Social Security

Debate between Jeremy Corbyn and Anne Begg

Thursday 17th February 2011 Commons Chamber

[Dame Anne Begg]

CPI is still much less. Perhaps the average is taken from rent overall, not only in the private rented sector. That is where some of the differential might come from.

[Jeremy Corbyn (Islington North) (Lab)]

My hon. Friend has made an important argument about the level of rent increases, particularly in the private sector in London, where rent increases and demand go up by far more than any rate of inflation or any other measurement. The Government’s cap on housing benefit has the perverse effect of driving many of the poorest people out of central London because they will not be able to meet the rent demands and normal costs of living within the global cap on benefits.

[Dame Anne Begg]

My hon. Friend is right. There is a triple whammy on people who live in London in high rent areas: the local housing allowance is to be capped, possibly below the level of the rents; they will have access only to houses within the 30th percentile; and they will not see the inflationary increases in the indexation of their housing benefit to meet those conditions. They will be hit more than once with regard to the affordability of their rents. That certainly came over loud and clear when the Select Committee looked at what was happening to local housing allowance.

The effects of the Welfare Reform Bill have been mentioned. The universal credit will make it difficult to project benefit uprating into the future to work out what percentage of their incomes people are likely to loose. There will be no straight line from the current benefits to the universal benefit, because they will be mixed up. It is difficult to see what will happen. The compounding effect will probably be seen in pensions, particularly for those in receipt of the state pension, and the level of pension will be less.

In reply to my hon. Friend the Member for Eastbourne (Stephen Lloyd)—I am sorry, Madam Deputy Speaker; I always refer to fellow Committee members as hon. Friends—I said that the assumption is that the largest part of a pensioner’s income is the basic state pension, but we know that for many people that is not the case. Even if the state pension makes up a large part of their pension, it is often not all of it. Many people on the lower pension are dependent on SERPS, which of course will now be moving up in line with CPI, rather than RPI.

On the basic state pension, I accept the Minister’s figures indicating that it will rise from £97.65 to £102.15, an increase of around £4.50 a week. No one would say that that is wrong, because we all agree that £234 a year is great. However, the average public sector pension of £7,800 will be reduced by around £117 because of the difference between RPI and CPI. I am not very good at the arithmetic, but that means that instead of getting a rise in income of 4.6%, the people affected will get a rise of less than 2%. It is a rise, but it is not as much as they were expecting, and we must remember that we are living in a time when inflation is increasing.

A woman who receives the average local government pension of £2,600 will be £40 worse off than if her pension had been linked to RPI. If she has paid the small stamp, she might get no extra money through the basic state pension anyway, not even the compensatory increase in it. She might not have made full contributions and so will get some of it, but not all. The Government’s proposal is unfair to pensioners, and it is particularly unfair to women.

My right hon. Friend the Member for East Ham has already mentioned the particular unfairness of raising the state pension age to 66 by 2020. To be clear on the Opposition’s position, we have no qualms about raising the state pension age to 66 in principle, but we are concerned about the speed with which the Government are doing so. That overrides what was already in place for women who were born in the 1950s, who were going to see their pension age rise to 65 by 2020 anyway.

Women who began their working lives expecting to get a state pension at 60—that happens to include me—will now have to wait another six years for it. On a quick calculation, that will save the Government £32,000 on today’s basic state pension. It will come out of the pockets of women who are roughly my age and will stay with the Government. We will have to increase the indexation an awful lot more to make up for the £32,000 that those women will lose as a result of the increase in the state pension age by six years.

I appreciate that the measure whereby women born in 1955 would have to wait until 2020, when they were 65, to receive their income was already in train, but what about the women born between 6 October 1953 and 5 April 1955, who had already made all their financial plans but will now have to work for more than one further year before they can receive their basic state pension? The Minister has said on numerous occasions that that measure alone will save the Government £10 billion. All that is a win-win for the Government: the Government win, because they do not have to pay the money out, and because they have changed the indexation. The people who lose are those who expected to receive their pensions at a certain point, and in this case those people are women.

I would understand the Government’s rationale if the measure was part of their deficit reduction plan, but they have already said that they intend to get the deficit off the books in four years’ time, and none of this stuff comes in until after the deficit is meant to have been reduced, so it cannot be part of a deficit reduction plan. The Government should be more honest. We have heard that the change to CPI is going to be permanent, so they should say, “We’re doing this as a long-term measure, because we want to save money.” That is part and parcel of what the Government are about: saving money.