With permission, Mr. Speaker, I should like to make a statement about benefits uprating and how that supports the action that the Government have taken to help people through the global recession. I shall place full details of the uprating in the Vote Office and arrange for the figures to be published in the Official Report at the earliest opportunity.
As the global recession, which had its origins in the US sub-prime market, began, we said that we would act to protect people in the UK. Since then, the Government have taken decisive action to support families, jobs and businesses. As the effects of the credit crunch spread to the real economy, we acted to protect people’s deposits in banks and to stabilise the wider financial system. Then we acted by making available an additional £5 billion to help people in the labour market to remain in work or get back to work as quickly as possible. We ensured that the Jobcentre Plus network and our providers could not only maintain but increase our support to the increased numbers needing help.
We were determined not to lose a generation of young people to work, which is why we set up the future jobs fund and why we will now guarantee every 18 to 24 year-old who has been unemployed for six months a job, a training place or a volunteering opportunity. The action that we have taken has had an impact. My right hon. Friend the Secretary of State will lay out further measures in our “Back to Work” White Paper next week.
Let me turn to the statement. I wish to tell the House that we will act to provide real help for people when they need it most during the early stages of recovery. People of working age who are claiming income-related benefits will have their benefits uprated in line with the Rossi index, which is the retail prices index less housing costs. That means that people who receive benefits such as jobseeker’s allowance, employment and support allowance, and incapacity benefit will receive an increase of 1.8 per cent from April 2010.
For those benefits that are traditionally uprated in line with the retail prices index, this year, as a consequence of the extraordinary global conditions, the RPI has moved into negative territory—it stood at minus 1.4 per cent in September. That means that those who rely on benefits being uprated by the retail prices index could have expected to see their benefits frozen in cash terms, which would have meant no increase at all next April. However, because the Government continue to demonstrate their commitment to helping the poorest and most vulnerable in society, my right hon. Friend the Chancellor has decided that those benefits should be increased by 1.5 per cent. from April 2010. That means that we will increase benefits for disabled people and carers, and statutory payments for parents and others who receive national insurance-linked benefits, by 1.5 per cent from next April. Recipients of attendance allowance, carer’s allowance, disability living allowance, and maternity allowances will have those important benefits uprated to ensure that they do not fall behind.
The basic state pension is traditionally uprated in line with the retail prices index, but as my right hon. Friend the Chancellor confirmed in yesterday’s pre-Budget statement, the basic state pension will be uprated by 2.5 per cent from April 2010. That means that, from April next year, the basic state pension for a single person will rise by £2.40 to £97.65 a week, while the standard rate based on spouse’s or civil partner’s contribution will increase to £58.50, giving a pensioner couple a total of £156.15 a week. That above-inflation increase, which is delivered as a result of a commitment by this Government, will ensure that more than 11 million pensioners receive a real-terms increase in the value of their basic state pension.
The uprating of state additional pension feeds directly through to public service pensions and to some aspects of occupational pension schemes. As a result, we are unable to uprate those benefits without creating unintended consequences for occupational pension schemes. In the circumstances, we plan to hold state additional pension flat in cash terms this year. However, the 2.5 per cent increase in the basic state pension will mean that, on average, pensioners in Great Britain will see an overall increase of 2 per cent in their state pension.
For the poorest pensioners, my right hon. Friend the Chancellor also confirmed that the standard minimum guarantee in pension credit will rise from next April by £2.60 a week for single pensioners and £3.95 for couples. That means that, from April next year, no single pensioner need live on less than £132.60 a week, and no couple on less than £202.40 a week. That represents a real-terms increase of more than a third for the poorest pensioners since 1997. The above-earnings increase in the pension credit guarantee underlines the Government’s ongoing commitment to tackling pensioner poverty, which has already ensured that there are 900,000 fewer pensioners in relative poverty today than there were in 1998-99. In fact, the Government have spent around £100 billion more on pensioners since 1997 than we would have done if we had simply allowed the policies of the previous Government to continue.
We have taken action, and we will continue to take action to ensure that people do not have to face the recession alone—abandoned, as happened so often in the past. We have learned the lessons from the recessions of the 1980s and 1990s, which is why our upcoming White Paper will set out the next steps in our continuing determination to invest in people and give them the help they need because, for this Government, unemployment will never be a price worth paying.
