Energy: Winter Fuel Payment

Monday 19th December 2011 Lords Chamber

Question

14:45

Asked By

[Lord Oakeshott of Seagrove Bay]

To ask Her Majesty’s Government whether they will make the winter fuel payment subject to basic and higher rate tax and limited to United Kingdom residents.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, the winter fuel payment is a simple to administer payment that ensures that older people can turn up their heating in the winter months without worrying about the cost. We have no plans to tax the payment. We are obliged under European law to continue paying the winter fuel payment to people who qualify for a payment in Great Britain and then move to another European Economic Area country or Switzerland.

[Lord Oakeshott of Seagrove Bay]

I thank the noble Lord for that reply. I am rather nervous about this Question because 674 noble Lords are entitled to receive the winter fuel payment. That is 81 per cent of us. Would I be right in guessing that the Minister, who is 61, is, like me, one of the half a million top-rate taxpayers who benefit from this farcical tax-free bung? Why cannot winter fuel payments at least be taxed like the old age pension? That would raise £220 million a year to help people in real need in our country.

[Lord Freud]

Yes, my Lords, like the other 81 per cent in the Chamber I have to declare an interest in this matter, although I shall keep my tax arrangements between me and HMRC. One of the issues around taxation is that it is not straightforward to tax the winter fuel payment as it stands because it is a household payment whereas tax is done on an individual basis. It could be done but it is rather complicated.

[Lord Faulkner of Worcester]

Can the Minister confirm that there is nothing whatever to stop the noble Lord, Lord Oakeshott, giving away the money if he does not want it?

[Lord Freud]

My Lords, as the noble Lord knows, all money is fungible. This is a matter of psychology rather than funding. If people find it convenient to look at money as being in separate packets and give money in a particular packet to a particular charity, that is a very excellent thing to happen, particularly if it encourages charitable giving more generally.

[Lord Palmer]

My Lords, is it fair that this tax will be the same whether you live on the south coast of England or the north coast of Scotland?

[Lord Freud]

My Lords, I think it depends on what side of the country you live. I understand that the Mull of Kintyre is rather warmer than East Anglia, so I think that what the noble Lord suggests would be a pretty complicated thing to do.

[Baroness Hayman]

Would the noble Lord be kind enough to clarify his original Answer on overseas payments? Am I to believe that my Trinidadian born neighbour, who complained to me recently that a family member of hers who had returned to the West Indies was in receipt of the winter fuel payment, was incorrect?

[Lord Freud]

Yes, you can keep your winter fuel payment only if you go to another European country, so if it is being obtained by someone in Trinidad, the noble Baroness might make a call to Crimestoppers or someone.

[Lord Stoneham of Droxford]

Does not my noble friend agree that it would be fairer to tax the winter fuel allowance and use the money to ease the burden of his housing benefit reforms?

[Lord Freud]

My Lords, clearly, one can look at how one treats this, but essentially it is a simple payment. It is one of the universal payments to pensioners along with the state pension, additional pension and passported benefits such as NHS prescriptions. That is how it is designed. It would be rather complicated and expensive to tax it.

[Lord Kinnock]

My Lords, the Minister appears to be very sympathetic to the idea of changing the system, and I am not taking into account the season of the year. Will he reconsider the possibility of a levy on higher-rate taxpayers? After all, what is good for King Wenceslas should be good enough for 81 per cent of us.

[Lord Freud]

My Lords, I am grateful to be told where my sympathies are but the reality is that about 500,000 people would be affected and the saving would be about £40 million a year. It would be expensive and difficult to do and, therefore, on its own, it would not be a good idea. That does not suggest where my sympathies are at all.

[Lord Campbell-Savours]

Would not this proposal actually penalise low-income group, basic-rate taxpayers?

[Lord Freud]

I am sorry—I missed the point of that question. Will the noble Lord repeat it?

[Lord Campbell-Savours]

Would not the proposal penalise low-income group, basic-rate, elderly taxpayers?

[Lord Freud]

No, I do not think so. This is just a universal benefit that is paid on a simple basis to households that need it. Older people above 80 receive rather more than those below that age.

[Lord McKenzie of Luton]

My Lords, for the winter fuel allowance to be put to good effect, you have to have a home to heat. Sadly, we know that homelessness is on the increase in our country. The Minister is always keen to look at funding within fixed envelopes, but on what does he base his philosophy for supporting the retention of tax-free winter fuel allowances for higher-rate taxpayers, rather than providing more support for the homeless?

[Lord Freud]

My Lords, I hope that I have made it quite clear that when you have a universal benefit you pay it out on a simplified basis. Because it is a household payment, it would be enormously complicated to change that. Clearly, it could be done. There has been a small increase in homelessness but it remains at historically low levels. We are watching the figures very closely and it is a priority for this Government that we do not see an excessive rise in homelessness.