§ John Robertson (Glasgow, Anniesland)
Thank you, Mr. Amess. I am delighted to have secured a debate on an issue that affects not just my constituents but those of every hon. Member.
People of pensionable age make up 18 per cent. of the UK's population. My constituency of Glasgow Anniesland has one of the highest concentrations in Europe— 31.5 per cent. of the electorate are in that bracket. It is very important for me to ensure that an issue that affects such a large number of my constituents is recognised and addressed by the Government. There is no doubt that the policy initiatives introduced by the Government have made a huge impact on improving the lives of our pensioners. We have spent a great deal of money on pensioners—an extra £6 billion a year in real terms—as a result of the policies that we have introduced since 1997. In fact, we are now spending three times more than an earnings link since 1998 would have given pensioners.
Between 1979 and 1997 the gap between the richest and the poorest pensioners widened beyond belief. The top fifth saw their incomes rise by 80 per cent. above inflation, but the incomes of the poorest fifth rose by only 34 per cent.—less than half as much. I am very pleased that the Government have focused on pensioner poverty as an immediate priority. Indeed, measures such as free eye tests, the winter fuel allowance and free television licences for the over 75s have applied to all pensioners regardless of income. However, measures such as the increases in the basic pension and the introduction of the minimum income guarantee have ensured that it is the poorest pensioners who have benefited most.
This year's Budget pledged that whatever the rate of inflation, the basic state pension will increase by at least £100 a year every year, and this year it is rising by even more than that: £156 a year for single pensioners and nearly £250 for couples. In fact, the average pensioner will be £7.75 a week better off as a direct result of the tax and benefit changes announced in this year's Budget. All in all, with the minimum income guarantee, the new pension credit and the new pensioner tax allowances, the average pensioner household is now £1,150 better off even after inflation than in 1997.
From next year, 5 million pensioners will gain from the new pension credit—on average by £8 a week or £400 a year more per household. For the poorest single pensioner, extra help will guarantee a minimum income of £98.15 a week this year and at least £100 next year. By absorbing the minimum income guarantee, it will underpin the incomes of people aged 60 and over so that they need not live on less than £100 a week, or £154 a week for pensioner couples.
There will also be a higher guaranteed income for those who are severely disabled, and for carers. I take a big interest in that subject, and I more than welcome that move. The pension credit will also reward pensioners for saving. We no longer want a security system that penalises pensioners with modest occupational pensions or savings. We no longer want millions of pensioners living on low or moderate incomes, who struggled to put money aside for their 307WH retirement, only to find they were little or no better off than people who had saved nothing. The credit will benefit half of all pensioner households, topping up the state pension with a cash reward, and ensure that pensioners with small occupational pensions or modest savings will no longer face losing a pound in their benefit for every pound of pension or other savings they have built up. Crucially, it will abolish the intrusive weekly means test. From age 65, most awards will instead be set for five years, and pensioners will have to report only significant changes in their circumstances.
The pension credit will be delivered through the new Pension Service as part of our plans to make it far easier for pensioners to claim all their entitlements. At the point of retirement, we will be able to work out how much pension credit pensioners are entitled to, at the same time as working out their basic state pension. We will then normally need to reassess their award only every five years, unless they tell us that their income has fallen.
Since April, the Benefits Agency ceased to exist and all work relating to pensions—for pensioners today and in future—became the responsibility of the Pension Service. There will be one point of contact for pensioners where pension entitlement and arranging payment can be worked out. Pensioners will need to give information only once and will not be left to find their way through the system. I welcome the measures, but I think that we could do more.
Life expectancy at birth has increased dramatically during the past hundred years. In 1910, for example, a man could expect to live until the age of 48, which means I would now have been dead for two years. Born today, he could expect to live until at least 75. Likewise, a woman born in 1910 had a life expectancy of 52 years, whereas today she can expect to live until at least 80. By 2020, there will be 50 per cent. more pensioners than there were in 1990 and a smaller work force to support them.
