I beg to move,

That the draft Social Security Benefits Up-rating Order 2007, which was laid before this House on 24th January, be approved.

I understand that with this it will be convenient to discuss the following motion:

That the draft Guaranteed Minimum Pensions Increase Order 2007, which was laid before this House on 24th January, be approved.

I am satisfied that the orders are compatible with the European convention on human rights. The uprating order will, as usual, increase most national insurance benefits by the retail prices index, which is 3.6 per cent, and increase most income-related benefits by the Rossi index, which as the House will know, excludes rent, mortgage interest, council tax and depreciation, and is 3 per cent. The guaranteed minimum pensions increase order sets out the amount by which contracted-out occupational pension schemes must increase members’ guaranteed minimum pensions that accrued between 1988 and 1997.

Where the annual increase in the retail prices index exceeds 3 per cent., the guaranteed minimum pensions indexation requirement is capped at that level under the primary legislation. This year’s order therefore provides for an increase of 3 per cent. This year’s uprating adds more than £3.5 billion to Government spending and reinforces our commitment to build an active welfare state and to tackle poverty by helping those most in need. The order provides an extra £2.48 billion to pensioners, of which £300 million is above inflation, and an extra £560 million to disabled people and carers.

When we came to power, one in four pensioners suffered the indignity of living below the poverty line. The poorest pensioners were expected to live on just £68.80 a week. This year’s uprating of the pension credit minimum guarantee means that from April no single pensioner need live on less than £119.05 a week and no couple on less than £181.70 a week. The basic state pension will have seen a real-terms rise of 9 per cent. since 1997.

How many pensioners in Britain are living in relative poverty?

From memory, the number is 17 per cent., which is down from its peak of about 39 per cent. under the previous Conservative Government. There has thus been a significant reduction in the number.

I am looking forward to the speech from the hon. Member for Yeovil (Mr. Laws) because I know that he is burning to answer the question of which premium in pension credit he would abolish. Would that be the extra money for disabled pensioners on pension credit, or that for those who care for people? He did not answer that question when it was put to him during a Committee sitting, as the hon. Member for South-West Bedfordshire (Andrew Selous) will know. Perhaps he was waiting until today so that he could tell the whole House which of those vulnerable groups he would take money off through his citizens pension. Alternatively, perhaps he has found the 5p increase in income tax that would be needed to fund that pension—

Same old jokes.

When the hon. Gentleman gives me answers to my questions, I will stop using them.

We now spend over £10 billion a year more on pensioners than we would have been doing if we had simply continued the policies that we inherited in 1997. Pensioners’ incomes have risen across the board, with the poorest benefiting the most. We have lifted 2 million pensioners out of absolute poverty and 1 million out of relative poverty. On average, pensioner households are about £1,400 a year better off in real terms than they would have been under the 1997 system. The poorest third are about £2,000 a year better off, which represents a significant increase in people’s average incomes.

We have now reached a position in which pensioners are no more likely to be poor than the population as a whole. We have broken the historical correlation between being old and being poor. It is genuinely remarkable that that has been achieved at a time of economic prosperity when the wages of the population in work have been increasing significantly. We now need to maintain that achievement, and through the Pensions Bill, which has completed its Committee stage, we will legislate to ensure that the progress that we have made for today’s pensioners is locked in for future generations.

The Bill provides an enduring pensions settlement and a solid platform on which people can save for their retirement in the form of a basic state pension that will be wider in coverage and more generous than previously because it will be uprated in line with earnings. The link to earnings will result in a pension that, by 2050, will be worth more than twice as much as it would have been without reform.

We are also tackling inequalities in the current system, especially those faced by women and carers, through the introduction of a modernised contributory principle that recognises and rewards social contributions alongside work. Today, about 30 per cent. of women reaching state pension age receive a full basic state pension. Our reforms will mean that that figure will increase to about 75 per cent. in 2010, and to 90 per cent. by 2025.

We are tackling the problem of complexity in the current system through a radical simplification of the state pension and by streamlining the private pension regulatory environment, thus making it easier for people to plan and save. Additionally, because it is crucial that we do not burden our children and grandchildren with the cost of a population spending longer and longer in retirement, we will gradually raise the state pension age to 68 by 2046, thus ensuring fairness between the generations and helping to secure the long-term financial stability of the system.

The Bill will eliminate the existing gender gap in the state pension system. It will lock in the reduction in pensioner poverty. However, we will truly eliminate inequality in retirement only when we tackle inequality in working life. That is why our welfare reform programme and our aspiration for an 80 per cent. employment rate are so important.

Ten years ago, nearly 6 million adults in this country were dependent on benefits, and with that dependency came poverty. Over a period of 20 years, the proportion of children in low-income households more than doubled. One in five families had no one in work, one in every three children was living in poverty, and in the late 1990s, the UK had one of the highest child poverty rates in the industrialised world. Today, that rate is falling faster in the UK than anywhere else in the EU. Since 1997, 800,000 children have been lifted out of relative poverty and 2 million out of absolute poverty. Tax credits now benefit nearly 6 million families and 10 million children. From April, families with children will be, on average, £1,550 a year better off in real terms than in 1997, and those in the poorest fifth will be £3,450 a year better off—a truly remarkable increase.

That support goes hand in hand with the other measures that are designed to give working families the support they need. In 1997, the standard rate of maternity allowance and statutory maternity pay was only £55 a week; this year, it will be increased to £112.75 a week, as will statutory paternity pay. In 1997, paid maternity leave lasted for 18 weeks; from April, it will increase from six to nine months, and by the end of this Parliament we aim to extend both statutory maternity pay and maternity allowance to a full year. It used to last for 18 weeks; it is now to last for a full year, which will make a genuinely significant difference to working parents. At the same time, we intend to introduce an additional period of paternity leave for employed fathers and we shall offer all parents unprecedented flexibility in dividing maternity and paternity leave between them, allowing both parents to play a greater role in the first year of a child’s life.

Of course, there is more to do if we are to eradicate child poverty. We shall continue to consider what more the Government can do to help those who are most in need, but ultimately it is the opportunity to work that provides the only long-term sustainable anti-poverty strategy. That is why the Government’s approach has always been about maximising opportunities to work. It is why we have created a national minimum wage and tax credits, invested in Jobcentre Plus and the new deal, and maintained a strong economy in which everyone shares in the benefits of record economic growth.

Today, more people than ever before are in work: employment has increased by more than 2.5 million since 1997. It has increased in every region and every country of the UK, with the biggest increases in the neighbourhoods and cities that started in the worst position. We have had real success in extending employment opportunities to those who were previously left behind. For example, since 1997 the employment rate for lone parents has increased from 45 per cent. to 57 per cent., and there have been significant increases in the rates for disabled people, ethnic minorities and older workers. Nearly 1 million fewer people are on benefits, and the number on incapacity benefits is falling, not rising.

The UK has one of the strongest labour markets in the world and has the highest employment in the G8, ahead of Japan, France, Germany, Italy, Canada, Russia and the United States. The contrast with the situation that we inherited is stark: claimant unemployment has decreased by 43 per cent. in the past 10 years, long-term unemployment has decreased by 73 per cent., and youth long-term unemployment has almost been eradicated.

Pathways to work now covers more than 40 per cent. of the country and we shall roll it out nationwide by April 2008, in time for the new employment and support allowance. Pathways is a success: independent evaluation carried out by the Institute for Fiscal Studies suggests that pathways reduces the percentage of new claimants still receiving an incapacity benefit after 10 and a half months by more than eight percentage points and increases the percentage in employment by more than nine percentage points. No other programme in the world has delivered results on that scale for that client group. Our Welfare Reform Bill will build on that success, delivering on our commitment to reform incapacity benefit while ensuring security for those who cannot work. Together with our city strategy, it will offer a new approach to delivering employment services to some of our most disadvantaged communities.

