Cost of Living Increases: Pensioners

Alan Brown Excerpts

Monday 21st March 2022 Commons Chamber

[Jonathan Ashworth]

The hon. Lady anticipates the meat of my speech and has put her point on the record with typical aplomb and eloquence.

Martin Lewis of Money Saving Expert has warned that he simply has no tools left to advise people on how to manage their finances; he said that people are literally going to have to “starve or freeze.” Let us look at the facts: 2 million pensioners in poverty and the number rising; 200,000 more pensioners falling into poverty in the last year; one in five people of pension age now living in poverty; and 1.4 million older people in England in fuel poverty, with tens of thousands more likely to be pushed into fuel poverty. As we also know that pensioners spend a significant proportion of their income on energy and food and the basic necessities of life, this is the moment when the Government should be helping the Maureens and Alberts in all our constituencies with extra help with the cost of living. But instead of helping those pensioners in every constituency, Ministers broke their promise on the triple lock and are forcing through deep real-terms cuts in the value of the basic state pension. When I meet and speak to pensioners across the country—older people who are struggling—there is deep despair, and indeed bewilderment, that the Government have abandoned them, having promised them so much.

In the general election campaign, the Prime Minister said:

“We will keep the triple lock, the winter fuel payment, the older person’s bus pass”

to help retirees with the cost of living. Yet just at the moment when pensioners are shivering in the cold, skipping hot meals and anxious and worried about paying the bills, rather than helping retirees with the cost of living, Ministers abandoned the triple lock, a broken promise that the former Conservative Pensions Minister, Baroness Altmann, warned would

“plunge more elderly people into poverty”.

She said:

“With rising energy costs, I fear many of the poorest will be even less able to afford to heat their homes adequately over the winter…To take away their much needed and promised protection, knowing inflation pressures are rising, seems unjustifiable”.

The former Conservative Pensions Minister was absolutely right.

I read recently—in the money section of The Daily Telegraph, no less—that

“pensioners will be worse off after the Chancellor capped the rise in the state pension…this will equate to pensioners taking a real terms cut of £7.45 a week, or £388 a year.”

That is a cut of around £30 a month. These are significant sums of money. Given that the state pension is the biggest source of income for most pensioners, and given that retired women in particular rely on the state pension and other benefits, such as pension credit, for over 60% of their retirement income, it will be retired women again who are disproportionately hit by this deep cut to the basic state pension.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The right hon. Gentleman is absolutely right that it is a disgrace that the Government have broken their triple lock promise. The Red Book shows a transfer of £31 billion over this Parliament from the pockets of pensioners to the Treasury—a disgrace. Given the point he is making, should the Labour motion not have demanded the immediate reinstatement of the triple lock? That is the one thing that I am concerned is missing from the motion we are debating.

[Jonathan Ashworth]

We are making clear our commitment to the triple lock in the remarks that I am making at the Dispatch Box.

--- Later in debate ---

[Alan Brown]

Of what the Secretary of State calls the £9 billion package, how much is provided by the Treasury and how much is a loan to consumers that has to be paid back?

[Dr Coffey]

It will depend to some extent on the individual circumstances. I fully accept that the £200 rebate on energy bills is a phasing of support and I recognise that it is not an entire grant, unlike the £150 council tax discount.

--- Later in debate ---

[Dr Coffey]

The hon. Lady asks a valid question. As I have said to the House before, tackling the cost of living and poverty more broadly is shared across Government. Although that may come under our umbrella—recognising our general role in support through the welfare system—my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy leads particularly on items to do with energy and fuel poverty more broadly. I will ask him to contact her.

That leads me on to pension credit, which has been highlighted as a passport to a range of other benefits, including free TV licences, help with council tax and NHS dental treatment. Together, those are making a real difference, reflecting the Government’s commitment to supporting pensioners and continuing the work of successive Governments since 2010—when the Conservatives took office—to tackle and alleviate pensioner poverty.

