Dewar promises to keep middle class in Serps

LABOUR will not break the link between the social security and pension system and the middle classes, Donald Dewar, Labour's social security spokesman, said yesterday.

To do so 'would be a disaster', he said, adding that Labour was studying options which include a revamped State Earnings Related Pension Scheme (Serps) or a funded pension, although he conceded that both options would be expensive.

To take the middle classes out of the existing system 'would then create a further divided society and you would have a two- tier system', Mr Dewar said. 'Those who would be paying for themselves would expect a great deal more than society would be prepared to give to those who had 'failed' the self-sufficiency test - and I don't think that's the way forward.'

Mr Dewar's comments on BBC Radio's The World This Weekend come as the Government is considering measures to privatise cover for unemployment benefit and when Michael Portillo, the Secretary of State for Employment, has suggested that those in their thirties might have to make their own pension provision without help from the state. Such moves might involve incentives, usually more attractive for the better-off, for people to opt out of state provision.

Mr Dewar conceded that with an ageing population there are 'certainly problems ahead' for social security spending, but it was wrong to go in for 'doom- laden talk. I certainly don't believe we are on the edge of an abyss in quite the same way the Government is suggesting'.

Ministers such as Mr Portillo and Peter Lilley, the Secretary of State for Social Security, were creating alarm about future prospects as a cover for their right- wing agenda, Mr Dewar implied. That, however, could lead to decisions 'which we would all bitterly regret in 40 or 50 years time'.

Options that had to be looked at included improving Serps, the top-up scheme which the Conservatives cut back in 1988, providing rebates for those who opted out of it. Mr Dewar said it would be expensive to credit into Serps, carers, those who lacked good employment records and the disabled. It was, however, 'one sensible way forward of carrying the burden that is going to fall on us'.

Another would be to look at the possibility of some extension of funded occupational pensions so that funds are built up to pay pensions in future. 'The difficulty about that is that this generation have got to continue paying today's pensions while funding their own in the future. That is also an expensive option.'

But it was also expensive for individuals to do it for themselves and far from clear that doing so provided the best buy.