The Minister mentioned the pathways to work pilot schemes being rolled out nationwide and the new welfare to work aspects of the Bill, but will he confirm whether people will receive the same amount under the employment and support allowance as they do under the pathways to work pilot schemes?

I think that the hon. Gentleman was a member of the Standing Committee, which considered that point, and he will know that it is still being considered. Ministers made the position clear: the ESA will be set at a higher level than the current long-term rate for incapacity benefit. As I think he knows, a decision on that subject will be announced in due course.

Our disability rights legislation, which is the most comprehensive of any European country to date, and our age discrimination legislation are breaking down the cultural and discriminatory barriers facing disabled people and older workers, but we have further to go if we are to meet the challenges of rapid economic, social and demographic change. The Leitch review highlighted the fact that the shape of our work force needs to change rapidly to fit the needs of our future economy. The demand for low-skilled workers is falling rapidly, and it is skills that employers now seek. We want British workers to be equipped for jobs, yet there are currently 4.6 million people without any qualifications. We need to build on programmes such as Train to Gain, which help employers to identify the skills that their businesses need and to contribute to the costs of training, so that they can help many previously unqualified workers.

Order. Many of the points that the Minister is touching on do relate to the motions before the House, but occasionally he strays wide of the mark. This debate is not a general review of the financial situation.

I have reached the last page of my speech, Mr. Deputy Speaker, so there is not much that I can do to correct that, but I take your guidance.

As I was saying, an active welfare state is crucial to provide people with opportunity and security. This year’s uprating statement continues the progress that has been made since 1997, and I commend it to the House.

We welcome the debate, and recognise its importance for welfare and social justice, and I am grateful to the Minister for setting out the Government’s proposals on uprating social security benefits and the basic state pension. The level of benefits, which is the subject of the order before us, is just part of the national debate about poverty in the UK. It is a debate that my right hon. Friend the Member for Witney (Mr. Cameron) has helped to open up in the past 12 months, through a refreshed and renewed commitment to social justice on the part of Conservative Members. Recently, the Department has responded to the policy challenge delivered by the Leader of the Opposition and other Conservative Members with a series of ministerial briefings, and sometimes even with speeches, on the record, on the subject of welfare reform. We await with interest the fruits of the short inquiry led by the Minister for Employment and Welfare Reform, who is not in the Chamber today, and Mr. David Freud. I understand that that report may be published as early as this week.

The order will deliver an increase in benefits, and we Opposition Members support that. It provides for most of the increases to take effect in the week commencing 9 April this year. However, the order specifies that, for statutory sick pay, maternity pay, paternity pay, and adoption pay, and for housing benefit, council tax benefit and the earnings limits in respect of child dependency, the increased rates will take effect at an earlier date in April. The increases take effect on different dates because of the difference in the prescribed pay days of the benefits, but we have no difficulty with those procedures.

I would like to talk about how the rate of the increases is determined. Depending on the benefit, either the retail prices index or the Rossi index is used. Before we decide on the order’s merit, it is worth trying to understand which inflation measure is applied to each benefit and why. It is important to air those issues because they open up important questions about whether different groups in our society suffer from different inflationary pressures. The benefits that people will access, as a result of the order being made, will differ depending on the inflation measure that is applied to the benefit. The question that we have to ask when considering the merits of the order is whether the uprating will cover the increased cost of living which any particular group drawing that benefit is subject to.

The retail prices index is applied to uprate contribution-based jobseeker’s allowance, child benefit, incapacity benefit, carer’s allowance and disability living allowance. Those are the main benefits. The RPI is calculated by the Office for National Statistics each month by collecting about 110,000 prices of about 650 goods and services in about 150 locations and on the internet. These goods include the obvious ones—bread, cereal, furniture and clothing, as well as water, gas and electricity. With that information, the ONS uses data from the Department’s family expenditure survey and other detailed expenditure analyses put together by market research companies and trade reports, and arrives at a representative shopping basket. The changes in prices of the goods in the basket are used to produce a headline figure that is intended to be broadly representative of the cost of living.

With reference to the RPI, which is the subject of the order, it is worth pointing out that the patterns of pensioner expenditure are not explicitly factored into the representative shopping basket. The ONS explains that that pattern of demand is probably atypical and would distort the average. Pensioner households, which on average derive about three quarters of their income from the state one way or the other, are having some of their benefits uprated by the order according to an inflation index that does not explicitly acknowledge or comprehend how they spend their money. That is worth considering.

I am not for a moment suggesting to the Minister that previous Governments made the calculations in any other way—[Interruption.] The Under-Secretary of State for Work and Pensions, the hon. Member for Warwick and Leamington (Mr. Plaskitt), is always quick to make a sneering party political point, but I will not be tempted. In a spirit of honest inquiry, I am not suggesting that the matter was fully considered by any Conservative Administration in the past. I simply wondered what the Minister’s views were.

I ask that because the question is endlessly put by so many of the hard-working lobby and interest groups that work on behalf of their customers, those who are of pensionable age. The Minister knows as well as I do who I am talking about. They make some very good points, and it would be useful to get an idea of the Minister’s thinking about why no Government have so far explicitly recognised the much higher inflation levels that pensioners experience—much higher than the RPI measure that is the subject of the order.

The other index that is the subject of the order is the Rossi index, which is used to uprate different allowances and benefits listed in the order—jobseeker’s allowance, council tax benefit, housing benefit and income support. It is compiled in the same way as the RPI, except that it excludes rent, mortgage interest payments and housing depreciation costs.

Parenthetically, and to provide context for the two separate inflation measures that are the subject of the order, it is worth reminding ourselves that both those indices are different from the consumer price index, which is the measure now used by the Bank of England to calculate bank rate. The CPI is similar to the RPI in so far as it uses a basket of allegedly everyday goods to compare how prices have changed over the period, but it also excludes council tax, mortgage interest payments and other major housing costs.

With the RPI in September 2006 standing at 3.6 per cent. and the Rossi at 3 per cent., these represent nine-year September highs, and the order contains one of the biggest upratings since 1997. With the exception of contribution-based jobseeker’s allowance, non-income-related benefits, including incapacity benefit, child benefit and disability living allowance, all will be uprated by 3.6 per cent., which was the RPI figure in the year to September 2006. To demonstrate the magnitude of the proposals, the long-term rate for incapacity benefit will rise from £78.50 to £81.35. The highest level of care component in the DLA will increase on average from £62.25 to £64.50. We support those increases. Housing benefit, income support and other income-related benefits to which I have referred will be uprated not by RPI but by the Rossi figure of 3 per cent. To give an example from the real world, housing benefit for a single 25-year-old, all things being equal, will rise from an average of £57.45 to £59.15. Income support will rise from £57.45 to £59.15. We welcome those modest increases—[Interruption.] Yes, we welcome them.

The September 2006 RPI is used, too, to calculate the annual increase in the basic state pension. The minimum guaranteed pension credit is linked to the higher level of earnings. But the 2004 Budget report specified that the basic state pension would continue to rise each April by 2.5 per cent., or the increase in RPI in the 12 months to the preceding September, whichever is higher. In September 2006, RPI was 3.6 per cent., and thus higher than 2.5 per cent., so it forms the basis for the uprating of the basic state pension, which will rise by just over £3 for a single pensioner, to £87.30. Again, we welcome that increase, but I urge the Minister not only to reflect on the nature of those increases but to comment on them. The representative basket of goods for the RPI and the Rossi methodology contains an incredible array—

Read it out.

