UK Poverty
David Crausby Excerpts(9 years, 6 months ago)
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Mr David Crausby (in the Chair)
Order. I intend to call the Front Benchers no later than 3.40 pm. That gives us 25 minutes. If Members can keep their remarks to about six minutes, I will be able to call everyone.
Mr David Crausby (in the Chair)
Order. We have only 16 minutes left before the Front-Bench speeches. Four hon. Members want to speak, which means four minutes apiece. Perhaps I could have co-operation on that.
Mr David Crausby (in the Chair)
Order. Hon. Members are now down to three minutes each.
Mr Raab
If someone is earning between £10,000 and £15,000 under this Government, they are paying 54% less tax than they were under the last Government. If someone is a millionaire—we get lots of jibes on the Government side of the House about that—they are paying 14% more. When do we ever hear that referred to?
A lot of people have talked about poverty. If we look at the inequality Gini coefficient, we see that on elderly poverty, fuel poverty, the number of people not in education, employment or training, and child poverty—on every single statistical benchmark—the level of poverty or inequality is lower now than what the last Government left behind. Where is a little bit of honesty about that?
When it comes to affordable homes, the average annual rate of the creation of affordable homes is 50% higher under this Government than the last Government. The hon. Lady might have mentioned that in her speech. What about inflation, which eats away at incomes?
Mr David Crausby (in the Chair)
Order. Mr Raab did give notice that he would be late. If I am going to call Mr Lavery as well, Members are going to have to give Mr Raab the opportunity to speak.
Mr Raab
Thank you, Mr Crausby, I appreciate that.
Inflation is the other key indicator. It was at 3.4% in May 2010, but it is now down to 0.5%. That is not unalloyed good news—it is tough for savers—but it is incredibly relevant to dealing with cost of living issues, which I believe the hon. Member for Wigan cares strongly about. There is still much to do, but if we care about things such as energy prices, we should not be backing reckless interventions in the energy market that will just create spikes in retail prices. We should be investing in nuclear and shale—but was it five or six nuclear plants that were closed down under the last Government? Labour is going slow on fracking as well. Again, if we are serious about long-term issues relating to poverty in this country, those are the things we should be dealing with. If we care about food prices, we should welcome the competitive supermarket price wars that we have been seeing recently. We should be concerned about the £400 that the common agricultural policy adds to the average annual family food bill, but when do we ever hear from Labour MPs about that? We should be looking for freer trade and reform of the EU.
In conclusion, I welcome the debate, but it is important to shed some light, not merely some heat, on this contentious issue, which afflicts the most vulnerable in our society. The hon. Lady can shake her head all she likes, but the fact is that on almost every official indicator and almost every policy lever, this Government have done better than the previous Government. Not only is the economy doing better, but life is fairer for most people in terms of the things that Government can reasonably control. Those are the facts, like them or not.
Mr David Crausby (in the Chair)
I did say that I would call the Front Benchers at 3.40 pm. It has now turned 3.40 pm, but I am going to give Ian Lavery one minute. If he goes past it, I will interrupt him.
Ian Lavery (Wansbeck) (Lab)
Thank you for your extreme flexibility, Mr Crausby.
We live in a different world here in Westminster. People in the rest of the country live in a broken society. Children are suffering because of poverty. Disabled people are suffering because of poverty and the introduction of the bedroom tax. Mentally ill people are suffering greatly because of the situation in this country. Single parents are being singled out because of the situation that the Government have imposed on them. Old people are suffering because of poverty; many of them are huddling together because they cannot even afford to put money in the electricity meter or food on the table.
We live in a broken society. Poverty is preventable. Poverty is a political choice. It brings shame on the Government and on politicians to allow poverty to continue as we are experiencing it here in food bank Britain. People in work cannot afford to put food on the table—
Mr David Crausby (in the Chair)
Order. A Parliamentary Private Secretary should be seen and not heard, Mr Elphicke.
Helen Goodman
The response that we have had from Ministers and Tory Members today is precisely what the Archbishop of Canterbury describes in the book “On Rock or Sand?” as “wilful blindness”. If we are wilfully blind to the real problems in this country, we will not be able to deal with them. That is the major problem. The Government are responsible for a large number of the measures that have pushed the poorest further down.