The package of uprating proposals, which is worth around £2 billion for 2010-11, represents significant and worthwhile help for those who are among the poorest and most vulnerable in society. It provides real help in a challenging year, and I commend the statement to the House.
I thank the Minister for advance sight of her statement. This recession has hit families hard throughout the country, and, as we heard yesterday, low and middle earners, particularly those earning £20,000 and above, will pay the price for the Government’s fiscal irresponsibility.
The Minister’s statement comes at a time of great challenges. Unemployment has reached 2.5 million, with youth unemployment being higher before the recession than when the Government came to power. There are 2.5 million pensioners living in poverty, and the rate of child poverty has increased by 400,000 since 2004. We welcome any action that provides greater support to the innocent victims of Labour’s failure to tackle poverty, but does the Minister agree that it is completely unacceptable and deeply cynical for the Government to increase benefit levels before an election, only to cut them after an election? That is exactly what they appear to be doing.
The Government are committed to a 1.5 per cent. rise in child benefit, disability living allowance, carer’s allowance and incapacity benefit, but they have no funding to continue the measure after the election. The Institute for Fiscal Studies has made it clear that
“the Chancellor committed himself—or rather, his successor—to increase those same benefits by 1.5 per cent. less than inflation this time next year”;
and the pre-Budget report confirms that the policy
“avoids a further permanent increase in expenditure”.
It is a pre-election con, paid for by a real-terms cut in benefits following the election. Does the Minister understand that such sleight of hand is exactly what we have come to expect from her Government and one reason why so many hold politics in such low esteem? Will she also confirm that this year there is no £60 Christmas bonus, which many pensioners valued this time last year, and explain the reason for its absence?
We welcome the increase in the basic state pension, which will be a relief to pensioners who have seen their savings hit by low interest rates. Will the Minister confirm when the Government plan to restore the earnings link for the basic state pension and will she explain how the Government plan to pay for it, having set their face against a state pension age increase that would save £13 billion a year?
There was a hidden threat to pensions in yesterday’s pre-Budget report. The Chancellor’s opaque reference to
“phasing in the roll-out of pension personal accounts” —[Official Report, 9 December 2009; Vol. 502, c. 369.]
appears to herald yet another delay in the Government’s flagship personal accounts scheme. Will the Minister confirm that personal accounts will not be fully up and running with 3 per cent. employer contributions until 2017? It is not high earners who will lose out from the delay, but people on middle and low incomes, because it potentially leaves millions of people facing a gap in contributions that they might never take up.
The measure will not only fail to improve the levels of saving, it could actually reduce saving rates at the very time that we need them to increase. The Association of British Insurers said:
“This money will be saved at the expense of getting the low-paid into long-term pension saving, which is absolutely vital for their future welfare in retirement.”
Will the Minister confirm that the PBR has taken £2.4 billion out of the pensions of people on low and middle incomes? I also note that the Government are not uprating state additional pensions. Will the Minister tell us how many pensioners are going to lose out as a result?
On disability benefits, following the Opposition day debate on Tuesday, I note that there is still concern about the threat that the Government’s care reforms pose to disabled pensioners. All the preferred funding models in the Government’s Green Paper are underpinned by the integration of attendance allowance and disability living allowance for the over-65s with a future care and support system. In effect, those cash benefits, which are currently paid directly to recipients for them to use as they wish, would be integrated into local authority social care budgets, and that would give older disabled people less control and less independence.
On Tuesday the Government were making up policy on the hoof without providing any details. They now have to answer a series of serious questions about how the new policy will work in practice. Will people entering a new scheme with equivalent needs to people currently receiving disability living allowance or attendance allowance get the same entitlement? Finally, will the Minister confirm that the Government are cutting £130 million from the national health service budget as a result of the rise in employer’s national insurance which was announced yesterday?
I was going to thank the hon. Gentleman for welcoming the £2 billion of extra resources that, even in difficult times, this Government have managed to find for those who are poor and vulnerable. However, I did not hear any welcome at all in his remarks. He talked about the increase of 1.5 per cent. in disability and carer’s benefits, but it would have been a zero-rate increase if we had not brought it forward as the Chancellor announced yesterday. That is not a cut in benefit; it is a 1.5 per cent. increase in benefit this year, over and above the current rate of RPI minus 1.4 per cent. Does he welcome that? He did not say whether he welcomed the fact that those who rely on disability and carer’s benefits will have an increase this year instead of a freeze.
