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Benefits Uprating

With permission, Mr. Speaker, I wish to make a statement on benefits uprating in the context of our reforms of pensions and our commitment to tackle poverty and build an active welfare state. I shall place full details of the uprating in the Vote Office and arrange for the figures to be published in the Official Report. I can confirm that most national insurance benefits will rise by the retail prices index, which is 3.6 per cent., and that most income-related benefits will be uprated by Rossi, which is 3 per cent. From next April, the basic state pension will increase by £3.05 a week for single pensioners and by £4.85 a week for couples, bringing the pension up to £87.30 for a single pensioner and £139.60 for couples. That is a real-terms rise of 9 per cent. since 1997. Next year, the minimum guarantee element of pension credit will rise, as it has since its introduction, in line with earnings. In 1997, the poorest pensioners were expected to live on just £68.80 a week. This rise means that from April no single pensioner need live on less than £119.05 a week and no couple on less than £181.70 a week. And in the Pensions Bill published last week, we will legislate to ensure that that progress is locked in. Pension credit is now benefiting 2.7 million pensioner households, with an average weekly award of around £47. The work of the Pension Service means that we are reaching more people and ensuring that they are able to claim their entitlements as easily as possible. We have increased the take up of housing benefit and council tax benefit by those claiming pension credit through the implementation of a new, streamlined telephone application process. More than 350 additional successful housing and council tax benefit claims have been generated each week over the past year. In addition, we have contacted existing pension credit customers not claiming housing or council tax benefits, and as a result have paid out nearly £30 million in backdated claims. We now spend more than £10 billion a year more on pensioners than if we had simply continued the policies that we inherited in 1997. Pensioner incomes have risen across the board, with the poorest benefiting the most. We have lifted more than 2 million pensioners out of absolute poverty, and 1 million out of relative poverty. On average, pensioner households next year will now be £1,450 a year better off in real terms than they would have been under the 1997 system, with the poorest third £2,100 a year better off. Alongside that rapid progress in the fight against pensioner poverty, we have introduced measures that have helped all pensioners, and will continue to do so. Through the warm front programme, we are now able to offer financial support to all pensioner homes looking to install a new heating system. And we are providing a suite of energy efficiency measures, including insulation and central heating, to low income households. By the end of 2008, we will have insulated 2.7 million homes. As my right hon. Friend the Chancellor announced yesterday, in the coming year we will extend the Warm Front programme, benefiting a further 300,000 pensioner and other households most vulnerable to fuel poverty. We have now reached a position in which pensioners are less likely to be poor than the population as a whole. That is unprecedented during a time of sustained economic growth, and an achievement that I believe the whole House should welcome. The Pensions Bill that we published last week builds on the consensus created by the Pensions Commission and the national pensions debate to provide an enduring pensions settlement. To provide a solid platform on which people can save for retirement, we will widen the coverage of the basic state pension and increase its generosity by linking its uprating to earnings. The link to earnings will result in a pension that by 2050 will be worth twice as much as it would have been without reform. We will tackle inequalities in the current system, and particularly those faced by women and carers, through the introduction of a modernised contributory principle that recognises and rewards social contributions alongside work. Today, around 30 per cent. of women receive a full basic state pension on retirement. Our reforms mean that that figure will rise to 75 per cent. in 2010 and to 90 per cent. in 2025. We will tackle the problem of complexity in the current system through a radical simplification of the state pension, and we will streamline the private pension regulatory environment to make it easier for people to plan and save. Because it is crucial that we do not burden our children and grandchildren with the cost of a population spending longer and longer in retirement, we will gradually raise the state pension age to 68 by 2046, thereby ensuring fairness between generations and helping to secure the long-term financial stability and sustainability of the pension system. We are laying the foundations for a lasting pensions settlement, but we will truly eliminate inequality in retirement only when we eliminate