Of course, we are in Parliament and in government not simply to be better than the alternative, but to improve peoples lives, meet their aspirations and bring
about our vision of a fairer society. One aspect of that is our target to end fuel poverty among vulnerable groups by 2010, and completely by 2016.
Before 1997, fuel povertywhich is defined as when a person pays more than 10 per cent. of their income on heating their homehad deliberately not been identified as something the Government should be worried about. In 2004, owing to a combination of declining retail prices and substantial Government assistance, 4.5 million homes had been lifted out of fuel poverty. However, with the winter fuel allowance remaining static and with steep increases in energy prices, the trend has unfortunately been reversed. By the end of last year, about 2 million households had fallen back into fuel poverty, taking the total to 4 million before the recent rises.
Since December last year, all but one of the six major energy providers have imposed double-digit increases averaging about 15 per cent. The starting gun was fired by npower with a 17 per cent. increase in the price of gas, the main source of heating in the United Kingdom. It was followed by EDF and British Gas, within three days of each other, and by Scottish Power and E.ON within a week of each other. I echo the concern of Energywatch, which has observed that while citing different rises in wholesale costs, with a £1,000 energy bill the major players come within £13 of each other. What a remarkable coincidence. Inquiries into the market by both Ofgem and the Business, Enterprise and Regulatory Reform Committee are welcome, and I look forward to the results.
It is important to note that while the energy companies have blamed increasing wholesale prices for the price rises, their own profits have rocketed. British Gas recently announced that its profits had risen by 500 per cent. That, in my view, reflects the fact that the motivation behind companies actions is profit. They are a front for investment, and they are not in business with a moral mission. We need to ask why they have nevertheless been given a free rein with customers. I hope that the lesson from this is not lost on the Government, given the Chancellors threat of legislation if energy providers fail to increase spending on social tariffs.
As for this years price increases, the Department for Business, Enterprise and Regulatory Reform estimates that for every 1 per cent. rise, 40,000 people are pushed into fuel poverty. The recent price hikes will therefore have pushed at least half a million more homes into fuel poverty, which means that the figure was about 4.5 million before last weeks Budget.
David Taylor (North-West Leicestershire) (Lab/Co-op): Does my hon. Friend agree that one of the prime reasons for the excessive price increases of recent months is that the market has moved on from the post-privatisation position, when the number of companies was in the teens? As a result of mergers and acquisitions, a mere handful now operate in an oligopolistic fashion, driving prices up to a higher level than the market would generate. Does my hon. Friend hope that our hon. and learned Friend the Minister will ask the Minister for Energy for an investigation of the apparent market failure?
My hon. Friend is right. During the Committee stage of the Energy Bill we took evidence from the various companies, and I posed a similar
question to them. They assured me that that could not possibly happen, and that the increases were due to external forces and nothing to do with profits. That was at the time they were telling us about the 500 per cent. increase in profits. I am sure that that will not have been lost on the Minister for Energy, because he was present during the evidence sessions, and I think that some of the things the Chancellor said last week might have something to do with it. It is important for us to keep tabs on those companies. They seem to be getting their money awfully easily nowadays, and they are certainly not contributing enough to look after those who need to be looked after the most.
I wrote to the Chancellor in February asking for double the increase that he eventually announced. I want to focus on the current amount of the payment, and also to take this opportunity to urge the Chancellor, and the Minister, to consolidate the additions and not to leave them as a one-off with an uncertain future.
The basic rate for 60 to 79-year-olds was raised by £50, from £200 to £250, while the payment for those over 80 was raised from £300 to £400. Those increases were the first since the introduction of the higher rate in 2003 and the first change in the £200 rate since 2001. As a proportion of the payment, they represent an additional 25 and 33 per cent. respectively. One immediate question I wish to ask the Minister is why there is that discrepancy, with the majority of claimants, at a ratio of 3:1, being paid at the lower rate.
Over the same period that saw increases of 25 and 33 per cent. in the allowance, based on figures from both the Department for Business, Enterprise and Regulatory Reform and British Gas, energy bills in real terms have gone up by 50 per cent. That would mean a significant shortfall of itself, but there is a far greater deficit. The retail prices index, against which energy bills are measured, shows inflation of around 18 per cent. since 2001, and 14 per cent. since 2003. That would mean real-terms increases of around 7 per cent. and 19 per cent. for the winter fuel allowance against 50 per cent. for energy bills. Perhaps the Minister could confirm that the calculations that I have done are correct.
David Taylor: My hon. Friend refers to the desirability of consolidation of the basic allowances, rather than a one-off payment. I think that most people would agree with that, but others might argue that it would be better still to incorporate the amounts into the basic pension entitlement, so that payment becomes part of that from here on in. Half the amount could be paid at the start of winter, on 1 December, and half the amount at the end of winter, the end of February. That approach would commend itself, and indeed higher amounts could be paid to recognise the fact that better-off pensioners would pay tax on the sums that they receive.
