Pensioners and Winter Fuel Payments

Mike Weir Excerpts

Tuesday 22nd November 2011 Commons Chamber

[Mr Dodds]

There has been a debate on that very issue over the past few days. I commend those who decide that because they do not need the winter fuel payment themselves, they wish to distribute it to those more in need. I welcome the initiative that the hon. Lady mentions.

[Mr Mike Weir (Angus) (SNP)]

rose—

[Mr Dodds]

Let me press ahead and make a little progress, and I will take more interventions in a short while.

I want to refer to the situation in Northern Ireland. Last winter, we had the coldest December in 100 years. In 2009-10, there were almost 1,000 excess winter deaths, 80% of which were of people aged 65 or over. On average, we get 910 such deaths per year, and that figure compares with 590 in 2001-02, so there has been a massive increase over that period. We have to understand that in addition to the stark figures on mortalities, for every death from cold there are eight hospital admissions and more than 100 visits to general practitioners and health centres. This is suffering on a vast scale.

The recent interim report from the Government’s independent review of fuel poverty, conducted by John Hills, states:

“Living in cold homes has a series of effects on illness and mental health.”

I will not go into all the repercussions of cold weather and of living in cold and damp housing on people’s mental and physical health. The interim report outlines those very clearly.

The winter fuel payment was introduced in January 1998 as a tax-free annual payment. Its purpose was and is to alleviate fuel poverty by giving specific help to encourage older people to spend more on heating during the winter. What is happening this year? For the past three years, the winter fuel payment has been £250 for those aged 60 and over, and £400 for those aged 80 and over. Despite spiralling fuel prices—we had a debate only a couple of weeks ago in this House on the crisis in the energy sector—and despite the extremely cold recent winters and the forecasts of a very cold winter to come, in 2011-12 the payment for pensioners aged 60 and over has been reduced by 20% to £200, and the payment for those aged 80 and over has been cut by a quarter to £300. That does not affect just a small group of people; it affects more than 9 million households and about 13 million people throughout the United Kingdom. Some 12.7 million of those people are in Great Britain and some 317,000 are in Northern Ireland.

As a result of the changes, the expenditure on winter fuel payments will fall from approximately £2.75 billion in 2010-11 to some £2.136 billion in 2011-12. That is a substantial monetary saving for the Treasury, but at what cost? That is the question that many people are asking. People in charities or third sector organisations who deal with older people’s issues are making it clear that they fear that this cut, which directly hits the pockets and incomes of pensioner households throughout the United Kingdom, will result in more illness, more disease and more deaths.

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[Mr Dodds]

The hon. Gentleman makes a valid point.

The Institute for Fiscal Studies has said that people are 14 times more likely to spend the winter fuel allowance on fuel than they would be if their incomes were increased in other ways. If an allowance is given specifically to spend on fuel, people are more likely to spend it on fuel; they would be less likely spend an allowance on fuel if it was not designated as a fuel poverty measure. There are strong arguments—for reasons that hon. Members and I have outlined—for retaining the universal payment of a winter fuel payment at current levels, and for indexing payments to the rising cost of energy. Some have argued that at a time of pressing demands on the Treasury and given the state of the economy, that would be a luxury we can ill afford. As I have indicated, money has been found for the priorities that the Government have deemed essential: the protection of international aid budgets, taking a penny off fuel duty, ring-fencing NHS budgets and so on. It is vital, however, that we also prioritise saving the lives of our senior citizens in times of very cold weather.

The chief medical officer has said that the annual cost to the NHS of treating winter-related diseases resulting from cold private housing is estimated at about £860 million, but that does not include additional spending by social services, economic loss through days off sick, and so on, which means that the total cost to the NHS and the country as a whole is unknown. However, we do know that every £1 invested in keeping homes warm saves the NHS 42p in health costs, so again this money would be well spent, and it could save the NHS more money in the long term.

Levels of fuel poverty in this country are staggering: in England, 18% of households are in fuel poverty; in Wales, it is 26%; in Scotland, it is 33%; and in Northern Ireland, it is 44%. It is right across the board. That equates to 302,000 households in Northern Ireland alone, 75,000 of which are in extreme fuel poverty, which means that they spend 20% or more of their income on fuel. Furthermore, almost half of all fuel-poor households in the country are headed by over-65s, so clearly fuel poverty disproportionately affects the elderly to a staggering degree.

Yet the situation will only get worse. I have highlighted the rising cost of fuel. In the past five years to October 2011, the retail price of gas in the UK rose by 52%, and the price of oil rose by 86%. In Northern Ireland, the situation is much worse. The price of home heating oil, which is a product that we depend on, has risen by 63% in the past two years and by 150% since 2003. Almost 70% of homes in Northern Ireland depend on it for their primary source of heating—that figure is 82% in rural areas—yet the price of oil has risen beyond anyone’s imagination.

