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Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Delegated Legislation Committees),

Terms and Conditions of Employment

Question agreed to.


Motion made, and Question put forthwith, pursuant to Standing Order No. 18(1)(Consideration of draft regulatory reform orders),

Question agreed to.


Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Water Policy: Environmental Quality Standards

Question agreed to.

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Pensioners (Age Addition)

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Watts.]

12.16 am

Jeff Ennis (Barnsley, East and Mexborough) (Lab): I am grateful for the opportunity to raise an extremely important issue, even in the wee small hours. The Minister for Pensions Reform will know that I recently tabled early-day motion 1463 on the 25p age addition for pensioners over 80, which reads:

I am pleased that the early-day motion has attracted 64 signatures from Members on both sides of the House. The Minister will also know that I recently raised the matter with my right hon. Friend the Prime Minister at Prime Minister’s questions.

I must admit that I have been concerned for some time about the fact that the 25p age addition has remained static since 1971, but matters were brought to a head on 4 April this year, when I attended the 80th birthday party of my father, Bill Ennis, in his back garden. It was a sunny day, unlike the weather that we have recently had in south Yorkshire. Without my prompting, my dad said to me: “Jeff, do you know what the Government have given me for my 80th birthday?” I knew the answer, but I thought I would go along with him and said, “No, what have they given you, Dad?” He said, “25p a week on my state pension. Isn’t that ridiculous?” That epitomises the reason why I called for this Adjournment debate. If that is my dad’s reaction to the 25p increase on his state pension, I am sure that most other 80-year-old pensioners will have a similar reaction.

When the 25p addition was introduced, it meant something. In those days, it was officially known as a crown, but we mostly called it five shillings and it was commonly known as five bob—that is the phraseology I recall. I am sure that the Minister’s recollections of 1971 are hazy compared with mine, because that was the year in which I started college in Bristol. I remember that at the student bar in Bristol in 1971, I could buy a pint of lager for 15p. Being a Yorkshireman, I remember that it was 15p, because I could buy a pint of lager in Brierley in my constituency for 12p, so there was a 3p differential, which was quite a substantial amount of money at the time. In 1971, for 25p, I could buy a pound of Cheddar cheese, but I would now have to pay £2.60. I could buy a dozen large eggs for 25p, but they now cost over £2. I could buy a pound of bacon for 24p, but it now costs over £3. I could buy four white loaves for 23p. That would now cost £3.44. Taking into account inflation, 25p in 1971 is worth £2.50 at today’s prices. There is quite a difference in the value of 25p in 1971 and in 2007.

I shall briefly examine the history of the 25p age addition and why it has never been increased. It was introduced in September 1971 through the national
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insurance Bill 1971 by the Tory Government of the day. Sir Keith Joseph explained that it was intended to recognise

Sir Keith Joseph explained that as a result of the introduction of the age addition, a single person over 80 on the standard rate pension would get £6.25 a week.

In 1978 the Labour Government floated the idea of raising the age addition in their discussion document “A Happier Old Age”, which stated:

That sounds rather familiar.

In 1995 Lord Mackay of Ardbrecknish, a Conservative Minister in the Department of Social Security, said:

In 2003, the present Minister for Trade, my right hon. Friend the Member for Makerfield (Mr. McCartney), who was the Minister for Pensions at the time, said:

There is no doubt that the Labour Government have done more than any previous Government to improve pensioner incomes. I am proud to be associated with what the Government have achieved. The Minister might think that I am having a bit of a whinge, but many OAPs resent the fact that the issue leaves a nasty taste in their mouths. We need to consider how best to deal with that. I understand the Government’s reluctance to consider raising the 25p age addition in its present form because of all the other initiatives that we have brought in. My view, as I suggest in the
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early-day motion, is that we should scrap the 25p age addition and, by way of compensation, raise the winter fuel allowance for the over-80s by a minimum of £25 a year.That policy change would find favour with pensioners, who undoubtedly like the winter fuel allowance.

The current winter fuel allowance standard rate of £200 for a household containing at least one person aged 60 or over was first paid in the winter of 2000-01. Households including a person aged 80 or over have received an additional £100 since the winter of 2003-04. Announcing the introduction of that higher rate for people aged 80 and over, the Chancellor said:

In the 2005 pre-Budget report, the Chancellor announced that winter fuel payments would continue to be paid at those rates for the duration of the current Parliament. Around 2 million households benefited from the 80-plus payment in the winter of 2003-2004 at a total cost of more than £208 million. The reply to a question that I recently tabled showed that the estimated annual cost of raising the winter fuel payment by £25 for people aged 80 or over in 2007-08 was around £50 million. For the winter of 2007-08, the total expenditure on winter fuel payments is forecast to be £2,059 million. That switch would be very popular, because it would automatically benefit every pensioner aged over 80.

The 25p weekly age addition is subject to income tax. Some 830,000 older pensioners currently pay income tax, which is roughly one third of older pensioners—we currently have just more than 2.5 million pensioners aged over 80. After their income tax has been deducted, 830,000 older pensioners only get 20p a week allowance after tax. By switching to an annual increase of 25p or more on the winter fuel allowance, every older pensioner would get the full £25. A two-pensioner household containing two pensioners aged over 80 currently gets 50p a week—25p each—and £25 a year roughly equates to 50p a week for a double household.

