Lord Palmer of Childs Hill (LD)
My Lords, this surely must be the Government of unintended consequences. When this policy was first mooted, I asked the Minister whether there would be any financial gain from it because, with the further uptake in pension credits, the actual money saved is miniscule. It is nothing like what the Government said they would get, so we have gone through all this pain and people have suffered, all for a strange bit of ideology.
Following on from what the noble Baroness on the Conservative Front Bench said, reports in the media suggest that winter fuel payments will be made automatically as a universal benefit this winter. Money will then be reclaimed when higher-income pensioners fill in their tax returns. Can the Minister say how the Government will ensure that the new system does not mean that the bereaved families of tens of thousands of dead pensioners—not only widows and widowers but dead pensioners—will be pursued by tax officials to recoup the payments? The Government of unintended consequences strike yet again.
Although the Chancellor has finally acknowledged the failure of this policy—thanks to sustained efforts by the Liberal Democrats and others—the scale of the distress created must not be forgotten. Do the Government intend to uprate the £35,000 threshold in line with inflation in future years?
This has been a disastrous policy. It has not raised the money we were told it was intended to raise. There will be further distress down the line while they try to sort out this mess.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I am very grateful to the noble Baroness, Lady Stedman-Scott, and the noble Lord, Lord Palmer of Childs Hill, for their questions and comments. I am grateful to the noble Baroness for welcoming this change of policy, and I thank both speakers for the consensus that now exists across the House on the current policy position.
The noble Baroness began by asking how we got here. We got here, of course, because when we came into office, we had to make a number of very urgent decisions to put the public finances back on a firm footing. That involved us taking some very difficult decisions on welfare, tax and spending, including means testing the winter fuel payment. I am very grateful to her for noting that we have now listened to the concerns raised, inside and outside this House, about the level of the means test.
The noble Baroness asked about the savings that will be generated from this policy. As she rightly said, we expect the policy to cost around £1.5 billion a year in total, including £1.25 billion in England and Wales, by the end of this forecast period. She asked about the savings that this would generate. It is estimated to save around £450 million a year, compared to universal winter payments.
The noble Baroness asked when and how this would be paid for. We are setting out these changes now to ensure that more pensioners can receive support this winter—that is the right thing to do. There is now just one fiscal event a year, so, as is normal, these changes will be fully funded at the next fiscal event, which is the Autumn Budget. This will ensure that final costings and funding decisions come alongside a full forecast from the OBR, and we will ensure that the fiscal rules are met at all times.
The noble Baroness also asked about the other policies we are pursuing. It was appropriate that, ahead of tomorrow’s spending review, she reminded us that the party opposite has not supported a single policy that we have put in place to stabilise the public finances or to raise money for public services. When we have tomorrow’s spending review, it will be very interesting to hear from the party opposite that it now supports all the spending we are doing, even though it did not support a single one of the difficult measures we took to raise money for public services. It is very interesting that she opposed the Employment Rights Bill, because we again see that her party does not support a single measure to improve the lives of working people.
Lord Livermore (Lab)
Well, I think it is true.
The noble Baroness asked specifically about the tax system. No additional pensioner will be brought into the tax system because of this change; we can give that assurance to the House today.
The noble Lord, Lord Palmer of Childs Hill, asked about recouping payments from deceased people. HMRC has established processes in place to recoup payments and finalise the tax affairs of deceased people, so nothing will change because of this policy. This is not a taxable payment. We assure the House that, if this is the only outstanding tax charge remaining from a deceased person, HMRC will not pursue anyone just for this specific amount of money. The noble Lord also asked whether we will uprate the threshold of £35,000. We will set that out in the Budget.
Lord Davies of Brixton (Lab)
My Lords, as someone who has spoken from these Benches against this proposal, I very much welcome the Government’s decision. The way the change has been characterised is a bit misleading. Does the Minister not agree that this represents a rejection of means testing and a return to universal benefits, with, quite rightly, the cost being handled for those on high incomes through a redistributive tax system?
Lord Livermore (Lab)
I am grateful to my noble friend for his support for the change—I was going to say in the means test, and that is obviously exactly what his question is about. I am not sure I am expert enough to engage in a debate with him about the definition of a means test. Clearly, we are raising the level at which pensioners are entitled to and benefit from this policy. As he says, it will be paid universally to all pensioners, and those with an income over £35,000 will have the winter fuel payment recovered by HMRC through the tax system.
