Social Security (Up-rating of Benefits) Bill
Monday 20th September 2021
(3 years, 2 months ago)
Commons ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 20 September 2021 - large print - (20 Sep 2021)
19:01 - The House divided: - Ayes: 59 / Noes: 303 - Question accordingly negatived.
19:17 - The House divided: - Ayes: 300 / Noes: 55 - Question accordingly agreed to.
Mr Deputy Speaker (Mr Nigel Evans)
The reasoned amendment in the name of the right hon. Member for Kingston and Surbiton (Ed Davey) has been selected.
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
I beg to move, That the Bill be now read a Second time.
Each year I am required to undertake a review of social security rates to consider whether benefits have kept pace with inflation or an increase in earnings. I will undertake that review shortly, and will report to Parliament in November. The Bill refers to how I will undertake the review.
As set out in the Social Security Administration Act 1992, there are four benefits for which there is a direct link with earnings: the basic state pension, the new state pension, the standard minimum guarantee in pension credit, and survivors’ benefits in industrial death benefit. That last benefit is devolved to Scotland, and I can confirm that we have received the legislative consent motion that is necessary. I must emphasise that the Bill does not extend to other benefits, including universal credit, where the uprating review is linked to prices.
Normally, I have a specific reference period to consider earnings growth as part of my review. That same earnings reference period has been used for the last decade. In preparing for the review last year, with regard to that reference period, we anticipated and saw an unprecedented fall in average earnings as a result of the covid restrictions that we introduced to protect lives—especially those of the most vulnerable, including many pensioners—and to protect the NHS. That was why we changed the law for one year to set aside the earnings link. Otherwise, state pensions would have remain frozen. I then made the assessment, and awarded an uprating of 2.5%, which was higher than the then inflation rate of 0.5%.
As I prepare for this year’s review, the economic context is very different from last year’s, as our economy and businesses have reopened following our successful vaccination programme and unprecedented support for businesses and households. Millions of people have moved off furlough and back into work, and we are witnessing a surge in the labour market, with over a million job vacancies. The combination of those factors has resulted in a distorting effect on wages, with a statistical anomaly.
Confirmed figures will be published in October, but provisional figures from the Office for National Statistics show an increase in earnings of 8.3%, more than two percentage points higher than at any time over the last two decades. Given that this statistical spike in earnings is due to a covid-related distortion, I am seeking the agreement of Parliament to again set aside the earnings link for just one more year, 2022-23. I have put provision in the Bill to award the higher of inflation or 2.5%, applying in effect, again, a double-lock policy. The triple-lock policy will be applied in the usual way from next year for the remainder of the Parliament. This approach has been strongly recommended by external commentators, including Sir Steve Webb, who was the Liberal Democrat Pensions Minister for the lifetime of the coalition Government. While it has come as no surprise to most of us in the House, I was disappointed by the amendment tabled by the Liberal Democrats, finding their latest bandwagon to jump on. They really should listen to Sir Steve, who probably knows more about pensions than anybody in the Liberal Democrats.
This Government are committed to ensuring that older people can enjoy their retirement with security, dignity and respect, and since 2010 the full yearly basic state pension has increased by more than £2,050 in cash terms. There are now 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10. I am proud of our record on support for pensioners and of the action we took last year to ensure that pensioners’ incomes continue to increase. This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions, while also preserving the spending power of pensioners and protecting them from increases in the cost of living. I commend the Bill to the House.
Matt Rodda (Reading East) (Lab)
While this Bill seems to be a technical piece of legislation, it raises fundamental questions about this Government and the trust that they enjoy among people across the country. I want to address a number of issues today: the substance of the Bill; how it is part of a pattern of behaviour; the changes we would like to see to protect pensioners; and the context of wider Government policy towards the most vulnerable in our society.
Turning first to the substance of the Bill, we are being asked to vote today for a change in the law to suspend the earnings-related part of the triple lock for one year while retaining the link to prices and the commitment to raise the state pension by a minimum of 2.5%. This is an important issue that directly affects millions of people today as well as the value of state pensions for future generations. Labour supports the triple lock. Indeed, all the major parties committed to maintaining it in the 2019 general election. I should add that it was a Labour Government in 2002 who committed to raising the state pension by the higher of 2.5% and inflation. It is also important to note that, taking inflation into account, state pensions rose more on average under the last Labour Government than they have under the coalition or the Conservative Governments.
Of course, the covid-19 pandemic distorted the earnings growth figures for this year, and the impact of the furlough scheme and the distribution of jobs lost in the crisis has artificially inflated the headline earnings growth figure. The Government have said that they expect earnings to be above 8% as a result of this anomaly. We have been clear that the Government cannot be allowed to use the current crisis as a smokescreen to break their word to pensioners and to abolish the triple lock by the back door. We accept that the pandemic has distorted the earnings data, but we knew that this problem was coming and it was surely not beyond the wit of the Treasury to find a solution to the anomaly in wage data that maintained the link to earnings and offered certainty to pensioners.
I am afraid that the Government have failed to be open about the earnings data they are using. They have also failed to show that they are concerned about low-income pensioners. They are asking us to vote on trust alone, but that is something I am afraid this Government do not enjoy much of. By downgrading the triple lock, they are breaking a manifesto promise. Trust in the Government has been badly damaged. I should not have to say this, but given the history of the Prime Minister and his Government, I want to set out what the House and the public have a right to expect. Over the last months we have seen a series of actions that show that the Government do not understand, and that in some cases they just do not seem to care. This should be obvious, but sadly it does not seem to be, to the Prime Minister and his Administration.