As the population ages, we find it more difficult to support and protect our elderly. Recent figures show that fewer pensioners were in poverty last year than for the previous decade. Some 21 per cent. of pensioner couples now have incomes after housing costs of less than 60 per cent. of the median income, which is down from 27 per cent. 10 years ago and equates to well over 1 million fewer pensioners than in 1997. Those are encouraging signs that we are reversing the trend in the number of pensioners on relatively low incomes, and clearly show that we are moving in the right direction. Although I take heart from those figures, I do not believe that it is acceptable for anyone who has contributed all their working life to find themselves in poverty in retirement.
I congratulate the Government on the work that has been done so far, but I should like to make one or two suggestions about what we need to do now. I mentioned earlier that I welcomed the introduction of free television licences for those over 75, but I should like us to go a step further by lowering the qualifying age to 65. The most recent estimates put the cost of doing that at £714 million. It is a lot of money, but when one considers 308WH that annual spending on education and skills increased by £12.8 billion in the comprehensive spending review, it is not much. It is absolutely right that we invest in our children, but we must also look after our pensioners. When a person reaches 65, television is no longer a mere luxury, but a necessity.
I wholeheartedly supported the introduction of the winter fuel allowance, and the increases since then have been welcome. However, it is time to go further. Although there has been a drop in excess winter deaths, more people die in the UK than in any other European countries as a direct result of the cold. Winter is often a precarious time for older people. Research shows that the poorest pensioners tend to live in housing with the most inefficient heating and insulation: those who can least afford a high heating bill must pay most to keep their homes really warm. When a household needs to spend more than 10 per cent. of its income on energy, it is considered to be fuel poor.
The energy efficiency of the home is another key indicator. The energy efficiency rating of a home is measured by the standard assessment procedure or SAP, which has a scale from 1 for highly inefficient to 100 for highly efficient. The most recent figures showed that lone pensioners living in the private sector had an average SAP rating of 11, which compares with the national average of 35. New buildings are required to have an SAP of 70. We can see why those pensioners have to pay most for their heating.
Some 77 per cent. of single pensioners and 43 per cent. of couples are still fuel poor. It is estimated that fuel poor households still spend between £700 and £800 a year less than they should to achieve adequate warmth. I would suggest that, as a further step to eradicating fuel poverty, we look at increasing the winter fuel allowance to £250. I completely accept that the existing £200 payment was not even an option under the Tories, but we need to find ways of further eradicating fuel poverty. The cost to the Exchequer could perhaps be offset by the £1 billion that fuel poverty costs the NHS every year.
I welcome the home energy efficiency scheme, HEESplus, which is aimed at people over 60 who receive an income-related benefit—the minimum income guarantee, council tax benefit or housing benefit. Government figures show that from 1990 to 2000, between 39,000 and 77,000 people did not claim the income support to which they were entitled. That does not entirely convince me that those who should claim HEES-plus will do so. If it is not claimed, it will not go far enough toward combating fuel poverty.
That brings me to my next point. One third of all benefits are now means-tested, but for pensioners the figure is almost 60 per cent. There is some evidence to show that the take-up of means-tested benefits by pensioners is low and, furthermore, that it is lower than when money was given directly to them through the higher basic state pension, which is targeted according to age. The key question, one that I hope the Minister will address, is how we continue to target our poorest pensioners. That requires a degree of means-tested benefits while ensuring that take-up is at a desirable level.
309WH I wish that we could do away with means-testing, but unless someone can come up with a better way of assessing those who have least, I fear that it will be around for as long as we have poverty.
§ John Robertson
Can the hon. Lady please wait? We must give the Minister time to answer, and I still have a little of my speech to go.
According to the Government's figures, between 300,000 and 750,000 pensioners who are entitled to MIG have not taken it up. Take-up is low because many elderly pensioners are baffled by the forms and the complexity involved in trying to claim. I appreciate that we have shortened the MIG claim form from 40 to 10 pages, but at that age, even 10 pages is too long. I hope that the aims to do even better under the pension credit scheme will come to fruition.
