Thursday 10 December 2009
[Hywel Williams in the Chair]
[Relevant documents: Fifth Report from the Work and Pensions Committee Session 2008-09 HC 411 and the Government response HC 1029.]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Tami.)
Although this is the first time that I have served under your chairmanship, Mr. Williams, it does not make it any less of a pleasure.
Unusually, I should like to start by thanking the Government for their fairly positive response to our report, which is not something that we are used to in our Committee. It usually takes two or three years for our fantastically good suggestions to bear fruit, but this time the Government have accepted much of what we said. Moreover, we should recognise the many organisations that submitted evidence to us and the hard work that they, and the witnesses who gave evidence for the report, put in.
When considering pensioner poverty, we need to focus on three distinct groups: today’s pensioners, people who are nearly retired, and the remainder of the population. In his report in 1948, which seems a long time ago now, Beveridge said that the state pension on its own would never be enough on which to live in retirement, and that it would always have to be supplemented by savings or insurance. It is that last bit that most people forget. All the letters that we get as constituency MPs say, “I can’t live on the state pension; it is not enough. You should put it up.” Somewhere along the way, we lost that behavioural imperative of providing for our retirement through those two additional vehicles. It was partly in response to that situation that we got the 1975 Castle revisions, which brought in, among others things, SERPS and earnings-related elements.
By the 1980s, many of those changes had been eliminated or significantly reduced. The Social Security Act 1988 had the unfortunate consequence of what we now know as pensions mis-selling, with many people being deluded into coming out of relatively good final salary schemes into personal pension arrangements. In 1994, post-Maxwell, we had the 2,000 page Goode report, which, rather oddly, made no mention of annuities. One of the main things to come out of that report was the minimum funding requirements. However, in the late 1990s and early 2000s, when employers went into liquidation, it was discovered that a large number of schemes were deficient and that the minimum funding regime had never worked properly. The consequence of that was a financial assistance scheme, which, at the last count, would cost about £8 billion. It is clear, therefore, that significant sums of money come into play in such matters.
Those events led to the establishment of the Turner commission. It is very telling that the commission finally reported in 2005, four and a half years ago. Although we have moved a long way in terms of time, the same is not true of legislative responses. A number of changes are due to come in next year that should address some deficiencies. We were expecting personal accounts in 2012, but after yesterday, they look like being delayed for a year, which is sad and will have consequences.
So, who are the pensioners living in poverty? It is largely women, because, historically, most of that generation either never worked or had very short working lives, and that was the way in which society was organised at the time. Sadly, some of those who worked never came off what was called the married woman’s stamp, so they never accrued pension entitlement themselves.
The second large group affected by pensioner poverty are black and minority ethnic communities. There is no obvious explanation for that other than, as a group, they tend to have lower earnings than the national average, and higher unemployment. The third significant group that suffers from pensioner poverty consists of those who live in inner London. No real insight has been given on why that is, but it may be due to a combination of a deep concentration of BME communities and large numbers of retired women.
One of the major responses—in fact, the principal response—to pensioner poverty has been pension credit. Never in the history of government has so much time, effort and finance been put into a take-up campaign as has been put into that for pension credit. All the evidence shows that the amount invested has diminishing returns. The vast majority of those who are entitled to the guarantee element receive it. However, we need to become more scientific about where we direct our effort on take-up, and particularly look at the BME community, those who live in inner London and any other blips that show up in the statistics.
Certain groups are likely to end up in poverty in retirement, including low earners, the disabled, carers and those with broken work records. The other thing that will lead to a lot of people suffering from poverty in retirement is longevity. Someone might retire at 65 with a reasonable or modest pension and an accumulation of savings, but savings run down over time. The longer they live, the more expenses they face to tackle the effects of ageing and poorer health, and the more their assets disappear. So, what initially was a comfortable retirement inevitably leads to a distressing situation.
Over the years, the accumulation of pension savings and assets has received enormous concentration and no end of debate in the House, but little attention has been given to “decumulation”. There is a minimal amount of advice about what to do when one gets to retirement age, and that links back to some of the debates about annuities. Sadly, despite the legislative changes, the vast majority of people who have defined contribution schemes will, when it comes to retirement, take an annuity with the provider of the scheme. They do not use the facility to shop around. Evidence suggests that someone can get up to 15 or 20 per cent. more than what is on offer from their provider.
Another vehicle that will become increasingly important in the coming years in attacking pension poverty is equity release. Some of us will remember what happened in the early 1990s and, dare I say it, the West Bromwich and, I think, Norwich Union. That was a scandal, but as long as we learn from the past, there is a role and place for equity release, providing people are able to get the proper advice and know exactly what they are getting into.
We have a problem in general in our society with financial literacy. A theme running through our report was the necessity for people who are nearing retirement to get appropriate, accurate and cheap advice on the options that they have to maximise whatever situation they are in. We still have not cracked that. I know that the Department for Work and Pensions have conducted some pilots on money guidance and that the Treasury are doing some things, but we need to pull those strands together so that people can maximise their situation and avoid being in poverty for the want of such advice.
Will my hon. Friend add to his point the need for independent advice? One of the real difficulties with equity release is that, dare I say it, families are not dispassionately interested in how that equity release might operate. It is not unknown for people either to advise their parents or, more commonly, to get someone they know to advise their parents. Sadly, that is where some of the family disputes come from. Therefore, it is necessary for older people to get genuinely independent advice.
I take my hon. Friend’s point. That is not a road that I particularly want to travel, but there have been some fairly scandalous examples of offspring being too eager to get their hands on their inheritance before there is a natural death—I think I will leave it at that.
In considering pensioner poverty, it is important not only to look at the income side but to look at the expenditure side too. There is no doubt at all that schemes such as free bus travel and winter fuel allowance have been major instruments in assisting retired people to reduce their expenditure and thus hold off the onset of poverty. The warm homes scheme itself has improved the heating systems of some 2.5 million pensioner households, through insulation, cavity wall insulation and so on. Again, that has the impact of reducing pensioners’ fuel bills.
However, in our report we make the point that retired people are far less likely than the general population to switch their fuel provider. If someone has a basic acumen about the internet, they can switch their supplier online fairly easily, but the elderly are a group for whom that is not the norm. Retired people tend to stick with their supplier, which they may have been with for the past 20 or 30 years. Quite considerable savings can be made by switching supplier and, given that people’s income gets lower and more fixed as they get older, the more important those savings are.
There is a long history of pensioner poverty. I am absolutely certain there will be more debates about it in the future. The changes that were introduced post-Turner were meant to ensure that we would have far less pensioner poverty in the future. I do not think that we will ever eliminate pensioner poverty. However, the principal instrument or change that is supposed to be introduced in 2012 is auto-enrolment, so that everybody hopefully would be in some scheme, even if it was only the personal account with a fairly modest contribution of 8 per cent. to it. In that way, everybody would be on the building blocks of the basic state pension and the state second pension, which will continue.
Of course, that excludes people who are not in work. Frankly, all Governments have a pretty poor record of dealing with those people, particularly those with a disability. When somebody at birth has a very severe disability, it is not right to say to them, “You will be poor in childhood, you will be poor in your working age and you will be poor in retirement”. Yes, we have built in assumptions that people with a severe disability are contributing to the state pension and the state second pension, but those people will still receive only an extremely modest income in retirement. As we move forward in the coming years, and hopefully as the public finances improve, we need to focus on that area and ask ourselves what we can do better for those disabled people, so that they do not experience a lifetime—from birth to death—of poverty.
I want to start by saying what a pleasure it was to serve on the Select Committee during this inquiry. Pensioner poverty is an important subject and, as people can see from the two volumes of the report that were produced and the evidence that went with them, it was a subject that we tackled in considerable depth, with assistance from a range of organisations.
I want to draw attention to four things in the report. The first is recommendation 130, which has already been mentioned by the Chairman of the Select Committee, the hon. Member for Bradford, North (Mr. Rooney). It relates to the Committee’s disappointment that there is an unacceptable level of pensioner poverty in some black and minority ethnic communities but pretty little in the way of information that explains why that problem exists and how it can be tackled. Having said that, the take-up of pensioner credit among BME communities must play a crucial part. So I want to echo recommendation 130, which showed the seriousness with which we viewed that issue, and to stress the importance of that recommendation.
Recommendation 199 is particularly helpful. My constituency is relatively close to London compared with the north of England, but it is still a very rural constituency. Of the 75,000 voters in my constituency, I think that only 14,000 live in towns; the rest live in small villages. Recommendation 199 brings out clearly the difficulty for pensioners, particularly pensioners in poverty, of living in a rural area. I think that too often we forget the difficulties that living in a rural area creates—both the extra costs and the physical difficulties of transport. Essentially, in many rural areas people are restricted to using their own transport, as public transport is weak. For example, my own village is considered sustainable on the basis that it has a bus stop, but there is only one bus during the week that takes people to the market to shop and then brings them back a couple of hours later. Of course, that leads to the other side of pensioner poverty in rural areas, which is the isolation that pensioners feel. Obviously, the financial aspect, combined with that feeling of isolation, makes for a sort of double hit on pensioners in rural areas. So recommendation 199 was one that I felt particularly strongly about.
The third recommendation that I want to underline is 315, which refers to the default retirement age. There was huge support for allowing the flexibility that the recommendation calls for. Retirement age must be a judgment for individuals; they must have the flexibility to decide when they retire, so that they can manage their retirement as they have managed their working life. The evidence that we found was that such flexibility was not a particularly onerous burden on employers. We found that people did not want to work for more than one or two extra years, but that the extra time made a big difference to them financially.
