I thank Mr. Speaker for allowing us to press the case for pensioners today, and I am delighted that you are in the Chair, Mr. Jones. I hope that we have a constructive debate. I am grateful to the excellent Members who have turned out today to bat for their constituents, and I thank them for that.
Pensioners should not and do not need to hold out a begging bowl. They do not owe us a scrap; indeed, we are indebted to them. They have given everything for a safer and more stable world and country. They fought for our freedoms and democracy, as well as working hard to build the economy of the City of London, and financial institutions and industry. They have given their blood, sweat and tears for us, and have created the wealth of this country, and I believe that they deserve a greater share of that wealth. Their share of gross domestic product has fallen year on year in the past decade. That is a shame, and it is not something that the Government should be presiding over. Their share has been falling while bankers, stockbrokers, footballers and the Jonathan Rosses of this world have selfishly been taking an obscene and far too great a share of the wealth of this country. That injustice needs to be put right. Pensioners deserve more respect from all sections of society and deserve a better deal, and that is what this debate is all about.
To move forward, we must understand a little of the history of this issue. I have said openly for many years, and several times in this Chamber, that pensioners have been let down by Governments of both flavours over several decades. Both parties have done good things, but both have also made major errors. There have been two glaring errors. First, the Conservatives cut the link with earnings, causing Britain to have one of the lowest state pensions in the developed world. Then, Labour did to personal and private pensions what the Tories had done to the state pension with changes to corporation tax in 1997, which were known in the vernacular as the great £5 billion pensions robbery.
Of course, the problem has not resulted only from Government actions. In the baby-boomer heyday of the ’50s and ’60s, which you would not know about, Mr. Jones, but I certainly do, masses of workers came on stream, there was a stable pensioner population and the economy went up and up. Things were looking very good, but then the demographic disaster began to emerge, and there were massive increases in both private and public sector debt. As economist Ros Altmann has said, we were
“effectively ‘borrowing’ growth from the future.”
If I may, I shall borrow liberally from Ros Altmann’s wise analysis, which has been reported by the Economic and Social Research Council in its “Winter 2009” pamphlet, although I imagine that it meant spring 2009. She points out that even the demographics are now against us. We are blessed with wonderful, far greater longevity, but that presents us with tough social and economic issues. There are not enough people in employment to support the rapidly growing number of pensioners, and we must pay back the debt that has built up in the past two decades, which amounts to tens of thousands of pounds for every man, woman and child in the UK. Pensions guru Dr. Altmann put it very succinctly when she said:
“This will lead inexorably to a ‘pensioners’ crisis, unless we make radical changes to pensions—and retirement.”
Let me put the obvious problems aside for a moment to thank the Government for what they have done and what they are doing. The cold weather payments have been very welcome, and the £60 that the Government recently gave was very well received. Also welcome is the intention to re-index pensions to earnings, so that we can start to rebuild a decent state pension. We need to do that in the longer run. Those moves, and much more, are not to be underestimated. I am sure that the Minister will tell us more about what the Government have been doing.
I congratulate the hon. Gentleman on securing the debate, and apologise that I cannot stay for the whole of it because I have to attend a Select Committee meeting this afternoon. As a co-sponsor of my early-day motion 301, on free TV licences for pensioners, does he agree that the Government could quickly and easily introduce free licences for all pensioners, not just those over 75? That would have a significant impact on pensioners’ money.
I did co-sponsor that early-day motion. I was going to suggest eight measures to the Minister, but now I shall add that point and suggest nine. For the elderly, TV often is not just an optional add-on that improves their quality of life, but the only way for them to keep in touch with the real world. Giving pensioners free TV licences would be a relatively inexpensive measure and would generate an enormous amount of good will. I thank the hon. Gentleman for his intervention.
Now that I have mentioned the Minister, let me say how lucky we are to have such an excellent Minister here. She is energetic and formidable, and she brings a certain elegance and charm with her. Last night, she told me—in the Lobby, not in the bar—that she is excited about having the opportunity to push forward this debate and to set out Government thinking on policy for pensioners, and that is what we are here to do today. I know that she is unable to say much about what will come in the Budget, because of the Budget purdah weeks, but I am sure that she will take some ideas from the debate and talk to the Chancellor and the Prime Minister about them.
The Minister will find the Prime Minister’s door open on this subject. Two indomitable pensioner representatives of Age Concern—Dorothy Axford and Kath Daly, from my constituency—helped to focus the Prime Minister’s mind a few weeks ago when they met him face to face. As he remarked, neither of them seems old enough to be in Age Concern—he was quite charming. I was so proud of them because they did UK pensioners a great service by telling the Prime Minister what pensioners really need and are really thinking. They found him anxious to listen, receptive to what they were saying and keen to help. However, we all understand that the speed at which we can change policy and move forward is limited by resources.
My constituents explained that pensioners are suffering terribly under the economic crisis. It is not only bankers who are suffering. The elderly, particularly those on small, fixed incomes, are facing real difficulties. Inflation for them is far worse than it is for we hon. Members, who earn above-average incomes. Their households face completely different inflation figures from ours and massive, unfair council taxes such as those in Castle Point, which are, astoundingly, being increased by 5 per cent. this year by Castle Point borough council. Given the Government target of 2.5 per cent., and the average for the rest of the nation, that is indefensible.
Pensioners have to choose between trying to keep warm, buying food and paying for TV licences, and those decisions are becoming tougher in the current economic crisis. Dorothy and Kath thanked the Prime Minister for the excellent Warm Front initiative, and told him that it was excellent. One of them had benefited from it, but they both pointed out that it could deliver far more in value for public money if the contractor list were more flexible and local contractors could be used. Contractors could then be more competitive and could carry out a boiler change for £1,300 or £1,500, instead of £2,500. That would reduce the number of top-ups that are now being claimed, which has increased tremendously over the past three years. It would also reduce the size of the top-ups that poor people have to pay. Dorothy and Kath put that point to the Prime Minister, and he said that he would look at it. I know that that is a matter for the Department for Environment, Food and Rural Affairs, not the Minister, but I am sure that she will ensure that her DEFRA colleagues know about it.