If my hon. Friend had been in the Chamber throughout my speech he would have heard an analysis bordering on the tedious of the number of items that are included and the way in which the Office for National Statistics obtains that information not just from 150 shop locations but from the internet. However, he can read that at his leisure tomorrow in Hansard, which he looks at first thing in the morning over his café latte as he attends to his two charming children at the breakfast table. There is a treat in store for him tomorrow.

And for them.

Indeed, it will be an even bigger treat for the two young Bercow offspring.

The representative basket of goods that forms the basis for the methodology of RPI and Rossi calculations contains an incredible array of items, weighted in a way that is supposed to be representative of the average spending patterns of the man or woman in the street. People on very low incomes, however, who receive the benefits that are the subject of the uprating order, face much higher levels of inflation, because of the nature of their daily expenditure patterns. For example, the price inflation of gas, electricity and council tax is an important consideration, because there is a systematic tendency for people on low incomes to spend a higher proportion of their incomes than other income groups on necessities that are subject to higher inflation. Many of them do not face an RPI of 3.6 per cent.—the increase in major benefits proposed by the uprating order—but a far higher inflation rate in their daily lives. An increase in their benefit of 3.6 per cent. could therefore amount to a real-terms reduction in their income. This may seem a rather technical point and, because a smile plays on the Minister’s face, I am happy to acknowledge that it is no different a set of propositions than could have been levelled at Conservative Ministers before 1997. However, it now bears on the poverty debate, which has taken on a new lease of life in the past year or so. Ministers and shadow Ministers are talking more intelligently about how we tackle relative poverty, not just absolute poverty. We have an identity of interest in having a full and frank debate about those policy issues. Our solutions may be different in tackling poverty, but at least we have the same goal in mind.

I look forward to hearing the Minister’s comments. He might like to tell us about the new personal inflation calculator introduced last month by the Office for National Statistics, which gave rise to some interesting media coverage. The calculator is a basic tool designed to allow an individual man or woman to calculate the rate of inflation that they personally face—not a bad initiative for a Government body to undertake. It works on the following principle: a person goes to the personal inflation calculator website and enters his or her weekly expenditure for a given set of 23 items, such as tobacco, petrol and food. They can also enter their mortgage payments, their annual expenditure on house insurance, DIY and other items. Using the inflation rates and levels of expenditure on each of those goods, the calculator will produce for an individual his or her own personal RPI.

The only reason there was a smile playing on my lips was that I was wondering whether, in their policy review, the Conservatives are considering having different inflation rates for different population groups. How far would that process go? Would they have different inflation rates for people in the north or the south? Would they have different inflation rates for people in their 20s or 40s, or for those with more, or less, inflationary tastes? Where are they going to stop?

The Minister’s imagination is running riot. I do not think that we have ever indicated that there should be different regional inflation rates or anything else. All I can say to him is that the policy group on social justice is at arm’s length from Front Benchers. It is not due to deliver the second phase of its policy prescriptions until June of this year. The Minister, like me, will have to hold his excitement in reserve, and perhaps we can have a grown-up debate on the matter when the group publishes its independent findings. I look forward to that.

I am extraordinarily grateful to my hon. Friend for giving way because he is addressing the House with the intellect of Einstein and the eloquence of Demosthenes, and I would expect nothing less.

I put it to my hon. Friend, who is making an extremely cogent and powerful speech, that there is a certain otherworldliness about the Government’s approach in expecting, in all cases, people to use a ready reckoner that is accessible through the website. I chair the all-party group on speech and language difficulties, and this is a serious point: the Minister must understand that there are many disadvantaged people, notably those with speech, language and communication impairments, who are statistically much less likely to use such a mechanism to find out what they are entitled to.

My hon. Friend makes an important point. I do not wish to be churlish; the Government put the website together and it is something that has not been done before. I hope that they will reflect on what he said and write to me, or to him, to give some indication of how wider access for those with learning and other disabilities can be delivered in the calculation of one’s personal inflation rate. As usual, he makes a trenchant point, to which I hope Ministers will respond with the good grace for which they are universally popular.

The calculator presumes to come up with an individualised RPI, but of course an individual punching in the data today would be inputting especially high figures for utilities. According to Ofgem—the Office of Gas and Electricity Markets—gas bills have risen by 71 per cent. and electricity bills by 45 per cent. since 2003. Ministers may want to quibble about what Ofgem is saying. I am not too worried about that, but the major thrust of its argument and, indeed, my argument is that those are astronomically high increases in utility bills far exceeding the level of RPI or the Rossi index in this order. According to the Department for Communities and Local Government, the average council tax bill is about one third higher than it was in 2003, while average water and sewerage rates have increased by just over one quarter.

The average man or woman in the street will have been hit by those increases. Let us assume for a moment that they do not have to access many or, indeed, any of the benefits that are subject to this measure. They could equally say, when they are calculating their own level of inflation, that they have seen tiny RPI increases in things that they buy a lot of. For instance, I think that the average figure for a year in relation to inflation for compact discs would be about 0.8 per cent.—less than 1 per cent. We are talking about a 10 per cent. reduction in real terms in the cost of audio-visual equipment. That is good news. There are examples of deflationary pressures. There are falls in the prices of goods such as clothing. Any of us who potter down our local high street see that there are not inflation increases higher than Rossi or RPI in respect of those goods.

We understand that, but we also know about the representative basket as regards inflation for all goods. Taken together, those inflationary and deflationary forces have led to an average RPI of 3.6 per cent, but not for pensioners. It is fair to say that if all that pensioners spent their money on was CDs and audio-visual equipment, all would be well, but they do not. A large proportion of their monthly income goes on utility bills and council tax, so for pensioners the reality of inflation is very different from Rossi or RPI, which is the subject of this order. Shona Dobbie of the Alliance Trust summed the situation up when she said:

“The impact of price increases on basic goods and services falls most heavily on the elderly, who spend a higher proportion of their monthly budget on necessities.”

There is no exact science to this, as Ministers well know and as I well know, but there are some decent estimates of the personal inflation levels faced by pensioners in our community today. Last December, Capital Economics did a short study of how inflation affects different groups in society and it concluded that some pensioners face a personal consumer prices index inflation rate of more than 9 per cent.—9.1 per cent., to be exact. Similarly, using the Department for Work and Pensions family expenditure survey, the Alliance Trust has sliced and diced some numbers and examined pensioner expenditure on 85 different items to construct a CPI inflation rate of more than 4 per cent. for the over-75s.

There are two points to be made in taking those studies on board. First, both the organisations to which I referred based their workings on a CPI method, rather than RPI. The CPI of course excludes housing costs, council tax and mortgage payments, but in so doing it tends to underestimate the cost of living for pensioners by about 1 per cent., according to the ONS. The second point about those estimates of the level of inflation a pensioner household will experience in the real world is that, although we are uprating the main pensioner benefits in line with RPI, pensioners are facing in some cases a decline in real terms in their weekly income.

A regular claim made by the Government—we heard it from the Minister a few moments ago—is that they have moved up to 2 million pensioners out of poverty. However, let us not forget the context. Help the Aged has calculated that there are 1.3 million pensioners with incomes just 10 per cent. above the poverty threshold of 60 per cent. of median income.

I hope that the Minister, while no doubt wanting to claim credit for the work done by the Government in the past nine years, will accept that there is much more to do to tackle pensioner poverty. In that spirit of working harder and doing more in future to fight pensioner poverty, does he agree that moving some pensioners from just below the poverty threshold to just above it is not really what this is about? It may hit a narrow target, but we need to cast our minds towards some depressing statistics about pensioner fuel poverty. Would the Minister like to comment on the fact that the number of people in pensioner households living in fuel poverty—that is, where the household spends more than 10 per cent. of income on fuel to maintain a satisfactory temperature, which is usually defined as 21° C for the main living area and 18° C for other occupied rooms—will have doubled since 2004? Whatever we talk about in terms of improving the outlook for pensioners trying to get out of poverty, those are some fairly damning statistics, which simply are not good enough.