The facts speak for themselves. The latest figures show that 200,000 fewer pensioners are in absolute poverty than in 2010, with levels of material deprivation having fallen from 10% to 6%, a record low. It is because of our commitment over that time and policies such as the triple lock that, from next month, the full yearly basic state pension will be more than £2,300 higher in cash terms than it was in 2010. In fact, no Government have paid more to pensioners than we will this year: £105 billion alone through the state pension. When we include all the other pensioner benefits, that rises to £129 billion a year.

Our aim over the two years of the pandemic has been to give fairness to pensioners and taxpayers, recognising what has happened with covid. For 2021-22, we protected the value of the state pension by legislating to secure and increase the state pension by 2.5%, despite a decline in earnings and inflation rising by just 0.5%. Had we not acted, the state pension, by law, would have remained frozen. Again, through the Social Security (Up-rating of Benefits) Act 2021, which Parliament passed last November, we legislated to temporarily suspend the earnings part of the triple lock in 2022-23 for one year. As I outlined at the time, that was in response to exceptional circumstances caused by the distorting effects of the pandemic on the earnings statistics.

Pensions will still rise by 3.1% next month. That reflects the inflation index that has been used consistently for many years, so over the past two years, pensions will have risen by a total of 5.6%. Next year, we will return to implementing the triple lock in the usual way for the remainder of the Parliament. I reinforce that full commitment, and whatever the right hon. Member for Leicester South may suggest—he may be trying to score points on politics, which, as the shadow Secretary of State he is absolutely entitled to do—I want to make sure that he avoids scaremongering.

[Alan Brown]

I welcome the Secretary of State’s commitment to reinstating the triple lock. Given that the Chancellor said this time that 8% was unaffordable and that that was £30 billion that we could not afford, is she saying that if inflation is at 8% when the Government do the measurement, they suddenly can afford to pay the £30 billion to pensioners?

[Dr Coffey]

I am not aware of any Minister trying to say to people that we did this because it was unaffordable. As a result of the pandemic, there was a statistical anomaly relating to earnings. We also understand the balance relating to intergenerational fairness, as has been outlined. At the time, however, we very much highlighted the statistical anomaly.

As a result of our actions, I believe that the state pension continues to be a strong foundation from which people can build additional savings for their retirement. We are seeing a thriving private and workplace pensions market, fuelled by the success of automatic enrolment, which transformed pension savings for more than 10.5 million workers. That is creating even firmer foundations for a robust pension system to ensure that not just today’s pensioners, but those of future generations are protected and supported. I know that, as a country, we will continue to build on the progress that we have made over the last 12 years under Conservative Governments, so that in the next 12 years, and in decades to come, pensioners will be able to enjoy a secure and dignified retirement.

We also know that a minority of pensioners choose to stay working beyond the standard retirement age. They do not pay the standard employees’ national insurance on their earnings, even though employers do if they earn above the threshold. As for the NHS and social care levy being introduced through national insurance, it is appropriate for anyone working at all, including pensioners, to contribute, bearing in mind that they will do so only if their earnings are at or above the regular threshold. I believe that will be about £190 a week, which is close to nearly £10,000 in earnings a year.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is kind of a pleasure to follow the Secretary of State, but I have to say, not for the first time, that I am a wee bit puzzled, because she seemed to be responding to a different debate from the one we are having. The shadow Secretary of State, the right hon. Member for Leicester South (Jonathan Ashworth), set out some clear and harrowing examples of people who are really struggling, yet the Secretary of State gave a pre-prepared speech about a secure and dignified retirement tomorrow, ignoring the here and now.

Talking about how this Government have paid the most in pensions ever does not cut it. Those statistics are fine, but they do not help pensioners who are really struggling. That point needs to be taken on board. I asked about the £9 billion package that the Secretary of State cited, but she was not sure how much of it was Treasury-funded and how much was a loan to bill payers. I can tell her that out of that £9 billion, roughly £5.6 billion is just a loan to bill payers that will have to be paid back—bill payers who include struggling pensioners.