Lord Clarke of Nottingham (Con)
My Lords, this is certainly a shambolic way of conducting a government, but otherwise, I find myself unfortunately rather out of step with the exchanges so far.
The winter fuel payment had nothing to do with the level of fuel bills. It was paid to everybody, rich or poor, as a prize for reaching a certain age, which is why, at the last general election that I fought successfully as a candidate, the Conservative Party manifesto contained a commitment to abolish it. Unfortunately, we never got round to that.
The Government failed to make their case, which was exploited very successfully by Nigel Farage, so now they are introducing an extraordinarily generous means test. I quite accept that this should be means tested, but we are now going to pay it out to some of the better off households in this country. Does the Minister not accept that if the Government can somewhere find £1.5 billion to spend on the alleviation of poverty, there are very many more sensible ways of spending it that might help relieve the quite excessive levels of poverty that exist in our society at the moment? Meanwhile, I thank him for the £300 that I shall be receiving in a week or two’s time, although apparently, I shall be giving it back eventually.
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I am sorry that he does not share the consensus in the House on the new policy position. He is absolutely right in his characterisation of the policy. I do not know what he earns, so it is not right for me to comment on that, but if he earns above the £35,000 threshold, it will be recovered through the tax system. He describes it as an extremely generous means test. It is kind of him to say that, but it is in line with average earnings and we have decided that that is the appropriate level it should be paid at.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I declare an interest as co-chair of the all-party group on older persons. Is the Minister aware that Age UK, which really understands this issue and campaigned on it, welcomes unreservedly the Government’s decision—unlike the Conservatives, who say that they welcome the decision but would not find the money to pay for it? [Interruption.] That is exactly what the noble Baroness said. Will the Minister use his undoubted talents and tell them how they can reconcile that difference?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. I pay tribute to him and to Age UK for the campaigning work they have done, not least to increase pension credit uptake. There was a record increase this year in the take-up of pension credit. An additional 60,000 people are now claiming pension credit, which is incredibly welcome.
We have listened to the concerns raised by Age UK, among others, about the level of the means test. We have now acted to ensure that, although we are still means testing the payment, we are raising the threshold to extend eligibility, so that this winter, more pensioners will be able to benefit from it. Nine million pensioners will now receive it—more than three-quarters of pensioners in total.
My noble friend is absolutely right about the party opposite: they are more than happy to spend the money, but they are less keen on raising it.
Viscount Hailsham (Con)
My Lords, would it not be better to incorporate the allowance into the pension, which is taxable, making it easier and fairer to administer?
Lord Livermore (Lab)
That may be one option, but it is not the option we have chosen.
Lord Macpherson of Earl’s Court (CB)
My Lords, as one of the few supporters of the original measure—like my friend, the noble Lord, Lord Clarke—I feel the Minister’s pain. But when the Treasury has to retreat, it is best to concede more rather than less; in that respect only, I congratulate the Minister on the proposal. Can he provide an assurance that, as and when the Government have the resources to consider further tax and benefit changes, they will prioritise working-age families rather than the elderly, who have benefited from considerable government largesse, not least through the triple lock?
Lord Livermore (Lab)
I am grateful to the noble Lord for his qualified support for the policy. The Government absolutely know that their number one concern and mission is to increase the living standards of working people and to do so through increasing growth in the economy, and that absolutely will be the focus of our policies going forward.
Baroness O’Grady of Upper Holloway (Lab)
My Lords, I welcome the position of the Minister, and it was also good to hear praise for his leadership from the Benches opposite. But does he agree that it is unfortunate to hear attempts to pitch pensioners against workers’ interests in fair pay and stronger employment rights, not least because the workers of today will become the pensioners of tomorrow, and we know that low pay, weak security and poor rights lead to poverty in old age?
Lord Livermore (Lab)
I am grateful to my noble friend and I agree with everything that she says. I will just add to what she said at the end: low pay and insecurity at work are detrimental to growth, and obviously we need growth in our economy to pay for the benefits that we want to pay to pensioners and others. Once again, the party opposite calls for the growth but they are not willing to support the policies that get us there.
