I am grateful for the opportunity to speak about the winter fuel allowance, especially at such an appropriate time, given that the Government set out their policy on it in last week’s Budget. As we have extra time, I am happy for my hon. Friend the Member for North-West Leicestershire (David Taylor) to take part in the debate. The winter fuel allowance administration centre is in his constituency.

Context is all-important when discussing the payment. Account must be taken of factors such as energy prices, inflation and the history of the allowance, and some of the criticisms of last week’s Budget show a lack of appreciation of that. As I am sure my hon. and learned Friend the Minister will emphasise, there would be no winter fuel allowance if it had not been introduced by the Labour Government in 1997. When it was introduced it was £20, but from next winter the basic rate will be £250 and the higher rate will be up to £400. In the light of that, some criticisms that I have read are reminiscent of the People’s Front of Judea—or should I say the Judean People’s Front?—wondering what the Romans, or in this case the Government, have ever done for us.

It is important to recognise the Government’s efforts to tackle fuel poverty. I welcome the recent increases in the winter fuel allowance. The Opposition talk about a revenue-neutral Budget—incidentally, when that is coupled with deterrent taxation, it inevitably means cuts to services—and the shadow Chancellor will not commit to even a one-off increase in the winter fuel allowance, so I know that people in my constituency are far better off under this Labour Government.

The payment operates against the backdrop of the cost of energy. It is interesting to note that this year’s increases have taken prices in real terms to the levels of the 1980s. There was no hint of assistance at that time from the incumbent Conservatives, which was no doubt one reason why 6.5 million households were in fuel poverty when Labour came to power in 1997. Furthermore, that situation had come about after a fall in energy prices that was more than three times the size of the reduction between 1997 and 2004. In the light of that, the Opposition’s claim that progress on eliminating fuel poverty has been down to even cheaper prices beggars belief. In Scotland, the Scottish National party is failing vulnerable groups, such as disabled children, and, with its planning policy it is tying Scotland’s future to the fluctuation of carbon prices, so my comments on the winter fuel allowance are made in recognition of the fact that the Government have done more than any other party on this front.

Will the hon. Gentleman give way?

No, I will not. I am sorry.

Of course, we are in Parliament and in government not simply to be better than the alternative, but to improve people’s lives, meet their aspirations and bring about our vision of a fairer society. One aspect of that is our target to end fuel poverty among vulnerable groups by 2010, and completely by 2016.

Before 1997, fuel poverty—which is defined as when a person pays more than 10 per cent. of their income on heating their home—had deliberately not been identified as something the Government should be worried about. In 2004, owing to a combination of declining retail prices and substantial Government assistance, 4.5 million homes had been lifted out of fuel poverty. However, with the winter fuel allowance remaining static and with steep increases in energy prices, the trend has unfortunately been reversed. By the end of last year, about 2 million households had fallen back into fuel poverty, taking the total to 4 million before the recent rises.

Since December last year, all but one of the six major energy providers have imposed double-digit increases averaging about 15 per cent. The starting gun was fired by npower with a 17 per cent. increase in the price of gas, the main source of heating in the United Kingdom. It was followed by EDF and British Gas, within three days of each other, and by Scottish Power and E.ON within a week of each other. I echo the concern of Energywatch, which has observed that while citing different rises in wholesale costs, with a £1,000 energy bill the major players come within £13 of each other. What a remarkable coincidence. Inquiries into the market by both Ofgem and the Business, Enterprise and Regulatory Reform Committee are welcome, and I look forward to the results.

It is important to note that while the energy companies have blamed increasing wholesale prices for the price rises, their own profits have rocketed. British Gas recently announced that its profits had risen by 500 per cent. That, in my view, reflects the fact that the motivation behind companies’ actions is profit. They are a front for investment, and they are not in business with a moral mission. We need to ask why they have nevertheless been given a free rein with customers. I hope that the lesson from this is not lost on the Government, given the Chancellor’s threat of legislation if energy providers fail to increase spending on social tariffs.

As for this year’s price increases, the Department for Business, Enterprise and Regulatory Reform estimates that for every 1 per cent. rise, 40,000 people are pushed into fuel poverty. The recent price hikes will therefore have pushed at least half a million more homes into fuel poverty, which means that the figure was about 4.5 million before last week’s Budget.

