Pensioner Poverty

Bob Stewart Excerpts

Tuesday 1st February 2011 Westminster Hall

[Bob Stewart (Beckenham) (Con)]

In our country, we have growing life expectancy, but pensioner poverty will become an increasing problem for us all. There are no reality shows on hospital geriatric wards. A dribbling one-year-old is cute, but a dribbling 91-year-old is not. One has their life in front of them, and for the other it is in the past. However, socially, each life is equally important.

We now have a population of 61 million. Nearly one third of us are pensioners. Of those, 1.8 million live in poverty. Statistically, when I walk down the street in my constituency, every 10th pensioner whom I see lives in poverty. Poverty is difficult to define, and I will not try to do so—it is a quagmire. To me, poverty involves not having enough food, clothing, warmth, shelter, care or contact with other people. Loneliness is a killer. How many of us have known of someone who just fell off the perch when their husband or wife died?

When I was canvassing for my seat—I am one of the youngest Members in the new intake eight months ago—I knocked on a door in my constituency and an old lady came to the door. It was a very respectable house. She said, “Would you like a cup of tea?” I said, “That would be lovely.” I went through to the kitchen and sat down, and she made a cup of tea for me. I said, “Are you alone?” She said, “Yes, I’ve been alone for 10 years.” I said, “I’m sorry. Your husband died?” She said, “Yes. It’s very lonely.” I said, “Well, thank goodness you’ve got a dog.” I have a dog; they are great fun and good companions. She said, “I haven’t got a dog.” I said, “Well, you’ve got dog food on the sideboard.” She said, “Do you know, it makes a passable stew.” That was in a respectable house. Our society has hidden poverty as well.

Often, pensioners face a stark choice between heating and eating. I am shocked that between 20,000 and 25,000 pensioners a year in this country are said to die from hypothermia. In my constituency, I am told, an average of 30 old people die of cold each winter, which is shocking. For each one who dies, eight are admitted to hospital, 32 must seek out-patient treatment and 30 see care workers.

Obviously, people on low incomes are most at risk. All of us here expect to heat our homes to a temperature of 21° C, which is the norm. One can go as far down as 18° C, but below that we start losing old people. I saw one figure saying that at 17° C, 8,000 more people die. I cannot believe it, but that is the figure that I was given by Age Concern. The mean average temperature last winter was 3.4° C. Hypothermia in old people starts at 5° C, so home heating is essential.

The state pension is about £97 a week for a single person or £162 for a married couple. No one can live on that, and we all know it. It is vital to keep the winter fuel allowance, bus passes, eye tests, free prescriptions and free television licences for pensioners. They are good measures, and it is absolutely right that any Government should keep them.

I think of people who, perhaps like the old lady I met, tried all their life to save for their old age. But interest rates are low now, so nest eggs yield no interest, and pensioners must bite into their capital. It is infrequently mentioned in the media that the elderly suffer most from low interest rates. Some 28% of all pensioners have less than £1,500 in savings, 4% do not even have a bank account and 26% of female pensioners have no savings whatever—for men, that figure is 28%. What happens when those people have a crisis—when their boiler breaks or something crucial to their lifestyle goes wrong? They panic, and they then become good bait for loan sharks. I suspect some of them just give up and say, “That’s it.”

The Department for Work and Pensions estimates that 39% of pensioners fail to claim their benefits. That amounts to between £3.1 billion and £5.4 billion a year unclaimed. In statistical terms, that accounts for 700,000 of the 1.8 million pensioners in poverty. Of course, many, like my mother and the parents of other people in this Chamber, are proud and dignified. They do not want to be a burden on anyone, and they spent their entire lives saving so as not to be. God bless them for it, but those benefits are a right, not charity. We are only giving back to pensioners what they contributed to our society, but the problem is trying to convince them of it.

My constituency, which is part of Bromley, is served by Age Concern Bromley. The lady who runs it, Maureen Falloon, has helped pensioners to claim £900,000 in the past year, which is vital. We should be encouraging such outreach services, where charities get involved with vulnerable people and help them out.

The old need to be cared for. There are 2.8 million carers in our country who get no money whatever for caring. Some 5% of those are over 85 years of age. Of course people want to stay in their homes. My mother did; all our parents do. It is natural. They do not want to go somewhere strange. We must try to help them stay in their homes, which, by the way, is cheaper than putting them in a home.

Old age can be lonely. Some 12% of pensioners say that they feel trapped inside their homes, and 6% say that they leave their homes only once a week. Other societies have what used to be called—I do not know whether they still are—extended families. Extended families ensure that the old are looked after and have a place in society. We seem to have lost that, which is a shame, because it is a part of the big society, too.