Today’s broken promise is the third breach of trust in just a few months. This is starting to become a pattern of behaviour. First, there was the cut in overseas aid that the Government made despite a wide range of opposition. We are the only G7 country to cut aid, breaking a manifesto commitment to support the world’s poorest and most vulnerable people, and this Conservative Government are retreating from our moral duty. This has already weakened the UK’s position at the G7 summit and it will continue to do so at the upcoming summit on education and COP26. Parliament has repeatedly made it clear that it does not support aid cuts and that Britain must not turn its back on the world’s poorest. I would add that a Labour Government will build partnerships with other Governments, civil society groups and communities to overcome global challenges by using the aid budget to tackle poverty and inequality.
Secondly, there was the breach of trust we saw last week when the Government broke their promise not to raise national insurance. The Government had already weakened social care and our NHS, cutting £8 billion and leaving us with long accident and emergency, cancer and mental health waiting lists even before the pandemic. Their solution, when finally pushed to act by the coronavirus pandemic, is an unfair tax on jobs—the biggest tax rise on families in over 50 years.
With a cut to universal credit in the Government’s sights, it seems that they are going after the same people time and time again. A tax rise that hits less well-off areas—so much for levelling up. The CBI, the Federation of Small Businesses and the British Chambers of Commerce have all criticised the national insurance rise as illogical and harmful to businesses and our recovery.
Now we face the third broken promise, on the triple lock, which Ministers have consistently said they would protect. I repeat that the Government must not use this crisis to leave the door open to scrapping the triple lock altogether. We recognise that the pandemic has caused an anomaly in the earnings data and, crucially, we are not calling for an 8% rise in the state pension, but the Government must come clean and show why they cannot calculate underlying earnings growth over a longer period of time. They have not adequately made the case for why an earnings link, with this year’s anomaly resolved, cannot be maintained.
At the very least, Ministers should maintain an earnings link, explain their decisions, offer binding commitments to protect the triple lock and protect the incomes of less well-off pensioners. There is nothing in the Bill that seeks to increase the uptake of tax credits or, indeed, to set out other steps the Government will take to protect low-income pensioners.
The public, and we as the Opposition, expect the Government to look at this thoroughly, to be diligent and to treat people fairly. When the Secretary of State first informed the House of her decision, my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) asked the Government to publish their reasons. That is the least pensioners could expect. Governments should explain the evidence used to make key policy decisions, as evidence-based policy making has been a central plank of good governance for a very long time. Sadly, no answers were forthcoming, but perhaps we will see some actual evidence in this debate. The Government’s track record on the use of evidence, however, does not offer much hope.
Finally, I pay tribute to the right hon. Members for Chingford and Woodford Green (Sir Iain Duncan Smith) and for Ashford (Damian Green) for tabling their amendment. Opposition Members are deeply concerned about the cut to universal credit and the devastating impact it could have. It will hit thousands of families and many people in work, including nurses, teaching assistants and supermarket workers. I know from experience that 9,000 people in my constituency will be affected. Like colleagues on both sides of the House, I have spoken to residents who are desperate and who do not know how they will cope.
Justin Tomlinson (North Swindon) (Con)
Although the temporary increase in universal credit has come to an end, surely the hon. Gentleman would welcome the permanent increases to the local housing allowance and the work allowance, the above-inflation increase to the national living wage and the changes to income tax thresholds. Does he welcome those?
Matt Rodda
I am grateful for the hon. Gentleman’s intervention, as I understood that the Government had frozen the housing allowance. I look forward to discussing that further in this debate.
The Government have left it late to do the right thing and end the cut, but it is not too late. There is clearly a strength of feeling on both sides of the House on the universal credit cut and the state pension uplift. I think we agree that trust is important and is the basis of good government. The Government will be letting down pensioners and the country if they plough on with these unfair changes without any explanation or reassurance about the future and without any assessment of the impact on many pensioners. We have now seen three successive breaches of trust in just a few weeks, and the last two were only days apart. Trust in this Government has fallen dramatically, and it will fall even further if they fail to listen.
We are making a very important decision today, but the Government can still correct some of their mistakes if they listen to their own Back Benchers as well as to the advice of the Opposition.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
I am grateful to be called so early in this debate, Mr Deputy Speaker. I am a huge admirer and supporter of my right hon. Friend the Secretary of State for Work and Pensions, as she knows.
I have some personal views on this subject, which I will explain. I tabled my amendment because I felt we needed to debate what the right level of investment in universal credit is. I have to say from the beginning that I otherwise support the idea that the Government have to make changes to the triple lock. What goes missing in a lot of these debates is the fact that we have just suffered the biggest blow to the economy as a result of covid—I accept that fully. We debate these things without realising that, but I recognise it and it changes the terms of the debate. It also changes the terms of the debate on the manifesto, because no manifesto could have predicted the kind of crisis we have just been through.
We need to get a rational and stable debate about these things. It is important to recognise the huge amount we have done for pensioners since the arrival of the triple lock; increases for pensioners have been remarkable, and so many more pensioners have been lifted out of poverty. These are success stories the Government should be able to talk about and recognise that there has to be some flexibility, so I am not going to end up at odds with the Government on this—quite the contrary, as I recognise all that fully.
