unemployed and never have the chance to build up savings, it will be their only income. The state pension is crucial, but we have seen what has happened to it since Mrs. Thatcher broke the earnings links getting on for 30 years ago. The state pension has dropped from about 26 per cent. to about 16 per cent. as a proportion of full-time earnings—a massive drop in real terms. Had we kept the link to earnings, the figure would now be about 40 per cent. higher than it is, and we could be getting close to the German level of 10 years ago. We still would not be where we should be, but we would be a lot better off. Of course, there would have been more contributions.