Cost of Living Increases: Pensioners

Jerome Mayhew Excerpts

Monday 21st March 2022 Commons Chamber

[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.

--- Later in debate ---

[Jerome Mayhew (Broadland) (Con)]

Last Saturday, like many hon. Members across the House, I was undertaking street surgeries and knocking on doors in my constituency. I spoke to several tens of pensioners, and it is absolutely right to say that the cost of living crisis is very much an issue, but it was also noticeable that people understand and recognise the causes of the crisis—the post-covid supply bottlenecks and, increasingly, the price that we all have to pay to support Ukraine and stand up to Russian aggression. I found universal support for the Government’s strong position and recognition that if we do not stand up to President Putin now, we will only make him stronger and ourselves weaker.

Although residents understand the causes, that does not make the cost of living crisis any less real, particularly in rural areas such as mine in Broadland where car transport is a necessity and homes are often heated by oil. People on fixed incomes are most vulnerable to inflation, which is why the Conservative Government over the past decade have done so much to raise pensions from the lows of the last Labour Government. In 2010, Labour spent £70 billion on pensions. The Conservatives have increased that by £35 billion—a 35% increase—while inflation, at 22%, amounts to a 13% real terms increase. Average earnings have been outstripped by pensions growth by 8% during this period. It is the case that state pensions are now at their highest, relative to earnings, for 24 years. It is so different from Labour, famous for its 75p increase in pensions.

Pensions are not just state pensions. Some 88% of all eligible employees are now participating in a private pension. That is not by chance; it is as a direct result of innovative Government policy. Pre auto-enrolment, fewer than 50% of workers benefited from an additional pension. Because of Government intervention an additional £28.4 billion has been saved every year since 2012 and continuing, raising living standards for pensioners of the future.

The Government are not just relying on years of pension increases, but are taking further steps to help pensioners with increased energy costs. We have already heard about the cold weather payment scheme, which provides £25 per cold weather week for those on pension credit, income support, income-based jobseekers’ allowance, income-related employment and support allowance or universal credit.

We have heard about the warm home discount, with an additional payment of £150 increased to 3 million households most in need. We have also heard about a reduction in council tax of £150 this year for council tax bands A to D, and the £200 of delayed payments for energy bills this autumn to help flatten the impact of the spike in energy prices. Then there is £144 million of discretionary fund. The two councils in my patch are considering applying that to oil heating support.

In addition to all those schemes, we know about the pension credits, which are guaranteed to top up weekly income to the equivalent of £9,200 a year. It is very heartening to hear the Government’s strenuous efforts to increase the take-up of that scheme. We have the spring statement later this week. I, like many others, am hopeful that there will be additional assistance with the cost of living, particularly for pensioners and particularly for rural areas, such as the one that I am lucky enough to represent.

I know that the Chancellor will continue to do all he can to support pensioners and others on lower incomes. If he does so, he will be building on a decade of support by Conservative Governments.