However, I want to speak to the amendment that I tabled alongside the right hon. Member for East Ham (Stephen Timms) and my right hon. Friend the Member for Ashford (Damian Green). I do feel it is necessary for us to re-examine the investment levels in UC. I recognise that the Government made the right decision at the beginning of the pandemic to invest in universal credit to ensure that those who were naturally going to be falling unemployed as a result of the problems that came from the pandemic would receive a higher level of support.
When I resigned from the job that my right hon. Friend the Secretary of State now holds, I did so on the basis of two or three things. My No. 1 basis was that the Treasury took a significant sum—much the same as the uplift—out of universal credit. I always made the point very early on that when we put money into universal credit we are investing in a dynamic process. It is one that by its very nature reduces the overall cost, because the more we get people into work, the lower the overall cost of the money we put in.
Mr Deputy Speaker (Mr Nigel Evans)
Order. You will remember that your amendment was not selected. A passing reference to it is fine, but please do not go into it in detail.
Sir Iain Duncan Smith
I understood that as the amendment is on the Order Paper, I have at least a right to speak to it, even though it was not selected.
Mr Deputy Speaker
No, you have got that wrong. You are not allowed to speak to an amendment that has not been selected. You can make passing reference to it, in the generality, in a Second Reading debate—that is fine—but you cannot go into it in detail.
Sir Iain Duncan Smith
In that case, I am going to make passing reference to it, and I will leave the Chair to decide whether or not that passing reference is more substantial. I shall pass through universal credit carefully and make full reference to the statement that has been made or the passing of this on Second Reading.
I want to make a simple point, and I am not going to hold the House up for too long. The point of the amendment I tabled but which was not selected and the purpose of today’s debate is to ensure that those of working age who are receiving security, support and benefit from this Government get the right level of support. We know that the changes made to the triple lock will ensure that a saving is made to the Exchequer against what was unpredictable at the time and resulting from the increase in pay that will happen as a result of the easing of the covid restrictions and the bounce back that is taking place. I also recognise that one problem we have as a result is that those of working age are going to have to pick up a bigger burden, which is why the universal credit uplift should be reviewed, and reviewed very quickly.
The point I simply make, in line with the idea that the pensioners are taking some of this burden, is about universal credit itself: if that money, or some of it, is moved towards the tapers, we will have a reality where more people move into work. I hope that my right hon. Friend the Secretary of State, in her discussions with the Treasury on these matters, will make the point that it needs to make sure that those on universal credit are able to move through it faster and that therefore investment in the tapers would benefit both the Treasury and those who are seeking to get work, by making that pathway easier. That will complement what is being done for pensioners at the moment under the terms of ending of the triple lock for one year. Such a move will almost certainly be beneficial; this winter and into the spring, while we see the effects of the fall-out of moving from the furlough scheme and of the other difficulties on energy pricing and some food pricing, which is going to rise, it will protect those who are most vulnerable, while giving people an opportunity to work, with work being the very best way out of poverty.
I am going to finish by simply saying that this is an important matter and I hope my right hon. Friend will take our amendment, which was not selected, as justification in her negotiations with the Treasury to secure a better investment in the taper.
David Linden (Glasgow East) (SNP)
It is a pleasure to follow the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith).
I rise to speak in favour of the reasoned amendment tabled by the right hon. Member for Kingston and Surbiton (Ed Davey), and commit the SNP to voting for it when the House divides this evening. As well as speaking to that amendment, I wish to comment on the broader principles of the Bill. I am conscious that those watching our proceedings will perhaps be unaware of the consequences of the passing of this legislation, and especially of rushing it all through in the space of a couple of hours.
In short, as we all know, the Bill facilitates this Tory Government’s breaking yet another manifesto commitment —namely, by breaking the pensions triple lock, to which all parties in the House committed themselves at the election less than two years ago. The breaking of that manifesto pledge follows on from the Government’s scrapping the commitment to spend 0.7% of GNI on the world’s poorest through our international aid budget, and now comes on top of the new Tory poll tax, which sees hard-working Scots having to endure a hike in national insurance to pay for the sorting out of the utter mess of England’s health and social care system. The Prime Minister is not known for keeping his promises, and the decision to suspend the triple lock will have dire consequences for pensioners.
As constituency MPs, we all know that the state pension is by far the largest source of income for UK pensioners, and the triple lock has kept it secure throughout the pandemic. To be blunt, the British Government’s decision to break its triple-lock promise is a betrayal and an unacceptable attack on pensioners’ incomes. What is more, this change will do nothing to stop recent indications that more pensioners are living in poverty. The proportion of pensioners on relative low income—that is, the percentage of pensioners in the UK living in households with net disposable income below 60% of the national median, after housing costs—rose from a historic low of 13% in 2011-12 to 18% in 2019-20.
Selaine Saxby (North Devon) (Con)
Does the hon. Gentleman recognise in his analysis that we took notice of pensioners’ needs last year? The triple lock is reliant on earnings being positive, and last year they were negative, but my right hon. Friend the Secretary of State took the opportunity to raise pensions, despite the fact that the terms of the triple lock were not met at that time.
David Linden
If the hon. Lady pays attention to the rest of my speech, she will understand that I am developing my argument because the UK state pension is so pitiful. That is the point I am addressing and I am sure she will make it in her speech, too.
The rise in the proportion of pensioners on relative low income followed a period of more than a decade during which the measure had been trending downwards from a high of 29% in 1998-99. The passing of the Bill will undo all that work.