John Robertson: I thank my hon. Friend for that intervention. I will touch on that matter at the end of my speech. I do not necessarily come to the same conclusion, but I do come to a conclusion, and I hope that the Minister will comment on my suggestion.
By the measure that I have outlined, the Government have a long way to go simply to get back to the stage we were at four years ago when 2 million homes were in fuel poverty. Roughly 600,000 of those were pensioners and I believe that, on the figures I have outlined, a far greater number will be in fuel poverty next winter.
I have no doubt that the Minister will rightly want to point out that the winter fuel allowance is not the only tool the Government use to tackle fuel poverty. Warm Deal, for instance, or Warm Front for those living in England, has helped more than 1 million homes at a cost of £1.4 billion. As he will be aware, however, that is available to more numerous groups than the winter fuel payment, such as those on certain income-related benefits or disability living allowance. Therefore, it is not directly comparable to the allowance figures. I ask the Minister, if he does cite Warm Deal as helping in that regard, how many of those it has helped are pensioners.
In answer to a written question from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on the proportion of a pensioners bills which the payment would cover, the Minister said in Hansard on 6 December 2007, at column 1512W, that pensioners' incomes had grown by 29 per cent. in real terms between 1996 and 2005. If we take the state pension from 2001 and 2003, the more significant dates in examining the recent Budget increase, they have increased by 21 and 25 per cent. respectively, so only 3 and 11 per cent. in real terms. That, once again, means that there is a large deficit in the rate at which pensioners' incomes have increased, even with the winter fuel payment, in comparison with the 50 per cent. rise in energy bills.
As with the Warm Deal scheme, I should point out that any comparison between the state pension and the allowance will be inexact because entitlements to them are not co-extensive. Moreover, with food pricesanother staple for pensionershaving increased by 6 per cent. this year, energy bills are not the only burgeoning demand on their finances.
The trend in fuel poverty has been going in the wrong direction for the past few years and because the payment has remained static, for the next winter pensioners will be far worse off than seven years ago. If we are serious about eradicating fuel poverty, there is clearly a need for the winter fuel allowance to be directly linked to fuel prices by some mechanism. The tragedy of the situation is summed up by the fact that we collate a statistic entitled the excess winter death figure, which stood at just under 24,000 for 2006. If the Government can afford to double the allowance for inheritance tax, I humbly submit that we can find the money to prevent pensioners from freezing in their own home.
The final issue I wish to discuss is entitlement to the allowance. All people over 60 are entitled to receive the payment and need specifically to claim to do so. The need to claim the allowancerather than, for instance, it being an addition to the state pension or paid directly to energy companiessignificantly reduces the chance of the targeted group receiving it. From my surgeries, I know that perceived entitlement to financial help does not go hand in hand with actual entitlement to it. In particular, many pensioners I meet do not want to claim for assistance, believing that they can get by without it and should make do with what they have, or feeling that it is charity. In this context, Help the Aged
estimates that about £4.5 billion in various benefits goes unclaimed by pensioners each year. All the calculations I have outlined are predicated on the assumption that there is full take-up of the allowance, so the situation is likely to be even worse than I fear.
Perhaps the rationale behind requiring a claim to be made is that that will deter those who are perfectly well off from applying for the payment simply to supplement their finances. If that is the case, will the Minister assure me that the relevant segment of the unclaimed £4.5 billion comes from the over-60s who are not in need of the allowance failing to claim it, rather than those in fuel poverty and in dire need of assistance towards their bills? Has any assessment of this been made?
This issue also highlights the fact that the winter fuel payment is indiscriminate, given that all those over 60, regardless of whether they are still in work and regardless of their resources or incomes, are entitled to receive the payment. It is bizarre that the payment is used as a blanket income supplement across the board for over-60s alone, when many vulnerable groups such as children and the disabled are equally susceptible to fuel poverty and receive no assistance at all from the allowance.
David Taylor: I am sure that my hon. Friend agrees that the scheme could be improved in numerous ways without great cost being incurred. One way would certainly be for those who reach the pension age of 60or 80 for the higher levelduring the winter period to be entitled to the amount, rather than having to have reached that age by the fixed date in September. In some of the correspondence I receive, that is identified as an anomaly. Does my hon. Friend get similar correspondence from pensioners?
John Robertson: I do, but at the end of the day we must ensure that the money goes as far as possible; I believe we have to look after all our pensioners, but that we also have to look after those with the greatest needs, and that is where I would like the money to go.
the huge wasted effort from searching for eligible customers
for their scheme. The Government, however, collect such data for tax purposes and I suggest that a more targeted approach would save money and help those most in need, and, if operated in conjunction with energy providers, this identification could be carried out and they could be engaged with social tariffs. I see no reason why the cost of this should not be met out of their incredible earnings and obscene profits.
One further change that I urge the Minister to consider is the direct payment of the allowance to the provider as part of that, so as to remove the problem of unclaimed funds. While I recognise the need to be flexible and respond to how individuals want to receive the support, the issue of unclaimed benefits can undermine all of our efforts.