Does my hon. Friend agree that one of the prime reasons for the excessive price increases of recent months is that the market has moved on from the post-privatisation position, when the number of companies was in the teens? As a result of mergers and acquisitions, a mere handful now operate in an oligopolistic fashion, driving prices up to a higher level than the market would generate. Does my hon. Friend hope that our hon. and learned Friend the Minister will ask the Minister for Energy for an investigation of the apparent market failure?

My hon. Friend is right. During the Committee stage of the Energy Bill we took evidence from the various companies, and I posed a similar question to them. They assured me that that could not possibly happen, and that the increases were due to external forces and nothing to do with profits. That was at the time they were telling us about the 500 per cent. increase in profits. I am sure that that will not have been lost on the Minister for Energy, because he was present during the evidence sessions, and I think that some of the things the Chancellor said last week might have something to do with it. It is important for us to keep tabs on those companies. They seem to be getting their money awfully easily nowadays, and they are certainly not contributing enough to look after those who need to be looked after the most.

I must ask you to excuse my bad throat, Mr. Deputy Speaker. I was at a football match yesterday, and I did a bit more shouting than usual.

I wrote to the Chancellor in February asking for double the increase that he eventually announced. I want to focus on the current amount of the payment, and also to take this opportunity to urge the Chancellor, and the Minister, to consolidate the additions and not to leave them as a one-off with an uncertain future.

The basic rate for 60 to 79-year-olds was raised by £50, from £200 to £250, while the payment for those over 80 was raised from £300 to £400. Those increases were the first since the introduction of the higher rate in 2003 and the first change in the £200 rate since 2001. As a proportion of the payment, they represent an additional 25 and 33 per cent. respectively. One immediate question I wish to ask the Minister is why there is that discrepancy, with the majority of claimants, at a ratio of 3:1, being paid at the lower rate.

Over the same period that saw increases of 25 and 33 per cent. in the allowance, based on figures from both the Department for Business, Enterprise and Regulatory Reform and British Gas, energy bills in real terms have gone up by 50 per cent. That would mean a significant shortfall of itself, but there is a far greater deficit. The retail prices index, against which energy bills are measured, shows inflation of around 18 per cent. since 2001, and 14 per cent. since 2003. That would mean real-terms increases of around 7 per cent. and 19 per cent. for the winter fuel allowance against 50 per cent. for energy bills. Perhaps the Minister could confirm that the calculations that I have done are correct.

My hon. Friend refers to the desirability of consolidation of the basic allowances, rather than a one-off payment. I think that most people would agree with that, but others might argue that it would be better still to incorporate the amounts into the basic pension entitlement, so that payment becomes part of that from here on in. Half the amount could be paid at the start of winter, on 1 December, and half the amount at the end of winter, the end of February. That approach would commend itself, and indeed higher amounts could be paid to recognise the fact that better-off pensioners would pay tax on the sums that they receive.

I thank my hon. Friend for that intervention. I will touch on that matter at the end of my speech. I do not necessarily come to the same conclusion, but I do come to a conclusion, and I hope that the Minister will comment on my suggestion.

By the measure that I have outlined, the Government have a long way to go simply to get back to the stage we were at four years ago when 2 million homes were in fuel poverty. Roughly 600,000 of those were pensioners and I believe that, on the figures I have outlined, a far greater number will be in fuel poverty next winter.

I have no doubt that the Minister will rightly want to point out that the winter fuel allowance is not the only tool the Government use to tackle fuel poverty. Warm Deal, for instance, or Warm Front for those living in England, has helped more than 1 million homes at a cost of £1.4 billion. As he will be aware, however, that is available to more numerous groups than the winter fuel payment, such as those on certain income-related benefits or disability living allowance. Therefore, it is not directly comparable to the allowance figures. I ask the Minister, if he does cite Warm Deal as helping in that regard, how many of those it has helped are pensioners.

