Pensions and Social Security

I am grateful to all hon. Members who have taken part in this debate. The hon. Member for Banff and Buchan (Dr Whiteford) deserves particular credit for being here throughout and not making a speech, but we are grateful to her for her interventions. I shall respond to the key points that have been made. I was going to respond first to the right hon. Member for East Ham (Stephen Timms), but I shall do so at the end if he has time to come back and join us. My hon. Friend the Member for Truro and Falmouth (Sarah Newton) has also been surprised by the timing of the winding-up speeches. I am grateful for her contribution and her important point about the significance of the take-up of these benefits. It is all very well us sitting here debating the rates, but if people do not claim the benefits, it is a slightly academic exercise. My hon. Friend was right to highlight the importance of our making sure that the benefits are taken up— [Interruption.] I am delighted that she is rejoining us. I was welcoming her comments about benefit take-up, and today we have published the latest take-up figures for income-related benefits in the final year of the previous Government. They demonstrate that in the benefits under discussion many billions of pounds go unclaimed, so she is absolutely right that we should do all we can to encourage people to claim them. My hon. Friend will have seen in these uprating orders that we are trying to shift the balance towards the benefits that people really do claim, such as the state pension, and even within pension credit we have loaded the balance towards the guarantee credit, which is more likely than the savings credit to be taken up. On today's figures, for those who are entitled to savings credit only, the take-up rate is less than 50%, so it is vital that when we set benefit rates we ensure that people claim them. I was grateful to her for her insight on that point, on the certainty that the triple lock gives pensioners and on the fact that we have stuck to it despite difficult economic times, and I can assure her that we will continue to do so. The hon. Member for North Ayrshire and Arran (Katy Clark) was entirely straight with the House, saying that she does not agree with the CPI measure or with her Front Benchers. On the issue of whether that is controversial, of course it is, but all I was saying is that I last joined the National Pensioners Convention at a time when no decision had been made, so it is worth winding the House back to that point. In the press there was speculation that we might introduce a freeze—I shall return in a second to the points made by the hon. Member for Bury St Edmunds (Mr Ruffley)—or use a forecast, a moving average or anything to get the number down. At that point, I was staggered to go to an NPC event and be—““harangued”” would be uncharitable—forcibly encouraged to deliver 5.2%. Having seen that delivered, I would, if I were the NPC, then demand 5.6%. I understand that, but it is worth reminding ourselves of the pressure that the Government were under to do less, so 5.2% was an entirely decent settlement in the current economic climate. The hon. Member for North Ayrshire and Arran made an important point about the cumulative effect, which was her key theme. She made an important point also about working age, but to focus on pensioners I note that there are two cumulative effects going on at the same time: one is the triple lock and the other is CPI, which applies to additional pensions. The question is, which is the greater? The hon. Lady mentioned someone with an occupational pension of £10,000 a year, but from memory—this is only from memory—the average occupational pension in payment is about £4,000 a year, so her example is more than double the typical, and our estimate, looking just at the cumulative impact over a retirement of the basic pension, is where the £13,000 figure comes from. Looking purely and cumulatively at the triple lock, because the earnings figure is normally more than RPI, we find that people will get more through that. CPI is on average less than RPI, so on the additional pension they will get less. The cumulative effective of the two is beneficial to those with lower occupational pensions, but less beneficial—indeed, there are net losses—to those with higher occupational pensions. So the hon. Lady is probably right: someone on a £10,000 occupational pension will get smaller net increases and someone on a £3,000 occupational pension will get bigger net increases overall. That is taking account of the two policies. She is right that these policies have a cumulative effect. For example, on the CPI link for local housing allowance, the Government have said that they will continue with that for two years and review the position having done so. I am grateful to the hon. Lady for drawing the House's attention to the Chair of the Select Committee's unfortunate accident. I am sure that we all wish her our very best for a speedy recovery. My hon. Friend the Member for Bury St Edmunds observed that the September 2011 figure was a peak. He said that by the time we get to April 2012 it will already be a bit out of date and that by the end of 2012-13 it will be 18 months out of date. This involves two separate questions: first, whether we should use forecasts or historical figures; and secondly, what we should have done this year. The VAT increase in January 2011 was a significant driver of the 5.2% figure. Had we, for example, chosen to look at inflation only over certain months, or chosen to switch to the future just at the precise point when something quite big happened historically, people might have queried our sincerity. At times in the late 1970s and '80s, some Governments switched to and fro between forecasts and historical figures, and there was a sense that that had nothing to do with compensating for inflation but was merely trying to find a low number. It is important that we have a system for compensating for inflation that we stick to and a separate system of judgments on what the country can afford, whereby if we cannot afford 5.2%, we should say so. We should not try to think of a period that will give us a lower number. My hon. Friend is right that if we had used a lower inflation measure we could have saved a lot of money, but that is the answer to a different question.