Means-testing presents pensioners with particular difficulties. The complexity of the forms is not the only problem. Research shows that 3 million pensioners throughout the UK are not claiming the full range of benefits to which they are entitled. According to research carried out by Prudential, 43 per cent. of pensioners surveyed said that they did not realise that they were eligible for certain benefits, 23 per cent. did not even know that a benefit to which they were entitled existed and 18 per cent. were put off by red tape.
The research showed that 18 per cent. of Scottish pensioners were likely to reject means-tested benefits, compared with a UK average of 10 per cent. Increased means-testing, therefore, is disproportionate in its effect on Scottish pensioners. A factor that I have not yet mentioned is that pensioners are often put off means-tested benefits because they are proud never to have claimed any form of income support during their working lives and do not want to start in their retirement. We need something better.
We could look at the language used in naming additional benefits. Words such as "benefit", "support" and "allowance" all conjure up an image of some form of income support or charity, as elderly people sometimes think of it. We must look at more positive words such as "entitlement". The name "pension credit" is a step in the right direction, but even that could be improved. We should examine how we can promote the range of benefits and advice available to pensioners, to maximise take-up.I certainly hope that the new Pension Service will be more effective in that way.
I shall consider the new proposals that deal with the ways in which pensions will be paid from now on. There are plans to scrap the traditional pension book and replace it with a bank card, and to pay pensions into bank accounts. Although I understand the reasoning behind those proposals,I have concerns. Many elderly people do not have bank accounts, for various reasons. They may not understand them or they may be uncertain about new technology. Above all, there is no substitute at that age for meeting and dealing with a real person. Pensioners like to have cash to hand, but I fear that having to withdraw it from a hole in the wall will not reassure them that their money is safe.
310WH I again congratulate the Government on all the work that they have done to help pensioners. They have introduced policies that would never have been introduced under previous Governments. Above all, we are on the right track to eradicating pensioner poverty and improving pensioners' lives. However, I reiterate that I would like further steps to be taken. I am talking about free television licences for the over-65s, an increase in the winter fuel allowance, less means-testing, more assistance for pensioners in finding their way around the system, and real people to deal with pensioners face to face, rather than new technology.
I have raised a number of issues and made suggestions about the way forward. I look forward to my hon. Friend the Minister's reply.
§ The Parliamentary Under-Secretary of State for Work and Pensions (Maria Eagle)
First and foremost, I congratulate my hon. Friend the Member for Glasgow, Anniesland (John Robertson) on securing the debate. He is fast showing himself to be a stalwart defender of, and advocate for, his pensioner constituents.I, along with other Ministers who have something to do with pensions, have noticed that, as I am sure that his pensioner constituents will have, too.
My hon. Friend has raised important issues.I thank him in particular for the way in which he has set out his comments, because he has taken the trouble to explain what the Government have already done. That is important, because it would have been easy for him just to come along and say, "This is what we want." I thank him for his even-handedness.
The Government's strategy is to ensure that all pensioners enjoy a decent and secure income in retirement and share in the nation's rising prosperity. As my hon. Friend was kind enough to say, we have already achieved a great deal, given where we started. We inherited a pension system that was failing to provide enough support to current pensioners and to provide security in retirement for future pensioners. In addition, the gap between better-off and poorer pensioners was growing. Indeed, my hon. Friend has given the figures.
As soon as we took over from the previous Tory Government, we started to right past wrongs. Our first priority was to address the immediate problem of pensioner poverty among retired people, which is why we introduced the minimum income guarantee in April 1999. Anyone who has had anything to do with social security will realise what a long and difficult task it is to introduce a new benefit or to change an existing one. However, we were determined to increase quickly the incomes of the poorest pensioners, who did not have access to a good second pension and who had not had the opportunities during their working lives, or their lives caring for others and bringing up children, to accrue such a pension.
