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28 Oct 2008 : Column 170WH—continued


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Mr. Hollobone: Before the hon. Gentleman concludes, may I reiterate the point about council tax benefit, which has the lowest take-up of all the benefits? Help the Aged made the sensible suggestion that council tax benefit should be renamed council tax rebate and paid automatically—a cause that has received strong backing from Sir Michael Lyons in his report on local government funding and, more recently, from the Communities and Local Government Committee report on council tax benefit.

Richard Younger-Ross: The hon. Gentleman makes a valid and fair point, which I agree with and which I hope the Minister will respond to.

John Mason (Glasgow, East) (SNP): On council tax benefit, does the hon. Gentleman agree that it would be better to abolish council tax and have a local income tax instead?

Richard Younger-Ross: There are those who have argued for a suspension of the payment levels for council tax. I do not agree with them; I do not think that we need to suspend it—we just need to get rid of it. In my view, the local income tax mentioned by the hon. Gentleman would be the best way of doing so. That would certainly take the majority of pensioners out of the need to claim council tax benefit and help them effectively. It would also have the advantage of taking other people who are on low incomes and those claiming benefits out of the need to claim council tax benefit in an efficient way.

The remarkable thing is that, when the Inland Revenue set up its new computer system, it was thinking ahead, and believe it or not, the design of the computer allowed for local income tax to be phased in. The hardware is there, but the software is not yet there and, sadly, neither is the commitment from the Government or the Opposition—who actually gave us the council tax in the first place—to change the system.

In conclusion, I am asking the House to consider giving a large sum of money to elderly people, but is it any more than they deserve? Do we really wish to have a system that involves benefit claims here and there, a little gift of a TV licence or whatever and a bit of a heating allowance for the winter? Would it not be better to give all pensioners a decent state pension, and to do so until such time as we can correct the errors unfortunately made by those who established the system and get to a system in which people have their own pensions and are able to make provision for themselves?

Several hon. Members rose

John Bercow (in the Chair): Order. It might be helpful for hon. Members to know that I intend to call the Front-Bench winding-up speakers at 10.30. Therefore, if several Members wish to contribute, they will have to tailor their contributions accordingly.

10.1 am

Mark Williams (Ceredigion) (LD): It is a pleasure to serve under your chairmanship this morning, Mr. Bercow. I pay tribute to my hon. Friend the Member for Teignbridge (Richard Younger-Ross) for securing this timely debate. I do not have the incisive figures that he provided, but I shall set the scene in respect of some of the hardship
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that pensioners in this country face and then discuss a specific group of pensioners.

My hon. Friend alluded to the Institute for Fiscal Studies survey and the figures that it produced, which show that pensioners are particularly hard hit in these difficult times as they spend more on food and fuel. The particularly high inflation on those items hits them all the harder. If we delve into the figures a little more deeply than even my hon. Friend did, we find that the real inflation increase is 9.2 per cent. for single male pensioners, 9.1 per cent. for single women pensioners, and 7.7 per cent. for pensioner couples. The average is 6.7 per cent., which is a high figure. Put in the context of this debate, pensioners will be among the worst affected by the economic difficulties that we are facing, at least when it comes to inflation.

My hon. Friend implored the Minister in her negotiations with the Treasury to bid for more than the 5 per cent. base rate that we are dealing with now. I reiterate that plea from the Liberal Democrat Benches and hope that the Minister will consider using the higher figure for future increases in the state pension.

As the IFS report pointed out, the inflation rate will not always be higher for pensioners—indeed, it has not always been the case—but the circumstances of high food and fuel inflation have put pensioners in a particularly difficult position this winter, and the differential needs to be considered.

Bob Spink: Does the hon. Gentleman agree that this is not a matter of philanthropy for pensioners? They built this country and helped to give Europe the freedoms that it now enjoys. They deserve a greater share of our national income, yet, year on year through Conservative Governments and now a Labour Government, pensioners have received a diminishing share of the national wealth. That is a downright shame for this country.

Mark Williams: I do not believe that any of us would disagree with that. The hon. Gentleman, who speaks for the UK Independence party, mentioned Europe. Notwithstanding that, I cite just one example from my constituency. I met a couple in the south of Ceredigion who have to grapple with whether it is worth while putting £5 of petrol in their car or paying £5 for a local supermarket to deliver their groceries. That illustrates some of the dilemmas that pensioners in this country face.

Pensioners on fixed incomes also face particular difficulty in paying council tax bills. I resist the temptation to discuss a local income tax—yawns were noticeable around the Chamber when it was touched on earlier—but it has been discussed by my party for many years. I do not expect the Minister to respond to the need for a fairer form of local taxation as that is not within her responsibilities, but I am sure that she will acknowledge that pensioners face proportionally higher council tax bills. I impress on her the need to reiterate the case in respect of council tax benefit. We heard from the hon. Members for Kettering (Mr. Hollobone) and for Castle Point (Bob Spink) about low take-up.

Mr. John Leech (Manchester, Withington) (LD): Does my hon. Friend agree that one of the reasons for the low take-up of council tax benefit is that a change in people’s circumstances means a change in the benefit payable?
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Pensioners are worried about the prospect, if their circumstances change, of suddenly being given an additional bill that they were not expecting to receive.