My hon. Friend is making some worthwhile points about retail price inflation, the Rossi measurement and the CPI measurement, and how a particular group such as the elderly may not have their household bills reflected by that. Does he share my concern that council tax has risen at such a tremendous rate that, where council tax benefit has not kept up, it is creating a huge trap for some of the least well-off?

I thank my hon. Friend. His power to anticipate what I am going to say is legendary. He will be happy to know that I am about to turn to council tax benefit, but it may be useful for the record to reconfirm the respect that I had for him in the Standing Committee that considered the Welfare Reform Bill, where he brought together a wealth of excellent real world examples from his constituency of Windsor about the impact that benefit dependency has on his constituents. He was able to throw an interesting sidelight on how Government changes, which are sometimes dry, complicated and boring to many people, affect people at the sharp end, so I am grateful to him, as ever.

The doubling in fuel poverty among pensioners since 2004 is something that the Minister would, I think, like to comment on. In the interests of balance, he can wheel out the statistics about improvements made, but what about the rather unfortunate record on fuel poverty?

Tackling pensioner poverty must continue to be a top priority for any Government: the current Government and, I trust, a future Conservative Government, led by my right hon. Friend the Member for Witney—who, as I said, has done a fantastic job in raising awareness about social justice and welfare issues in the 12 months since he took up his position. In 2004-05 there were 1.8 million pensioners living in poverty. Let us not forget—this is a critical new point—that there were 1.6 million pensioners not claiming the pension credit to which they were entitled. I do not wish to stray out of order in any way, Mr. Deputy Speaker, but one cannot have a sensible discussion about the uprating of these benefits, particularly as they relate to pensioners, without understanding that the other part of the equation is the take-up of the benefits that are the subject of the order. It may interest the House to know that in November 2004 the then Secretary of State for Work and Pensions said:

“The Government still has a take-up problem on pension credit.”

Although that was over two years ago, nothing has been said or done to suggest that the problem has gone away or otherwise been dealt with.

The new estimates for benefit take-up were announced in October 2006. The figures do not extend beyond 2004-05, but according to the 2006 Department for Work and Pensions reports “Income Related Benefits—Estimates of Take-Up in 2003/2004” and “Pension Credit—Estimates of Take-Up in 2004/2005” the percentage of pensioner couples entitled to just the guaranteed pension credit who received it fell from a range of 61 to 75 per cent. in 2003-04 to a range of 55 to 68 per cent. in 2004-05. In 2003-04, 53 per cent. of pensioners entitled to pension credit but not claiming it were below the poverty line as set by the Government. According to the National Audit Office report “Progress in Tackling Pensioner Poverty: Encouraging Take-Up of Entitlements”, if pension credit take-up were increased by just under a third—30 per cent.—to a level similar to that for housing benefit, about 320,000 pensioners could be lifted out of poverty according to the Government’s own measure of that. Almost a third of a million pensioners would be lifted out of poverty if the take-up of that benefit, which is a subject of this order, were increased.

The order also refers to council tax benefit, which my hon. Friend the Member for Windsor (Adam Afriyie) mentioned. There are pensioners who are eligible for council tax benefit but who will not get it; they will not be able to access the upratings under this order, because they are not claiming the benefit. Will the Minister comment not only on the astonishingly low take-up of council tax benefit for pensioners, but on the fact that the rate of take-up is apparently declining? Using the DWP’s tax benefit model tables, since 1997 average council tax has risen by 75 per cent., and over the same period there has been a decrease of about 11 per cent. in the take-up of council tax benefit for pensioners. Currently, only about 56 per cent. of pensioners are claiming this benefit to which they are entitled. In 2003-04, 41 per cent. of pensioners entitled to council tax benefit but not claiming it were below the Government’s own poverty line.

According to the previously mentioned NAO report “Progress in Tackling Pensioner Poverty”, if the council tax benefit take-up rate were improved to about 95 per cent., 160,000 pensioners would be lifted out of poverty, according to the Government’s own poverty measure. Those are significant statistics; they show that if there were better take-up of the last two benefits mentioned—pension credit and council tax benefit—we would get more pensioners out of poverty more quickly than is currently projected.

For owner-occupiers, many of whom are pensioners, the council tax benefit take-up is in the range of 36 to 41 per cent. That proportion has fallen, and the poor level of take-up damages the prospects of pensioners on low incomes. Will the Minister tell us what steps he is taking, and will take, to improve take-up? That is not a party political point; I know that he has been working on this, and that outside groups want him to work on it, and the Opposition have a duty to ask about it. We look forward to hearing his comments.

The story that the statistics tell is ultimately one of a benefit system that is too complex and too bureaucratic. So that the Minister understands that I am being balanced, I repeat that I do not believe for one second that benefit complexity was invented by Ministers some time after 1997. What I am suggesting is that there has been a problem for a long time, and that during the last 10 years, although well-meaning attempts have been made to reduce benefit complexity and bureaucracy—I do not doubt the bona fides of Ministers in that regard—the problem persists. The answers given to the questions that many Members, particularly me, have tabled on underpayment and overpayment in relation to a raft of benefits—not only pension credit, income support and jobseeker’s allowance, which are the big-ticket benefits—reveal that there is still a very high level of inaccuracy, whether in terms of customer error, customer fraud or official error.

This is not a “policy wonk” debate; it is important for a much better reason. Support is not getting to those who need it most: those at the bottom end of the income scale. Of course, that is ultimately what this motion is about—delivering more support and help to those who need it.

The NAO report to which I referred earlier underlines the fact that complexity is part of the problem in delivering support to those who need it. It states:

“Many pensioners and those that advise them”—

let us not forget the lobby groups and support groups that advise 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.”

The 17th report of the Social Security Advisory Committee, published in 2004, says that

“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 get much more independent than the Social Security Advisory Committee. Help the Aged tells us the following in its campaign on benefit complexity:

“The (benefits for pensioners) 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.”

My hon. Friend might like to know that at a recent lunch at the Age Concern office in my constituency, I asked the 20 to 30 elderly people there whether they were taking up their full benefits, and not one of them said that they were. When I asked why, they said that the system was too complicated and involved too much of an intrusion.

In his inimitable way, my hon. Friend makes an important point, taken from the real world—in this case, the real world of Windsor. That statistic and that experience do not surprise me at all. Again, I am not suggesting for one minute that the same comment might not have been made in the 18 golden years of the last Conservative Administration, before 1997, but I do say that pensioners are unable to access what they need in the way that they need to, as my hon. Friend’s example demonstrates. Indeed, I am sure that we could all give similar examples from our own constituencies, so however well the Government think that they are doing, they can do better.

rose—

I am very happy to give way to the Minister.

Would the hon. Gentleman describe the fact that 39 per cent. of pensioners lived in relative poverty as part of those golden years?

I would not wish to characterise any Administration—not even the hon. Gentleman’s—by picking out one statistic. I merely point out that, happily for all parts of this House, poverty in 2007 is perhaps considered a more important issue for debate than it has ever been, and certainly in my recent political memory. That is a good thing, and the debate should be about the future and not too much about the past.

The Government have policies that they champion and talk about, which is fine, but to say that everything is fine and dandy, and everything in the garden is rosy, will not do, because people out there do not believe it. They want a simpler, fairer benefits system and a Government who will deliver it. They will judge a Government by their results, not just by their policy announcements—and that goes for any Government, I hasten to add.