On pension credit, the Secretary of State picked up on what the pensions Minister—the Under-Secretary of State, the hon. Member for Hexham (Guy Opperman)—said earlier, bragging about how the Government are writing to local papers. When the shadow Secretary of State called them out on it, however, the Minister shouted, “Oh, we’ve done that for years!” If it has been done for years and there is still £4 billion of unclaimed pension credit, it is clearly not working. It is quite clear that another strategy is needed to make sure that there is a far greater uptake of pension credit, which can then be a passport to other benefits.

I welcome this debate. The motion combines the key issues for pensioners in the ongoing cost of living crisis: rising energy costs, real-terms cuts to pensions and, for older people in work, the health and social care levy. Where I disagree slightly with the shadow Secretary of State, which is why I intervened on him, is that I think that the motion could have been stronger in explicitly demanding the reinstatement of the pensions triple lock.

Earlier today, the pensions Minister stated that pensioner poverty has fallen, but as I tried to point out, the Government’s own statistics on households below average income show that UK pension poverty has risen to a 15-year high under Tory rule. Some 2.1 million UK pensioners—18%—are now living in poverty after housing costs, an increase of 200,000 people on 2018-19. Sadly, that was the figure before the latest energy cap rise was announced, so it will massively increase unless there is proper Government intervention. It is worrying that the Minister is trying to argue something different; either he is ignorant of the facts or he does not care. The Government really need to pay attention and start intervening.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend is making a terrific point about the poverty that is affecting pensioners just now. Does he agree that the effect is disproportionately felt by pensioners living in off-gas grid households? Last year, heating fuel was 42p a litre; it is now £1.25 a litre and rising. There is going to be a really dramatic effect on pensioners in those areas.

[Alan Brown]

I completely agree. I thank my hon. Friend for highlighting that point; he has been at the forefront of the campaign to highlight the effects of increased energy costs on those who are off the gas grid. That threefold increase in fuel costs is completely unsustainable and really does lead people to the choice between heating and eating.

Let us look at conventional households covered by the energy cap. Next month, the cost of energy for the average household will have increased by 75% compared with April 2021, a rise of more than £800 a year. Pensioners spend more time in their homes and are more likely to feel the effects of cold or damp, so increased energy costs disproportionally hit the elderly. Not being able to afford to heat their homes puts their health more at risk. There are already something like 10,000 premature deaths a year due to fuel poverty, and that was before the huge energy cost increases. It is truly shameful that in an energy-rich country, or group of nations, people are dying prematurely because they cannot afford to heat their homes.

National Energy Action has estimated that the cap increase will have caused a 33% increase in fuel poverty rates. If this rise continues without Government interventions, come October we will be looking at some 8 million fuel-poor households in the UK, with perhaps between 2.5 million and 3 million of those households containing pensioners. When we look beyond the phrase “heating or eating”, we see that the grim reality for people faced with that choice is starving or freezing or suffering in damp houses, and that brings us back to the possibility of more people dying prematurely. It is truly shameful.

The interventions that the Government have announced to date clearly do not go far enough. Even worse, the removal of the triple lock is taking more than £500 a year from the pockets of pensioners, as the Government’s own Red Book demonstrates. Earlier today and this evening, Tory Ministers were arguing that wage increases were a false measurement owing to the partial recovery from covid. They have used that to justify breaking the triple lock. Just four months on, however, we have evidence that a much larger pension increase than 3.1% is required. The facts are clear: the spring statement in two days’ time will provide the one opportunity to reinstate the triple lock, or at least, as a bare minimum, to introduce a mechanism for increasing pensions by 6.1% in line with the current rate of inflation and what the Scottish Government are doing with benefits.

It was good to hear the Secretary of State guarantee that if inflation is at 7% or 8% later in the year, at the point when calculations are being made for the purpose of future uprating, pensions will rise by that amount. I hope that the Government stick to that, and it is not just bluster at the Dispatch Box. We all know who pulls the strings; it tends to be the Chancellor, so I hope that the Secretary of State is lobbying the Chancellor, because we know that inflation is not going to go down any time soon.

