Pensioners and Winter Fuel Payments

Debate between Lord Dodds of Duncairn and Steve Webb

Tuesday 22nd November 2011 Commons Chamber

[Steve Webb]

Well, obviously, cynicism would be well beyond this Government. The rates of public spending are published through a comprehensive spending review period and for the rest of this period the figure we inherited was £200. That, as I say, was our baseline.

Another strange thing that went on was to do with the cold weather payment. That is the money paid when it is freezing cold to the poorest and most vulnerable people—the poorest pensioners and the poorest disabled people. Temporarily, pre-election, that was increased from the regular £8.50 to £25 a week. Temporarily, too, for the year after the election, as announced before the election, it was to be maintained at £25 a week. You will not be surprised to learn, Mr Speaker, that beyond that, it was planned to be slashed back to the £8.50 a week level. In other words, had we done nothing and taken no action, the winter fuel payment would have reverted to its £200 level and the cold weather payment paid to the most vulnerable when it is most cold would have reverted to £8.50 a week.

Let me remind Members that that was the baseline from which we were trying to find something in the order of £70 billion to £80 billion-worth of savings, so the question was not whether we should cut the winter fuel payment or the cold weather payment, but whether we could find the money to reverse the planned cuts, and thus have to find still further cuts from across the budget.

I agree with the right hon. Member for Belfast North on one point—that Governments have to make choices about priorities. He listed some of the priorities of this Government: ring-fencing the NHS, for example, about which I suspect the pensioners of Northern Ireland will be glad. He also mentioned the penny on petrol duty. I was not aware that it was his policy that we should not have reversed that, but I am happy to be corrected.

[Mr Dodds]

I am sure that the Minister was listening when I said that I supported those priorities. My point was that the Government had decided to increase or maintain spending in certain areas but to target cuts on other areas, and I wanted to know why they had targeted our senior citizens.

[Steve Webb]

I am grateful to the right hon. Gentleman for confirming that the measures that he listed were measures that he supports. I had assumed that, having begun by telling the House that we should spend an extra £600 million on something, he would in the course of his speech identify something on which we should spend £600 million less. Given that he spoke for 30-odd minutes, I may have missed it.

[Mr Dodds]

I could have taken much more time—indeed, I had a page devoted to areas that we could cut—but I considered it to be in the interests of the debate to leave time for others to speak. I am sure that my colleagues will make similar points, but may I begin by suggesting that the Minister reverse his attachment to Europe and save the £400 million that is going to the External Action Service, along with all the other money that is being wasted? And what about the £80 million that he wasted on the alternative vote referendum, which could have gone towards helping older people rather than being wasted on a trivial political exercise?

[Steve Webb]

It is intriguing that, in presenting a 30-minute explanation of why we should spend a further £600 million, the right hon. Gentleman should remove the bit about where the money should come from, which seems to me to be fairly central to the debate.

Faced with that baseline of a proposed reversion to a £200 winter fuel payment and an £8.50 cold weather payment, we could simply have gone ahead with the previous plans, and found our £70 billion to £80 billion on top of that. However, we took the view—as does the right hon. Gentleman—that fuel poverty matters, and we therefore found the money that would enable us to reverse the planned cut in the cold weather payment. I believe that ours was the right priority. If we are concerned about the most vulnerable when it is most cold in the coldest of winters, we should bear in mind that an increase from £8.50 to £25 gives people the confidence to turn up their heating when it is bitterly cold. The system even allows cold weather payments to be triggered by a forecast. It need not actually have been freezing cold; we merely have to expect it to be freezing cold.

Last winter in Northern Ireland, we made 672,000 cold weather payments at a cost of £16.8 million. Had we not reversed the earlier decision, the value of those payments would have fallen by about two thirds. Our decision put about £10 million into the hands of the poorest pensioners and disabled people in Northern Ireland during a bitterly cold winter, and I am proud that we made it.

--- Later in debate ---

[Steve Webb]

My hon. Friend is quite right. In Northern Ireland, dependence on heating oil is substantially greater than it is on the mainland and even in a semi-rural constituency such as my own, oil prices, oil supply and so on are big issues. I am grateful for her kind words about our ministerial colleagues as these are important matters.

Let me go back to the issue of fuel poverty. Clearly, it has a number of components and one is income. We focused on a change from last year’s rate to this year’s of less than £1 a week in the winter fuel payment and that is what we are talking about today. Instead, we have taken the basic state pension, which for 30 years has been declining relative to wages, and put a triple lock on it so that every year from now on, pensioners in Great Britain and Northern Ireland will see their pensions rise by the highest number of inflation measured by the consumer prices index, earnings and 2.5%. We are in a strange period in which inflation is greater than earnings, but in most years, earnings have grown faster. That will mean that as we return to more normal times, pensioners will enjoy above inflation standard of living increases year after year.

