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Dr. Roberta Blackman-Woods (City of Durham) (Lab): With three prisons and a young offenders institution in my constituency, I greatly welcome the statement and the measures to reduce prison overcrowding. However, will my right hon. Friend assure me that prison officers and probation staff will be fully involved in developing non-custodial sentences
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and deciding the circumstances in which they can be applied, including finding alternatives to prison for non-violent vulnerable women and people with mental health problems?

Mr. Straw: Yes, I can give my hon. Friend that commitment. I hope that she is looking forward to the publication of the Government’s response to the Corston report tomorrow.

Adam Price (Carmarthen, East and Dinefwr) (PC): Greater proximity to home and family networks is, as the right hon. Member for Leeds, West (John Battle) suggested, a major factor in helping reduce reoffending rates. With that in mind, does today’s statement mean that we will finally get a prison in north Wales for the first time, and a women’s prison in Wales for the first time? Can we get more secure facilities for young people in Wales so that we do not have to send so many young offenders hundreds of miles away to institutions in England?

Mr. Straw: Yes. If one looks at the map, it is patent that, while north-west England—my area—has many prisons, north Wales does not, although there are five prisons in south Wales. The Minister of State, Ministry of Justice, my right hon. Friend the Member for Delyn, the Minister with responsibility for prisons, represents a north Wales constituency, and we are considering sites in north Wales. If we can find a suitable site, we shall use it, I hope with the full support of constituency Members.

Mr. Nick Hurd (Ruislip-Northwood) (Con): Can the Lord Chancellor clarify how many of the 10,500 new places will be new cells?

Mr. Straw: I am happy to write to the hon. Gentleman with the details. Most of the prisons are entirely new build. We are also putting rapid build units into existing sites, but I emphasise that we are considering a building programme.


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Benefits Uprating

1.17 pm

The Minister for Pensions Reform (Mr. Mike O’Brien): With permission, Mr. Speaker, I wish to make the annual social security uprating statement and a broader statement on pensions. I will place full details of the uprating in the Vote Office and arrange for the figures to be published in the Official Report.

As in previous years, most national insurance benefits will rise by September’s retail price index, which is up by 3.9 per cent. Most income-related benefits will rise by September’s Rossi index, which is RPI less housing costs, and is up by 2.3 per cent. As my right hon. Friend the Chancellor announced, from April 2008 the basic state pension will increase to £90.70, which is up by £3.40. For couples, the standard rate will rise to £145.05, which is up by £5.45. That is a real-terms rise of 10 per cent., or more than £47.30, since 1997.

My right hon. Friend the Chancellor also announced that the standard minimum guarantee part for pension credit, which has risen with earnings since 2003, will from next April rise by £5 a week for single pensioners and £7.65 for couples. That means that from April next year, no single pensioner should live on less than £124.05 a week, and no couple on less than £189.35 a week. That is an increase of £57 for a single pensioner and £85 for couples since 1997.

Since 1997, pensioner poverty has reduced by more than a third as a result of targeted support from pension credit and £11 billion of extra funding. That has lifted more than 1 million pensioners out of relative poverty. As a result, pensioner households are on average £1,500 a year, or £29 a week, better off in real terms. The poorest pensioner households are around £2,200 a year, or £42 a week, better off. That underlines our commitment to target resources where the need is greatest.

That is a commitment that I can reinforce today. I can announce a package of changes for introduction in October 2008 to simplify further the state pension system. The package is cost-neutral over the long term and will be paid for by reducing the backdating of pension credit from 12 months to three months, as from next October. Twelve-month backdating was introduced in 2003 to ease the introduction of pension credit. The new changes will make better use of these resources and, I understand, will be broadly welcomed by Help the Aged and Age Concern. The changes that we intend to introduce will make the system less confusing, less intrusive and more transparent. We want the customer to be able to get their state pension entitlements with the minimum fuss, bureaucracy and form filling.