[Mr Weir]

The situation is similar in rural Scotland. I have previously suggested—I wonder whether the right hon. Gentleman agrees with this proposal—that the Government make the fuel allowance available earlier in the year to those who rely on home heating oil, when price and demand are lower, allowing them to fill up before the winter hits and the price tends to rocket.

[Mr Dodds]

Yes, the hon. Gentleman raises an important point about those who depend on home heating oil. These are one-off payments of about £600 for 900 litres of oil—it is a lump-sum payment—so it would be extremely helpful to people to have that money in their hands when they were able to buy more oil at a lower price. He makes an extremely good point.

The picture is stark: we have much higher energy costs; there are considerable pressures on pensioner household incomes owing to lower savings returns; and increases in VAT are hitting everybody hard, but hitting pensioners particularly hard. Furthermore, pensioners tend to be on fixed-retirement incomes, and we know that, according to a recent report, the cost of living has risen by one fifth for older people over the past four years, compared with 14% for the population as a whole.

At the last election, the parties made a number of pledges. On pensioners, the Conservative party described the number of excess winter deaths as a national disgrace, and it said:

“we want to set the record straight. Labour are sending cynical and deceptive leaflets to pensioners’ homes saying we would cut their benefits. This is an outright lie, and here it is in black and white: we will protect pensioners’ benefits and concessions, and this includes: the Pension Credit; the Winter Fuel Allowance; free bus passes; and, free TV licences.”

I defy anybody out there in the public to interpret that statement as anything other than a pledge not only to maintain the existence of the winter fuel allowance, so that it continued to be paid as a benefit, but to maintain it at the same rate at which people were receiving it when the election was called. What other interpretation can we put on those words?

The Liberal Democrats said in their manifesto before the last election that they would reform winter fuel payments, extending them to all severely disabled people, and that this would be paid for by delaying age-related winter fuel payments until people reached 65. However, the Minister, who is in his place, said earlier this month:

“There are no plans to extend provision under the winter fuel payment scheme.”—[Official Report, 3 November 2011; Vol. 534, c. 719W.]

The coalition programme for government stated:

“We will protect key benefits for older people such as the winter fuel allowance,”

and so on. Then there is the argument about the Labour party’s position and what Labour was proposing—or not proposing—to do had it remained in office.

I point to those pledges for this reason. People say today that politicians, Parliament and this House are disconnected from ordinary people. People are losing faith in politics; and is it any wonder, when they read those clear statements and are led to believe one thing, but then, as soon as the election takes place and the same politicians come to office, they turn round and do something entirely different? Their argument in doing so is: “Well, we’re only doing what the previous Government said they would do.” When people can so cynically disregard the pledges that they make on such an important issue, that is another reason for the disconnect between politicians and the public out there.

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[Steve Webb]

That is entirely the response that I expected. The point is that not everyone would perhaps respond in quite that way. Given the choice between spending the money on at least some folk gracious and generous enough to give it away, or on people who self-evidently desperately need it because they are on a low income or are disabled and it is freezing cold, the priority at a time when money is tight is obvious. This is one decision that I would defend.

[Mr Weir]

Will the Minister address the point? Whether he is saving money on one or the other, he has just admitted that the figure spent in Northern Ireland is lower than it would have been overall. However, the cost of energy has rocketed in the past year or two, so every pensioner in Northern Ireland or in any other place in the United Kingdom is paying more for their energy and is suffering through this system. Would it not be better to put some money in to ease that suffering?

[Steve Webb]

Absolutely, and I shall come on to the whole subject of the fuel poverty strategy that we have adopted. I suspect, as my hon. Friend the Member for Meon Valley (George Hollingbery) suggested in an intervention, that the correlation between the rate of the winter fuel payment and the depth and impact of fuel poverty is incredibly weak, if it is there at all. In other words, we have seen the winter fuel payment go up and go down, yet if that was plotted against the terrible problem of excess winter deaths or fuel poverty, I suspect there would be no correlation at all. When money is tight, we should be prioritising how we spend it so that it will do the most good.

As the hon. Member for Angus (Mr Weir) rightly says, fuel bills have shot up. Surely the priority should be stopping people paying a fortune for their fuel when half the heat goes out through poorly insulted walls, windows and lofts. Every year, it is tempting to say that this winter we should put cash into people’s hands because it is cold. Of course that is true, but if we always put off the hard work of insulation, energy efficiency and so on, the situation will be the same the next winter and the one after that. Money spent on energy efficiency will save pensioners and others money every winter, rather than our giving them cash one year, only for the heat to go out through poorly insulated roofs and windows.

