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Benefits Uprating

Volume 485: debated on Thursday 11 December 2008

With permission, Mr. Deputy Speaker, I wish to make a statement on benefits uprating, particularly in the context of the Government’s commitment to provide real support to people in the current economic climate. I will, as usual, place full details of the uprating in the Vote Office and arrange for the figures to be published in the Official Report.

As in previous years, I can confirm that most national insurance benefits will rise by September’s retail prices index, which is up by 5 per cent. Most income-related benefits will be uprated by September’s Rossi index, which is RPI less housing costs, and is up by 6.3 per cent.

We are not alone in experiencing the shock waves reverberating through the world’s economic systems. Effects emanating from the epicentre of the American banking system are being felt around the globe. We believe that when the economic situation is more difficult, people need all the help they can get to deal with the situation. When things get tougher, people need more help, which is why our response to the current climate is twofold.

We are not only focusing on providing immediate support for those who lose their jobs; we are also determined to continue with our radical programme of welfare reform, to ensure that those further away from the labour market are not forgotten, as they have been in the past. As my right hon. Friend the Secretary of State for Work and Pensions made clear yesterday in his statement to the House, we are not going to repeat the mistakes of the past. During the recessions of the ’80s and ’90s, hundreds of thousands were shuffled on to inactive benefits to keep the unemployment count down. They were trapped there without support, and abandoned. In contrast, we are investing an extra £1.3 billion in helping people to find work now, and we are bringing forward proposals to increase requirements on people the longer they are out of a job, to ensure that they do not fall out of touch with the world of work.

We believe that work is the best welfare, and we are committed to ensuring that everyone has the opportunity to improve their prospects and those of their families. The proposals in our White Paper are based on the simple ideas that no one should be left behind, and that virtually everyone should be required to take up the support that we know works, to help them to prepare for and look for work. But we recognise that, for those who are receiving benefits, we need to uprate the value of this safety net to reflect changes in the cost of living.

We propose, therefore, that most working-age income-related benefits will increase in line with the Rossi index, at 6.3 per cent. This means, for example, that the personal allowance for a single person over the age of 25 will increase from £60.50 a week to £64.30 a week. The amount for a couple will increase from £94.95 to £100.95. Child-related allowances that may be payable in the income-related benefits will be increased in parallel with child tax credit rates by almost 7 per cent., from £52.59 to £56.11. This is essential to ensure that families receiving these benefits see the full value of any increase in child tax credit. We have already announced in the pre-Budget report that we are bringing forward April’s increase in child benefit to January. This will be worth an additional £22, on average, to families. The standard rate of statutory maternity pay and maternity allowance will increase in line with prices by 5 per cent., from £117.18 to £123.06.

In April 2009, incapacity benefit will be uprated by the same index as the employment and support allowance—the Rossi index, instead of the retail prices index—in order to prevent rate differences widening over time. No incapacity benefit customers with age additions will, as we proposed in the welfare reform Green Paper, have their rates frozen. Instead, the cash increase in their overall benefit will be at least half of Rossi, until they are transferred to the employment and support allowance. The additions will therefore be phased out more gradually than previously planned. Incapacity benefit claimants with an age addition, including those formerly on invalidity benefit, will not receive less than £95.15 a week—the same as someone in the support group on contributory employment and support allowance.

In these difficult times, we must also continue our strategy of providing support for all, and more for those who need it most. This means that for older people, as my right hon. Friend the Chancellor announced recently, from April 2009, the basic state pension will increase to £95.25 per week, which is up by £4.55. For couples, the standard rate will rise to £152.30. These increases, against a backdrop of falling inflation, are in line with the highest level of inflation this year—5 per cent.—and represent a real-terms rise in the state pension of 7 per cent. since 1997. And for pensioners on the lowest incomes, from April 2009 we will see the biggest increase in the pension credit guarantee since its introduction in 2003. The standard minimum guarantee will rise from next April by £5.95 a week for single pensioners and £9.10 for couples. That means that from April next year, no single pensioner need live on less than £130 a week, and no couple on less than £198.45 a week. That is an increase of £31 for a single pensioner and £45 for couples since 1997.

