Westminster Hall
Tuesday 28 October 2008
[John Bercow in the Chair]
State Pension and Benefits
Motion made, and Question proposed, That the sitting be now adjourned.—[Barbara Keeley.]
9.30 am
Richard Younger-Ross (Teignbridge) (LD): For the benefit of some Members, I have been asked to clarify the pronunciation of my constituency, as it seems to cause some difficulty. It is “Teignbridge”, with the first syllable pronounced “teen” as in “teenager”, not “tyne” as in somewhere in the north-east close to where my wife comes from.
This is a very important debate. We are talking about the basics for elderly people—about their income and how, often, they get by in the latter part of their lives. As Members of Parliament, we all have a lot of people who come to see us at our surgeries. Coming from Teignbridge, I certainly have a large number of people who come to see me about a wide variety of issues, particularly elderly people who are concerned about the cost of living, the rises in heating bills and so on.
In fact, Teignbridge is one of the constituencies that has a high percentage of elderly people. It is a beautiful constituency in the south-west. It has both seaside resorts and moorland, so there is quite a lot to attract people who, when they finish working, want to move somewhere to settle. When people retire, they expect to do so in some reasonable comfort. However, the tragedy for many who retire is that that expectation is often betrayed.
We can go back to the origins of the state pension system to examine its foundations and how it was funded, and we can blame people in the 1930s and 1940s for not having enough foresight to see that there would be a growth in the number of elderly people, that our longevity would increase and that we would have a greater percentage of people surviving into the latter stages of life.
Elderly people come to my surgery to discuss a wide range of issues with me, as I am sure they do with every other Member here. They talk about the council tax; in the south-west in particular, they talk about the rises in water charges. They are concerned about fuel and transport costs, although there has been some progress on transport with the concessionary bus fares scheme for the elderly. The funding of that scheme still gives rise to certain issues, which I have discussed with the Minister in the past in other guises.
Elderly people are also worried about heating costs, and some may be concerned about private pensions. The Government still have questions to answer about Equitable Life, the ombudsman’s review and what needs to be done about that issue. Elderly people are also concerned about post offices and their pension books, which they can no longer use. They may also be concerned about the pension credit, especially the difficulties in getting it. As MPs, we all write appropriate letters
saying that a particular person has not been paid the pension credit, or asking if we can sort out it out for them.
Bob Spink (Castle Point) (UKIP): The hon. Gentleman is aware—I am sure that he will be coming to this issue—of the fact that about a third of pensioners who are entitled to the pension credit do not actually claim it. Will he press the Minister to find ways to reach those people and to encourage more of them to claim their benefits, so that they can afford the high council tax bills, fuel bills and food costs that form a greater proportion of elderly people’s outgoings than those of ordinary families, which means that elderly people are hurt more by the current situation?
Richard Younger-Ross: The hon. Gentleman makes a very good point, and I will touch on precisely that towards the end of my speech.
There may be other issues for elderly people in respect of annuities. I must say that I am slightly puzzled by certain policies on this issue. Perhaps the Conservative spokesman will explain later why the Conservatives are looking at only a suspension with regard to annuities. I thought that one was either in favour of something or opposed to it, and would either pledge to get rid of it or not.
Mr. Nigel Waterson (Eastbourne) (Con): I would like to take this opportunity to congratulate the hon. Gentleman on securing this debate. I can reassure him that it is Conservative policy to remove the annuitisation rule altogether. However, while I am on my feet, may I ask him to reassure the Chamber that the leader of his party, the right hon. Member for Sheffield, Hallam (Mr. Clegg), is aware of the true level of the state pension now?
Richard Younger-Ross: I came here to debate an important issue about pensions; if Members just wish to make flippant points, that is fine. I asked a valid question of the Conservative party concerning the contribution of Lord Fowler, who talked about suspension; I was seeking clarity on a specific point. I am not here just to try to score cheap points off other Members—I do not believe that any of us should be here to do that—because that is an insult to the pensioners whose case we are here to argue in terms of increasing their pension and benefits.