Unlimited funds would help, but the Minister and I know very well that we do not have them. There are 1.4 million people in our country over 85 years of age. In 10 years’ time, according to The Spectator—it is in the press, so it must be true—there will be 2.5 million, which is a time bomb.

I will conclude with three thoughts. We need to get the 700,000 people who do not claim their benefits to do so, because if they do, they will be lifted out of the poverty trap. The Minister will know about the claim form for attendance allowance and its instructions. One of my staff spent two days—a whole weekend—and two bottles of wine filling out the form, which is actually half the size it was. We have to make it simpler, not only for those who are trying to claim individually, but for those who help them. The Minister is running an automatic credits payment scheme. It is a trial that has been ongoing since last year and will conclude at the end of this year. It is fantastic that, fundamentally, the Ministry, the Government and the system will identify people at risk and give them back their money, for which they have worked all their lives, look after them and make sure that they do not freeze to death or have to eat dog food.

My second thought relates to fixed income bonds, which used to be called granny bonds. When someone has saved all their life and they are trying their best not to be a burden on anyone—not just the state, but their family—they might at least have some guarantee of income. If we were to give a guaranteed rate of return for savings, at least those people who need it would know how much money they could plan on getting without trying to take out their savings.

Thirdly, it should be relatively easy to target potential pensioners as they approach retirement. Surely Her Majesty’s Revenue and Customs knows what people’s tax band is likely to be in retirement. Surely all our wonderful computer systems can spew out exactly what has happened and why we should target them. When that happens, they will need advice. The lady in the house with the dog food needed someone to help her. Perhaps she should downsize. I know that it is difficult for her, but somehow someone has to get in there and help her. A charity such as Age Concern Bromley could, through someone such as Maureen Falloon, talk to pensioners in that sort of situation, convince them of their entitlements and help them fill in forms such as that for attendance allowance.

Remember that some people in our society cannot read—they are illiterate. I speak as an ex-Army officer who had to deal with such people as they joined the Army. Surely it would be a moral and proper use of taxpayers’ money to spend some of our resources on helping people via a grant of some kind to a local charity that could offer assistance. The way a society looks after its vulnerable is a very good measure of its civilization.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate my hon. Friend the Member for Beckenham (Bob Stewart) on raising a serious and important issue, and on explaining its depth and breadth. On pensioner poverty, we talk too often about incomes and measuring the statistics, and therefore lose sight of its human side. No matter how immersed we get in the statistics or how much progress we may think has been made, we should all still be shocked by the example that my hon. Friend has given. The experience of the pensioner whom he visited is totally unacceptable. Notwithstanding anything I might say in the time available to me, one person in such a situation is, clearly, one too many.

My hon. Friend raised a broad spectrum of issues and I will respond to a number of his key themes. On fuel poverty, I want to talk about the support we aim to give and some of our new initiatives. I will also address the issue of non-take-up of benefit, which as he rightly says is one of the most significant causes of pensioner poverty. He raised the issue of investment returns, granny bonds, interest and so on during oral questions a few weeks ago. I am pleased that he has followed up on that and I will give him a bit more information on it. Finally, I will talk about some of the broader issues he raised—income, material deprivation, loneliness and so on—and the steps the Government can take to identify those problems and act on them. I will try to run through all those things.

On fuel poverty, my hon. Friend is absolutely right that it is a pretty basic need to be able to keep warm enough and healthy, particularly in such a bitterly cold winter. One of the very first decisions we had to take as a Government was, as he rightly says, to continue the winter fuel payment when there was some speculation that it might go or be cut in some other way. We also made a decision on the cold weather payments, which are specific, £25-a-week payments for when the temperature is below zero for a week. They were temporarily raised to £25, and the budget plans we inherited would have reduced them this winter to £8.50 a week. We took the view that when temperatures are below freezing spending money on relatively low-income pensioners, disabled people and families with young children was a priority. My hon. Friend rightly says that money is tight, but that was a priority for us. Instead of cutting it to £8.50, we held the rate at £25, and those who are eligible in his constituency will have received three payments of £25—a total of £75—towards the extra costs of heating in this bitterly cold winter. I think that he and I can be proud of that decision.