Mark Williams: My hon. Friend clearly makes a point about the practicalities that many pensioners face. Many people become frustrated as they try to navigate their way through potentially complex forms, and there are also the practical difficulties that he outlined.

I shall reserve most of my remarks for a special group of people: ex-servicemen. It is not a small group—it represents a significant proportion of the pensioner population in this country. I pay tribute to the Royal British Legion, which is working with Age Concern on the Return to Rationing campaign. The campaign points out that 38 per cent. of ex-service pensioners report an income below the minimum required for healthy living, which is £7,072 per annum or £136 per week for a single person, and £11,200 or £216 for a couple.

The Government have a particular duty of care to ex-servicemen. As the hon. Member for Castle Point said, they made extraordinary sacrifices for their country. The campaign argues, with some justification, that the present tough economic conditions represent a return to rationing. The title of the campaign may well be emotive, but it illustrates some of the frustrations that many pensioners feel. They assert, and I agree with them, that the support given to those who served their country is simply not good enough. I am sure that we will all support the poppy appeal in the next two weeks and beyond, but we should strive to ensure that help for veterans is not confined to two or three weeks each autumn.

The situation is a matter of extreme concern, and I wonder what assessment the Minister has made of the Royal British Legion’s proposals. Among other things, it proposes making the 100 per cent. disregard of war pensions for council tax and housing benefit a statutory requirement. I know that local authorities have some discretionary powers, but there is a feeling that the disregard should be a statutory requirement. The proposals also include developing automated payment of council tax benefit to older people, and exempting recipients of war pensions who have a service-related injury or disablement from means-testing for the disabled facilities grant.

Veterans often find themselves in particular difficulties, and the package that has been proposed by the Royal British Legion goes some way to recognising that fact. The legion carried out a survey of ex-servicemen, and a picture emerged of difficult financial circumstances combined with, as we have already heard, a failure to claim all the benefits to which they are entitled. Some 71 per cent. of respondents said that they did not claim council tax benefit, and, of those, nearly one half said they found paying their council tax bill difficult.

Problems that are apparent elsewhere are all too often magnified for ex-service personnel. A survey carried out by the legion in June found that 15 per cent. of the veterans whom they contacted went without full central heating. Rising energy bills are a concern for many pensioners, but the legion’s figures are particularly eye-catching. They suggest that more needs to be done to help veterans pay their fuel bills.


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The increase in the winter fuel payment is, of course, welcome, and I thank the Government for making that decision, but we must recognise the limited nature of the benefit. Fifty pounds is a welcome contribution, but, for many, it will make only a small dent in fuel bills this winter. Put crudely, energy prices have risen by 40 per cent. this year but the winter fuel payment has gone up by only 25 per cent. That is without considering the steady increases in fuel bills over the past few years: the winter fuel payment was frozen at £200 from 2000, when it accounted for one half of the average pensioner’s fuel bill, until 2007, when it accounted for just one fifth.

The Minister will be aware that many people, particularly those in rural areas such as the one in Wales that I represent, use heating oil or liquefied petroleum gas to heat their homes. They have faced even starker price rises, and although the price of heating oil has started to go down recently, the maximum price remains very high. I have to say that many people in the constituency that I represent do not have the alternative of different fuel suppliers. That is a real problem in rural Wales.

Richard Younger-Ross: My hon. Friend makes a good point about heating oil and the difficulties in rural areas. Returning to his point on ex-servicemen and pensions, does he agree that there is a problem with spouses, particularly wives—or second wives—of ex- servicemen who have married post-1978 and who are not entitled to a pension? The sums provided to enable these people to get by when their husband or wife has died are small. It is seen as mean-minded that the Government are denying them that provision. That also applies to the police.

Mark Williams: My hon. Friend has, with characteristic incision, made a detailed and valid point.

I want to end by mentioning the practicalities of the Royal British Legion’s campaign. My hon. Friend has set the scene clearly. I share his concerns about the fundamental priorities of the state pension. I do not deviate from his message in any way at all. The Royal British Legion and Age Concern campaign is modest but necessary. I look forward to hearing what the Minister has to say in response.

10.11 am

John Barrett (Edinburgh, West) (LD): At a time when the banking system is in crisis and the future of many jobs, pensions and incomes is under threat, it is right that, in this debate, we are looking at the state pension and benefits for elderly people. Never before have so many people questioned those who are the guardians of their old-age pension, whether it is a private pension or a pension in the hands of the state. Yesterday’s newspapers revealed that workers’ pension pots have had £157 billion wiped off their total value in the last year. In 2007, the value of defined contribution pension assets stood at £552 billion. By October this year, that figure had dropped by nearly a third to £395 billion. That is happening now. What the future holds is anyone’s guess. In the midst of all this, people are still saving for their pension, but are fearful about whether their money is safe. Many of the elderly will continue to rely on benefits for the rest of their lives if they have little or no pension provision.


