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This year’s uprating moves us further towards our aspiration of a fair and inclusive society that offers opportunity and independence for all. It reinforces our commitments to tackle poverty and exclusion and ensure security in retirement. I commend this statement to the house.
Mr. Nigel Waterson (Eastbourne) (Con): I should like to thank the Minister for his usual courtesy in allowing me an advance copy of his statement. Naturally, I welcome the increases in benefits, as far as they go. We will certainly not follow the example set by the Liberal Democrats a couple of years ago and vote against the uprating orders. [ Interruption. ] I have obviously drawn blood with that remark.
The Minister was right to emphasise the position of pensioners. He boasted of having increased the pension by 9 per cent. since 1997, but has he not seen the recent report that shows that each year pensioners face their own distinctive inflation rate of 9 per cent? The Government have rightly given priority to tackling poverty—although they have given themselves a boost by moving the goalposts on the targets in that area—but the issue of pensioner poverty is every bit as important. Does the Minister accept that 2 million pensioners still live in poverty?
Why was there no move to increase winter fuel payments for the elderly, especially given the recent sharp rises in energy prices? Why was there no further help for pensioners with their council tax payments, which on average have doubled since 1997? Was the help with those payments merely a pre-election bribe?
Does the Minister agree with Mervyn Kohler of Help the Aged? He has said:
“It is bordering on an insult to recycle the same Christmas presents year after year, and brazenly claim that the problem of pensioner poverty is sorted.”
Does the Minister accept that there is nothing in the pension reform package to assist existing pensioners? Is not that especially unfair to women pensioners, who either are retired already or will retire before 2010?
Does the Minister accept that there is a particular problem with benefits take-up by pensioners? Up to 1.6 million pensioners do not claim the pension credit to which they are entitled. The worst take-up of all has always been for council tax benefit, with up to 2.2 million pensioners failing to claim. The latest figures show a reduction in the numbers claiming over the previous year. What are the Government doing to encourage the take-up of that benefit, which is crucial for pensioners, who often live on their own?
The Minister rightly said that work is the best route out of poverty. We agree, but far too many people are still trapped in an overly complex benefits system. Will he confirm that 1 million people on incapacity benefit want jobs? Will he also confirm that the number of people receiving incapacity benefit for five years or more is now 20 times as great as it was when the Government came to power? In the small print—one should always look at the small print—of the pre-Budget report yesterday, the income threshold for tax credits was frozen at £5,220. Will he confirm that, as a result, many people will see a fall in the value of their tax credits, and that someone working 30 hours a week on the minimum wage will pay a marginal tax rate
of 70 per cent.? How is that designed to tackle poverty or to get people out of benefits and into work?
Will the Minister confirm that £2.7 billion was lost due to benefit fraud and error last year? That is a wholly unacceptable level of loss of benefit payments. Does he agree that the Government are also set to miss spectacularly their own target for reducing the amount of overpaid housing benefit to claimants of working age by 25 per cent. by this year?
Will the Minister tell me what plans his Department has for benefit simplification? For example, the current system for disabled people is extraordinarily complex. In the Committee stage of the Welfare Reform Bill, my colleagues questioned the necessity of separate assessment phases for limited capability for work and limited capability for work-related activity. Will he promise to move towards a single assessment process and will he tell the House what he and his colleagues are doing to simplify the benefits system overall?
James Purnell: I welcome the fact that the hon. Gentleman will not be voting against the measures. I was looking at the exchanges from last year, when he was teasing my predecessor about welfare reform. It is interesting to look back. The hon. Gentleman said that the Government were dithering about incapacity benefit reform. We are now legislating on it. He said that the Government would do nothing about the Turner report. We have now brought forward a Bill on it. He said that the Government would do nothing about the Child Support Agency. We have a White Paper due shortly. It is quite clear that, over the last year, there has been real progress on welfare reform. We are legislating to implement the things that he said last year we would do nothing about. I am glad that he recognises that and that the Opposition support us on quite a lot of this.
