IT'S THE SAME OLD TORY AS BROWN GIVES MORE HELP TO BUSINESSMEN

AT last the Chancellor has woken up to the political dangers of the pensioners' anger over the paltry 75p increase in the basic pension. True, the Government has spent a great deal more than that on the means-tested minimum income guarantee, but even the "poorest pensioners" have their dignity - and they all hate means testing.

The Chancellor's gesture of giving the basic pensioners another pounds 1billion on the basic pension will not remove their fury. For one thing he is not even giving them as much as he gave businessmen in his last budget - pounds 1.35billion - by cutting the employer's National Insurance contribution. He boasted of this gesture in his Budget speech saying it was intended to offset some increased levies he had made on businessmen (the climate change and aggregate levies) so they would not in fact face any increases at all.

Nor does his paltry pounds 1billion offset the loss of pension which pensioners have suffered every year by linking their annual increases to the retail price index instead of the earnings link which I introduced in the Labour Government of 1974.

If Margaret Thatcher had not removed that earnings link as soon as she came into power in 1979 the basic pension for the single person would have been worth pounds 97 a week today - well above the pounds 78 minimum income guarantee.

Oh but, says the Government, we cannot afford to restore that. We must target any money we've got on the "poorest pensioners", thus penalising those who have saved a bit over the odds.

No-one is suggesting we can restore the pension to pounds 97 a week at a stroke but some of us are suggesting it's time we started to narrow the gap with the minimum income guarantee with the means- tested benefit which will be earnings-linked.

At present the Government is simply mimicking the Tory policy of increasing the number of people on means testing while allowing the basic pension as of right to "whither on the vine".

The 1974 Labour Government's plan was to do the very opposite, we believed that by wise extensions of State insurance we could eliminate means testing.

So we want at least a change of direction along our way but the Government claims that even that cannot be afforded as the mounting cost would break the National Insurance Fund.

Unfortunately for the Government, the Select Committee on Social Security sank this argument in its report issued only 10 days ago. What the committee grasped was something the Government refuses to do: namely that there is a mounting surplus in the National Insurance Fund every year. This surplus, says the report, will continue to increase as long as the present system of making everyone pay a contribution which is earnings-related while giving them in return a flat-rate benefit which is only price indexed.

SURELY this country will not stand by and see levy on pensioners being used each year to help the business community rather than those who need increased pension most?

Moreover the committee engaged the services of the Government actuaries department to work out what increase in contribution would be necessary if the fund came under strain.

They reported that only a three per cent increase (shared by employer and employee) would be needed up to 2021 rising to some seven percent by 2061.

But earnings would be rising at the same time and so any increase could be absorbed quite easily.

If the earnings were not rising then there would be no increase cost so the government's decision to allow the State insurance to decrease is a political and not an economical one.

It positively prefers "targeting" any money to means-tested benefits. Some of us will go on fighting to make it see the light.

Copyright 2000 MGN LTD
Provided by ProQuest Information and Learning Company. All rights Reserved.