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This debate has already raised a number of key issues. I congratulate my hon. Friend the Member for Teignbridge (Richard Younger-Ross) on triggering this debate and raising a large number of points, for example, on pension credits, unclaimed benefits and the Age Concern briefing. I also congratulate my hon. Friend the Member for Ceredigion (Mark Williams) on his contribution, in which he mentioned ex-servicemen. I welcome the hon. Member for Glasgow, East (John Mason), who raised the important point about the need to scrap the council tax, which has been worked towards north of the border, but in respect of which the potential holding back of council tax benefits by the Government at Westminster causes a major problem.

In summing up for the Liberal Democrats, I am glad to say that my party has a proud tradition in this field—from Lloyd George to my hon. Friend the Member for Twickenham (Dr. Cable). With the state pension being 100 years old this year, it is right that we consider a new pensions Bill fit for the 21st century. For all the talk, the commissions and all the many other people involved it took a Liberal Government to finally deliver the Old Age Pensions Act 1908.

David Taylor: I need a bucket, Mr. Bercow! The fact is that that pension was only paid to those over 70, was means-tested and was dependent on acceptable social behaviour and, certainly, a lack of fondness for alcohol. Is that the framework for a future Liberal Government’s improvement of the pensions system?

John Barrett: I thank the hon. Gentleman for his intervention. However, my next sentence was going to be, “But life has moved on.” Today, our Treasury spokesman, my hon. Friend the Member for Twickenham, continues to be ahead of the field, in his analysis of the current financial issues, the future for pensions and the way forward. This is in stark contrast to the Conservative shadow Chancellor, who has become the Sarah Palin of the Tory party, doing his best but convincing nobody that he has either a grasp of the problem or proposals for a solution.

The majority of today’s older generation now struggle to make ends meet as the gap between pensioners’ costs of living and the basic state pension continues to grow, with pensioners often disproportionately hit by increases in costs. The oldest, poorest pensioner households now face an average inflation rate of approaching 10 per cent., compared with around 5 per cent. for non-pensioners. The number of pensioners living below the poverty line in the UK has risen by 300,000, taking the figure to 2.5 million. Official figures show that first-time pensioner poverty has increased since 1998.

The anniversary of the state pension is rightly celebrated, but from its noble beginnings it has subsequently failed to reflect the growth in our national wealth. The rot set in in 1980, when Margaret Thatcher’s Conservative Government broke the link between earnings and pensions, diminishing the value of pensions in relation to earnings. No hon. Member in this Chamber today could reasonably claim that £90.70 a week is enough for a single person to survive on.

As we have heard, the fact that the basic state pension is uprated only in line with prices means that, as pensioners get older, many also become poorer in relation to the
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rest of the population. The basic state pension is now worth 15 per cent. of average earnings, compared with 26 per cent. in 1979. We welcome the commitment to reinstating the earnings link, but clarification on the date—2012 or 2015—would be welcome. It goes without saying that, for us as Liberal Democrats, it cannot come soon enough. I hope that the Minister will throw some light on this issue.

Sadly, the most striking similarity with 100 years ago is the presence of means-testing. More pensioners are means-tested now than at any other time. It remains unpopular, demeaning and ineffective at getting help to those who need it most. I was not in Parliament in 1993 when the now right hon. Member for Kirkcaldy and Cowdenbeath (Mr. Brown) declared that he wanted to end means-testing for the elderly, but I cannot help feeling that he was right then and it is right now.

David Taylor: Does the hon. Gentleman agree that one of the most straightforward ways of reducing the means-testing of pensioners would be to make the basic state pension payable at the guaranteed credit level of £124 a week? Of course, there are cost implications of doing that and it would need to be phased in, but it could be funded readily by two sources: first, through access to the national insurance fund and the surpluses in it and, secondly, and more substantially, by tackling more effectively the tax evasion and tax avoidance that is so prominent in the commercial sector in this country.

John Barrett: As the hon. Gentleman rightly mentions, there are a number of ways to get our pensions up to a decent basic level. I have no doubt that there is a substantial amount of money in the Government’s Budget that has not been used—it has been set aside for pension credit, and so on, and is earmarked for pensioners—but which the pensioners do not receive. So any way forward is a good idea.

The Government have admitted that their public service agreement target set in 2004 to increase pension credit take-up to 3.2 million pensioner households is unachievable and they have quietly abandoned that target. The latest figures show that the take-up of pension credit was about 65 per cent., or 2.6 million. In total an estimated 1.7 million people eligible for help are missing out. Often, the Government say that pension credit goes to those who are most in need, but those most in need are those who are entitled to pension credit but who are not receiving it.

We can argue about whether the low take-up rate is down to the complexity of the forms, the perceived degrading nature of having to apply for benefits or to people not knowing that help is available. However, make no mistake: whatever the reasons why individuals do not claim, it is not because they do not need the help.

As a result of over-reliance on means-testing, people are not only falling through the net in respect of pension credit. The take-up rate of housing benefit among pensioners, according to the latest figures, was 87 per cent., leaving up to 310,000 eligible people not claiming. Similarly, the take-up of council tax benefit among pensioners is languishing at 58 per cent., or 2.5 million, leaving up to 2.1 million eligible people not claiming. To put those two figures into perspective, this is even worse than under the previous Conservative Government.


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