The key to all these issues, and others such as TV licence benefits and the various benefits that pensioners have been given to help them, is having a decent pension. For most pensioners, that means having a decent state pension. This year, it is 100 years since the introduction of the state pension. I would like to quote from a speech that my hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) gave at our party conference. I apologise for the references to “Liberals” in it; I hope that they do not cause too much offence. However, they are important in the context of what my hon. Friend said:
“In 1889 the Rev F H Stead, warden of the Browning Settlement, organised a meeting in Browning Hall off the Walworth Road in my constituency to start a campaign for a state pension. This led to the national campaign spearheaded by the National Committee of Organised Labour for a free state pension of 5 shillings a week. Within 20 years the campaign had succeeded. A state pension was
piloted by Lloyd George when he succeeded Asquith as Chancellor in 1908. The first pensions were paid, through the post office, in January 1909. In 1908 when our Liberal forefathers passed the landmark Pensions Act, only a quarter of people lived to draw their pensions and on average lived only a further 9 years. A hundred years on, four out of five people live to retirement age - and on average 24 years more.”
David Taylor (North-West Leicestershire) (Lab/Co-op): Reverend Stead was formerly a minister in Leicester and most of the work on pensions was done not by the Liberal Government of the day but by Charles Booth, a philanthropist ship owner who lived in Thringstone in north-west Leicestershire, an area that I used to represent. The hon. Gentleman should therefore give credit to the movement that produced the old age pension, and not try to claim credit on behalf of the passing politicians of that era.
Richard Younger-Ross: The hon. Gentleman has put on the record what he wishes to put on the record, but it is still the case that it was Lloyd George who responded to that campaign. It was not just the Reverend Stead who was involved; other people, including Booth, campaigned for the pension. I am not trying to take any credit away from any of those people. Indeed, I mentioned the National Committee of Organised Labour, which I understand was one of the key bodies involved in that campaign.
The centenary of the first state pension has been marked by a number of Government initiatives. The Government are looking at how to address some of the issues that I have referred to. We have had announcements in the last week about a boost for women—I think that it was described as an amendment to the Pensions Bill—and those changes are welcome. However, my basic contention is that they are simply not enough. The rises in the cost of living, heating bills and food bills are far outstripping what pensioners are receiving.
The September retail prices index inflation figure was 5 per cent., and the question is: will the Government honour their commitment whereby, by convention, the inflation increase for pensioners from April next year will be 2.5 per cent. or the RPI figure, whichever is the higher? I hope that the Minister will make it clear in this debate, rather than our having to wait until later, whether the increase will be at least 5 per cent. She needs to say, “Yes, at least 5 per cent.”, and she should then say, “I’m going to go back to the Chancellor of the Exchequer and argue for a bit more, because I have seen the research from the Institute for Fiscal Studies, which says that pensioner inflation is actually 7.3 per cent.” She should say, “I will go back and argue for more because I have read Age Concern’s briefing, which actually puts pensioner inflation at 9 per cent.” Whether one believes the 7.3 per cent. or 9 per cent. figure, what is clear from the simple mathematics I learned when I was at school is that both figures are greater than 5 per cent. If pensioners are not to be worse off in the coming year, we must ensure that their income rises according to the increase in their cost of living.
According to Department for Work and Pensions figures, there are 9,327,800 state pensioners. Of those, some 2,360,900 claim state pension credit, and some 2,693,300 million are more than 80 years old and claiming
the over-80s allowance. What do they receive? For clarity, it is £90.70 for a single pensioner and £145.05 for a couple. I shall come to the issue of the take-up rate, but if a couple apply for pension credit, they receive respectively £124.05 and £189.35. The question is, why is it estimated that 2.5 million pensioners live in poverty? That is 19 per cent.—one in five—of pensioners living in poverty. In one subsection of those people, the Pakistani and Bangladeshi community, the figure for those living in poverty rises to 43 per cent. There is an issue about how we calculate who is in poverty, but we will return to that in a minute.