The hon. Gentleman has referred to complexity and bureaucracy several times, particularly in relation to pensioner benefits. Does he assume that his commission looking into this issue will end means-testing for pensions and the pension credit, or will the Conservative party stay wedded to them?

The hon. Gentleman will have to wait for the publication of the policy commission’s report; I am not going to do a Mystic Meg impression and guess what it will say. There will of course be a full, grown-up debate on the idea of a simpler and fairer benefits system, and all parties are welcome to contribute, but I am not going to make any premature judgments about means-testing. Ministers know as well as we do that some element of means-testing will be necessary in any benefits system in a mature western industrialised democracy. It is stupid to suggest that we could abolish means-testing across all benefits as a matter of ideological principle. The tricky question for all parties is where to draw the line. The hon. Gentleman will have to wait and see how the debate unfolds.

Lone parents will access many of the benefits that are the subject of this order. I welcome the Department’s recent comments on the importance of getting lone parents back to work, but we must be sure to get the language right. This is not about “sticks”. The days have gone when politicians wielded a big stick towards customers of the benefit system. We need a lot more “carrot”, and my party understands that policy imperative. We have to win hearts and minds when it comes to getting people out of dependency, not to employ tough macho rhetoric. I hope that we do not hear too much of that from Ministers, or anyone else.

It is important to reform the regime for lone parents—in the sense of providing more opportunities, not of forcing them into work in a punitive way—because child poverty levels are a function, to a greater or lesser extent, of whether a lone parent is in work. In that context, it is worth remembering, when considering the benefits that are the subject of this order, that the Government have another string to their bow. Uprating is sensible and necessary, but it is not a sufficient condition for tackling poverty across all income groups and sectors of society.

The Minister referred to the Welfare Reform Bill, but we must remember—again in a grown-up and mature way—that it was perhaps not the flagship radical reform promised at the time of the Green Paper. We know that Ministers accept that the Bill did not do enough to support people back into work. Why else would the Secretary of State have commissioned a review in December last year, led by the Minister for Employment and Welfare Reform, assisted by Mr. David Freud? That will be of interest to those receiving the benefits that are the subject of this order. They will get their uprating, as we will not vote against the order, but they will want to know what is going on when the Secretary of State has to commission, in very short order, a radical look at what the welfare state does. At least, that is how his briefers represented it to journalists.

Perhaps the Minister who winds up will share with the House some details about when the Freud review will be published and debated. Someone from the Department briefed the Financial Times this time last week—there is no reason why they should not do so—that we could expect the review some time this week. In the interests of a decent, grown-up and informed debate, Ministers might wish to inform the rest of the House when we may expect the Freud review, and also assure us that they will ask the Leader of the House for some Government time in which to debate its contents.

I hope that when we debate next year’s uprating order, fewer people will be in dependency and more people who want support will 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 to have a better life for themselves and their families and 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 currently all-too-low pensioner incomes will be higher. We will work with the Government on any proposals they may make, but I serve them notice that Her Majesty’s loyal 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 really want to be.

I am pleased to be able to take part in the debate. Last year, the hon. Member for Bury St. Edmunds (Mr. Ruffley) summed up for his party in the debate on benefits uprating, which he characterised as interesting, important and short. Last year, only two Conservative Back Benchers spoke and no Government Back Benchers; it looks as though our proceedings will be similarly short today.

However, as the Minister for Pensions Reform and the hon. Gentleman indicated in their speeches, the debate is important because it has impacts on the uprating of all benefits—means-tested and non-means-tested—administered by the Department for Work and Pensions. As the Minister noted, the uprating will cost about £3.56 billion. We are allocating a little less than three hours to debate it, a scrutiny rate of more than £1 billion an hour by my calculations. We are talking about the uprating of £125 billion-worth of benefits, which, including the uprating of child and working tax credits, gives a total amount of benefits administered by the DWP and Her Majesty’s Revenue and Customs of about £150 billion—more than a quarter of the total managed expenditure of £585 billion for 2007-08, and the largest component of Government expenditure.

As both the Government and the Conservative spokesmen indicated, those benefit increases will have an impact on many of the lowest income people in society. The Minister gave us, understandably, an upbeat perspective on progress against poverty since 1997. Like all Ministers, he is inclined to emphasise the positives, but to put the importance of the uprating statement in context we ought to note that 20 per cent. of the population are still in relative poverty, according to the Government’s definition. That amounts to 11.4 million people: 3.4 million children, 6.2 million adults of working age and almost 2 million pensioners, despite the Minister’s suggestion that pensioners can get out of poverty by claiming means-tested benefits. Poverty rates are still high: 27 per cent. for children and 17 per cent. for pensioners.

The Minister’s opening comments showed a little complacency about the employment situation and thus, by implication, the number of people dependent on benefits. He said that since 1997 the UK employment rate has improved and that it is one of the highest in the Organisation for Economic Co-operation and Development. However, he did not mention the changing composition of employment and the fact that, compared with the Wilson days of the mid-1970s, male employment is about 10 percentage points lower. It is now 79 per cent. compared to 89 per cent. in the mid-1970s. Since then there has been a big decline in male employment that has been made up by an increase in female employment, which feeds directly into the question of who is affected by the benefit uprating statement. The distribution of employment is increasingly unequal, so although there are many households where two people are employed and earning there are many where nobody at all is in employment. That is why we are in the bizarre situation of having not only one of the highest employment rates in Europe, but more children in workless households than any other country in the European Union. That is a strange combination of factors.

The hon. Member for Bury St. Edmunds set out in magnificent detail how benefits are uprated; he talked about the Rossi index and the minimum income guarantee going up by earnings. He was right to say that the different benefits about which we are talking will be uprated in different ways—through the retail prices index, the Rossi index or the earnings index. When we look at the paperwork, circulated in December by the Department, that sets out which benefits would be impacted, we find a long list that tells us something of the complexity of today’s benefits system. It lists 464 different rates, tapers, premiums and allowances that could be affected by today’s announcement, which is titled an upratings announcement. Interestingly, when we look at the benefits and how they will be uprated, we find that of the 464 different benefits, tapers, premiums and allowances, 130 are not uprated at all. In other words, it is an uprating and non-uprating statement.

Perhaps I am being slightly generous to the Department, as a number of items are missing entirely from the uprating statement, even some that relate to areas administered by the Department—for example, the 25p addition to the pension for those aged 80 and the Christmas bonus of £10. Those rather embarrassing items, which I do not think have been updated since the 1970s, are not mentioned at all.

Before we start on the uprating bit, it is worth saying something about the non-uprating part of the uprating statement. Rather a lot is not being uprated at all. There are the disregards for many people when they go into employment. We discussed that issue in the Pensions Bill Committee the other day. We pointed out that the disregard for people over the age of 60 who are claiming the pension credit but are in employment has not been uprated for many years. I cannot remember the exact number of years; it would be helpful if the Under-Secretary of State for Work and Pensions, the hon. Member for Warwick and Leamington (Mr. Plaskitt), told us when he winds up. However, for another year there is to be no uprating of the disregards for people in those circumstances. That means that many people—pensioners and others—have powerful disincentives to work. We also discovered that the disregards for housing benefit in respect of child care are not being uprated. In other words, more people on housing benefit will find themselves squeezed by the fact that child care costs are going up but no allowance is made for that.

There are no upratings of the capital disregards that affect a number of the benefits. That means that more and more people with modest savings will find that their benefits will be disallowed. There is also no uprating of the winter fuel payment. The hon. Member for Bury St. Edmunds spoke in detail about how different elements of the retail prices index are going up very rapidly while other components are falling. I am not sure whether I would follow him all the way down the path that he set out for the social justice commission: that of having a series of different uprating factors for different benefits.