The excellent and much-loved charities Help the Aged and Age Concern joined our delegation to the Prime Minister. They are doing magnificent work and are now combining their resources to form a single charity, or organisation, that will be totally focused and even more effective in putting the case for pensioners. I am sure that all hon. Members will wish sincerely to thank the charity’s staff, volunteers and members for all that they do. They are all stars, and they are all working to improve the quality of life of pensioners.
Age Concern in my constituency has many members—hundreds, actually. They get together for lunch on Tuesdays and Thursdays and have trips out and about. I went to a Thursday lunch just before Christmas and got heavily slagged off because the Tuesday people wanted me to go to one of their lunches, so I am going to one of those at Easter. By the way, they take no prisoners, and when I visit them they bend my ear. I know that they will be pushing for a bus service from Canvey town to Morrisons supermarket, and that they also want to keep wardens in our local residential homes as the borough council are threatening to withdraw the service. In addition, they want the council to keep the streets cleaner and safer, so that they can enjoy their environment, and they desperately want councillors to consult them properly and stop the overdevelopment that is destroying their quality of life and community. They are right on all those issues and I am fighting shoulder to shoulder with them on that. However, today is not about local issues. Thank you, Mr. Jones, for allowing me to mention my patch, but I will now move on to the economic crisis, which has hit pensioners harder than other groups.
With profits investments have collapsed and savings income has literally been decimated. Pensioners with, for example, £15,000 of savings, which provides just a few extra pounds to help them pay their bills, have seen their weekly income fall by £12 a week as a result of an interest rate cut from 5 to 1 per cent. That £12 a week does not mean much to us, I suppose, in this Chamber, but it means a lot to my constituents and pensioners. It will help them not to have to choose between food and heating, and it will allow them to have a little treat, such as a takeaway or a glass of beer. Why should they not be able to do that? Pensioners with savings of £15,000 are not rich.
Pensioners’ lack of spending ability is hitting the general economy because, compared with other groups, the UK’s 12 million pensioners generally have low debts and tend to spend more of their net disposable income. As Dr. Altmann states:
“Cutting rates is like a tax increase that will reduce their spending.”
That damages the rest of the economy. If we want to get money out into the economy and for people to start spending again, putting it through pensioners is probably the most reliable way of doing it.
I am sorry to distract the hon. Gentleman slightly from his macro approach and from talking about the economy, but in dealing with this shortfall, I understand that he is active in his constituency in trying to encourage pensioners to have full access to their benefits. What approach does he take to that, and does he not think that a better take-up of benefits would solve some of these issues and be more of a stimulant to the economy, as he was trying to suggest in his comments?
I am grateful to the hon. Gentleman for that intervention. I assure you, Mr. Jones, that it was not planted and that I was not expecting it. I will come on to benefit take-up in one of my eight suggestions. The hon. Gentleman is right: about one in three pensioners lose an average of £1,477 a year because they do not take up, for example, pension credit. We have debated that matter in this Chamber, and I have run a local campaign on it using my local newspaper the Yellow Advertiser. I have taken a full-page advert that explains to pensioners that the pension credit is theirs by right and that they should claim it. I have explained to them how they can claim it and that they can come to my surgery and let me claim it for them if they feel challenged by picking up the phone. Of course, the means test is one of the reasons why people are not encouraged to claim pension credit and find it difficult to do so. Many pensioners fail to do so. The hon. Gentleman makes an extremely good point, and I thank him.
I, too, congratulate the hon. Gentleman on securing the debate. I also apologise for the fact that, because of the short notice of it that we had, I will be unable to stay for the entire debate. Does he share the concern of one of my constituents who recently wrote to me to say that, when he reached the tender age of 65, he was not told where and when to pick up his pension; he was not informed about what benefits he might be entitled to; and he was not even given any information about age-related tax allowances? Is it any wonder that so many pensioners do not claim what they are entitled to and, in some cases, end up paying more tax than they should?
That is an extremely good point, and I am grateful to the hon. Gentleman for making it. The Minister will, I am sure, address benefit take-up. When someone reaches a certain age, they should automatically receive not only the pension that they have paid into all their life, but clear and easy-to-read information about what benefits are available, so that they can take advantage of them. I am astounded that the Government have not done more, although they have got their act together to set up programmes—I suspect that we will hear about them from the Minister.
There are many different types of pension. There is that based to an extent on social insurance—the state pension—and that based on long-term savings by the individual, employer, or both.
I, too, congratulate the hon. Gentleman on securing the debate. He has just mentioned the issue that I was waiting for: employers contributing to pensions. Does he agree that we cannot have a purely public sector answer and that there must be a bit of private sector and individual thinking as well? One option would be to make it compulsory for all employers to contribute to all employees’ pension funds, because if we could push up the amount that people get out of a pension fund, the public sector could target the people who really need help.
That is an extremely valid point. Of course, the Pensions Act 2007, which the Government recently put through Parliament, moves a long way to achieving that. I think that that Act received all-party support in the House; it is a good Act. The problem with relying too much on employers is that the returns on equities and employers’ ability to fund pension schemes have been greatly challenged in the past year. We must develop public policy to address that and fill that gap.
In the 1980s and 1990s, with rising equity markets and a falling state pension that was driven down by Government social policy—or, as some might say in relation to the ’80s, lack of social policy—employers took the lead from Governments and started to provide decent pensions. That was a good thing—God bless them. However, with people thankfully living longer and the sudden fall in investment and stock market returns, private pensions are no longer able to provide sufficient income alone. The state must therefore step back up to the plate and do more. What the state has done so far has meant wide, extensive and demeaning means-testing, which is a problem, as I have already discussed.
Let us try to plough new ground in relation to the problem. The state has long encouraged pension savings, but opting out costs the Exchequer £10 billion a year. Pension savings tax relief costs us £30 billion a year, and half of that—£15 billion a year—goes to a few, rich people who are top rate taxpayers. That situation is like the Pareto rule. I am not even going to go anywhere near the 50-year-old banker’s pension this afternoon—we have heard enough about that over the past week or two—so let us focus on how effective and efficient the use of that £15 billion really is. Could it be used to help poorer pensioners, rather than being spent on yet another tax break for often tax-avoiding rich people?