In 2005, we made some improvements. Those applying for pension credit by telephone have been able to get council tax benefit and housing benefit together, using a shortened claim form completed by the Pension Service. The form is then sent out to the customer to sign and send to their local council. Many pensioners do not send the form on, however, and so lose out. We aim to improve on that by being more efficient and more joined up. We intend for council tax benefit and housing benefit claims to be made over the telephone in exactly the same way as those for state pension and pension credit. The claim will be taken by the Pension Service and automatically passed to the local council for assessment.
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No more action will be needed by the pensioner. They can access up to four benefits in one telephone call: pension credit, state pension, housing benefit and council tax benefit. About 50,000 pensioners will gain from the measure by 2010. We also plan to align the rules on backdating of pension credit, housing benefit and council tax benefit with those on the working age benefits. That will reduce complexity and make the application process less intrusive.

These days, some pensioners spend longer periods abroad in warmer countries. They currently lose their pension credit after only four weeks. We intend to change the pension credit rules that relate to the length of time that pensioners can spend abroad before their benefit is affected. We will align pension credit with the rules on housing benefit and council tax benefit, so that benefit will continue for up to 13 weeks. That will mean that almost 90 per cent. of the pensioners who would currently have their pension credit stopped will in future retain their entitlement.

Those changes will be taken with two further measures in the pensions Bill that, with your permission, Mr. Speaker, I hope to put before the House today. Those measures will simplify the rules relating to the additional state pension and remove the need for most pension credit customers aged 75 and over to tell us about changes in their retirement income. More than 1 million pensioners will benefit through not having to complete a review of their income and capital, because we believe that income and capital do not increase much for most people after 75.

We will also uprate benefits and allowances for the working population. Child allowances linked to the income-related benefits will be increased in parallel with the child tax credits. This is intended to ensure that families receiving those benefits see the full value of increases in child tax credits. In particular, the allowance paid for a child dependant will increase by £5.14 a week from next April to £52.59, which is a rise of almost 11 per cent.

As in previous years, the uprating provides an opportunity to deal with anomalies and make the system simpler. So from next April, the single person rate for income support and jobseeker’s allowance will be the same for all 16 to 24-year-olds. For the small number of 16 and 17-year-olds who claim, this amounts to an increase of £12.30, uplifting their weekly benefit from £35.65 to £47.95. That will tackle a perverse incentive that exists in the current system to leave home to receive more benefits. The change will also provide extra help to some vulnerable teenagers, as well as simplifying the benefit structure.

To return to pensions, our first priority was to tackle pensioner poverty and ensure that everyone shared in rising prosperity. Our next priority is to put in place a pensions system for the future. The good news is that on average we can expect to live longer, but that has consequences. Measures in the Pensions Act 2007, passed earlier in the year, will tackle gender inequality in the state system, providing a more generous basic state pension, restoring the earnings link and giving people a clear picture of what the state will provide and what they need to do for themselves. Measures to be introduced in Parliament later today will take the next step in the reforms by encouraging saving and extending for the first time the benefits of pension saving with minimum
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mandatory contributions from an employer across the working age population, and by giving everyone the opportunity to create a retirement income that helps them to meet their aspirations. In bringing forward these measures, we will continue to support existing final salary pension provision.

I am pleased to announce that we are today publishing the Government’s response to the deregulatory review consultation. The response summarises the comments that we received and outlines the further action that will be taken. We are grateful for all the responses received and for the detailed consideration that many have already given to the issues involved. We want to reduce burdens on employers who provide good workplace pension schemes, but we need to balance that against maintaining adequate protection for pension scheme members. That is not easy to achieve, but without action, the slide away from final salary schemes could turn into a rush.

We intend to reduce the statutory cap on the revaluation of deferred pensions from 5 to 2.5 per cent. for pension rights that will build up from a future date. That change will not affect pension rights that are already earned. We will include the changes needed to achieve that in the pensions Bill that I hope to introduce this afternoon. In addition, we will take forward some issues through secondary legislation or guidance, and work with stakeholders to explore the scope to address concerns that have been raised in other areas. This includes a statutory override to enable employers and trustees to agree changes to pension schemes, which will enable them to benefit from statutory and regulatory changes. That has proved difficult for some schemes in the past. Copies of the detailed response will be placed in the Libraries of the Houses of Parliament.

The cost of uprating benefits for next year is nearly £4 billion, with more than £2.75 billion of that going to pensioners. The further simplification measures that I have announced today, together with those that, with your permission, Mr. Speaker, I am bringing forward in the pensions Bill, represent a substantial further investment in social justice, reducing poverty and helping those in need. I commend the statement to the House.