In answer to a written question from the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on the proportion of a pensioner’s bills which the payment would cover, the Minister said in Hansard on 6 December 2007, at column 1512W, that pensioners' incomes had grown by 29 per cent. in real terms between 1996 and 2005. If we take the state pension from 2001 and 2003, the more significant dates in examining the recent Budget increase, they have increased by 21 and 25 per cent. respectively, so only 3 and 11 per cent. in real terms. That, once again, means that there is a large deficit in the rate at which pensioners' incomes have increased, even with the winter fuel payment, in comparison with the 50 per cent. rise in energy bills.

As with the Warm Deal scheme, I should point out that any comparison between the state pension and the allowance will be inexact because entitlements to them are not co-extensive. Moreover, with food prices—another staple for pensioners—having increased by 6 per cent. this year, energy bills are not the only burgeoning demand on their finances.

The trend in fuel poverty has been going in the wrong direction for the past few years and because the payment has remained static, for the next winter pensioners will be far worse off than seven years ago. If we are serious about eradicating fuel poverty, there is clearly a need for the winter fuel allowance to be directly linked to fuel prices by some mechanism. The tragedy of the situation is summed up by the fact that we collate a statistic entitled “the excess winter death figure”, which stood at just under 24,000 for 2006. If the Government can afford to double the allowance for inheritance tax, I humbly submit that we can find the money to prevent pensioners from freezing in their own home.

The final issue I wish to discuss is entitlement to the allowance. All people over 60 are entitled to receive the payment and need specifically to claim to do so. The need to claim the allowance—rather than, for instance, it being an addition to the state pension or paid directly to energy companies—significantly reduces the chance of the targeted group receiving it. From my surgeries, I know that perceived entitlement to financial help does not go hand in hand with actual entitlement to it. In particular, many pensioners I meet do not want to claim for assistance, believing that they can get by without it and should make do with what they have, or feeling that it is charity. In this context, Help the Aged estimates that about £4.5 billion in various benefits goes unclaimed by pensioners each year. All the calculations I have outlined are predicated on the assumption that there is full take-up of the allowance, so the situation is likely to be even worse than I fear.

Perhaps the rationale behind requiring a claim to be made is that that will deter those who are perfectly well off from applying for the payment simply to supplement their finances. If that is the case, will the Minister assure me that the relevant segment of the unclaimed £4.5 billion comes from the over-60s who are not in need of the allowance failing to claim it, rather than those in fuel poverty and in dire need of assistance towards their bills? Has any assessment of this been made?

This issue also highlights the fact that the winter fuel payment is indiscriminate, given that all those over 60, regardless of whether they are still in work and regardless of their resources or incomes, are entitled to receive the payment. It is bizarre that the payment is used as a blanket income supplement across the board for over-60s alone, when many vulnerable groups such as children and the disabled are equally susceptible to fuel poverty and receive no assistance at all from the allowance.

I am sure that my hon. Friend agrees that the scheme could be improved in numerous ways without great cost being incurred. One way would certainly be for those who reach the pension age of 60—or 80 for the higher level—during the winter period to be entitled to the amount, rather than having to have reached that age by the fixed date in September. In some of the correspondence I receive, that is identified as an anomaly. Does my hon. Friend get similar correspondence from pensioners?

I do, but at the end of the day we must ensure that the money goes as far as possible; I believe we have to look after all our pensioners, but that we also have to look after those with the greatest needs, and that is where I would like the money to go.

The point about identifying those whom we need to support also applies to social tariffs. In a briefing from British Gas, the company mentioned

“the huge wasted effort from searching for eligible customers”

for their scheme. The Government, however, collect such data for tax purposes and I suggest that a more targeted approach would save money and help those most in need, and, if operated in conjunction with energy providers, this identification could be carried out and they could be engaged with social tariffs. I see no reason why the cost of this should not be met out of their incredible earnings and obscene profits.

One further change that I urge the Minister to consider is the direct payment of the allowance to the provider as part of that, so as to remove the problem of unclaimed funds. While I recognise the need to be flexible and respond to how individuals want to receive the support, the issue of unclaimed benefits can undermine all of our efforts.

These proposals involve a recasting of the winter fuel allowance into something that lives up to its name. At the moment, there is no link to fuel prices, the allowance is limited to the over-60s and there is a blanket entitlement to receive it, so a more appropriate description would be the over-60s income supplement—a point alluded to by my hon. Friend the Member for North-West Leicestershire. Although there is no problem with having such a measure, if the purpose is to alleviate fuel poverty, a far more nuanced and targeted approach is surely called for.

