Key issues - Benefits and pensions

The Tory system of penalising the poor while allowing the rich to evade taxes and charges must be scrapped. There must be a concerted war on poverty, which must mean a major increase in benefits for the poorest, and scrapping the Tory "social fund" which forces thousands of claimants further into poverty and debt.

Instead New Labour has presided over a massive setback to Britain’s poorest families. A massive 362,000 applications for help from the social fund were rejected in 1999/2000 - up from just 5,000 in 1997/98. Most of those who were turned down were told it was because social security officers thought they would be too poor to pay back the loans - which average £390.

Some families have been refused loans to buy a cooker, and told that it is "not an essential item". New Labour ministers clearly believe that poor people should feed their children on sandwiches instead - or maybe Millbank’s Marie-Antoinettes think they should eat cake?

The social fund was always one of the meanest and most degrading of the Tory attempts to strip away any real safety net for the poorest families. It has now been eagerly embraced and its performance defended by New Labour ministers. Even those whose applications are approved have to scrimp and save to pay back the "loan" from pitifully small state benefits. The fund should be scrapped at once, and the old system of special needs grants restored.

Pensioners, too, were enraged in 2000 to hear ministers trying to defend their miserly 75p per week increase claim that while the government could afford to restore the link with earnings now, the cost of doing this would be too great in the years to come. Not only is this putting the survival of capitalism ahead of the health of pensioners, and penalising a whole generation whose efforts built up the post-war British welfare state, but it spells out the extent to which ministers know that the state pension is intended to go on falling compared with average wages.

This must stop. Pensions must be restored to at least the real terms level they were at in 1981 when the Tories broke the link with earnings. This means an increase of £30 per week for a single pensioner, or £48 for a couple in 2001, and future increases linked to average wages.

Complaints that an increase this big will benefit a small number of wealthy pensioners are misplaced. Two thirds of pensioners are currently too poor to pay income tax (receiving less than £112 per week). The average income for all pensioners is only £138 per week. We already know that any system of means-testing for additional benefits "targeted" at the poorest will leave millions of pensioners not claiming their entitlements. The increase should be paid across the board, leaving the wealthiest handful to pay back much of it in tax.

We must also revamp the current range of benefits for the unemployed, single parents and people with disabilities or long term illness, to eliminate unjust and humiliating "tests" and conditions, and link increased benefits to average wages. People who are able to do so will best be encouraged into work by the offer of properly funded training and the prospect of a decent living wage.

The problem of a relatively small number of "scroungers" and of more systematic criminal fraud is massively outweighed by the number of top-paid corporate and managerial tax-evaders, who get away scot-free while social security snoopers target the poor. Two obvious scams that should immediately be halted are the regressive "ceiling" on National Insurance payments, which benefits all those earning over £27,000 a year (this change alone could bring in upwards of £2 billion) and the ludicrously low rate of tax on high (£60,000-plus) earners.

But the biggest single group of scroungers are British employers, whose contributions to tax and National Insurance are only a fraction of those paid by big firms in Europe. French companies pay up to 40% of gross wages as pension contributions for their employees: in Britain the comparable figure is about 10%. Low rates of taxation on company profits, as brought in by the Tories, have left the public coffers empty for funding health and education.

Let’s tax the rich: but let’s not forget to tax the bosses and the corporations. A turnover tax on multinationals operating here but otherwise paying little or no tax on their profits (such as Rupert Murdoch’s News International) would also offer a large injection of resources to improve pensions, benefits and public services.

John Lister is a leading health activist.