I am talking more like a socialist than a Tory, but so be it. The answer is clearly that, yes, a major policy rethink is necessary, so I would like to set out eight specific responsible and workable suggestions to add to the one on TV licences that was made earlier. Some of them were suggested by Dr. Altmann, and I am grateful to her for her paper.
First, we should make computers talk to each other to automate pension credit awards. My campaign in Castle Point has already been discussed. I believe that many more people in Castle Point are now claiming their pension credit—I hope so, anyway. I used my communications allowance to run that advertising campaign and several others. It is absolutely right and proper that MPs should use the allowance to do good work in their constituencies and to inform constituents about things such as pensions, benefits, planning issues and so on. I try to do that, and I encourage other Members to do it.
Secondly, we should change the pension credit rule that assumes, in this day and age, an utterly ridiculous 10 per cent. return on savings. That is highway robbery. Thirdly, we should end the £5 a week earnings disregard. Fourthly, the Government should simply say “sorry” again and reinstate the 10p tax rate for pensioners and the lowest paid. Fifthly, we should change annuity rules in the coming Budget, so that we can give people who have to buy annuities over the next few months and years more flexibility. They are being badly stuffed at the moment, but the situation is not their fault. We should help them.
My sixth suggestion is that we should now end the interest rate cuts. It was right to cut them, and I congratulate the Government on their policy of action to try to work our way out of the world economic crisis, but we have gone far enough on interest rate cuts, and I hope that they will now stop.
My seventh point is that we should pay £140 per week to all those aged 75 and over. That would end savings disincentives and provide fair and equal treatment of women, which is something that I have argued for in the House. I voted against the Tory Whip on the issue a year ago. That policy would remove means-testing for almost all the elderly, which would be a good thing. Dr. Altmann estimates that it would cost less than £3 billion a year—not a lot of money when one considers the £15 billion a year that we waste on tax relief on wealthy people’s pensions, which does not go a long way towards changing their quality of life.
My eighth and final recommendation is that we should issue specific pension and annuity gilts to take advantage of current low yields in the market and to help pensioners and the pensions industry.
The question is whether we want a fairer society. Those polices would be fair, and they would be popular. I draw attention, if I need to—I probably do not—to the much greater propensity of elderly people to vote. I ask the Conservative and Labour parties to say today that they will consider my suggestions. I hope that they will and that they will not simply slag me and each other off and fail to address the needs of vulnerable people and pensioners.
I am so lucky to be an independent MP. I have to read the Order Paper for myself, of course, but I am free of party Whips. Martin Bell, God bless him, once quipped that his party conferences were all party and no conference. Joking aside, the fact is that, as an independent, I can be terribly open and honest. I can say what I truly believe needs saying, and I try to do so. In a hung Parliament or one with a small Government majority, either of which is very likely after the next general election, an independent would have great influence, so I hope to return after the election to fight for pensioners, for people and for fair play in politics.
The financial sector has gone from the extreme of embracing risk to the opposite extreme of being utterly averse to it and thereby harming individuals and businesses alike. In short, it is now strangling the economy. It messed up, and now it is making businesses, pensioners and individuals pay. The stock market collapse has wiped billions off the value of investments and stripped massive sums out of pension funds, including those of charities. The credit crunch has hit the third sector like a steamroller, and it is not only limiting the sector’s ability to raise money but leaving it with a big hole in its pension funds and massive problems as a result.
The Parliamentary Secretary, Cabinet Office, the hon. Member for Cardiff, West (Kevin Brennan), who has responsibility for third sector, recently announced improvements to the grassroots grants programme for building capacity, and I am grateful for that. He is a good man. Nevertheless, many charities face large deficits. The debate on the third sector may be for another day, but I put down a marker on it. We must return to it, probably in this Chamber.
Policy for pensioners is most important. There are many issues that I have not been able to cover today, such as incentivising people to work beyond 60 or 65, so that they do not fall off the cliff edge of retirement but get those bonus years and phase out of full-time work by doing part-time, third sector or voluntary work and continue to contribute their wisdom, reliability and application. They have so much to offer.
I have not mentioned health care or the charging and care regimes in residential homes. Those are all important matters for pensioners. I am sure that the debate will develop over the coming months. Again, I sincerely thank all the hon. Members who turned out for this debate and you, Mr. Jones, for your latitude.
I, too, very much thank Mr. Speaker for the opportunity to hold this debate on policy on pensioners. The terms of the debate are drawn quite widely to allow us not only to discuss the recent developments in the financial markets, as the hon. Member for Castle Point (Bob Spink) has done, but also to look at the experience of senior citizens in terms of services for the elderly that are provided by local authorities.
I congratulate the hon. Gentleman on securing this debate. As I implied in the question that I posed to him, he has been a strong campaigner for the benefit rights of senior citizens in his constituency. It was good of him to spend some of his communication allowance on that important issue. He referred liberally to Dr. Altmann, and I have attended some of the meetings that she has addressed in the House. I would like to contribute to this debate by discussing the experience in my constituency, and perhaps to draw some lessons from it. I am particularly grateful to the Croydon Older People’s Network and to the Croydon Retired People’s Campaign for the advice that they have given me, both in recent years and for this debate.
It is helpful to consider the experience of senior citizens in Croydon, bearing in mind that Croydon is a top-class local authority for adult services, or, to use another term, social services. Indeed, it was up for a nomination for a beacon award only yesterday evening for the good work that it does. It is a three-star authority for social services, which is the comprehensive performance assessment equivalent of a four-star rating. Although it did not secure the award yesterday—[Interruption.] I was under the impression that it had not, and am grateful to be corrected. I heard from the authority that it had not secured the award, but it has, which is excellent. It is recognition that, despite some difficult financial circumstances, an additional £6 million is being provided for adult services this year, including support for the elderly.
