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4 Mar 2009 : Column 299WH—continued
The subject of benefits is crucial to pensioner poverty. We have heard that £5 billion in benefits goes unclaimed
by pensioners every year. Some 1.8 million pensioners are not claiming the pension credit to which they are entitled. Only the other day, I received some parliamentary answers about the proportion of pension credit claims that are not dealt with within the target period of 10 days. In fact, in the past year or two, it has taken something like 15 or 14 days to process these claims. People are desperate for help and are, presumably, able to negotiate the jungle of forms and information that they have to provide, but still the bureaucracy is not able to deliver within the 10-day target. I should be interested to hear what the Minister is doing to put that right.
Then there is the mystery of the £60 extra Christmas payment, which, as it now turns out, many pensioners will only get at Easter. Did we misunderstand the Chancellor when he made that announcement in the pre-Budget report? I am sure that he was not setting out to mislead people, but many pensioners out there have yet to receive that extra money. On the issue of savings, which has come up more than once, we are talking about pensioners who have done absolutely the right thing: when they were working, they set aside money, and saved for their retirement to supplement their pension, which successive Governments have always said is the right thing to do, but they are now looking at something like a zero return on those savings. According to Age Concern and Help the Aged, 9 million people over 60 have at least £1,000 in savings of some sort.
The other day, during departmental questions, when the tariff income rule was raised with the Minister, she seemed impervious to the suggestion that there was a problem at all. Surely, it is bad enough that people are getting a zero return on their savings, but does it not add insult to injury when they are told that it will be assumed that they are getting a return of at least 10 per cent. on at least part of those savings? There would be a stampede down the high street if anyone was actually offering that kind of interest rate. The brief from Help the Aged and Age Concern says that
“recent interest rate cuts mean that the current assumed rate is now completely out of step with the actual rate of income people earn from their savings.”
What do Ministers propose to do about that? An interesting side point in the brief mentions tax overpayments, which are almost as important:
“Up to 3 million on low incomes, many of them pensioners, overpay a total of around £250 million a year in tax on savings income.”
That tax is deducted, and many pensioners fail to claim it back. Again, it would be good to see what the Government have in mind to right those overpayments. The brief also says:
“HMRC must do more to identify those on lower tax rates and ensure that overpaid tax is refunded.”
We want that money to go into the pockets of pensioners in these difficult times, not into the hands of the Treasury.
Mr. Truswell:
With all due respect, does the hon. Gentleman understand why some of the hand-wringing points that he is making at the moment are profoundly nauseating to Labour politicians such as myself? Forgive me, Mr. Jones; I do not like to resort to anecdote, but my parents’ experience was one of the motivating factors that drove me reluctantly into this murky world that we call politics. They worked all their lives on low incomes and retired on the basic state pension, which was eaten
away, partly by the removal of the link with earnings. Under this Government, they have seen real-term increases in the annual pension, the minimum income guarantee and, subsequently, pension credit, the winter fuel allowance, free TV licences and free dental and eye checks. On top of that, they have access to a much improved NHS and the modernisation of the council house in which they have lived for 60 years, which went to rack and ruin under a Tory Government who cut housing investment by such colossal amounts. Does the hon. Gentleman understand why, given that record, some of the things that he is saying are profoundly offensive?
Mr. Waterson: I was always taught that the definition of a gentleman is someone who is never unintentionally offensive. I certainly was not setting out to offend the hon. Gentleman.
Mr. Truswell: I apologise for the use of the word.
Mr. Waterson: No apology is called for. I should just say that in the list that the hon. Gentleman managed to rattle out in his intervention, he omitted to mention that the one thing the Labour Government have not done in more than 11 years of government is restore the earnings link. Finally, they have belatedly legislated—it is on the statute book—but still they will not tell us exactly when they will do so.
There is a kind of demonology about what happened in 1980. I remind the hon. Gentleman, since he has given me a new rush of enthusiasm with his intervention, that a disastrous and financially incompetent Labour Government were replaced by a Tory Government who had some serious decisions to make about the economy, one of which was the decision he mentioned.
Bob Spink: Does the hon. Gentleman not see that the sort of exchanges that are going on here, and his seasoning his speech with bitterness and party political points, is just what the public do not want to hear and see? They want us to take a constructive approach to solving the problems that we face—they do not want us to try to lay the blame on others. When is he going to get real?
Mr. Waterson: If I am going to be patronised, I do not want to be patronised by a one-man party. [Interruption.]
Mr. Martyn Jones (in the Chair): Order.
Mr. Waterson: May I pluck something from the hon. Gentleman’s comments with which I agree? Yes, let us stop all this bickering, and take the opportunity to sort these matters out. However, the way things are looking, we are going to have 14 months of this mess, as are the British public and the pensioners, before we can start sorting it out.
Returning to taxes on savings and savings generally, it is bad enough that people are getting nothing, but the tax treatment, including the tariff income rule, is unfair. Our policy of scrapping tax on savings for basic rate taxpayers would be useful. I hope that it will be considered—taking the hon. Gentleman’s point—not in a party political light, but sensibly and genuinely by the
Chancellor in the run-up to the Budget. Likewise, our proposal to increase the personal allowance for people of 65 and over by £2,000. That is real help for people in real difficulties.
