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9.56 pm
The Minister for Pensions Reform (Mr. Mike O'Brien): I congratulate my hon. Friend the Member for Glasgow, North-West (John Robertson) on initiating this debate. This is an enormously important issue for hundreds of thousands of pensioners throughout the country—in my constituency, as well as his.
The Government have done more for older people than any other. In the past 10 years, we have lifted more than 1 million pensioners out of relative poverty. Relative pensioner poverty has fallen by a third since 1997, and we have broken the adage that being old means being poor. These days, people are no more likely to be poor if they are old than if they belong to another social category. We have banished the memories of the previous Conservative Government, under whom the poorest scraped a living on—imagine this—under £69 a week. By way of contrast, this year the poorest third of pensioners will, on average, be £2,100 better off than if we had continued with the previous Conservative policies.
We have achieved this through targeted support to provide security in retirement. This amounts to £11.5 billion a year more than was spent on pensioners in 1997. We are right to be proud of our achievements, but there is more that we need to do. We want to ensure that pensioners claim all the benefits to which they are entitled. I wrote to Members of this House three weeks ago outlining some of the measures that we are taking to simplify application procedures, and informing them how they can get their older constituents to claim the various benefits available to them. A lot of pensioners are still not claiming sufficient benefits. The money is there, we are waiting to pay it and we need those applications to come in.
John Robertson:
Does my hon. and learned Friend not accept that in the days when we had pension books, every pensioner knew that they had to have such a
book, and so we could get information to them? Nowadays, we do not have such a facility, but there has to be a way that we can contact every pensioner; otherwise, we will have the same problem with a lack of uptake.
Mr. O'Brien: We can actually get to every pensioner; the problem is getting those pensioners whom we can get to to recognise that if they are on a low income, they can apply for further benefits. In the past 18 months, we have written in some instances up to four times to people whom we think may be entitled to claim the pension credit, help with their council tax and perhaps housing benefit in respect of their social housing rent. Many of them are not responding. We know their addresses and can write to pensioners, but it is getting the response that is sometimes the problem. We are trying to encourage working with partner organisations and the Pension Service to get more pensioners to claim the benefits. Tackling broad poverty is crucial, but, as my hon. Friend says, we must go further.
It being Ten o’clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, That this House do now adjourn.— [Mr. David.]
Mr. O'Brien: It is vital that pensioners can keep their heating on, secure in the knowledge that they can pay their fuel bills. The key to dealing with pensioner fuel poverty is therefore ensuring that pensioners have sufficient money to pay those bills. That was why we introduced the winter fuel payment in 1997—the first ever support targeted to help pensioners with their heating costs. It currently helps more than 8.5 million households, and nearly 12 million people. It has taken us away from the cold, dark days of the last Conservative Government, when freezing pensioners were offered minimal support to stay warm. Instead, Health Ministers went around telling pensioners to buy long johns and woolly nightcaps if they wanted to stay warm in winter.
We have moved on since then. Back in 1995, just £65 million was spent on cold weather payments for the vulnerable. Last winter we spent more than £2 billion on winter fuel payments. Today, the debate is not about whether we should give pensioners help with heating costs, but about how much more help we should give. In the past decade the winter fuel payment has risen tenfold, and stood at £200 for the over-60s and £300 for those over 80 last winter.
But we are not complacent. Last year we launched a cross-Government strategy to target the most vulnerable and to ensure that everyone can keep warm and keep well in winter. It brings together the priorities of my Department with those of the Department of Health, the Department for Business, Enterprise and Regulatory Reform, and other agencies to provide a one-stop shop for help and advice on keeping warm and obtaining benefits. Schemes such as Warm Front, which my hon. Friend mentioned, have helped more than 2 million low-income households to improve their energy efficiency, through better heating or insulation. In fact, every minute of the working day, a home receives a new heating system as a result of the scheme.
As the Chancellor announced last week, we expect energy companies to increase their support to the vulnerable. In particular, we want a fairer deal for the 5
million customers on prepayment meters. Energy companies currently spend about £50 million a year on social tariffs. We want to see that treble to at least £150 million a year in the period ahead. We want to work with the energy companies, but we will take any necessary steps—I say this very clearly—to ensure that that happens.