What are we going to do instead? My hon. Friend the Member for Edinburgh East (Sheila Gilmore) pointed out that in-work poverty is now exploding as well. That point is also made in an excellent book by Julia Unwin, which I recommend to all hon. Members. In-work poverty is the new feature of poverty. It is caused by rising prices, a cost of living crisis and falling incomes. The Government will continue on that exploitative path, which will, in fact, increase the benefits bill by £9 billion, as my hon. Friend the Member for Leeds West (Rachel Reeves) pointed out this morning. However, this morning the Secretary of State was bragging about something that Barnardo’s has complained to me about, namely the taking of £50 billion from the children of this country during this Parliament.
Hon. Members have asked, “What would Labour do?” I will tell them what Labour will do. The first thing that Labour will do is to abolish the bedroom tax.
Helen Goodman
Paid for by taxing the hedge funds, as was discussed during Prime Minister’s questions only this lunchtime, when the Prime Minister refused to do that. [Interruption.]
Helen Goodman
The bedroom tax bill of £3,800 over the next Parliament will be visited on the poorest people. Two thirds of those who pay the bedroom tax are disabled. If a Tory-led Government are re-elected, those people will face having to pay another £3,800. That is why the first thing that a Labour Government will do, if we are elected, is to abolish the bedroom tax.
We will also increase the minimum wage. We will tackle the zero-hours culture. We will tax bankers’ bonuses in order to get young people into work. We will sort out the energy market. We will do something about rents. We will take steps to improve child care, so that lone mums and other mums can get out to work and support their families. We will build more houses, which will help to bring down housing costs and provide more jobs. It is a comprehensive picture, and it is a real choice for the British people.
The Minister for Employment (Esther McVey)
It is a pleasure to serve under your chairmanship, Mr Crausby. This is an incredibly important debate, and I thank the hon. Member for Wigan (Lisa Nandy) for securing it. I begin by putting what I have heard today in context. Every story that has been brought here is important, and it is important that we listen to them, but let us look at the independent figures on inequality, which show us what is happening. Income inequality is lower now than it was at the election. There are 600,000 fewer people in relative poverty than at the election. Why do I use relative poverty? There are various measures, but relative poverty is Labour’s preferred measure against which it set its targets. Labour said that it would halve relative poverty by 2010, but it missed that target. [Interruption.]
Mr David Crausby (in the Chair)
Order. Ms Nandy, you have had your opportunity to speak. Let us listen to others who want to speak.
Esther McVey
There are also 300,000 fewer children living in relative poverty.
Esther McVey
I will not give way for the moment.
It is also key to know that 1.75 million more people are in work. When my hon. Friend the Member for Esher and Walton (Mr Raab) talked about what sorts of jobs those people are doing, he was right to say that, since the election, three quarters of them are full-time jobs. In fact, in the last year 80% are full-time jobs. What sorts of jobs are they? The vast majority, 75%, are skilled, managerial and professional. If we want to look at the figures from the other point of view, we could say that, at the election, 600,000 more people were in relative poverty and there were 670,000 more workless households. We could say that there were 300,000 more children and 200,000 more pensioners in relative poverty. We could also say that there were 50,000 more households in which no member had ever worked. That is what we were picking up. As my hon. Friend the Member for Daventry (Chris Heaton-Harris) pointed out—I hope this is a point of consensus for all of us—there had been a financial crash and the GDP of the whole country had shrunk by 7%. The truth of the matter is that everybody had to bear the brunt of the crash that we had from the Labour party, but we have ensured—[Interruption.]
Esther McVey
We have ensured that the richest are paying the most. We are ensuring that the richest people are now paying more than they ever paid under Labour. The hon. Member for Wigan talked about working for Barnardo’s, and I congratulate her because I am a child of Barnardo’s. When we talk about poverty and how we take people out of poverty, the key building blocks have to be education and employment, and the Government are creating those key building blocks.
When we look at this, what have we done? We have brought record rates of women into work. We are increasing and supporting lone parents into work. We have put £2.5 billion into the troubled families initiative, and we have put the same amount into the pupil premium. We have ensured that 3 million people are out of tax altogether and that 26 million people have had their tax reduced. We have increased the minimum wage to £6.50 an hour, which is the first real increase since 2008—a 3% increase—and which benefits more than 1 million people. People in full-time work on the national minimum wage are getting an extra £355 a year. All those things are key, and we are doing them.