In answer to the hon. Gentleman’s detailed questions, I think that the rate of inflation that he referred to is the pensioner poverty index, which is a technical measure. It is related only to the proportion of pensioners who get most of their income from the state—75 per cent., I think. Of course, the vast majority of them are on pension credit and their pension credit will go up in line with earnings. We are the first Government to do that. They used to have to live on £68.80; it is now going up to nearly £120. We have made the commitment that we will continue to do that in relation to earnings. In fact, we are going to legislate for that. I am sure that the Conservatives will join us in voting for that to continue to be uprated in line with earnings, because that is the certainty that the poorest pensioners in our country deserve. Of course, there is always more that we can do on pensioner poverty. However, it is worth remembering that when we came to power there were more than 3 million pensioners in poverty. Now there are fewer than 1 million. That has been achieved only because of the policies that we put in place—policies that the Opposition have opposed at every single stage.
The hon. Gentleman asked what more we could do to increase take-up. We are doing exactly that. I am happy to provide him with a briefing on the pensions transformation programme, which is one of the leading
programmes on that in the world. It is making a significant difference. The National Audit Office, which reported on the Pension Service recently, made it clear that good progress had been made. It made some suggestions—in particular, about how we can reach the poorest pensioners in our society and how we can make sure that pensioners claim all the benefits that they are entitled to—which we will look at. I urge any hon. Member who is worried about this matter to go on a visit to look at how the local service is helping people to claim their benefits, and to see the real progress that is being made and the way that that is transforming the incomes of some of the poorest pensioners in our society.
As part of that programme, we are responding to the point that the hon. Gentleman made about council tax benefit. We want more pensioners to be able to claim that and there is a radical new way for them to do so. There is now a three-page form where there used to be a 26-page-form. Claims can be made over the phone in a matter of minutes. We are looking forward to that starting to make a big difference. As I said in my statement, we are already paying out £30 million extra in backdated claims because of the data-matching exercise that we did.
The hon. Gentleman raised the issue of incapacity benefit reform. As he knows, there is a major Bill going through the House on that. I thought that he was slightly churlish in not acknowledging the fact that there are now 900,000 more disabled people in work than there were before and in not acknowledging the great success of pathways to work, which is recognised by independent experts as one of the most successful programmes anywhere in the world for people who are on inactive benefits.
The hon. Gentleman finished by talking about fraud and simplification, which is an important subject. Our simplification unit is constantly looking at ways of simplifying benefits. For example, we have just announced a radical simplification of the state second pension system, which will mean that people will know that they will get £1.40 a week extra in retirement for every year that they care or contribute. We are always looking for opportunities to simplify the system, not least because that can help to reduce error and to deal with fraud. It is worth remembering that, before we came to power, the Tories never even measured what fraud was going on in the system. We have reduced fraud in income support and jobseeker’s allowance by two thirds. That is another area where we have made significant progress and one that I hope that the House will welcome.
Mr. Sadiq Khan (Tooting) (Lab): I welcome my hon. Friend’s statement. More than 10,000 pensioners in Tooting will benefit from the increase in the basic state pension. A significant proportion of them will benefit from the increase in pension credit. Will he join me in paying tribute to the staff at Eaga, who have done such a great job in increasing knowledge of and information about the Warm Front initiative? I have held two events in Tooting over the last year, which have increased take-up. Does he share my concern that we need to do more to extend the reach of the new initiatives that are being announced, to make sure that all our pensioners—even the poorest and those from the most deprived communities—will benefit from some of the announcements about initiatives that he has made today?
James Purnell: I completely agree with my hon. Friend. The Eaga partnership has made real progress on getting people to take up energy efficiency measures and to get new central heating systems fitted. However, it is important that we reach everybody who is entitled to that help and particularly people who may be socially isolated. The extra funding announced yesterday by the Chancellor will aim to do exactly that. I urge hon. Members to make sure that they publicise the Eaga partnership and the work of the Warm Front scheme to as many of their constituents as possible.
Mr. David Laws (Yeovil) (LD): May I also thank the Minister for his Department’s typical courtesy in releasing the statement to us well in advance? He is entitled to draw attention in his comments to those achievements that the Government have made in this area since 1997. However, may I gently suggest that there was quite a large measure of complacency in his statement, particularly set against what is going to be a far less benign environment over the next few years? Will he confirm that in the Chancellor’s Budget book yesterday, the Government’s projection for unemployment over the next year is that it will rise above 1 million and that their projection for public expenditure is that it will be growing, in current terms, at less than the growth rate of the economy over the period of the next spending review? Is that not going to make it significantly tougher to meet the Government’s targets on poverty across the board?
