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Social Security

3.35 pm

The Minister for Pensions Reform (Mr. Mike O'Brien): I beg to move,

Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to discuss the following motion:

Mr. O'Brien: I am satisfied that the orders are compatible with the European convention on human rights.

This year’s uprating adds almost £4 billion to Government spending and reinforces our commitment to build an active welfare state and tackle poverty by helping those most in need. The uprating order will increase most national insurance benefits by the retail prices index, which was 3.9 per cent. in September 2007, and increase most income-related benefits by the Rossi index, which is the retail prices index excluding rent, mortgage interest, council tax and depreciation, which was 2.3 per cent. on the same date. The reason the latter is used is that housing-related costs are dealt with in other benefits.

Mr. David Gauke (South-West Hertfordshire) (Con): I am grateful to the Minister for giving way so early in his speech. He has outlined how benefits will increase by 2.3 or 3.9 per cent. However, the Government say that public sector increases of above 2 per cent. will be inflationary—a bogus argument in my view—so can he explain why the increase in benefits will not also be inflationary? My view is that neither would be inflationary, but could he explain the distinction that the Government have made?

Mr. O'Brien: We have a primary aim of helping the poorest in our society and ensuring that they do not get poorer. They are the people on the lowest incomes. When inflation rises, it is important that we should seek at least to maintain—or, where we can, improve—the situation of the poorest. It is interesting that the hon. Gentleman says that, for him as a Conservative, it does not matter by how much people’s pay rises. I suspect that those on his Front Bench will take a different view.

Mr. Gauke: I will not detain the House too long on this, Madam Deputy Speaker, but the reason the Government are refusing to increase public sector pay is that they are running out of money, owing to the state of the public finances. All I am saying is that it is bogus to argue that the reason is to do with inflation. The very fact that the Government are, rightly, prepared to increase benefits in line with the RPI demonstrates that the argument does not work.

Mr. O'Brien: I am afraid that it does not demonstrate that at all. If the hon. Gentleman takes the view that pay rises have no impact on inflation and that inflation does not matter, he is taking us back to
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the days of Thatcher, Major and roaring high inflation. That just shows that the Tories have learned nothing in the past 20 years.

Let me return to the orders before us. The Guaranteed Minimum Pensions Increase Order sets out the amount by which contracted-out defined-benefit pension schemes must increase members’ guaranteed minimum pensions that accrued between 1988 and 1997. Where the annual increase in the retail prices index exceeds 3 per cent., the guaranteed minimum pensions indexation requirement is capped at that level under primary legislation. This year’s order therefore provides for an increase of 3 per cent.

The order provides an extra £2.8 billion to pensioners. This underlines our commitment to today’s pensioners. In real terms, the Government have done more for older people than any Government before them. Today, for the first time in a period of sustained economic growth, pensioners are less likely to be living in poverty than the population as a whole. Today’s pensioners are, on average, £1,500 a year better off than they were under the last Conservative Government. We have focused on the poorest pensioners, and they are now £2,200 a year better off.

Sir John Butterfill (Bournemouth, West) (Con): I am slightly puzzled by that assertion, because the number of pensioners going bankrupt has more than doubled in the past five years, from just 900 in 2002 to 7,900. How does that fit with the Minister’s assertion that pensioners are doing rather better than most?

Mr. O'Brien: The hon. Gentleman will be well aware that the figures that I have just given the House show the increase that pensioners have had. Many pensioners are on very low incomes, but they are not in the position that he has identified. I accept that some people on low incomes go bankrupt; housing and other issues can lead to that happening. However, we are talking about helping the poorest third of pensioners to improve their lot in our society and reducing the level of pensioner poverty in this country. I repeat that the poorest third of pensioners are now £2,200 a year better off. I do not think that there is any real doubt that that is the case.

We are spending £11 billion more this year than if we had merely continued the policies of the previous Conservative Government. As a result, pensioner poverty has reduced by over a third since 1997. That is a real achievement, of which Labour Members can be very proud. However, we must do more. We have been reducing pensioner poverty, and we treat that as a high priority, but our policies need to take more people out of poverty than we have done up to now.

Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): The Minister is right to highlight the issue of pensioner poverty. One contributory factor is that between 1.1 million and 1.7 million pensioners do not claim the pension credit to which they are entitled. What is the Minister doing to raise the number of people claiming such benefits, given the complexity of the means-tested system that the Government have put in place?

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Mr. O'Brien: The hon. Gentleman has raised an important point, and I shall come to that matter in a moment. It is one that has greatly concerned me, and I hope that I shall be able to provide him with some reassurance.

