Social Fund Winter Fuel Payment Regulations 2024 - Motion to Annul

Part of the debate – in the House of Lords at 6:30 pm on 11 September 2024.

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Photo of Baroness Sherlock Baroness Sherlock The Parliamentary Under-Secretary of State for Work and Pensions 6:30, 11 September 2024

My Lords, that seems a good place to start. I start by thanking all noble Lords who have contributed to tonight’s debate. We have covered a lot of ground and there have been many thoughtful and constructive contributions. I thank the noble Baroness, Lady Stedman-Scott, for her welcome and I welcome her, in turn, to her place on the Opposition Benches. We have worked well together over the years, although I must admit I prefer it this way round—if not tonight.

Before I turn to the specific issues and questions that have been raised, I want to start by clearly setting out why the Government feel the need to take action and what we are doing. Then I will do my best to answer all the questions that have been asked tonight. I might not manage to attach everybody’s name to them, but I want to try to hit all the questions, so please bear with me if that is what happens.

The reason for the change is simple: there is a huge hole in the public finances. The noble Baroness, Lady Stedman-Scott, started by addressing the projected £22 billion overspend for this year which the Chancellor found when she came into office. The noble Baroness seems to think that the OBR knew all about this. The OBR has clearly specified that it was not told about the overspend. It described it as

“one of the largest year-ahead overspends against … forecasts outside of the pandemic years”.

Beyond this figure that we are bouncing back and forth, what does it mean in practice? It means that the day-to-day departmental spending by the previous Government as set out in the Spring Budget was, frankly, not even close to reality. Some noble Lords might remember that my first appearance at this Dispatch Box was to answer questions from around the House calling to keep the household support fund, which helps local authorities to help people with the cost of living, until the end of the year. The fund was due to run out in September, and I was called upon not to let that happen in the middle of the financial year. I went back to the department, but there was money in the budget to fund it only until September; there was nothing for the second half of the financial year. We found the money to cover that, but doing so, plus the Barnett consequentials, came in at an estimated £500 million—which had to be found from nowhere.

Ask my colleagues on the Front Bench what they found—a £6.4 billion overspend on the asylum system; a £2.9 billion overspend on the transport budget; and new roads, hospitals and train stations promised but not funded. There has not been a spending review since 2021. As a result, the public sector pay rises were not budgeted for and our reserves were spent three times over. This needs to stop. I take very seriously the comments made by the noble Baronesses, Lady Stowell and Lady Fox, about the importance of public trust, but the manifesto on which we were elected began with a promise that we would regain economic stability and by that means deliver growth. To do that means that we have to take difficult financial decisions right now to stabilise our economy before we can start the rebuilding, and then we can start to give the people we are all here to serve the better future they deserve.

No one thinks that things are okay in our country—do they, really? Public services are struggling, the prisons are full to bursting, the courts are overrun, and NHS waiting lists are sky high. We must deliver the change the country needs, but none of that is possible if we simply ignore the overspends right in front of our faces and put economic stability and credibility at risk.

That is why, as well as our plans—the noble Lord, Lord Desai, may be glad to hear this; I cannot remember what economic rationalism is, but it probably does not include this—to scrap non-dom tax status, close the loophole enjoyed by private equity investors and introduce a proper windfall tax on energy company profits, we are having to make some difficult in-year spending decisions. This has included cancelling capital projects, stopping discretionary spend and, yes, means-testing the winter fuel payment so that it will no longer go to all pensioners—many of whom are clear that they do not need it—but to those who need it most.

I say to the noble Baroness, Lady Fox, that I am absolutely with her. I do not want to see this as being about pensioners versus young people or public sector workers versus pensioners. The fact is that pensioners are not a homogenous group—we can tell that by looking around the House. There are rich pensioners and poor pensioners, and our job is to try to have a system that does its best to be fair across the piece.

I think most noble Lords would agree that the winter fuel payment should not be going to the richest, so we are therefore going to target those who need it most. Let me be clear for the record: those on pension credit, and those over state pension age living in a household that gets universal credit, income-based JSA or ESA, income support or tax credits will still receive £200 or £300 a year. That is on top of the significant rises in the state pension, which I will come back to in a moment.