As I have mentioned, the cost to the Exchequer of increasing the winter fuel allowance by £25 has been estimated at £50 million. In my opinion, that would be £50 million well spent. That sum would, of course, be reduced by the current cost of paying out the 25p age addition. Perhaps the Minister will inform the House of that cost, because I have not found that information—the total cost would be £50 million minus that particular sum of money.

I repeat that I hope that the Minister does not think that I am having a go at the Government. I am proud
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of what we have achieved so far for pensioners. The announcement earlier this year about once again tying pension increases into average earnings from 2012 is yet further evidence of this Government’s commitment to the nation’s pensioners. However, my philosophy on this matter is this: why spoil the barrel for a hap’orth of tar? That is exactly how pensioners regard the 25p age addition. After all, these days 25p cannot even buy a second class stamp. I should like the Minister and his Department, and indeed the Treasury, to give very serious consideration to this important matter.

12.30 am

The Minister for Pensions Reform (James Purnell): It is a pleasure to be here to respond to this important debate. I should like to start by congratulating my hon. Friend the Member for Barnsley, East and Mexborough (Jeff Ennis) not only on securing the debate but on the case that he has made and the eloquent way in which he did it. I know that he has already managed to convince the Government on two of his campaigns to date, and he was assuring me earlier today that my likely resistance to his proposal would probably be a pyrrhic victory. I look forward to seeing whether he is proved right about that.

I recognise the point that my hon. Friend makes, not least because I receive a number of letters from people who have just turned 80 and who make exactly the same point—and, indeed, who thank me for having paid for some of the cost of the stamp that enabled them to send me the letter in the first place. The Government will certainly continue to look at the arguments that my hon. Friend makes but, as he anticipated, we will not support his proposal.

I also congratulate my hon. Friend on the fact that he will be the last Member of this House to obtain an Adjournment debate, certainly in this Chamber, under the current Prime Minister. It is an historic moment and it is worth reflecting on the fact that 10 years on, as he said, pensioners are significantly better off as a consequence of the changes that have been brought in by this Government. That is why we continue to believe that the best way to address the genuine needs of older people is through policies other than increasing the age addition, although I recognise that that is not my hon. Friend’s central proposal.

When the age addition was introduced, 25p was more money in people’s pockets than it is now. Then, it was about 4 per cent. of the basic state pension, whereas now it is less than 0.3 per cent. In 1971, only a small minority of people reached the age of 80, whereas now there are nearly 3 million people over 80. However, the problem with increasing the age addition is that it would not be a well targeted measure. As, in effect, an increase in the basic state pension, it would be taxed for people who pay tax and means-tested away for those who are on pension credit—and those who are on the guaranteed credit only would gain nothing at all from the increase.

That is why the Government, in trying to recognise the needs of older people, have focused on other ways of achieving the same goal. About 3.5 million households with someone aged 75 now benefit from the free television licence—that is worth £135.50 a year and in 2007-08 costs about £500 million. It is already
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making a big difference. Pension credit makes a particularly significant difference to older people; indeed, more than a third of those entitled to pension credit are over the age of 80. Pension credit has particularly benefited older women, especially widowed women, who have seen a significant difference in the amount that they receive from it.

Most notably, as my hon. Friend said, we have not only introduced the winter fuel payment but increased it to £200 for pensioners under the age of 80 and to £300 for pensioners over the age of 80. I recently replied to a parliamentary question, which asked how much was being spent on the extra fuel costs of pensioners in 1996, and the answer was £60 million. As my hon. Friend eloquently said, the figure for the winter fuel allowance is now more than £2 billion. That is another example of difference.

Overall, pensioners over the age of 75 are much better off through the measures that I have outlined than if we had increased the age addition allowance in line with inflation—and, indeed, better off even than if we had backdated it. As my hon. Friend said, it would be approximately £2.50 if it was backdated in line with prices to 1971. The consequence of our reforms is that pensioner households with at least one pensioner over 75 are better off by £34 a week. That dwarfs the figure of £2.44.

My hon. Friend asked what the cost of the current 25p age addition allowance is. The answer is £35 million in this year’s money. I hope that that is helpful, though he will doubtless argue that that makes his case stronger rather than weaker. However, in the spirit of
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openness at this late hour, I thought that I would give him that figure. The changes that we have made mean that households with pensioners who are over 75 are £34 a week better off. That is significantly more than would be gained even by backdating the age addition allowance to 1971. I understand my hon. Friend’s point but, if one has any contact with the social security system, one realises that there are strange byways in it, and we are considering one of them.

We are united on the point that the Government have done much to help pensioners in the category that we are discussing.

Jeff Ennis: My hon. Friend has been kind to me at this late hour and I am pleased about that. He obviously realises that my main point is not about increasing the age addition allowance but switching it so that the income tax element falls away. I know that I am meeting some resistance. I met the same the resistance from Ministers about raising the age for smoking from 16 to 18, but it crumbled after two years of trying. Will my hon. Friend facilitate a meeting involving him, me and a Treasury Minister to discuss the matter further?

James Purnell: I shall endeavour to do that. My hon. Friend has uttered chilling words, which will stand in Hansard as a warning to anyone who dares oppose him. With that, I shall take my leave of the House.

Question put and agreed to.

Adjourned accordingly at twenty-three minutes to One o’clock.

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