On the earnings link for the basic state pension, the hon. Gentleman knows that Parliament has already legislated to restore the link from 2012, or by 2015—the end of the next Parliament—at the latest.
Obviously the Conservatives abolished it in the 1980s. [Interruption.] Opposition Front Benchers say that we have done nothing about the earnings link for the basic state pension while we have been in power, but we have raised the basic state pension above prices every year since 1998-99. Every year we have seen a real increase above RPI; in 18 years, the Conservatives increased it once, and they did so to compensate for the introduction of VAT on fuel. We have a far greater record of which to be proud than the Opposition.
I can confirm that the personal accounts reform programme will begin in 2012 as planned, but there will be a slowing of implementation to enable us to ensure that this very complicated and large programme can be put into effect appropriately.
On additional pensions, the hon. Gentleman asked why there is no increase this year, and that is because of the feed-through to those private sector pensions that are contracted out. Such a measure would be extremely complicated, and there would then be an increasing difference between public sector pensions, which would get the increase, and private sector pensions, which are often linked to RPI increases and have planned for a zero-rate increase. We felt that that situation would not be desirable, but I emphasise that all pensioners will see a real-terms increase because of the 2.5 per cent. increase that my right hon. Friend the Chancellor announced in his pre-Budget report yesterday.
The Opposition have spent the past few months telling us that in the depths of a recession we should cut public expenditure. They voted against the fiscal stimulus and the extra help from the Department for Work and Pensions for those in the real economy who have to deal with the effects of the recession, and for those who have been unemployed. Indeed, the Opposition continue to say that they would cut the deficit further and faster, but I still do not know, and I have not heard from the hon. Gentleman, whether they support the uprating—whether they support the £2 billion of extra money that we have been able to allocate for the poorest and most vulnerable in our society. I note with interest that he gave us no indication of whether the Opposition support today’s statement.
I am grateful to the Minister for advance sight of the statement. May I offer her my commiserations? When there is good news, the Secretary of State comes to the House to make the statement; when it is bad news, the Minister of State does so. I therefore thank her for coming to the House with this statement. However, we had hoped that it would provide us with the bits that the Chancellor forgot yesterday. When we saw a copy of it a few moments ago, we anticipated the Minister explaining that April’s rise in child benefit and disabled people’s benefit was temporary, and that when the 2011 increase comes about it will be as if the 2010 increase had never happened. Mysteriously, she forgot that as well. I wonder whether her Department actually knew, or knows, about this; when we read the small print of the pre-Budget report last night, we spotted the problem and I challenged the Minister’s ministerial colleague, the hon. Member for Bishop Auckland (Helen Goodman), about it in the Chamber. I asked whether there would be real-terms cuts in 2011, to which the hon. Lady replied:
“I do not think that there will be a real-terms cut”—[Official Report, 9 December 2009; Vol. 502, c. 424.]
Will this Minister clarify whether the Department was told about the issue in advance, and indeed whether it knows now, that what it proposes is a real-terms increase before the election and a real-terms cut after the election? Is that not a definition of cynicism?
The Minister mentioned additional pension and the state earnings-related pension scheme, or SERPS. Surely the Government could have indexed SERPS if they had wanted to; pensioners who heard that they were getting 2.5 per cent. would hardly have thought that the Government were picking and choosing which bits of their pensions to index and which bits not to. Can the Minister confirm that next year SERPS will be indexed fully in line with the RPI, and not clawed back as child benefit and disability living allowance have been? Can she also confirm that more than 10 million families and disabled people will, as the hon. Member for South-West Bedfordshire (Andrew Selous) said, be subject to a real-terms cut—by definition—between 2010 and 2011, because whatever the inflation rate in September 2010, the Government will put less than that on the benefit rates for 2010? That is a real cut; it must be. Will she confirm that?
Among the additional pension components is the graduated retirement benefit. That is not subject to contracting-out issues, so will the Minister confirm that she will index that benefit, which many older pensioners receive? I am sure that she will, because there is no reason not to.