The fourth and last point that I want to emphasise is not one of the report’s recommendations but the evidence from our visit to Canada. For me, that visit was a particularly useful exercise, because we were impressed with Canada’s success story in the last 10 years in reducing pensioner poverty. A number of things struck me about that success story that we might want to think about.
The first was the way in which the Canada pension plan had been funded, or at least part-funded, in the good times. Obviously, the opportunity to do the same has now passed us by and it is unlikely to be a practical option in the future, so it is a source of regret that we did not go down that route.
One of the other things that I was struck by was that the fact that the Canadian pension plan funds were managed on a completely arm’s-length basis, unrelated to any contribution that they might have to make to the Canadian economy. They were there to generate as much income as possible to fund pensions. That professionalism came out very strongly.
The last element of the Canadian experience was the recognition that there was no obligation in Canada to purchase an annuity, something about which we have probably all had correspondence from constituents during these recessionary times. The Canadians thought about it in advance and ensured that annuity purchase was not compulsory, a policy that we would like to see enacted for pensions here; I would certainly welcome it.
I stress those three recommendations. The evidence from the Canadian trips usefully brought together a lot of my experience of the matter. It was a useful trip and one that achieved an enormous amount for my own personal education and knowledge. I am grateful to the Committee for allowing me to be a part of it and for choosing this subject.
It is a pleasure to serve under your chairmanship, Mr. Williams, and to follow my colleague on the Committee, the hon. Member for Henley (John Howell), as well as our Chair, whose introduction of the report brought to bear the knowledge that he has developed over the years. There is a lot of important background to the report.
To start on a positive note, I am sure that the Minister was pleased to read in our report that we acknowledge the hard work done by the Government. Pensioner poverty has decreased in recent years. As the Chairman said, we acknowledge the important role of pensioner credit, the winter fuel payment, the increase in cold weather payments and other elements that help pensioners’ lives, not least of which is free bus travel. I see many pensioners in my constituency taking advantage of free bus travel and enjoying themselves.
Those things have helped pensioners, but the two recent Pensions Bills have also contained lots of improvements that should help reduce pensioner poverty in future, including the introduction of a credit for carers, a reduction in the number of qualifying years of national insurance contributions to 30—that will help everybody, especially women, to retire with a full state retirement pension—a proposal to uprate in line with earnings and the introduction of new personal accounts. We all want those improvements to happen sooner rather than later so that people get used to saving for their retirement and build up a personal pension pot as well as their entitlement to a state retirement pension.
Nevertheless, the reason for the Committee’s report is the fact that we are all too aware that too many pensioners still live in poverty. We set ourselves a comprehensive task. Page 9 of our report sets out the terms of reference, the extent of which shows that the problem has many different angles that need to be considered. We wanted to know what the Department for Work and Pensions was doing to address the issue, but we also wanted to know what specific groups were more vulnerable to poverty in old age.
The terms include the impact of the financial crisis on pensioner poverty. Much of the debate about the global financial crisis has focused on people in work, but it also affects pensioners, some of whom, of course, are also in work. Other issues include benefits take-up, the basic state pension, disability living allowance, attendance allowance and carers’ allowance, which all affect the problem. Are lump sum payments such as the winter fuel payment the right way to address pensioner poverty? Also, of course, there is the Government’s overall welfare reform programme. That is why the report is comprehensive. We received a huge amount of evidence from a variety of different people.
I congratulate the Committee on its excellent and comprehensive report. The hon. Lady mentioned a range of issues, including benefit take-up. One problem is that many people—I meet them in my constituency and elsewhere—do not get what they are entitled to, whether through lack of knowledge or due to difficulties filling in forms and all the rest of it. What more can be done to encourage and incentivise people to take up the benefits to which they are entitled rather than losing out on the £5 billion that Help the Aged says older people go without?
The hon. Gentleman raises a key point. My contribution to this debate will concentrate on two areas. The first is simplifying the system, which includes enhancing take-up. One reason for low take-up of some benefits is that pensioners see them as too complicated and do not understand not only individual benefits but how benefits are inter-related. I shall address that issue.
The second issue that I will concentrate on is people in retirement who are carers. More men than women are carers in retirement, and that gives rise to all sorts of issues that we address in the report and which I will talk about in more detail. As the Chairman said in his introduction, we investigated what groups were vulnerable to poverty in old age. They include older pensioners and women, and often older women: those aged 85 and over who did not build up an entitlement to the full state pension, and who often do not take up the benefits to which they are entitled.
Other vulnerable groups include black and minority ethnic and disabled pensioners—again, a lot of pensioners with disabilities do not take up as many benefits as they ought to—carers, whom I will discuss in a little while, and people in care homes. We often forget about those individuals, but their personal allowance for expenses is minimal. We think somehow that everything is provided for them, but it sometimes is not, so we need to remember them as well.
On simplification, it is important that we consider take-up and how to make the system more accessible and understandable for people, both before retirement age and on retirement. We received a lot of information about reasons for non-take-up of pension credit, which are discussed on page 35 of the report. One reason is lack of knowledge. Many people who retire had no contact with the benefit system while they were of working age and have little understanding of what they can claim.
Some people also believe that they are ineligible for benefits, especially owner-occupiers. I represent a constituency with a high percentage of pensioners who are owner-occupiers. Many people who choose to retire to the seaside buy bungalows by the sea. As the Chairman said, when they first retire, they often have a reasonable income, and they furnish their homes and have a nice lifestyle. But 20 years later, that is not always the case, and they do not always realise that they can claim additional support.
The hon. Lady is absolutely right, not least about people retiring to seaside towns. However, I urge her also to make a point about council tax benefit, to which the same considerations apply in spades. It has the lowest take-up of any of the means-tested benefits. My constituency—I am sure that hers is the same—is full of widows who live on their own and own their homes but are cash-poor, but who do not imagine for a moment that they are entitled to any help with their council tax.
The hon. Gentleman is absolutely right. I will come to the issue of council tax and housing benefit in a moment.
People are reluctant not only to claim but to give out personal information. Many pensioners are proud and do not want to talk to people about their financial circumstances. We need to convince them that they ought to, because it involves their entitlement, something that the state thinks that they deserve to have. There is a difficulty, or a perceived difficulty, in claiming and there is a lack of support, particularly face-to-face support. We identified areas of non-take-up of pension credit and we must consider how we can make improvements.
The Select Committee looked at automaticity, although I dislike that word and am sure that there must be a nicer way of putting it. There are automaticity pilot schemes that are looking at whether people have an automatic entitlement. We looked at a pilot in Motherwell in which people who were in receipt of income support were contacted five months before they reached the age of 60. They were asked to arrange a telephone call to claim pension credit. Our recommendations called on the Department to undertake a prompt evaluation of that pilot. The Department said that to bring in automatic entitlement, it might be necessary to change legislation. We all know how difficult that can be. However, adopting the approach of the Motherwell pilot would not require a change in legislation, although it would require work by officials in the Department. I hope we will hear more about that so that we can maximise the ways of simplifying the system. If we can identify the people who should be entitled to pension credit, we should do so. We should be proactive to ensure that those who should get the credit do get it.
The Select Committee considered council tax benefit and housing benefit. The Institute for Fiscal Studies told us:
“Pension Credit and Council Tax Benefit are the most significant benefits for the 65-and-over age group”.
There is a long list of recommendations in the report on increasing take-up. The clear way forward that we identified was having a single phone line for all three benefits. However, the response from the Department said:
“It will sometimes be more efficient for both the pensioner and the decision-maker to direct the pensioner to the local authority rather than a PDCS phone line.”
Why? It seemed to me and the Committee that having a single phone line would be a lot easier for pensioners.
Blackpool council in my constituency works closely with the Department and tries to simplify the interaction between council tax benefit and pension credit. That does not always happen, so we must do more to simplify the process.
I agree entirely that the process should be simplified. I think that Britain is the only country in Europe in which three major Departments are responsible for distributing benefits, and there are agencies below that. I have suggested many times that we ought to combine all benefits in one Department. That would solve the problems of complexity and difficulty for claimants, and save a lot of Government money.
I refer my hon. Friend to the various Work and Pensions Committee inquiries on housing benefit. The Government are considering that issue and perhaps there is a way forward. The Department has a simplification unit that is aware of the complexity of the benefits system and is trying to simplify it. Every time the Committee looks into the matter—as we did in our report on benefit simplification, which suggested ways forward—we find that it is not easy to have a simplified system, particularly a simplified benefits system, because it tends to lead to a broad-brush approach that does not deal with the detail found in people’s lives. We must therefore look at compromises. For example, we could respond to people using less detail and ensure that they get as much as they can, rather than have the situation in which some people do not claim and so do not receive anything.
I am grateful to my hon. Friend for giving way again—she is most generous. She talks about ensuring that everyone gets the benefits to which they are entitled ands says that it is simple. Would it not be simpler to have one Department with responsibility for benefits and a one-stop shop that can deal with all of the details for every person in one place, by one person and at the same time?
The Committee’s reports on simplification, on carers and on tackling pensioner poverty have considered a one-stop shop. The answer is not necessarily to amalgamate everything into one Department, but could be to amalgamate it all into one telephone line or one door that people can walk through so that everything is dealt with together and there is the clearest possible analysis and response to each person’s situation by an official.
The second area I want to touch on is carers. “Tackling Pensioner Poverty” refers back to our report on carers because many carers are of retirement age. If ever a system needed simplifying, it is the interaction between the state retirement pension and carer’s allowance. I am not the only Member of Parliament to whom pensioners have come, saying that they have applied for carer’s allowance and have received letters from the pensions agency saying, “You are entitled to carer’s allowance and your reward is £0.00.” Do people understand that? Of course not.