I have talked about the collapse of the stock market, much of which emanates from the failures of Government policy and regulation. More than 1 million people work beyond normal retirement age, and there is an interesting article in The Daily Telegraph today by Emma Soames about the boomerang employees, who retire at 65 and go off somewhere for a year, perhaps to climb Machu Picchu, then return home, wanting to work a few days a week. The reality is that we shall all have to continue working longer than was normal.
My final point was raised by Age Concern and Help the Aged, which have given us a lot of statistical evidence about what happened to older workers in previous economic downturns. A London School of Economics study shows that unemployed men over 50 have only a one in five chance of being in work two years later, and the chance of older men finding employment falls by a quarter for each year that they are out of work. Age Concern and Help the Aged refer to their campaign, particularly in the European Court, to persuade the Government to scrap the default retirement age, but that is a big issue and perhaps one for another debate.
Sweeping aside the party political knockabout, to which the hon. Member for Castle Point referred, the group of people whom we are talking about will almost certainly bear the brunt of Gordon’s Brown’s recession. It is important to have some imaginative thinking, not just from the Minister, who is well intentioned, but from her colleagues in the Treasury, so that the Budget includes some practical measures to help pensioners.
3.51 pm
The Minister for Pensions and the Ageing Society (Ms Rosie Winterton): It is a pleasure to serve under your chairmanship, Mr. Jones. I congratulate the hon. Member for Castle Point (Bob Spink) on securing this debate and join him in his opening comments about the valuable contribution that pensioners have made to society. I also join him and other hon. Members in their comments about Age Concern and Help the Aged, which are both extremely valuable organisations for older people. I wish them well in their forthcoming merger, and I am sure that they will continue to be powerful in their lobbying activities and in providing services for older people.
I was pleased to hear that the hon. Gentleman’s constituents were pleased with the Warm Front programme, and I take on board his points about the installers. I understand that a re-tendering process is taking place, and I am sure that there will careful examination of how those services are provided.
The debate provides a good opportunity to consider the general landscape of policies for older people, and it is worth reminding ourselves that one in four children born today can expect to live to 100. Another fascinating fact that I heard recently is that, by 2063, we in the UK will have our first 120-year-old. That woman—I am told that it will be a woman—is already drawing her state pension at the age of 65. That is all food for thought when planning policies for older people, which is why yesterday’s beacon awards were important. One of them involved the engagement of older people in shaping policies at council level.
On the comments of the hon. Member for Croydon, Central (Mr. Pelling), although Croydon did not become a beacon council, it was nominated and should be congratulated on its involvement and on the engagement of older people locally, which we want to promote. He said that some of his constituents thought that the process of accessing council care services was perhaps not as good an experience as it should be. I firmly believe that the key to solving some of those problems is not only the extra resources that the Government have provided, but ensuring that older people are involved in shaping and developing services locally, regionally and nationally. We recently published our response to the Elbourne review to capture that spirit of involvement and to ensure that we set up structures, so that many of the older people’s organisations that hon. Members have talked about today are properly taken into account when developing policies.
I certainly challenge the assertion of the hon. Member for Eastbourne (Mr. Waterson) that our policies for older people have been disastrous. We are concentrating on addressing some of the points that hon. Members have made about the problems that pensioners face in difficult times and the fact that they need real help now and that we must put money in their pockets. That is why we increased the winter fuel payment by £50 for the over-60s and by £100 for those aged 80 and over, why we increased the Christmas bonus by £60 for more than 12 million pensioners, why we increased pension credit by the highest amount since its introduction and why we are increasing the basic state pension by 5 per cent. from April this year.
In all, we will spend £90 billion on pensioners in 2009-10, which is £13 billion more this year than if we had simply continued with the policies of the last Conservative Government. We have lifted 900,000 pensioners out of poverty since 1998, but we are not complacent. We know that there is more to do.
I want to address some of the points made about comparisons with other EU countries.
Bob Spink: The Minister told us how much she is spending on pensioners, and I welcome that. She said that she wants to address the problem of poorer pensioners. Does she accept that, if some of the money spent on very rich pensioners—the £15 billion tax break on pensioner savings will help bankers who retire at 50 on massive pensions—were redirected to poorer pensioners, it might be more effective and helpful to society as a whole?
Ms Winterton: The hon. Gentleman is arguing that pensioners’ savings have been hit—frankly, those are the more well-off pensioners—and he wants to remove tax breaks on pensioner savings and redistribute them, but I am not sure whether he can argue at the same time that people with savings should have more help. He might want to ponder that.
I want to return to the point about comparisons with other European countries and the recent EUROSTAT report and poorer pensioners. Even when taking into account differences in living costs across countries, the income of a poorer pensioner in the UK will be nearly a 10th higher than that of a poor pensioner in Germany, more than one fifth higher than that of a poor pensioner in France and more than twice that of a poor pensioner
in Portugal. We need to look below the headline figures to understand our position when compared with other countries.