Obviously, that is a short-term situation and, ideally, we have to ask why we in Britain have what is known in the jargon as “excess winter deaths.” Why is a cold winter killing people in Britain when, essentially, it does not in Scandinavia, which is a much colder region? It does not get the spikes that we do in the winter, but one of the fundamental reasons is the poor standard of our existing and new housing stock. Even the houses that we are now building are often not good enough. The Department of Energy and Climate Change is leading on those issues and it is requiring the energy companies, as part of their carbon reduction commitments—the carbon emissions reduction target scheme—to target the most vulnerable households. The idea is that the energy companies will pay for things such as home insulation, loft insulation, cavity walls, draft-proofing and so on because, yes, we need to make sure that pensioners can afford their heating bills, but it would be far better if we could make sure, through a properly insulated home, that those heating bills were not so large in the first place. If we can make sure that more elderly people have cosy homes, they will be able to afford to heat them and everybody will gain. We are requiring the energy companies to do more on that front.

We also experimented—this is an interesting point in relation to take-up—with the energy rebate scheme earlier this year. The electricity companies made payments to pensioners based on data-matching between the data held by the Department for Work and Pensions and the energy companies’ customer data. We brought the two together, identified people on the guarantee credit element of the pension credit and simply credited them with £80 on their electricity bills. The previous Government initiated the scheme and we did it as an experiment earlier this year. We targeted those aged over 70, so the elderly and the vulnerable got £80 credit on their electricity accounts. It was a one-year pilot and most of the delivery costs were paid by energy suppliers, and I sense that it was pretty successful. I had a few letters about people who were not sure why they did not qualify when their name was on the bill, and we had a few teething problems. However, overwhelmingly, that scheme put cash in the pockets of people living in vulnerable households. That has worked well, so we are now proposing something called a warm home discount scheme that will build on that success. We propose that energy suppliers should again pay a rebate to vulnerable pensioners, who have been identified through data-matching. That scheme was a useful precedent and we want to build on it.

However, crucially, that brings me on the second point: take-up. Of course, eligibility for the scheme I mentioned is dependent on the person concerned getting pension credit. As my hon. Friend rightly says, too many people who are eligible do not get the money. I absolutely endorse his comment that the payment is not charity; it is a right. People have paid their taxes and their national insurance and they are entitled to the money. I would not want any pensioner to feel that claiming money that the law says they are entitled to is anything other than a right. I am grateful to him for how he expressed that. As he rightly says, one of the things we are looking at—I view this as a two-stage process—is getting people to claim what is there now and simplifying the claims process. The second step, which I will come on to, is to reduce the reliance on means-testing and use more of the benefits and pensions that we know people will get. We should regard means-testing as a safety net, a residual part of the system, rather than a mainstream part of the process, as it is now.

As my hon. Friend rightly says, we are running a pilot scheme. We are trying to use the data we already hold to indentify the people who are eligible but not claiming. I sense that that will be more difficult than we might think. Eligibility for pension credit depends not just on one’s own income but on one’s spouse’s. It also depends on the whole household’s housing costs, and on all its savings in different accounts with different institutions. One of the problems we have in Government is bringing all that together. On my hon. Friend’s point about identifying people approaching pension age who might be about to become poor, the pilot will tell us how far we can draw together the disparate information that different bits of Government hold. People might have three different pensions from three different providers, and, two years before pension age, might not have even crystallised the pot into a pension. We therefore do not yet know how big the pension will be.

[Bob Stewart]

Perhaps those who work for charities could be used as additional social workers to help those people and give information back to Government. We would all win by doing that.

[Steve Webb]

I am grateful to my hon. Friend for stressing the valuable contribution of charities, such as Age Concern Bromley. Many other charities that do their work in people’s front rooms have a crucial part to play. The Pension, Disability and Carers Service is a local service that works with local authorities and does home visits. It goes into people’s front rooms and does similar sorts of work. Such work is very valuable, but I want to be as systematic as I can, so that we can catch the folk who fall through the net.

[Bob Stewart]

It is part of it.

[Steve Webb]

Absolutely. That work is a very valuable complement to the process. I want to ensure that the Government are as systematic as we can be, so that we can get as much money automatically to people as we can. As I said, we have been running a pilot scheme and have identified a sample of 2,000 people who, on the face of it, appear to be entitled to pension credit and are not claiming it. We have made payments to those people of what we think they should get. We have contacted them and said, “The money that’s arriving in your bank account is what we think you could get as pension credit. Would you like to make a claim?” As my hon. Friend says, that has been going on and we are closing the study in the middle of March. We are hoping to learn from that how far we can use the information we have to ensure that people get what they are entitled to. We will certainly be reporting back to the House on that.