I am not saying that this was an easy decision, and nor were many of the other decisions the Chancellor has had to take; but she believes that it was a necessary decision, and so do we. These are difficult circumstances, and we should be targeting.

I have heard very few noble Lords, if any, call for no reform of the system, with the possible exception of the right reverend Prelate the Bishop of Southwark. I would love to have a conversation with him on another day about how we balance means-testing versus universal benefits, because there is an interesting conversation to be had. But when public money is tight as it is right now, it is completely legitimate to decide to prioritise those who need it most.

I would like to see an end to the stigma around benefits. The benefits system is like social security insurance for all of us—it is there because needing it could happen to any of us. That is why putting money into it should not be stigmatising, and we should all encourage people not to see it that way.

A number of noble Lords, including the right reverend Prelate the Bishop of Sheffield—I will stop naming noble Lords; it is invidious and I will get them wrong—have said “Don’t do it now” or “Don’t do it this quickly”. The speed issue was also raised in the Secondary Legislation Scrutiny Committee. Delaying the policy for another year or until later is, unfortunately, simply not an option. We are trying to save money to plug the hole in this financial year, and we are already half way through it.

Urgency is also the answer to the question raised by the SLSC and a number of noble Lords about the timing of laying the regulations and the role of the Social Security Advisory Committee. Let me set this down for the record, as the SLSC has taken the time to make these comments for the benefit of the House. Because the savings needed to be made in the current financial year, the regulations had to be laid quickly enough to observe the 21-day rule but still come into force by the qualifying week, beginning 16 September. That meant there was no time to consult SSAC in the usual way, so the Secretary of State invoked the established urgency procedure. As a result, the committee formally considered the regulations this morning when it met, and Ministers will consider any recommendations it has made.

The SLSC also suggested that we delay the qualifying week for winter fuel allowance. Unfortunately, that would delay payments to all those people who are depending on the winter fuel payment and expecting to get it, so that would not help either.

I was asked why we did not publish a formal regulatory impact assessment. Noble Lords will know that it is not required for legislation such as this, but of course Ministers did their statutory duty and looked at the equality effects of this change. We all know what the effects are; we have published information and noble Lords have debated this at some length, as has the other place.

The noble Baroness, Lady Stedman-Scott, and others, referred to this decision in the context of public sector pay awards. That was another cost not accounted for by the previous Government, a point helpfully made by the noble Lord, Lord Balfe. The previous Government commissioned the independent pay review bodies without any affordability criteria, and then sat on the results. This Government accepted the recommendations of those bodies because it was the right decision for those who work in public services and for those who use them, many of whom are pensioners.

Improving our public services is part of the change that, during the election, our manifesto was crystal clear about the need to deliver on. But we cannot do that while healthcare workers are using food banks and teachers are leaving the profession in droves. We have to get public services right.

Some noble Lords have noted the wider context of the winter energy price cap and the cost of living going up. Let me turn to what the Government are doing in this respect. First, I want to be clear about what is happening with pension credit. Some 1.4 million of the poorest pensioner households are already receiving pension credit. It is worth up to £3,900 a year, and they will still get the winter fuel payment on top. There are, however, many others out there who do not claim it, as noble Lords have said. We urge them to claim this support. They can do it in various ways—please spread the word. People can claim it online. Some three quarters of that 1.4 million do so, and the great advantage is that, rather than filling in a huge form, they might have to answer only 35 questions, because online you skip the questions that do not apply to you.

Those who do not like doing things online, as the noble Baroness explained, can often reach out and get a friend or relative to help them, or go to local organisations; or they can simply call DWP free of charge on the telephone and we will take them through the process step by step. We will fill out the form for them, so effectively, it is like doing it online, but somebody does it for you at the end of a phone. For the most vulnerable, DWP visiting officers can even help them fill in an application form in person.