Esther McVey
I never recognise where the hon. Lady gets her figures. I have given the independent facts, which are correct. The only thing I will say is that here is a party that delivered the biggest financial crash in living memory. This is the party that said there would be 1 million more unemployed people now, but we are near to having 2 million more people in employment. [Interruption.] Labour Members would do better to listen for a change, rather than charging forward with things that really are not true. It is sometimes worth listening, rather than talking, especially when the Labour party delivered such a disaster for the UK, which we are all now having to cope and deal with. It is worth remembering that, because of our long-term economic plan, we are the fastest-growing developed nation. The UK has delivered more jobs than the rest of Europe added together. Those are the facts.
My hon. Friend the Member for Esher and Walton read out a list of facts about the constituency of the hon. Member for Wigan. He talked about the unemployment figures and the claimant count rising by 100% between 2005 and 2010, but let us look at what is happening in Wigan now: the employment rate is up by 7.9 percentage points; the claimant count is down by 49%; the long-term claimant count is down by 44%; the youth claimant count is down by 70%; and the long-term youth claimant count—[Interruption.]
Esther McVey
The long-term youth claimant count is down 80% on the year. In fact, youth unemployment across the country has had its biggest fall in living memory. More than 170,000 more young people now have jobs. Those are just the facts. In the north-west region, the number of workless households is down by 41,000 since 2010, which is a decrease of 1.7%.
Last week, the local paper in Wigan stated that the number of apprenticeship vacancies in Wigan has hit a record high. There has been a 72% increase in the number of apprenticeship vacancies in Wigan posted online, and the paper said:
“An upsurge in firms willing to take on apprentices has been credited with bringing about a dramatic fall in young people not in employment”.
Esther McVey
I think it is. Many people who have gone to hospital with malnutrition have actually put on weight, which is down to a poor diet. That is a much bigger debate for another time. What we can talk about is what is happening, how we are getting people into work and how worklessness is falling in the constituency of the hon. Member for Wigan. [Interruption.] Obviously she does not want to listen to these answers because they do not play to the things she was talking about. Equally, her local paper celebrated that Wigan has received the pupil premium award. A headmaster said:
“We couldn’t be more pleased to win the award”.
The award is key to helping young people to go forward.
I listened to the hon. Lady’s stories about sanctions, and I would like to know about the specific instances. I replied to a letter the other week—I hear that she has sent me another, to which I will be writing back in due course—but if she gave me the names of the people, rather than keeping them anonymous, I could find out what happened at the jobcentre. If someone wanted to go to a funeral, it would be good cause. Somebody with learning difficulties is a vulnerable person and has good cause. There is a booklet that the hon. Lady can download from the website that outlines the guidance, which is substantial. It is a heavy document that says how people will be given good cause. Equally, there have always been sanctions in the benefit system. This is nothing new—
Mr David Crausby (in the Chair)
Order. I am pleased to say that we will now move on to the next debate.
Oral Answers to Questions
David Crausby Excerpts(10 years, 7 months ago)
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Mr David Crausby (Bolton North East) (Lab)
T3. In response to an inquiry, the Department for Work and Pensions has confirmed to me that employers advertising vacancies on the Government’s jobmatch service must provide a full, clear and accurate job description. Does the Secretary of State agree that they should also make it clear when they are offering zero-hours contracts, rather than simply listing them as part time?
Mr Duncan Smith
Of course, the key point is that all contracts must be clear from the beginning and every employee must know what contract they are on. A very small percentage of the population are on zero hours and great care is needed, as some jobs and some individuals prefer such contracts—as the hon. Gentleman’s Government found out when they were in power.
Housing Benefit
David Crausby Excerpts(10 years, 9 months ago)
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Mr David Crausby (Bolton North East) (Lab)
I intend to use the term “bedroom tax” today and not “under-occupancy penalty” or “single room subsidy”. If that offends anyone, I can assure them they will not be anywhere near as offended as thousands of my constituents have been by this repulsive Government attack on disadvantaged and disabled people. The conflict surrounding the description of this despicable act reminds me of Margaret Thatcher’s attempt to force the term “community charge” down the throats of the British people. Not surprisingly, she failed, and history damned it as the poll tax. The same fate awaits the single room subsidy.