Pensioners cannot receive two income-replacement benefits simultaneously. They therefore cannot receive the state retirement pension and carer’s allowance at the same time. However, the Government changed the rules a few years ago, so an exception is that people can receive a reduced state pension topped up to the level of the carer’s allowance. In general, the two cannot be received together. Despite that, if people want to get the carer’s credit, they must first apply for the carer’s allowance. That is difficult to explain to some carers.
In the report on carers, the Select Committee came up with the good idea of dividing the carer’s allowance in two. The first allowance would be the carer’s allowance and the second would be a caring costs allowance that reflected the cost to the carer of the caring work they do. We recommended to Government that the second element, which is not an income-replacement benefit, should be paid whether the carer is above or below retirement age. We returned to that recommendation in the pensioner poverty report. I am pleased to say that the Government did not dismiss the idea out of hand. In response to the report on carers, Ministers said that they would look at carer’s allowance as part of an overall review of benefits and benefit simplification. Will they consider it further and give a concrete answer to the problem? If not, pensioners who receive pension credit will continue to not receive carer’s credit because they do not want to go through, do not think they have to go through or do not know about the rigmarole of claiming for carer’s allowance in order to be told that they cannot have it, but that they can have something else instead.
The Select Committee’s reports on carers and pensioner poverty said some very nice things about carers’ centres. That relates to the point my hon. Friend the Member for Luton, North (Kelvin Hopkins) made about having a single focus. They are a place where people can go to learn about their whole benefit entitlement.
This comprehensive report covers lots of other things, including the issue of disability living allowance and attendance allowance, the default retirement age, which the hon. Member for Henley mentioned, age discrimination, financial advice and choosing the correct annuity. Last but not least, it covers the importance of health and well-being—many poor pensioners experience ill health. We need to look at all the issues that affect pensioners. If we can lift pensioners out of poverty, we can help them to lead much fuller and healthier lives. That is why the Committee’s report is a good one. I am proud to be a member of the Committee and I fully support our Chairman and the report.
It is a pleasure to serve under your chairmanship, Mr. Williams. I am glad that we have time to debate these important issues at appropriate length.
I welcome the publication of the report and the speeches in support of it by my hon. Friends the Members for Bradford, North (Mr. Rooney) and for Blackpool, North and Fleetwood (Mrs. Humble). I have to say, however, that we still have not faced up to the fact that the basic state pension and pensioner incomes are simply a disgrace. Compared with the rest of Europe, they are very low indeed, and more than 2 million pensioners still live below the poverty line.
About 10 years ago, a comparison was made of pensions across Europe. At the time, Britain had the absolute rock-bottom basic state pension in the European Union for a single person with no qualifications. The next lowest state pension was in Germany, where people received £150 a week, which was about £60 a week more than in Britain. When I told a group of pensioners, they gasped—they thought that £160 a week was an enormous amount. I said that it was rather less than a Member of Parliament got paid in one day—I had to put it in a context that they would understand. We are still in that situation.
I have to say at this point that I regularly sponsor the annual lobby of Parliament by the National Pensioners Convention and I have publicly supported many of the things that it has said, particularly in the pensioners’ manifesto that it recently published.
The reason why we have got away with a low basic state pension is that so many people have benefited from occupational schemes. Indeed, I am in receipt of an occupational pension, even though I am working. Millions of people are in such a scheme. As a result, the low basic state pension has not affected a high proportion of the population, because people receive incomes from elsewhere. Many people also save privately, and private pensions have been another way of cushioning the impact of our disgracefully low basic state pension.
However, occupational schemes are dying; they are being cut off at the knees or are disappearing altogether, and many schemes are preventing new entrants from joining. Occupational schemes will not be there by the time that people such as my children retire, and members of my family who work in the private sector—they are not that well paid, but reasonably well paid—will not have the benefit of an occupational pension, which was something that we could look forward to in the past. Occupational pensions offer guaranteed payments after people retire and even the possibility of retiring early and getting very comfortable payments, but that system is dying and will not be revived.
I suspect that the real reason why companies introduced occupational pensions, which were not transferable, was to hold on to workers. I am older than almost everybody here, and when I grew up we had something called full employment. Every factory had lists outside of the jobs that people could go in and get—that was certainly true in the south-east, where I grew up. As a result, companies wanted to hang on to their workers, and one way in which they did that was by providing occupational pension schemes. It was the same in local government and the public sector, where pay has often been quite low and people have been attracted into jobs by the knowledge that they will get a decent pension at the end of it. Attacking public sector pensions will not be to our advantage in the long term. With great respect for what my right hon. Friend the Chancellor said yesterday, we should look at the problem with private pensions, which are disappearing and being broken down. That is the problem—not the public sector pensions.
On private savings, we have had the Equitable Life scandal. I am a member of the Select Committee on Public Administration, which has supported the ombudsman in calling for those who were affected to receive compensation because regulation failed to protect them. Light-touch or non-existent regulation has led to hundreds of thousands and possibly millions of people losing out. Every year, 30,000 people die who lost out as a result of the Equitable Life scandal.
A high proportion of contributions to private pensions go on advertising and administration. About one third of what would go back to pensioners in a well-regulated state scheme goes to meet just advertising and administration costs, so private schemes are not good value. They are also subject to the vagaries of the stock market and interest rates, so we cannot guarantee that an annuity will be at a particular level, because we do not know what the economic situation will be when the annuity is paid.
The future will not, therefore, be a good private sector or occupational schemes. Increasingly, we will have to rely on a state pension for our fundamental income; indeed, for many working people or those who are unemployed and never have the chance to build up savings, it will be their only income.
The state pension is crucial, but we have seen what has happened to it since Mrs. Thatcher broke the earnings link getting on for 30 years ago. The state pension has dropped from about 26 per cent. to about 16 per cent. as a proportion of full-time earnings—a massive drop in real terms. Had we kept the link to earnings, the figure would now be about 40 per cent. higher than it is, and we could be getting close to the German level of 10 years ago. We still would not be where we should be, but we would be a lot better off. Of course, there would have been more contributions.
I accept that the state pension is important, as the hon. Gentleman says, but could the increase over the past 10 years in the number of pensioners living in poverty not be at least partly attributable to the fact that the numbers claiming housing benefit and council tax benefit have declined? If we could improve the take-up of the benefits that are due, that could help to deal with pensioner poverty and to improve the numbers that the hon. Gentleman mentioned.
Indeed. I should have said that the Government have taken some steps to improve pensioners’ lot over the past 12 years, which I welcome. However, those steps have been marginal and, as the hon. Gentleman says, the numbers living in poverty have increased. With a high level of means-testing, however, there will always be these problems. The poorest and least able pensioners—those from ethnic minorities with poor language skills who feel nervous about claiming and who are not used to the system—will lose out. The report refers in particular to Bangladeshi and Pakistani pensioners, who are the poorest of the lot. I have a high proportion of Pakistani and Bangladeshi constituents, and they live in poverty. At this stage, most of them are young, but as time goes on they will become pensioners. Means-testing is part of the problem. The Government benefit to the tune of £5 billion a year because people do not claim benefits. Constantly urging people to claim benefits and giving help through citizens advice bureaux and advisers will not overcome the basic problem of means-testing. I would like us to move away from means-testing for pensions altogether and towards a much higher basic state pension. We should use the tax system, not means-testing, as a redistributive mechanism.
I refer my hon. Friend and the hon. Member for Billericay (Mr. Baron) to page 11 of the report, which points out that the number of pensioners living below 60 per cent. of contemporary median income—the usual relative poverty line—has gone down from 29 per cent. in 1998-99 to 18 per cent. in 2007-08. Each of the three indicators that are used to describe poverty shows that the number of pensioners living in poverty has gone down.
I thank my hon. Friend for that correction. I may have to look at the statistics more carefully, but the fact is that we still have more than 2 million living below the poverty line, and of course the number of pensioners is increasing. As we live longer, a much higher proportion of people will be of pensionable age. If we do not start to put the system right, and put more into it now, the level of poverty will inevitably increase. We need to do something serious about contributions.
I accept what the hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) says, but the figures are open to dispute. Help the Aged, for example, would question those statistics, according to the evidence that I have. We must not just bandy figures around willy-nilly. The bottom line is, as the hon. Member for Luton, North (Mr. Hopkins) says, that the issue remains a key one. We can debate whether there have been slight rises or falls in number, but the simple fact remains: too many pensioners in this country live in poverty, and we must do something to put that right.
As the hon. Gentleman says, we could debate the figures and argue about them, and no doubt the National Pensioners Convention has its own figures, although I do not have those to hand.
Had we not broken the pensions-earnings link, we would have solved much of the problem already, but the NPC suggests that to make sure that no pensioner lives below the poverty line we need a basic state pension of £165 a week, which is an enormous increase. Of course, I have suggestions about how we would achieve that. It would mean much greater contributions. However, for the future we must think about radical reforms. With the gradual—even rapid—demise of occupational and private schemes, we must look towards a compulsory state scheme for the long-term future, if people like my children and grandchildren are to have any kind of decent living in old age, assuming that they do not have enormous incomes from which they can save vast amounts.
For an adequate state pension, the NCP talks about £165 a week, and that is a fine place to start. One way in which we could achieve that would be, first, to roll up all the payments that are made at the moment—pension credit and the winter fuel allowance—and build them all into the basic state pension, so that there are not means-tested bits and little add-ons. The winter fuel allowance, much as I welcome it—it is very useful—is said to be targeted on the poor; but actually it is a benefit that is not even taxed, so the rich get it as much as the poor. It is regressive in that sense.