This above-earnings increase in the guarantee credit underlines our ongoing determination to tackle pensioner poverty, with 900,000 pensioners lifted out of relatively low income since 1998, after housing costs, and £13 billion more will be spent on pensioners in 2008-09, compared with what would have been spent if we had continued the policies that we inherited in 1997, over half of which is going on the poorest third of pensioners. Tax and benefit changes will mean that the poorest one third of pensioner households will be on average £2,100 a year, or about £40 per week, better off in 2008-09 than under the 1997 system.

But of course, the Government recognise the difficulties that pensioners face when prices increase. That is why, alongside the winter fuel payment, which is worth £200 for those aged 60 to 79 and £300 for those aged 80 or over, this winter there will be additional payments of £50 for those aged 60 to 79 and £100 for households with someone aged 80 and over. This will take the total direct help with fuel costs for pensioners this year to £250 for those aged between 60 and 79 and £400 for those aged 80 or over.

The pre-Budget report also announced additional direct financial support in the form of a £60 payment that will benefit not just pensioners, but all the estimated 15 million people who receive the Christmas bonus. This will take the total value of the Christmas bonus this year to £70, and is equivalent to bringing forward the uprating of the state pension from April 2009 to January 2009.

All these measures demonstrate the Government’s commitment to supporting pensioners, just as we are also committed to increasing the support on offer for those of working age. Our new proposals for lone parents and disabled people, for partners and for those facing multiple barriers to work, build on the steps that we have taken over the past 10 years to bring the advantages of an active, responsive welfare state to all those who can benefit. Today’s uprating continues our progress towards a fair and inclusive society that offers opportunity and independence for all. It reinforces our commitments to tackle poverty and exclusion and to ensure security in retirement. I commend this statement to the House.

I begin by thanking the Minister for his usual courtesy in letting me have sight of his statement in advance.

The Conservatives support the uprating of benefits. Anything that will help hard-pressed individuals and families at this difficult time is welcome, especially as this Government’s own policies have contributed so much to the economic downturn and to its likely duration and severity. Every day brings new job losses, including the extremely bad news from Woolworths only yesterday. Will the Minister share with the House his projections for unemployment levels over the next 12 months? I also wonder whether he has an up-to-date figure for the amounts paid out by his Department due to fraud and error. On welfare reform, the Minister knows that he will have our support, if the Government are really serious about tackling these hugely important issues.

We welcome the increase in the state pension, which will then be worth, as we have heard, £95.25 a week and £152.30 for a couple. Perhaps the Minister will join me in pointing out to the leader of the Liberal Democrats that it is not £30 a week. Will the Minister tell us exactly when the Government intend to restore the link with earnings for the state pension?

We know that £5 billion of benefits go unclaimed by pensioners every year, so what are the Government doing to increase take-up? About 40 per cent. of those entitled to council tax benefit do not claim it, and 1.8 million are not claiming pension credit. Will the Minister restore the boosting of take-up as a departmental priority? The Government’s decision to reduce the period of backdating from 12 to three months for pension credit claims suggests that they are more interested in saving money than in increasing take-up. Will the Minister confirm that at least 110,000 pensioners will be adversely affected by that change, and that they will tend to be older pensioners?

There are already 2.5 million pensioners living in poverty in this country, so how are the Government going to tackle that disgraceful state of affairs? We naturally welcome the extra £60 and so forth, but does that really tackle the problems faced daily by our older citizens? Help the Aged describes the pre-Budget report as

“a truly skinflint package for the UK’s older citizens. The chilling message from the Chancellor is ‘keep struggling’”.

Age Concern said of the same report that it

“will still leave many of the oldest and poorest pensioners…paying the price for the economic downturn.”

