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“The Government still has a take-up problem on pension credit.”
Of the poorest pensioners, where household income is less than 40 per cent. of median earnings, 60 per cent. are not claiming the benefits that they are entitled to—up from 36 per cent. in 1997-98. About 40 per cent. of those entitled to council tax benefit, uprated also in the order, do not claim it.
We rightly hear a great deal about fuel poverty, particularly regarding pensioners, but pensioners often tell me that they consider themselves to be in council tax poverty, too. I find it quite extraordinary that up to £4.5 billion of means-tested benefits that should rightly go to older people is unclaimed each year. Perhaps that is what the Prime Minister feared when he said:
“I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of the means test for our elderly people”.
We welcome the increase in the state pension, which, as the Minister told us earlier, will be worth £95.25 a week and £152.30 for a couple, and perhaps the Minister will join me in gently pointing out again to the leader of the Liberal Democrats that it is not about £30 a week. Will the Minister also tell us exactly when the Government intend to restore the link with earnings for the state pension? She alluded to the well-worn formula, but many people would like greater precision on that subject. If she said something on that when she replies to the debate, we would all be grateful.
It is worrying that the take-up of pension credit continues to decline, as an answer that the Department gave on 3 November last year shows. In November 2003, the take-up for female pensioners was 64.9 per cent., and according to the latest figures that I have, which are for February 2008, it has declined—albeit only by a small amount—steadily to 62.1 per cent. So we not only have a problem, as my hon. Friend the Member for Ribble Valley has quite properly identified, but one that is getting worse.
It is worth putting on the record the number of pensioners not claiming individual benefits, which are uprated by the order. Up to 1.82 million older people are not claiming pension credit—41 per cent. of those
entitled. Up to 350,000 older people are not claiming housing benefit—18 per cent. of those entitled. Up to 2.14 million older people are not claiming council tax benefit—a staggering 45 per cent. of those entitled.
Pensioner poverty has risen by 300,000, both before and after housing costs are taken into account, and is higher than in 1997. In 2006-07, 2.5 million pensioners were living below the poverty threshold of 60 per cent. of median income, representing 23 per cent. of pensioners. After allowing for housing costs, 19 per cent. of pensioners were below 60 per cent. of median income, representing 2.1 million individuals. Those facts were pointed out by Help the Aged as recently as Tuesday of this week. Again, perhaps when the Minister replies, she will tell the House what estimate of pension credit take-up the Chancellor of the Exchequer will use in his Budget report this year.
The Government received quite a lot of criticism last autumn for their decision to reduce the period of backdating from 12 to three months for pension credit claims. That suggests that they are more interested in saving money than in increasing take-up. So will the Minister confirm that at least 110,000 pensioners will be adversely affected by that change and that they will tend to be older pensioners, who will not be able to claim some of the benefits uprated by the order?
Falling interest rates may be popular with some people—indeed, with many people, particularly home owners—but they are really bad news for one section of the population. So does the Minister recognise that many pensioners are facing real hardship because their hard-won savings are now attracting very low interest, thus forcing them to rely on many of the benefits uprated by the order? We are talking about people who have done the right thing and what successive Governments told them to do: they saved during their working lives, so that their savings could supplement their incomes in retirement. To add insult to injury, those with modest savings are assumed to earn 10 per cent. on their savings in respect of their eligibility for pension credit, which is uprated by the order.
Will the Minister update the House on the conversations that the Minister for Employment and Welfare Reform told the House that he would have with her and the Treasury on this matter when he made his statement on 11 December, as reported in column 697 of Hansard. We would like to know how they got on when they went to the Treasury on that matter. Will the Minister confirm that she is wholly confident that the new personal accounts system will begin on time and that people who are being auto-enrolled into personal accounts will not be worse off by not being eligible for pension credit, which is, again, uprated by the order.
The Government have presided over the decline in a large number of occupational pension schemes, and we would like to hear the Minister say something about that as well, because of its direct effect on people being forced to claim the benefits in the order.
Fuel poverty has been mentioned by one or two hon. Members, and the statistics that the Department for Business, Enterprise and Regulatory Reform released recently show that electricity prices have gone up by 17 per cent. in real terms and gas prices by 27.1 per cent. over the past year. Again, that has a bearing on the 5 per cent. figure used to uprate the basic state pension.
Mr. Hoyle: The hon. Gentleman is being generous with his time in giving way. I agree with him on fuel poverty. I blame the energy companies for their sheer greed in putting up prices and not bringing them down. Does he agree that that is part of the problem and that families, particularly pensioners, are being put into poverty, purely because of the greed of the energy companies?