inequality in working life. That is why our welfare reforms and our aspiration for an 80 per cent. employment rate are so important. It is why we are committed to tackling poverty, and why we want to have an enabling welfare state. A decade ago, the UK had the highest child poverty rate in the industrialised world. It is now falling faster than anywhere in the EU. Since 1997, 2 million children have been taken out of absolute poverty, and nearly 1 million out of relative poverty. From April, the poorest children will receive £64 a week through child benefit and the child tax credit. In 1997, they received only £28. My right hon. Friend the Chancellor announced yesterday that, because we know that the last months of pregnancy and first weeks of a child’s life can bring extra costs, from 2009 mothers will be eligible for child benefit from the 29th week of their pregnancy. That means an extra £200 for the first child, and up to an extra £130 for subsequent children. The standard rate of maternity allowance and statutory maternity pay will be increased by £3.90 to £112.75 a week. Statutory paternity pay and adoption pay will also be increased in parallel to £112.75. In 1997, paid maternity leave lasted 16 weeks. From April 2007, that will rise to 39 weeks, and by the end of this Parliament we intend to extend statutory maternity pay and maternity allowance to 52 weeks. At the same time, we intend to introduce an additional period of paternity leave for employed fathers. For the first time, parents will be able to divide paid maternity and paternity leave equally between them if they wish, thus allowing both parents to play a greater role in the first year of their child’s life. In addition, for the seventh successive year, we are freezing non-dependent deductions to relieve the pressure on low-income parents who are accommodating their adult children. We know that work is the best route out of poverty, and today there are more people in work than ever before. Employment is up by 2.5 million since 1997 and it has risen in every region and country of the UK, with the biggest increases in the neighbourhoods and cities that started in the worst situation. Since 1997, we have increased the employment rate for groups in society that have previously been disadvantaged. Lone parents are up 11 percentage points, and disabled people are up 9 percentage points. Ethnic minorities are up 5 percentage points, and older workers are up nearly 7 percentage points. That means that more than 300,000 more lone parents, 900,000 more disabled people, 1 million more people from ethnic minorities and 1.5 million more older workers are in work than in 1997. There are 1 million fewer people on benefits. The numbers on incapacity benefits are falling, not rising. For the first time in 50 years, the UK has the best combination of high employment, low unemployment and low inactivity of any of the G8 countries. However, we have further to go if we are to meet the challenges of rapid economic change. As the Leitch review highlighted on Tuesday, the shape of our work force needs to change rapidly to fit the needs of our future economy. Our future success will hinge not just on getting people into work but on supporting them to stay in work and to acquire the skills, confidence and ambition to progress though the workplace. As my right hon. Friend the Chancellor said yesterday, we want British workers to gain the necessary skills for the jobs of the future. So we intend to raise the number of apprenticeships to 500,000 by 2020. Through the Train to Gain programme we will increase the number of adults learning basic workplace skills from 100,000 last year to 350,000 a year by 2011. Our Welfare Reform Bill will build upon the success of pathways to work, delivering on our commitment to reform incapacity benefits while ensuring security for those who are unable to work. Together with our cities strategy, it will offer a new approach to delivering employment services to some of our most disadvantaged communities. Our pathways to work pilots now cover a third of the country, and will be nationwide by 2008. They have continued to deliver outstanding results: the Institute for Fiscal Studies confirms that there has been an increase of over 9 percentage points in the number of people leaving incapacity benefit in pathways areas, as compared with the rest of the country. We are making great strides in tackling discrimination and breaking down the barriers that have previously stood between disabled people and work. We have also taken crucial steps in tackling discrimination against older workers. The introduction this October of the UK’s first legislation on age discrimination means that people can no longer be denied jobs because of prejudice, and that they have an equal chance of training and promotion, whatever their age. This year’s uprating moves us further towards our aspiration of a fair and inclusive society that offers opportunity and independence for all. It reinforces our commitments to tackle poverty and exclusion and ensure security in retirement. I commend this statement to the house.