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J[none1]OHN HUMPHRYS: Britain's pensioners
are feeling a little better off this weekend .. wondering, perhaps, how
to spend the increase they had when they collected their pensions on Wednesday
... all 75 pence of it. It's generally thought that many pensioners refused
to vote for the government in last week's elections precisely because the
increase was so small. The government points out that pensioners are actually
better off than that meagre rise suggests because of all the other extra
benefits they've had .. but that does not seem to impress them nor, indeed,
many Labour MP's who want to see a bigger increase next time around. The
Social Security Secretary Alastair Darling is in our Edinburgh studio.
Good afternoon, Mr Darling.
ALASTAIR DARLING MP: Good afternoon.
HUMPHRYS: The pensioners champion -
that's what the government calls you. That laurel seems to sit a little
uneasily upon your head this morning doesn't it?
DARLING: Well let me explain what
we are doing for today's pensioners. As you rightly say the increase in
the basic state pension is only part of what we're doing. The winter fuel
payment of one hundred and fifty pounds which of course is not taxable
nor is it taken into account for benefit purposes is going to everyone.
The television licences worth one hundred and four pounds to the over
seventy-fives will come in from this November. We've reduced VAT on fuel
which helps pensioners probably more than anybody else and of course for
the major problem that we inherited, that of pensioner poverty, it is worth
noting that as a result of what we've done someone on the minimum income
guarantee will be fifteen pounds, sometimes more than that, better off
than they were in nineteen ninety seven. So what we're doing is we're
tackling the dreadful inheritance that we took over and that is that you
had millions of pensioners living in poverty and if you look at the amount
of money we're spending on pensions during this parliament, some six and
a half billion pounds more than the Conservatives ever planned to spend,
almost half of that amount is going to the poorest three million pensioners
in this country. So the strategy is to deal with pensioner poverty first.
The next stage of course is to help those pensioners who've got modest
savings, and we've doubled the capital limits available to them and to
introduce the pensioner credit to help those pensioners who have got modest
occupational pensions.
HUMPHRYS: People watching this
programme, many elderly people watching this programme will have heard
that explanation, that little list many times before but they are still
unimpressed, they don't think it's good, they don't think it's enough,
can you understand why they're so unhappy?
DARLING: I think many people don't
always appreciate that the pensioner income comes from mainly two different
sources: One is what you get from the government, what you contribute
to, that is the basic state pension but of course that's always been a
foundation, a stepping stone for other measures and if you look at the
average pensioner income in this country at the moment it is a hundred
and thirty-two pounds. That is because in addition to the basic state
pension, more and more people have got funded pensions, occupational pensions,
works pensions, call it what you want on top of that. Now when we came
into office what we found was that over the last twenty years or so the
gap between the richest or better off pensioners and the poorest pensioners
was as wide in 1997 as it had been forty years earlier. That is the legacy
that we inherited and this is a major problem that we had to tackle, that
is why it's not a question of not wanting to spend the money because we're
actually spending two and a half billion pounds more than we would have
done if, for example, we'd restored the link to earnings, two and a half
billion pounds more, but as I say, nearly half of what we are spending
more is going to Britain's three million poorest pensioners and I think
that is the right thing to do in principle and I think when you explain
that to people they do accept that that is also the right thing to do in
practice.
HUMPHRYS: Do they? Well maybe
they do and maybe they don't. I can assure you that both you and certainly
I will get an awful lot of letters after this programme from pensioners
who say 'Why is the minister telling me I don't understand it?'
DARLING: No I'm not saying that
at all......
HUMPHRYS: Well that's exactly what
you said - 'they don't seem to understand'. I mean I quote you from what
you said at the beginning of your last answer. The fact is that they understand
perfectly well and they want it done differently. Can you not appreciate
that and can you not accept therefore that it was a mistake to give them
such a small rise in the basic pension? I take your point about what you
said about the basic state pension but they believe it was the wrong thing
to do. Do you accept that it was a mistake?
DARLING: All three political parties
in this country, the three major political parties gave exactly the same
promise - to increase pensions in line with prices. We want to do more
than that but we wanted to make sure that the money was spent where it
had the most effect. Now if you look at the top twenty per cent of pensioners
in terms of income in this country, they're income in the last twenty years
went up by about eighty per cent whereas the bottom twenty per cent, the
poorest, saw their incomes go up by about thirty per cent. Now as I've
said to you we are spending more, much more than the last government intended
to - some six and a half billion pounds and nearly half of that is being
spent on the poorest three million people.
