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Several hon. Members rose—

Madam Deputy Speaker (Sylvia Heal): Order. We must move on to the next statement.

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Benefits Uprating and Welfare Reform

2.3 pm

The Secretary of State for Work and Pensions (Mr. Andrew Smith): With permission, Madam Deputy Speaker, I should like to make a statement on benefits uprating and the employment measures in the pre-Budget report.

On uprating, I can confirm that national insurance benefits will rise by the retail prices index—2.8 per cent. From next April, retirement pension will go up by £2.15 a week for single pensioners and £3.45 a week for couples. When we came to office, the pension was just £62 a week for a single person. From April it will be £79.60 and £127.25 for couples. In keeping with the Government's aim to provide extra help to poorer pensioners and those who have saved, the pension credit guarantee will rise in line with earnings by over £3 to £105.45 a week for singles and by over £5 to £160.95 for couples. The threshold for the savings element will rise in line with retirement pension. That means that a typical single pensioner will now gain from pension credit on income up to £144 a week, and £212 for a couple.

I am pleased to report that last month, an extra 106,000 pensioners received pension credit. By the end of November more than 2.4 million pensioners were benefiting, with an average household award of £46.40 per week. The application line continues to work well, with 96 per cent. of calls answered within 30 seconds. Each week more and more pensioners are getting this extra money. All of them will gain from the increases I have announced today.

As my right hon. Friend the Chancellor set out, the child element of the child tax credit will rise by £3.50, benefiting 7.2 million children. That means that, by September next year, a single-earner family on half average earnings with two young children will be £3,750 a year better off as a result of all our measures, compared with 1997.

For the fourth year running, non-dependent deductions in income-related benefits will be frozen, benefiting around 180,000 claimants. Most income-related benefits will rise by the Rossi index—1.8 per cent.—in the normal way. I shall place details of the uprating in the Vote Office and arrange for figures to be published in the Official Report.

As well as security for those who cannot work, we are continuing our drive to help into work all those who can. Despite the downturn in the world economy, employment in the UK has continued to grow. We now have more people in jobs than ever before, and for the first time in nearly half a century, the highest employment rate and lowest unemployment rate of the major industrialised countries. That has happened not by accident, but as a result of deliberate choices for economic stability and a new approach to welfare. As the paper entitled "Full Employment in Every Region" which is published today shows, our approach is working. The UK labour market is diverse and flexible. We are better placed than our European competitors to adapt quickly to changes in the global economy.

Through our investment in the new deal and Jobcentre Plus, we have tackled the legacy of mass unemployment. Long-term unemployment, particularly

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among young people, has been slashed. With 1.7 million more people in jobs, and nearly 700,000 fewer on unemployment benefits, we have saved £5 billion on the costs of economic and social failure. Some suggest that the new deals should be abolished, but those figures show that that would be the wrong thing to do. The new deals have helped over 900,000 people into work. Independent research shows that the programmes can pay for themselves. The new deal for lone parents alone is saving the Exchequer £40 million a year.

Even the strongest labour market will have some people who do not connect with the world of work and who will need extra support to move into jobs. Although the numbers moving on to incapacity benefits each year have been reduced by a quarter since 1997, there remain 2.7 million people largely excluded from the labour market, at huge human and economic cost. A large number of them want to work and could work, if given the right help and support to do so. Last year I announced new measures to help them re-engage with the labour market.

The pathways to work pilots, combining work support, rehabilitation and financial incentives, are already under way in Derbyshire, Bridgend and Renfrewshire. Further pilots start next April. I am regularly updating MPs in pilot areas on progress and have been encouraged by the keen interest shown by hon. Members in this groundbreaking initiative. As part of the pre-Budget report, we are announcing that some basic elements of this approach will be extended from next April. Everyone on incapacity benefits will have voluntary access to support from a personal adviser.

Although our programmes have helped 230,000 lone parents into work since 1997, we want to do more. Research shows most lone parents want the choice of combining paid work with the vital job of bringing up a child, but they face many barriers along the way. One of the biggest barriers is child care. That is why we have created places for more than 1.3 million children since 1997. From next April, we will be piloting better use of school facilities outside school hours and in the holidays to provide affordable child care targeted at lone parents.

Today's pre-Budget report goes even further, with new measures to encourage employers to provide affordable child care, which my right hon. Friend the Chancellor has just set out; free child care for all those on the new deal for lone parents in the week before they start work to help them to make that transition; and free child care for lone parents undertaking work search activity in 12 pilot areas. As we remove those barriers, we will do more to help lone parents find work. Today I can announce extra job search support for parents with older children to help them prepare for the labour market and compulsory action plans for all lone parents.

As well as making work possible, we need to make sure that it pays. From next October, lone parents in a number of pilot areas who move into work will have their wages topped up by £40 a week for a year. We know that workless families in London face especially high housing and child care costs, which mean they can often find themselves little better off in work than they were on benefits. So today I can announce that we will extend the £40 a week top-up across the capital both to

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lone parents and to couples with children who have been on benefit for more than a year, making sure that work pays.

As my right hon. Friend the Chancellor said, we will also offer extra support for all jobseeker's allowance claimants aged 25 or over by piloting a mandatory, intensive work-focused course at the six-month stage of unemployment, as well as by providing extra help for those on benefits to enter self-employment. To improve the choices available to older people, those in receipt of pension credit will be able, on a voluntary basis, to access the full range of our employment programmes.

Together, today's PBR measures build on our successful approach and help to continue our drive to full employment in every region. For all those excluded from the labour market, housing benefit reform has an important part to play. From April 2004, people on housing benefit who move into work will no longer be required to submit a full new claim. We have started pathfinders of the local housing allowance in the private rented sector to be introduced in nine areas, allowing people to know in advance what benefit support they will receive. As soon as we can, we will apply a similar approach in pilots in the social rented sector. That will promote greater choice and responsibility and bridge the gap between benefit and work by allowing tenants to budget for their own rent.