The policy itself will also fail because, like the poll tax, it is based on mean-mindedness and political dogma. It will be also rejected by Conservative and Liberal leaderships yet to come, and once it has gone—as it will do after the next election—it will be disowned. Even as Margaret Thatcher was being driven away from Downing street in tears, John Major was planning to ditch the poll tax. He had remembered what Mrs Thatcher had clearly forgotten: that, regardless of how big someone gets for their boots, if they want to win elections and stay in power they should keep in touch with public opinion. They should also bear in mind that our electorate are, I am proud to say, for the most part decent and fair-minded people who know a pig in a poke when they see one. John Major understood that, which is why he went on to win the next election in 1992.
Prime Ministers have their albatrosses, however: John Major’s was the exchange rate mechanism; Margaret Thatcher’s was the poll tax; Tony Blair’s was Iraq; and Jim Callaghan’s was the winter of discontent. The bedroom tax will belong to the present incumbent. As with the ancient mariner, it will hang round his neck in shame.
Dr Coffey
The hon. Gentleman might wish to check the recent opinion polls. We would appreciate it if he were more consistent about changing the rules for people on local housing allowance. If they were so bad for private sector rented flats, why is the situation so different for the public sector?
Mr Crausby
I do not think that my political principles have changed, to be perfectly honest. I would have put forward these same arguments prior to the election as well.
On a more serious point, nearly 2,500 people back home in Bolton have been affected, and more than 75% of them have fallen into arrears since April—so much for this being a money-saving measure.
Sir Tony Cunningham (Workington) (Lab)
On the difficulty of moving, I have a constituent who has got into arrears because of the bedroom tax. The only way in which she can get out of arrears is to move to a smaller property but, guess what, she cannot move because she is in arrears. Does not this demonstrate the madness of this policy?
Mr Crausby
Absolutely. I will come to that point in a moment.
The fact is that millions of pounds will be lost. That represents much-needed cash that needs to be spent on making living conditions better, not worse. The demand for debt advice and financial service advice is bound to soar, and housing staff will concentrate most of their efforts on chasing rent arrears and helping people to move—when they can, that is. Legal expenses will escalate, and the potential cost of evicting decent families is enormous. This additional expense might not come directly from the Government’s coffers, but it will come from British people’s pockets and, frankly, we have better things to spend it on.
One example of the measure’s inflexibility involves constituents of mine who have two children, a boy and a girl. The girl was nine when they moved in, just before the bedroom tax was implemented. They were not entitled to live in a three-bedroom house until she was 10, when she could no longer be expected to share a room with her brother. As a result, the family were penalised for months until she was 10. The problem with this cruel measure is that it is focused on punishing people, and not on dealing with the problems of under-occupancy.
Under-occupancy is plainly a problem, but the bedroom tax is definitely not the solution. Where is the justice in denying tenants the opportunity to move to smaller, more energy-efficient properties when there are hardly any available—that is certainly the case in my constituency —and at the same time penalising them financially? The sensible solution involves helping people and building affordable homes for rent. It also involves giving tenants an incentive to downsize, not making them suffer because they are poor and in receipt of welfare benefits. Back in Bolton, the Conservative and Liberal councillors actually get it, and they have voted for a council motion to abolish the bedroom tax—then again, maybe they understand what John Major understood when he abolished the poll tax.
Oral Answers to Questions
David Crausby Excerpts(11 years, 9 months ago)
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Steve Webb
I am grateful to my hon. Friend for that. The industry’s response to the code has been very encouraging. Some 49 individual firms and, perhaps more importantly, 14 representative organisations have publicly signed up to support the code, and the figures are growing. The supporters include the major employee benefit consultancies engaged in these exercises and their representative organisations.
Mr David Crausby (Bolton North East) (Lab)
Auto-enrolment of pensions is a wise and overdue step forward, especially for low-paid employees. However, with workers changing jobs an average of 11 times in their working lives, does it not make much more sense for them to park their pensions in low-cost aggregator schemes? If not that, what will the Minister do to ensure that fundholders will not have incurred high charges throughout their working lives as a result of numerous transfers?
Steve Webb
The issue that the hon. Gentleman rightly raises is one of the many loose ends left for us by the previous Government. When auto-enrolment was set up, they simply left us with a situation where people could accumulate a dozen small pots and leave them fragmented. We propose under auto-enrolment that where people leave behind a small pot it will, by default, transfer to their new employer, so that they will accumulate what I have called, in technical terms, a big fat pot.