I want to send the word out: even if someone thinks that they are just over the threshold for the safety net bit of pension credit, they should still check, because they might still qualify for the savings credit element of pension credit. If they do that and they get anything at all, they will still get a winter fuel payment. So please tell anyone you know who might be able to qualify to get in there and find out.

So what are we doing to find them? It is a really good question from the noble Lord, Lord Palmer. We are doing a lot. We kicked off last week with a week of action to drive up claims. We are working closely with charities and local authorities to encourage pensioners to check their eligibility and apply. We have written to every single local authority asking them to identify pensioners who might be eligible. The Deputy Prime Minister is working with housing associations and supported accommodation providers to ensure residents know the benefits they are entitled to. It is part of a cross-government effort in which we will, for example, ensure front-line NHS staff have the information they need to signpost patients who might need help with energy costs to where they can get support.

For the first time, we are writing directly to all pensioners on housing benefit who we think could be entitled. The noble Baroness, Lady Stedman-Scott, thinks she did it; her Government tried it out with 10 local authorities, and it worked. We are going to do it for everybody now and make sure they find out what is going on out there. We will merge the administration of housing benefit and pension credit as soon as operationally possible—something repeatedly delayed, she will acknowledge, by the last Government. It will mean that pensioners who get housing benefit will also get the pension credit they are entitled to. There is going to be a big media campaign, in print and broadcast, which, as well as trying to reach pensioners, will urge people to reach out to retired family, friends and neighbours to get them to check if they are eligible. That work will carry on right up to the deadline of December 21 for people to claim the winter fuel allowance.

But I need to make something very clear. The noble Baroness, Lady Altmann—like many people I have been reading her in many of my newspapers recently, even the ones I do not normally read—had a full-page article in the Daily Mail yesterday in which she expressed her views much as she has tonight. She said in that article that it was too late for people to apply now for pension credit. That is simply untrue. The qualifying week for winter fuel payment is the week of 16 September, but pension credit can be backdated for three months, so someone can claim until 21 December; it will be backdated and, as long as they get in, they will also get their winter fuel allowance as well as any backdated payment to which they might have been entitled. Remember, pension credit could be worth £3,900 a year.

Over the past five weeks, we have already seen claims for pension credit more than double, and we expect it to keep rising. The noble Lord, Lord Palmer, again raised the important question about delays in processing, which is something the SLSC also raised. I can confirm a delay in processing will not affect someone’s entitlement—so just get the claim in, as it will not affect their entitlement. We are redeploying 450 staff to ensure we process pension credit claims as quickly as possible. So let us join together to get the word out.

I will pause for breath. I am sorry. If I speed up anymore, only dogs can hear me, so I will try to slow down.

Some noble Lords have questioned whether means testing the winter fuel payment will achieve the intended savings, given increasing claims for pension credit. I just want to make clear to the House that the estimated savings from this policy assume increased take-up of pension credit in line with the highest levels it has ever reached. We want everybody who is going to go out there who is possibly entitled to claim this to do so. Some noble Lords have speculated whether, if every single person claimed pension credit who was entitled to it and got the winter fuel payment, we would save any money. In a hypothetical world, if every single person who could get pension credit gets it and gets the winter fuel allowance, do you know what we would have done? We would have taken one of the least targeted benefits in the world and turned it into one of the best targeted benefits in the world. Let us see what happens when we get out there.

We know there are some concerns about pensioners affording energy bills this winter, and we agree no one should be unable to heat their home. This action on pension credit comes on top of other commitments to support pensioner households. Of course, energy bills are tough: the price cap has gone up. But, compared to last autumn, they are £117 pounds lower, and bills have fallen over the last two years. We also provide a warm home discount, which gives a £150 rebate on electricity bills for eligible low-income households, including 850,000 pensioners. Crucially, we found the money to extend the household support fund. The truth is that, with any threshold, there are always hard cases above it, and that is where discretionary pots of money come in. Please encourage people to go to their council for help. We will also use our warm home plan to reduce bills and slash fuel poverty by upgrading millions more homes with low-carbon heating and better insulation.