Although the state pension is the biggest source of income for pensioners, House of Commons Library analysis shows that UK state pensions are the lowest as a proportion of pre-retirement wages of all our European neighbours. Pensioners throughout these islands receive around just a quarter of the average wage when they retire, whereas pensioners in Luxembourg and Austria receive 90% of the average working wage. According to the OECD’s latest analysis, the UK has an overall net replacement rate of 28.4% from mandatory pensions for an average earner. That is well below the OECD average of 58.6% and the EU average of 63.5%. It is simply not right that the UK devotes a smaller percentage of its GDP to state pensions and pensioner benefits than most other advanced economies.
The triple lock betrayal is yet another Tory-imposed austerity cut. The Commons Library briefing for this debate estimates that the British Government will take away £5 billion from pensioners in 2022-23 if the triple-lock elements of the state pension are uprated by 2.5% rather than 8.3%. Investment in the state pension is crucial, especially as many are still excluded from automatic enrolment in workplace pensions—although I acknowledge that some, but nowhere near enough, progress has been made on auto-enrolment.
Let me briefly develop that point a little further. The British Government’s failure to extend automatic enrolment to low-income earners and young people disproportionately impacts women, thereby worsening the already massive gender pension gap on these islands. That is before we even come to the issue of the Department for Work and Pensions’ maladministration with regard to 1950s-born women who, quite rightly, await to see what stage 2 of the ombudsman’s process will conclude. I very much hope it will do so soon.
Patrick Grady (Glasgow North) (SNP)
I echo what my hon. Friend is saying about 1950s-born women. Is the decision to abandon the triple lock not a double injustice to those women—and to the Women Against State Pension Inequality campaign—because not only are they now being denied the rise in their pension that they might have expected, but they were denied a pension at all at the time they originally expected their pension?
David Linden
I am grateful to my hon. Friend for that intervention, and he is right. I am sure that, like me, he receives regular representations on that matter from Rosie Dickson from WASPI Scotland. I am glad that he has put that on the record on Rosie’s behalf.
Before I move on, let me touch on frozen pensions, to which the Father of the House made reference when we were considering the business of the House motion. Members will be aware that the UK has a series of historical reciprocal arrangements to provide for the uprating of state pensions in certain countries. Most recently, the Government committed in the Brexit trade deal to uprating the state pensions of UK pensioners in the European economic area. UK pensioners in other countries such as the USA, Philippines, Israel and Jamaica continue to receive their full payments. However, the arbitrary system means that pensioners in other countries—and, indeed, even in British overseas territories such as the Falkland Islands—have their pensions frozen, despite their having paid in the same dues. More than 90% of affected pensioners live in Commonwealth countries with close cultural ties to the UK. The UK is the only country in the OECD to take this two-tier approach to state pensions; I ask the Minister to reflect on that.
There is opposition to the Bill from various parts of the House, but that opposition does not stop in this Chamber. TUC general secretary Frances O’Grady has said:
“The UK has one of the least generous state pensions in the developed world. The triple lock was introduced to close this gap and lift pensioners out of poverty. Suspending it will only halt our progress. This is a dangerous precedent. If the government is allowed to pick and choose when to apply the triple lock, the result will be lower state pensions for future generations and more pensioners experiencing hardship. This decision will hit old and young alike. A race to the bottom on pensions helps no one.”
She is absolutely right.
Let me finish with a quote from even closer to home: something I found on the Better Together website, which advocated Scotland voting against independence in 2014. The Better Together campaign said:
“Our pensions are safer as part of the UK…We are living longer and working longer than ever before. People want to know that their pensions are safe. The UK State Pension means that everyone in the UK can get the same basic State Pension. It is a great example of how we share good things across the UK.”
David Linden
Not at the moment. The campaign went on:
“We all pay in when we are working, and we all benefit when we retire. This means we can support all our pensioners in the same way whether times are good or bad. Scotland’s people are getting older at a faster rate than the rest of the UK. This is good but it means that if we leave the UK we could have a difficult choice to make”,
including on “Cutting the state pension.” On that, I give way to the hon. Member for Moray (Douglas Ross).
Douglas Ross
Can the hon. Gentleman tell us what the state pension would be in an independent Scotland and what currency it would be paid in?
David Linden
I am grateful to the hon. Gentleman for finding the time to come to the House of Commons this evening; I know he will be balancing his obligations—
David Linden
The Minister chunters from a sedentary position. I outlined earlier in my speech that we want pensions much more in line with those of, for example, Austria and Luxembourg. I hope that that answers the question.
The SNP will vote to reject this legislation, but in the passing of this Bill tonight we will see yet another Better Together myth burst: that pensioners are somehow protected by Mother Britannia. To be blunt, to allow the Bill to proceed tonight will not only violate the contract offered to voters by the Prime Minister in 2019—and, indeed, by the hon. Member for Moray—which won a handsome majority in this place, but make a mockery of the no campaign’s claim that Scotland remaining in this broken Union is the best deal for UK pensioners when it is patently not.
The SNP will vote to reject this legislation, but in truth we all know that the democratic deficit throughout these islands means that Scotland’s MPs will be outvoted when we try to protect pensioners’ incomes. That is why the only way to truly tackle the plight of pensioner poverty is with Scottish independence, because Westminster is not working and we need to retire from this United Kingdom.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
It is a pleasure to speak in this debate. Fundamentally, this is about fairness. When the triple lock was conceived, no one anticipated a pandemic that would lead to mass redundancies of people predominantly on lower pay, which, in turn, would lead to wage inflation, through those people losing their jobs, and a cash bonanza for pensioners. Most pensioners believe that having an 8% or more rise would be fundamentally unfair.