There are very real challenges in Croydon. I was grateful for advice from a Croydon voluntary action official who advised me that because of the adverse weather conditions in particular, as well as the current level of fuel poverty benefits, the Mayday, our local hospital, has had more elderly residents attending accident and emergency with chronic cold-related illnesses. I have not had the chance to check that with the Mayday. When I last called the chief executive’s office for information, I was referred to the press department, which suggests that I was not going to get far—being referred to the press department normally means being supplied with very limited information, rather than extra information. Clearly, however, senior citizens have been put under stress by having to face higher fuel bills this winter, and Age Concern has said that one in three pensioners now face fuel poverty.
It is interesting that Croydon Retired People’s Campaign estimates that 10,000 senior citizens in Croydon—the borough is quite large and has more than 350,000 residents—are living in poverty, defined as having an income of less than £7,850 per annum. In the context of the discussions ahead of this year’s Budget, it is interesting to consider the point made by the hon. Member for Castle Point. Pushing extra money in pensioners’ direction is an attractive option, because they are likely to have a high propensity to spend it. Their incomes can be very limited, so those moneys would be likely to find their way back into the economy. The past financial year was stressful for pensioners, because the impact of the high rate of inflation fell particularly on them. A high percentage of their expenditure goes on food and fuel, so they were particularly disadvantaged.
It is encouraging that we have strong organisations in Croydon, such as the Croydon Retired People’s Campaign and the Croydon Older People’s Network, which has a membership of 400 senior citizens. Those organisations have been conscientious in getting feedback on many of the good initiatives that the Government have taken, including “Putting People First”, which showed very good vision in its approach to the care needs of the elderly. In the consultation on that initiative, it was interesting that the Government conceded that two thirds of senior citizens felt that they were not exactly getting a fair deal on their care needs. The responses from Croydon suggested that thousands of senior citizens felt that they were not getting fair access to services. As Members of Parliament, we often hear senior citizens express concerns about their different experiences of agency and permanent staff whom social services employ in adult services. Nevertheless, I do not want to give the impression that I am decrying the quality of services to senior citizens in Croydon.
The hon. Gentleman referred to the unfortunate 5 per cent. increase in council tax that his local authority is introducing, and council tax is an important issue for senior citizens. I have met many widows—as one does as a politician, knocking on doors—who live in properties with which they are reluctant to part because of the family memories they hold. Those women’s savings are often heavily eroded by significant increases in council tax and the transference of other taxes to council tax, and such developments hit them particularly hard.
The hon. Gentleman mentions the way in which council tax hits people on low incomes. Does he accept that it is basically an unfair tax and that although it might be a good thing to freeze it, it would be much better to replace it with something such as local income tax?
I thought that the hon. Gentleman was going to boast about the council tax freeze in Scotland. There is no doubt that his proposal would lead to a significant improvement in senior citizens’ circumstances. Governments have struggled—at least since the Layfield report on local government taxation—and a council tax freeze at this stage would be helpful.
On pensions generally, there are other considerations. Croydon council recently announced that in continuing to provide proper services to senior citizens it must meet the competing demands involved in keeping provision under its own pension fund up to scratch. The current financial crisis makes things extremely difficult for the local authority, and it has recently been suggested that its pension fund faces a £200 million shortfall. I know that that sounds like a large number, but I suspect that the situation is very similar in many local authorities, and that is a significant challenge. That said, Croydon council always pursued a rather extravagantly aggressive stance of investing its money only in equities, which does not work well in the current circumstances.
On the point about local government pension funds, groups such as the Institute of Directors have suggested that we should get rid of such funds because they are unfair on the private sector. Does the hon. Gentleman agree, however, that they are better than nothing and that it is good to top them up a bit or help them in some way? The majority of people do not get a huge amount from them, and very few get a lot. The average worker in councils such as his and mine would not get a huge pension from these funds.
I agree entirely. I was somewhat perturbed by the suggestion that was made. It is a bit like what is happening in the Republic of Ireland. My local authority has suggested that it lobby the Government to be allowed to increase employees’ contributions from 6 to 8 per cent. Going down that route would give rise to great consternation and great disruption to good industrial relations in local authorities.
I am, however, allowing myself to drift far too far from the issue of fair access to care. I am interested in the response from senior citizens in Croydon on this issue, because they tend to find that fair access to care is complicated, convoluted and sometimes lacking in compassion, despite the fact that the Government have the very best intentions. Indeed, the Croydon Older People’s Network said:
“Older people in Croydon feel too many are missing out on essential services and are experiencing ill health and isolation because their needs are not being met”.
It is fair to say that despite the local authority’s best intentions, it tends to concentrate its support on pensioners with the most chronic needs.
We need to remember that many carers are pensioners or are about to become pensioners. Like many colleagues, I have come across people who have sacrificed almost all of their career, right up to becoming a pensioner. They have stayed in social housing with their mother or father, who has then passed away. Having made that caring commitment, and saved the nation a great deal of money, they find that they are unable to continue with the tenancy. I am currently dealing with the case of a gentleman who looked after both his ailing mother and his father. He lived in the property for 46 years, but now faces the prospect of being turfed out.
We need to bear in mind the fact that carers in employment, who benefit from the Government’s generous carer’s allowance, face difficulties if they want to leave employment and take up other benefits, because they will lose the carer’s allowance. Rather perversely, the system encourages people to stay in employment who would perhaps save the state additional moneys by acting as full-time carers. I see many such problems as a director of Croydon Carers Centre. True independence is a distant dream for many older and disabled people, and charging and means-testing dictate that many older and disabled people are living their life in poverty or struggling to cope. The Government recognised that in their “Care, support, independence” consultation, and should be supported on the issue. However, pensioner poverty is so widespread—in the past year it has risen by perhaps 300,000—that it may take the total number living in poverty, when that is defined as being on less than 60 per cent. of the median population income before housing costs, to 2.5 million.
Many Members of Parliament often come across women pensioners living in poverty, because those women are not entitled to the full basic state pension. Many of them have paid not paid full attention to the matter in the past, or they may have been badly advised about the small stamp and been unable to pay their national insurance contributions, because of the need to care for their families. I know that the Government are concerned about that and want to deal with it, but it does not look good for our country that a recent European Union survey found that only pensioners in Latvia, Spain and Cyprus are more likely than those in the UK to fall into poverty. The Institute for Fiscal Studies concluded that the proportion of pensioners below the poverty threshold will remain at its current level at least into the next decade, despite the best intentions of the Government to reform the process.