The hon. Gentleman should not infer from my speculative questioning that I am trying to lead the social justice policy group one way or the other. It is an independent body. For the avoidance of doubt, I should say that I was not advocating different measures; I was merely asking whether Ministers had thought about using different measures for different benefits.

I am grateful to the hon. Gentleman for that clarification. I fear that he may be accused of toying with and teasing us; he was tempting us to believe that under the Conservatives everyone might get uprated by a higher factor. I think that he is saying now that such a panacea would not be as evident under a Conservative Government as we might have hoped.

I am sure that the Under-Secretary will mention in his summing-up that some indices that are now actually higher than the rate of inflation—the pensions and prices index, for example—have, in the past, been lower for quite long periods. However, it is worth noting that the winter fuel payment has not been uprated this year. The Minister will confirm that there has been no uprating of the winter fuel payment since 2000-01—a very long time. Perhaps that is why the Department of Trade and Industry indicated in a written parliamentary answer a couple of months ago that it expects the recorded number of people in fuel poverty not to disappear to zero, which is the Government’s target, but to double from 1 million to 2 million between 2004 and 2006.

The hon. Member for Bury St. Edmunds mentioned in an intervention how much fuel costs have gone up over the last year alone. I think that he mentioned—if he did not, I will—that the September 2006 retail prices index for heating and lighting rose by 29.2 per cent. We would certainly not suggest that every single benefit should be uprated by some different factor, but there is a powerful logic behind the idea that the winter heating allowance, which is designed to compensate for heating costs, should in some way be related to those costs rather than be allowed to shrivel over time. The RPI shows that since 2000-01 the cost of fuel has gone up, on the Government’s own measure, by 67.8 per cent.—double even the increase over last year—which is considerably greater than the RPI increases.

I know that the Government will argue today against uprating for actual fuel costs and say that it would be quite inappropriate to use other elements of inflation in examining the way in which benefits are uprated. During a quiet morning, however, I looked through a long piece of paperwork—the uprating statement—sent by the Minister back on 11 December 2006. I examined in particular the increases and non-increases of benefit and counted up the number of benefits that were not increasing at all. I suddenly reached the section on housing benefit, which dealt with non-dependent deductions, rent rebates and allowances. One category listed is entitled “service charges for fuel”. The most interesting fact to note is that those service charges are going up enormously—by 29.2 per cent.—in 2007-08. Not being as familiar or literate about these matters as my hon. Friend the Member for Northavon (Steve Webb), I thought that that extraordinary aspect of Government generosity might be used as a precedent for arguing that the winter fuel payment should go up by a higher rate. Then, however, I discovered that the service charges for fuel are actually the allowance for fuel costs that is made where housing benefit is paid to people who pay a rent that includes the cost of fuel. In other words, the Government are saying that for people who pay rent and do not pay a dedicated fuel cost—they are not supposed to receive housing benefit in order to pay for those costs—it can be assumed that the cost of fuel has gone up by 29.2 per cent. That allows the Government to avoid paying an excessive amount of housing benefit to those individuals.

That is pretty cheeky of the Government. On the one hand, there is a winter heating allowance, which is disappearing in relation to the cost of winter heating, while on the other the Government are actually using the 29.2 per cent. increase in costs to ensure that housing benefit is clawed back from people on low incomes. I would be grateful if the Minister commented on that and let us know whether it sets a good precedent that would allow the Government to look more generously in future at the uprating of the winter heating allowance.

From the other interesting document on the national insurance fund and how it is accruing, we discover that because the Government are uprating many of the benefits only at the rate of inflation and many allowances by nothing at all—more than a third of the allowances and premiums are not being uprated at all—the surplus on the fund will increase from £4.8 billion of revenue versus expenditure in 2007-08 to £10.042 billion in 2011-12. The total cumulative balance in the fund will increase from £43 billion in 2007-08 to £74 billion in 2011-12. The pensioner lobby, which frequently approaches the Minister about this issue, may well suggest that he can afford to offer a more generous pension because he has a huge amount in the national insurance fund. We can all imagine what they will say.

I would like to touch on a few specific benefit issues that arise from the uprating statement. It is worth saying from the outset that this provides one of the rare opportunities to look into how the whole benefits system is mapped out for us—taking account of the 464 different rates, premiums and allowances that I mentioned earlier—and it should provide an opportunity for the Government to consider how complex the benefits system has become since Beveridge and others designed it 50, 60 or even 70 years ago.

We know that the Government have a simplification team that is supposed to be looking into all these matters, but when the issue was raised in Work and Pensions questions recently, it sounded as if the work being done was not particularly radical. As each new Secretary of State comes in and goes through the red boxes on the first day, he quickly makes a speech saying how complex the benefits system is and what a hideous nightmare it has become. He says that it must all be cut back, but then the new Secretary of State disappears somewhere after about a year. It was slightly earlier than that at one point—[Interruption.] Probably June this year, as the hon. Member for Bury St. Edmunds says. The benefits system is then left in that very complex state.

As a consequence of the uprating statement, I hope that we will increasingly focus on how messy and complex the system has become. There are all sorts of historic anomalies, such as the 25p additional payment, which now succeeds only in irritating pensioners at the age of 80 and the Christmas bonus, which was supposed to be equivalent to a double pension when first introduced, but would now buy only a small proportion of a turkey.

We will talk about particular benefits and pensions in more detail later, but we should note that we have a benefits and pensions system that is phenomenally more reliant on means-testing than Mr. Beveridge could ever have thought up. What are the implications of the uprating of pensions today? There is a basic state pension of £87.30 and a means-tested minimum guarantee—or whatever it is now called—of £119.05. That means a gap of almost £32 between the level of the pension when people have accrued all their contributions for 44 years or 39 years—it is now going to be 30 years—and the level that people get if they accrue nothing at all and end up on means-tested benefits. If Mr. Beveridge had been asked to comment on such a system, he would have regarded it as absolutely crackpot to set the full level of the basic state pension £32 below the minimum means-tested level.

I think that Beveridge would have been worried about many of the issues raised by the hon. Member for Bury St. Edmunds—for example, the problem of take-up of pension credit or council tax benefit. We discover that little more than half of all pensioners are actually taking up their entitlement to council tax benefit despite the extraordinary increases in council tax since 1996-97. I believe that Beveridge, in reflecting on today’s uprating statement and the implications of the uprating of different benefits, would have been very worried by the reliance—or over-reliance—on means-testing. He would have wanted an uprating provision that reduced the number of people on means-testing in the future in relation to pensions, so that there was an incentive to save, and in relation to all the other means-tested benefits that the Minister discussed earlier—including tax credits. Although those credits are not specifically the subject of this uprating statement, there has been a big increase in the number of people impacted by the means-testing of tax credits. According to the Institute for Fiscal Studies, that has undermined work incentives since Labour came to power in 1997.

I will not rehearse to too great an extent some of the debates that we have had at modest length in Committee when considering the Pensions Bill over the past few weeks. However, it is worth picking up the continuing dissatisfaction among Liberal Democrat Members about the delay and confusion in restoring the earnings link for pensions—something to which we will no doubt return—and about the fact that the number of people on means-tested benefits will increase as a consequence.

We are also concerned about the fact that the future uprating of the basic state pension, which is supposed to be done on the basis of earnings, will be done on the basis of an earnings index that the Government are determined not to include in the Pensions Bill, so that this Government or a future Government could pick and choose the earnings index that they want to use from time to time. That is a matter of concern to hon. Members on both sides of the House, as is the fact that the Government have removed the safety net that existed in the 1970s, when the basic state pension had to be uprated according to the higher of either earnings or prices. We now discover that it will be uprated only according to earnings, even if the increase in prices is higher than that in earnings during the year.