Andrew Selous: Certainly there is some truth in what the hon. Gentleman says, and I personally think that we need a range of policies to deal with this very important issue and the scandal of the poorest people paying the most through prepayment meters—a matter that I raised in the House a number of years ago. We could do all sorts of things—for example, with the Post Office card account, the use of which the hon. Gentleman will be particularly keen to encourage. People could be provided with decent information, telling them whether they are getting the cheapest tariff. They should not have to ring up and ask; it should be made absolutely obvious to them—something that the Conservative party is proposing. There is something in what the hon. Gentleman says, but we can do a number of other important things to tackle the issue.
I want to deal with fraud and error—a subject that the Minister for Employment and Welfare Reform mentioned when he made the December statement in relation to the order. It is an important issue, because if we were able to deal more effectively with the £2.6 billion overpaid, we could uprate many of these measures more generously. The figures are pretty staggering: £2.6 billion overpaid, and £1.1 billion of benefit expenditure underpaid. That has been going on for a very long time, and it includes money paid wrongly to prisoners, to people who have moved abroad and who were not entitled to it, to people already earning an income through employment and to people already claiming other benefits.
The Department is now running a sort of television show, showing some of its inspectors doing very good work. It makes quite entertaining television, but I tell the Minister in all seriousness that £2.6 billion is a very large amount of money at a time of great pressure on public expenditure. Again, I ask her to go back to the Department and discuss the matter with the Secretary of State and her fellow Ministers and to urge that that matter be pushed rather higher up the Department’s agenda. We could be more generous with the uprating of a number of these benefits, which, as a number of Members have pointed out already, are not that generous for many of our fellow citizens in great need.
I want to consider the issue of the complexity of the benefits system. As I have said, 14 pages of benefits are uprated by the order that we are considering. That is 14 sheets of closely typed A4. The National Audit Office report, “Progress in tackling pensioner poverty: Encouraging take-up of entitlements”, underlines the fact that complexity is part of the problem when it comes to delivering support to those who need it. It states:
“Many pensioners and those that advise them”—
we must not forget the lobby groups and support groups that help pensioners—
“consider the systems and administrative procedures for claiming benefits to be too complex. In all there are 23 potential entitlements for pensioners, with 36 linkages between 16 of them.”
Our pensioner population will need degrees in higher mathematics to work their way around some of the system.
Similarly, the 17th report of the Social Security Advisory Committee, published in 2004, says:
“complexity characterises the entire benefits system...the size, complexity and dispersion of the benefits system, and the blurring of the boundaries over what should constitute its proper role has led to a pervading sense of a loss of cohesion”.
Bodies do not come much more independent than the Social Security Advisory Committee. Help the Aged makes a point in similar terms. It says, on benefits for pensioners, that the
“system is so muddled and poorly advertised that even Pension Credit, a widely advertised benefit aimed at some of the poorest older people, is only claimed by just over half of those entitled to it.”
I come to the final subject that I want to discuss. It is incredibly important, and I should be grateful if the Minister would respond to this part of my speech as fully as she can when she winds up the debate. If there are points to which she cannot respond, will she write me a fairly full letter on the subject, and put a copy in the Library? I refer to the thorny issue of what is happening in the national insurance fund. I have great concerns about the assumptions that the poor old Government Actuary, Mr. Trevor Llanwarne, has been forced to use, namely the ones given to him by the Chancellor in the pre-Budget report. I have before me a report from the Government Actuary’s Department; it is directly relevant to the debate. Indeed, it was produced for the House, and is about the two orders before us. The Government Actuary is forced to use the assumption, made by the Chancellor in the pre-Budget report, that there will be an increase in earnings growth of 3.2 per cent. in 2009-10. The average of the forecasts in the Treasury’s January comparison of independent forecasts for the UK economy is an increase in earnings growth of only 2.7 per cent for 2009-10.
The assumption in the pre-Budget report on claimant count unemployment for 2009-10 was 1.31 million. Yesterday, the figure rose to 1.23 million. The Treasury’s January forecast for 2009-10, which uses independent forecasts, is average claimant count unemployment of 1.83 million, so the first thing that I want to say about the national insurance fund is that I am concerned about the assumptions in the pre-Budget report that the Government Actuary has been forced to use. Even small changes in those assumptions are likely to have a very large impact on the fund.
I want to ask the Minister a question that I should think almost every Member of the House is asked regularly by pensioners in their constituency, not least if those pensioners are allied to the National Pensioners Convention. It is on the thorny subject of the increasing surpluses in the national insurance fund, and the fund’s increasing balance. I do not know about the situation in the Minister’s constituency, but in mine, the Dunstable pensioners’ association and other bodies haul me in once a year and ask, “What are you MPs doing? You are sitting on more and more cash in the fund. We’re not very well off. By law, the money can be given only to pensioners and others. Why can’t we have some of it?” That is more or less what they are saying.
