Ashdown joins call to privatise state pension

Paddy Ashdown last night called for the state pension to be replaced by an insurance-based system in a wide-ranging lecture demanding radical reforms of the welfare state.

Mr Ashdown stepped into the row which erupted during the general election campaign over Labour's claims that the Tories, if re-elected, would "privatise" the state pension.

The Conservatives angrily protested that the plans proposed by the former Social Security Secretary, Peter Lilley, had been twisted into scaremongering stories by Labour, which frightened pensioners on the doorsteps in the election.

But last night Mr Ashdown backed the Tory plan for the next century by calling for the state pension to be replaced in the long-term by compulsory insurance schemes. It would not affect the current generation of pensioners, the poorest of whom, he said, should be given a top-up linked to wages not prices.

Calling for "sacred cows" to be slaughtered, the Liberal Democrat leader said in the lecture at the University of Birmingham that it was the only way of restoring stability to the system.

Sources close to Mr Ashdown said: "We thought what Labour did in the election was pretty disgraceful. What Paddy is saying is that Peter Lilley's ideas were pretty interesting, and we would back an insurance-based system."

The Liberal Democrats do not believe Labour's alternative for the state pension to continue with a top-up provided by a state-run insurance scheme would be the long-term solution all the parties are looking for.

Mr Ashdown said: "I believe we have to tackle today's problem of pensioner poverty by moving towards a two-tier pension, where the basic universal pension is topped up for the poorest pensioners with additional pension uprated in line with earnings, rather than prices.

"But for future generations, an insurance-based system would provide a far greater level of security than exists today, and a realistic framework in which to plan for old age."

Urging Labour to be more radical, he said: "The only sacred cow that must not be slain in the welfare debate is our duty to the poor and to each other.

"If this government is prepared to work with others to build a wide consensus for welfare reform, we are prepared to work with them."

Outlining welfare-to-work plans, Mr Ashdown urged the Government to take up his party's election proposal for transferable benefits that could help employers take on more jobless people; individual accounts to give every individual a personal account number and a smartcard to check on their balance of welfare benefits; the choice about where to invest the money would be in the hands of the individual.