Some 2.7 million people claim pension credit, but 41 per cent. of those who are entitled to it do not claim it. That is a saving to the Government of £2.81 billion a year. On council tax benefit, 45 per cent. do not claim, which is a saving of £1.51 billion to the Government every year. On housing benefit, the figures are better, as only 18 per cent. do not claim, but that is still a saving of £770 million a year.
Mr. Philip Hollobone (Kettering) (Con): I congratulate the hon. Gentleman on the way in which he has started the debate and on his very incisive remarks. On the question of benefits that are not being paid, Help the Aged has produced research that states:
“Older people are missing out on £5 billion in income related benefits each year. Taking just Pension Credit alone”,
which the hon. Gentleman mentioned,
“those missing out would be on average £1,477”—
“a year better off, were they to take up their entitlement.”
Richard Younger-Ross: The hon. Gentleman takes a line from later in my speech and saves me having to repeat it. He is, of course, entirely right. He mentions a briefing from Help the Aged, and Age Concern and others have also provided Members with very good briefings for the debate. We ought to thank them not just for their contribution to the debate, but for their work, along with the National Pensioners Convention, in raising the pensions issue and other issues regarding elderly people all the time.
Poverty is defined as income that is 60 per cent. below the median national income. There is a difficulty: we can argue that, if it is always set at 60 per cent. below the median national income, we may not be able to achieve our target of abolishing it. It is fair to say that the Government should look at that point, but there must always be a proportionate factor; otherwise we would just argue that there was no poverty in the west and the only poor people were elsewhere. So poverty is relative. The question is how we measure it, and I cite those earlier figures with that caveat. It is very hard to come up with figures for the absolute poverty of some people.
If we define poverty as income that is 60 per cent. below the median national income, however, the definition of severe poverty has slightly more bite. That occurs when someone’s income is below 50 per cent. of the median national income, and I believe that 1.4 million people live in severe poverty. UK pensioner poverty is the second worst in the European Union. We can recognise that figure, because it is a matter not of relativity to income, but of absolute failure. We hear time and again,
from politicians and from people who criticise the EU, that the pension systems in Germany, France and all Europe are not sustainable, but although we may have a sustainable system, in reality, our pensioners live in poverty and are worse off than all those in the EU, bar those in Spain.
Pensioner poverty, whether absolute or relative, is getting worse. Some 300,000 new pensioners were forced into poverty last year—822 pensioners a day—and the result is that more people are worried about money. I am told that, statistically, 16 per cent. admit that they are worried about money, but when I listen to the pensioners who come to my surgery, I suspect that that is a conservative estimate. They worry about their heating bills and many turn their heating down, but if they do so during a cold snap, there will be more cases of hypothermia. They also worry about their eating bills, and they will cut back. The Help the Aged briefing mentions how they will talk about a treat of a tin of soup for the husband, and how it is made to last a couple of days. Is that the sort of joy that we expect people to experience in the latter years of their lives—a tin of soup as a treat? If I were to ask Members here, or most people walking through the doors of the Palace, what they considered to be a treat, the answer would be rather more than a tin of soup.
David Taylor: On the issue of joy, one former Minister talked about pensioners needing to wear woolly hats in winter, so I admire the hon. Gentleman’s self-denying ordinance in not mentioning the meanest act of the Thatcher Government, which was to break in 1980 the link between pensions and pay in the economy, thus producing real poverty. In that light, does he believe that this Government, through the very able Minister present, ought to look at early re-linking, which is promised for 2012 or later, as one means of heading off some of the poverty that he so vividly describes?
Richard Younger-Ross: I certainly believe that we should re-establish the link, and the hon. Gentleman is entirely right that the break of that link was a disgrace—it left many pensioners in severe difficulty during the 1980s and 1990s. The problem that we have now is how to address pensioners today. As I started by saying, we can blame the politicians of the ’40s for not having foresight, and we can certainly blame the politicians of the ’70s, ’80s and other periods for the policy mistakes that they made, but I am trying to concentrate on what the Minister can do today to try to address the issues.
