Old-Age Pensions: November Increase (Hansard, 5 July 1983)

§ Lord Hatch of Lusby
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur)
My Lords, the increase in retirement pension due in November will be based on the 3.7 per cent, increase in the retail price index in the 12 months from May 1982 to May 1983. For further details I would refer the noble Lord to the Statement made in another place on 23rd June, which I repeated in your Lordships' House on the same day.

§ Lord Hatch of Lusby
My Lords, will the noble Lord agree with the proposition that the old-age pensioners have spent virtually the whole of their working lives in contributing to the accumulation of wealth in this country, putting aside, as they are statutorily bound to do, a part of their earnings in order to keep them in their old age? Therefore would it not be more appropriate that the old-age pension should be linked to present workers' earnings, rather than to an arbitrary retail price index, which often does not cover the main items of an old-age pensioner's budget? Secondly, will he confirm that, if the Treasury forecasts that in November the rate of inflation will be at 6 per cent. are correct, the loss to old-age pensioners will be £1.20 per week for a married couple, and 75p per week for a single pensioner, representing over the 498 year the equivalent of a week's pension, and that that amount will be lost as a result of this assessment?

§ Lord Glenarthur
My Lords, I would not agree with the noble Lord's first proposition; nor would I agree with his second one. The Government have repeated their pledge to maintain the value of retirement pensions and associated long-term benefits. When the proposed increases come into effect this November, pensions will have increased by 74.6 per cent. since November 1978. Even if we assume that by November the annual rate of inflation will have risen to 6 per cent., this would still mean a rise in prices of 70.7 per cent. over the same period, and the noble Lord will be aware that in the days of his party's Administration the rise in the RPI was 110 per cent.

§ Lord Shinwell
My Lords, is it not true that a member of the Government—I believe that it was the Chancellor of the Exchequer—recently stated that before the end of this year inflation would rise up to 6 per cent? If that is so, what is the explanation for this reduction in the pension?

§ Lord Glenarthur
My Lords, the method of calculating the way that pensions were to be increased was debated in your Lordships' House last Session. The reversion to the historic method from what was known as the forecast method was in order to improve the accuracy by which these matters could be determined. Had we kept the forecast method in existence, it could have been the case that we might have had to ask pensioners to pay back the amount that was overpaid when the last increase was made.

§ Baroness Jeger
My Lords, can the noble Lord say whether, in the light of what seems to be the agreed view that inflation is likely to rise, not least due to the increases in petrol prices and mortgage rates, the Government will give more generous treatment to the level of supplementary benefits and other ways of helping people, such as through assistance with heating costs? Can the noble Lord say whether the Government are paying any attention to the pensioners' price index, as distinct from the retail price index, and, if they are not, why are they keeping the pensioners' price index in existence?

§ Lord Glenarthur
My Lords, as the noble Baroness will know, the pensioners' price index covers only pensioner households in which at least three-quarters of the total income is from state pensions or benefits, and the pensioners' price index covers less than two-fifths of retired persons.

§ Lord Banks
My Lords, is the noble Lord aware that there is no guarantee that any loss which is caused by going back to the historic method in 1983–84 will be made good in the ensuing year? Is he also aware that I have a letter from his noble friend Lord Trefgarne confirming this?

§ Lord Glenarthur
My Lords, I have not seen the letter which the noble Lord has received from my noble friend Lord Trefgarne, but it is the case that if there is an adjustment to be made next year, that will 499 take into account any rise in inflation beyond the figure which has been mentioned earlier.

§ Baroness Jeger
My Lords, may I say, with apologies, that I think the noble Lord did not answer my first question, which was whether there would be brought in more generous levels of supplementary benefit and help with heating costs in order to compensate for the virtual drop in pensioner income?

§ Lord Glenarthur
My Lords, supplementary benefits were increased on the basis of the movement in the RPI, excluding housing costs. This was because the housing needs of people on supplementary benefit are met separately in addition to the scale rates. As the noble Baroness will be aware, these rates were increased when I repeated the Statement the week before last.

§ Lord Brockway
My Lords. I do not know whether one should declare an interest. May I ask the Minister whether the Government will look very carefully at the index of the cost of living, since old-age pensioners spend a much more limited amount on goods than does the average family?

§ Lord Glenarthur
Yes, my Lords; of course the Government always keep an eye on the index to which the noble Lord refers. But the full range of improvements which were stated in the announcement which I repeated the week before last will cost £1½billion in a full year and will mean that our social security programme will cost £35 billion in 1983–84. To give the noble Lord some idea of what that means, I would point out that it is equivalent to paying about £650 for each man, woman, and child in this country.

§ Lord Hatch of Lusby
My Lords, the first supplementary question that I asked was a matter of argument: the second was a matter of fact. The noble Lord has contradicted both of my propositions. Can he tell me whether or not the figures that I gave for the difference between the forecast method and the historic method are correct? Secondly, he has addressed himself to comments made in another place. Is he aware that in the other place it was stated by the Government that pensioners would catch up next year if the inflation rate fell? Is the noble Lord also aware that the probability is that at least half a million of those pensioners will die during that year?

§ Lord Glenarthur
My Lords, so far as I understand it, the noble Lord is quite wrong in the figures that he has produced: but of course if he is correct, I will certainly write to him: though I repeat that, so far as I understand it, he is quite wrong. The noble Lord will also be aware that in 1976 the Labour Party, of which he is a member, when in Government, changed from the historic method to the forecast method—in other words, to the method which is the other way to the way that we are now doing it—as in those days inflation began to fall below 20 per cent. This helped reduce the November 1976 uprating from 21 per cent, to 15 per cent., which saved £500 million on pensions, equivalent to £1 billion at today's prices.

Lord Paget of Northampton
My Lords, when the noble Lord speaks about £650 per family, may I ask why are we being treated as poor cousins of the Falklanders, who are receiving £3 million per family?

§ Lord Glenarthur
My Lords, with respect, that is a totally different Question.