I see from the Government Actuary’s report that the Government Actuary is required to make sure that there is a yearly excess of at least one sixth over and above what is paid in benefits. This year, that will be a sum of £12.5 billion, yet when we look at the report, we find that the balance is actually £52 billion. The surplus, and therefore the overall balance, has got larger year on year since about 1997, and it is forecast to grow in a substantial way. If Members look at page 30 of the report, they will see that the balance will rise from £52 billion in 2008-09 to £102 billion in 2013-14. That is a substantial rise. That may well be necessary because of demographic trends in the population—there will be a lot more pensioners, and a lot fewer people paying into the national insurance fund—but I have not found that clearly stated by any Minister in recent times.
It causes me slight concern that when the hon. Member for Newport, West (Paul Flynn) tabled a question asking the Minister’s predecessor, the hon. and learned Member for North Warwickshire (Mr. O'Brien), about the issue, part of the answer received was:
“when there is a surplus it is invested in public services.”—[ Official Report, 22 February 2008; Vol. 472, c. 1116W.]
The Minister knows as well as I do that, by law, the national insurance fund can be used only for pensions, jobseeker’s allowance and so on—a very narrowly defined range of public services. People might see the answer and think that money was being taken out of the fund and spent elsewhere in government. The Minister’s predecessor went on to say, again in a written answer:
“The equivalent of the excess of receipts overpayments would need to be raised through tax increases to maintain the Government’s fiscal strategy.”—[ Official Report, 21 April 2008; Vol. 474, c. 1858W.]
That is in relation to the issue of ever-increasing yearly surpluses in the fund.
There may be perfectly good reasons why the balance in the fund is increasing in such a significant way—and such a sustained way, according to the forecasts in the back of the report—but we need clearer answers on the issue, if only so that we can properly engage with people from the National Pensioners Convention and others who are, quite properly, considering the issue and wondering whether the Government could be more generous. I hope that I am not blind-siding the Minister on that issue; I know that it is technical and complicated, but it is incredibly important. I am not playing party politics on this serious issue. If she is not able to give the House a full answer today, will she write me a full letter, and place a copy of it in the Library, so that every Member can see it?
To conclude, I hope that when we debate next year’s uprating order, fewer people will be in dependency, and more people who want support can get it. I also hope that the millions of people who say that they would work if they had the proper support will have had the chance that they want of a better life for themselves and their families, and the chance to be less reliant on benefits. We hope, too, that more of our fellow citizens will be able to make arrangements for their pensionable age, so that some of the all-too-low pensioner incomes will be higher. We will work with the Government on any proposals that they make, but I serve notice on them that the Opposition will make their own proposals to deliver better welfare, and a fairer system that lifts more people out of dependency, which is not where so many of our citizens want to be.
2.9 pm
John Barrett (Edinburgh, West) (LD): It is interesting that in a week when much of the news has been about people at the other end of the pay scale—those earning large sums of money—we are considering people who are surviving on benefits, and who are very much at the opposite end of the scale. Sadly, important though the measures before us are, they will not get the same news coverage as people who have been getting large bonuses and salaries. That is not to say that the measures are not important; they affect millions of people.
The hon. Member for South-West Bedfordshire (Andrew Selous) covered many of the issues in great detail in his excellent speech. We welcome the uprating today. We are talking about a significant amount of money that will go to those who are most in need. I am delighted to see pensioners getting a significant rise in their pension. Of the £6.2 billion, £4 billion is going to pensioners. I could say it is too little too late, but we should welcome what has been announced today. It is a good thing.
We have heard the details of the figures involved. I share with the hon. Member for South-West Bedfordshire a concern about the complexity that runs throughout benefits uprating and the entire benefits system. The 14 pages of details are too much. It is not only difficult for those receiving the benefits to understand; it is also very difficult for those trying to give them advice and work out exactly what benefits people are entitled to.
As I said in my intervention, I thank the Minister for prior sight of her statement on invalidity allowance. I am pleased that no amounts will be claimed back. It is clear, once again, that because of the complexity of the system, many errors are made. So many people contact hon. Members regularly about errors made by the Department for Work and Pensions, particularly on tax credits. The Minister dealt with one relatively small error, but there are far larger errors out there that need to be tackled. It is also worth remembering today that there are many tapers, allowances and premiums that are not being uprated and have not been uprated for many years.
We are entering different times. Last year’s benefit uprating occurred before the increase in unemployment that we are, sadly, seeing now. With unemployment nudging the 2 million mark and with four unemployed for every vacancy, tackling poverty among the population of working age will assume increasing importance. Even in my constituency, which is not normally noted for much unemployment, Royal Bank of Scotland headquarters announced 2,300 redundancies earlier this week. Many people, for the first time in their lives, will be looking at the results of today’s debate. People who have never known unemployment in the past will rely on the upgrading and the benefits that we are discussing.
With unemployment rising across most sectors, there will be an increasing number of skilled workers on benefits and seeking employment. Although the extra money for jobseeker’s allowance is welcome, is the Minister concerned that back-to-work benefits and policies under the Welfare Reform Bill are ill suited to high unemployment? We are considering a number of changes but, in the words of one famous individual, the times are a-changin’.
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