PM stirs the storm over means-tested pensions

Labour was forced to rush out a promise last night not to means-test the state pension after Tony Blair appeared to leave the door open to the politically explosive step.

The Tories scented blood when the Prime Minister twice failed to rule out cutting the basic pension entitlement for the better-off in an overhaul of the pension system. He said: "All of these things need to be looked at in the context of overall pension provision."

The Government has been accused of delaying difficult decisions over the "pensions time bomb" until after the election by setting up by the Turner Commission on pensions, which will report in the autumn.

The Tories claimed Mr Blair's words were proof that the means-testing of pensions would feature prominently if the party was re-elected. They also allege that Labour is considering forcing employees to save for their retirement.

A Labour spokesman acknowledged that the Prime Minister had chosen his words badly. He said: "Of course we rule out means-testing the basic state pension. The basic state pension will remain the universal foundation of pension provision."

The three main parties are all vying for the "grey vote", with rival promises on council tax, but the Tories believe Labour are vulnerable on pensions.

They point to comments by Peter Hain, the Leader of the Commons, who has said the Government plans to introduce "major legislation" on pensions early in a third term as part of a "radical, fizzy" programme that will surprise people. The Tories interpret this as evidence that contributory pensions could be replaced by a new pension based on residence, with payouts reduced for the better-off to control costs. David Willetts, the shadow Work and Pensions Secretary, said Mr Blair's comment was the "answer of someone who knows what his party's plans are".

He said: "Peter Hain said Labour's plans after the election would be a 'surprise'. Instead of pensioners being surprised afterwards, we're warning them in advance - Labour could means-test your pension."

Labour's apparent confusion on pensions deepened further yesterday when Mr Blair and Alan Johnson, the Work and Pensions Secretary, appeared to contradict each other.

Mr Blair said last week: "If you were to move to additional compulsion, that's something that would have to be worked out and put to people at a future election."

But Mr Johnson said: "He's not ruling it out as policy. The Prime Minister's personal view is that it wouldn't be the solution."

The Tories also enjoyed Labour discomfort over a mistake in a health policy document published yesterday. It said the Government decided to increase national insurance contributions in 1998 to fund improvements in the NHS when in fact the move was not announced until after the 2001 general election.

George Osborne, the shadow Chief Secretary to the Treasury, said: "They may have agreed these rises in 1998 but they did not tell us until 2003."

A spokesman for the Labour Party blamed a typographical error. He said: "This is desperate stuff from the Tories.

"The decision to raise national insurance was only made in response to the publication of the Wanless report [on the NHS] in March 2002."

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