Had we had a real-terms increase in 2010 for disabled people and families that was a permanent feature of the system, we would have welcomed it unreservedly. As it is, it is a temporary, pre-election feature of the system. It should have been made permanent. We all hoped that the statement today would make that clear; it is almost as if the Government are embarrassed about what they have done.
I am not embarrassed about a statement on uprating that, at a time of economic challenge and difficulty, puts £2 billion of extra resources into the pockets of people who are often the poorest and most vulnerable in our society. I am rather surprised that the hon. Gentleman could think that I would be.
The rise in retail prices-indexed benefits is not temporary, but real. It is happening in April next year instead of a zero increase. I would have thought the hon. Gentleman would welcome the fact that we have been able to get extra resources now into the pockets of those on child benefit, disability allowance and incapacity benefit, rather than inflicting on them the zero increase that the RPI benefits would have left them with. We are helping 5.5 million people, and I would have thought the hon. Gentleman would welcome that.
I confirm that we will increase SERPS indexation in line with the RPI; the question was simply whether we could, in the short space of time, give assistance with additional pension in that way. There would have been a difficulty with uprating the additional pension rather than holding it flat this year; it would have meant that the public sector would have got the increase, but that those responsible for private sector pensions, which are connected to this, would all have been planning for a zero-rate increase and would not have been able to increase their pensions in line with the increases we announced in the time available. We therefore felt that it would be better to do it in a more orderly way and keep additional pensions at zero for now. That does not mean that an increase connected to RPI will not come through in due course.
As someone who occasionally criticises the Government, I should say to my hon. Friend that one of the most impressive achievements of the Labour Government since 1997 has been to undermine pensioner poverty substantially. We should also bear in mind the winter fuel allowance, which was introduced almost from the moment at which Labour was elected. That compares well with the disgraceful poverty that pensioners had to face year after year during the last Tory Government.
I thank my hon. Friend for his comments. I am certainly very proud to be part of a Government who are the first in our history to break the link between old age and poverty. People over 65 are now no more likely to face poverty than any other generation or age cohort in our society. That is a substantial achievement. I am also proud that instead of spending a mere £60 million on helping pensioners with their fuel bills—the situation we inherited in 1997—we now spend £2.7 billion a year on that, because of the introduction of the winter fuel payment.
May I direct the Minister’s attention to the group of pensioners who were very responsible during their working lives and established a quality and way of life funded not only by benefits or the state pension but by the savings they had made? Their quality of life has now been dreadfully undermined, because the rate of interest on savings has plummeted to almost zero. Are the Government and the Minister concerned about that group of people, who were highly responsible during their working lives but are now suffering? They cannot benefit from the announcements—announcements that I welcome—from the Minister this afternoon.
I thank the hon. Gentleman for welcoming the announcements, which is more than his party’s Front-Bench spokesman did. The historically low interest paid at the moment, because of the economic situation we find ourselves in and the world finds itself in, has caused particular issues for those who rely on interest from savings in their retirement. We do our best to assist them—particularly, for example, by increasing the personal allowance thresholds, as my right hon. Friend the Chancellor did in his Budget last year. That lifted another 600,000 pensioners out of tax altogether, and 60 per cent. of pensioners now pay no tax.
Although we are concerned about pensioners who rely on savings income, I should also say that 55 per cent. of pensioners receive less than £10 a week, or no income at all, from investments. In essence, today’s statement is more about them, as the hon. Gentleman himself acknowledged.
I warmly welcome this statement on benefits uprating; it is proof today that the Government have not abandoned the poor and vulnerable. I particularly welcome the uprating on state pensions. Some of us will recall Mrs. Thatcher’s being handbagged because of the Conservative Government’s disgraceful record for cutting pensions rather than upgrading them. Will my hon. Friend confirm that some analysts in the media are suggesting today that, when we take account of the RPI and inflation trends, the increase may be worth about 4 per cent. in real terms? Will she also confirm that the Government have done more to bring pensioners and retired people out of poverty than any Government since the introduction of the welfare state? A Tory Budget—
Order. This is becoming a speech.
I share my right hon. Friend’s passion for the results of our work on eliminating pensioner poverty. Pensioners are now no more likely to be poor than other age cohorts in our society. There is still more to do, which is why we continue to work to improve access to pension credit, to assist those who are still on low incomes.