If the winter fuel allowance were to be built into the basic state pension, which, with total income, would be taxed, what was taken from the rich could be recycled to be built into the system at the bottom and help the less well-off. A taxed system is much better than one that is either means-tested or, indeed, not taxed or means-tested at all. I suggest a 54-week year for the payment of the basic state pension, with a double payment in January and December, which would have the same effect of extra income in the winter, when it was needed to help people. Instead of the winter fuel allowance, people would get that double payment in December and January, to overcome the problem, and pensioners would get the extra lump sum that they enjoy so much.
Such an approach to the basic state pension would, however, still mean a fairly basic standard of living for many people. I defy any Member of Parliament to sustain the standard of living to which they are accustomed on £165 a week; nevertheless, a lot of poor pensioners would think it a good start. Still, many people would want to save beyond that. Voluntary saving in the end does not work for many people. The only system that would work would be a compulsory one—a compulsory universal state earnings-related pensions saving system. That is the only way forward.
There would be two elements—the basic state pension and a compulsory state earnings-related pension scheme for everyone. The contributions would be substantial and people would know what they would receive in the end; it would not be subject to economic conditions, the stock market, interest rates or whatever. That is the way forward: voluntarism will not work. People live for today and there are pressures in daily living which mean that they do not save. The amounts that must be saved to provide a serious pension are enormous. People might say, “I’ll put away £50 a week.” That would not give very much over a lifetime; it would give something, but not enough. Many forecasts have been made about the kind of money that must be paid. Private schemes are inefficient, anyway. The great advantage of a national scheme is that it is easy to administer and very efficient, and we could have a large national savings fund, which could be used for investment purposes and would generate its own income, particularly in public infrastructure, for example. It would be a comprehensive state scheme, with a large fund that would mean that people’s pensions were secure for the long term. That is the only serious way forward.
I do not believe that we have yet addressed the problem at all seriously, although I welcome the marginal changes that have been made, and the worthwhile suggestions in the report. We must be much more radical if our children and grandchildren are not to suffer poverty in old age.
I apologise for being late to the debate, Mr. Williams. I am happy to be here to add to what has been said by other members of the Committee who put together the report, and I congratulate the Government on having done a huge amount in the policy area of pensioner poverty. Often when a Government achieve some successes, we pocket them and say, “Thank you very much,” and then add, “And what are you going to do for us now?” My remarks this afternoon will be in that mould as well; there are other things that the Government may want to look at.
I endorse the comments made by my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble), who covered much of the meat of the report. I do not want to repeat all that she said, but there is no doubt that the incomes and lives of women pensioners in particular have been transformed by the Labour Government, especially by the introduction of the pension credit. They are much better off than they were under any previous Government. That is partly because many of them did not qualify for the basic state pension, or had gone through a marriage break-up and so no longer had their husband’s contributions to their basic state pension. Also, women live longer, and there is an ageing population of women who, before the Labour Government were elected in 1997, were living on very modest means. I still find, particularly when I visit sheltered housing in my constituency, women who say that they have never been so well off, and that they are very pleased with what the Government have done.
However, the Government have also gone beyond what is in the report in considering the future of women as they reach retirement age. I am very pleased about what was done in the Pensions Act 2007 to ensure that the women pensioners of the future would not be in the same position as those of today—that they will be able to build up national insurance contributions and qualify for the national state pension, and will have an income in their own right. Society has changed and it is no longer good enough for a woman to depend on her husband’s pension contributions so that she will have an income. Those practices led to the issue that has never been properly resolved—I do not think that there is a resolution—of married women who paid the small stamp in the mistaken belief that it would not affect the pension they received. Of course, it did not affect them in terms of the 60 per cent. that they received through their husband’s contributions, but it did affect their contributions to a pension in their own right.
Those women feel particularly aggrieved when they get a letter from the Pension, Disability and Carers Service telling them that their basic state pension will be 12p a week. They cannot understand it; they have worked all their life and that is what they get—or rather, they get more, because they get the 60 per cent. from their husband’s contributions and the 12p, but it still rankles. That was often sold on a false prospectus. Hopefully, the Government’s more recent legislation will mean that future generations of women will not face that and will manage, even though they might still have roles as carers. I am glad that the Chancellor announced in this year’s Budget that grandparents who look after their grandchildren would qualify for the carers element of national insurance credits. Those provisions are all really important.
I do not intend to speak for long, but I would like draw Members’ attention to the personal expenses allowance, which my hon. Friend the Member for Blackpool, North and Fleetwood mentioned in passing. I appreciate that it is not the direct responsibility of DWP and that the Department of Health makes decisions on that, but our Committee recommended in another report that the allowance should be doubled. The Government did not quite say no in their response to that report, but they did say that doubling the allowance from £20 to £40 would cost £150 million.
I want to make another plea for an increase in that allowance, not just because my mother is now in a care home so I am slightly more attuned to it, but because there are other people, not just pensioners, who get caught. Some people who live in supported accommodation, who might now be pensioners, are disabled. Where local authorities have cut back on transport, entertainment or day centres, for example, the pensioners and disabled people who live in care homes are now expected to pay for all of their social life, all their clothes, all their toiletries, any presents, hair-dos or anything else out of £20 a week. That really is not enough. It does not give them the dignity to have an independent life.
We must remember that people are living longer and so are sometimes fitter when they go into homes than people in homes have traditionally been, so they expect to go out for a Sunday lunch with their family, for example, but they cannot pay for it. They cannot take their grandchildren out on their birthday because they only have £20 a week to spend. In any case, they could not afford the taxi if they lived in an area controlled by a council like Aberdeen city council, which has taken away their taxi as well. There is a need to address that issue. It is not a huge amount of money, but it could make a big difference to people who have worked all their lives and who are paying high costs for their care. It would be nice if they could hold on to a bit more to spend themselves.
Finally, I would like to ask about council tax benefit. We know that a large number of pensioners are put off claiming because it is a benefit. Those who probably need it most are owner-occupiers, and to them claiming any kind of benefit is anathema. In fact, it is a badge of pride that they have never claimed anything in their life. Sometimes they complain that they get nothing. On that point, I must pay tribute to the Government, because at least we can now say to those pensioners who say they get nothing, “At least you get your winter fuel allowance and your free bus travel.”
It is perhaps a slightly different point from that made by my hon. Friend the Member for Luton, North (Kelvin Hopkins), because sometimes we have to ensure that the middle classes feel that they are getting something for their money in order for them to pay the tax and help sustain our welfare state. I ask the Minister, when are we going to change the name of council tax benefit? It is almost as simple as that. I understand that the Government are already minded to change the name to council tax rebate, but when will that happen?
Thank you, once again, Mr. Williams, for allowing me to speak in the debate. The Committee members work extremely well together, which is why we have successfully produced a very good report, and I am happy to support it.
I am delighted to take part in this debate on the excellent treatise from the Work and Pensions Committee. I apologise that I have to leave earlier than I had anticipated, because I wish to speak in the debate in the main Chamber, but I will make some brief comments.
I will start with two points of congratulation. One of them is addressed in part to the Department for Work and Pensions and in part to the Treasury. We would have many more pensioners living in poverty had the Government not bitten the bullet and introduced the financial assistance scheme and, latterly, the Pension Protection Fund. We had our arguments when that went through Parliament, but the scheme’s benefit is shown when we talk to people who are now receiving moneys after funds to which they had contributed over their whole lives went into administration through no fault of their own. The sums are not necessarily as high as some of us would like, as we believe that they should be fully compensated, but as far as I can tell they are receiving money automatically—I do not like the word “automaticity”. That particularly vulnerable group would have every reason to feel let down, principally by their employers, secondly by their trust fund administrator, and thirdly by the Government, potentially, had we not done something about it. That is something the Government ought to be proud of, because it is good news that it seems to be working, and that pride ought to be shared between the DWP and the Treasury, as they overlap on that.
My second point of congratulation, which I have mentioned on other occasions, is for the DWP directly, and I only wish that it would say more about it and take some congratulations. It is about the village agent scheme, which was pioneered in Gloucestershire. The DWP employed people in village areas to go out and proselytise—the aim being to find out whether people were fully taking all that they were entitled to in pension credit and various benefits. Despite criticism in the early days from some people in the localities who thought that those involved were interfering busy bodies, the scheme, which has now been taken on by Gloucestershire county council, because sadly the funding ended, has been an unalloyed success.
I hear nothing but good about what has happened as a result of the scheme. People who had no reason to believe that they were entitled to claim now do so just because someone came round, sat down with them and helped them fill in the forms, asking, “Are you sure you are not entitled to carer’s allowance?” For the first time they are receiving benefits that make a great deal of difference. I say to the DWP that when it gets it right it ought to be out there shouting it from the rooftops.
There is the argument about the £5 billion that is not claimed, as my hon. Friend the Member for Luton, North (Kelvin Hopkins) mentioned. That is why we are going out to try to get people to claim and going the extra mile in rural areas, because the people there are too old or incapacitated to ever go to a citizens advice bureau. Where we have done it, and done it right, let us say so. It might be a relatively small number of people, but they are eternally grateful—I know because I have met them. They are also shocked because they had not realised how poorly off they were. That is often the way—they often do not claim because they do not see themselves as particularly poor, even though they are struggling from day to day.
My third point is not one of congratulation, but of realism. We need to look far closer at the relationship between pensioner poverty and the low quality of life of many of our older residents, particularly in rural areas. The evidence, if Stroud is anything to go by, is that the oldest residents live in the oldest property and, sadly, face the most immense problems with heating and just with the daily grind of getting to the shops and so on. As much as that is to do with quality of life, rather than something we would necessarily term poverty, it is really about what many of our older people face day in, day out.