On a point of clarification, we have left the flexibility for the Government to decide between inflation and earnings. The Government have not said that the pension would increase in line with earnings every time if that was below inflation. I think that the hon. Gentleman understands the point. All that the Bill says is that the Government could decide at what rate the pension would have to increase and that it would have to go up at least in line with earnings.

On uprating, the Minister is confirming precisely that the guarantee that was in place under the predecessor Labour Government in the 1970s is not the guarantee that he will now put in place. The higher of either inflation or earnings will not be used. Indeed, there is even a removal of the minimum guarantee, which has been implemented over the past couple of years, that the increase would not be less than 2.5 per cent. That certainly concerns us.

The hon. Gentleman accepts the point that I made—at least earnings will be used in those situations—and he knows full well that the link to earnings means that the pension will go up much faster than inflation and be worth about twice what it would otherwise be worth by 2050. So I hope that he will not be scaremongering unjustifiably.

I will certainly not be scaremongering, but the Minister has acknowledged that he has taken a decision to break the earnings uprating policy that was introduced in the 1970s, under which there was a guarantee that pensions would never increase by less than inflation. The guarantee in the 1970s was that pension would never fall in real terms and that, if earnings were higher than inflation, it would go up faster. He is now saying that he will not include that guarantee in the Bill. He is saying that he wants to reserve the right to contemplate circumstances where the pension can fall in real terms. That is what we object to in relation to this aspect of the upratings.

I have a couple of final issues. Housing benefit is the second biggest component of the benefits bill after pensions. This year’s uprating will increase the cost of housing benefit, which has risen from about £11 billion in 2000-01 to £15.3 billion in the latest year for which information is available. That increased cost, with the upratings, is quite surprising when one considers that 20 per cent. fewer people claim housing benefit now than in 2000-01. In other words, the cost has increased, despite a falling number of people using the benefit. One of the things that that indicates is that the Government need to put a lot more emphasis on increasing housing supply to take the pressure off housing benefit and to ensure that it is not being wasted because of having to increase the amount hugely in the future as a consequence of higher house prices.

The final specific benefit that I want to comment on is the uprating of incapacity benefit and jobseeker’s allowance. We remain disappointed that, despite a fair degree of cross-party support, the Government have not decided to move more ambitiously to consolidate incapacity benefit and jobseeker’s allowance into a single working-age benefit, with one rate for the uprating. If the Government were willing to do that, it would ease some of the transitions from welfare into work and ensure the removal of the incentives in the system, which still exist to an extent, for people to remain on incapacity benefit rather than jobseeker’s allowance.

We will not vote against the uprating order today, as we did not last year. We welcome, as far as they go, this year’s modest increases, but an overview of the benefits system and the uprating that has taken place this year would demonstrate that the standards that Beveridge and others who founded this element of the welfare state set in the 1940s and 1950s are not met in the benefit system that is delivered by this uprating. The element of security is not delivered for those people who are reliant on means-tested benefits that they do not end up claiming or for pensioners who get the basic state pension, which is below the poverty level. The element of incentive is not delivered by the reliance on means-testing, and the element of responsibility that Beveridge sought is not delivered by the rules and regulations for benefits, which has even now been acknowledged by the Secretary of State for Work and Pensions, who is due to make a statement on that matter in the next few weeks.

We have had a short but detailed and interesting debate, comprising only Front-Bench spokespeople. I will endeavour to reply to the points that the hon. Members for Bury St. Edmunds (Mr. Ruffley) and for Yeovil (Mr. Laws) made, some of which overlap. I am pleased that the order has already commanded the full support of the House. They made comprehensive and thoughtful speeches, and most of their points were perfectly legitimate and proper.

On the different measures of inflation, the hon. Gentlemen rightly referred to the recent steep increases in utility bills and energy prices. Of course, there have been considerable energy price spikes before in the past40 years or so and, in all those previous cases, there was no winter fuel payment, which offers a measure of relief from such spikes. It is fair to say that, despite the recent sharp increase in gas and electricity prices, the winter fuel payment will still cover the winter fuel bill of most pensioner households.

The hon. Member for Bury St. Edmunds is right to point out that there are different rates of inflation for the various goods that make up the basket that constitutes the purchases that pensioner households make. He fairly pointed out that there has been little inflation in clothing prices, which constitute a considerable element of pensioner purchases. The dominant item for most pensioner households is food, for which inflation rates have been very flat if not negative. That goes some way to offset the steep increases in utility bills that pensioners, like everyone else, have experienced.

On average, over the past 18 years, pensioners have faced lower inflation than those who are of working age and pensioner average income has grown faster than earnings over the past 10 years. To help to meet the costs of fuel, particularly in the winter when it is the most sensitive issue, we introduced the winter fuel allowance, which began at £20. It has now increased to £200—a tenfold increase—and £300 where the pensioner household contains a pensioner over the age of 80. Over the whole time frame, the increase in the winter fuel payment has well exceeded the rate of inflation. That needs to be borne in mind when looking at the current situation.

Following the fall in wholesale prices, energy retail suppliers are beginning to forecast lower prices. They have already announced some reductions, with some more to come. Both hon. Gentlemen would acknowledge that there is a certain volatility in utility prices. We need to see that the inflation measure that we use reflects the entire basket of goods that pensioner households purchase and is not overly dependent on one element that is notoriously more volatile than any of the other major components.

Notwithstanding the Minister’s comments, does he agree that, since 2000-01, the value of the winter heating allowance in relation to fuel prices has fallen by about 60 per cent.?

I am suggesting that the hon. Gentleman take into consideration the overall period that I was referring to, which has seen the winter fuel payment that started at £20 reach £200. That tenfold increase clearly indicates our intention to assist pensioner households in overcoming fuel poverty. That is why, for those aged over 80, who are more vulnerable, the amount has increased to £300. As I said, notwithstanding the recent increases in retail prices, those winter payments will still meet the winter fuel bill of a typical pensioner household. That is the most important consideration for us to bear in mind.

Issues were also raised about council tax, which can be a burden on pensioner households and constitute a considerable element of the expenditure that pensioners face. Both hon. Gentlemen were right to emphasise the importance of council tax benefit and of seeing that it is fully taken up. They reasonably asked what action the Government were taking to try to increase take-up of council tax benefit. The Pension Service is engaged in an outreach exercise that involves telephoning pensioners who we think are entitled to the benefit to try to ensure that it is taken up. Thousands of calls a week are being made. We have also tried to simplify the paperwork. There is now a vastly reduced single form that, if necessary, does not even have to be completed by the pensioner household; it can be completed over the phone. All that is required is a signature to authorise collection. That is a considerable advance on the previous forms, which I accept were too long and complicated. That simplification in the application process has helped to improve take-up of that important benefit.

The burden of my argument was that the adequacy of the level of benefit is important, as is take-up. I mentioned not only council tax benefit take-up, which is way too low—I adduced statistics to prove that point—but pension credit take-up. For the benefit of the House, will the Minister indicate when the next set of take-up statistics for both council tax benefit and pension credit will be available and whether he will report on progress along the lines of outreach and so forth?

Yes. I am pretty sure that we publish those figures on an annual basis. If the hon. Gentleman cares to check, he will see the point at which they are generally published. I was just about to move on to pension credit take-up, which he legitimately raised. At present, 3.3 million individual pensioners benefit from pension credit. The average award is about £43 a week, which emphasises the importance of taking pension credit up. It is encouraging to see that, in the case of the guarantee credit, which is the aspect of the credit that is directed at the most vulnerable and lowest income pensioner households, the take-up rate is as high as 81 per cent. That is a significant improvement on the minimum income guarantee, which preceded it.