While I am talking about inadequate measures, let me point out that the £150 rebate on council tax will not catch all pensioner households in terms of bandings; and, as the shadow Secretary of State said, many pensioners living alone or in receipt of pension credit already receive a full or partial council tax discount, and are therefore unlikely to benefit from the new council tax rebate measure unless the Government do something about it. Making others who have avoided debt all their lives take out a £200 loan to pay back later is also morally wrong. That loan should be converted to a grant for all, and certainly, as the bare minimum, for pensioners and those on benefits.

The Secretary of State spoke about the warm home discount, but, as she knows, the Government put no money into that scheme, although too many Ministers do not even understand that; it is actually paid for by other bill payers. While I welcome the extension of the discount to 3 million households, only 10% more pensioners will receive it. The Government should extend it further, but, in doing so, should provide some direct funding rather than imposing the funding on other bill payers. They should also consider extending the energy company obligation scheme so that more homes become energy-efficient, but that too should involve direct funding rather than other bill payers having to foot the bill.

Apart from the £150 funded rebate, the only direct Government intervention to date on energy has been the allocation of £1.7 billion for the development of Sizewell C. Not content with Hinkley Point C being the most expensive power station in the world, the Tories are determined to build another more expensive one. In their own impact assessment for the Nuclear Energy (Financing) Bill, the upper estimate of the capital and financing costs of the Sizewell C development is £63 billion. How will that help people who need energy costs to come down? And why did Labour vote to commit bill payers to that amount for a new nuclear power station? The money could be spent so much more wisely. There really needs to be a rethink on this nuclear policy.

There are other cost increases to be considered. For instance, the cost of food is rocketing.

[Jerome Mayhew (Broadland) (Con)]

I note the hon. Gentleman’s opposition to the gaining of low-carbon energy from nuclear. He has also told us that this is an energy-rich country. What does he think the Government should do with the Cambo oilfield? Should we open it up to reduce energy prices for pensioners?

[Alan Brown]

The hon. Gentleman is not comparing like with like. Cambo means more fossil fuel extraction, and there needs to be a proper assessment to establish whether this could be done in a way that is compatible with net zero. That is a test that the Government are refusing to apply. Apart from that, they should be investing much more in floating offshore wind, in tidal stream, in which Scotland leads the world, and in pumped- storage hydro, which is a dispatchable low-carbon technology. That scheme is ready to go, but the Government have not agreed a pricing mechanism. Then there is carbon capture and storage at Peterhead, in which respect Scottish customers have been let down again. So much more could be done in energy, and it would not cover even a portion of that £63 billion that has been allocated to nuclear. More energy efficiency reduces demand, and therefore reduces the need for new power generation. I hope I have answered the hon. Gentleman’s question.

[Jerome Mayhew]

Yes.

[Alan Brown]

Yes!

Returning to fossil fuel, obviously petrol and diesel prices have increased massively at the pump. They have gone up by between 35p and 40p a litre compared with a year ago—a 30% increase. That also means that while people struggle to run their cars, VAT returns to the Treasury have increased massively. The current rates compared with last year mean that the Treasury is getting something like £3 billion a year extra in VAT returns, but that should be recirculated to support hard-pressed people, especially pensioners. It seems that the Chancellor may respond to calls to cut fuel duty, but if he does, he will be demonstrating the folly of a 12-year duty freeze. When we had lower prices, that was the time when bolder action could have been taken to raise fuel duty, so that when fuel prices increased in the way they have, fuel duty could have been decreased. That would have created a much smoother curve, instead of peaks and troughs, and the Treasury would have had a far more stable income as well.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I am just trying to understand the hon. Gentleman’s policy. Is it genuinely his policy to raise fuel duty? That is the impression he has just given.