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[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I congratulate the right hon. Member for Belfast North (Mr Dodds) on choosing this subject. With winter fast approaching, this is an issue that will clearly be on many of our constituents’ minds. Although it has been unseasonably warm in my part of Scotland, we must realise that the winter is still ahead of us and we face the challenge of yet again trying to heat our homes. I declare an interest to the House. In the Register of Members’ Financial Interests, I have noted oil and gas industry interests which are relevant to this debate.

As has become apparent in the debate, fuel poverty is made up of a combination of three pillars: the cost of the energy itself, the income of the household, and the quality of the houses that people live in and are trying to heat. All three of those factors need tackling, and attempts have been made to do so over the years. I suspect that one of the mistakes probably made by all of us, but particularly by the previous Government, was relying on the cost of energy as the main platform for tackling fuel poverty in a period when competition brought down energy prices. We did not realise the need to get our housing stock well and truly up to standard to ensure that, when prices went back up, people would be able to afford to heat their homes because they would not need so much energy. The energy efficiency of homes and our housing stock is a crucial factor in building the long-term foundations for tackling the problem once and for all.

In the run-up to this winter, the Government are rightly trying to concentrate on making sure that energy bills are as low as possible by pushing for an end to the complexity. As the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made clear, many people do not know how to shop around. They are faced with myriad complex tariffs and offers and are lured in to sign up to new contracts and, after that, a rising tariff. One of the ways of improving the markets and ensuring that at least bills are no higher than they should be is to have clearer tariffs and an end to the complexity.

The other problem is that of houses not on the gas grid. It would be interesting to hear, perhaps in the reply to the debate, whether anything can be done in Northern Ireland to extend the gas grid. If we can get more people on to the gas main, it will at least ensure that they have one of the most reasonable fuels for heating their homes in the immediate future.

However, not every house will be on the gas grid and we will have to tackle the problem of those that are not. Consumers of grid heating fuels such as gas and electricity have a market in which Ofgem—the regulator—and the rules consider how vulnerable customers are treated, and vulnerable customers cannot be disconnected in the winter. However, following the Office of Fair Trading inquiry and all the other reports on the off-grid, I am concerned that heating oil and liquefied petroleum gas suppliers do not have the same constraints on their market in terms of how they handle vulnerable customers and their relationship with them.

[Mr Weir]

The hon. Gentleman is making a very good point. He may remember that, in the previous Parliament, the excuse was always that that market was made up of smaller companies. Does he agree that that is no longer so? In many cases, suppliers have a virtual monopoly, and it is high time that the same sort of tariffs were introduced into that market as those that exist in the electricity and gas markets.

[Sir Robert Smith]

One can certainly buy from a lot of brands, but when one gets behind them and finds out who the beneficial owner is, one learns that it is not necessarily a different company. There is still scope for considering something we pursued when the hon. Gentleman and I were both on the Select Committee on Energy and Climate Change in the previous Parliament, and that is whether Ofgem should have some kind of locus in relation to off-grid customers as well as on-grid customers. It is certainly worth pursuing with the Secretary of State and Ofgem whether there is any way it can be involved in that market to improve the treatment of vulnerable customers.

I welcome the warm home discount because, obviously, that targets a saving that goes some way to counteract the loss of income. However, we must recognise that the long-term pressures are upward for energy prices, which brings us back to the need to tackle the quality of homes. There is a hope that shale gas may have the potential to assist with energy prices in the medium term, but the reality is that we have to prepare for a world where energy prices are higher. Therefore, in terms of targeting resources, I welcome the cold weather payment being maintained at the higher level because that at least targets those who have the most need most effectively.

The take-up of benefits is crucial and we need to reinforce the campaigns and the different ways of engaging with customers. The data sharing on pensioners between energy companies and the Government is going some way towards trying to identify those vulnerable customers. The energy companies that are doing benefit audits of their customers have shown that such an approach can greatly improve a household’s income. Pensioner take-up of targeted benefits needs to be improved, as does the information. We need to try to get across to people the message that these payments are entitlements, not gifts. People are entitled to these payments and they should not feel in any way inhibited from claiming them, because they have been paid for and they are meant to be claimed. If they were claimed, the problem of fuel poverty would be reduced.

Information is also crucial in trying to get people’s homes up to standard. There is still a lot of reluctance to engage, even when energy efficiency is free. With the upheaval and the uncertainty, people do not have the confidence to let someone into their home to interfere with the fabric of their building. We need to give people more reassurance that the long-term benefits of improving the energy efficiency of their home will give them a stable future when it comes to fuel bills.

