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Benefits Uprating

3.56 pm

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Hunt of Kings Heath): My Lords, with the leave of the House, I shall repeat a Statement made by my right honourable friend in another place. The Statement is as follows:

"I should like to make a Statement on benefits uprating in the context of the Government's continued fight against poverty, and our ambitious programme to renew our welfare and pensions systems.

"I shall place full details of the uprating in the Vote Office and arrange for figures to be published in the Official Report. I can confirm that most national insurance benefits will rise by the retail prices index, which is 2.7 per cent, and most income-related benefits will be uprated by Rossi, which is 2.2 per cent.

"From next April, retirement pension will go up by £2.20 a week for single pensioners and by £3.55 a week for couples. When we were elected the pension was just £62.45 for a single person—from April it will be £84.25 for a single person and £134.75 for couples. That is a real terms rise of 8 per cent.

"Next year the guarantee credit of pension credit will rise in line with earnings, so that no single pensioner need live on less than £114.05 a week and no couple on less than £174.05 a week.

"The threshold for the savings element of pension credit will be uprated so that it remains equal to the basic state pension. This means that a typical single pensioner will now gain from pension credit with an income of up to £158.75 a week, while a typical couple will gain on income of up to £233 a week.

"Nearly 3.3 million pensioners are now in receipt of pension credit, with an average weekly award of around £43. We are reaching more people and ensuring that they get their entitlements—over 900,000 more households receive pension credit than those previously in receipt of the minimum income guarantee.

"Following the introduction of pension credit around 2 million pensioner households now qualify for more help, or qualify for help for the first time, with their council tax or rent. And from this week, pensioners can make a single phone call to claim all three of pension credit, housing benefit and council tax benefit.

"By targeting resources at the least well off pensioners, we have succeeded in lifting nearly 2 million pensioners out of absolute poverty. We are now spending £11 billion extra each year on pensioners, with almost half of the extra spending
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going to the poorest third. If we had instead merely increased the basic state pension in line with earnings, then just over a quarter of that extra spending would have gone to the poorest third—who would have been £30 a week worse off than they are under these measures.

"On average, pensioner households are now £1,400 a year, or £27 a week, better off in real terms than they would have been under the 1997 system—with the least well off third of households £1,900 a year, or £37 a week, better off in real terms. As well as tackling the dreadful legacy of pensioner poverty, we have also helped all pensioners and will continue to do so.

"My right honourable friend the Chancellor confirmed yesterday that the winter fuel payment would be £200 for every year of this Parliament. He also announced that he would be setting aside an additional £300 million over the next three years, so that the Government's Warm Front programme can offer pensioner households on pension credit free installation of central heating, and all other pensioner households without central heating a contribution of £300 towards the costs of installing it. He also announced further help with the cost of insulation. I believe the whole House will welcome those announcements.

"We have now reached the unprecedented position where pensioners are no more likely to be poor than any other group in society—a particularly remarkable achievement after a period in which earnings have grown so fast, thanks to the stability and steady growth we have enjoyed in the economy since 1997. We need now to introduce further reform to ensure that our pensions system delivers for future generations of pensioners as it is doing for today's.

"We warmly welcome the broad framework of the Pensions Commission's proposals and options published last week, and we believe they are the right basis for the consensus that we need. But there is still a great deal to be discussed and debated about the detail.

"Yesterday I issued a challenge to the pensions industry. It believes that they can produce an industry-led model that will meet the Turner objective of enabling all people to save for a pension at low cost, but that will outperform the model proposed in the report. I have asked the industry to work up the details of an alternative approach by early February, ahead of a joint national pensions debate event between industry and government, when these proposals can be closely examined.

"In the same way, as we embark on a major new consultation exercise involving every section of our community, we will be scrutinising the commission proposals and options, and debating the best ways to achieve the objectives that the commission set out and to deliver a lasting pensions settlement.

"But if we are to meet the challenges of an ageing society and permanently eradicate poverty in retirement, we need also to address the inequalities
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during people's working lives. That is why our record in tackling child poverty is so important. It is why the Government are committed to supporting families in work and why our welfare reforms and our aspiration for an 80 per cent employment rate are so important, and why we want to see a modern, active and inclusive welfare state.