I welcome the announcement last week by my right hon. Friend the Chancellor that we will provide an additional payment of £50 for the over-60s and £100 for the over-80s, to sit alongside the winter fuel payment. That vital extra support underlines our commitment to tackling pensioner fuel poverty. It shows that the Government can react quickly to changing fuel prices, and it will ensure that the winter fuel payment continues to provide a significant contribution to winter fuel bills, providing an extra £575 million and benefiting nearly 12 million individuals. Pensioners can therefore heat their homes with more confidence next winter. It sits alongside measures announced last year that will take a further 600,000 pensioners out of paying income tax. I hope that those positive measures will be widely welcomed in the House. They provide significant extra support to our older citizens.
The generous payments that we have already put in place have, to some extent, been affected by increasing fuel prices. Back in 1997, we were getting the benefits of North sea oil and gas, and there were quite considerable beneficial changes in the world energy market. The result was that during the late ’90s and the early part of this century, fuel prices were lower than earlier in the ’90s. The benefits from the winter fuel payments were therefore considerable.
In the past two or three years, we have seen that some of the benefits from North sea oil have been eroded, because much of the energy it supplies has been used. It will be around for many years to come, but the easily accessible oil and gas reserves in the North sea have now been exploited. Some of the new areas will be more difficult, and therefore more expensive, to access.
We have also seen changes in the international fuel market, with extra demand coming from China, India and several other sources. The world price of energy has therefore risen, just at the point when we have to import more energy than ever before. I well remember that, when I was the Minister with responsibility for energy, I signed the agreement with Norway that would bring about a fifth of our gas from the Norwegian gas fields into Scotland through the Langeled pipeline. That is very beneficial, but we are now much more subject to world fuel prices than we were only seven or eight years ago. The result is that our fuel prices are rising, and that is having an impact on pensioners’ budgets.
David Taylor: Does my hon. Friend and parliamentary neighbour agree with those observers who remark that it is easier for a smaller number—now five—major energy companies to form an unofficial cartel to hold prices at higher levels than they should be, or to push them to levels that the market does not dictate? Would not that be worth investigating? Many observers think that it should be investigated.
Mr. O'Brien:
Ofgem is there precisely to ensure that such a situation does not arise. The aim of setting up a regulator such as Ofgem is so that it can ensure that the
market is operating properly and the interests of the consumer are paid due attention. My hon. Friend suggests that the consumer comes off worst, but Ofgem—an independent regulator proud of its independence—is aware that, especially at a time of fast rising fuel prices, we need to ensure that energy companies are responding to the concerns of their customers and operating the best competitive market. We rely to some extent on Ofgem to carry out its regulatory and policing activities to ensure that the consumer is protected.
John Robertson: To back up the point made by my hon. Friend the Member for North-West Leicestershire (David Taylor), the difference in price between the dearest and cheapest energy suppliers is only 1.3 per cent. Is that likely to happen if we are in a competitive market?
Mr. O'Brien: That depends on whether they are competing at the lowest possible price. If they are, that might well happen. It does not necessarily mean that the market is not working effectively. It is possible that several companies are competing with each other and offering similar low price levels. However, if the prices were not low, but were agreed in some way, that would be improper and a matter that we would expect the regulators to address. Certainly, my hon. Friend the Minister for Energy has indicated that we are keeping a close eye on these issues, to ensure that the energy companies are operating fairly within the market. The extra payment promised by the Chancellor will mean that the winter fuel payment for those over 60, including the £50 top-up, will total £250 next winter. That is a 25 per cent. rise on last year. For those over 80, the winter fuel payment and the £100 additional payment will total £400, a rise of one third on last year.
Last year, the winter fuel payment covered more than half of the average winter fuel bill. Next year, with rises of £50 and £100, the winter fuel payment will continue to make a significant contribution to pensioners’ winter fuel bills. It is difficult to give a precise figure because we do not know precisely what the winter fuel bills will be. These measures will, I hope, ensure that many more pensioners can keep their homes warm, safe in the knowledge that they can meet their fuel bills.