My hon. Friend makes the point only too clearly. I would argue that we have to get much smarter in ensuring that we are targeting not just benefits and credits but help with insulation grants and the boiler replacement scheme announced yesterday, if nothing else. I do not know exactly how that would work; I know that the budget is limited. We are now into a new scrappage scheme. I would like that to go principally to our older people because they are the very people who will not do it—they cannot necessarily afford to do it, but they really need to do it.
I have just a few other comments, although I do not want to speak for long. I entirely support my hon. Friend the Member for Luton, North—I am sure that he will be completely unshocked to hear that—on retying the state pension to average earnings. I go along entirely with what he says. I have a question for my hon. Friend the Minister. We are only two and a bit years away from when this is supposed to come in—it is supposed to happen in 2012. The parties are all agreed, although we can argue for perhaps a year either way. One presumes that an immense amount of work is being done to make it happen, yet I have seen relatively little published by the Government about the mechanism for moving to retying, and the effect on pension credits and other benefits. I go along with what my hon. Friend said, but I believe that it will have to be done incrementally, to some extent. In effect, we are trying to turn back the clock how many years? It has been a great many years since the terrible decision was taken to break the earnings link.
I just want to be assured that we will not get to 2012 and then suddenly be told that the work is not done, the computer system is not ready or it is all too expensive, because if there is one thing that will detach pensioners from the voting population, given that they tend to vote in greater numbers than any other group, it is total disillusion over something that they have been promised and have fought for through the National Pensioners Convention and so on. It is now being realised after the political parties have agreed to it, but where is the mechanism by which it will happen?
Much as I agree with what my hon. Friends and the hon. Member for Henley (John Howell) said on specific issues, I want to raise what I think is still a great unfairness: the failure to allow disability living allowance to be paid to pensioners who did not claim it when they were of working age. We discussed this during the proceedings on the Equality Bill, and there are hon. Members present who will remember some of those discussions.
We have to come up with a valid reason why we are doing what we are. My hon. Friend the Member for Aberdeen, South (Miss Begg) spoke about explaining to pensioners who have not made full contributions why what is happening is happening. The most difficult letters I get are from people who may be slightly over retirement age who have not claimed beforehand but suddenly feel that their disability is such that they need to claim. They are told, “Oh, no, you are entitled to attendance allowance only, and it is always at the lower rate,” and so on. We need to see that as an issue.
The most important thing, of course, is mobility. The one thing that pensioners have really benefited from, as my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) said, is free bus travel, yet if one is in any way incapacitated and unable to get a mobility allowance, that is a somewhat pyrrhic victory as they cannot actually get places. We need to look at that carefully.
My last point is about the retirement age. This is difficult, because we all know that it will probably be increased further by current financial difficulties, but there is great unfairness around the operation of early retirement. I have always argued that there is a fundamental difference between the social classes because people of lower income, unless they go on early retirement for sickness reasons, are highly unlikely ever to be able to retire on such a scheme, whereas all manner of professional classes, whether in the private or public sector, have come up with advantageous packages and are able to go young.
I use my own cousin as an example. I hope that he does not read this. He was a head of department in a secondary school and retired at 50 because of a merger—one of them had to go. In effect, for ever and a day, he is on half his teaching salary with an enhancement. I am sure that nowadays we will have to get much tougher, but there is a hell of a disparity between people who retired in the past and who have managed to do quite nicely out of it, compared with people who have had to go on.
We would welcome people going on, given how we attacked the matter in the Equality Bill. We would want to prevent people from not being allowed to go on post-state retirement age, whether it is 65, 66 or whatever. We allow and encourage that, but, for some people, it is not a choice but a reality. They have little or no pension, and they are not able to call on early retirement schemes.
I know the nuclear industry very well. We talk about its liabilities as though they are all to do with horrible stuff that we have to stick in the ground at some time, but they are not all that. Some are human liabilities incurred when the industry had a massive enhancement programme to allow people to go early—to get them off the books, which was considered to be helpful. Compare that with someone who has been in a low-paid job all their life who has to keep going because they have little or no pension.
That is a great unfairness, and the Government should do anything that they can to eradicate the gap, to address the poverty of those who have no choice but to keep going and to make sure that they do not do it when it is completely unfair. We should look at that and do something about it.
It is a pleasure to serve under your chairmanship, Mr. Williams. I congratulate the Chairman of the Work and Pensions Committee, the hon. Member for Bradford, North (Mr. Rooney), and the members of the Committee, who have produced an excellent report. It contains a great deal of information and many recommendations that I believe we can all support and accept.
I accept the point made by the Select Committee Chairman at the start of this debate that when one deals with pensions, one inevitably deals with issues that affect different people at different times, depending on where they are in the cycle. Nevertheless, the report mainly deals with pensioner poverty, and, although it deals with other aspects, it deals in particular with those people who are pensioners now.
The hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) referred to the table on page 11 of the report. I believe that there is broad agreement on where we are in terms of pensioner poverty. As the hon. Member for Luton, South said—
We are all from the north. As the hon. Member for Luton, North (Kelvin Hopkins) said, 2.1 million pensioners, or 18 per cent. of the pensioner population, are still in poverty. The figure rises to 25 per cent. for the over-85s. It is clear in paragraph 17 that, from 1988-89 through to 2004-05, the Government’s measures considerably reduced the numbers of pensioners in poverty. In 1998-99, 29 per cent. of all pensioners were in poverty, taking the 60 per cent. median, and by 2004 the figure was down to 18 per cent. It is also clear that in 2007-08, the figure is still 18 per cent. The other figure, which is often taken to be the real poverty line—those who are below 50 per cent. of median income—has not changed as much: it has only gone down from 13 per cent. of all pensioners to 10 per cent. That brings me back to the point that the hon. Member for Luton, North made about means-tested benefits, because those people comprising the 10 per cent.—Age Concern says that it is 11 per cent.—of all pensioners who have been in persistent poverty, below the poverty line, in the past three years are reluctant for one reason or another to claim the benefits to which they are entitled.
The submissions in the report mention many of the reasons for that. For example, pensioners may have a lack of knowledge, may not have contact with the benefits system and may have no history of being in that system. They may believe that they are ineligible for benefits. The hon. Member for Stroud (Mr. Drew) mentioned that in respect of his constituency, where people in a particular area did not know that they could claim. There is a general
“Reluctance to claim a benefit…Reluctance to give out personal information”
“Difficulty or perceived difficulty in claiming”.
People often feel that they lack support negotiating the labyrinth.
I agree. That is a clear issue, particularly for many older people.
The issues that I have mentioned also affect people applying for housing and council tax benefit. I welcome the proposal in the report that there should be a single phone line and that the Pension, Disability and Carers Service should work much more closely with local authorities. I also welcome the “automaticity” in the Welfare Reform Act 2009, which the hon. Member for Blackpool, North and Fleetwood mentioned—I cannot say that word, never mind that I do not particularly like it, but she made a good point. Despite 10 years of pension credit, 11 per cent. of people who are entitled to the benefit still have not claimed it, and the sooner we get such a measure up and running, the better.
Age Concern makes a clear, important point. This week in the House we passed the Child Poverty Bill, which sets clear targets and guidelines by which poverty for young people will be eliminated. I have to ask the Minister why can we not do exactly the same for pensioners? Why are they different? There is clearly a lot of merit in making such provision. We know what the problem is. The report answers and deals with some of the things that can be done to go about seriously eradicating that issue. Why are we not setting ourselves the same sorts of targets for older people that we think are appropriate for young people?
On other aspects of the state pension, hon. Members who were involved in consideration of the Pensions Bill will remember that, during its passage, some of us voted to support the principle of having a tie to income by 2012. Again, I agree with what other hon. Members said. I hope that the Minister gives us a clear commitment: the tie should be not just to average earnings, but to average earnings or the retail prices index. There is an opportunity for pensioners to benefit, depending on inflation and earnings. I would not want to see a shift in that commitment beyond 2005. As Age Concern rightly says, the sums saved by that delay are relatively small: only £200 million a year. Although, in the current financial position, such a sum is relevant, it is not a large sum, given the amounts that the Government are spending. I hope that the Minister will commit to sticking to the deadline. My party is discussing its manifesto today and that matter is on its agenda: we want to be clear that that should happen.
I think that the hon. Member for Luton, North mentioned the National Pensioners Convention’s commitment to a citizens’ pension. The hon. Member for Eastbourne (Mr. Waterson), the then Pensions Minister the right hon. Member for Doncaster, Central (Ms Winterton) and I had the pleasure of attending that convention in the Winter gardens in Blackpool earlier this year. I have never been in a cage of lions before, but it certainly felt like that. We know—the hon. Member for Luton, North mentioned it—how angry pensioners feel about the fact that they have not received such a commitment. In the current economic circumstances, I will not say that that can happen right away. However, moves must be made, and certain moves can be made.
I agree. Again, I pay tribute to the Government for reducing the number of years’ national insurance contributions that people need to get their entitlement. Last year, only 30 per cent. of women reaching retirement age were entitled to the full state pension. The Government’s proposals in the previous two pensions Bills will eliminate many of those problems and ensure that people get what they are entitled to.
The Committee rightly raises the issue of the national default retirement age. It is an anachronism that people are forced to retire at a certain age, whether they want to or not. I cannot see how that national default retirement age can stand alongside an Equality Bill that would treat everyone as equal. It is right that people should have the opportunity to retire at a certain age, but that should not be forced on them.
As a younger person I taught in further education. I was under 30, but I taught on a course called “Preparation for retirement”. What did I know about retirement? The hon. Gentleman is right. Some people on that course had had hard physical jobs all their lives and they could not wait for 65. However, on the same course there was a legal secretary, a spinster lady, who was in tears because she was going to be forced to retire at 60.