I can confirm that, with the RPI at minus 1.4 per cent., the 2.5 per cent. increase is closer to 4 per cent. If he had chosen to, my right hon. Friend the Chancellor could have frozen the basic state pension; instead, he chose to increase it by 2.5 per cent.—and that is closer to a 4 per cent. increase, as my right hon. Friend the Member for Leeds, West (John Battle) said. I know that across the country many of the spokespeople for our 11 million pensioners welcomed the announcement when they heard it in my right hon. Friend the Chancellor’s statement yesterday.
Earlier, during business questions, I asked about the level of winter fuel payments and was told to await this benefits uprating statement, but unfortunately there is nothing in it about that issue. I welcome the Government’s introduction of winter fuel payments and the increase in the basic state pension that has been announced. However, is there not a need for regular reviews on increases in winter fuel payments? Also, what about the £60 Christmas bonus for pensioners this year?
My right hon. Friend the Chancellor always keeps in view the level of the winter fuel payment, which the Conservatives have called a gimmick but is £2.7 billion of real help that ensures that when the weather gets cold, pensioners do not have to worry about turning their heating up. I welcome the hon. Gentleman’s view on that. On uprating, my right hon. Friend keeps that under review. When the winter fuel payment was first introduced it was £20; this year, it is between £250 and £400 for all people over state retirement age—substantial and real help for those who wonder whether they can get through the winter and worry about turning their heating up. There is no need for them do that because of the winter fuel payment, which should be arriving even as we speak.
Is my hon. Friend aware that in previous recessions stretching back to the ’70s, on every single occasion the people at the bottom of the pile have come off worse? This is the first time that those least able to weather the storm have come off better than many others, including—dare I say it?—some bankers who could have been hit even harder. Can I suggest to my hon. Friend that this is an example of fixing the roof even when it is raining for those least able to bear it?
I agree wholeheartedly with my hon. Friend’s comments. My right hon. Friend the Chancellor was very clear in his approach to the pre-Budget report, of which this uprating statement is a very important part. He believes that those with the broadest shoulders should bear the greatest burden of the challenges that face us in the economy at the moment. This uprating statement proves that he has delivered that in action.
We keep these things under review. However, we are bound by EU reciprocal laws on social security that enable the 1.5 million UK citizens who live and work in the European Union to benefit in turn from local arrangements in the countries in which they work.
We all appreciate what the Government have done over the past 10 or 12 years in general terms in increasing benefits across the board. Having said that, coming back to the point made by the hon. Member for Belfast, North (Mr. Dodds), can my hon. Friend reassure me that she will keep the winter fuel allowance under review, bearing it in mind that oil prices and so on are starting to creep up?
I know that my right hon. Friend the Chancellor is committed to keeping the winter fuel payment as the helpful benefit that it is. Its size has gone up consistently since it was introduced, and we now spend £2.7 billion a year on ensuring that older people need not worry about keeping warm in winter.
The Minister has a reputation for not trying to dodge a question and giving an honest answer. Will she therefore explain to the House whether, given that when we get to 2011 this year’s 1.5 per cent. increase is going to be disregarded, that means there will be a real cut of 1.5 per cent.? Could she be absolutely clear about that?
Flattery will get the hon. Gentleman to all sorts of places; I welcome his comment about my answering straight questions. My right hon. Friend the Chancellor has taken action to ensure that 1.5 per cent. of money can be given to those on carers’ benefits, who otherwise, without the action he has taken, would have been facing a zero increase in today’s uprating statement. That assists 5.5 million people. This morning, when asked about what would happen in 2011, he said that we will have to decide in 12 months’ time what will happen for the next year. The hon. Gentleman knows that benefit upratings are held only on an annual basis, so we cannot speculate from this far away when we do not know what the rate of inflation will be and what the implications for uprating will be in 2011.
We can have some interesting debates about the interaction of benefits, but today we are talking about their uprating rather than changing their balance in the benefits system. We all know from our own constituency case loads of the crucially important work that carers do. That is why I am pleased to be at the Department for Work and Pensions when we are bringing in the historic changes that, from April next year, will credit carers into access to the basic state pension for their caring responsibilities. For the first time, it will be possible for someone who has cared for 30 years to get the credits to qualify in full for the basic state pension. I am very proud of that change, which this Government have managed to bring in.