For all of us who have benefited from saving for our pensions, the financial crisis offers a very bleak prospect, but there may be things that the Government can do to deal with some effects of the reduced interest rates, which can significantly affect pensioners, as the hon. Member for Castle Point mentioned. Age Concern takes the view that income from savings provides a modest but important top-up to the pension and benefits of many low-income pensioners, but the average gross savings rate on an instant access account fell from 4 per cent. to 1.6 per cent. over the year to January 2009. That can greatly affect the likelihood of a pensioner having a reasonable standard of living. For a pensioner couple with savings between them of £10,000, which is a substantial sum, the fall represents a reduction in income accrued from interest from £400 to £160 over a year—a loss of £4.62 a week. Perhaps it is possible for the Government to give consideration to the £16,000 upper capital limit for receiving housing benefit and council tax benefit. The rate has been frozen for several years, which is another source of frustration for older people, who feel penalised for saving. It is appropriate for the lower capital limit for income-related benefits to be increased to £10,000. The assumed rate of income for people with savings above the lower limit could be reduced to £1 in every £1,000, and the upper capital limit for housing benefit and council tax benefit could be increased.
I accept that it is easy for me to come to the Chamber and make suggestions about how things might be treated to deal with pensions needs, when the demands on the Government’s finances are severe in the economic downturn. However, to repeat the point that I made earlier, if we want to stimulate the economy, we could do so by putting more money in the hands of pensioners, which is much more likely be spent locally in communities than it would if we took other economic initiatives. Despite the demands on the Government’s finances, that might be justifiable from a macro point of view. From a micro point of view, I have spoken about Croydon, but I think that something can be said about the positive responses to the consultation carried out by Croydon Older People’s Network and Croydon Retired People’s Campaign: the Government’s action is appreciated by Croydon people, but nevertheless the shortfall in standards of living affecting many Croydon pensioners suggests that further urgent reforms are required.
It is a pleasure to serve under your chairmanship, Mr. Jones. I congratulate the hon. Member for Castle Point (Bob Spink) on securing the debate, and other hon. Members, including the hon. Member for Croydon, Central (Mr. Pelling), on taking part. It is a timely debate. In the run-up to the Budget it is important to discuss issues affecting pensioners, and pensioner poverty. As the hon. Member for Castle Point said, it is a huge issue, but I want to focus on some practical steps that I believe the Government should take.
Inflation has hit pensioners much harder than most other people, because their spending on fixed costs such as food, fuel or council tax takes up a much higher proportion of their income than is the case for most other people. Figures provided by Age Concern show that in August last year, while the rest of us were dealing with an inflation rate of about 5.4 per cent., for pensioners it was 9 per cent. That is why in the past 12 months the number of pensioners in poverty has risen from 1.8 million to 2.1 million. This winter approximately one in four elderly people is opting to stay in bed because they cannot pay their fuel bills, and one in 10 must cut back on what they spend on food, or at least buy cheaper types of food, because they cannot afford not to. It is not a mark of a civilised society when pensioners, who have given so much for us, are forced into such choices.
I hope that the Government will recognise such concerns in the Budget and deal with the issues, such as fuel poverty. Fuel bills have increased by more than 40 per cent. in the past 12 months; yet in the pre-Budget statement the maximum increase in support for someone over 80 is only 25 per cent. The average fuel bill now is £900 and the maximum that any pensioner can get is only £400. There is a huge disparity. The Government’s flagship policy is of course pension credit, but it has been dogged, despite all the Government advertising, by the stubborn refusal of a huge number of pensioners to claim what they are entitled to. The Committee considering the Welfare Reform Bill reported yesterday, and I welcome the fact that the Government are introducing a pilot programme to auto-enrol people and pay them the benefit to which they are entitled. That goes some way, but not far enough.
The poorest pensioners are those over 75, which is logical, because anyone who retired at 60 or 65 with any savings would, over a period, exhaust them because the state pension is inadequate. That is why it was regrettable that, when the Government changed the rules on backdating benefit claims, cutting the time to three months, they did not take account of information provided by Citizens Advice. The information showed that people over 75 would be worst affected by the change in backdating, because most older folk are very proud, quite independent and do not rush to claim something to which they are entitled. By the time they do make a claim, they usually have a large number of debts, so I regret that policy. It is why we would move to a citizens pension—£124.05 a week for a single pensioner and £189.35 for a couple—over two Parliaments. Immediately, however, we would grant it to all pensioners over 75, because they are the people who currently have the greatest need.
The Government have an opportunity with the Budget to demonstrate that they are concerned about pensioner poverty and its effects. As the hon. Member for Castle Point rightly said, the Government can introduce several measures to help those people. It is quite wrong that the notional interest for people’s savings is still 10 per cent., because the amount of money to which a person is entitled when they apply for pension credit is eroded. The loss of the 10p tax band has also adversely affected a considerable number of pensioners. I do not argue for its reintroduction, because we believe in the principle of simplification, but it is important to raise the threshold to ensure that pensioners’ income is sufficient, and to take account of the cut.
The Government have not tackled fuel poverty. Yes, the fuel allowance has been increased, but the Secretary of State for Energy and Climate Change, despite promising that he would legislate if necessary to do something with the fuel companies, has gone down the Ofcom route of trying to persuade people instead. The changes that have been made still mean that people who have card meters pay £51 a year more than those who are able to pay by quarterly instalments, and that is neither fair nor right. Those are some of the issues that the Government must tackle.
The earnings link must also be restored. I accept that the link with prices is right at the moment, but we have always said that the link should be with prices or incomes. The long-term change would more than make up for the losses. Although the prices link is currently more advantageous, in the longer term the earnings link must be restored.