The cost of that commitment—I hope that the Chancellor is not listening at this point—will add a total of £45 billion to the amount we spend on pensions by the mid-2020s, which gives a sense of the magnitude of what we have announced. That is rather invisible at the moment, because prices are higher than earnings. When I signed the legislation into law last year, I expected bells to peal and for there to be confetti on the floor and so on. That has not quite happened yet, because people have not seen the impact. In the longer term, it will give a sustained boost to the real incomes of pensioners in Northern Ireland and Great Britain.

[Mr Dodds]

The Minister raises the issue of the triple lock. Previously, in the autumn statement the Chancellor has always announced the increase in line with the September rate of inflation, which would mean a 5.2% increase. Does the Minister expect the Chancellor to do the same this year, and would he rebuke the Chancellor if he were to take an annual inflation figure? Given what he has said, I take it that he is very much in favour of the former.

[Steve Webb]

The Chancellor was asked this very question at Treasury questions recently, and he confirmed, as is entirely in line with my view, that the triple lock is something of which we are proud. I am sure that we will be just as proud next Tuesday when he announces his verdict.

This is not just about the basic state pension: it is also about pension credit. As has rightly been pointed out, we need to make sure that pension credit take-up is maximised and we already do many things in that regard. Some people may not know that they can ring an 0800 number—a freephone number—to claim pension credit. They might think there is a long and complicated form to fill out, but in fact they can claim it over the phone and can also claim housing benefit and council tax benefit at the same time. We also undertake a lot of activity to engage with people who might be eligible. For example, we mention pension credit to people when they claim the state pension or when they report a change in their circumstances such as a bereavement. We also have a visiting service so that if people are not online or perhaps are not able to get out, DWP and local authority staff go out to their home and fill in forms with them in their front room.

As a Department, we are doing quite a lot to encourage take-up, but I am aware that the Democratic Unionist party manifesto mentioned trying to pay pension credit automatically. We have been piloting that in Great Britain and I can update the House on that exercise. We took a random sample of about 2,000 customers who were not receiving pension credit but whom we thought, based on what we knew about them, appeared to be entitled to it. For 12 weeks, we paid them the money anyway without their having to make a claim and then we contacted them and said, “By the way, we’ve just given you some free money. This is what we think you would get on pension credit—would you like to make a claim for it?”

The delivery phase of that study ran from November 2010 to March 2011 and an evaluation is now under way, but I can update the House on the early findings from that research. We found that by August, after the process had finished, a percentage of those involved in the study had successfully claimed pension credit. I am going to ask Members to think to themselves what percentage I am about to say, assuming that no one has read what we published. So, of the 2,000 people to whom we gave pension credit because we thought they were entitled to it, what percentage do hon. Members think then successfully claimed it? I shall not do a straw poll at this point. The answer is just 9%, which is a very low figure. Given that 3% of those in the control sample claimed, if we had done nothing we would have had 3% claiming anyway, whereas we had 9%.

We found that those who did go on to claim pension credit did so because the study had raised their awareness of the benefit and their potential eligibility for it, as one might expect. We talked to some of those who did not claim and found that some of them retained the view that they were not entitled to it even though we had contacted them and given them the money. Some felt that they did not need it, which is fair enough, some did not claim because of health issues, others forgot and some did not quite understand what was going on. It was a complex process, and we will publish a rigorous evaluation of it. It would be great if we could spot all the folk who are not taking pension credit and get the money to them automatically, but the early indications are that that will not be the case and that this approach is not a silver bullet that will enable us to deliver the money automatically. However, we will see what lessons we can learn from the pilot and I shall be happy to update the House on that a bit nearer the time.

State Pension Reform

Debate between Lord Dodds of Duncairn and Steve Webb

Monday 4th April 2011 Commons Chamber

[Steve Webb]

I am grateful to my hon. Friend and I know of the expertise she brings to the Select Committee on these issues. We propose that bringing up the next generation or caring for an elderly relative will be valued by society just as much as a high-paid job. A year will be a year will be a year. If someone is contributing to society in that way or in paid work or in other ways, it will bring them one thirtieth of a single state pension. We think that is a big step in the right direction, which will be widely welcomed around the House.

[Mr Nigel Dodds (Belfast North) (DUP)]

We welcome the Green Paper and the consultation that will ensue. We agree that moving away from means-testing and complexity towards a universal flat-rate pension is greatly to be welcomed. The Minister says that this will not entail spending any more money. Given that so many pensioners today do not claim all the means-tested benefits to which they are entitled—this is a big factor in these reforms and should again be welcomed—does it not mean that more money will need to be spent to make up for the fact that people do not claim? If so, will the Minister guarantee that that money will be provided?

[Steve Webb]

The right hon. Gentleman has made an important point, namely that under the current system many people are entitled to top-ups and do not claim them, whereas pretty much everyone claims the state pension. The new system will guarantee that a great many people will live clear of the poverty line for the first time. As the right hon. Gentleman says, a price tag is attached, and we have factored that into our costings. Although the prospective state pensions of the very highest earners will be lower than they would otherwise have been, many lower earners and people who would not otherwise have taken up their entitlement to pension credit will be in a better position, and we consider that to be a fairer system overall.