Falling interest rates may be popular with some people—indeed, with many people—but there is one section of the population for whom they are really bad news. Does the Minister recognise that many pensioners are facing real hardship because their hard-won savings are now attracting very low interest? Now there is talk about interest rates reaching even zero. We are talking about people who have done the right thing, and what successive Governments told them to do: they saved during their working lives so that their savings could supplement their income in retirement. To add insult to injury, those with modest savings are assumed to earn 10 per cent. on their savings when it comes to eligibility for pension credit. In these times of falling interest rates, that is surely total nonsense. I am sure that pensioners would love to get 10 per cent. on their savings, but in Brown’s bankrupt Britain, that idea is pure fantasy. Will the Minister please undertake to approach the Treasury as a matter of urgency to right this wrong?

Will the Minister confirm that he is wholly confident that the new personal accounts system will begin on schedule in 2012, and that it will definitely come in at or below a 0.5 per cent. cost base? Is he confident that the crucial issue of the relationship with means-tested benefits will be addressed in good time so that we do not have hundreds of thousands of people who are no better off, or worse off, as a result of being auto-enrolled into personal accounts?

Will the right hon. Gentleman tell the House what the Government intend to do in respect of deregulatory measures to encourage defined-benefit provision? Is there an intention to add any such measures to the welfare reform Bill?

This Government have presided over the closure of more than 70,000 occupational pension schemes since 1997, yet we know such schemes are likely to provide a significantly more comfortable retirement than personal accounts ever will? Why have the Government given up on final salary schemes?

The Prime Minister may think that he is saving the world, but is it not high time he got round to repairing our broken society?

I will ignore the politicking in the hon. Gentleman’s comments, as I usually do—not least his last throwaway point about a broken society, which is, of course, absolute nonsense, but I do not have time to go into that now. I thank the hon. Gentleman for his usual courtesies, and for broadly supporting the uprating. Let me deal in turn with some of the points that he raised.

I have said, until I am—I was going to say “blue in the face”, and I shall stick to that, as I do not know what the Labour equivalent is. I have said until I am blue in the face that I am not Mystic Meg, and that it is not my job to forecast what unemployment may or may not be as the months progress. Rather, it is my job to ensure that Jobcentre Plus and all other aspects of the Department for Work and Pensions’ offer are there for people when they need them—sometimes before and sometimes after they lose their jobs. The hon. Gentleman will know that we look into what we can or cannot do on an almost monthly basis.

I take the hon. Gentleman’s point about Woolworths, but let us be clear that it is not closing down shops and losing jobs at the moment. There has been an apparent lack of success with the administrator. Since Woolworths first went into administration, we are, and have been, talking with Deloitte and we stand ready to help as much as we can on a regional and local basis if the worst prevails—but it has not, yet. As I said some weeks ago when the news was first announced, we should not discount the 27,000 jobs that are currently in the mix.

I also take very seriously the hon. Gentleman’s point about fraud and error. Notwithstanding the fact that losses due to those two have gone down by about £100 million over the last period, some £2.6 billion remains variously attributable to them. About one third is caused by customer error, one third by benefit error on the DWP side, and one third by fraud. I welcome all the help and support that the hon. Gentleman and local agencies of whatever persuasion can make to drive that down.

With the best will in the world, I am not going to get into the issues around the fixation of the right hon. Member for Sheffield, Hallam (Mr. Clegg) with the figure 30. That is not my business at all.

I do not think that the points made by the hon. Member for Eastbourne (Mr. Waterson) about the link between pensions and earnings stand up to much scrutiny. Current rates and increases are significantly better than they would be by simply establishing the link—but I think that the hon. Gentleman would concede that the link was broken by the last Conservative Government rather than by any other.

The hon. Gentleman’s points about take-up were well made. He may not have noticed, but we have made that absolutely central to what I am trying to achieve with colleagues on London child poverty. Take-up is part of that process, and boosting it is one of the quickest ways of dealing with poverty, whether at child or pensioner level: it helps to restore the balance and get people back on the path out of poverty. I welcome the hon. Gentleman’s support in that regard.