That is why we built on the income support system that already existed, but we were left with a number of problems, which my hon. Friend has mentioned and to which I shall return. The key issue was to get money to poorer pensioners as fast as possible, and the MIG did that. We have uprated it in line with earnings every year since its introduction, and we will continue to do so for the lifetime of this Parliament.
311WH We went further by introducing winter fuel payments in winter 1997. These benefit pensioners generally as well as the poorest pensioners. When we introduced the payments, the rate was £20 for each eligible household and £50 for those on income support. Many of us forget that that was the starting level. It was increased to £100 in 1999, and from winter 2000 the payments have been £200 for each eligible household. That is considerably more than they would have been if the increases had been in line with inflation.
More than 11 million older people in more than 8 million households receive a significant contribution to their winter fuel bills through the winter fuel payment. In my hon. Friend's constituency, as he probably knows, almost 14,000 people received payments last year. He will know that my right hon. Friend the Chancellor has already announced that sufficient money has been set aside to continue paying winter fuel payments at £200 for the rest of this Parliament. My hon. Friend asked for a further increase, but I hope that he acknowledges how much we have already done and how welcome and popular the winter fuel allowance is among our pensioner constituents. I have found that when knocking on doors in south Liverpool.
My hon. Friend referred to fuel poverty and the home energy efficiency scheme plus, but did not say how much that scheme could help. In 2001–02, we expect some £81 million to have been spent on home energy efficiency scheme plus grants, which tackle fuel poverty on a house-by-house basis—possibly the most effective way imaginable. We expect 600,000 homes to have received help by 2004, and my hon. Friend should recall that we have increased the scheme's maximum grant from £315 to £2,500. Significantly more work can be done to tackle fuel poverty, and the grant is usually enough to pay for gas-fired central heating.
§ John Robertson
Does my hon. Friend accept that take-up is never sufficient to alleviate the poverty? The £200 winter fuel allowance worked, so if we gave £250, it would go a long way to alleviating the problem of people not taking up their allowances.
§ Maria Eagle
As expected, my hon. Friend is sticking tenaciously to his argument. I shall come to his point about take-up in a moment, but I want to get on record the fact that the increase in home energy efficiency scheme plus is significant. It will help 600,000 households by 2004 on a house-by-house basis, dealing with cold problems in particular dwellings. That is a very targeted way of spending the money.
I should like to remind my hon. Friend that in real terms between 1997 and 2001, domestic gas prices in the UK fell by 12.6 per cent. while domestic electricity prices fell by 16.8 per cent. Therefore, he will have to acknowledge that the winter fuel payment is becoming better and better value each year, even though it is staying at £200.I hope that I have convinced him.
§ Maria Eagle
My hon. Friend thinks that I have far more power that I do. We hope that the falls will continue, but unfortunately I am not in charge of the entire economy or domestic fuel pricing. We can only hope.
312WH My hon. Friend acknowledged that the free television licences have been a tremendously popular initiative, and we spend more than £356 million a year on providing free television licences to households with at least one person aged 75 or over. My hon. Friend may know that about 6,200 pensioners over 75 are eligible for free television licences in his constituency, and I am sure that they tell him how pleased they are to have them. I know that my hon. Friend would like the scheme extended to all pensioners, but the current regime strikes the right balance between safeguarding the principle that the BBC should be funded by viewers through the universal licence fee and our duty to help our oldest pensioners, who for reasons of ill-health, restricted mobility and social isolation are more likely to be reliant on television as their window to the world.
I cannot agree that people turn into couch potatoes when they hit the age of 65. That is a somewhat pessimistic view of human nature, and one statistic will illustrate my point. At age 75 plus, only 2 per cent. of pensioners still receive income from earnings, but one-fifth of those aged 65 or more are still working in one form or another and are not as socially isolated as some of our more elderly, frail pensioners. I hope that my hon. Friend will acknowledge my response, although I cannot expect him to have been won over completely by my arguments. No doubt he will come back to me and to the Department.