During the passage of the last Pensions Bill, my noble Friend Lord Oakeshott tabled an amendment to make flexible the period pensioners have in which to purchase annuities. Sticking to the rigid age rule of 75 simply does not make sense in the current market. I know that the Minister cannot tell us what is going to be in the Budget, but I hope that she appreciates just how hard done by many pensioners feel due to the rigidity of that rule. The changes that Baroness Hollis secured for women are likely to benefit only a small fraction of those who are entitled to backdated payments, and that issue must be looked at. One change that the Government are introducing is a carer’s allowance. It will go some way towards helping, but, for those women who have lost out because of what they have done in the past, payments must be made up.
There are 12 million pensioners in this country and they have given their best to serve it. The Government are helping them to some extent, but more needs to be done. If we can afford to pay for ex-bankers’ huge pension increases, whether approved by the Government or not, we ought to consider the ordinary man in the street. I hope that the Minister will take account of that point.
It is a great pleasure to serve under your chairmanship, Mr. Jones. I congratulate the hon. Member for Castle Point (Bob Spink) on securing the debate, and I thank the hon. Members for Croydon, Central (Mr. Pelling) and for Rochdale (Paul Rowen), who, in their different ways, made very helpful contributions.
It is helpful that the hon. Member for Castle Point has chosen this subject to tell us what his party might do. However, I saw only a couple of days ago that there was something of a distraction involving his colleague, Mr. Robin Page, who spoke about
“accusations of rigged internal elections, tales of extravagance and high living in Brussels”.
I may have missed it, but if the hon. Gentleman has now joined the general exodus from the UK Independence party, I commend his common sense. I just wonder where his attentions will alight next. I wonder whether he has tried the Liberal Democrats.
In all fairness, although the hon. Gentleman’s own one-man party may not be in government, he has given us all a chance to look at the current Government’s policy and, perhaps, those of the next Government. I join him—I think it was him—in what he said about the two organisations, Age Concern and Help the Aged. We have all enjoyed huge assistance from them over the years, and it is great that they are about to embark on a joint life together under the provisional name of Age UK. Indeed, we have all benefited from the organisations’ extremely informative briefing for this debate, in which they primarily talk about three different issues: first, rising pensioner poverty, much of it due to low take-up of benefits; secondly, the impact of interest rate cuts on savings, which has already come up in this debate; and thirdly, the plight of older workers in the economic downturn.
I shall focus on the Government’s disastrous policies in respect of pensioners over a number of years. We could start with the decision on corporation tax in the Government’s early days—the policy that they kept secret during the 1997 election campaign—going right the way through to the current economic turmoil, which is affecting pensioners so much. Back in 1997, the now Prime Minister said in his party’s manifesto:
“We believe that all pensioners should share fairly in the increasing prosperity of the nation.”
That is a very fair aspiration for a political party but, in recent times, there has been a double whammy: the Government not only failed to match that pledge while the nation’s prosperity increased, but now seem to be ensuring that pensioners bear the brunt of the recession and of the nation’s declining prosperity, both of which are due at least in part to the Government’s own policies.
There are 2.5 million pensioners officially living in poverty—a figure that, by now, I am sure is well out of date—and one in three pensioner households live in fuel poverty. Many pensioners face huge problems and, as Age Concern said in its research last year:
“60 per cent of low income pensioners were struggling to get by… Two-thirds were cutting back on gas and electricity”.
All those factors have got worse rather than better. More than one Member has today raised the issue of the inflation rate that affects pensioners. Owing to the fact that such a high proportion of their fixed income is spent on food, utility bills, heating and so on, they face an inflation rate in the real world of something like 9 per cent. Going round my constituency, which has more than its share of pensioner households, I find that many pensioners fear utility bills or the council tax demand arriving on the doormat. We have seen huge council tax rises under this Government. Our policy of a two-year freeze on council tax would be extremely popular.
On the earnings link, we could have theological discussions about what happened in 1980—when the hon. Member for Castle Point was a loyal Conservative, I am sure, and probably a Thatcherite—but in the here and now the Government are saying, “Yes, we will restore the link, but not yet.” I understand that their current policy is that they will do it sometime in the life of the next Parliament. I think it unlikely that they would have that opportunity, but it would be good to hear from the Minister whether that thinking has moved on at all.
The subject of benefits is crucial to pensioner poverty. We have heard that £5 billion in benefits goes unclaimed by pensioners every year. Some 1.8 million pensioners are not claiming the pension credit to which they are entitled. Only the other day, I received some parliamentary answers about the proportion of pension credit claims that are not dealt with within the target period of 10 days. In fact, in the past year or two, it has taken something like 15 or 14 days to process these claims. People are desperate for help and are, presumably, able to negotiate the jungle of forms and information that they have to provide, but still the bureaucracy is not able to deliver within the 10-day target. I should be interested to hear what the Minister is doing to put that right.
Then there is the mystery of the £60 extra Christmas payment, which, as it now turns out, many pensioners will only get at Easter. Did we misunderstand the Chancellor when he made that announcement in the pre-Budget report? I am sure that he was not setting out to mislead people, but many pensioners out there have yet to receive that extra money. On the issue of savings, which has come up more than once, we are talking about pensioners who have done absolutely the right thing: when they were working, they set aside money, and saved for their retirement to supplement their pension, which successive Governments have always said is the right thing to do, but they are now looking at something like a zero return on those savings. According to Age Concern and Help the Aged, 9 million people over 60 have at least £1,000 in savings of some sort.
The other day, during departmental questions, when the tariff income rule was raised with the Minister, she seemed impervious to the suggestion that there was a problem at all. Surely, it is bad enough that people are getting a zero return on their savings, but does it not add insult to injury when they are told that it will be assumed that they are getting a return of at least 10 per cent. on at least part of those savings? There would be a stampede down the high street if anyone was actually offering that kind of interest rate. The brief from Help the Aged and Age Concern says that
“recent interest rate cuts mean that the current assumed rate is now completely out of step with the actual rate of income people earn from their savings.”
What do Ministers propose to do about that? An interesting side point in the brief mentions tax overpayments, which are almost as important:
“Up to 3 million on low incomes, many of them pensioners, overpay a total of around £250 million a year in tax on savings income.”