These proposals involve a recasting of the winter fuel allowance into something that lives up to its name. At the moment, there is no link to fuel prices, the allowance is limited to the over-60s and there is a blanket entitlement
to receive it, so a more appropriate description would be the over-60s income supplementa point alluded to by my hon. Friend the Member for North-West Leicestershire. Although there is no problem with having such a measure, if the purpose is to alleviate fuel poverty, a far more nuanced and targeted approach is surely called for.
At this point, I shall mention vulnerable groups such as the disabled and children, many of whom live in fuel poverty. I receive a great deal of correspondence about their plight, and I urge the Minister to expand the allowance as part of the overall drive to eradicate poverty.
I conclude by declaring a vested interest. My constituency has one of the highest percentages of pensioners in the country. It is one of the colder areas of the UK, and more than 15,000 of my constituents claim the winter fuel allowance. I hope that my hon. and learned Friend will take on board the points that I have made on their behalf. I reiterate that we can discuss increasing, extending and modifying the payment, and discuss fuel povertys being an issue, only because of a Labour Government. I recognise the steps that we have taken, but with people set to die from cold-related illnesses next winter and energy companies pocketing billions of pounds in profits, this is clearly an issue on which we must do more.
The Minister for Pensions Reform (Mr. Mike O'Brien): I congratulate my hon. Friend the Member for Glasgow, North-West (John Robertson) on initiating this debate. This is an enormously important issue for hundreds of thousands of pensioners throughout the countryin my constituency, as well as his.
The Government have done more for older people than any other. In the past 10 years, we have lifted more than 1 million pensioners out of relative poverty. Relative pensioner poverty has fallen by a third since 1997, and we have broken the adage that being old means being poor. These days, people are no more likely to be poor if they are old than if they belong to another social category. We have banished the memories of the previous Conservative Government, under whom the poorest scraped a living onimagine thisunder £69 a week. By way of contrast, this year the poorest third of pensioners will, on average, be £2,100 better off than if we had continued with the previous Conservative policies.
We have achieved this through targeted support to provide security in retirement. This amounts to £11.5 billion a year more than was spent on pensioners in 1997. We are right to be proud of our achievements, but there is more that we need to do. We want to ensure that pensioners claim all the benefits to which they are entitled. I wrote to Members of this House three weeks ago outlining some of the measures that we are taking to simplify application procedures, and informing them how they can get their older constituents to claim the various benefits available to them. A lot of pensioners are still not claiming sufficient benefits. The money is there, we are waiting to pay it and we need those applications to come in.
Does my hon. and learned Friend not accept that in the days when we had pension books, every pensioner knew that they had to have such a
book, and so we could get information to them? Nowadays, we do not have such a facility, but there has to be a way that we can contact every pensioner; otherwise, we will have the same problem with a lack of uptake.
Mr. O'Brien: We can actually get to every pensioner; the problem is getting those pensioners to whom we can get to recognise that if they are on a low income, they can apply for further benefits. In the past 18 months, we have written in some instances up to four times to people whom we think may be entitled to claim the pension credit, help with their council tax and perhaps housing benefit in respect of their social housing rent. Many of them are not responding. We know their addresses and can write to pensioners, but it is getting the response that is sometimes the problem. We are trying to encourage working with partner organisations and the Pension Service to get more pensioners to claim the benefits. Tackling broad poverty is crucial, but, as my hon. Friend says, we must go further.
Mr. O'Brien: It is vital that pensioners can keep their heating on, secure in the knowledge that they can pay their fuel bills. The key to dealing with pensioner fuel poverty is therefore ensuring that pensioners have sufficient money to pay those bills. That was why we introduced the winter fuel payment in 1997the first ever support targeted to help pensioners with their heating costs. It currently helps more than 8.5 million households, and nearly 12 million people. It has taken us away from the cold, dark days of the last Conservative Government, when freezing pensioners were offered minimal support to stay warm. Instead, Health Ministers went around telling pensioners to buy long johns and woolly nightcaps if they wanted to stay warm in winter.
We have moved on since then. Back in 1995, just £65 million was spent on cold weather payments for the vulnerable. Last winter we spent more than £2 billion on winter fuel payments. Today, the debate is not about whether we should give pensioners help with heating costs, but about how much more help we should give. In the past decade the winter fuel payment has risen tenfold, and stood at £200 for the over-60s and £300 for those over 80 last winter.
But we are not complacent. Last year we launched a cross-Government strategy to target the most vulnerable and to ensure that everyone can keep warm and keep well in winter. It brings together the priorities of my Department with those of the Department of Health, the Department for Business, Enterprise and Regulatory Reform, and other agencies to provide a one-stop shop for help and advice on keeping warm and obtaining benefits. Schemes such as Warm Front, which my hon. Friend mentioned, have helped more than 2 million low-income households to improve their energy efficiency, through better heating or insulation. In fact, every minute of the working day, a home receives a new heating system as a result of the scheme.