Mr. Nigel Waterson (Eastbourne) (Con): I thank the Minister for his usual courtesy in letting me have a copy of his statement in advance.

We on the Conservative Benches of course do not oppose the uprating of benefits, although we have issues with the administration and complexity of the system, as well as with the disincentives to both work and saving that are inherent in it. Can the Minister update the House on the Department’s efforts to tackle fraud and error in the system? It is bad enough that the Government are so inept at dealing with people’s confidential records, but why are they still paying out more than £5 billion through fraud and error in the benefits system? Can he confirm that benefit payments have been going to prisoners, students and those who are already in work? Can he also confirm that, at the same time as that largesse at the taxpayer’s expense is going on, up to £2.5 billion of pension credit went unclaimed last year—a rise of £500 million on 2004-05?

May I welcome the proposal for 1 million pensioners not to have to review their income and capital? However, can the Minister confirm that there will be losers from reducing the backdating for pension credit from 12 to three months? How many does he estimate there will
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be? What steps will he take to ensure that pensioners are aware of this change in the rules? Is it not the case that the saving made by the change is simply being transferred to, I hope, an increased take-up of means-tested benefits?

Is it not simply a case of robbing Peter to pay Paul? Can he confirm that almost 40 per cent. of those entitled to council tax benefit do not claim it, and that pensioners are the worst category in that regard? Is it true that the take-up of the benefit has fallen—fallen—by 12 per cent. since 1997? I therefore welcome the proposals in the statement to increase take-up, but why has it taken so long to produce them? Have the Government not tested to destruction the system of means-tested benefits to the extent that the poorest pensioners are becoming poorer in real terms? Will he explain the Government’s failure yet again to provide help to pensioners with their council tax bills?

The Minister made much in his statement of what the Government are allegedly doing for pensioners. While he mentioned the restoration of the link between the state pension and average earnings, he gave no clue whatever as to when that might happen. Previously, it has been said that it would happen in 2012 or 2015, or not even then if it was unaffordable. When will it happen?

As the Minister pointed out, there is a broad measure of consensus over long-term pensions reform. My party supports the overall pensions settlement emerging from the Turner commission. In our last election manifesto, we embraced auto-enrolment and the need to boost pension savings. But does he accept that we have legitimate concerns about the design of personal accounts? In recent weeks, Ministers and others have tried to shut down debate on those important issues by suggesting that the official Opposition were in some way undermining the consensus. I wholly reject that argument. Does he not accept that it is the job of the official Opposition to question? We have serious questions about the effects of means-testing on pensions saving.

The Pensions Policy Institute has identified at-risk groups who will be no better or worse off as a result of being auto-enrolled into personal accounts. Can the Minister confirm that he takes the issue seriously? Does he appreciate that whatever politicians might say, commentators and journalists are bound to write the story that some people will not be better off? It is fundamentally an issue of confidence, which has been badly shaken by the pensions crisis. Will he make a statement in the near future on proposals to deal with the problem?

While we are on the subject of confidence, will the Minister confirm that he will shortly receive and publish the Young report, and bring forward proposals for compensation in response to pension victims’ legitimate claims?

We broadly support the measures mentioned by the Minister in response to the deregulatory review. I assure him of our broad support on the revaluation of deferred pensions and on the statutory override. If we are to stem the disastrous decline in defined benefit schemes, however, Ministers must be more radical and courageous. I assure him that he will have our encouragement and support in looking at radical options such as risk-sharing.

On personal accounts, is it not most unfortunate that the new chairman of the Personal Accounts Delivery Authority, Paul Myners, has rendered his position wholly
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untenable, given his intemperate attack on the official Opposition from his civil service position and his record as a Labour donor?

Finally, does the Minister accept that with nearly 2 million pensioners living in poverty, 125,000 pension victims, nearly 5 million people claiming out-of-work benefits, and the highest proportion of children living in workless households in the whole of the European Union, the complacency that peppers his statement today is grossly misplaced?