In conclusion, today's statements show that this Government are delivering on our pledge of work for those who can work and security for those who cannot. Our measures will ensure that we make further in-roads into child and pensioner poverty, extend the opportunities of disabled people and reform welfare so that rights, responsibility and opportunity go hand in hand.

The House and the country will have noticed how few Conservative Members considered the war against poverty to be an issue meriting their attendance in the Chamber, although the six who are present have now neatly grouped themselves on the Opposition Benches. By contrast, Labour Members are determined to win the war against poverty. Our reforms are creating a labour market that works for the many and not the few and which achieves our goal of full employment throughout the UK—social justice and economic strength together, which is a central purpose of Labour in government.

Mr. Nigel Waterson (Eastbourne) (Con): I thank the Secretary of State for his usual courtesy in providing an advance copy of his statement to me. I should perhaps also declare my interest, in that I have some private pension provision.

Of course, I noticed the Secretary of State's comment about how many Benches are filled, but I also notice that there is a considerable doughnutting of Government Members around him, and very few of them are out of camera shot. I should like to pass on the apologies of my hon. Friend the Member for Havant (Mr. Willetts); sadly, his flight was cancelled and he is therefore unable to be present. The House will have to make do with one brain, as opposed to two brains.

May I inquire of the Secretary of State why this statement has been made on the same day on which the Chancellor's report has been put before us? It is normal practice for the statement to be made a day or so later. Is this a good day for burying bad news or very little news?

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The Secretary of State had little or nothing to say about the Child Support Agency. Will he please update the House about the implementation of the new model? How long will people have to wait for the new computer system to work properly and for old cases to be migrated to the new system? Does he share my alarm about the evidence on this subject recently given to the Select Committee on Work and Pensions?

Will the Secretary of State also advise the House what steps he is taking to increase the take-up of council tax benefit, which continues to have the lowest take-up of any benefit? The matter bears heavily on older pensioners in areas where council tax has risen sharply, and especially the south-east, in large measure due to Government policy.

I continue to be impressed by the Secretary of State's touching faith in the effect of the new deal, but he rightly conceded that there are still far too many economically inactive people in this country. Will he also advise the House whether he shares my disappointment and that of many disability groups about the continuing lack of success in helping people with disabilities back into work? We know that about 1 million disabled people would like to work, but they are too often deterred by the artificial barriers in the system. Will he please dispel the anxieties caused by recent press leaks suggesting that the Government are going to have a major crackdown on benefits for people with disabilities?

Of course, we welcome any uprating in benefits. We will certainly not follow the example of the Liberal Democrats, who memorably voted against any uprating a couple of years ago. I noted what the Secretary of State had to say about inflation, but will he please give a cast iron assurance that the changes to the inflation index about which we heard will have no detrimental effect on the uprating of the benefits and that the existing inflation measure will continue to be applied to upratings for the foreseeable future?

We will be very interested in the outcome of the housing benefit pilots to which the Secretary of State alluded. We welcome at least some of the measures to improve child care and access to employment advice for older people, although this Government's record on age discrimination has generally been pretty dismal.

We continue to be in the midst of a severe pensions crisis. A dreadful situation is faced by pensioners who have lost everything because their company has gone down and taken their pension fund with it. Will the Secretary of State tell the House how far the Government have got in trying to find ways of compensating those workers? When will we see the pensions Bill? Will it be this year or next year? Many anxious current and future pensioners will be hanging on his answer.

May I also ask the Secretary of State about the pension credit, about which he had a great deal to say? The latest figures on its roll-out have only just been published. They show that there are still only 106,000 new claimants. The total number benefiting is still less than half the number who are eligible. That is hardly surprising given the recent Daily Express poll showing that a third of all older people had not even heard of the pension credit. More than half had no idea how the system worked or how they should claim their money. Nor should anyone be surprised about that. We have

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tried to tell the Government that the new system is too complex and involves too much intrusive means-testing, and that many pensioners will be deterred from applying as a result. Indeed, the Government themselves have set a target—it was confirmed the other day by his junior Minister, the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle)—under which 1.4 million of the poorest pensioners will not claim at all. Can he please confirm that that is still his working assumption?

Of course, Opposition Members would encourage all our constituents who are entitled to apply for the credit to do so, but we fear that the Government will not hit even their own modest targets. It will be a lasting legacy of this Government that they will have raised the proportion of means-testing from 38 per cent. in 1997 to 60 per cent. and even more. The Secretary of State and his Ministers should be worried by the increasing level of anecdotal evidence about the practical difficulties of telling people about this complex new system.

The other day, people from the citizens advice bureaux told me that they are starting to hear stories about the 20-minute phone call that we have already heard about taking as long as an hour or an hour and a half. Those may be isolated cases—I would be the first to concede that we are at an early stage—but if not, it is deeply worrying.

Can the Secretary of State tell me whether he intends to raise the pension credit in line with earnings or with prices in the next Parliament, if this Government should survive? Incidentally, the Minister for Pensions, the hon. Member for Croydon, North (Mr. Wicks) sought to rubbish the independent actuarial advice that we received, which said that a couple would have to save £180,000 during their working lives in order not to be reliant on means-tested benefits. If the Secretary of State does not accept that estimate, will he give the House his figure? Surely, he must have one.

Would it not be a lot simpler and much better for poorer pensioners if the Government were to adopt the Conservative party's policy—which has considerable support among Labour Members—of restoring the link with earnings? They need to roll back means-testing, restore dignity to pensioners and, above all, ensure 100 per cent. take-up of pension credit.

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