"We have lifted over half a million children out of relative low income since 1997. Twenty million people, including 10.3 million children, are benefiting from tax credits. And the child tax credit, which will again increase by earnings, is benefiting six million families.

"The standard rate of maternity allowance and statutory maternity pay will be increased by the retail prices index to £108.85 a week. Where the maximum maternity pay and child benefits for mothers at home with their first baby in 1997 was just £2,610 for the first year, it will rise by 2007 to £8,300—a real terms increase of £5,000.

"In addition, the Work and Families Bill, which received its Second Reading yesterday, introduces a new entitlement to statutory paternity pay to enable a father to take time off work and receive statutory pay instead of his partner if she returns to work early. This gives parents greater choice in how they balance their work and caring responsibilities in the first year of their child's life. And for the sixth successive year, I can announce that we are freezing non-dependent deductions to relieve the pressure on low-income parents who are housing their adult children.

"Work is the best route out of poverty. There are now more people in jobs than ever before—2.3 million more than 1997. Unemployment is at its lowest for nearly 30 years, with long-term youth unemployment 90 per cent lower than in 1997. In just 12 months employment has risen by 330,000 to 28.8 million and is the highest in the country's history. It has risen in every region and nation of the UK. The lone parent employment rate has increased by 11 percentage points since 1997 and there are now nearly one million lone parents in work, while the numbers of lone parents on income support has fallen by over 200,000 since 1997.

"As my right honourable friend said yesterday, we are not going to abolish the New Deal. We will instead strengthen it, offering learning agreements for teenagers in eight areas of the country; extending the New Deal pilots to help lone parents back to work; and piloting personal action plans for those unemployed for six months or more. Our New Deal for Disabled People has seen nearly 75,000 job entries since its launch in 2001, with 200,000 disabled people helped into work through our total package of New Deal programmes.

"We are also seeing very encouraging early results from our Pathways to Work pilots. In the first year of the pilots, the number of recorded job entries for people with a health condition or disability had almost doubled compared with the same period the year before. Their continued success has driven a
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significant increase in the proportion of customers leaving incapacity benefit in the first six months of their claim compared with non-pilot areas. Overall, on a national basis, this early success would be equivalent to something in the region of 150,000 IB claimants being helped into work each year.

"This early success has underpinned our achievements in helping people off incapacity benefit, with new cases now down a third since 1997 and the first falls in the total count—down 41,000 in the year to May 2005.

"In March this year, our Disability Discrimination Act completed the most far-reaching programme of disability rights legislation that any European country has put in place. It fulfilled our manifesto commitment to deliver enforceable and comprehensive civil rights for disabled people and represented a major landmark in enabling disabled people to live independently, fully recognised and respected as equal members of society.

"Last week, on the International Day for Disabled People, we launched the new Office for Disability Issues. And from this week, the new Disability Discrimination Act 2005 has extended protection from discrimination to another 250,000 people.

"But we are not stopping there. In January, our welfare reform Green Paper will go further in tackling exclusion from economic activity and independence across the working-age population.

"In April, we will take further steps in breaking down the barriers that face older workers. The radical tax simplification that comes into play on A-day, as well as reducing the existing regimes down to a single regime, will enable people to draw their occupational pension while working for the same employer. Last year's Pensions Act continues to improve the rewards for those who choose to delay taking their state pension, even for only a short period, and in April we will see the first people to benefit from the new option of a lump sum, which could be worth more than £5,000. And later in the spring our White Paper will seek to lay the basis for a consensus on a lasting pensions settlement.

"My right honourable friend also announced yesterday the change to the treatment of charitable, voluntary and personal injury income payments in income-related benefits. They are disregarded already in pension credit, pension age housing benefit and council tax benefit. To simplify the system further and encourage the work of charities, they will be disregarded from October next year in assessing eligibility for income support and jobseeker's allowance. There will also be a 52-week grace period for lump sum personal injury payments when assessing entitlement to income support, jobseeker's allowance, working age housing benefit and council tax benefit.
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"This year's uprating continues our commitment to promoting opportunities for the many, not the few. It contributes to our programme of radical reform that balances rights with responsibilities and offers everyone the opportunity to build a decent income for their retirement; and it takes another big step away from the legacy of pernicious poverty which we inherited and which we are determined should never return. I commend this Statement to the House".

My Lords, that concludes the Statement.

4.8 pm

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