What we have to do—and what the Government are doing—is to ensure that the money people definitely do claim is better. Let me give an example. The state pension, which has virtually 100% take-up, is worth having. My hon. Friend will know that, after 30 years of the link with earnings being broken, we restored the earnings link this year. Over the lifetime of their retirement, a typical pensioner retiring this year can expect to get an extra £15,000 in state pension compared with the old price link. That money is guaranteed and we know they will claim it. My goal for the longer term is to try to rebalance the system, so that we do not have, as he rightly says, a wholly inadequate basic pension—someone cannot live on £97 a week—and a mass means-testing system that results in many people failing to claim. There will always be a need for a safety net and a catch-all, but I would rather ensure that the pension is at a decent level. Restoring the earnings link is the first step towards that, but I hope we can go further.

My hon. Friend rightly raised the issue of investment income and set out a very important context. In fact, many pensioners, particularly poorer pensioners, have next to no investment income. He quoted some figures. Regarding the poorest fifth of single pensioners, who are living on £136 a week, just £4 of that is coming from investment income. So even if I could magically double interest rates, I would be giving them an extra £4 a week. That clearly matters for those who have structured their finances to depend on interest income. I will say a word about that in a moment. However, for us as a Government, getting pensions, pension credit and so on right will have a substantial effect.

My hon. Friend is right: falling interest rates are an issue. He mentioned the granny bond or, as I gather it used to be called, the pensioner guaranteed income bond. That bond was withdrawn by National Savings and Investments in 2008, when it was paying an interest rate of 3.9%. That was a few years ago. Obviously, when there is a base rate of 0.5%, one might think that savings rates had plummeted so far there would be nothing like that out there. I have done a bit of research and, for example, today on the market 3% interest rates are available for a one-year bond, and for three-year bonds 4% interest rates are available.

However, people do not necessarily know about that. When I responded to my hon. Friend in the House a little while ago and mentioned the issue of shopping around, we discussed the fact that, if someone has access to the internet, dealing with such issues is straightforward. Moneymadeclear and so on are good websites. However, the Consumer Financial Education Body also offers a helpline that people can ring up. If someone is not sure whether they are getting the best interest rate and they want to know what is available, they can ring the helpline number. I shall read that number into the record: 0300 500 5000. People can simply phone that number and say, “I’ve got this amount of savings. What sort of options do I have?” As I mentioned, with savings rates of 4% or more and increased limits on individual savings accounts available, decent rates are out there. However, too many people are trapped in receiving very poor interest rates. Let me give an example. I noticed this morning that a high street building society is offering what it calls an e-savings plus account that pays 0.1% interest, and a high street bank is offering what it calls a premier saving account, also offering 0.1%.

[Bob Stewart]

That is exactly where people who work for charities that go into people’s homes can help. If they have such things in their quiver, they can say, “Let’s have a look at your savings and see if we can get you a better return.” That does not cost them anything.

[Steve Webb]

Indeed. I certainly would not downplay the role of face-to-face conversations. I fully accept that many older and more vulnerable people will not have internet access. We need alternatives, such as charities or visitors going into people’s homes and talking about savings rates and giving phone numbers of the sort I have mentioned. That is all part of getting the message across that people who have suffered a big fall in their savings rate need not necessarily face such a situation. There are options out there for them.

In the final few minutes of my speech, I shall talk about the broader issues that my hon. Friend raised. He mentioned carers and social care. As he will know, the Department of Health has an independent care commission headed by Andrew Dilnot, which is due to report in the summer. Although that commission’s formal consultation process finished on Saturday, I am sure it would very much welcome my hon. Friend’s input if he has further comments to make about the role of older carers, whom he mentioned. The Government are seeking to ensure that those who are doing full-time care of, for example, 50 hours a week or more can get far more respite. Perhaps 1 million people are in that category. He also raised the issue of claim forms. I entirely agree: there is always a lot more to be done. I should stress that people can ring a free phone number—0800 882200—and can claim over the telephone. As he rightly says, that might help people who cannot read or deal with the forms. It is great if those people have someone do the form for them or with them. We also try to enable people to complete the form over the phone if that is more helpful to them.

Finally, my hon. Friend properly raised the much wider issues of pensioner poverty. It is not just about income; it is about loneliness and what happens if the cooker breaks and so on. When we publish the figures on households with a below average income—the poverty figures—I am keen for our Department not simply to publish table after table about income, but for it to look much more broadly at deprivation. I have a list of the things we are studying and publishing figures on: for example, whether someone can replace a cooker, take a holiday away from home or go out socially at least once a month. As he rightly says, loneliness, isolation and financial insecurity are important facets.

--- Later in debate ---

[Bob Stewart]

rose—

[Steve Webb]

I am about to conclude as there are only a few seconds left.

I congratulate my hon. Friend on raising a vital issue and I look forward to having an ongoing conversation with him. Like him, I congratulate the voluntary sector and our front-line staff on their work. They are bringing these messages to vulnerable people, whom we are determined to help.