That tax is deducted, and many pensioners fail to claim it back. Again, it would be good to see what the Government have in mind to right those overpayments. The brief also says:
“HMRC must do more to identify those on lower tax rates and ensure that overpaid tax is refunded.”
We want that money to go into the pockets of pensioners in these difficult times, not into the hands of the Treasury.
With all due respect, does the hon. Gentleman understand why some of the hand-wringing points that he is making at the moment are profoundly nauseating to Labour politicians such as myself? Forgive me, Mr. Jones; I do not like to resort to anecdote, but my parents’ experience was one of the motivating factors that drove me reluctantly into this murky world that we call politics. They worked all their lives on low incomes and retired on the basic state pension, which was eaten away, partly by the removal of the link with earnings. Under this Government, they have seen real-term increases in the annual pension, the minimum income guarantee and, subsequently, pension credit, the winter fuel allowance, free TV licences and free dental and eye checks. On top of that, they have access to a much improved NHS and the modernisation of the council house in which they have lived for 60 years, which went to rack and ruin under a Tory Government who cut housing investment by such colossal amounts. Does the hon. Gentleman understand why, given that record, some of the things that he is saying are profoundly offensive?
No apology is called for. I should just say that in the list that the hon. Gentleman managed to rattle out in his intervention, he omitted to mention that the one thing the Labour Government have not done in more than 11 years of government is restore the earnings link. Finally, they have belatedly legislated—it is on the statute book—but still they will not tell us exactly when they will do so.
There is a kind of demonology about what happened in 1980. I remind the hon. Gentleman, since he has given me a new rush of enthusiasm with his intervention, that a disastrous and financially incompetent Labour Government were replaced by a Tory Government who had some serious decisions to make about the economy, one of which was the decision he mentioned.
Does the hon. Gentleman not see that the sort of exchanges that are going on here, and his seasoning his speech with bitterness and party political points, is just what the public do not want to hear and see? They want us to take a constructive approach to solving the problems that we face—they do not want us to try to lay the blame on others. When is he going to get real?
May I pluck something from the hon. Gentleman’s comments with which I agree? Yes, let us stop all this bickering, and take the opportunity to sort these matters out. However, the way things are looking, we are going to have 14 months of this mess, as are the British public and the pensioners, before we can start sorting it out.
Returning to taxes on savings and savings generally, it is bad enough that people are getting nothing, but the tax treatment, including the tariff income rule, is unfair. Our policy of scrapping tax on savings for basic rate taxpayers would be useful. I hope that it will be considered—taking the hon. Gentleman’s point—not in a party political light, but sensibly and genuinely by the Chancellor in the run-up to the Budget. Likewise, our proposal to increase the personal allowance for people of 65 and over by £2,000. That is real help for people in real difficulties.
I have talked about the collapse of the stock market, much of which emanates from the failures of Government policy and regulation. More than 1 million people work beyond normal retirement age, and there is an interesting article in The Daily Telegraph today by Emma Soames about the boomerang employees, who retire at 65 and go off somewhere for a year, perhaps to climb Machu Picchu, then return home, wanting to work a few days a week. The reality is that we shall all have to continue working longer than was normal.
My final point was raised by Age Concern and Help the Aged, which have given us a lot of statistical evidence about what happened to older workers in previous economic downturns. A London School of Economics study shows that unemployed men over 50 have only a one in five chance of being in work two years later, and the chance of older men finding employment falls by a quarter for each year that they are out of work. Age Concern and Help the Aged refer to their campaign, particularly in the European Court, to persuade the Government to scrap the default retirement age, but that is a big issue and perhaps one for another debate.
Sweeping aside the party political knockabout, to which the hon. Member for Castle Point referred, the group of people whom we are talking about will almost certainly bear the brunt of Gordon’s Brown’s recession. It is important to have some imaginative thinking, not just from the Minister, who is well intentioned, but from her colleagues in the Treasury, so that the Budget includes some practical measures to help pensioners.
It is a pleasure to serve under your chairmanship, Mr. Jones. I congratulate the hon. Member for Castle Point (Bob Spink) on securing this debate and join him in his opening comments about the valuable contribution that pensioners have made to society. I also join him and other hon. Members in their comments about Age Concern and Help the Aged, which are both extremely valuable organisations for older people. I wish them well in their forthcoming merger, and I am sure that they will continue to be powerful in their lobbying activities and in providing services for older people.
I was pleased to hear that the hon. Gentleman’s constituents were pleased with the Warm Front programme, and I take on board his points about the installers. I understand that a re-tendering process is taking place, and I am sure that there will careful examination of how those services are provided.
The debate provides a good opportunity to consider the general landscape of policies for older people, and it is worth reminding ourselves that one in four children born today can expect to live to 100. Another fascinating fact that I heard recently is that, by 2063, we in the UK will have our first 120-year-old. That woman—I am told that it will be a woman—is already drawing her state pension at the age of 65. That is all food for thought when planning policies for older people, which is why yesterday’s beacon awards were important. One of them involved the engagement of older people in shaping policies at council level.
On the comments of the hon. Member for Croydon, Central (Mr. Pelling), although Croydon did not become a beacon council, it was nominated and should be congratulated on its involvement and on the engagement of older people locally, which we want to promote. He said that some of his constituents thought that the process of accessing council care services was perhaps not as good an experience as it should be. I firmly believe that the key to solving some of those problems is not only the extra resources that the Government have provided, but ensuring that older people are involved in shaping and developing services locally, regionally and nationally. We recently published our response to the Elbourne review to capture that spirit of involvement and to ensure that we set up structures, so that many of the older people’s organisations that hon. Members have talked about today are properly taken into account when developing policies.
I certainly challenge the assertion of the hon. Member for Eastbourne (Mr. Waterson) that our policies for older people have been disastrous. We are concentrating on addressing some of the points that hon. Members have made about the problems that pensioners face in difficult times and the fact that they need real help now and that we must put money in their pockets. That is why we increased the winter fuel payment by £50 for the over-60s and by £100 for those aged 80 and over, why we increased the Christmas bonus by £60 for more than 12 million pensioners, why we increased pension credit by the highest amount since its introduction and why we are increasing the basic state pension by 5 per cent. from April this year.