Work Experience
David Crausby Excerpts(12 years, 5 months ago)
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Damian Hinds
That is a fascinating scheme. I am not familiar with it, but I will certainly look it up. As it transpires, that was the end of my remarks, so I will stop.
Mr David Crausby (in the Chair)
I want to call the two Front-Benchers at 12.10 pm, so I would appreciate a very short contribution from Graham Evans.
Graham Evans
I will finish quickly. A record 440,000 apprenticeships have been created this year alone. There has been £150 million of capital spending to support improved technical and vocational education. There are ambitions for at least 24 new colleges by 2014 and, of course, there are the fantastic education reforms. The future competiveness of our economy depends on these initiatives.
Chris Grayling
Further to that point of order, Mr Crausby. Since becoming a Minister I have not received, to the best of my knowledge, any communication from the UK Statistics Authority questioning any statistics that I have published. I want to place that on the record and ask whether it is in order for a shadow Minister to make an allegation of that kind.
CPI/RPI Pensions Uprating
David Crausby Excerpts(12 years, 5 months ago)
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Mr David Crausby (Bolton North East) (Lab)
Despite all the detailed arguments about geometric or arithmetical calculations, the reality is that CPI will pay out less than RPI. Even the Treasury calculates that the difference between the two measures is 0.5% per annum, and my hon. Friend the Member for Hayes and Harlington (John McDonnell) revealed some even more disturbing figures. That difference explains why the Government have changed the measure without consultation or negotiation. They have done so to cut both their costs and the earnings of those who will be affected. This is not an efficiency measure that will benefit us all; it is simply transferring money from poor pensioners to the Government or to private pension schemes.
Although I abhor any reduction in the earnings of poorly paid workers, I accept that it is perfectly legitimate for an employer or the Government to argue that a change in their financial circumstances means they simply cannot afford to continue to pay the same levels of remuneration. In turn, the employee, either individually or through their trade union, is then entitled in any free society to make a decision on whether they are going to accept that reduction in pay or seek employment elsewhere—or look for a different pension scheme.
That is why I believe that this issue of changing the payment of pensions should be dealt with in two parts: the future should be dealt with differently from the past. It is one thing to say that any pension earned from now on will be dealt with by indexing it to CPI, but to say that the arrangement will cover the whole of someone’s pension life is another. It reminds me of the story of the young, inexperienced trade union representative who called his members to a meeting to announce that he had met their employer and had good news and bad news to report. He informed them that the bad news was that he had been forced to accept a pay cut on their behalf. When asked what the good news was, he said that he had managed to get it backdated.
It should be a fundamental principle that employees should be aware of what their pension will pay when they qualify for it, because they will, thus, be able to make an objective decision about whether they should pay in and be part of the scheme. Pensions, once earned, are like earnings: they are the property of the individual and not the property of the employer or the Government. The employer and the Government should just be custodians of the pensioners’ invested money, and they should look after it prudently and honestly. Pensions are deferred wages, and backdating a pension cut is like backdating a wage cut—it is ridiculously unfair. In these circumstances, it is little wonder that working people are suspicious about saving up for their pension.
Grahame M. Morris
Does my hon. Friend acknowledge that if we attempt to balance the books on the backs of future pensions payouts, as the Government are proposing to do, there is a danger that people will simply opt out of pensions provision, particularly in the private sector, and therefore the cost that falls on the state and the taxpayer in the long run might actually be more? So this measure is a false economy.
Mr Crausby
I have always believed that this is principally a matter of trust between employees and employers, be they private employers or the Government, and so I agree with my hon. Friend.
I have represented poorly paid working people all my life, and my sympathy lies with those who come to my surgery to tell me, “I’ve worked hard all my life and saved what I could, but now I am retired I wonder why I bothered because I am no better off than those who didn’t work and saved nothing.” I rarely agree with that argument, because the truth is that they are nearly always better off than they think they are as a result of their prudence, and their neighbours who live on benefits are usually worse off than they are perceived to be, although I must say that sometimes it is very close to the margin. The Government’s decision to cut pensions arbitrarily by linking them to the inferior CPI encourages that prejudice, and it will persuade poorly paid people to save their money in a different and less sensible way.