I want to respond to some of the points about trust. We earn trust by being open and straightforward about difficult decisions that have to be made. We need to explain where we are and why we are doing the things we are doing. Ploughing headlong into this and upholding our manifesto commitment would be clearly ludicrous in the face of the current situation. That would be the way to lose trust in the Government and to lose trust in their competent administration.
None the less, this should be the start of the debate on the broader utility of the earnings component in the triple lock. At the moment, this has been distorted twice now by earnings in the past year. We need to make sure that we are correctly measuring the cost of living and tackling inequalities and pensioner poverty. While we cannot have that extensive debate today, a debate on that is sorely needed.
Wendy Chamberlain (North East Fife) (LD)
I beg to move an amendment, to leave out from “That” to the end of the Question and add:
“this House, while recognising the extraordinary circumstances of the covid-19 pandemic, declines to give a Second Reading to the Social Security (Up-rating of Benefits) Bill because it represents a broken manifesto commitment made by the Government at the last General Election, fails to address the impact of the pandemic on the two million pensioners living in poverty and fails to increase key benefits, such as making permanent the uplift to Universal Credit.”
The Government are on track to break yet another of their manifesto promises. It is another example of how this Government are willing to turn their back on people living in poverty—now it is pensioners, but next month it will be those on universal credit.
The Liberal Democrats want Britain to be the best place in which to live and to retire, but, frankly, we all accept that it is far from that. People who have worked hard and paid taxes all their lives deserve a comfortable retirement when the time comes. It was our party that was instrumental in putting the triple lock in place, providing a lifeline to millions of pensioners who had seen increases as derisory and as low as 75p per year.
When pensions were only pegged to price inflation, their real value shrunk to one of the lowest in the developed world. We all deserve to live in dignity, to be able to afford food and heating, and to be able to live a life with some meaning or enjoyment, and reaching retirement age does not and should not change that.
There are more than 18,000 people in my constituency claiming the state pension, which is over 20% of the local population. They have worked, paid taxes, raised families, and built communities, and I want them to know that they are visible. The Conservative party clearly does not feel the same about their local pensioners, with the 20 hardest hit constituencies all being represented by Conservative Members. The Secretary of State’s own constituency is the fifth most affected by this broken manifesto commitment.
We all accept that we have lived in exceptional times over the past 18 months, and that earnings growth this year is out of the ordinary, but the big picture here is that this Government are refusing to take any action to lift any group out of poverty. The refusal to do so highlights the hollowness of the phrase “levelling up”. They are cutting universal credit, taking away vital income from 5.5 million households, and pushing thousands of families further into poverty. They have refused throughout to increase legacy benefits at all, ignoring the needs of recipients who are disproportionately disabled. Technical issues were given as the reason for this, but, 18 months on, a lack of appetite seems to be the more obvious case.
The decision to increase national insurance is a further tax on young people, on working people—those who have already been hit the hardest by the pandemic. We know that people are willing to make sacrifices when it is needed—we have seen that during the pandemic—but a part of that must be seeing that we all follow the same rules. There must be a fairness in what is being asked of us. There cannot be one rule for them and one rule for us, which, sadly, is what we see time and again from this Government.
This Government’s habit of breaking their promises makes me very wary of this Bill. We might be told that this change is just for one year, but they also promised no increase in tax in their manifesto and they have just increased national insurance.
Guy Opperman
I am listening with great interest to the hon. Lady’s speech. I just want to know whether she agrees with Sir Steve Webb, the esteemed former Pensions Minister, who, for five years, represented her party in this House and who indicated on 16 June that he strongly supported the sort of change that the Government propose tonight, but that she opposes.
Wendy Chamberlain
I thank the Minister for his intervention. I am grateful to have the opportunity to respond to him, especially as the Secretary of State did not give me that opportunity.
I agree that we have seen extraordinary circumstances over the past 12 months, including significant increases in wages, causing this anomaly, but what this Bill fails to do—I will have this conversation with my friend, Steve Webb—is help those of working age in poverty through maintaining universal credit, or pensioners themselves.
The Bill has only two clauses and five subsections. It fails to address any of the problems with the state pension, or to assess the impact of suspending the triple lock. There are already 2 million pensioners living in poverty, the majority of whom are women and/or from black and Asian communities. This Bill ignores them and the disproportionate impact that suspending the triple lock will have on people already struggling. The promises made by a party in their manifesto matter. It is the essence of the mandate that they claim.
Just last week, during the urgent question on transport, the Transport Secretary welcomed increases in wages and hoped that they continued and were sustained. That is the whole point of the triple lock; it is about helping pensions to keep up with the cost of living.
Women have already been left behind when it comes to the state pension, with those born in the 1950s—the WASPI women—being unfairly penalised by the Department for Work and Pensions’ failure to properly notify them about the change in pension age. Women who had worked hard and planned for retirement suddenly found themselves without either. With women more likely to rely on the state pension than men, this policy is another damaging blow.
