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Social Security

I am grateful to the hon. Gentleman for that clarification. I fear that he may be accused of toying with and teasing us; he was tempting us to believe that under the Conservatives everyone might get uprated by a higher factor. I think that he is saying now that such a panacea would not be as evident under a Conservative Government as we might have hoped. I am sure that the Under-Secretary will mention in his summing-up that some indices that are now actually higher than the rate of inflation—the pensions and prices index, for example—have, in the past, been lower for quite long periods. However, it is worth noting that the winter fuel payment has not been uprated this year. The Minister will confirm that there has been no uprating of the winter fuel payment since 2000-01—a very long time. Perhaps that is why the Department of Trade and Industry indicated in a written parliamentary answer a couple of months ago that it expects the recorded number of people in fuel poverty not to disappear to zero, which is the Government’s target, but to double from 1 million to 2 million between 2004 and 2006. The hon. Member for Bury St. Edmunds mentioned in an intervention how much fuel costs have gone up over the last year alone. I think that he mentioned—if he did not, I will—that the September 2006 retail prices index for heating and lighting rose by 29.2 per cent. We would certainly not suggest that every single benefit should be uprated by some different factor, but there is a powerful logic behind the idea that the winter heating allowance, which is designed to compensate for heating costs, should in some way be related to those costs rather than be allowed to shrivel over time. The RPI shows that since 2000-01 the cost of fuel has gone up, on the Government’s own measure, by 67.8 per cent.—double even the increase over last year—which is considerably greater than the RPI increases. I know that the Government will argue today against uprating for actual fuel costs and say that it would be quite inappropriate to use other elements of inflation in examining the way in which benefits are uprated. During a quiet morning, however, I looked through a long piece of paperwork—the uprating statement—sent by the Minister back on 11 December 2006. I examined in particular the increases and non-increases of benefit and counted up the number of benefits that were not increasing at all. I suddenly reached the section on housing benefit, which dealt with non-dependent deductions, rent rebates and allowances. One category listed is entitled ““service charges for fuel””. The most interesting fact to note is that those service charges are going up enormously—by 29.2 per cent.—in this particular year of 2007-08. Not being as familiar or literate about these matters as my hon. Friend the Member for Northavon (Steve Webb), I thought that that extraordinary aspect of Government generosity might be used as a precedent for arguing that the winter fuel payment should go up by a higher rate. Then, however, I discovered that the service charges for fuel are actually the allowance for fuel costs that is made where housing benefit is paid to people who pay a rent that includes the cost of fuel. In other words, the Government are saying that for people who pay rent and do not pay a dedicated fuel cost—they are not supposed to receive housing benefit in order to pay for those costs—it can be assumed that the cost of fuel has gone up by 29.2 per cent. That allows the Government to avoid paying an excessive amount of housing benefit to those particular individuals. That is pretty cheeky of the Government. On the one hand, there is a winter heating allowance, which is disappearing in relation to the cost of winter heating, while on the other the Government are actually using the 29.2 per cent. increase in costs to ensure that housing benefit is clawed back from people on low incomes. I would be grateful if the Minister commented on that and let us know whether it sets a good precedent that would allow the Government to look more generously in future at the uprating of the winter heating allowance. From the other interesting document on the national insurance fund and how it is accruing, we discover that because the Government are uprating many of the benefits only at the rate of inflation and many allowances by nothing at all—more than a third of the allowances and premiums are not being uprated at all—the surplus on the fund will increase from £4.8 billion of revenue versus expenditure in 2007-08 to £10.042 billion in 2011-12. The total cumulative balance in the fund will increase from £43 billion in 2007-08 to £74 billion in 2011-12. The pensioner lobby, which frequently approaches the Minister about this particular issue, may well suggest that he can afford to offer a more generous pension because he has a huge amount in the national insurance fund. We can all imagine what they will say. I would like to touch on a few specific benefit issues that arise from the uprating statement. It is worth saying from the outset that this provides one of the rare opportunities to look into how the whole benefits system is mapped out for us—taking account of the 464 different rates, premiums and allowances that I mentioned earlier—and it should provide an opportunity for the Government to consider how complex the benefits system has become since Beveridge and others designed it 50, 60 or even 70 years ago. We know that the Government have a simplification team that is supposed to be looking into all these matters, but when the issue was raised in Work and Pensions questions recently, it sounded as if the work being done was not particularly radical. As each new Secretary of State comes in and goes through the red boxes on the first day, he quickly makes a speech saying how complex the benefits system is and what a hideous nightmare it has become. He says that it must all be cut back, but then the new Secretary of State disappears somewhere after about a year. It was slightly earlier than that at one point—[Interruption.] Probably June this year, as the hon. Member for Bury St. Edmunds says. The benefits system is then left in that very complex state. As a consequence of the uprating statement, I hope that we will increasingly focus on how messy and complex the system has become. There are all sorts of historic anomalies, such as the 25p additional payment, which now succeeds only in irritating pensioners at the age of 80 and the Christmas bonus, which was supposed to be equivalent to a double pension when first introduced, but would now buy only a small proportion of a turkey. We will talk about particular benefits and pensions in more detail later, but we should note that we have a benefits and pensions system that is phenomenally more reliant on means-testing than Mr. Beveridge could ever have thought up. What are the implications of the uprating of pensions today? There is a basic state pension of £87.30 and a means-tested minimum guarantee—or whatever it is now called—of £119.05. That means a gap of almost £32 between the level of the pension when people have accrued all their contributions for 44 years or 39 years—it is now going to be 30 years—and the level that people get if they accrue nothing at all and end up on means-tested benefits. If Mr. Beveridge had been asked to comment on such a system, he would have regarded it as absolutely crackpot to set the full level of the basic state pension £32 below the minimum means-tested level. I think that Beveridge would have been worried about many of the issues raised by the hon. Member for Bury St. Edmunds—for example, the problem of take-up of pension credit or council tax benefit. We discover that little more than half of all pensioners are actually taking up their entitlement to council tax benefit despite the extraordinary increases in council tax since 1996-97. I believe that Beveridge, in reflecting on today’s uprating statement and the implications of the uprating of different benefits, would have been very worried by the reliance—or over-reliance—on means-testing. He would have wanted an uprating provision that reduced the number of people on means-testing in the future in relation to pensions, so that there was an incentive to save, and in relation to all the other means-tested benefits that the Minister discussed earlier—including tax credits. Although those credits are not specifically the subject of this uprating statement, there has been a big increase in the number of people impacted by the means-testing of tax credits. According to the Institute for Fiscal Studies, that has undermined work incentives since Labour came to power in 1997. I will not rehearse to too great an extent some of the debates that we have had at modest length in Committee when considering the Pensions Bill over the past few weeks. However, it is worth picking up the continuing dissatisfaction among Liberal Democrat Members about the delay and confusion in restoring the earnings link for pensions—something to which we will no doubt return—and about the fact that the number of people on means-tested benefits will increase as a consequence. We are also concerned about the fact that the future uprating of the basic state pension, which is supposed to be done on the basis of earnings, will be done on the basis of an earnings index that the Government are determined not to include in the Pensions Bill, so that this Government or a future Government could pick and choose the earnings index that they want to use from time to time. That is a matter of concern to hon. Members on both sides of the House, as is the fact that the Government have removed the safety net that existed in the 1970s, when the basic state pension had to be uprated according to the higher of either earnings or prices. We now discover that it will be uprated only according to earnings, even if the increase in prices is higher than that in earnings during the year.