[Alan Brown]

I repeat that the time to be bold and increase fuel duty would have been when fuel prices were at a record low. That would not have had the same impact on people’s pockets. The current rise is unsustainable—[Interruption.] The Minister did not listen to what I said. This here-and-now policy from the Government is unsuitable; it should involve bolder long-term planning. Had they raised fuel duty earlier when prices were lower, they could have reinvested the revenue in public transport and in creating money for a rainy day, like right now.

[Drew Hendry]

Is it not a fact that pensioners and other people could have been helped greatly in this fuel crisis, had the Government listened and introduced a fuel duty regulator, which would have regulated the price and ensured that fuel was affordable for people just now?

[Alan Brown]

Absolutely. My hon. Friend has made my point much better than I was making it myself, and I appreciate that. A fuel duty regulator is exactly what would have given better stability for the Treasury and for people’s pockets.

Looking at other windfalls the Treasury receives, we see a VAT windfall from the £800 increase in average household bills. That is well over another £1 billion coming into the Treasury coffers. The Treasury is also benefiting from increased oil and gas revenues. The last Budget predicted an extra £6 billion in oil and gas revenues in this Parliament compared with the March 2021 Budget, but given the sustained period of increased prices, that £6 billion will prove to be an underestimate. That is more money that should have been reinvested.

I know that Labour has targeted a windfall tax on the oil and gas companies, but that sounds a wee bit like raiding the one traditional cash cow. Why do we not, as the SNP motion suggested last week, look at this in the round? Why do we not target all sectors or companies that have benefited disproportionately from the pandemic, and in particular the new-start companies and the Tory crony companies that were awarded PPE contracts and that have realised record profits since? That is a real obscenity that should be targeted. Anyone who has read Private Eye and seen the eye-watering sums that those companies have made should be truly horrified.

I want to highlight some additional measures in Scotland where the SNP Government are providing mitigation for pensioners, but even the powers the Scottish Government have are nowhere near enough to make the transformational changes that we want. Older people in Scotland get their bus passes at the age of 60, instead of having to wait until the state pension age. They also have universal free prescriptions and are more likely to have had targeted energy efficiency measures for their homes. All charitable organisations in this sector, as well as the energy companies themselves, want the UK Government to follow the lead of the Scottish Government in making energy efficiency a national infrastructure programme. The low-income winter heating assistance will give around 400,000 low-income households a guaranteed £50 payment every winter instead of the complicated UK cold weather payment of just £25.

[Guy Opperman]

I am just trying to understand the hon. Gentleman’s speech. Is it still SNP policy that, post-independence, the rest of the UK would have to pay for Scottish pensions? He seems to be unclear on that, and I just want to be utterly clear.

--- Later in debate ---

[Alan Brown]

I am not sure how I can have been unclear when I have not mentioned it. The Minister is listening to a different speech—that is simply not what I have in front of me. This is very interesting. First, on day one of independence, Scotland can afford pensions. Right now, we collect about £11.5 billion in national insurance contributions. Pension payments are about £8.5 billion, so that is a £3 billion surplus right away to cover other payments from national insurance contributions. On day one, we can afford it. If we are supposed to be a Union of equals, it is very strange that we are being told not, “Stay with us because we value you,” but, “Stay with us because we are threatening you.” A DWP official publication from 2014 says that there is an historical precedent for dealing with this, with historical credits being built up in pension payments. So in 2014 the DWP actually stated that there is a solution, but obviously the Minister has conveniently forgotten that.

Perhaps this is a good time to finish. The Minister’s intervention shows that after 315 years of the Union, Scotland needs full independence as a means of counteracting this present-time dystopia, which Labour has also recognised and sought to address today.

--- Later in debate ---

[Guy Opperman]

My hon. Friend is right to raise the issue. A bit like with the jab, we are all responsible for making the case to our constituents that there is huge benefit in what is in reality a passport to several hundred pounds a month—potentially £3,000-plus a year. The stats are extraordinarily good. When we took office in 2010, the take-up was 70%; it is now up to 77%. Obviously we want it to go higher. The take-up figure for guarantee credit is up to 73%, and internal management information suggests that in the 12 months to December 2021, the number of new claims for pension credit was about 30% higher than the figure for the 12 months to December 2019.