Last year, I talked about the importance of the triple lock for intergenerational fairness. This Bill is not just of interest to those of state pension age. Unless we truly trust that this Government will keep their promise—and there is no evidence to show that this will be any different from the other broken promises over the past two years—this will impact everyone. Jobs for life and final salary pensions are a thing of the past. It is harder than it has been in recent memory to get on to the housing ladder. It is fair and right that young people today are able to look ahead to a state pension, but if we return to the days of minimal increases to pensions, they will be impacted, too.
I am asking the House to support the amendment tabled by the Liberal Democrats for all the reasons that I have outlined. While there is no doubt that the pandemic has required exceptional measures, this Bill was an opportunity for the Government to support poorer pensioners and to right previous wrongs, and it is an opportunity that they have ignored. Why is there no impact assessment on how this will affect groups already disadvantaged under the pension system? I hope the Minister will address that in his closing remarks. Why do the Government continue to ignore the needs and wants of ordinary people, and why do they think that anyone will trust their word given what has happened over the past few weeks?
The public deserve better than these broken promises, better than this Government, and the 2 million pensioners living in poverty certainly deserve better than this Bill.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak in this debate. May I start by paying a tribute to my hon. Friend the Member for North Swindon (Justin Tomlinson), who is in his place, and my hon. Friend the Member for Colchester (Will Quince) who left the Department in the reshuffle last week? We may have had our robust scrutiny sessions, but all of us would recognise that both Ministers were fully on top of their brief, keen on the issues and very competent. We wish them both luck in the important jobs that they will have in future, and we welcome the two new Ministers, including my hon. Friend the Member for Macclesfield (David Rutley). I have enjoyed him being my Whip even more than he enjoyed being my Whip. [Interruption.] To be fair, I think I was the first person to make their Whip vote against the Government during the covid proxy period, so perhaps he really will be glad to have a different job, rather than having to go through that again. None the less, I wish both Ministers all the best in their new roles and look forward to seeing them soon.
I rise to support this Bill. I have been calling on the Government for about a year to fix what will obviously be a problem with the earnings blip due to the reductions at the start of the pandemic and then the hopeful rebound this year. I think it is right that the Government have taken this step and to do it with more than six months’ notice, so that pensioners will not be expecting an 8% rise and then have their hopes dashed in March. Those pensioners now have plenty of warning that that huge rise will not be happening. I think that most people are clear about this given what we have seen over the pandemic, with people losing their jobs, being put on furlough, and losing their earnings. All that insecurity has hopefully passed, but with furlough ending in a few weeks’ time, we may have a further round of that. The idea that a promise that was put in place to ensure the state pension kept pace with earnings would deliver an 8% rise in the state pension, on top of a 2.5% rise the previous year, is not remotely in the spirit of what this promise was meant to be. Most Members who, like me, strongly believe in the triple lock and want it to last a very long time, recognise that it needs to sustainable and reasonable. Had the Government tried to plough ahead and retain the 8% rise, that would have been the biggest threat to the triple lock in the future. It would mean that the Treasury, with its eagle eye, would think that this was a promise that could not be sustained for the long term. I hope we are now clear that this is a one-year suspension and that the triple lock will then be retained in its current form in the long term. That is the right policy and it is what we promised in our manifesto.
I was slightly confused by the Opposition’s approach. They appeared to say that the Government are not being transparent and are breaking a promise, but then accepted that 8% is too high. They therefore seem to be suggesting that the Government should go away and try to find a new definition of earnings that is different from the one that has been used for the 10 years of the triple lock, and that they should come up with a number that is a bit lower than 8% and a bit higher than the 3% or so that inflation would probably give to pensioners. The Opposition seem to think that it would somehow be fairer, more transparent and more honest to say to pensioners, “We aren’t breaking a promise; we’ve just contrived a new definition that gives us the answer that we think is acceptable.” That is clearly nonsensical.
Either we say that we will stick with the 8% that the law puts in place, or we do what the Government are doing here and say, “Look, we can’t stick to that measure. Let’s do something reasonable and have inflation or 2.5%, whichever is higher this year.” That is a clear policy. It is a calculation that we can all see and scrutinise, rather than asking the Government to contrive something that would necessarily be rather odd and artificial, and through which I suspect we would end up in a whole load of court cases while the Government tried to defend why they had picked one arbitrary earnings measure rather than another just to produce a number they were happy with in the first place. I do not see how we could produce a robust process in that situation.
I would have had some sympathy with the amendment of my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), had it been selected, because I believe that the Government should retain the universal credit increase, at least for the next six months until we can be sure that the pandemic is finished. That amendment was not selected, so I cannot face the quandary of voting for it. I will happily support the Government tonight in a sensible measure that saves the public finances an unsustainable increase in the state pension that was never in keeping with the spirit of the promise and which in the long term will preserve the triple lock as the right way of protecting state pensions.
Stephen Timms (East Ham) (Lab)
I am pleased to follow the hon. Member for Amber Valley (Nigel Mills), who makes an important contribution to the work of the Work and Pensions Committee. I echo his words of appreciation and good wishes to the hon. Members for North Swindon (Justin Tomlinson) and for Colchester (Will Quince).
The Bill reduces an increase in the state pension that the Government’s triple lock policy would have delivered. I understand why it has been done, but let us not kid ourselves; we have a growing problem with pensioner poverty, after a quite long-sustained improvement following the introduction of pension credit 18 years ago. The charity Independent Age has analysed the Government’s households below average income statistics. Its analysis shows that pensioner poverty has started to increase again since 2012, with 18% of pensioners—more than 2 million people—in 2020 living in poverty after paying housing costs, of whom more than 1 million are in severe poverty. This is a significant challenge and it is getting worse. Of the English regions, the problem is particularly acute in London. There is no room for complacency about pensioner poverty.