Mr. O'Brien: It is interesting to read what the hon. Member for Eastbourne (Mr. Waterson) said last year and compare it with what he says today. In the past, he said that the Government would do nothing about the Turner report, but we passed one Bill in July and are about to introduce a further Bill. He claimed that nothing would be done about the Child Support Agency, but we have just taken through legislation in relation to it.

We made it absolutely clear that we would reduce pensioner poverty, and the whole statement is about ensuring that. We are putting an extra £11 billion into helping pensioners. That money would not have been in the system had the Conservatives maintained office in 1997. Two million pensioners have been lifted out of poverty, and 1 million out of relative poverty. Those are enormously good figures. Had the Conservatives stayed in power, pensioners would be on £69 a week. Instead, no pensioner need be on less than £119 a week, and that figure will rise next April to £124 for a single pensioner.

The hon. Gentleman asked me about a number of issues, including those in relation to fraud. We are committed to protecting the integrity of the benefits system and ensuring that we pay our customers the right benefits at the right time. May I make it clear that fraud in income support and jobseeker’s allowance has been reduced by about two thirds since we took over from the Conservatives? It is down from 7.2 per cent. to 2.1 per cent., and is now the lowest ever recorded. Since 1997, our Department has put enormous effort into reducing fraud in the benefits system, with great success. Fraud now stands at its lowest level—down from an estimated £2 billion in 2001. As well as changing the way in which fraud is dealt with, we are addressing error in the system through benefit simplification. Today’s announcements will help in that process.

The hon. Gentleman also asked how we would ensure that people were able to claim pension credit. Our officials are ready today to accept telephone calls from pensioners who wish to claim pension credit. I know that the changes announced today will be welcomed by some of the pensioners’ organisations, as they have asked for them in their conversations with me for some time. The whole basis of those changes is to ensure that take-up of pension credit increases and that people get help with their council tax. Those who are on low incomes and struggling with council tax, many of whom did not fill in the form that they got from the Pension Service, and did not send it on to their local authority and get the benefit to which they were entitled, will no longer have to sign that form. Many of them thought that the form was confusing and did not want to sign it. In future, that form will be dealt with automatically by
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the Pension Service, and pensioners will not have to worry about it, sign it or pass it on to local councils. That will not only be a saving for local councils; I hope that it will ensure that more people who are entitled to help with their council tax get it.

The hon. Gentleman asked about losers in relation to the backdating. There will be no actual losers, as we are redistributing the money within the budget— [Interruption.] I see that Opposition Front-Bench Members are chortling. Overall, there will not be losers, as the money will be redistributed within the budget. During the next nine months, we will encourage some people to make the application before the change is introduced. There need be no losers in the long term either. We want those who are entitled to claim the backdating for 12 months to make that claim before next October. We will therefore work with some of the pensioners’ organisations to ensure that we support their campaign to get more people to apply.

The hon. Gentleman also asked about the Young report in relation to the financial assistance scheme. We hope to receive the Young report shortly—I have not yet seen a copy of it, but I hope to get it within days. We will then consider it, and I hope to announce in due course our response to that report.

The hon. Gentleman mentioned proposals in relation to risk-sharing, which he said that he supported. We have looked into that and we could look at it more broadly, but I am not anxious to rewrite the whole of pensions and trust law in order to bring it in. That would not be helpful. The hon. Gentleman might find it worth talking to some leading figures in the CBI, as some are a little concerned that it might lead to a movement from defined benefit schemes into the new system, as some companies are not prepared to go straight from such defined benefit schemes into defined contribution schemes. The issues around this subject should be examined with great care, but I do not want to rush into this just yet.

The hon. Gentleman said that his party supported Turner and automatic enrolment and, indeed, wanted to ensure that it was a success. I accept the hon. Gentleman’s good faith in saying that, because I think he has been broadly supportive. I have to say, however, that his colleague, the hon. Member for Epsom and Ewell (Chris Grayling), has not filled me with any confidence that he takes that view; nor is it the case, I also have to say, that he has adopted the same role as his predecessor in supporting personal accounts. I have seen the hon. Member for Epsom and Ewell take every opportunity to run down the whole idea of personal accounts. I think he needs to be really careful, as we have built a consensus on it. I pay tribute to the hon. Member for Eastbourne for contributing to it, but I warn him that the hon. Member for Epsom and Ewell takes every opportunity, as I said, to undermine it.


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