HUMPHRYS: You make that point and
you've made that point quite clearly but what I'm asking you is whether
you appreciate now, bearing in mind the reaction to what has happened,
bearing in mind the local elections and all the rest of it that giving
an extra seventy-five pence on the basic state pension was a mistake.
Certainly John Prescott seems to think so. Do you not agree with him?
DARLING: No John Prescott didn't
say that........ what he said was precisely what I'm saying is that what
we're doing is right in principle and as I said last week just after the
local elections, clearly for any government and our government in particular,
we've done a lot, we clearly have a lot more to do to explain to people
what we're doing. Now let me just explain what the next step is. Firstly
if you look at those pensioners who do feel aggrieved and I perfectly well
understand the point they make, that is those people who have got modest
savings or a modest small occupational pension which they've built up and
as a result of which they don't qualify for the minimum income guarantee.
Now at the last budget we doubled the capital limits...........
HUMPHRYS: But you've already made
that point......... don't go and repeat yourself..........
DARLING: Can have twelve thousand
pounds in the bank and not be effected. The next thing we've got to do
through the new pensioner credit which I shall be consulting on later this
year is to make sure that those pensioners who've got very modest occupational
pensions are rewarded for their thrift and not penalised because of it.
HUMPHRYS: But I just wanted to
follow up you see where you said that John Prescott didn't say that. Let
me quote you because he was in this studio just last week saying it and
I've got a note here - a precise note - of what he said 'it's okay being
intellectually convinced that it's the best way to do it" - what you've
just been outlining "but pensioners don't believe it's benefiting them.
Governments are elected by those people, not by a kind of score board
as to whether it was intellectually right. That's what we learned." So
clearly Mr Prescott thinks that you have learned something. You, by contrast,
seem to be saying, well actually no, we haven't learned anything on that,
what we're doing is right, maybe, maybe it is right, the question is that
people don't think it is.
DARLING: No, what..both of us are
saying the same thing. I believe the pensions policy that we are following,
tackling the inheritance, making the long-term reforms of the pension system
that are absolutely necessary, are absolutely right. Where John and I say
exactly the same thing, clearly what we are doing needs to be got across
to people, we've got to win the political argument...
HUMPHRYS: ..that's all it is...
DARLING: ..neither of us would
disagree with that point. But let's come back to the first principles here,
you were asking what we're doing and why, what I am saying to you is that
the situation we inherited was that an awful lot of pensioners had lost
out, the gap between rich and poor like the rest of the society had never
been greater. That's why we're doing it. Now as I say to you, we could,
yes we could have restored the link to earnings which I think is the converse
argument being run by some people but the problem with that is that it
doesn't actually help the poorest pensioners because they'll lose it pound
for pound through the benefit system. The people at the top end probably
wouldn't notice it because it wouldn't amount to much in comparison with
their other income and it's far better therefore to say yes let us spend
more and we are spending more, next question, where do we spend it to best
effect, the answer is that the package ought in the first instance be weighted
towards those pensioners living in poverty. The next stage, as we've announced
is to ensure that the pensioner credit deals with a situation which is
something that should have been tackled years ago and that is people with
small occupational pensions or modest savings who ought to be rewarded
for all their effort during the lifetime and not penalised because of it.
HUMPHRYS: Alright. What about next
year's rise then, next year's rise in the basic state pension that is and
I am sticking with the basic state pension for the moment because that's
what concerns so many people, so many pensioners. It's going to be based,
presumably, on the assumption that inflation will be at a certain level.
We've been led to believe that they'll get another couple of pounds in
their pensions as a result of that. Now, if inflation is less when it's
calculated in September does that mean that they will get less than two
pounds or is that two pounds figure that's been bruited around by the Chancellor
among others, is that a guarantee?
DARLING: What I've said many times
is that on the information we have got at the moment the pension will rise
by at least two pounds for a single pensioner, over three pounds for a
pensioner couple. Every year, as required by statute, I have to make a
decision on all benefit levels, all pension levels, I have to do that having
regard to what the RPI is in September...
HUMPHRYS: ...those contradict each
other don't they, sorry..it's either going to be two pounds or it will
be linked to the RPI - I'm slightly puzzled by that.
DARLING: No, what I've said is
that on the information available to us now the RPI increase would mean
that pensioners, a single pensioner would get at least two pounds and pensioner
couples three pounds...
HUMPHRYS: ..so it's not guaranteed...
