VAT on Domestic Fuel (Hansard, 4 May 1993)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, a reply was sent to Age Concern on 28th April. This confirmed that, in view of the decision to charge VAT on domestic fuel, extra help will be given to poorer pensioners and others on low incomes. The precise details of this help will be given in the autumn.

§ Lord Stallard
My Lords, I am grateful to the Minister for that reply. I have read the reply which was sent to Age Concern, in which it was confirmed that, because of the method of uprating of pensions, the pension increase that will take place in April 1994 will be based on the RPI of 1993. That is before the imposition of the 8 per cent. value added tax. Is it not a fact that the pension increase due in April 1995 will be based on the RPI in 1994? The VAT in 1995 will be 17.5 per cent. However, the increase will reflect only the 8 per cent. which was catered for in the 1994 figure. I can hardly believe that it was intended to write that anomaly into the order. Should not the issue be considered and the anomaly put right with an adjustment made to pensioners who will be due such payment?

§ Lord Henley
My Lords, the noble Lord is right in saying that generally the uprating of pensions and other benefits is by means of historic figures on the level of the RPI from September to September, and the uprating takes place the following April. That is why my right honourable friends the Chancellor and the Secretary of State for Social Security gave the assurance, offering the guarantee of an additional uprating, to reflect the fact that the VAT will be imposed on domestic heating. As both my right honourable friends said, that extra help will go to the poorer pensioners and those on low income. In other words, no poorer pensioner or someone on low income will have to pay any bill before they have received some additional money by way of whatever measures my right honourable friend announces in the autumn.

§ Lord Molloy
My Lords, one bears in mind that, somehow or other, the Government will help those people who will have difficulty dealing with the tax being imposed on them. However, is the Minister aware that, in addition to charities and many families 599 on income support, the Royal British Legion has many members who will be affected? They served in the last war and gave of their best. They will now have an increase of between 20 per cent. and 30 per cent. in their expenditure. In the view of the Royal British Legion and many other people it is an absolutely unnecessary burden to impose on old people and pensioners.

§ Lord Henley
My Lords, as I have made clear, and my right honourable friends have made clear, we shall be announcing extra additional help to the most vulnerable. We have increased the rates of income support for pensioners by over £1 billion a year since 1989.

§ Lord Peston
My Lords, the noble Lord's Answer sounded encouraging. However, will he clarify it? Will poorer pensioners receive an increase as though the 17.5 per cent. increase had been included in the RPI? Alternatively, will they receive a further increase taking account of the fact that the RPI does not represent the cost of living for poorer pensioners?

§ Lord Henley
My Lords, I cannot give the noble Lord any further details at present. I am trying to make clear that full details of the extra help will be given in the autumn based on the latest information available. I repeat the assurance that both my right honourable friends have given: that that full extra help will be targeted at the poorer pensioners and others on low income.

§ Lord Molloy
My Lords, I welcome what the noble Lord said. It is appreciated to a degree that some help will be given to those who have to meet the new VAT rate. We in the Royal British Legion do not believe that our members should have to apply for additional help. Those members gave of their best. Why do not the Government give of their best now that those members are in their old age?

§ Lord Henley
My Lords, that is exactly why we have increased levels of income support. That is why we are offering to give further help to the less well-off to help meet their extra fuel bills.

Lord Bruce of Donington
My Lords, the noble Lord has given many assurances today. Will he also bear in mind that we were given specific repeated assurances that the tax would not be imposed?

§ Lord Henley
My Lords, we are doing nothing more in regard to that than bringing the position into line with a great many of our colleagues in Europe, all of whom impose VAT on domestic heating bills. As I have made clear, we shall be offering extra help to the poorer pensioners and those less well off.

§ Lord Stallard
My Lords, the noble Lord keeps mentioning the poorer pensioners. I and others are concerned about all pensioners, not only those who qualify for income support and so on. That qualification leaves out thousands of pensioners on the borderline and many others who cannot afford an increase of 17.5 per cent. on their fuel costs. What about those thousands of people who do not qualify being included in what the Minister and his 600 Government will call the poorest of the poor? There are others who cannot afford the increase. What will the Government do about those?

§ Lord Henley
My Lords, the noble Lord will know perfectly well that the average incomes of pensioners have increased by about 30 per cent. since 1979. All pensioners are very much better off. In trying to direct extra resources at the least well off, it is better to do it, as often as not, through income-related benefits. I would point out to the noble Lord that some 90 per cent. of all new pensioners have some income in addition to their state retirement pension.