The Minister of State, Department for Work and Pensions (Steve Webb)
The hon. Gentleman makes an important point about pension promises being kept. Will he confirm that he is aware that all his constituents who worked for a company whose pension rules entitled them, in writing, to RPI increases still have that right and have not been affected by anything we have done?
Mr Crausby
I accept that that is the situation on their pension fund, as long as those individuals can trust those private pension schemes to continue to pay; I have to say that during my working lifetime that has not always been a very happy experience when it comes to private pension schemes.
My principal argument is against the Government’s decision to make savings at the expense of our pensioners by using CPI rather than RPI. Of course this is not the first time a Government have behaved in this way, as the Conservatives have a track record of not treating pensioners properly. Margaret Thatcher’s decision to make a change on the link with earnings has cost pensioners across the country many thousands of pounds. The harsh truth is that the public just cannot trust the Government any more than they can trust their employers, and I find that very sad. It is not in the best interests of our country.
Richard Graham (Gloucester) (Con)
If the hon. Gentleman and others of his colleagues were so concerned about the decision made by the previous Conservative Government to separate pensions uplift from earnings, why did his party do nothing about it for the 13 years it was in power?
Mr Crausby
The previous Labour Government did decide to restore the link and were committed to doing so. The current Government have now restored the link at a time when wages are flatlining, and the reality is that the restoration has cost them not a penny. But the real issue is not the restoration of the link, but the many thousands of pounds that will have been lost by our pensioners until the day they die since Margaret Thatcher broke the link in the first place.
Katy Clark
I would have liked the Labour Government to have restored the link in 1997. I do not really understand why they did not do so, because the increases that were given were greater than they would have been had the link been restored. Does my hon. Friend accept that?
Mr Crausby
I completely accept that. I do not recall any of the political parties demanding that the Government of the day in 1997 restore the link. I am not making my argument on a party political basis; I am trying to make some principled arguments about how Governments should behave towards pensioners in the longer term. I completely accept that when I criticise how the Government deal with pensioners, that reflects on a series of Governments whose actions have resulted in many of my constituents not trusting in pensions at all.
That is why I make the point that the public cannot trust the Government on pensions in the long term any more than they can trust their employers. So many employers took large pension contribution holidays in the good times and then argued when more difficult times arrived that they just could not afford to pay the increased cost, and I am sorry to say that the Government—this Government are proving this—behave in exactly the same way, the only difference being that when the Government renege on a pension deal they call it legal. When Robert Maxwell absconded with the Daily Mirror pension fund he was, properly, castigated as a villain, but when compared with the behaviour of a series of Governments he was a paragon of virtue. Their behaviour is partly accounted for by the fact that, in the main, we have no accumulated pension funds, with one generation of taxpayers paying the previous generation of pensioners. Prime Ministers and Chancellors of the Exchequer find it difficult to resist the temptation to renege on the promises made by the politicians who went before them. Whatever the reason, they should be ashamed of themselves because when they do that they are no better than an employer who just runs off with the pension scheme.
John McDonnell
In the representations that I have received, even when there is a pension fund, as with the teachers’ scheme, when they are desperately seeking revaluation and when it seems completely sustainable, members of the pension fund cannot understand the increased contributions and the shift from RPI to CPI. The accusation that is being made goes to the heart of my hon. Friend’s point about trust. These people feel that they have been mis-sold a pension scheme based on the information they were given by successive Governments about what they would receive in the end.
Mr Crausby
I think that members of the public have been mis-sold pension schemes over a generation by a series of Governments. It is about time that this House instructed its leadership to behave decently to pensioners. That is why I am trying to make the principled point that one Government should stick by the promises made by previous Governments. To effectively backdate the reduction in an individual’s pension throughout their entire life through this move on RPI and CPI must be completely unacceptable—[Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. I was waiting for Members to stand. I call Stephen Lloyd.
Mr Crausby
Regardless of the legal judgment, does the Minister not accept that any reduction in pension—clearly the move from RPI to CPI creates a reduction, and it is backdated—is simply a clear breach of trust?
Steve Webb
Let me deal with the issue of backdating, as the hon. Gentleman has used that term. People’s pensions are revalued from the point at which they cease to work for the company until they retire and then indexed once the pension is drawn. The revaluation has not been backdated. In other words, all the revaluation up to the date of the change which used RPI will still use RPI, so there was no backdating of any of that. It is future revaluations that will use CPI. Furthermore, the right to indexation cannot exist until a person draws their pension. They build up a pension, and when they draw it they have a right to have it indexed. We have defined indexation according to what we think is a better measure of indexation. The right to indexation existed all the way through, and continues. The law has always been that the Secretary of State of the day has to measure inflation in an appropriate manner, and that is what we have done.