The Bill will increase the standard minimum guarantee of pension credit by 2.5% or inflation—whichever is the greater—next April. When the Minister responds, will he tell us what the Department will do to increase take-up of pension credit so that more people can benefit from the increase? The most recent figures show that only six in 10 of those who are eligible for pension credit are claiming it, and that only 76% of the total amount of pension credit that could have been claimed is claimed. That is quite a significant reason why the problem of pensioner poverty is rising.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I am extremely grateful to the right hon. Member for making that important point. In preparation for this debate, I read an incredible stat: in Wales alone, about £214 million of pension credit is not claimed. Increasing take-up would be an easy way to deal with the growing tides of pensioner poverty, but the key thing with pension credit is that it is also a gateway to other support.
Stephen Timms
The hon. Gentleman is absolutely right. That is why Independent Age has called on the Government properly to research who is not claiming pension credit, and to draw up a plan to increase take-up over five years.
Research by academics at Loughborough University found that maximising pension credit uptake could lift three in 10 pensioners out of poverty and reduce the number living in severe poverty by half. When the Secretary of State came to the Select Committee in July, I asked her whether the Department would bring forward an action plan. She replied that there had been a “media day of action” in June to encourage take-up of pension credit, and told the Committee:
“We will continue to advertise it in a different way but I am not anticipating a big action plan, no.”
That is disappointing. Given that the Bill will deny pensioners an increase that the Government’s policy appeared to promise, I ask the Minister to look again at further steps to increase pension credit take-up.
My name was also on the reasoned amendment tabled by the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), which, as he reminded the House, was not selected. However, I want to comment on the reasoned amendment that was selected, which states that we should reject the Bill because it
“fails to increase key benefits, such as making permanent the uplift to Universal Credit.”
Let me pick up that specific point. As the amendment drafted by the right hon. Member for Chingford and Woodford Green pointed out, the money that the Bill will save the Government next year would almost deliver the £20 a week uplift to universal credit next year. Many Members across the House are deeply worried by the plan to remove the uplift next month. The Select Committee’s call to at least postpone the removal of the uplift was unanimous. There are lots of different kinds of worry, which I will outline.
First, this is not the right time, because the furlough scheme is about to end. We are told that Ministers’ intention in introducing the uplift was to protect people who were becoming newly unemployed, but there will be a surge of newly unemployed people when furlough ends. Ministers told the Select Committee last week that the Government have no estimate of the number of redundancies that will follow the end of the furlough scheme, but the most recent figures showed that 1.6 million people were furloughed at the end of July. Surely the consideration given to people who became unemployed at the start of the first lockdown should be given to those losing their livelihood next week as well. What justification could there be for treating them differently?
Secondly, since the decision to introduce the uplift—especially in the past month—we have seen a surge of price rises. September’s inflation figure was a record, reflecting increased food prices in particular, and earlier this afternoon the House was considering the current steep increases in energy prices. This cannot be the right time to take £20 a week away from everyone receiving universal credit. The Select Committee recently heard evidence of people having to skip meals before the uplift was introduced. Well, their position will be a good deal worse if the uplift is taken away in a couple of weeks, because the prices they now face are so much higher, and have become so much higher in just the last few weeks.
Thirdly, what justification can there be for reducing universal credit to a historically low level? If the uplift is taken away, support for unemployed families will be the lowest in real terms for more than 30 years. The economy has grown by more than 50% in real terms over that period, but we are being asked to agree that support for unemployed families should be no higher at all in real terms than it was 30 years ago. As a proportion of average earnings, support for unemployed families will be the lowest since the modern welfare state was introduced in 1948. The Library tells me that it will be lower as a proportion of average earnings than it was when unemployment benefit was first introduced in 1911.
We are told that the Government’s priority is levelling up. This policy is not levelling up; this is a policy of grinding down. Social security has a job to do—an important job that we all recognise needs to be done. Pushing it inexorably downwards when prices are surging upwards means that it cannot do that job. People cannot focus on getting a job if they are worrying about whether they can afford to eat their next meal.
Speaking to the Committee last week, Ministers from the Department could give no reason at all for the Government choosing to set the rate of universal credit so low, other than as a consequence of historical accidents. They said that the Government had made no assessment of the impact of ending the £20 a week uplift on people claiming, nor of how many people would be pushed into poverty as a result. The Legatum Institute has today published research suggesting that the number of people in poverty will go up by 840,000, including 290,000 children, if the uplift is removed. The Government have also made no new estimate of the annual cost of keeping the uplift.
Sir Iain Duncan Smith
Does the right hon. Gentleman agree that often in the briefings used there is a kind of mistake in that they talk about this as being an unemployment benefit? It is not, because it combines tax credits, so putting investment into this is more likely to get people through and into work than taking it out. That is the point I was going to make but was not able to.
Stephen Timms
The right hon. Gentleman makes a very important point that I agree with. It is a vital fact, often not understood, that universal credit is an in-work benefit as well as an out-of-work benefit. I think that 40% of universal credit claimants are in work. We have taken evidence in the Select Committee from working parents receiving universal credit who are having quite a hard time at the moment and are going to have a very hard time indeed if they lose the £86 a month that they will if the uplift is removed.
