Benefits - Uprating
I firmly believe in a welfare system that is both compassionate and fair. This means helping people move out of poverty and into work while protecting the most vulnerable.
Between 2008 and 2015, average earnings rose by 11 per cent whereas most benefits, such as Jobseekers' Allowance, rose by 21 per cent. Freezing working-age benefits intended to ensure that work always pays and that welfare did not outgrow earnings in a time of low earnings growth, following the last recession. This was a fair balance between taxpayers and those receiving benefits. There are, however, exceptions for benefits for disabled people and carers, as well as statutory payments. The final year of the freeze will be 2019/20.
I am glad to say there continues to be substantial support available for working families. People can recover up to 85 per cent of their eligible childcare costs on Universal Credit (UC), compared to 70 per cent on the legacy system. It is also welcome news that the amount that households with children can earn before their UC award begins to be withdrawn - the Work Allowance - will be increased by £1,000 from April 2019. This means that 2.4 million households will keep an extra £630 of income each year.
This is accompanied by a wider package of increased childcare provision, including an extra 15 hours of free childcare available to working parents of 3 and 4 year olds, and the introduction of Tax-Free Childcare for working parents of children aged up to 12 and disabled children aged up to 17. I can assure you that the welfare system continues to be a source of help for many, and I will continue to support improvements when necessary.
I appreciate that you and many other individuals remain very disappointed with the level of payments being made to Equitable Life policy holders. However, the Parliamentary Ombudsman was clear her determination that the total sum should reflect the interests of the taxpayer. In her 2008 report, which provides the foundation of the Equitable Life Payment Scheme, the Ombudsman stated that "It is appropriate to consider the potential impact on the public purse of any payment of compensation."
While the total relative losses suffered by the group are in the region of £4.1 billion, in light of the pressures on the public purse the Government decided to make £1.5 billion available for the payments scheme. It believes this is a fair balance between the interests of policyholders and taxpayers. To determine how to distribute the remaining funds, the Government established the Independent Commission on Equitable Life Payments. The Commission invited views on this matter from interested parties and considered a number of options. Its final recommendation was that the simplest approach was for a 22.4 per cent pro-rata to be applied to payments to non With-Profits Annuitants, which the Government accepted.
At the 2013 Budget the Government announced that payments of £5,000 would be made to people who bought With-Profits Annuities (WPAs) from Equitable Life before September 1992, with a further £5,000 going to those on Pension Credit. From recent correspondence I have had, it is clear the Government remains of the view that there is no basis for their inclusion within the wider compensation Scheme as it believes WPAs whose policies commenced before 1 September 1992 did so before any maladministration could have affected their investment decisions. Accordingly, they did not suffer a loss in respect of which any compensation would be appropriate. The reduction in the levels of annuity payments that they have experienced is largely due to a combination of poor investment market performance, and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing.
I know that action to protect depositors in other banks such as Bradford and Bingley has also been taken, and at the time the Treasury stated that this action was important to preserve financial stability. The issues facing these banks were so profound that there was a significant risk of a loss of confidence in the banking system as a whole, which would have had a very serious impact effect on the UK economy. In contrast, the circumstances relating to Equitable Life in the 1990s were rather different.
Action to protect depositors in RBS, Northern Rock, Bradford and Bingley and Icelandic banks was important to preserve financial stability and I would also point out that not all of these costs will be met by the public purse, unlike the case with Equitable Life. For these other financial institutions, amounts up to £50,000 are covered by the Financial Services Compensation Scheme (FSCS), which is funded by a levy on the financial services sector. The Government and the FSCS also expect to recoup funds from the administration processes for some of the other institutions affected.
The then Chancellor during the Summer Budget 2015 announced that eligible policyholders in receipt of Pension Credit will see their lump sum payment doubled. I am pleased that people who most need it will receive this extra help. The Government made a further payment to Equitable Life policyholders on Pension Credit who received 22.4 per cent of their relative loss. This payment was for an additional 22.4 per cent and was made in early 2016.
The Equitable Life Payment Scheme was set up in 2011 to make payments to all those affected by the government maladministration of Equitable Life identified by the Parliamentary and Health Services Ombudsman in her 2008 report. After making payments of over £1.1 billion to more than 900,000 policyholders, the Scheme has now closed. A final report on the Scheme's achievements was published in November 2016.
Women's State Pension Age
I am sorry to learn of your concern, which I can certainly understand. I have assisted in a number of cases on this issue, which I have taken as far as possible within the scope of a Member of Parliament. I have also had individual meetings and have asked a question in the House. Those affected can raise their cases with the Pensions Ombudsman, which is an independent body with greater powers than those of an MP, and I have forwarded cases to the Ombudsman when asked by constituents to do so. After much thought, I also signed EDM 2296, which calls on the Government to reconsider the case of women born in the ‘50s whose pension date has been moved. At present there is not a great deal more I can do on this issue, although I shall continue to take an interest in it.