I want to deal with a question raised by the hon. Members for Croydon, Central and for Rochdale (Paul Rowen): why do we not just replace means-testing with a flat rate of £140 for all pensioners? The fact is that, from April, no pensioner in this country need live on less than £130 a week and no pensioner couple need live on less than £198 a week. Moreover, it is important to remember that pensioners on pension credit can claim housing benefit and council tax benefit. The average payout for housing benefit is £65 a week and for council tax benefit it is £15 a week, so we are immediately looking at an increase to between £130 to some £200 a week.
Replacing the current system with a flat rate of £140 or even £150 would mean that the poorest pensioners lost out. The poorest pensioners have often been women who were unable to build up the required number of national insurance payments, so we would be penalising the very poorest people, whom we have set out to help. That is the problem with introducing a flat rate. There has to be an element of means-testing. I admit that means-testing can be complex, because every individual is different. People will have different sources of income and different outgoings. However, adopting the Liberal Democrat policy of a flat rate would penalise the poorest people; it would provide a lower income.
Paul Rowen: What the Minister says raises two issues, one of which is take-up. The reason why we have said that there should be a flat rate for over-75s is the continuing problem with take-up. Such a flat-rate pension would not affect entitlement to housing benefit or council tax benefit, so people would be better off without having to fill in any forms.
Ms Winterton: I am not sure how the hon. Gentleman thinks that housing benefit and council tax benefit would get through. The other aspect that we have introduced is an increased ability, even when people have savings, to claim a small amount of savings credit. Whatever we do, we must have a system that enables people to access those payments. That is why I caution against what seems to be the easy idea of simply giving people a flat rate.
I also want to challenge the points that have been made about tariff income and particularly the point made by the hon. Member for Eastbourne. I have before me the regulations that were introduced back in 1987. I know that the hon. Gentleman was not elected until 1992, but I am not sure whether he complained at the time, perhaps as a prospective parliamentary candidate, about the Conservative party introducing a system whereby, for every £250-worth of savings, a notional income of £1 was considered.
When the current Government came to power, we changed the system, but let me be clear: the tariff income rules have never been about interest rates. Obviously, if the tariff income rules were linked to interest rates, we would have to change them every time interest rates moved up or down. The rules were laid down clearly in legislation and no link to interest rates was intended. The Government ensured that the system became more generous.
Under the previous Government’s system, anyone with savings of more than £12,000 was not eligible for any support at all. As I said, the less generous rules of the previous Government assumed an income of £1 a week for every £250-worth of savings. Not only is the rate of tariff income half the previous rate, but we abolished the upper capital limit, giving more people access to support.
Mr. Waterson: Does the Minister recall that, in 2000, the Government of whom she is a member issued a consultation paper about changing the assumed income rule and that, in November 2001, they said that they had decided not to do that and not to take actual income from capital into account, but that they would assume a notional rate of income set at about 10 per cent.? Yes, the rule might have applied when my party was in government, but when we were in government, I do not recall any stage at which interest rates were more or less zero.
Ms Winterton: The point that I am making is that, as set down in legislation, there was no indication whatever that the rules should be linked to interest rates. That has applied since, and we have made the rates more generous. I can confirm in response to the hon. Gentleman that we have legislated to re-establish the link between the basic state pension and earnings, abolished by the previous Government. Our objective, subject to affordability and the fiscal position, is to do that in 2012, but in any event by the end of the next Parliament at the latest.
Fuel poverty was raised by the hon. Members for Croydon, Central, for Rochdale and for Castle Point. I reiterate that we have increased winter fuel payments. We have this year increased the Christmas bonus by £60, and cold weather payments have been increased from £8.50 to £25 a week for this winter. That has resulted in 8.3 million payments. I think that last year the total paid out in cold weather payments was £5 million
or £6 million; this year it has been £209 million so far, so we have certainly been trying to help during these difficult times.
Bob Spink: Can the Government do something more to establish a consistent set of social tariffs and to have them publicised in a form that people can understand, so that the elderly can take advantage of them?
Ms Winterton: The hon. Gentleman is right to say that we need to continue to work with the utility companies and others to ensure that people are aware of social tariffs and that they are reaching people.
I also take the point that we need to continue the work that we have been doing to increase pension credit take-up. There is a big role for Members of Parliament in helping to inform constituents about that, and I know that many hon. Members in this Chamber will join many of the campaigns that are run by, for example, Age Concern.
A range of issues have been touched on and I will certainly take away a number of the points that have been made, but I conclude by reaffirming the fact that the current Government have made pensioners a priority. We are spending record amounts, putting more money in the pockets of today’s pensioners. As well as the many measures that I have outlined, we have introduced free national off-peak bus travel, benefiting 11 million people over the age of 60, free eye tests, free TV licences for over-75s, and we are introducing free swimming from April. On average, pensioner households will be £1,600 better off this year as a result of our tax and benefit changes than if we had stuck with the policies in place in 1997. The Government are committed to tackling pensioner poverty. The poorest third of pensioner households will be £2,200 a year better off. That is about £42 a week. We are committed to tackling—
Mr. Martyn Jones (in the Chair): Order. We must move to the next debate.
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