Pension credit ensures that no single pensioner need live on less than £119.05 a week. That will increase to £124.05 from April. However, I want to ensure that everyone receives the benefits to which they are entitled, which is the point that the hon. Gentleman has just made. Where we can make improvements further to simplify and increase uptake, we will.

In my uprating statement last December, I was able to outline an important package of measures further to simplify the state pension system. These changes will make the system less confusing, less intrusive and more transparent. In particular, they will automate council tax and housing benefit assessments, enabling thousands more pensioners to receive those important benefits with the minimum of fuss. And we will do more.

Yesterday I announced detailed plans to deal with exactly the issue that the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) has raised. We are seeking to increase the uptake of pension credit. We recognise that there are those who, for a variety of reasons, do not claim. Many just do not think that they will be eligible; others do not realise how easy it is to find out about their entitlement. Pensioners can currently claim up to five benefits from one telephone call. The amounts of money involved can be substantial, with average awards of pension credit of around £50 per week.

Chris Ruane (Vale of Clwyd) (Lab) rose—

Anne Snelgrove (South Swindon) (Lab) rose—

Mr. O'Brien: I will give way in a moment.

We are working jointly with Help the Aged, Age Concern, Citizens Advice and other partners to get this message across: “If you are entitled, this money is rightfully yours and we’re here to help you get it.” We will target the areas where take-up is low, using intermediaries and local channels and joining up with other organisations to create innovative communications strategies. For example, we are working with the Scottish Executive to extend pilots that will test methods for increasing take-up. In Birmingham, we will send out more than 500,000 targeted mailings and advertise through local radio, GPs’ surgeries, libraries and post offices. I will be writing to all Members of Parliament shortly to outline our plans and show how hon. Members can help. This will make pension credit even more accessible and get money to those who are most in need.

Chris Ruane: I am pleased to hear that the Minister will use intermediaries to help with take-up campaigns, but may I ask whether such campaigns will include, in addition to pension credit, attendance allowance, which can make a massive difference to spending power of between £30 and £60 a week? Will attendance allowance be included, and if the Department is working with intermediaries, will financial help be available for them to do that additional work?

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Mr. O'Brien: Attendance allowance is not one of the five benefits that we are particularly targeting, but people can be referred to departmental centres where they can get advice and will be able to get attendance allowance. May I add that getting that allowance is now much easier than in the past, and we have sought to improve the speed at which people can get it? When applications need to be made, it is important to get on and make them quickly. Some recent family experience of trying to do that for a relative showed that it can indeed happen pretty quickly—and I do not believe that those involved knew that I was the responsible Minister!

At the request of Age Concern and Help the Aged—they are anxious to work with us in the run-up to October, when some of these changes will occur—we are changing the way in which benefits are accessed. We want to ensure that we get as many people as possible on to pension credit in particular. Up to October this year, pensioners will be able to receive up to one year’s backdated pension credit. That can amount to a lot of money for often very poor pensioners and it can help them to improve their standard of living. We have talked to the relevant agencies, which are very happy to work with us, so I shall not offer funding when we already have volunteers happy to do so.

Anne Snelgrove: I commend the Minister on the initiatives that he has just mentioned. He said that he was going to write to MPs, so may I give him an example of how MPs can work proactively with Age Concern? In January, I held a joint advice surgery with one of Age Concern’s advice workers, which was specifically targeted on senior citizens. It was extremely helpful to me and to the senior citizens and it enabled Age Concern to reach a different group from the people it usually reaches. We all thought that it was a great success and we intend to repeat it. Would my hon. and learned Friend consider referring to that example in his letter to MPs?

Mr. O'Brien: I find that to be a very good example and I will certainly consider doing so. It sounds like just the sort of initiative that MPs could use to help put more pensioners in a position to deal with problems relating to lack of income.

Mr. Ben Wallace (Lancaster and Wyre) (Con): I am aware that the Government are very keen on targets and the Minister has already said that he is keen to target areas where uptake has been low. Does he have a target in mind for the level of uptake that he is aiming for?

Mr. O'Brien: Our basic aim is to get as many pensioners as we possibly can to take up the rights to which they are entitled. The money is there, so we are able to cover the costs. Getting pensioners to make a telephone call to one of the helplines is basically all it takes: we would like a 100 per cent. take-up if we could get it, but we do not have it at the moment. If we could get pensioners to make those telephone calls, it would be very helpful; people are waiting on the end of the line to receive them. The straight answer to the hon.
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Gentleman’s question is that in that sense there is no specific target percentage; the objective is to get everyone signed up.