At this point, I shall mention vulnerable groups such as the disabled and children, many of whom live in fuel poverty. I receive a great deal of correspondence about their plight, and I urge the Minister to expand the allowance as part of the overall drive to eradicate poverty.

I conclude by declaring a vested interest. My constituency has one of the highest percentages of pensioners in the country. It is one of the colder areas of the UK, and more than 15,000 of my constituents claim the winter fuel allowance. I hope that my hon. and learned Friend will take on board the points that I have made on their behalf. I reiterate that we can discuss increasing, extending and modifying the payment, and discuss fuel poverty’s being an issue, only because of a Labour Government. I recognise the steps that we have taken, but with people set to die from cold-related illnesses next winter and energy companies pocketing billions of pounds in profits, this is clearly an issue on which we must do more.

I congratulate my hon. Friend the Member for Glasgow, North-West (John Robertson) on initiating this debate. This is an enormously important issue for hundreds of thousands of pensioners throughout the country—in my constituency, as well as his.

The Government have done more for older people than any other. In the past 10 years, we have lifted more than 1 million pensioners out of relative poverty. Relative pensioner poverty has fallen by a third since 1997, and we have broken the adage that being old means being poor. These days, people are no more likely to be poor if they are old than if they belong to another social category. We have banished the memories of the previous Conservative Government, under whom the poorest scraped a living on—imagine this—under £69 a week. By way of contrast, this year the poorest third of pensioners will, on average, be £2,100 better off than if we had continued with the previous Conservative policies.

We have achieved this through targeted support to provide security in retirement. This amounts to £11.5 billion a year more than was spent on pensioners in 1997. We are right to be proud of our achievements, but there is more that we need to do. We want to ensure that pensioners claim all the benefits to which they are entitled. I wrote to Members of this House three weeks ago outlining some of the measures that we are taking to simplify application procedures, and informing them how they can get their older constituents to claim the various benefits available to them. A lot of pensioners are still not claiming sufficient benefits. The money is there, we are waiting to pay it and we need those applications to come in.

Does my hon. and learned Friend not accept that in the days when we had pension books, every pensioner knew that they had to have such a book, and so we could get information to them? Nowadays, we do not have such a facility, but there has to be a way that we can contact every pensioner; otherwise, we will have the same problem with a lack of uptake.

We can actually get to every pensioner; the problem is getting those pensioners to whom we can get to recognise that if they are on a low income, they can apply for further benefits. In the past 18 months, we have written in some instances up to four times to people whom we think may be entitled to claim the pension credit, help with their council tax and perhaps housing benefit in respect of their social housing rent. Many of them are not responding. We know their addresses and can write to pensioners, but it is getting the response that is sometimes the problem. We are trying to encourage working with partner organisations and the Pension Service to get more pensioners to claim the benefits. Tackling broad poverty is crucial, but, as my hon. Friend says, we must go further.

It being Ten o’clock, the motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. David.]

It is vital that pensioners can keep their heating on, secure in the knowledge that they can pay their fuel bills. The key to dealing with pensioner fuel poverty is therefore ensuring that pensioners have sufficient money to pay those bills. That was why we introduced the winter fuel payment in 1997—the first ever support targeted to help pensioners with their heating costs. It currently helps more than 8.5 million households, and nearly 12 million people. It has taken us away from the cold, dark days of the last Conservative Government, when freezing pensioners were offered minimal support to stay warm. Instead, Health Ministers went around telling pensioners to buy long johns and woolly nightcaps if they wanted to stay warm in winter.

We have moved on since then. Back in 1995, just £65 million was spent on cold weather payments for the vulnerable. Last winter we spent more than £2 billion on winter fuel payments. Today, the debate is not about whether we should give pensioners help with heating costs, but about how much more help we should give. In the past decade the winter fuel payment has risen tenfold, and stood at £200 for the over-60s and £300 for those over 80 last winter.