I agree. In my constituency, a head teacher who is 74 years of age is still working because the governors of the school, a Church of England school, have agreed that she can do so. But she has had many problems with the teachers’ pension scheme in terms of what she is entitled to do. The rules do not allow people like her to work for as long as they want to and are able to. She should be able to defer her pension and take a larger lump sum when she retires. However, that will not be permitted, which is completely wrong.
The Government, with all-party agreement, have set a policy of gradually raising the retirement age over a period to enable those who are currently working, but planning for retirement, to make the necessary provision. I do not want, and my party will not support, an earlier date for that raising of the retirement age. That might be Conservative party policy, but it is certainly not one to which I can subscribe. It would be totally wrong, after agreeing a pensions policy across the political divide, to break it now and to put at a disadvantage people who have made arrangements for their retirement based on what was agreed after the Freud report was accepted.
I want to refer to a couple of other issues that hon. Members raised about entitlements. The disability living allowance is important. If someone is disabled and is given an allowance to take account of the extra costs associated with their disability—Cancer UK is conducting an excellent campaign on extra heating costs—why should they suddenly, at the age of 65, become ineligible for DLA because they have a retirement pension? That is nonsense. I agree with the point that was made about splitting the components, so that the living component is not age-related, and I also accept the point that was made about the Equality Bill. How can someone who is disabled have different needs depending on their age? They either have those needs, or they do not, and they either receive support for those needs, or they do not. Support should not be, as it is at the moment, dependent on eligibility for a pension. Someone who is working would be entitled to DLA, so what is the difference?
Another issue is the attendance allowance. The Green Paper refers to dealing with that as part of the care and support system. Again, we need clarity from the Government, and no doubt there will be an opportunity to pursue the issues when discussing the Bill that is going through the House. That, and the issue to which the hon. Member for Blackpool, North and Fleetwood referred about carers, is important. The Committee’s report makes excellent recommendations that I and my party can support.
It is a pleasure to serve under your chairmanship, Mr. Williams. It is always a pleasure to follow the hon. Member for Rochdale (Paul Rowen). We are all excited to hear that the Liberal Democrats are finalising their manifesto. I look forward to reading it, and picking out the undoubted huge contradictions.
I pay tribute to the Select Committee, which has clearly worked hard in a spirit of great amity to produce two excellent volumes. The Committee’s distinguished Chairman made an excellent speech with a tour d’horizon of many of the issues, and I apologise if I do not touch on every recommendation—if I did, we would be here for a very long time.
I single out the hon. Member for Aberdeen, South (Miss Begg), who talked about women. With cross-party support, we have gone some way in recent legislation to tackle the historic outrage that less than one third of women receive a full state pension, but we are still left with some cliff edges and so on. However, I will not deal with that in great detail, but not because it is not important.
The debate is taking place against a dark background for pensioners. We have heard that 2.6 million live in official poverty, and 11 per cent. live in persistent poverty. Several speakers touched on the take-up of benefits, and it is tragic that, according to the latest figures, some £5.4 billion of means-tested benefits that are rightfully the entitlement of older people are not claimed. That money is left in the Treasury and does not benefit pensioners. Some estimates are that if all that money were claimed, up to one third of pensioners would be lifted out of poverty. The hon. Member for Blackpool, North and Fleetwood (Mrs. Humble) spoke about means-tested benefits and take-up, and I cannot improve on what she said. The overall answer is that, as Age Concern and Help the Aged said,
“reductions in pensioner poverty have ground to a halt in recent years. It is shameful that, in one of the richest countries in the world, one in five pensioners continue to live in poverty.”
That is a challenge not just for the current Government, but for a future Government.
One problem is that the Government do not treat the matter sufficiently seriously. Ministers have a habit of claiming—I have a shrewd suspicion that the Minister here will be no exception—that they are curing the problem of poverty. I shall not take the line of the hon. Member for Rochdale, because I do not believe that a law to abolish poverty, any more than a law to abolish the deficit, is the way forward, because that is just a politician’s response to a problem. I hope that he will not be too tearful when I say that I do not agree with what he said about introducing a Bill on pensioner poverty.
I certainly think we should have some clear policies on how we will reduce poverty. I totally agree with that, but legislation is not the answer. Legislation on child poverty seems to be merely a reaction to the fact that the Government are clearly missing their existing targets. Targets are one thing, but hitting them is entirely different.
The Minister for Pensions and the Ageing Society, said only the other day on the Floor of the House that this is
“the first Government ever to end the link between poverty and old age.”—[Official Report, 7 December 2009; Vol. 502, c. 12.]
I shall demonstrate why that is a ludicrous claim, particularly as well over 2 million pensioners still live in poverty.
The fact is that it all depends, as with so many things connected with the Department for Work and Pensions, and the Government, on which statistics are used. Let us be precise. Ministers said at one time that under them pensioners were no more likely than any other part of the population to fall into poverty, but I think the current mantra is that pensioners are less likely than other members of the population to fall into poverty. One might be able to argue that if one set of statistics were used, but using the before-housing-costs income measure the figures are that 23 per cent. of pensioners and 18 per cent. of the population as a whole are in poverty according to the latest figures. So that claim is simply inaccurate, and I hope that it will not be repeated today.
Yesterday was a particularly grim day for pensioners, current and future. First, we had the pre-election con of an increase in benefits next year, to be followed by a cut the following year. The Government have put Tory benefit cuts into their own projections in the pre-Budget report, and it has not taken long for most commentators and most pensioners to see through a blatantly cynical manoeuvre.
Another issue is the yet further delay that was announced yesterday, rather diffidently and quietly, in implementing personal accounts. I shall return to that in more detail in a moment.
The third thing is the dog that did not bark, and the fact that we are still here with no firm commitment on when the Government intend to restore the link with earnings for the basic state pension. That point was touched on by the hon. Member for Rochdale.
I have already spoken in some detail about the pre-Budget report, but let me reiterate that the Government are committed to increasing benefits—which are normally uprated by the RPI—by 1.5 per cent. in April 2010. However, to help pay for that, benefits in 2011 will be uprated by 1.5 per cent. less than the RPI, which is a real-terms cut. That is extraordinary. We are now effectively in an election campaign in which the Government predict, using their own projections and figures, that the next Government will cut benefits and pensions in real terms.
I return to the issue of personal accounts, which are about trying to establish a solution to a problem that we all agree on—those millions of people, mainly middle and low-income earners, who have no existing pension provision. The Government have been talking about the issue since 1998, and the Turner review worked on the basis that the new system would start in 2010. A few weeks ago, an announcement came out of the blue stating that the implementation period for personal accounts would be extended from 18 months to three years. Many low-paid workers, particularly those who work in smaller firms which are at the end of the queue under the present plan, will not get their full employer contribution, or the full benefits of being auto-enrolled into personal accounts, until 2016.
That is bad enough. However, in an interview a couple of days ago, the Minister for Pensions and the Ageing Society said that as far as the Government were concerned, it was “full steam ahead” on personal accounts. From that, I assume that she was wholly unsighted of the fact that the Chancellor was about to announce a further delay in the implementation of personal accounts. As we know, a significant delay was announced yesterday. The delay is not in the commencement—personal accounts will still commence in 2012, but quite what will happen is a bit of a mystery. I suppose that one person might be auto-enrolled into personal accounts by 31 December 2012. Who knows? Something will happen in 2012, but it will be 2017 before employers are required to pay the full rate of contribution. Until then, the rate of contribution will be 1 per cent.
All sorts of problems are associated with that. It is bad news for Turner’s target audience—those on low or medium incomes—who need to save for their retirement. It means several years at least of a sort of planning blight, during which people will not be making or receiving full contributions, or making any other arrangements for their retirement. It will be a period of contributions and benefits that they will never be able to make up over their working lives.
The Association of British Insurers said that the Government admit that
“this delay will save £2.4 billion”.
The delay has nothing to do with the efficient introduction of personal accounts, or trying to avoid what has been called “a terminal 5 moment” in introducing them. We have always accepted that there should be no big bang in introducing such a measure, and we always accepted a period of around 18 months for its introduction. However, this has nothing to do with that; it is about saving the Treasury £2.4 billion.
The ABI goes on to say:
“This money will be saved at the expense of getting the low-paid into long-term pension saving which is absolutely vital for the future welfare in retirement of the workers of today. The Government’s changes to the timetable will mean that employers joining the scheme in 2012 will be able to pay just 1 per cent. contribution for a full four years with Government backing. This will create a dangerous incentive for employers to join the Government’s scheme and level down from the typical private sector Defined Contribution scheme of over 6 per cent. This will lead to a fall in overall savings levels for the employees affected.”
We are looking at potential pensioner poverty in the future as a result of this measure.
Tom McPhail, from the financial advisers Hargreaves Lansdown, has said:
“This move is all about sacrificing the long-term interests of people’s retirement plans for the sake of digging themselves”
—that is the Government—
“out of a hole the economy has got into.”
Our position is clear: this is yet another setback to rebuilding savings and pensions in this country. The Government have already been forced to delay the scheme’s implementation, by phasing it in over several years. Now, we find out that the 3 per cent. employer contribution will not be reached until October 2017. Yet again, it is low and middle-income earners who will pay the price for Labour’s debt crisis, with the delays taking £2.4 billion out of the pension pot.
All that is against a background of existing damage to final salary schemes. Active membership of final salary schemes has halved since 1996, and there have been problems associated with the Pension Protection Fund and the financial assistance scheme, which the hon. Member for Stroud (Mr. Drew) referred to. There have been considerable problems in getting compensation for people in all the schemes that have collapsed since 1997, which at the same time undermines people’s confidence in the process of saving for retirement. That is the key to all this; we must make it worth while for people to save for their retirement. If some experts are right, and one in four babies born today will live to see their 100th birthday, a potential king-sized problem of pensioner poverty looms in the future, as we try to pay for many years of retirement, far more than we have at the moment.
