Mr Speaker,M-S 4: Winter Fuel Payments
Issue: The Department of Work and Pensions is introducing reforms to Winter Fuel Payments. The Government has long been committed to redressing the balance of Winter Fuel Payments in order to make the benefit fairer and more generous. The Government also seeks to highlight two issues within these reforms; payments made to wealthier households and UK residents Overseas and providing an Opt Out option for wealthier recipients.
Intervention and Implementation: This Winter, the following changes will be made to Winter Fuel Payments: -
• For those over 80 and fully resident in the UK and with a household income of less than £17,500 per annum, the Higher Rate of Winter Fuel Payment will be £500
• For those under 80 and fully resident in the UK and with a household income of less than £17,500 per annum, the Higher Rate of Winter Fuel Payment will be £333
• For those over 80 and fully resident in the UK and with a household income of more than £17,500 per annum but less than £54,000 per annum, the Standard Rate of Winter Fuel Payment will be £300
• For those under 80 and fully resident in the UK and with a household income of more than £17,500 per annum but less than £54,000 per annum, the Standard Rate of Winter Fuel Payment will be £200
• For those over 80, fully resident in the UK and with a household income of more than £54,000 a year, and those over 80, not fully resident in the UK, regardless of household income, the Basic Rate of Winter Fuel Payment will be £100
• For those under 80, fully resident in the UK and with a household income of more than £54,000 a year, and those under 80, not fully resident in the UK, regardless of household income, the Basic Rate of Winter Fuel Payment will be £67
An Opt Out option will now be provided for, allowing recipients to voluntarily remove themselves from the automatic payment system via telephone or online.
Cost: The reforms will introduce a saving of £100m to the Winter Fuel Payments Scheme. The savings will be used for future projects at the Department which will be introduced to the House in the near future. There will be £2m in additional administration costs which will be met by the Departmental Staff Budget.
I should like to give the following statement to the House on Winter Fuel Payments. With respect to my colleagues throughout the House, I shall not be giving way during this statement because it does contain rather a lot of detail and I feel it important for those watching our proceedings to be able to get a crystal-clear picture of what these changes mean. I am of course more than happy to respond to any questions Honourable Members may have once the statement is before the House.
Winter Fuel Payments are a lifeline to many up and down our country. When temperatures plummet, we know that many older people are reticent to incur additional heating costs to keep warm. The sad result of this is that we see more older people admitted to hospital and sadly, many preventable deaths among the older population. To this end, the Government has been committed not only to continue paying Winter Fuel Payments but to ensuring that the payments received are as fair and as generous as they can be. When we came to power nine years ago, we inherited a broken economy from the party opposite and many difficult financial decisions had to be made. After successfully turning the economy around, this Department is now in a position to review some of its spending commitments. With this in mind, I should like to begin my statement today by explaining the reasoning behind these reforms.
From this Winter, that is November/December 2019 Mr Speaker, Winter Fuel Payments will be means-tested. I want to make it clear however that for the vast majority of recipients of Winter Fuel Payments, they will either see an increase, or no change at all, to the rate they receive. By implementing these reforms, we will be redirecting a larger financial package of help to the poorest and most vulnerable pensioners in our society and I would like to stress at this point that there will be no changes to the Cold Weather Payment or the Warm Home Discount Scheme but I shall return to this later on in my statement.
In formulating these changes, the Department has focused on the best way to give our poorest pensioners more in their Winter Fuel Payment this year whilst keeping as many people as possible on their existing rate. I am happy to say that with the careful approach to spending that has defined the Conservative Party in government since 2010, we have been able to deliver savings of £100m whilst ensuring that those who need Winter Fuel Payments still receive them and indeed, will even receive more money. So Mr Speaker, I should like now to outline the main body of the changes which will be coming into effect at the end of this year.
Payments will now be divided into the Higher Rate, the Standard Rate and the Basic Rate. There will still be the two-level system for those over and under the age of 80 but for the first time, income and living arrangements will be taken into consideration. For those over 80 years old and fully resident in the United Kingdom, and with a household income of less than £17,500 per annum, the Higher Rate will be awarded. This rate will be set at £500, a £200 increase on the payment they received last year. For under 80s in the same economic bracket and who live in the UK as full-time residents, the Higher Rate will be set at £333. This is an increase of £133 on last year's payment.