We are dealing with an uprating statement, but there was no uprating of the winter heating allowance. Perhaps the Minister can confirm that and remind us when there was last an uprating of the winter heating allowance. Will he confirm that energy prices have risen by something like 50 per cent. over the last four years? Will he also confirm that, although his Government have a commitment to eliminate fuel poverty by 2010, the Department of Trade and Industry is now projecting that fuel poverty will double from 1 million households to 2 million households between 2004 and 2006. In the light of that, is it not surprising that the Government are not doing more on the winter heating allowance?
The hon. Member for Eastbourne (Mr. Waterson) is still clearly quite sore about the fact that his party did not vote against the disgraceful rise of 75p in the basic state pension a couple of years ago. We make no apology at all for voting against that. Does not the lack of progress on the winter heating payment reinforce the case for re-linking and for bringing forward the restoration of the link between the basic state pension and earnings? Is the Minister embarrassed that he is still not in a position to tell the House whether the earnings link will be restored by 2012? Will he confirm that we may have to wait until 2015?
The Minister pointed out that much of what the Government have done for pensioners has been on means-tested benefits. He gave the impression that the take-up of means-tested benefits is improving, but will he confirm that up to 1.6 million pensioners are not receiving the pension credit and that about 2.2 million pensioners are not receiving council tax benefit? When about 45 per cent. of all the pensioners entitled to council tax benefit are not actually getting it, how can the Minister tell us that take-up is improving or even at
a satisfactory level? Surely that reinforces the case for a higher basic state pension, which would take more people out of means-testing and give personal accounts a chance to work.
Will the Minister tell us what the Government are doing to simplify the benefits system, as means-testing is only one aspect of the complexity? Will he confirm that there are now 51 different benefits and 250 different rates—something like double the number of 30 years ago? Is that not a major challenge for many claimants? Will he confirm that the Government have made grossly inadequate progress on reducing the number of people on incapacity benefit since 1997? Will he also confirm that the rolling out of the pathways project to all who want to take advantage of it is to be halted because of cuts in his Department’s administration budget, which could have very serious consequences? Is he not worried that the Government seem to have a lot of money to spend on keeping people in dependency, but not much to help those who want to work to get back into employment?
Finally, may I raise the issue of whether we need a more fundamental review of the levels of many benefits that are not linked to earnings. The Minister will be aware that, since 1979, jobseeker’s allowance and its equivalents, for example, have shrunk from about 23 per cent. of average earnings to little more than 10 per cent. now. If the Government want to continue to reduce poverty, will they not therefore at some stage have to review the benefits that are not simply in the priority area of child poverty? Will he consider not only trying to simplify the benefits system, but bringing some of the other benefits that have fallen so far behind up to a level that will stand a chance of keeping people out of relative poverty?
James Purnell: As usual, the Liberal Democrat money tree is in evidence again, with a whole bunch of unfunded spending promises, which we will continue to tot up on his account. I reject the hon. Gentleman’s accusation that we are in any way adopting a complacent approach to welfare reform. Our approach aims to get 1 million people off IB and to reach an 80 per cent. employment rate. We are proposing probably the most radical reform of the pensions system since Beveridge and we have just published the Lisa Harker report on child poverty. Of course there is more to do. We are in no way reticent about bringing forward radical plans where they are needed to continue to reform the welfare state. We want to ensure a welfare state that is not only generous and able to lift people out of poverty, but active in encouraging people to get into work, providing the right support and the right conditionality to help them do exactly that.
The hon. Gentleman raised the issue of the winter fuel allowance. As he knows, there was no winter fuel allowance before 1997. It was first introduced at the rate of £20 a year and it is now £200 a year, so it has gone up far faster than earnings and far faster than inflation. For people over 80 years old, it is £300 a year. I remind the House that before we came to power, pensioners could get £60 million a year for help with heating bills; today they can get more than £2 billion, which is quite a significant difference.
The hon. Gentleman also asked about uptake of pension credit. As I said, we want to do more. The National Audit Office—not normally known for being overly generous to Departments—said that we had made very good progress. People recognise that the Pension Service has done an excellent job. It is particularly important to get money to the poorest in society who need it. Take-up of the guarantee credit is now between 70 and 80 per cent. It is important for Members not to talk down pension credit or say that somehow it is old-fashioned means-testing. It is a system for getting money to the poorest in society; it means that the poorest third in our society get an extra £2,000 a year—a massive difference compared with 1997. We want to do more, but people should acknowledge the work that has been done.