I also take seriously the broad point about pensioners and savings, and I will happily raise the issue with my right hon. Friend the Minister for Pensions and the Ageing Society, and report back with her to the Treasury about the House’s concerns. I would also say that pensioners in receipt of pension credit who find that their capital has decreased should report the changes to the Pension Service, which will be able to reassess their claim. That may be a shorter-term point, but the hon. Gentleman cannot get away with the notion that somehow, tariff income rules have only just been imposed by this Government. They have always been linked with income-related benefits, and pension credit disregard of savings of up to £6,000—and £10,000 for those in care homes—are still very real. The vast majority of pensioners who get pension credit—about 80 per cent.—have savings of £6,000 or less and do not have tariff income applied, but I am not belittling the point. I have said clearly that I will take the matter back to my right hon. Friend the Minister for Pensions and the Ageing Society and to the Treasury because we can and should look further into the current circumstances for savers—both for pensioners and more generally.

I, too, thank the Minister for sight of his statement. There are more than 500 people currently employed in the Woolworths office in Rochdale, which I understand from yesterday’s newspapers will be closing. What steps is the Minister’s Department taking to assist those people, with more than 70 losing their jobs last week in Castleton, for example?

We are pleased to see from the welfare reform White Paper that the Government are moving towards our policy of having a single working-age benefit in future. Although the Minister was unable to tell us the amount lost in fraud, we believe that the position will be improved by moving to such a benefit. I understand that more than £6 billion was lost last year.

The right hon. Gentleman mentioned the additional £1.3 billion for next year. How will that be spent by the Department? As he is not sure about rising unemployment, how does he think that that will pan out? If there is a need for additional resources, how will they be found?

We welcome and support increases in pension and benefits. However, we are disappointed that the right hon. Gentleman has again refused to link earnings to pensions. What will happen next year, when there may well be negative inflation, and the value of the pension will continue to be less than it was in 1950? Does he not think that now is the right time to restore that link?

The Minister should be aware that the carers allowance stops completely if anyone earns above £95 a week. Carers have the worst of all worlds. The allowance is not an income replacement, but it is an active barrier to carers being able to work. In the current economic circumstances, why has he not at least introduced a taper—but does he not accept that it would be better to have a meaningful increase of the carers allowance?

With regard to take-up, we remain concerned about the 1.8 million eligible pensioners who do not claim pension credit. The Minister must have some data now. Will he explain what has happened to the number of people claiming pension credit, in the light of the three-month backdating limit? Does he not accept that in the current economic climate, that is making life very difficult for pensioners who fall behind with their rent, for example?

Does the Minister have plans to extend the winter fuel payment to people who claim the higher rate mobility component of the disability living allowance? I am sure he would agree that that reflects the fact that their movement is limited and they have to spend more time indoors. What about people with severely disabled children, and the terminally ill?

On Woolworths, let me be clear that we have a rapid support service located in every region and district. Where there are large redundancies—defined as those involving more than 20 people—the service will engage directly and locally with Woolworths when the jobs are under threat. As I said, we are, and have been, talking to the administrator at a national level. As and when that follows through in each region and locality, the hon. Gentleman can be assured that Jobcentre Plus will work alongside the rapid response service. Where the problem is larger and has a more distinct impact on a region or area, we will grow the service response as well. He will know that we have quadrupled, from £3 million to £12 million, the central co-ordinating costs for the rapid support service.

On the hon. Gentleman’s point about the White Paper, I welcome what he says about the single benefit. We think that it is the right direction to take. However, given his genuine concern for carers, he may know that one thing buried in the White Paper is the fact that we are taking the carers allowance out of the path to a single benefit. There were concerns in the caring community that putting carers on a single benefit akin to jobseeker’s allowance would undermine what they saw as a strong job that well supported the members of their family who needed that care. We are looking at that whole notion again.