The noble and learned Baroness, Lady Butler-Sloss, mentioned disabled pensioners, who face extra costs—she is absolutely right—with heating. There are specific benefits deliberately aimed at disabled people to help with the extra costs. Depending on age, attendance allowance, personal independence payment and disability living allowance are all available and are not means tested, but, as it happens, if somebody is on pension credit, they can also give them extra money in pension credit as well.

I have heard various concerns about the threshold, so I will try to go through the different helpful suggestions that have been made. The first is that we should tax it but not means-test it. I am afraid that falls on two fronts: it does not pass either the savings test or the fairness test. I disagree with my noble friend Lord Davies, because it would actually go against the general rule that income replacement benefits are taxable but those such as winter fuel payments, which are designed for specific costs, generally are not.

Limiting the winter fuel payment to higher rate taxpayers would not begin to deliver the savings needed—and, trust me, it would be an administrative nightmare. If anyone doubts that, ask the last Government, which tried to do that to child benefit and they are still trying to figure it out now. Using council tax bands as a proxy is not an option. We do not have the data on what pensioners’ homes are worth, where they are and what their council tax value is.

Other suggestions included adding a big increase to the 25p age addition, which the noble Baroness, Lady Altmann, suggested. Part of the problem with that is that not only would that become taxable but it could make recipients fail the means test for pension credit if they take that as well. Likewise, rolling winter fuel payments into the state pension would just give it to everybody, even those who do not need it. When public money is this tight, that is not the right way forward. As regards creating a new higher stand-alone threshold, I can see that is tempting, but it is just not practical as we would have to build a whole new means test for a payment of two or three hundred pounds once a year. Pensioners would then have to make a separate claim and be separately assessed just for winter fuel payments. By linking entitlement to pension credit, not only can we ensure we support the poorest pensioners but we can make sure we pay pretty much all of those who are eligible automatically.

I have no idea what the time is, but, in trying to wind up, I shall pick up on other points that were raised. The noble Baroness, Lady Altmann, said that these payments will still go to pensioners in Europe. I just want to clarify this. The only people who will still get these outside the UK are those who are covered by the withdrawal agreement, agreed by the last Government, are living in the EEA or Switzerland, getting an equivalent benefit from that Government but also still have an appropriate social security link to the UK, and that country has to be colder than the warmest region of the UK. I can reassure her that that definitely takes out Spain.

The noble Lord, Lord Morrow, quoted some research from the Labour Party from 2017. I did check this, because I saw this in the papers. The big difference is the fact that the full rate of basic state pension has increased by more than £2,600 since 2016-17, and the full rate of the new state pension has increased by more than £3,400 in that time.

I just want to say we have to consider this change in the round. This is not the only thing the Government are doing for pensioners. We have committed to keeping the triple lock, not just for this year or next year but for the whole five years of this Parliament. That means pensioners every single year will find their benefits going up and up, because increases are based on the previous year; they go up and up. Despite the grim finances, we have done that and 12 million will see their state pension going up year on year throughout this. Last year, it went up by £970; this year, the new state pension went up by £900. If the ONS figures are confirmed, next April it will go up by another £460. This is a significant difference. I do not have time to take my noble friend Lord Davies on, but I think he is wrong in his calculations on the triple lock. I am happy to explain to him why over a decent sized gin and tonic afterwards.

Let me finish here, as time is against me, and come back to my main argument. If we can face up to the reality of our financial predicament and if we can take the difficult but necessary decisions to stabilise our economy, we can start to bring about the change our country needs. If we can unlock growth, we can rebuild our public services, we can tackle poverty, we can spread opportunity and we can deliver the dignity and security in retirement that pensioners deserve. I have tried really hard to listen to concerns, I have had open meetings with Peers and I have had conversations with many noble Lords. I have listened and tried to answer every single concern I have heard tonight—if I have missed one, please come and grab me afterwards, but I have really tried. I hope I have made it clear: this was not an easy decision, and it was not one taken lightly. Since I have tried to answer all the points given here, and those raised by the SLSC, and given that the instrument was extensively debated yesterday in the elected House and that it was overwhelmingly carried, I urge noble Lords not to support any of the Motions.