Pensioner Income

From Questions to the Department Of Work And Pensions, 10th January:

Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab): What assessment his Department has made of the effects of changes to prices in January 2011 on the incomes of pensioners.

The Minister of State, Department for Work and Pensions (Steve Webb): In April this year, benefits and pensions will be increased by more than £4 billion, more than three quarters of which will go to pensioners. In addition, price rises in January 2011 will feed through into the September 2011 price indices, which will be used in future benefit uprating.

Gregg McClymont: Pensioners on fixed incomes will be among the hardest hit by the Government's VAT rise. Will the Minister confirm that the VAT hike will mean that pensioners are worse off in 2011 under this Government than they would have been under the previous Government's plans?

Steve Webb: I am grateful to the hon. Gentleman for referring to the previous Government's plans. In his constituency, vulnerable pensioners, vulnerable disabled people and vulnerable families with young children received four or five cold weather payments this winter to help them with their fuel bills in January 2011. His policy, and the plans that we inherited, would have reduced those payments to £8.50 a week. We have paid £25 a week four or five times to vulnerable pensioners in his constituency.

Rachel Reeves (Leeds West) (Lab): I will give the Minister another try: will he accept that with pensioners set to pay an extra £217 in 2011 because of the VAT rise, the basic state pension rising by only the same amount as planned by the previous Government and now news that the Department for Work and Pensions and the Treasury cannot agree the £140 flat-rate pension that he has extolled, pensioners have very little to look forward to in 2011 but a lot to fear?

Steve Webb: The hon. Lady used to be an economist, so I would not dream of suggesting that any of the figures that she has quoted are in the slightest bit dodgy. She will be aware that colleagues at Her Majesty's Treasury have calculated that the impact of the VAT rise for each percentage point increase is just less than £1 a week for single pensioners. The 2.5% increase will cost pensioners £2.50 a week, which compares with our £4.50 pension increase this April, and there will be additional increases in 2012 because of the VAT rise, so I dispute her figures.