DARLING: What I was going on to
say is that the law requires me to decide on how much pensions actually
go up by reference to what the actual RPI is. Now, if you had asked me
a year ago I could have told you that it looked like about seventy five
pence based on the information we had. So my guess is, and you know I'm
pretty confident this is the case, that it will be at least two and three
pounds respectably, this coming Autumn. What we do for pensioners as
a whole, and as I've said to you it's not just the basic state pension
there's the other measures I referred to which we've already introduced
like the winter fuel payment, like the free television licences and the
pensioner credit, the details of which we've yet to announce. When we come
to sit down and decide what we are going to do, then we will make an announcement.
But what I can tell you is that all the information at the moment shows
that the pension, the basic state pension increase will be two and three
pounds but I do make this point, you know no matter how much it may be
tiresome to listen to it, the basic state pension always has been designed
to be just that. It is a stepping stone, a foundation, most pensioners
have incomes beyond that and of course one of the things you might - I
understand you want to ask me about are the longer term changes that we
are making to deal with the fact that you know in thirty years time nearly
half the population will be over fifty and a quarter will be living in
retirement. So in addition to dealing with today's problems, the problems
we've inherited, we've also introduced substantial changes to the pension
system to make sure that we have a sustainable, affordable system in the
future and that we get more and more pensioners able to retire on a good
income, something that hasn't been possible in the past.
HUMPHRYS: But just to draw a line
under this area of the basic state pension you are ruling out the possibility
that the next increase in the basic state pension will be higher than inflation?
DARLING: What I am saying to you
is that the information we have at the moment...
HUMPHRYS: No, no, I understand
that...but that's a simple yes or no..
DARLING: ... the RPI looks as if
it will be two and three pounds. I will make an announcement, usually
about November time and that will be when I'll set out exactly what we're
going to do so far as pensioners are concerned, and as I've also said to
you the proposals that we're working up at the moment for the pensioner
credit are designed to help the - I think the next problem that the government
needs to deal with, and as I say having, clearly pensioner poverty was
the first priority, the next thing to do is to help those pensioners with
modest savings or modest ....who really have lost out in the past.
HUMPHRYS: Indeed, but I am just
trying to draw a line under the question of the basic state pension. That's
what gets so many people so upset. Is it going to be above - well but you
see, you told me that it was linked to RPI. Clearly, we know that, that
that is the policy. I'm just asking you to tell us this morning whether
it is likely to be or whether it cannot be above the rate of inflation.
DARLING: I'm not going to make
the up-rating statement you know, in the middle of May. It has to be made
in November. What I said to you is you need to look and see what we're
doing for pensioners in the round, basic state pension yes, but also the
other measures, the winter fuel payment, the free television licences,
not to mention other things of course pensioners greatly benefit from.
You'll see the changes, the long term changes we're making in health care
for example, the reduction in VAT and fuel, they all add up, they all should
be taken into account and as I say to you what we're determined to do is
to make sure the money we do spend, and we would be spending far more than
we would have done with the earnings link, it's actually is spent to the
best possible effect.
HUMPHRYS: Yes, but the trouble
is that people don't like the way these benefits are - particularly old
people - there's a matter of pride here isn't there? A lot of elderly
people think that 'I've paid for all of this, all the years that I've worked
and paid my taxes and National Insurance and all the rest of it, and I
don't want to be taking benefit. I want to have my basic state pension'
So why you cannot just say let's roll it in together, all these fancy
benefits you've got - free television licences for heaven's sake. - why
can't you just roll it all up together so that you give them the money
and they can spend it on what they like and when they like, instead of
being a kind of nanny state that says you know, this is a free television
licence, whether you want it or not you'll get it.
DARLING: The hundred and fifty
pounds going into fuel payment is paid before Christmas, it's not taxable,
it isn't taken account from benefits which it would be if you lumped it
into the pension income generally. Now, you know, I think any pensioner
listening to this will know that you can pay a hundred and fifty pounds
in a lump sum or weekly it's still a hundred and fifty pounds and I think
most pensioners, many pensioners will welcome the fact they get it. Now,
on your broader point people want to work throughout their lives and they
don't want to have to rely on benefits. You're dead right. Now, the situation
we've inherited is that at the moment had we done nothing one person working
in three would have been retiring straight onto benefit. Now, as the
result of the changes we've made, firstly on the state second pension
which reforms SERPS the poorest people and those on the lowest wages will
in some cases see the amount of benefit they get from the state scheme
treble. So far as people who are on moderate and higher earnings are concerned
as the result of the changes we've made there, the introduction of the
new stake-holder pension which will benefit maybe some five million people,
as a result of those changes that we've made that means that most people
will be able to retire way above benefit level after a lifetime of hard
work. So those changes that we've made are absolutely fundamental to the
points you make, and that is that none of us want to work all our lives
only to discover we're on benefit. That will not happen in the future
because of the long term changes we're making.
