Alistair Darling faced renewed backbench pressure over the Government's pensions policy yesterday after he insisted that the poorest people were better off than before the election.
The Social Security Secretary said the Government was spending more money on schemes such as the minimum income guarantee than it would if it restored the link between pensions and earnings,
Figures from the Department for Social Security showed gains for the poorest pensioners from the last three Budgets were 9.5 per cent, compared with the extra 4 per cent in income they would have if the link had been restored.
But ministers have privately admitted it had been difficult to "sell" the mere increase of 75p to the basic state pension when canvassing before the local elections, in which Labour lost 600 seats.
Phil Sawford, the MP for Kettering, warned Mr Darling during question time that many pensioners would be denied other benefits of they took the minimum income guarantee.
He asked: "Will you consider the wishes of many of us on these benches who want you to restore the link with earnings?"
Mr Darling replied: "If we restored the earnings link the pensioners you are concerned about, the poorest pensioners, would be worse off. Because of the way the benefit system works, if we restored the earnings link they would lose their benefits pound for pound."
Later, Gordon Prentice, the MP for Pendle, said: "If pensions were linked to the rise in average earnings, pensioners this year would be getting a pension increase of £2.85 rather then 75p. Why can't we just tax the very well-off pensioners? That is something that is lost on me. The minimum income guarantee going to the poorest pensioners is linked to the rise in earnings but all other pensioners will be getting a real terms increase for the next 10 years of about 2 per cent."
Jeff Rooker, a Social Security minister, said: "Over the lifetime of this Parliament the £6.5bn extra to be spent for the pensioner population is £2.4bn more than we would have spent if we had only raised the pension in line with earnings. That extra money has gone to the poorest pensioners and I challenge anyone in this House to argue against redistribution to the poorest pensioners."
Earlier, Tories accused Mr Darling of breaking the ministerial code for not making public a speech that showed an alleged Government U-turn on its pensions policy.
The shadow social security minister, David Willetts, said Mr Darling claimed stakeholder pensions were for people on low and moderate incomes, but was now saying they were for those on higher incomes - a change of emphasis. He believed the U-turn was disclosed by Mr Darling in a speech to the Association of British Insurers.
But Mr Darling denied breaking the code. "What you are saying is that I did in fact deliver a speech from a prepared text - I didn't."
He added: "Our pensions policy is devised to help those who have got moderate and higher earnings, through stakeholder pensions, occupational pensions and other ways.
"For those on lower incomes, the state second pension has been introduced to help them."
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