My hon. Friend the Member for Glasgow, North-West suggested that we should extend the winter fuel payment to other groups. We provide a range of benefits to meet different people’s needs and we have a series of benefits in place that are designed to help people who are terminally ill, cannot work or are in need of further help from the state. Older people are particularly vulnerable to the effects of cold weather during winter months. That is why we created the winter fuel payments. They give pensioners the reassurance that they can afford to heat their homes.
Other groups also have issues, such as the disabled. However, 60 per cent. of those who receive disability living allowance or attendance allowance are over 60 and already receive winter fuel payments automatically. The extra heating needs of children with disabilities arise throughout the year, not just in the winter
months. The disability living allowance is worth £109.50 and will increase to £113.75 from April this year, while the poorest are entitled to some extra help through the disability premium in income-related benefits.
My hon. Friend wanted to know whether it would be possible to reconsider the issue of having two bands, one for those over 60 and one for those over 80. He suggested that it might be possible to have a more targeted, nuanced payment system and drew attention to the fact that some people on relatively high incomes also receive the supplement. We could do various things to change all that. For example, we could take the view that those on higher incomes would be taxed on their winter fuel payment. We could take the view that people on higher incomes would not receive a winter fuel payment and that we would only perhaps allocate it to those who were on pension credit.
There are all sorts of things that the Government could do to change, alter and redirect the payments. We considered all that and took the view that there was an expectation among pensioners that we would make winter fuel payments to them as we did in the past and as the Government had committed to do in their election manifestos, and that we ought to continue to do that. If there needs to be a debate about changes to the system, let us have a debate by all means. At the moment, the Government’s view is that we have made commitments on winter fuel payments and we want to keep to them.
The two age-related bands make the system easier for people to understand and help older people plan ahead secure in the knowledge of the contribution they will receive towards their winter fuel bill. The current age split takes account of the fact that older pensioners over 80 are more likely to live alone or in less energy efficient homes. They are more likely to have a lower income than recently retired people. People over 80 are less likely to have well-paying final salary pension schemes. Many of those who are retiring now will have good quality final salary pension schemes, although not all of them will. People over 80 tend to spend a higher proportion of their income on fuel. Our view has been that there is a strong argument for making payments to those over 80. Of course, those older pensioners are also likely to be most vulnerable to not sensing that they are getting cold and are the most likely to fall victim to hypothermia. There is an argument for ensuring that we keep things simple while recognising that the over-80s deserve an extra payment.
My hon. Friend has made a powerful argument, and I congratulate him on raising the issues, which do call for a wider debate. The Government are committed to tackling pensioner poverty, including fuel poverty. We have made considerable progress in the past decade, with pensioner poverty falling significantly. The winter fuel payment is an important part of our strategy; we know that our cold winters affect older people more than the rest of the population. The winter fuel payment provides a guaranteed payment to all older people. It is an important contribution towards household fuel bills.
The extra money announced by the Chancellor last week will ensure that the winter fuel payment continues to make a significant contribution to pensioners’ winter fuel bills next year; it is a generous extra payment,
keeping pace with changes in the market. That will give older people the confidence to continue to keep their home warm, and hopefully it will keep many more of them alive. We hope that that will be the outcome of the changes that we have made.
It can always be argued that the Government could pay more and do more, but of course they have to ensure that they balance the various demands for public expenditure. However, pensioners were rightly a high priority in the Budget last week. As Minister with responsibility for pensions, I am pleased that the Chancellor
listened to representations, not only from me but from people such as my hon. Friends the Members for North-West Leicestershire (David Taylor) and for Glasgow, North-West, on the need to consider, and respond to, the issue of rising winter fuel bills. The Chancellor did so by increasing the amounts that will be paid next winter. I am glad that that was done, and I hope that pensioners will feel the benefit of it.
Adjourned accordingly at sixteen minutes past Ten o’clock.
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