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[Mr Mike Weir (Angus) (SNP)]

Thank you, Mr Deputy Speaker. I congratulate my friends in the Democratic Unionist party on bringing forward this important debate. Fuel poverty is an important issue for all of us, and it is worth noting that in Scotland 770,000 homes are in fuel poverty and that, for every 5% rise in energy prices, a further 46,000 go into fuel poverty. Clearly, those, such as pensioners, who are on fixed incomes are much more likely to be affected by these escalating prices.

In an e-mail prior to the debate, the National Pensioners Convention and Greenpeace made the point that the winter fuel payment used to cover one third of a dual fuel energy bill, but it now covers less than one fifth. That shows how much pensioners are suffering. They also make the point, since the Minister raised the issue of cost, that the impact of cold housing on people’s health already costs the NHS more than £850 million a year, while restoring the winter fuel allowance would cost only £695 million. It is thus questionable whether there is much of a saving in what the Government are doing. The rises in energy prices cannot be looked at in isolation because just as they rising, so is the cost of road fuel, food and other essentials. Clearly, those, such as pensioners, on fixed incomes are the most affected.

In June this year, I received a written answer from the Secretary of State to a question on energy prices and inflation, which showed that in four out of the last five years, the rise in domestic energy prices—whether we use the retail prices index, the consumer prices index or whatever measure—had outstripped the rate of inflation. That was before the latest round of price hikes. The Government’s usual mantra of energy efficiency and switching simply does not wash with pensioners who are struggling to pay their bills. The amount that most people can save from switching is not going to make a significant difference to these bills. That is especially true for the poorest pensioners. To get a better deal on energy bills by switching, they have to move to a direct debit tariff, and many of the poorest pensioners do not have bank accounts or simply like to juggle their bills in the month and do not want to see money coming out of their account on a regular day in the month.

I very much agree that we should insulate our houses and take more measures, but that is a long-term project. What is needed now is relief for our pensioners from ever-escalating bills. In discussing the situation in Northern Ireland, the Minister made it clear that the overall effect of increasing the cold weather payment as against reducing the winter fuel allowance amounted to a cut in the total sums going to pensioners. Frankly, that is irresponsible at a time when prices are escalating.

It is interesting to note the tendency of some Government Members to question whether there should be a universal winter fuel allowance at all, but I would remind them that in the last Parliament they argued against means-testing for pension credit—correctly, in my view—on the grounds that many pensioners would, through pride, not claim means-tested benefit. The same applies here, and I think the Minister’s figures on the trial project of direct payment of pension credit clearly demonstrate that there needs to be universality in order to get through to pensioners.

Let me mention one group of special problems for which I suggest there might be cost-free or at least a very low-cost partial solution. It applies to those who are off the gas grid who rely on home fuel oil for their heating—a problem in Northern Ireland and in large areas of Scotland. These people do not get the special tariffs available for those on the grid and, in many of these areas, extending the gas grid is simply not a practical proposition because of the geography of the area. Even worse, in winter time, these people cannot even be sure of the price of their fuel during the time between ordering and delivering, since in many cases a company will not give them a price at the time of ordering—the price was certainly rising high last winter.

I have previously raised the possibility of allowing these people to receive their winter fuel allowance earlier in the year, which would allow them to fill up their tanks when demand and prices might well be lower. It is not an absolute solution, but it might help in some way. I have raised this with energy Ministers before and I was told that they would consider matters, but nothing seems to have been done. We need to look at solutions like this to alleviate a very serious situation.

The hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) talked about the three pillars, and the Minister rightly said that many of these issues were devolved. That is true, but at least two of these pillars—energy prices and the money that comes through benefits—are not devolved matters. The devolved Parliaments and Assemblies thus have a problem in dealing with fuel poverty.

From the outset, the Scottish Parliament has been inventive in tackling these issues. All parties were involved in the central heating scheme in the first instance, and now it has moved on. The current Scottish Government’s energy assistance package, which is worth £33 million, has helped 150,000 people on low incomes to reduce their energy bills. One in six Scottish homes have been visited for a home energy check, which also looks at the benefits side. We all agree that something needs to be done about this, and almost 18,000 installations have been made.

The package was originally targeted at pensioners, but has since been extended to help other vulnerable people in these very difficult times and, in addition to helping pensioners, the scheme has been extended to include the disabled, families with young or disabled children, those with severe disabilities and the terminally ill—and it is to be extended to include those on carers allowance, which could benefit up to another 7,000 households. Next year, the £50 million warm home fund will also begin operation to give additional help to the fuel poor. None of these programmes is cheap; none will ever be cheap. If we go down the road of looking only at energy efficiency, however, we will not tackle the immediate problem. It will take many years before all our homes are energy efficient; the cost of doing it is enormous. Although it is a good thing in the long term, we must also deal in the short term with the immediate problem of getting our pensioners through this coming winter.