The hon. Gentleman rightly says that occupational schemes are declining. Is it completely unrealistic to expect people voluntarily to save the sort of amounts that will be required in order to have a decent pension in old age? Does he have a serious alternative to my state scheme proposal, which would be efficient and would work?
As the hon. Gentleman might imagine, we are a bit dubious about any state-based solution. However, we think that auto-enrolment harnesses inertia—that is the problem; people are not interested in finding out the options. Furthermore, apart from not being a very conservative thing, straightforward compulsion means forcing people to do something that might not be in their best financial interests. A huge question mark hangs over personal accounts regarding the interaction of means-tested benefits.
Would the hon. Gentleman repeal the legislation introduced by the Government in 2007-08, which enacts automatic savings and places a savings obligation on all employees? Is that what he means when he says that he does not want a state-based solution to encourage savings?
I was saying that I did not want the state-based solution proposed by the hon. Member for Luton, North (Kelvin Hopkins). I am not saying that we would repeal that legislation. Let me be precise: we are in favour of automatic enrolment. We were in favour of it before the Turner review or personal accounts were dreamt about. It was in our last election manifesto, and we are signed up to the Turner consensus which, as far as I am concerned, includes an easy-to-access, cheap pensions saving vehicle for people who do not have pensions at the moment. Whether that is precisely the right model is another matter. We have said that if we win the election, we will review how far the Personal Accounts Delivery Authority has got with designing personal accounts, and I have mentioned one or two of the issues that the review would cover.
I was coming to that issue, but I shall deal with it now. We think that anyone who tinkers with the Turner consensus does so at their peril. It was a painfully achieved consensus, and is the only game in town as far as long-term pension reform is concerned. The shadow Chancellor felt able to bring forward the timetable for raising the state pension age because Lord Turner has subsequently said that he wished he had been more radical. That is our reason for the line that we take, which I know is different from that taken by the hon. Gentleman’s party.
I have a couple more points. Decumulation is a dreadful word, but it is an important issue that one or two people have touched on. People must know more about the choices that are available to them as they approach retirement, particularly those about finding a better deal for annuities—the open market option, or OMO as it is called.
To return to the point made in the last intervention, it is important to have good thinking about whether people choose to work longer. Already, 1.3 million people are working beyond the state pension age. There are problems with the default retirement age. The situation is particularly bad in parts of the public sector and particularly local government, where as soon as someone is 65, it is goodbye. Many people resent that. Those points were made by my hon. Friend the Member for Henley (John Howell) and by the hon. Member for Rochdale.
There are benefits from working longer. Boosting incomes is an obvious one. There are many health benefits for some people. There are clear issues about longevity, physical jobs and so on that need to be examined, as I am the first to accept. It is a question of choice, but it is a good way of boosting incomes, apart from the other benefits to be had. Of course, one of the things that we did—in the Pensions Act 2004, I think—was to allow people to defer their state pension for five years and take a lump sum. That is one of the best deals around, as far as I can make out, as long as people are around to collect it.
I have a final quick thought on restoring the earnings link. The hon. Member for Luton, North particularly talked about that, as did other hon. Members. The Select Committee recommended that it should happen in 2012. My understanding is that the Government are currently committed to it happening some time in the next Parliament, if they are in power. It is about time that they came up with a specific promise on that.
This has been a bad few days for the Government’s flagship policies. Tuesday saw the imploding of their Green Paper on social care. Yesterday saw a further undermining of personal accounts and pensions policy generally. This Government, like their flagship policies, are holed below the waterline and it is time for a fresh start.
It is a pleasure to speak under your chairmanship, Mr. Williams. I apologise on behalf of my hon. Friend the Minister for Pensions and the Ageing Society, who obviously has responsibility for this area of policy. Because of the combination of the timetabling of this debate with the uprating statement in the main Chamber, she was unable to be here, so I am speaking on behalf of the Government on this matter today.
I congratulate the members of the Work and Pensions Committee on an excellent and, as has been noted already, extremely comprehensive report on pensioner poverty. In particular, I congratulate the Chairman of the Committee, my hon. Friend the Member for Bradford, North (Mr. Rooney), who once again brought to the discussion not just his huge knowledge, but his great commitment to the people affected by the pensions and benefits system. He began by reminding us of the position as set out by Sir William Beveridge. Of course, he is absolutely right: Sir William Beveridge always envisaged that the state pension would be supplemented by people’s own savings—by people taking responsibility for themselves.
The reforms that the present Government have introduced in the Pensions Acts of 2007 and 2008 are among the most significant reforms of pensions legislation that any Government have undertaken since the second world war. They will deliver a fairer and more generous state pension. As a result of the reforms, three quarters of women reaching state pension age in 2010 will be entitled to a full basic state pension, compared with less than half now. The introduction of auto-enrolment will result in between 5 million and 9 million people newly saving or saving more for their retirement. Those are fundamental changes in our pensions system, which will allow people to take more responsibility for themselves.
The 2007 Act provides a fairer and more generous pension. The changes will help to tackle the historical inequalities in the state system—in particular, by reducing to 30 the number of qualifying years that people need for a full basic state pension for both men and women. The Government have made it clear that we will restore the link between the basic state pension and earnings. Subject to affordability and the fiscal position, that will begin in 2012 but will in any case be completed by the end of the next Parliament.
We have said that we will do it at some point from 2012 but in any case by the end of the next Parliament. That is the position that the Government take.
We are replacing home responsibilities protection with a new system of weekly credits for those pensioners receiving child benefit for children up to the age of 12, approved foster carers and those who spend at least 20 hours a week caring for severely disabled people. That is to ensure that there is provision through the state system for those whom the Committee has identified as the ones who are particularly liable to suffer pensioner poverty.
From 2010, an extra 1 million people will build up entitlement to the state second pension. Uprating the basic state pension in line with earnings from 2012 should roughly double its value by 2050, compared with the value if current uprating policies continued.
Although I welcome that, as I am sure we all do, the reality is that the slippage since 1980 has been so substantial that there should also be substantial increases in the pension—not just the re-linking with the earnings index but substantial increases—to compensate for what has been lost.
I intended to finish by saying something about the general record of the Government, but as has been pointed out to my hon. Friend by other hon. Members, the fact is that by introducing the minimum income guarantee and the pension credit, the Government have lifted 900,000 pensioners out of poverty in the past 12 years. I am sorry about the fact that the previous Administration cut the earnings link, but it would not be realistic for the present Government to undo what was done more than 30 years ago, within the timetable that my hon. Friend seems to be suggesting.
I have some figures from 2007; I agree that they have changed slightly since then. The figures, from Aon Consulting and published in The Guardian, show the UK at the bottom of the European league table, with the European average for the basic state pension at 60 per cent. of average working pay and ours at just over 30 per cent. In terms of making up that gap, even the National Pensioners Convention figure would still be below the EU average.
It is misleading to focus on the state pension alone. I think that my hon. Friend was referring to the OECD report published in June. That report shows that the replacement rate for the average earner, taking account of private pension provision, rises to 70 per cent., which is above the overall OECD average. The European Commission’s report on social protection and social inclusion this year showed that the median income of those aged 65 and over in the UK rose from 15 per cent. below the EU average in 1997 to 9 per cent. above it in 2007. So my hon. Friend should give credit where it is due.
Let me say a few words about the Pensions Act 2008. For the first time, all employers will be required to contribute a minimum of 3 per cent. to an eligible employee’s workplace pension scheme. That will supplement the 4 per cent. contribution from the employee and about 1 per cent. from the Government in the form of tax relief. It is planned to introduce from 2012 a new low-cost saving vehicle—the personal accounts scheme—aimed at employees who do not have access to a good-quality work-based pension scheme. In the main, those are median to low earners.
The Opposition spokesman, the hon. Member for Eastbourne (Mr. Waterson), suggested that this week there had somehow been a U-turn, or at least an S-bend. That is absolutely not true. The starting date for automatic enrolment is unchanged; it was always planned to be October 2012, and it is still planned to be 2012. Implementation was always intended to be staged, and it is still intended to be staged. We will announce in January the details of our full implementation path, in response to the consultation that we have undertaken.
I shall move on to the position of women in the pension system, because they were one of the key groups that the Select Committee identified as facing particular problems. Of course, the most important thing that has been done in the past 12 years is the introduction of pension credit, which means that pensioners need not live on less than £130 a week. Almost 60 per cent. of recipients of that credit are single women. As a result of the reforms that we have introduced, around three quarters of women reaching state pension age in 2010 will be entitled to a full state pension, compared with around half who would have been entitled without the reform, and the figure will have risen to more than 90 per cent. by 2025. Reforms in the Pensions Act 2008 will provide equality of opportunity for male and female workers to build up a private pension, thus tackling the long-term problems from which women in this country have suffered in the past two generations. We estimate that around 3.5 million to 4 million women will be eligible for automatic enrolment in a workplace pension scheme.
My hon. Friend the Member for Bradford, North also raised the issue of people disabled in early life becoming poor old people—having a life totally lived in poverty. It is certainly true that that group has a high risk of living in poverty, but I would like to point to a number of policies that the Government are implementing that are intended to—and do—help to mitigate that situation. First, the gap between the employment rate of people with disabilities and that of the rest of the population has been falling, and that means that people with disabilities are able to build up their contributions record, which is what they need for their pension. Further to that, we have introduced reforms to the state pension, ensuring that more people with disabilities can build up a state second pension, as well as the credits for a full pension.