The Joseph Rowntree Foundation, which does excellent work, has estimated that a couple needs £265.92 a week, but on the state pension, they get £145. On the link to earnings that the hon. Member for North-West Leicestershire (David Taylor) mentioned, the White Paper has promised that the link will be re-established by 2012. The Institute for Fiscal Studies has calculated that, if we were to effect that measure now, rather than in 2012, it would cost £1.5 billion, and we could take 2 per cent. of pensioners out of poverty by 2017-18. The Institute for Fiscal Studies also estimates that, if all pensioners were paid the pension credit guarantee, it would cost £8.3 billion, and we could take 5 per cent. of pensioners out of poverty by 2017-18. Of course, even if we did that and even if the changes that the Government are about to introduce were in place, not all pensioners would receive a full pension.
The Institute for Fiscal Studies has calculated the cost of a universal pension paid on the basis of residency rather than contribution. The Liberal Democrats have advocated that policy for some time, and former Secretaries of State have discussed it in the Chamber and have indicated that they thought it a good idea, although it has never come to fruition. I suspect that the idea ran into trouble when it reached No. 11 Downing street. If we had a universal system and it were applied for everyone at the pension credit guarantee level, it would cost £20 billion. That sounds like an awful lot of money, but in the context of banks being saved and the international debt estimated at £2.8 trillion—the figures are almost too large—it is a drop in the ocean.
I accept that the Minister might say that we cannot afford £20 billion, but I would argue that, if we cannot afford that, we must look at what can be done. Perhaps the parties need to debate the retirement age and consider shifting it up a year or two, so that we can afford to pay people pensions. Perhaps we should scale the introduction of such a system. It is known that people who are over 80 years old have greater difficulties than those who have just retired. If we introduced a universal pension for those over 65, the cost would be £20 billion; for those over 70, it would be £15.9 billion; for those over 75, it would be £11.7 billion; and for those over 80, the cost would come down to £6.8 billion. If we brought in such a system for the over-65s, we would take 12.5 per cent. of them out of poverty by 2017.
The Minister will tell me that it cannot be done, but there is £5 billion of unclaimed benefit that could offset the cost. If we cannot increase pensions, we need to do more to ensure that those entitled to benefits claim them, as was mentioned earlier by the hon. Member for Castle Point (Bob Spink). The Government have been missing their targets. The gap between the total number entitled to a pension and those who are actually in receipt of it was declining, but it is now increasing again. The question for the Minister is why can such benefits not be automatically paid.
I shall conclude by referring directly to the Help the Aged briefing paper on the issue. It suggests that the following options should be implemented:
“The Government should automatically give Council Tax Benefit to anyone in receipt of Guarantee Credit. The Department for Work and Pensions (DWP) already holds all necessary data to implement this measure.
The Government should in addition automatically award Guarantee Credit to all pensioners for a month upon bereavement, asking them to put in a claim if they wish keep on receiving this benefit. This measure would cost the government an estimated £50 million a year, and would be highly beneficial to the many older women who suffer a substantial drop in income when their partner dies. Many pensioners in this position are unaware that this change in life circumstances makes them eligible for Pension Credit.
Finally, the DWP should match its data on people’s state pensions with HM Revenue and Customs data to identify those pensioners who are very likely to be eligible for means-tested benefits but who are not yet claiming, then deliver the benefits to them automatically. With the introduction of new data systems in HMRC in 2009, such an approach could be highly effective, especially for those pensioners aged over 75, whose incomes tend to remain stable or go down over time. Estimates have shown that full take-up of means-tested benefits by pensioners aged over 65 would reduce pension poverty among people in this group by 5 per cent, and would cost the Government an estimated £3.9 billion a year.”
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