Mr Crausby
Is the Minister saying that at any point in the future he can decide what the measure of inflation is and then refer it back to the whole of an individual’s pension? Is he not seeing this just as a matter of his judgment at any point in time, in effect producing an index very much lower than the expected one?
Steve Webb
No. What I am saying is that the law of the land requires the Secretary of State to make an assessment of the increase in the general price level each year. If the Secretary of State were to make such an assessment in a flippant way, by coming up with the first low number that he thought of because it suited him to do so, he would soon find himself in the High Court, and rightly so. That is not what is being done.
The Secretary of State has chosen a measure of inflation that is internationally standardised and used by the Bank of England for macro-economic targeting, and that better reflects the spending patterns of pensioners. One of the big differences between CPI and RPI in regard to the basket of goods is that the CPI does not include mortgage interest. It is worth pointing out that only 8% of pensioners have a mortgage. Why would we insist on using a basket that gives huge weight to mortgages for a population that hardly ever has a mortgage?
My hon. Friend the Member for West Worcestershire (Harriett Baldwin) mentioned in her excellent speech that in the year to September 2009 the RPI was negative, not because pensioners’ living costs had fallen but because something that most pensioners did not have— mortgages—had got a lot cheaper. Does the hon. Member for Hayes and Harlington really think that in the year to September 2009 the RPI was giving an accurate measure of the cost of living of pensioners? I am sure he does not. It was negative, but I am sure he would not say that that was because pensioners’ living costs were falling; they were not, but the index suggested that they were, because it was using the wrong basket of goods.
There is a second difference between CPI and RPI. As my hon. Friend the Member for Gloucester (Richard Graham) said, in addition to the basket of goods being different, the way in which people are deemed to respond to price changes is different. That is called the formula effect, and in general it is the bigger difference between the two. On that point, the Institute for Fiscal Studies has said that this was a sound basis for the change that we made because it better captures the way in which people on lower incomes respond to price changes. It has been suggested during the debate that pensioners do not shop around, but my experience tells me that they do. In the shops, for example, they will choose between a branded product and an own-brand product. I think that most pensioners are pretty canny. They are the most likely to shop around, and that is the way in which the CPI is constructed.
It has been suggested that the switch to CPI was purely a cost-saving measure that was dreamt up post-election. I have been reading through the evidence given to the court, and the judgment, and I found out something quite startling about what was happening in the Treasury before the last general election. In 2009, the Treasury was considering whether CPI was the best measure to use. The court judgment refers to a senior Treasury official, Dr Richardson. It states:
“Dr Richardson confirmed that the Treasury also considered that CPI was superior for…all benefits, tax credits and public service pensions. The Treasury had reached the same conclusion that ‘CPI provides a fairer reflection of inflation experience than RPI over the longer term…’ Dr Richardson also stated in 2009—that is, even before the 2010 election—once it had become widely anticipated that RPI inflation to September 2009 would be negative, the Treasury had formed the view that a move to CPI would ‘better reflect the experience of those affected by up-rating measures’”.
Now, the Treasury had decided before the last election that CPI was a better measure, so why did it not implement it? Because in that year, CPI was higher. In other words, on methodological grounds the Treasury had decided before the last election—I think the right hon. Member for East Ham (Stephen Timms) was a Treasury Minister around that time—that CPI was a better measure, but it held off from implementing it because it would have cost money. We think the CPI is a better measure, and we implemented it after the election, following a period when the RPI was clearly misrepresenting pensioner living costs—and I believe that to have been the right thing to do.
There was some discussion about whether the judges said that the change was just about cuts—I think it was the hon. Member for Easington (Grahame M. Morris) who suggested that it was. Let me quote him paragraph 63 of the court judgment:
“In our judgment, the evidence from Mr Cunniffe and Dr Richardson”—
the civil servants—
“set out above makes it plain that both the Secretary of State and the Chancellor independently came to the view that the CPI scheme better reflected the effect of inflation on the spending power of benefits and pensions, for a variety of reasons quite independently of cost.”