The hon. Gentleman asked when we would introduce the earnings link. As recently as a few months ago, he was probably saying that we were never going to legislate for that. He may have been surprised that we have legislated for it in the Pensions Bill. I look forward to seeing him bring forward his proposals. I think that he is to propose a citizens pension, and we will be asking him exactly how it would be funded. Would it be funded by cutting back on the state second pension, taking money away from people; by cutting back on pension credit allowances that allow disabled people to get £160 a week; or by a raid on working families—taking money off them and reducing their incentive to save for their retirement? We look forward to seeing the detail of the hon. Gentleman’s policy. Like the rest of Liberal Democrat policies, it will probably come from the money tree.
The hon. Gentleman asked finally why pensioners’ money should be going up in line with earnings and he also referred to children. The answer is that since we came to power we have recognised that pensioners should share in the country’s growing wealth. We accept the principle that, as the country gets richer, so should pensioners. In fact, pensioners’ incomes have gone up significantly faster than earnings over the past 10 years—of which we are quite rightly proud.
The best route out of poverty for people of working age is not the benefits system. Whether they be lone parents or disabled people, the best route out of poverty is work. Our system is intended to encourage people to get out of poverty by getting into work. That is exactly what we will continue to do.
Mr. Nigel Evans (Ribble Valley) (Con): I heard what the Minister said about taking pensioners out of poverty. I had thought that, with the Government’s intention of increasing the age at which people can retire, they just wanted to stop people from becoming pensioners in the first place. Is it not a fact that council tax has doubled since 1997 and that a huge chunk of pensioners are not able to get any benefits to help them stem that doubling of council tax payments? What are the Government going to do to protect the huge chunk of people who have worked all their lives and have small levels of savings or a small second pension from the doubling of council tax?
James Purnell:
That is yet another division between the Tory Back Benchers and their Front-Bench team, given that their Front Benchers support the raise in the
state pension age. If the Conservatives want to be a serious political party, they will have to face up to big decisions. If the hon. Gentleman is not prepared to support the consensus in the House on pensions, that is absolutely fine.
Mr. Evans: What about council tax?
James Purnell: I am responding to the hon. Gentleman’s first point and I shall now respond to his second.
The right way for people to take up the benefit is to call the Pension Service. As I have explained, the system is far simpler than it used to be. There used to be a 26-page form and there is now a three-page form. It can be done in minutes, so I hope that the hon. Gentleman will encourage his constituents to take up what is owed to them. The previous Government used means-tested benefits as a way of discouraging people from taking up benefits; we do everything that we can to ensure that people do take them up.
Jim Cousins (Newcastle upon Tyne, Central) (Lab): I reassure my hon. Friend that many of us on the Labour Benches who also voted against the 75p pension increase are very much happier with the direction in which the Government are now moving on pensions and with this year’s statement on pensions. However, will he acknowledge that some of today’s pensioners may not benefit from the longer-term reforms, and therefore consider uprating the savings component as well as the guarantee component of pension credit in line with earnings? In the context of next year’s council tax increases, will he also consider whether there might still be a need for general help for pensioners with council tax that is free of benefit and tax clawbacks?
James Purnell: The Chancellor has just made his pre-Budget report and I am sure that he will take my hon. Friend’s comments as the first representation on the Budget. I am glad that our policy on pensions has increased general well-being and that my hon. Friend is much happier than he was with what the Government are doing. The savings credit goes up broadly in line with earnings—in fact, I think it has been going up faster. We want to make sure that we reduce the amount of means-testing in the system, so we are making some changes, but our principle continues to be that we want to ensure that the poorest in society have a safety net that rises in line with earnings and that we reward people’s modest savings above that level. That is what the pension credit has done and will continue to do.
Sir Nicholas Winterton (Macclesfield) (Con): May I direct the Minister’s attention to pensioners and council tax? He appears to avoid questions on the matter or to avoid responding positively to them. Does he share with me and many Members on both sides of the House—not least his hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), who has just contributed a question—the concern that elderly people feel that they have to risk going to prison for non-payment of council tax because they can no longer meet the huge council tax rises that have taken place? Is the Minister saying that the problem is dealt with in his benefits uprating statement, or are we to see more retired people in court, risking prison, because they cannot pay their council tax?
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