Ministers at odds over state pension

CABINET ministers at the Treasury appeared to be at odds again over the state pension after Michael Portillo, the Chief Secretary, suggested that it would be worth only a trifling amount in the next century.

Mr Portillo's remark, in a BBC TV interview, threatened to revive the conflict over the welfare state, after signs the Cabinet was retreating from a programme of wholesale reform to the system.

Although Mr Portillo stopped short of reviving suggestions that people might in future opt out of the state pension, the tone of his remarks was in sharp contrast to those of Kenneth Clarke, the Chancellor, last week.

Mr Clarke told reporters last Wednesday that he envisaged the old age pension as an 'inevitable key part' of the welfare state. He said he did not see it as being opted out of, or left as a 'vestigial remain' for those who could not make provision for themselves.

Mr Clarke had earlier warned Cabinet colleagues against fuelling fears of a big shake-up of the welfare state, and to tone down talks of people opting out of benefits.

At the weekend, Peter Lilley, a fellow right winger of Mr Portillo's, said he did not envisage the state pension being restricted to 'part of the population'. Mr Portillo was asked by the Westminster Live programme whether an earlier statement of his about people under 40 not being able to rely on the state to look after them in retirement was compatible with Mr Lilley's weekend remarks. He said: 'The two are not incompatible. My worry about the state pension is that it is going to be a nugatory amount in the coming century.'

Mr Portillo said this was because earnings were rising 'so much faster' than prices. He added: 'We can only afford to increase pensions, I believe, in line with prices, because there are going to be so many more pensioners in the 21st century.

'So, if we keep increasing the pension in line with prices, and people's earnings rise much faster, then the pension is not going to replace the value of those earnings.'

He added: 'That was my warning. You can't rely on the state pension to keep you living in the style you have been used to. Therefore people need to make provision for themselves beyond the state system for their retirements.'