For those over 80 and fully resident in the UK with a household income of more than £17,500 per annum but less than £54,000 per annum, they will be awarded the Standard Rate. That rate will be set this year at £300. For the vast majority, this will be the same sum they received last year. The same, Mr Speaker. For those under 80 and fully resident in the UK with a household income of more than £17,500 per annum but less than £54,000, the Standard Rate will be set at £200. Again Mr Speaker, this is the same rate as last year. For those over 80, fully resident in the UK with a household income of over £54,000 per annum and for those under 80, not fully resident in the UK, regardless of household income, the Basic Rate will be set at £100. For those under 80 fully resident in the UK with a household income of over £54,000 per annum and for those under 80 who are not fully resident in the UK, regardless of household income, the Basic Rate of Winter Fuel Payment will be £67.
In effect Mr Speaker, these changes therefore mean that the rate is lower for wealthier pensioners and those UK citizens who live Overseas. We consider this to be an entirely fair approach. First let me address the issue of those who will now receive only the Basic Rate and who are fully resident in the United Kingdom. I am among this bracket myself Mr Speaker, albeit in the under 80 category. Until now, I have been forced to accept the Winter Fuel Payment regardless of my financial circumstances. I am not alone in this. In 2012, SAGA ran a very successful campaign in highlighting the absurdity in a situation that has developed in which many recipients of Winter Fuel Payment were told they could not return the payment if they did not need it. In the same year, Npower reported that 38% of recipients of Winter Fuel Payment did not require that financial assistance.
And if I may, I’d like to highlight the work of Baroness Bakewell who I know contributed to that SAGA campaign and has spoken in the Other Place on this very issue. If I may quote her; “The government’s generosity is great in theory, in practise the allowance is badly distributed and worryingly inefficient”. We agree. Baroness Bakewell also recounted an example of the trials she faced in contacting her local authority and this Department to return her Winter Fuel Payment, only to be told that if she really didn’t want it, she should donate it to charity. And this formed the backbone of the SAGA campaign which saw £2m in Winter Fuel Payments voluntarily donated to support geriatric charities, £2m that clearly was not needed, indeed not welcomed, by those wealthier households which received it. I am proud to say Mr Speaker that we have SAGA’s approval on these reforms.
So to that end, we shall be introducing an Opt Out scheme to Winter Fuel Payment. This will be as simple as a telephone call or filling out of a form online in which an individual can decline future Winter Fuel Payments. And we are calling on the people this affects to be realistic Mr Speaker. Winter Fuel Payment is a vital benefit, it saves lives. We cannot have a situation where Winter Fuel Payment is not being spent on heating costs but rather, is seen as a kind of stocking filler by wealthier recipients. We are asking those who can Opt Out to do the responsible thing. If you don’t need it, don’t claim it. In this way, we can direct more money to the most needy recipients.
And on that note Mr Speaker I must return to a point I raised earlier in regard to Cold Weather Payment and the Warm Home Discount Scheme. I know that changes such as this can often confuse or concern older people. I want to stress here and now that no changes to these payments will be made. I should also like to point out that these benefits remain totally unaffected by the receipt of Winter Fuel Payments and vice versa. In real terms, this means that for someone over 80 years old and living on a low income, they could well be in receipt of £800 in heating allowance over the winter period from November/December this year. I am sure we can all agree Mr Speaker, that this is a very welcome boost to their finances and I am proud to be a part of the government that, through its careful management of the economy, has been able to introduce it.
If I can make one further point Mr Speaker, and then I will conclude, because we understand that changes to this kind of benefit need clarity, we will be undertaking a publicity campaign to explain the changes as clearly as we can. We will allocate a further £2m from the Departmental Staff Budget to meet administrative costs and I would like to confirm to the House today that the £100m saving from these reforms has already been allocated to a project which I shall lay before the House in due course.
Mr Speaker, we know the last nine years have meant many people have had to make sacrifices. We are proud of the resolve and determination shown by the British people as we embarked on an ambitious programme of economic recovery after the catastrophic choices made by the last Labour government. We said then that when that recovery came, we would ensure the rewards were seen by all and whilst we have maintained the commitment to Winter Fuel Payments throughout our time in government, now is the time for generosity. These reforms are a common sense approach, an approach which delivers more money for those who need it and a greater degree of personal responsibility and financial freedom for those who do not. These reforms are also a clear sign of better days to come.
I commend this statement to the House.