Social Security

Hywel Williams Excerpts

Thursday 17th February 2011 Commons Chamber

[Jenny Willott]

As I understand the way in which that relates to working-age households, people who are on benefits are much more likely to be living in social housing and so will not face large fluctuations in mortgage costs. For those of working age who are on benefits and do have mortgage costs, there is a lot of assistance from the state. They are not bearing the full brunt of mortgage interest fluctuations because a lot of that is borne by the state. Therefore, I believe that CPI relates appropriately to that group, too.

The financial implications, over this Parliament and beyond, for the Government of the difference between CPI and RPI have been discussed a lot today. We are in very difficult financial circumstances and the Government have had to make some extremely difficult financial decisions. The Minister has laid out why the Government believe that CPI is the right measure to use, but the financial benefits of that for the Government coffers are significant. By introducing the triple lock, the Government are protecting the most vulnerable pensioners. The people potentially most penalised are being protected, while the amount of money saved is quite significant and will help the economy to grow in future.

The shadow Minister, the right hon. Member for East Ham (Stephen Timms), eventually made it clear that the Opposition will not vote against the orders and will support the changes and the uprating, which seems to suggest that they understand the logic and agree with the overall decision. Whether it be for the moment, for three years or until the next Parliament, I am not entirely sure, but it is good to see it when occasionally agreement breaks out across the House. It is also good and quite a novelty to see Labour Members finally supporting measures that will save the Treasury some money. If they plan to return to RPI in the future, I look forward to seeing how they plan to find the billions of pounds that will be necessary to implement it.

I congratulate the Government on introducing the triple lock for pensioners, which is a significant step forward. It is also pleasing for me as a Liberal Democrat to see a manifesto commitment implemented.

[Hywel Williams (Arfon) (PC)]

The hon. Lady is generous. She has mentioned the triple lock many times. Is she at all concerned about the ratcheting effect of implementing it, which has been a consideration in the past?

[Jenny Willott]

I would have thought that being too generous to pensioners was a good thing.

[Hywel Williams]

I am unconcerned about it being too generous. When the ratcheting effect was considered in the ’80s, when Barbara Castle presented her proposals for pensioners, I was supportive of her, but concern was expressed in the House at the time.

--- Later in debate ---

[Hywel Williams (Arfon) (PC)]

I begin by welcoming the Government’s change of mind on housing benefits. If that had not happened, there would have been a disastrous effect on constituencies such as mine which have high unemployment rates and slim prospects of people finding a job within a year. There will be a general welcome for that. I wanted to say that because I have campaigned about it in the past, as have many of my constituents.

I should like briefly to refer to correspondence from pensioner constituents who are concerned about the change from RPI to CPI. At the very least, there is a problem of perception. People see that RPI for the third quarter of 2010 was 4.6%, whereas CPI was 3.1%. They see that the current rate of inflation under RPI is 5.1% and that it is 4% under CPI. Clearly, people are worried. People have made long-term financial decisions on expectations that might not be realised. I raised the triple lock in an intervention and I do not want to discuss it in detail, but I worry about its longevity because of concerns that have been expressed many times in the past.

I have received correspondence about CPI and RPI from the Public and Commercial Services Union, the Civil Service Pensioners Alliance, Age UK and my constituents. My attention has been drawn to some statistics and I would like to read them into the record. The PCS states that using the base of 1988, had CPI been used to uprate a £10,000 pension, its value now would be £18,035, compared with £20,935 under RPI—a difference of 16%. A pensioner on the median public sector pension of £5,500 who has been retired for 20 years would now be on £4,845—a loss of 12% or £655. It is those sorts of figures that worry people.

Obviously, CPI has been higher than RPI in some years—1991, 1993, 1996, 1999 and 2008—but the Treasury itself reckons that over the next five years, RPI will consistently be higher than CPI. Perhaps that is because of the predicted steeper rises in housing costs. I refer the House to table C2 in the Budget Red Book, which puts the overall change to 2016 of CPI at 13.7% and of RPI at 22.1%. That is a substantial difference. Of course, a gloss has been put on, but I will not go into that at the moment.

[Naomi Long (Belfast East) (Alliance)]

One argument for the change to CPI is that many of those in receipt of a pension are insulated from fluctuations in housing costs because they are not paying a mortgage. However, does the hon. Gentleman agree that they often have other private housing costs that are not reflected in CPI, such as insurance costs and the depreciation of their properties?

[Hywel Williams]

That is a valid point. Of course, the variation across the country is quite substantial. I refer again to my own constituency, where there has traditionally always been a very high level of owner-occupation. There are older people who own their houses, but in other areas people are still paying off their mortgages. The figure of 7% has been mentioned—that is a lot of people who will be hit.

[Sheila Gilmore]

Does the hon. Gentleman agree that that figure might well grow in future? Given the level of borrowing that many people have made to buy properties, and that a lot of people are buying at a much later age, many more people are likely to move into retirement with a mortgage still to repay.

[Hywel Williams]

That is a very good point. Indeed, I think I might be one of those people. I understand that the average age of the first-time buyer is now 38. These are valid worries that people have.

The arguments on RPI and CPI have been well rehearsed this afternoon so I will not go further into them. I have a great deal of respect for the Minister and I think he would agree with me and many other people that what we need is a bit of calm and consensus on pensions policy—something that has been lacking for 25 or 30 years. I worry that this change will not lead to consensus and that he might have fallen in with a bad lot.