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Benefits Uprating

With permission, Mr. Deputy Speaker, I wish to make a statement on benefits uprating, particularly in the context of the Government's commitment to provide real support to people in the current economic climate. I will, as usual, place full details of the uprating in the Vote Office and arrange for the figures to be published in the Official Report. As in previous years, I can confirm that most national insurance benefits will rise by September's retail prices index, which is up by 5 per cent. Most income-related benefits will be uprated by September's Rossi index, which is RPI less housing costs, and is up by 6.3 per cent. We are not alone in experiencing the shock waves reverberating through the world's economic systems. Effects emanating from the epicentre of the American banking system are being felt around the globe. We believe that when the economic situation is more difficult, people need all the help they can get to deal with the situation. When things get tougher, people need more help, which is why our response to the current climate is twofold. We are focusing not only on providing immediate support for those who lose their jobs; we are also determined to continue with our radical programme of welfare reform, to ensure that those further away from the labour market are not forgotten, as they have been in the past. As my right hon. Friend the Secretary of State for Work and Pensions made clear yesterday in his statement to the House, we are not going to repeat the mistakes of the past. During the recessions of the '80s and '90s, hundreds of thousands were shuffled on to inactive benefits to keep the unemployment count down. They were trapped there without support, and abandoned. In contrast, we are investing an extra £1.3 billion in helping people to find work now, and we are bringing forward proposals to increase requirements on people the longer they are out of a job, to ensure that they do not fall out of touch with the world of work. We believe that work is the best welfare, and we are committed to ensuring that everyone has the opportunity to improve their prospects and those of their families. The proposals in our White Paper are based on the simple ideas that no one should be left behind, and that virtually everyone should be required to take up the support that we know works, to help them to prepare for and look for work. But we recognise that, for those who are receiving benefits, we need to uprate the value of this safety net to reflect changes in the cost of living. We propose, therefore, that most working-age income-related benefits will increase in line with the Rossi index, at 6.3 per cent. This means, for example, that the personal allowance for a single person over the age of 25 will increase from £60.50 a week to £64.30 a week. The amount for a couple will increase from £94.95 to £100.95. Child-related allowances that may be payable in the income-related benefits will be increased in parallel with child tax credit rates by almost 7 per cent., from £52.59 to £56.11. This is essential to ensure that families receiving these benefits see the full value of any increase in child tax credit. We have already announced in the pre-Budget report that we are bringing forward April's increase in child benefit to January. This will be worth an additional £22, on average, to families. The standard rate of statutory maternity pay and maternity allowance will increase in line with prices by 5 per cent., from £117.18 to £123.06. In April 2009, incapacity benefit will be uprated by the same index as the employment and support allowance—the Rossi index, instead of the retail prices index—in order to prevent rate differences widening over time. No incapacity benefit customers with age additions will, as we proposed in the welfare reform Green Paper, have their rates frozen. Instead, the cash increase in their overall benefit will be at least half of Rossi, until they are transferred to the employment and support allowance. The additions will therefore be phased out more gradually than previously planned. Incapacity benefit claimants with an age addition, including those formerly on invalidity benefit, will not receive less than £95.15 a week—the same as someone in the support group on contributory employment and support allowance. In these difficult times, we must also continue our strategy of providing support for all, and more for those who need it most. This means that for older people, as my right hon. Friend the Chancellor announced recently, from April 2009, the basic state pension will increase to £95.25 per week, which is up by £4.55. For couples, the standard rate will rise to £152.30. These increases, against a backdrop of falling inflation, are in line with the highest level of inflation this year—5 per cent.—and represent a real-terms rise in the state pension of 7 per cent. since 1997. And for pensioners on the lowest incomes, from April 2009 we will see the biggest increase in the pension credit guarantee since its introduction in 2003. The standard minimum guarantee will rise from next April by £5.95 a week for single pensioners and £9.10 for couples. That means that from April next year, no single pensioner need live on less than £130 a week, and no couple on less than £198.45 a week. That is an increase of £31 for a single pensioner and £45 for couples since 1997. This above-earnings increase in the guarantee credit underlines our ongoing determination to tackle pensioner poverty, with 900,000 pensioners lifted out of relatively low income since 1998, after housing costs, and £13 billion more will be spent on pensioners in 2008-09, compared with what would have been spent if we had continued the policies that we inherited in 1997, over half of which is going on the poorest third of pensioners. Tax and benefit changes will mean that the poorest one third of pensioner households will be on average £2,100 a year, or about £40 per week, better off in 2008-09 than under the 1997 system. But of course, the Government recognise the difficulties that pensioners face when prices increase. That is why, alongside the winter fuel payment, which is worth £200 for those aged 60 to 79 and £300 for those aged 80 or over, this winter there will be additional payments of £50 for those aged 60 to 79 and £100 for households with someone aged 80 and over. This will take the total direct help with fuel costs for pensioners this year to £250 for those aged between 60 and 79 and £400 for those aged 80 or over. The pre-Budget report also announced additional direct financial support in the form of a £60 payment that will benefit not just pensioners, but all the estimated 15 million people who receive the Christmas bonus. This will take the total value of the Christmas bonus this year to £70, and is equivalent to bringing forward the uprating of the state pension from April 2009 to January 2009. All these measures demonstrate the Government's commitment to supporting pensioners, just as we are also committed to increasing the support on offer for those of working age. Our new proposals for lone parents and disabled people, for partners and for those facing multiple barriers to work, build on the steps that we have taken over the past 10 years to bring the advantages of an active, responsive welfare state to all those who can benefit. Today's uprating continues our progress towards a fair and inclusive society that offers opportunity and independence for all. It reinforces our commitments to tackle poverty and exclusion and to ensure security in retirement. I commend this statement to the House.