Lord Harper (Con)
My Lords, when the Chancellor was doing her various media interviews setting out the retreat on this policy, she rather unbelievably tried to suggest that it was done not because it was incredibly unpopular but because somehow the economy has got rather better since last year. Given that we have seen inflation up, unemployment up and the OBR slashing its growth forecast, the Minister should get some personal credit for not trying to insist on that nonsense in your Lordships’ House. When the Treasury analyses the cost of both the original policy and its reversal and takes into account the extra people claiming pension credit and the cost of reversing this policy, can he set out, either today or at the fiscal event, whether this whole set of decisions has saved or cost the taxpayer money?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. On the facts about growth, we inherited forecasts from the previous Government for 2025 growth where we would have been seventh out of seven in the G7. In quarter 1 of this year we were first out of seven in the G7, so we will not take any lectures from him about the growth performance of the economy. He asked about the costings of the policy. The costings of the previous policy included assumptions about take-up of pension credit, so that pension credit increase figure was already in the costings for the previous policy. The costings of this policy will be certified by the OBR and scored at the Autumn Budget, and we will set out what he asks for.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I commend my noble friend the Minister on the courageous decision to make the necessary changes to the winter fuel payment and bring some joy to many pensioners. The Government should be congratulated on actually listening to what the people are saying. In that respect and under the principle of parity as it relates to the payment of benefits in Northern Ireland, can the Minister outline what discussions have taken place between the Treasury, the Department for Communities and the Department of Finance in Northern Ireland about ensuring that pensioners—I declare an interest—qualify for this restoration of the winter fuel payment?
Lord Livermore (Lab)
I am grateful to my noble friend for her question. As she knows much better than I do, winter fuel payments are transferred in Northern Ireland. The Minister for Pensions spoke to his counterpart in the Northern Ireland Government yesterday. We are of course very conscious of the need for sufficient lead-in time so that the necessary policies can be put in place in good time for this winter. The Northern Ireland Executive will receive a mechanical uplift in their funding as a result of this change in England and Wales.
Lord Harries of Pentregarth (CB)
I welcome the new policy, but does the Minister agree that the public would find it helpful if some thinking was given by the Government about the choice of the figure of £35,000? I have no feelings one way or the other, but I think the general public might find it helpful to find some kind of rationale behind this figure. Why was it not higher or lower? Why that particular figure?
Lord Livermore (Lab)
My Lords, £35,000 is broadly equivalent to average earnings. It means that 9 million pensioners will now benefit from this. That is roughly three-quarters of pensioners.
Baroness Smith of Llanfaes (PC)
My Lords, last week the Intergenerational Foundation released a report that found that the public spending gap between children and pensioners has widened by 170%. That means that in 2023-24 pensioners received around £31,000, in comparison to children at £18,000. The winter fuel allowance has meant that there are fewer pensioners in poverty, and that is a good thing, but when we look at child poverty stats, they are almost double those of pensioners in poverty. Will His Majesty’s Government review abolishing the child benefit cap?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question, and I absolutely share her commitment to tackle child poverty in this country. We have made initial steps with the free school meals policy that the Prime Minister and the Secretary of State for Education set out last week. I hope that the spending review will have more to say on that subject, and on the child poverty strategy published alongside the Budget.
Lord Sikka (Lab)
My Lords, I have two points. First, can the Minister say how many more pensioners will now have to submit a tax return? Secondly, this policy is full of anomalies. To give just one example, somebody who has saved diligently since ISAs began will have a portfolio of about £400,000. The income from that is not reported on any tax return at all. Therefore, somebody with £35,000-plus—at least £20,000, £30,000 or £40,000 more—can still get winter fuel payment under the Government’s announcement. How are the Government going to force people to disclose the income from ISAs and other tax-free savings?
Lord Livermore (Lab)
Well, the tax system stays exactly as it is now, so I do not quite understand how my noble friend’s question arises. As I said before, no one will be brought into the tax system as a result of this policy who currently is not in the tax system.
The Lord Bishop of Southwark
My Lords, I welcome the reversal of the decision on winter fuel payments, having spoken, like others, cautioning against so many pensioners who are vulnerable and in need being deprived of it—not against the principle of changing it and restricting it to some degree. I just wonder whether, in terms of lessons learned, a more general principle might be acknowledged that in future cuts, the Government will not look to making them from vulnerable or disabled people.