But we are not complacent. Last year we launched a cross-Government strategy to target the most vulnerable and to ensure that everyone can keep warm and keep well in winter. It brings together the priorities of my Department with those of the Department of Health, the Department for Business, Enterprise and Regulatory Reform, and other agencies to provide a one-stop shop for help and advice on keeping warm and obtaining benefits. Schemes such as Warm Front, which my hon. Friend mentioned, have helped more than 2 million low-income households to improve their energy efficiency, through better heating or insulation. In fact, every minute of the working day, a home receives a new heating system as a result of the scheme.

As the Chancellor announced last week, we expect energy companies to increase their support to the vulnerable. In particular, we want a fairer deal for the 5 million customers on prepayment meters. Energy companies currently spend about £50 million a year on social tariffs. We want to see that treble to at least £150 million a year in the period ahead. We want to work with the energy companies, but we will take any necessary steps—I say this very clearly—to ensure that that happens.

I welcome the announcement last week by my right hon. Friend the Chancellor that we will provide an additional payment of £50 for the over-60s and £100 for the over-80s, to sit alongside the winter fuel payment. That vital extra support underlines our commitment to tackling pensioner fuel poverty. It shows that the Government can react quickly to changing fuel prices, and it will ensure that the winter fuel payment continues to provide a significant contribution to winter fuel bills, providing an extra £575 million and benefiting nearly 12 million individuals. Pensioners can therefore heat their homes with more confidence next winter. It sits alongside measures announced last year that will take a further 600,000 pensioners out of paying income tax. I hope that those positive measures will be widely welcomed in the House. They provide significant extra support to our older citizens.

The generous payments that we have already put in place have, to some extent, been affected by increasing fuel prices. Back in 1997, we were getting the benefits of North sea oil and gas, and there were quite considerable beneficial changes in the world energy market. The result was that during the late ’90s and the early part of this century, fuel prices were lower than earlier in the ’90s. The benefits from the winter fuel payments were therefore considerable.

In the past two or three years, we have seen that some of the benefits from North sea oil have been eroded, because much of the energy it supplies has been used. It will be around for many years to come, but the easily accessible oil and gas reserves in the North sea have now been exploited. Some of the new areas will be more difficult, and therefore more expensive, to access.

We have also seen changes in the international fuel market, with extra demand coming from China, India and several other sources. The world price of energy has therefore risen, just at the point when we have to import more energy than ever before. I well remember that, when I was the Minister with responsibility for energy, I signed the agreement with Norway that would bring about a fifth of our gas from the Norwegian gas fields into Scotland through the Langeled pipeline. That is very beneficial, but we are now much more subject to world fuel prices than we were only seven or eight years ago. The result is that our fuel prices are rising, and that is having an impact on pensioners’ budgets.

Does my hon. Friend and parliamentary neighbour agree with those observers who remark that it is easier for a smaller number—now five—of major energy companies to form an unofficial cartel to hold prices at higher levels than they should be, or to push them to levels that the market does not dictate? Would not that be worth investigating? Many observers think that it should be investigated.

Ofgem is there precisely to ensure that such a situation does not arise. The aim of setting up a regulator such as Ofgem is so that it can ensure that the market is operating properly and the interests of the consumer are paid due attention. My hon. Friend suggests that the consumer comes off worst, but Ofgem—an independent regulator proud of its independence—is aware that, especially at a time of fast-rising fuel prices, we need to ensure that energy companies are responding to the concerns of their customers and operating the best competitive market. We rely to some extent on Ofgem to carry out its regulatory and policing activities to ensure that the consumer is protected.

To back up the point made by my hon. Friend the Member for North-West Leicestershire, the difference in price between the dearest and cheapest energy suppliers is only 1.3 per cent. Is that likely to happen if we are in a competitive market?

That depends on whether they are competing at the lowest possible price. If they are, that might well happen. It does not necessarily mean that the market is not working effectively. It is possible that several companies are competing with each other and offering similar low price levels. However, if the prices were not low, but were agreed in some way, that would be improper and a matter that we would expect the regulators to address. Certainly, my hon. Friend the Minister for Energy has indicated that we are keeping a close eye on these issues, to ensure that the energy companies are operating fairly within the market. The extra payment promised by the Chancellor will mean that the winter fuel payment for those over 60, including the £50 top-up, will total £250 next winter. That is a 25 per cent. rise on last year. For those over 80, the winter fuel payment and the £100 additional payment will total £400, a rise of one third on last year.