In all, we will spend £90 billion on pensioners in 2009-10, which is £13 billion more this year than if we had simply continued with the policies of the last Conservative Government. We have lifted 900,000 pensioners out of poverty since 1998, but we are not complacent. We know that there is more to do.
I want to address some of the points made about comparisons with other EU countries.
The Minister told us how much she is spending on pensioners, and I welcome that. She said that she wants to address the problem of poorer pensioners. Does she accept that, if some of the money spent on very rich pensioners—the £15 billion tax break on pensioner savings will help bankers who retire at 50 on massive pensions—were redirected to poorer pensioners, it might be more effective and helpful to society as a whole?
The hon. Gentleman is arguing that pensioners’ savings have been hit—frankly, those are the more well-off pensioners—and he wants to remove tax breaks on pensioner savings and redistribute them, but I am not sure whether he can argue at the same time that people with savings should have more help. He might want to ponder that.
I want to return to the point about comparisons with other European countries and the recent EUROSTAT report and poorer pensioners. Even when taking into account differences in living costs across countries, the income of a poorer pensioner in the UK will be nearly a 10th higher than that of a poor pensioner in Germany, more than one fifth higher than that of a poor pensioner in France and more than twice that of a poor pensioner in Portugal. We need to look below the headline figures to understand our position when compared with other countries.
I want to deal with a question raised by the hon. Members for Croydon, Central and for Rochdale (Paul Rowen): why do we not just replace means-testing with a flat rate of £140 for all pensioners? The fact is that, from April, no pensioner in this country need live on less than £130 a week and no pensioner couple need live on less than £198 a week. Moreover, it is important to remember that pensioners on pension credit can claim housing benefit and council tax benefit. The average payout for housing benefit is £65 a week and for council tax benefit it is £15 a week, so we are immediately looking at an increase to between £130 to some £200 a week.
Replacing the current system with a flat rate of £140 or even £150 would mean that the poorest pensioners lost out. The poorest pensioners have often been women who were unable to build up the required number of national insurance payments, so we would be penalising the very poorest people, whom we have set out to help. That is the problem with introducing a flat rate. There has to be an element of means-testing. I admit that means-testing can be complex, because every individual is different. People will have different sources of income and different outgoings. However, adopting the Liberal Democrat policy of a flat rate would penalise the poorest people; it would provide a lower income.
What the Minister says raises two issues, one of which is take-up. The reason why we have said that there should be a flat rate for over-75s is the continuing problem with take-up. Such a flat-rate pension would not affect entitlement to housing benefit or council tax benefit, so people would be better off without having to fill in any forms.
I am not sure how the hon. Gentleman thinks that housing benefit and council tax benefit would get through. The other aspect that we have introduced is an increased ability, even when people have savings, to claim a small amount of savings credit. Whatever we do, we must have a system that enables people to access those payments. That is why I caution against what seems to be the easy idea of simply giving people a flat rate.
I also want to challenge the points that have been made about tariff income and particularly the point made by the hon. Member for Eastbourne. I have before me the regulations that were introduced back in 1987. I know that the hon. Gentleman was not elected until 1992, but I am not sure whether he complained at the time, perhaps as a prospective parliamentary candidate, about the Conservative party introducing a system whereby, for every £250-worth of savings, a notional income of £1 was considered.
When the current Government came to power, we changed the system, but let me be clear: the tariff income rules have never been about interest rates. Obviously, if the tariff income rules were linked to interest rates, we would have to change them every time interest rates moved up or down. The rules were laid down clearly in legislation and no link to interest rates was intended. The Government ensured that the system became more generous.
Under the previous Government’s system, anyone with savings of more than £12,000 was not eligible for any support at all. As I said, the less generous rules of the previous Government assumed an income of £1 a week for every £250-worth of savings. Not only is the rate of tariff income half the previous rate, but we abolished the upper capital limit, giving more people access to support.
Does the Minister recall that, in 2000, the Government of whom she is a member issued a consultation paper about changing the assumed income rule and that, in November 2001, they said that they had decided not to do that and not to take actual income from capital into account, but that they would assume a notional rate of income set at about 10 per cent.? Yes, the rule might have applied when my party was in government, but when we were in government, I do not recall any stage at which interest rates were more or less zero.
The point that I am making is that, as set down in legislation, there was no indication whatever that the rules should be linked to interest rates. That has applied since, and we have made the rates more generous. I can confirm in response to the hon. Gentleman that we have legislated to re-establish the link between the basic state pension and earnings, abolished by the previous Government. Our objective, subject to affordability and the fiscal position, is to do that in 2012, but in any event by the end of the next Parliament at the latest.
Fuel poverty was raised by the hon. Members for Croydon, Central, for Rochdale and for Castle Point. I reiterate that we have increased winter fuel payments. We have this year increased the Christmas bonus by £60, and cold weather payments have been increased from £8.50 to £25 a week for this winter. That has resulted in 8.3 million payments. I think that last year the total paid out in cold weather payments was £5 million or £6 million; this year it has been £209 million so far, so we have certainly been trying to help during these difficult times.
The hon. Gentleman is right to say that we need to continue to work with the utility companies and others to ensure that people are aware of social tariffs and that they are reaching people.
I also take the point that we need to continue the work that we have been doing to increase pension credit take-up. There is a big role for Members of Parliament in helping to inform constituents about that, and I know that many hon. Members in this Chamber will join many of the campaigns that are run by, for example, Age Concern.
A range of issues have been touched on and I will certainly take away a number of the points that have been made, but I conclude by reaffirming the fact that the current Government have made pensioners a priority. We are spending record amounts, putting more money in the pockets of today’s pensioners. As well as the many measures that I have outlined, we have introduced free national off-peak bus travel, benefiting 11 million people over the age of 60, free eye tests, free TV licences for over-75s, and we are introducing free swimming from April. On average, pensioner households will be £1,600 better off this year as a result of our tax and benefit changes than if we had stuck with the policies in place in 1997. The Government are committed to tackling pensioner poverty. The poorest third of pensioner households will be £2,200 a year better off. That is about £42 a week. We are committed to tackling—