I thought that I had made it clear—I am sorry if I did not—that fraud accounts for about one third of the £2.6 billion currently lost through fraud and error. Customer error also accounts for about one third of that, as does DWP jobcentre error. We need to do all we can—I think that this will be a consensual point across the House—to eradicate that fraud and error. Much is being done. We are at least going in the right direction, but quite slowly.

The hon. Gentleman makes a perfectly valid point about the £1.3 billion. We will in due course announce how that is to be broken down, but a central part of it will be for Jobcentre Plus, given the circumstances, and some will be for employment services and intervention. We will make those announcements as soon as we can, and I will ensure that he knows when that happens. The only significant spend from that thus far has been in connection with the 60,000 additional jobs that we committed to Jobcentre Plus in the PBR.

To be fair, I do not think I said that I was not aware that unemployment might rise. Again, that is a point of consensus, whether we like it or not. It is not my job to make forecasts. The hon. Gentleman will know that forecasts are made on a daily basis, with various degrees of legitimacy and cogency, by any number of people, some of whom probably should set up a little tent and call themselves Mystic Meg. However, I shall not do that.

I take cognisance of the hon. Gentleman’s general point about welcoming the uprating. Given the time, I will happily get back to him on the smaller points of detail at another stage.

Perhaps I ought to declare an interest, in that I am a pensioner.

On behalf of my many constituents who are in receipt of benefits, I appreciate my right hon. Friend’s statement. Is he aware that in parts of Yorkshire, certainly in west Yorkshire where I live, we have had an awful winter—although I am not blaming him for that? The winter fuel allowance of £250 for those between 60 and 79 and £400 for those over 80 is much appreciated, but that money will quickly go if the weather of the past week or two continues into the new year. Will there be a supplement later if the severe weather continues in Scotland and the north of England?

The comments of the Secretary of State for Work and Pensions yesterday about single parents are related to those of my right hon. Friend the Minister. Most single parents are not single parents by choice. That situation is visited upon them by a husband—usually—who has left. I am sure that those single parents would prefer to be in work, training, or further or higher education, but especially if they have more than one child, they can do that, only if there is adequate provision of day nurseries. Will the Minister assure me that day nurseries will be provided in every area where they may be needed?

I am grateful to my hon. Friend for not blaming me for the weather. I am grateful, too, that she welcomes the uprating. I can no sooner forecast the weather, or the bitterness or otherwise of the winter in west Yorkshire, than I can the unemployment trends for forthcoming years—but I am sure that all services, not simply on the benefits side, will look at that problem as it affects vulnerable elderly people.

I take my hon. Friend’s point about lone parents. I am not in the business of demonising lone parents in the shameful way in which others have done and continue to do. However, we think it is right that, at the core of the welfare reform White Paper outlined yesterday, we afford them all the support and help they can possibly have. Notwithstanding what she says about barriers such as child care, as my right hon. Friend the Secretary of State for Work and Pensions said, no lone parent will be forced into a job, however appropriate, if child care is not available.

The hon. Member for Rochdale (Paul Rowen) asked about negative inflation. We enshrined a 2.5 per cent. floor in the Pensions Act 2008, so if inflation goes down to zero, as some anticipate, there will always be at least that 2.5 per cent. I am sorry I forgot to say that earlier.

As the Minister knows, I fully support in principle the welfare reforms that his right hon. Friend the Secretary of State announced yesterday to which he himself has referred today, but on the assumption that they would save money rather than cost money. Can he clarify that point? Outside the House, he and his colleagues have suggested that the reforms will, on balance, save the taxpayer money, but in the House yesterday the Secretary of State said that the reckless borrowing in the pre-Budget report—he was quoting a Conservative Member—was necessary because

“it allocated an extra £1 billion and this White Paper allocates still further money.”—[Official Report, 10 December 2008; Vol.485, c. 541.]

The Minister said today that that further money would amount to £1.3 billion. Will he tell us whether the programme will cost money and require extra borrowing, or save money and reduce the borrowing and the cost to the taxpayer?