Lord Livermore (Lab)
As I have said all along, we have listened to the concerns about the level of means tests. We are still means-testing the winter fuel payment, because we think it is right that the very richest pensioners do not have their fuel bills subsidised when there are other calls on public spending, but I am grateful to the right reverend Prelate for supporting the policy now to extend that eligibility so that this winter more pensioners are able to benefit from it.
Baroness Altmann (Non-Afl)
My Lords, I declare my interests, and I am glad that the Government have listened. I welcome the undoing of a terrible wrong. Can the Minister confirm that the Government estimate that about 50,000 more pensioners were in poverty last winter and 100,000 more pensioners ended up in A&E? Does this not show the difficulties of making short-term changes, without proper planning, which affect some of the most vulnerable people in our country? I ask for a commitment that, first, there will not be a consideration of means testing of the state pension itself and, secondly, the Inland Revenue’s helplines for simple assessment will be sufficiently staffed so that pensioners worried about whether they are going to have to pay back this money will get answers in a reasonable period of time.
Lord Livermore (Lab)
I am happy to give the noble Baroness those commitments.
Lord Watts (Lab)
My Lords, the Opposition suggested that the Government have put pensioners behind the NHS and teachers. Does the Minister agree that the Tories do not seem to want to tell teachers or NHS staff that they want them to be poorer?
Lord Livermore (Lab)
My noble friend is obviously right to point out that the party opposite has consistently criticised the public sector pay rises that we have given.
Lord Bellingham (Con)
My Lords, following on from the question asked by the right reverend Prelate, I hope that the Minister is aware that roughly 750,000 pensioners on pension credit and therefore eligible for the winter fuel allowance applied for it last winter but have not yet had it. Will he look at this problem?
Lord Livermore (Lab)
I will look at that and discuss it with my noble friend Lady Sherlock.
Lord Young of Norwood Green (Lab)
My Lords, I perhaps take a slightly different view on this. Of course, I welcome people being able to get their winter fuel payments. We are still applying the pension credit, which is absolutely right. I do not know what everybody else in this House who got winter fuel payments did with them, but I donated mine to charity; I certainly did not need that £300, and there are plenty of others like me.
If I have a concern about government policy, it is this. Nobody seems to recognise that pensioners benefited very well from the triple lock. I do not agree with the triple lock. I may be in a minority, but that money could be used, as people have said, for alleviating child poverty—probably one of the biggest challenges that we face. I am not expecting the Minister to do an about-turn on that one; I am just making a comment. When we go for the triple lock, there is an expensive cost. Tomorrow, we will hear the Chancellor make known how she will balance that budget. I welcome that people on pension credit—who we wanted to claim pension credit—will be able to get their winter fuel payments. In that respect, this is good. I have only expressed my one area of concern.
Lord Livermore (Lab)
I am grateful to my noble friend for what he says. Over 12 million pensioners are now benefiting across the UK from the triple lock. Their state pension is set to increase by up to £1,900 over the course of this Parliament. Almost 60,000 extra households are now receiving the pension credit that they are entitled to, which I think we can all agree is a very good thing. He said that he donated his winter fuel payments to charity; he is welcome to continue to do that if his income is below £35,000. If it is under that and he wants to opt out of receiving it, he is very welcome to do so. We will bring forward proposals before the Summer Recess enabling him to do that.
Baroness Penn (Con)
My Lords, when your Lordships’ House debated the original changes to the winter fuel payment, it was suggested that we should not means-test the winter fuel payment but tax it instead. The noble Baroness the Minister rejected that option, saying that it failed on two fronts: it did not meet the savings test or the fairness test. If the Government had listened to your Lordships’ House then, millions of pensioners who did not receive their winter fuel payment this winter would have done so. What has changed in terms of the practical ability to implement this policy now compared with when it was first suggested by your Lordships’ House?
Lord Livermore (Lab)
I thank the noble Baroness for her question, but to be clear: we are not taxing it. We are recovering it through the tax system, which is a different policy from the one that she is describing.
Lord Brooke of Alverthorpe (Lab)
Of the 12 million pensioners, how many are millionaires? Is it true that it is 3 million?
Lord Livermore (Lab)
I do not have those numbers to hand, but I will see whether they exist. If they do, I will write to my noble friend.