Again, we are trying to do all that we can to encourage and extend take-up. Local pension services are running a benefit entitlement check programme. There were more than 2 million mailings as part of that programme last year. As a result of increasing the awareness of the benefit, we are now handling about 4,000 calls a week on the telephone-based application line. Increasingly, we can develop means of using data sharing, based on other information that we have in the Department, to help us to identify customers who we have reason to believe have an entitlement to pension credit, but who may not have taken it up. Using the data-sharing techniques, we can identify who those people are and contact them. That should enable a further increase in take-up over time.

Both hon. Gentlemen—again, perfectly reasonably—raised benefit complexity. We all accept that the welfare state has become very complex. Governments of all persuasions have made individual reforms to the welfare system, each perfectly reasonably intentioned, but with the effect of adding yet more changes on to the base and making the thing more complex. It therefore behoves us to try to do what we can to achieve greater simplicity in the system and to iron out some of the complexities that undoubtedly cause problems for the operation of the system and for the customers who receive the benefits.

The work of the simplification unit, which was referred to in the debate, has helped us to establish the principles on which we can proceed. For example, we now ask searching questions about any intended reform or revision that we might be thinking of making to the benefit system. The test that it has to pass is whether it will help us to achieve greater simplicity, rather than adding to complexity. The issue is partly about trying to prevent greater complexity from coming into the system, as well as looking at a whole range of aspects of the existing system to see whether there are historic complexities that we can iron out by harmonising arrangements. We have done quite a lot of that. Partly as a result of the work that the simplification unit has done, we have already seen about 300 statutory instruments scrapped as a contribution towards achieving greater simplification across the benefit system. However, it is a huge task, as I think that the hon. Member for Yeovil would acknowledge, and no doubt the work will be ongoing for a long time.

It sounds as though the work of the simplification unit is useful and is generally in a helpful direction, but surely it will not be able to deliver the fundamental overhaul of the existing benefit system that would really be necessary to achieve the type of massive simplification that Secretaries of State constantly talk about. Is not something more ambitious necessary?

Indeed. One could carry out any number of technical changes to the welfare system and achieve some measure of simplification as one went, but I agree that, if we want to try to arrive at the degree of simplification that we all hope to see, something more substantial is required. However, I hope that the hon. Gentleman does not use that as a way of diminishing the importance of the work that we are doing as we go forward with those specific measures of simplification. He will know that we have a large ambition for simplification. That was set out in the welfare Green Paper that we published some 18 months ago. I think that he would accept that that Green Paper sets out bold, long-term ambitions for reform of the welfare system.

We talk about reform of the system. The Minister makes the point that it is an ongoing, laborious process, but excitement has been generated outside this place, and even on our own side, about the review led by the Minister for Employment and Welfare Reform, in conjunction with Mr. David Freud, as announced by the Secretary of State in December. It would be useful if the Minister shed some light on when that report will be published, because it is pertinent to the debate.

I have no doubt whatsoever that the report will stimulate much debate, as the hon. Gentleman says. We said that we expected it to be published early in the new year, which is round about where we are now, so hopefully he should not have to wait too much longer.

Both hon. Gentlemen made points about lone parents. It is right that we need to make more progress on assisting lone parents into work because that helps us to secure further reductions in poverty. The employment rate for lone parents has increased by 11 per cent. since 1997 and the number of lone parents who are benefit claimants has declined by 230,000.

The hon. Member for Bury St. Edmunds was right to point out that there needs to be a carrot. The issue is broader than levels of benefit, because it embraces the structure of the tax system and a requirement for a substantial extension in the number of child care places. He is right that we need to consider the matter comprehensively, which is why our measures respond in all respects, including the extension of child care places, which have greatly assisted many lone parents to choose to move off benefits and go back into work.

The orders provide more than £3.5 billion of additional support: £2.48 billion to pensioners, of which £300 million is above inflation; £16 million to children, of which £7 million is above inflation; £560 million to disabled people and carers; and £520 million to people of working age. The uprating order contributes to our overall programme of reform to the welfare system, which involves linking rights with responsibilities during working lives and providing the opportunity for all to build a decent income in retirement.

We announced last year that we would continue our commitment to uprate the pension credit minimum guarantee by earnings rather than prices, so this year’s uprating order will take us another step away from the extent of pensioner poverty that we inherited in 1997. Through measures including pension credit, the state second pension and above-inflation increases in the basic state pension, we have lifted 1 million pensioners out of relative poverty and established a more equitable system. The uprating order continues that progress. It will lock in the progress we have made on eliminating pensioner poverty and ensure that the poorest pensioners share in the rising prosperity of our nation.

As we look to the long term, we face the challenge of profound social and demographic change. In the next 50 years, the number of people over pension age will increase by more than half. If the system were left unchanged, there would be only two people in work for every one in retirement, as opposed to four at present. The measures that we are taking forward in the Pensions Bill will set in place a historic settlement that will meet these long term challenges.

Let me turn to the aspects of the orders that deal with working-age benefits. Since 1997, we have taken forward a series of reforms to enable people to escape poverty and fulfil their potential by coming off benefit and moving into work. As a result, there are now over 2.5 million more people in work and about 900,000 fewer on out-of-work benefits. Since 1997, we have lifted 1.8 million children out of absolute poverty and almost 700,000 out of relative poverty. We have a historic target of halving child poverty by 2010, and if we are going to achieve that, we will need to renew our efforts.

We want to ensure that children have the best start not just because that is morally right, but because we recognise that individuals’ outcomes are often determined by their experiences in earlier life. From April, the poorest children will thus receive £64 a week through child benefit and child tax credit—in 1997, they received only £28. We will again uprate maternity allowance and statutory maternity pay by earnings and we will significantly extend the length of coverage over the course of this Parliament. Furthermore, because we know that the last months of pregnancy and the first months following a birth are associated with additional costs, mothers will be eligible for child benefit from the 29th week of their pregnancy from 2009. That will mean up to an extra £200 for the first child and an extra £130 for subsequent children.

Ultimately, work is the surest way for families to escape poverty and give their children the best start. It is the only way to meet the challenges of an ageing and increasingly globalised society. That was why we began the new deal, which has helped hundreds of thousands of people to get off benefits and back into work. It was why we invested heavily in creating Jobcentre Plus, which has provided an integrated service for people who need support and help in finding employment. It was also why we introduced the national minimum wage and tax credits, which gave people the unambiguous message that they would be better off in work than on benefits. With the orders, we are keen to build on that success by enabling and empowering people to fulfil their potential and ambitions, rather than consigning them to a lifetime on benefits. Our Welfare Reform Bill sets out aspirations for an 80 per cent. employment rate. That would mean a million fewer people claiming incapacity benefit, a million more older people in work and an extra 300,000 lone parents off benefit.

The uprating order further delivers on our promises to help those who need it most, to support families and to tackle the poverty suffered by pensioners and children wherever it occurs. However, we see the right to work as fundamental to tackling poverty and building aspiration, so we are supporting more people to find work, including people on incapacity benefit, lone parents and older people who want to return to, or remain in, the work force. The orders will assist that, so I commend them to the House.

Question put and agreed to.

Resolved,

That the draft Social Security Benefits Up-rating Order 2007, which was laid before this House on 24th January, be approved.

PENSIONS

Resolved,

That the draft Guaranteed Minimum Pensions Increase Order 2007, which was laid before this House on 24th January, be approved.—[James Purnell.]