I know that the right hon. Gentleman has been consistent in his support for welfare reform, albeit, as he has said, in the context of saving rather than otherwise. We believe that not only the welfare reform proposals but all that we are seeking to do will, on balance—his words, not mine—be cost-neutral. We have said, however, that at least during the interim period, when savings can be made we want to work closely with local authorities to come up with flexibilities that will enable them to respond to the requirements of their areas. Not all the savings will be brought into the centre in the first instance.

In the broader context of all that the Department is seeking to do, as I have announced and others have announced previously, there will be an additional £1.3 billion because of the economic downturn—and that is £1.3 billion that could not be counted on as an absolute if the policies of the right hon. Gentleman’s party were pursued. My right hon. Friend the Secretary of State made that point yesterday.

We are indeed experiencing difficult times when even the greatest financial institutions in the land are happy to take Government loans on very acceptable terms. Meanwhile, some of the very poorest people are taking money at the door at annual percentage rates of 100 per cent., or even several thousand per cent. Has the Minister reviewed the operation of the social fund in connection with both the money that is available and the stringent conditions that are applied?

I believe that an informal consultation paper reviewing the operation of the social fund was published yesterday along with the White Paper, but if it was not, it will be published very shortly. As my right hon. Friend the Secretary of State said yesterday, we want it to become much more community-focused and responsive, and, if possible—and eventually, we hope, on a national basis—to have credit unions at its core. I am aware of the hon. Gentleman’s interest in this topic, and I accept the broad sweep of his perspective on it. I invite him to read the consultation paper and present us with his comments.

I welcome the Minister’s statement. Unfortunately, there have been a series of redundancies in my constituency. When I met a group of people who had been made redundant this week, they reported that the local Jobcentre Plus simply could not cope and they were being referred to telephone numbers. While I welcome the uprating, I wonder what advice the Minister can give people who are finding it difficult to obtain benefits in certain parts of the country.

Obviously I do not know the details of the case, or cases, raised by the hon. Gentleman, but I can say that people who have been redundant and want to claim benefits are finding increasingly that the telephone is the first point of contact enabling them to establish their claims and get the process running, so I would not be so dismissive of telephone numbers.

I made it very clear the other week—on the Jeremy Vine show, no less—that if people did wish to complain about the service that they had received, I genuinely wished to know about it. I do not want to go around saying that this is a world-class service, although I believe that to be the case. It is certainly a far better service than that provided in the early 1980s, when I was unemployed; in those days people had to run around four or five different buildings before they knew for certain whether they could make a claim. What I want to do is provide a service at local level, because that is what is required.

As the hon. Gentleman will know, we are increasingly using Train to Gain funds and other interventions to work with companies to try to prevent redundancies from occurring in the first place, and, when that cannot be done, to ensure that people know exactly what support they will be offered long before they are faced with the cliff edge of redundancy. For that purpose we need, and are receiving—for which we are grateful—support and intelligence from, for instance, companies, the insolvency administrator—whatever that is—and trade unions on a region-by-region basis. The earlier the intervention, the earlier we can tailor the appropriate response from Jobcentre Plus.

Can the Minister answer the specific question asked by my hon. Friend the Member for Eastbourne (Mr. Waterson) about the Department’s decision to reduce the time limit for pensioners to backdate their pension credit, housing benefit and council tax benefit from 12 to three months? Does he accept that older pensioners are more likely to be affected by the proposed change, and can he explain why a decision was made which will cause endless extra poverty to people who are in difficult circumstances at this time of year?

I am sorry that I failed to deal with that question when it was first asked. The change is part of a wider package to increase take-up and make claiming simpler, and we believe that it will benefit thousands. It is not about saving money, but about targeting people in the most effective way possible. I do not doubt that the hon. Gentleman’s concerns and those of the hon. Member for Eastbourne (Mr. Waterson) are genuine, and I should be happy to pursue the matter with both of them outside the Chamber, but we genuinely believe that this measure is not about saving for the sake of it. As I have said, it is part of a wider package to increase take-up and make the claiming process simpler.