The hon. Member for Henley (John Howell) pulled out a number of issues from the report. The first one he talked about was the position of pensioners in rural areas. One of the things that the Government have done to support people in rural areas is to introduce free bus passes. I do not know the Conservative party position on that or whether it intends to maintain free bus passes.
I am grateful for the opportunity to confirm that we are great supporters of concessionary bus fares for pensioners. We think that they have been liberating for pensioners, and have been a great success. I have only one caveat, which I suspect is shared by the hon. Member for Blackpool, North and Fleetwood. That caveat is that places such as seaside resorts end up spending a great deal of council tax payers’ money running the buses, because the Government announced that bus travel was going to be free, but that did not come to pass in areas of high usage of bus passes, of which seaside resorts are a good example. The financing needs to be looked at, but we are great fans of the scheme and intend to continue concessionary bus travel.
I am sure that that is very welcome. The hon. Gentleman has not made it clear whether it will be financed by council taxpayers or from central taxation.
Issues relating to rural areas were also raised by my hon. Friend the Member for Stroud (Mr. Drew). A large amount of work has been done to support take-up campaigns in rural areas and they have been, as my hon. Friend said, extremely successful.
The hon. Member for Henley also asked about poverty among black and ethnic minority groups. The Department is absolutely conscious of the need to address that problem, which is why the Pension, Disability and Carers Service has specific take-up campaigns for those groups, and is addressing the issue energetically at the moment.
My hon. Friend the Member for Bradford, North also talked about the importance of equity release and the quality of advice that people receive. The Government are extremely supportive of innovations that promote independence and well-being in later life, and our aim is to provide a well-functioning market in that area. More than 90 per cent. of that market is now regulated by the safe home income plan of the UK industry body for equity release. He also talked about the importance of good-quality financial advice and information. Services such as money guidance and the one-stop shop must gain public trust to be fully effective, and that is why we are working with the voluntary sector. We are working with Citizens Advice and Age Concern, and have some pilots in the north-east. Those groups already have the confidence of the communities and are, therefore, extremely effective not just in giving independent advice but in being understood to give it.
My hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble) talked about the position of the personal expenses allowance and her desire to see it increased to £40 from £21. Her concerns were echoed by my hon. Friend the Member for Aberdeen, South (Miss Begg). As colleagues from other Departments have pointed out on previous occasions, although that is a worthy objective, it would be extremely expensive, and at the moment the Government’s priority is to concentrate on improving the quality and level of social care. I cannot, therefore, offer an immediate solution to the problem that my hon. Friends have raised.
My hon. Friend the Member for Luton, North (Kelvin Hopkins) questioned why we were encouraging a system for pensions for the long term that was not simply state provision. That question really was answered by the Chairman of the Select Committee in his opening remarks. Surely the key point here is incentives. We have to set up a system that rewards people who have saved and encourages people to save for the future, and to do that alongside providing—which we have done—a minimum income guarantee, which enables people to have a proper and dignified old age.
There is a constant emphasis on voluntarism. Many countries in Europe have compulsory contributions by employers and employees, and any attempt to tamper with that sees demonstrations in the streets, as has happened in France. What is wrong with a compulsory state system? If people who are very rich want to save on top of that, fine, that is not a problem at all. They would not be means-tested because there would be no means-testing in the system.
I think that my hon. Friend is calling for the Pensions Act 2008, which we have already implemented and which provides for automatic savings.
Several hon. Members have talked about the importance of the default retirement age, the introduction of which in 2006 was a significant step forward. For the first time, it meant that people had the right to remain in work until the age of 65. Proposals to raise or abolish the default retirement age will clearly need consensus between employers and employees for it to work properly. It is not the sort of thing on which we can change our minds, rewriting legislation every couple of years. That is why we are reviewing the matter.
Many Members spoke about the importance of take-up, and asked what we were doing to improve it. The significance of take-up can hardly be underestimated. That is why, every week of the year, the Pension, Disability and Carers Service undertakes 13,000 visits to pensioners. Earlier this year, my hon. Friend the Minister for Regional Economic Development and Co-ordination, then a DWP Minister, wrote to nearly 250,000 recipients of pension credit about the passporting of benefits such as council tax benefit.
The importance of ensuring that no stigma attaches to people who claim benefits is well understood. That is why, following a campaign by the Royal British Legion, the Government amended the Welfare Reform Bill a few weeks ago—it has now been enacted—to take the power to rename council tax benefit “council tax rebate”.
Since November 2008, people have to make only one telephone call to claim pension credit, housing benefit and council tax benefit. We have also removed the need for people to give a signature, which was unnecessarily bureaucratic.
I am sorry, but I do not know. I shall write to the hon. Gentleman.
The majority of housing benefit and council tax benefit recipients are passported from pension credit. That is why we believe that it is right for the PDCS to remain the first port of call for such benefits.
It will happen as soon as is practicable. It is obviously a complex matter. I am sure that the hon. Gentleman is aware of the fact, but council tax benefit and housing benefit are administered by local authorities, so it is not completely under the control of the Department for Work and Pensions. We need to set up a system that everyone can operate; computer systems will have to be changed and so on, and that cannot be done overnight.
My hon. Friend the Member for Blackpool, North and Fleetwood asked about automaticity. A national pilot will take place over six months during the next financial year to test how the concept works. I hope that it will provide the opportunity to build the evidence base necessary to support consideration of how we might use the information that we hold at the moment to increase take-up while minimising fraud and error. It is important that we have tight data-sharing systems, so that people can be sure that information that they give to one arm of government is used for appropriate purposes and does not get lost.
My hon. Friend asked about an adviser hotline, with only one telephone number. We now have a dedicated pension centre liaison officer in every pension centre. That person has a separate, dedicated phone number. We hope that that service is effective. It is bedding in at the moment, and we will evaluate it to ensure that it works properly everywhere.
My hon. Friend also spoke about the needs of carers. The Government have taken a number of steps to improve the position of carers. The first will benefit them disproportionately—it will benefit them more than most groups. It is the decision to reduce the national insurance contributions requirement to 30 years. One reason why carers do not have full contribution records is that they have been out of the workplace caring for relatives.
Secondly, from April 2010, we will introduce the carers credit; people will be credited with NICs if they are caring for a member of the family for at least 20 hours a week. Thirdly, we have enabled people over the age of 65 to receive the carers allowance, although it will be offset against their basic state pension. As a result, they will receive an extra £30 a week. That is significant for the quarter of a million people who are entitled to it.
One thing that really concerns people of working age is that they should be able to combine their caring responsibilities with a job. We are therefore having people trained to ensure that every jobcentre has someone on the staff who understands the needs of carers and can advise them specifically on finding work that will fit with their caring responsibilities. My colleagues in the Department of Health have done much to improve the availability of respite breaks.
My hon. Friend pointed out that the administrative arrangements for applying for carers allowance in order to qualify for the additional pension credit, even if unsuccessfully, is not quite the model of streamlined government that one would expect in the 21st century. We have said, and I reaffirm it today, that we will look carefully at the Committee’s proposals for carers in the long term. We are also considering how to improve the process in the shorter term for pensioners in receipt of pension credit, in order to make it more straightforward. As I said about housing and council tax benefits, there are IT issues, but we wish to address them.
My hon. Friend the Member for Stroud spoke about the quality of life of pensioners. In addition to enhancing the pension, the Government have introduced bus passes, free swimming, support for the television licence fee and the Warm Front scheme; and we have maintained the level of the cold weather and winter fuel payments this winter. On Monday this week, the Energy Bill received its Second Reading; it will introduce social tariffs, from which poor pensioners should benefit.
I turn to the question of why we do not have targets for pensioner poverty like those that we introduced for child poverty. Essentially, we come back to the incentives point that I made earlier. The fact of the matter is that, in most cases, pensioners have had the opportunity to take actions to enhance their income in retirement. We want to set up a system that removes the barriers to people doing that, which is why we have placed such emphasis on the changes to the rules for carers and women who have had particular difficulties because the rules were not structured to acknowledge their different life patterns. Moreover, the system should be forward-looking so that we provide incentives for the future. That is the essential difference between pensioners and children.
The hon. Member for Eastbourne concluded with a speech of such negativity that I wondered whether we were living in the same country. The benefits uprating statutes normally link benefits to the retail prices index. Although the September RPI was minus 1.4 per cent., the Chancellor has decided to increase the basic state pension by 2.5 per cent. from April next year, which is almost a 4 per cent. increase in real terms. He has increased other benefits by 1.5 per cent., which means bringing forward 1.5 per cent. of the following year’s increase. There is no question of a cut in benefits under the Government’s plans for April 2011. That can be clearly seen in the Green Book, and in table B4 in particular. Paragraph 5.19 states:
“To provide additional support to households during the early stages of economic recovery, the 2009 Pre-Budget Report announces that the Government will bring forward a proportion of the increases expected in April 2011 a year earlier, thereby providing a 1.5 per cent increase next April for those benefits and tax credits normally uprated by RPI. In April 2011, rates will be increased by the remaining amount necessary to make up the difference with the RPI for September 2010. This locks in the real increase that arises from not reducing benefits next April, but avoids a further permanent increase in expenditure that would reduce the amount available for frontline services in the next spending review.”
I hope that that clarifies the fact that the Chancellor, instead of freezing rates, which he had the opportunity to do, has chosen to protect pensioners in this country to enhance their incomes in real terms. This year, we will be spending more than £13 billion more on pensioners than we would have done if the policies that were in place in 1997 had continued.
A recent report by the Joseph Rowntree Foundation described an historic reversal in the fortunes of pensioners over the last decades, with people over state pension age now the age group at the lowest risk of poverty.
I hope that the Government and the Select Committee can continue to maintain a constructive relationship as we move forward to address the serious issues that pensioners face in this country.
Question put and agreed to.