Last year, the winter fuel payment covered more than half of the average winter fuel bill. Next year, with rises of £50 and £100, the winter fuel payment will continue to make a significant contribution to pensioners’ winter fuel bills. It is difficult to give a precise figure because we do not know precisely what the winter fuel bills will be. These measures will, I hope, ensure that many more pensioners can keep their homes warm, safe in the knowledge that they can meet their fuel bills.

My hon. Friend the Member for Glasgow, North-West suggested that we should extend the winter fuel payment to other groups. We provide a range of benefits to meet different people’s needs and we have a series of benefits in place that are designed to help people who are terminally ill, cannot work or are in need of further help from the state. Older people are particularly vulnerable to the effects of cold weather during winter months. That is why we created the winter fuel payments. They give pensioners the reassurance that they can afford to heat their homes.

Other groups also have issues, such as the disabled. However, 60 per cent. of those who receive disability living allowance or attendance allowance are over 60 and already receive winter fuel payments automatically. The extra heating needs of children with disabilities arise throughout the year, not just in the winter months. The disability living allowance is worth £109.50 and will increase to £113.75 from April this year, while the poorest are entitled to some extra help through the disability premium in income-related benefits.

My hon. Friend wanted to know whether it would be possible to reconsider the issue of having two bands, one for those over 60 and one for those over 80. He suggested that it might be possible to have a more targeted, nuanced payment system and drew attention to the fact that some people on relatively high incomes also receive the supplement. We could do various things to change all that. For example, we could take the view that those on higher incomes would be taxed on their winter fuel payment. We could take the view that people on higher incomes would not receive a winter fuel payment and that we would only perhaps allocate it to those who were on pension credit.

There are all sorts of things that the Government could do to change, alter and redirect the payments. We considered all that and took the view that there was an expectation among pensioners that we would make winter fuel payments to them as we did in the past and as the Government had committed to do in their election manifestos, and that we ought to continue to do that. If there needs to be a debate about changes to the system, let us have a debate by all means. At the moment, the Government’s view is that we have made commitments on winter fuel payments and we want to keep to them.

The two age-related bands make the system easier for people to understand and help older people plan ahead secure in the knowledge of the contribution they will receive towards their winter fuel bill. The current age split takes account of the fact that older pensioners over 80 are more likely to live alone or in less energy efficient homes. They are more likely to have a lower income than recently retired people. People over 80 are less likely to have well-paying final salary pension schemes. Many of those who are retiring now will have good quality final salary pension schemes, although not all of them will. People over 80 tend to spend a higher proportion of their income on fuel. Our view has been that there is a strong argument for making payments to those over 80. Of course, those older pensioners are also likely to be most vulnerable to not sensing that they are getting cold and are the most likely to fall victim to hypothermia. There is an argument for ensuring that we keep things simple while recognising that the over-80s deserve an extra payment.

My hon. Friend has made a powerful argument, and I congratulate him on raising the issues, which do call for a wider debate. The Government are committed to tackling pensioner poverty, including fuel poverty. We have made considerable progress in the past decade, with pensioner poverty falling significantly. The winter fuel payment is an important part of our strategy; we know that our cold winters affect older people more than the rest of the population. The winter fuel payment provides a guaranteed payment to all older people. It is an important contribution towards household fuel bills.

The extra money announced by the Chancellor last week will ensure that the winter fuel payment continues to make a significant contribution to pensioners’ winter fuel bills next year; it is a generous extra payment, keeping pace with changes in the market. That will give older people the confidence to continue to keep their home warm, and hopefully it will keep many more of them alive. We hope that that will be the outcome of the changes that we have made.

It can always be argued that the Government could pay more and do more, but of course they have to ensure that they balance the various demands for public expenditure. However, pensioners were rightly a high priority in the Budget last week. As Minister with responsibility for pensions, I am pleased that the Chancellor listened to representations, not only from me but from people such as my hon. Friends the Members for North-West Leicestershire (David Taylor) and for Glasgow, North-West, on the need to consider, and respond to, the issue of rising winter fuel bills. The Chancellor did so by increasing the amounts that will be paid next winter. I am glad that that was done, and I hope that pensioners will feel the benefit of it.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Ten o’clock.