Compared with 1997, single pensioners in receipt of the minimum income guarantee, the winter fuel payment and free TV licences are now at least £18 a week better off. Pensioner couples have gained by more than £27 a week in real terms. My hon. Friend referred to the take up of means-tested benefits and, in particular, the minimum income guarantee. Our recent take-up campaign for the minimum income guarantee resulted in more than 138,500 successful additional claims. Those pensioners received, on average, an extra £20 a week. That campaign can be seen only as a success. He explained some of the reasons why we have a problem with take-up of the MIG, and they include the stigma and resulting reluctance felt by many pensioners to claim what they consider to be perhaps a handout or an income-related benefit. We want to tackle that.
It is certainly true that the figures for the pensioners entitled to the minimum income guarantee, but who have not claimed it yet, pre-date the national take-up campaign in May 2000. We are therefore undertaking further research to obtain a more precise estimate of the number of pensioners who are entitled to, but not receiving, the minimum income guarantee. More than 1 million pensioners responded to the take-up campaign and many of them were not eligible for MIG, usually because they had too much capital. The changed capital limit—the abolition of some of the requirements for MIG in pension credit—will tackle that problem and many more of those pensioners will be entitled to help under pension credit than under the minimum income guarantee. We can get in touch with them; we know who they are and where they are, unless they have moved. However, many pensioners remain in the same home.
We have made it easier for older people to claim their entitlement through a new shortened MIG claim form. We have reduced it from 40 pages to 10, which is certainly an achievement. We have stopped asking pensioners whether they are pregnant, which must be a 313WH step forward. The reason why such questions were on the form was that it was based on income support. We had to administer MIG through the income support system to ensure that payment was made quickly. The change to pension credit will be a major breakthrough. It will make real changes to the way in which we ask pensioners for information, the type of information we ask for and the type of process that they must go through to receive it. It will make a big difference in respect of take-up.
Pensioners who contact the retirement pension telecentre line are asked a series of questions to identify those callers who are not already receiving the minimum income guarantee, but who may be entitled to it. We are taking a more proactive approach to identifying entitlement and trying to ensure that payments are made to those who are entitled to them. That will make a difference, too. We have started a data matching exercise that will enable us to invite a claim to MIG from those whom we think may be entitled, following the award of another benefit or life event, for example a bereavement or marriage. We will know whether people are entitled to it and encourage them to claim.
§ Maria Eagle
I appreciate that the hon. Lady has attended the debate, but perhaps she may apply for one herself at a later stage. I still have some points to make in answer to my hon. Friend.
The pension credit is a tremendously important stage in our strategy to address the unfairness in the social 314WH security system that leaves people with modest savings no better off than some people who have no savings. From 2003, we shall reward people with most savings through the introduction of the pension credit. The way in which we shall undertake that will deal with the take-up issue raised by my hon. Friend the Member for Glasgow, Anniesland. The main group of people who will benefit will be women over 70. Under the current rules, the occupational pension that they may have saved towards is taken into account pound for pound against any entitlement that they may have. Under pension credit, there will be a reward for that saving of up to £13.80 a week for a single person. My hon. Friend made the point that, on average, pensioners who are entitled will be £400 a year better off.
For most pensioners, the pension credit will be fixed for five years and people will not need to make reports each week on whether their income has changed. That will also remove the stigma and ensure that entitlement is clear and take-up is fully implemented. We hope that more pensioners will claim pension credit as a result of such changes. My hon. Friend asked about automatic credit transfer. I reassure him that that will not stop pensioners being paid in cash over post office counters. The measure will save administrative costs and, because order books are open to fraud, we want to ensure that there is less fraud. I hope that I have given him some assurance on the points that he has raised and I congratulate him again on the debate.
§ It being Two o'clock, the motion for the Adjournment of the sitting lapsed, without Question put.