That was the majority view of the judges. Even if the hon. Gentleman does not want to take my word for it, the High Court looked at it independently, with no locus to defend the Government, and judged that a range of factors was in play. Clearly, the fiscal context was important to the decision—no one is pretending it was not—but the most appropriate index, CPI, was chosen by the Government, which is the one we went ahead with.
The position of the official Opposition and the Labour party pension scheme have been discussed, and the shadow Minister, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), said that the Labour party could not support the move to CPI. What is not clear to me is whether it can oppose it. A week ago, we talked about CPI and RPI in relation to an uprating order. Shadow Ministers made their trenchant criticisms of our policy, but when the vote came they walked away. After the contribution of the shadow Minister today, I am a little hazy about whether he is going to walk away again today. I think the trade unions would want Labour MPs to back the motion, but my impression is that whereas Labour Back Benchers will back it, Labour Front Benchers will be busy when the Division comes. I am of course happy to give way if I am misrepresenting the position of the official Labour party.
Important issues were raised in the debate. One of the key ones was the impact on individuals. In a sincere and well-informed contribution, the hon. Member for North Ayrshire and Arran (Katy Clark) listed particular groups of people she was worried about: women, low-paid workers who retire on low occupational pensions, NHS pensioners, and the average occupational pensioner. We have estimated the impact of the CPI change along with the impact of our triple lock. The hon. Lady accepts that the triple lock helps people and the CPI change reduces people’s incomes on average. She gave three examples: people on pensions of about £2,000, £3,000 and £4,000. We estimate that in all three of those examples, people will gain more from the triple lock than they lose from CPI. The very people she is most concerned about will, on average, benefit from what the Government have done on indexation.
My hon. Friend the Member for Eastbourne (Stephen Lloyd) asked about the £13,000. To be absolutely clear, what we are saying is that if people retire this year on a full pension, the change to the triple lock compared with RPI will provide a cumulative £13,000 extra on average over the course of their retirement. Even if we strip out the CPI effect, people will, on average, be £6,000 better off because of the combined changes we have made. I should say—I thought the House would want to know—what would have happened if the triple lock had been applied by the last Government back to 1997. If that had been the case, we would now have a pension nearly £10 a week higher than the current one. We heard in the debate that the last Labour Government kept meaning to restore the earnings link but they just never quite got round to it. If our policy had been in place, we would now have a pension £10 higher to start with, on which to build subsequently.
It is clear that there are gainers and losers from these changes. The gainers are average pensioners with average occupational pensions. It is true that the highest earners with the very largest occupational pensions will lose more from CPI than they gain, but I thought the Labour party was a progressive party that would welcome our protection of the most vulnerable. That is what we have done.
I welcome the fact that 100,000 people wanted this debate. It is a debate that we are willing to have. We accept that these changes have a big impact, but they should be seen in the context of, for example, the triple lock, which will mean that the average pensioner benefits from our policies. These are significant and important changes. We believe that we are measuring inflation properly and appropriately, and we believe that we have protected people through the triple lock. That is a combination that I urge the House to support.
Disability Allowance
David Crausby Excerpts(13 years, 8 months ago)
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Mr David Crausby (in the Chair)
Order. I will come to the winding-up speeches at 10.40 am, so I would appreciate it if Members kept their contributions short, because several wish to speak.
Welfare Reform
David Crausby Excerpts(13 years, 9 months ago)
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Mr Duncan Smith
This comes back to the Work programme, because it will be about drawing in mentors from the private sector to advise people on setting up businesses and to give other support and advice. The mentoring programme will allow us not only to get people into work, but to mentor them until they get the work habit. That is the critical point. Once they get the work habit, they will be capable of looking after themselves.
Mr David Crausby (Bolton North East) (Lab)
The minimum wage plays an essential part in making work pay. Has the Secretary of State forgotten that he was completely opposed to the minimum wage and did all that he could to prevent its introduction? Will he ensure that he makes work pay not only by reducing benefits?
Mr Duncan Smith
There are several ways to make work pay beyond what I am doing. Making work pay by leaving people with more of their own money in the first instance will be a major step forward. The minimum wage is a good indication of how to set the base below which people should not fall. Another area in which the Government have also made a start is lifting the tax threshold for the poorest people. As we have said, we intend to move that all the way up to £10,000, and I hope that the hon. Gentleman will welcome that.