HUMPHRYS: On the minimum income
guarantee that you mention, I think it's. what is it, seventy-eight pounds,
forty-five pence one of your ministers, Lord Faulkner has said he could
perfectly well live on that, given of course that may include Housing Benefit
and things like that. Jeoff Rooker, another of your ministers says he
couldn't. Your own minister of state says he couldn't. Could you, could
you live on seventy-eight pounds forty-five a week?
DARLING: Isn't the important thing
here to make sure that we gradually increase the ...
HUMPHRYS: But, I asked you whether
you could live on that at the moment.
DARLING: Our objective is to make
sure that everybody in this country retires on a decent pension. Now,
that was not happening in the past because of the system that we inherited
which was basically run down, no-one had given it any proper thought for
year. What we're doing is making sure that now, if somebody works throughout
their life, either through an occupational pension, a stake-holder pension
or perhaps a private pension, a personal private pension if they're better
off and that's appropriate, they will be able to retire on a decent income.
We'll also increase the amount of money that people get through the reformed
SERPS, the new state second pension as I say, sometimes trebling the amount
of money that someone earning less then nine-and-a-half thousand pounds,
and some eighteen million people will be better off as a result. But all
these changes to the pension system, they take time. You know this is a
classic example of where this government has looked to the long term, we're
making changes, we've done a lot, we clearly have a lot more to do. Yes,
we've got to win the argument in places where we're not winning it at the
moment, yes of course we've got to do that, but the long term changes to
the pension system, plus what we're doing to help today's pensioners seems
to me to be the right thing to do in principle...
HUMPHRYS: Yeah, but not enough,
enough to help today's pensioners, or many of feel, and then they may note
that you ducked that question on whether you could live on the minimum
income guarantee.
DARLING: Well, let's come back
to today's pensioners.
HUMPHRYS: Well, I'd like you to
answer that question.
DARLING: The average pensioner
income in this country is a hundred and thirty-two pounds. The reason
it is so far higher than the basic state pension is as I said more and
more people coming into the pension system come with their occupational
pension, thanks to the reforms made in the nineteen-fifties, the nineteen-sixties
and so on. What we've got to do is to make sure that those pensioners
who missed out on all that, many of whom because they had broken work
records, they were out of work for a time or they didn't actually
have access to occupational pensions, we've got to make sure that they
get the help. That's why as I say, nearly half of the six- and- a- half
billion pounds extra we're spending this parliament goes to Britain's
three million poorest pensioners.
HUMPHRYS: Right. Can I just ....
DARLING: I believe that's the right
thing to do. We're dealing with today's problems but we've also crucially
had the courage to sit down and ask ourselves what do we need to do to
stop this problem happening in the future. It will take time but we've
made a start.
HUMPHRYS: Just a very quick thought
about a story in the papers this morning about benefit fraud. I raise
because if you could crack it you might have a bit more money to spend
on pensioners. It says that you were supposed to be reducing benefit fraud,
in fact it's rising, it's up at seven billion pounds a year now. Is that
worrying you?
DARLING: No. I saw the story.
It was a bit of a muddle. They say it's a secret report, and then say
we've published it, so it can't be both. The position is that we know
that we lose between two and four billion pounds a year in relation to
fraud. Now, we've already begun to turn that round. If I give you one
example. When we came into office two out of every five cases of income
support were wrong. We've halved that already, that saved a billion pounds,
and indeed if you look at Social Security spending as a whole it is now
growing at the lowest rate than it has since the second world war. One
of the reasons is because we are making sure the system is more secure.
Because of that we've been able to spend more money on pensions, indeed
the only reason Social Security spending is growing is because we're spending
more money on pensioners, more money on families with young children.
So we are tightening the system, but it's like everything else we inherited
from the Conservatives, the system and Social Security was run down, it
was lax, it needed to be reformed. We're making those reforms, they will
take time to work their way through, but at the DSS, you know, at the end
of this parliament will be far more secure, it will be in far better shape
than it was when we took over from the Tories.
HUMPHRYS: Alastair Darling, thank
you very much indeed.
DARLING: Thank you.
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