The change that I announced last December should help us substantially in that regard. One of the problems we have faced is that pensioners often feel that they do not want to fill in the forms, they do not want other people to know their business or their private information and they perhaps do not like accepting charity. But one thing that pensioners certainly do not like doing is paying council tax. [Interruption.] Well, nobody likes paying tax, as Conservative Members are pointing out from a sedentary position. It is probably true that nobody likes paying taxes, but we need to pay them. However, after October we will change how we make available those access points to benefit.

Rather than a pensioner having to make a telephone call, receive a form, sign the form and send it on to the local authority to access some help with council tax, we are aiming to automate all that. The pensioner will make one telephone call and the Department will be able to do all the work. All the Department will then have to do is send a letter to the pensioner saying, “It is done.” It will also send a letter to the local authority, or probably an e-mail in this example, saying, “This now has to be put into payment.” Some of the various pensioner groups have been asking for that for a long time. It is what I announced last December, and we will bring it into effect in October. That will require evening up some benefits. We will pay for that by reducing the back payment of pension credit as from October to three months rather than a year. We are finding the funding for that, and as a result we hope to lift about 50,000 pensioners who are in poverty out of it.

Anne Main (St. Albans) (Con) rose—

Mr. O'Brien: If the hon. Lady will excuse me, I think that there is a queue behind me.

Paul Flynn (Newport, West) (Lab): Does the Minister agree that many pensioners who have never claimed benefits in their life see the pension credit and income support as handouts, and the basic pension as an entitlement? Should we not be working to ensure that the entitlement is increased and that those benefits that are seen as handouts are incorporated into the basic pension?

Mr. O'Brien: I have a lot of sympathy with that position, and if our resources were infinite we would be able to do that. We are trying to move towards the point at which we have to rely less on means-testing, but at the same time our objective has been to help the poorest pensioners first and to remove the scourge of pensioner poverty, remembering that, back in 1997, the poorest pensioners were relying on £69 a week. We have increased that amount substantially, and as from April it is going up to £124, which is a big, important change.

We are lifting pensioners out of poverty, but that has meant means-testing. I share some of the concerns about means-testing that were expressed by my hon. Friend the Member for Newport, West (Paul Flynn), but as resources are limited, it is a way to ensure that
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those resources are targeted on the poorest people. With all those caveats, I hope that he accepts that response.

Anne Main: I was interested to hear that, under the automated system, everything will be put in place by one telephone call. I am sure that that is laudable in respect of those who are eligible to claim those benefits, but, given the high profile case of a lady who made 200 telephone calls and swindled £20,000 of child benefit, I would hope that some checks and balances are being put in the system that the Minister has just announced to us, to ensure that people who are claiming those benefits are entitled to do so. Otherwise, if it really takes just one telephone call, we will have another scam in which the fraudster out there—I am not saying that any of my pensioners will be doing this—becomes used to milking the system.

Mr. O'Brien: A few more checks are made, rather than just a telephone call. These days, we do not have to rely on a telephone call to make checks on people. We want to ensure that people are able to provide us with information about their various sources of income. Today, most pensioners rely not just on the basic state pension plus pension credit, but on a number of other sources, such as savings or a second pension, which many people have.

We must take it into account—this is a major part of the work done by the Pension Service—that checks must be carried out on the financial circumstances of individuals. When dealing with millions of people, there are always a few who try to milk the system and defraud it, so it is important that we put in place the appropriate checks. That is what we have done. Indeed, it has been done particularly successfully in recent years as we have targeted those who might seek to defraud the system. What we are doing will build on the hard work of the Pension Service.

Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): The Minister says that pensioners should make telephone calls themselves, but how about some proactivity? Could the Department not target the category of pensioners in greatest need?

Mr. O'Brien: We are sending mailshots to about half a million people in Birmingham in an attempt to persuade them to take up their entitlements. However, we have experienced problems with the take-up of, in particular, pension credit, although we have written to some of those who we think should be taking it up. Our information, limited as it is, suggests that people living in certain areas may well be on low incomes, but although we have sent them up to four mailshots a year, we are not achieving the take-up we would like, for the reasons that I gave earlier.

The hon. Gentleman suggests by means of signals that telephone calls might be appropriate. We rely on pensioners’ telephoning the hotline. Our objective is not to start making what would amount to unsolicited calls to pensioners, and I would be rather cautious about introducing such a procedure.

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