My hon. Friend specifically asked what the Government could do. There are a number of things that we have been doing for some time. We set up the pension credit taskforce to work with key stakeholders such as charities—including Age UK, which many Members rightly mentioned and whose representatives we have met several times—the Local Government Association, Virgin Money, and several of the banks. The energy company Centrica is involved, and ITV and the BBC have a key role to play in raising awareness, ensuring that we have greater knowledge of pension credit and that our constituents are aware that the opportunity is out there.

As the Secretary of State said, 11 million letters about the state pension uprating were sent out—that has never been done before—along with copies of the pension credit information factsheet containing information for pensioners so that they could apply. That, too, seems to be making a difference. There was a pension credit awareness day last June, when we worked with the BBC throughout the country. We also worked with the other stakeholders, including Age UK, with which we formed a specific partnership. We have been making the case to local papers: we wrote to all of them on three occasions last year, we did it again this year, and we will continue to do it. Individual Members of Parliament can do a fantastic amount in making the case to their local communities, working with their citizens advice bureaux and Christians Against Poverty groups. Mention has been made today of the older persons fairs, which have been very successful in individual constituencies and have made a big difference to pension credit take-up.

[Alan Brown]

Will the hon. Gentleman give way?

[Guy Opperman]

I will give way to the hon. Gentleman, because he allowed me to intervene on his speech.

[Alan Brown]

How much extra money do the Government set aside each year on the assumption that there will be a greater uptake of pension credit, and what happens if that sum is not used? Does the Minister agree that any money that is not used for pension credit should be recirculated to support elderly people?

[Guy Opperman]

I can answer that question easily. There is no limit whatsoever. This is a means-tested benefit which was set up by Gordon Brown. If there were a 100% take-up, the Government would pay. If the take-up is 70%, the Government pay.

I was going to address some of the comments made by the hon. Gentleman in his interesting speech. I genuinely felt that it was the policy of his party to raise fuel duty, which is certainly an interesting approach to cost of living difficulties. He made no mention of the powers conferred by sections 24, 26 and 28 of the Scotland Act 2016 and the capability of his Government to intervene if they should choose to do so—which, to be fair, they have done. The hon. Gentleman shrugs his shoulders and heaves a sigh, but he probably does that when he tries to analyse and understand the policy of that humble merchant banker-crofter the right hon. Member for Ross, Skye and Lochaber (Ian Blackford), whose approach to the state pension is something that we all struggle to comprehend.

I did test the hon. Gentleman by asking him what genuinely was the Scottish National party policy on the state pension in the unlikely event that the Scottish people were unwise enough to choose independence. Is it the old policy that was agreed previously, or is it the new policy of his leader in Westminster that the rest of the UK should pay for this? I genuinely do not understand, and I think one of the reasons why the popularity of independence is falling in Scotland is the fact that the leadership that the hon. Gentleman so strongly supports are not making the case in any way whatsoever.

The arguments of the hon. Members for Cynon Valley, for Liverpool, West Derby (Ian Byrne) and for Leicester East (Claudia Webbe) centred on the issue of the state pension age. Let me say, with respect, that that is a matter that has been determined by successive Governments. As I pointed out earlier, this Government continued, as did the coalition Government, the policy of the Labour Government under Tony Blair and Gordon Brown. I realise that no one is a Blairite any more, but those 13 years saw exactly the same policy. The arguments put forward on that issue were comprehensively rejected by the Court of Appeal.

The situation in respect of energy prices has been addressed in detail by the Secretary of State, but it is right to make the point that the key intervention was announced by the Chancellor on 3 February with a £9.1 billion energy bill rebate, and there is in excess of £12 billion of support over this financial year and the next to ease cost of living pressures. We have set out in sufficient detail the £200 rebate for households, the £150 non-repayable council tax rebate for all households in bands A to D, and the fact that local authorities will in addition have access to £144 million of discretionary funding to support households in need, regardless of their council tax band.