On the issue more generally, I certainly believe people who have worked hard all their lives deserve security in their retirement. The basic State pension currently rises by inflation, earnings, or 2.5 per cent, whichever is highest - the Triple Lock. This means that in 2018-19 the state pension is more than £1,450 a year higher than in 2010. For those reaching State Pension age after April 2016, a new State Pension has been introduced at a single, flat rate of £159.55 per week, which has also been triple locked. All those women affected by the 2011 State Pension age changes will draw their State Pension under the new system, which is much fairer to women than the previous system and will mean 650,000 women will receive an average of £8 per week more in the first 10 years.
Equalising the State Pension age was necessary to ensure the State Pension remained sustainable, and to reflect our modern economy and society. The Pensions Act 1995 legislated for this to be done gradually after 2010. Following sharp increases in life expectancy projections, the Government had to accelerate this process slightly in the Pensions Act 2011 to secure the sustainability of the system. The Government did listen to concerns raised at the time of the 2011 adjustment, and I am pleased that as a result the maximum increase was capped at 18 months relative to the 1995 timetable. That represented a £1.1 billion concession, helping those women affected with the transition to a higher State Pension age. Making further transitional arrangements would not only complicate the system but could also cost taxpayers many billions of pounds, and the potential cost of reversing the 2011 changes has been estimated at £39 billion. I do not consider this to be a fair balance.
On the issue of notice being given to those affected, the Department for Work and Pensions is clear that all those women affected were written to between January 2012 and November 2013. Those affected by the 1995 changes were also contacted between April 2009 and March 2011 – my wife received her letter in 2010. Higher life expectancy does mean that as a society we will have to adjust to slightly longer working lives, but it is right to ensure at the same time that people have security and dignity when they do retire. That is why the Government will continue to provide unprecedented support for people in later life, including the triple lock and maintaining universal benefits such as the Winter Fuel Payment. The Government did adjust its proposals in 2011 to mitigate the impact on those worst affected by the State Pension age changes, and I do not think there is a need to revisit the issue again. I am sorry that we must disagree on this point, but I am grateful to you for taking the time to contact me.
Universal Credit - 'Five Weeks Too Long' Campaign
I am committed to having a strong safety net where people need it. That is why the Department for Work and Pensions has committed to a test and learn approach to delivering UC and has made improvements where necessary, such as removing the seven-day waiting period and introducing 100% advances. Since 2016, almost £10 billion has been injected into UC, and UC is on target to be £2 billion more generous than the legacy benefits when fully rolled out.
All UC claimants are subject to an initial assessment period, regardless of the circumstances that have led to a claim. Assessment periods allow for UC awards to be adjusted on a monthly basis, ensuring that if a claimant's income falls, they do not have to wait several months for a rise in their UC award. I do understand concerns about having any delay at all in the first payment, but this would be the case with any income - if a person were to take a job, the salary payment will be at the end of the first payment period, not the start. For those in financial difficulty, advance payments of up to 100 per cent of someone's indicative award are available from the date of their claim. Around 60 per cent of eligible new claims to UC received an advance in October 2018, which indicates that people are being made aware of advances and are getting help when they need it. I would add that if a claimant is in financial difficulty as a result of the level of deductions being made, they can request that a reduction be considered.
As of February 2019, 86 per cent of paid UC full service new claims were paid in full on time. When new claims are not paid on time, it is estimated that two-thirds have an outstanding verification issue, such as providing bank statements, evidence of childcare costs, or proof of rent. In addition, the DWP recently announced that parents may be eligible to receive a Flexible Support Fund Award or a budgeting advance to enable them to take up a job offer or increase their working hours. The DWP is also piloting a more flexible approach to claimants reporting childcare costs, which will allow people to be reimbursed for childcare even if they are not able to provide immediate evidence. Once the pilots have concluded, the DWP will consider whether to roll out this approach further.
I am glad that UC has been designed with accessibility in mind, and I have spoken of this often in debates in the House. Where a claimant requires assistance to complete the initial application process, support is available via the Universal Credit helpline, face to face in the Jobcentre or in exceptional circumstances through a home visit. If a claimant needs more intensive or specific support to make their claim, face-to-face and other help is available through the Universal Support Assisted Digital Service.
Claimants may also be entitled to a two week Universal Credit Transitional Housing Payment. Claimants on the income-related elements of Jobseeker's Allowance and Employment and Support Allowance, and Income Support will also receive an additional payment providing a fortnight's worth of support during their transition to UC. This will be effective from July 2020, and benefit around 1.1 million claimants. Personal Budgeting Support (PBS) is also offered to UC claimants from the outset of their claim. PBS helps claimants as they transition to UC and adapt to the financial changes that UC brings in relation to legacy benefits. PBS can be accessed online, by telephone or face to face (currently delivered through local authorities via Universal Support).
I do realise that, despite the above support, some people can fall into problem debt. That is why I support the implementation of the Breathing Space Scheme - a 60 day period of protection for people in problem debt, to engage with debt advice and find a sustainable, long-lasting plan to solve their debt problems.
I hope this helps to clarify the support available to people claiming UC when they struggle with financial difficulty, and I will continue to support and to speak for improvements where necessary.