The cost of keeping the uplift, the figure that we are given, is £6 billion a year, but—the hon. Member for Amber Valley drew attention to this in the Select Committee last week—that figure was calculated when lockdown was still in place and job vacancies were much lower, so presumably the cost would be less if the uplift was kept.
The Bill misses the chance—the Liberal Democrats’ reasoned amendment gives us the opportunity to reflect on this—to address this very serious flaw in the Government’s current intentions. We are heading into an extremely difficult period for both working families and unemployed families who depend on universal credit, because of price rises across the board.
David Johnston (Wantage) (Con)
The triple lock has been a successful policy that has seen the basic state pension increase by 35% since 2011—£2,050 in cash terms, and, importantly, the highest level of the basic state pension in relation to earnings for 34 years. My political interest and awareness about this grew when the last Labour Government were in power, because they came into power when I was 15. I well remember the outcry over the 75p a week increase in the basic state pension early on in their term and the outcry over the 25p a week increase for older pensioners towards the end of their term. So it is important that we get these things right, and the triple lock has been a considerable advance in how we support pensioners.
We are now faced with the interplay of two things: an anomaly in earnings, as has been touched on, where wages have fallen as a result of furlough and the economic conditions of the pandemic and then sharply risen; and over £400 billion spent on protecting people’s jobs and livelihoods that will need to be paid back. On the triple lock, often, a lot of the commentary pits young against old. As someone whose pre-politics career was entirely spent supporting young people, one might expect me to take a particular side on that, but actually, on this, I think that it is the wrong characterisation, because pensioners are not a group of people who just sit there worrying solely about the value of their pensions. They will have children and grandchildren whose job prospects they are concerned about. They will have relatives who were furloughed who might have otherwise lost their jobs or who work in the public sector where unfortunately pay has been frozen. They will be concerned about international aid, where we have taken another difficult decision. Although I have had emails from people who are not happy about the decision that has been made about the triple lock, I have had emails right up until this debate and from quite a while ago saying that, in the context of all the difficult decisions that have been made, it would not be right to make an increase to the basic state pension that is so far above what other people can expect.
It was right of the Government to introduce the triple lock in 2011, it was right to change the legislation last year so that instead of getting no increase pensioners still got a 2.5% increase, and it is right to move to a double lock for a year where in all likelihood pensions will still rise by at least 3% thanks to prices growth. Most people, including most pensioners, understand why we are making that decision, and I support the Government in doing so.
Patricia Gibson (North Ayrshire and Arran) (SNP)
Finally, in this Bill, it is official: the Government will break their triple-lock promise to pensioners. The state pension will not increase with earnings in 2022-23 after all. Well, well, well: we can hardly be surprised. The betrayal of the commitment to the triple lock can be filed under the same heading as the broken pledge not to raise national insurance and the pledge to maintain the commitment to spend 0.7% of gross national income on development.
Those broken pledges fly in the face of yet another pledge from the Prime Minister:
“to restore trust in our institutions and in how our democracy operates.”—[Official Report, 15 January 2020; Vol. 669, c. 1019.]
I wonder whether anybody on the Treasury Bench can tell me how that is going. We are discussing the Elections Bill later this evening, but we do not need to look at that to see what restoring trust is worth. With the contents of the Elections Bill, even the Government realised that the assault on democracy that that constitutes meant they could not call it the electoral integrity Bill any more, because that really would be taking the mickey.
This particular broken pledge of abandoning the triple lock is an attack on the largest source of income for UK pensioners, on which they rely. Recent indications show that the number of pensioners living in poverty is rising. I wonder whether those on the Government Benches can even begin to imagine the anger, fury and sense of betrayal of those women born in the 1950s, some of whom have only just qualified for their state pension after so many years of being robbed of it, only to find a new betrayal—the abandonment of the triple lock. That is why SNP Members seek to require the Secretary of State to assess and to be held accountable for the impact that this legislation will have on poverty among pensioners in each of our constituencies. I will stand up for pensioners in North Ayrshire and Arran, just as all of my SNP colleagues will stand up for pensioners in their respective constituencies. This is what we have committed to do and that is what we will do.
It is a cause for shame that this cut is taking place fully in the context of the fact that we in the UK have the lowest levels of proportion of pre-retirement wages of all our European neighbours. As my hon. Friend the Member for Glasgow East (David Linden) pointed out, UK pensioners receive about a quarter of the average working wage when they retire, whereas pensioners in Austria and Luxembourg receive 90% of the average working wage. When will the UK Government devote a percentage of GDP to pensioner benefits that is similar to that in other advanced economies?
The other element to this scandal is that it takes place in the context of too many workers being excluded from automatic enrolment into workplace pensions. The failure to extend that impacts low earners and disproportionately impacts women, widening further the gender pensions gap. Why has that not been fully addressed?
The state pension remains an important source of income for pensioners living in or at risk of poverty because of the very low uptake of pension credit. I ask those on the Treasury Bench: what steps have been taken to increase uptake of pension credit—something I first raised four years ago? What has been done about that? I suspect—I fear—that nothing has been done about it. So much for levelling up.
The Government say they are breaking the triple-lock pledge because this year’s earnings measure is “skewed and distorted”. Well, I have heard people say the same thing about this Government’s priorities. Age UK has expressed real concern that this may not just be a one-off measure but a sneaky way of ditching the triple lock altogether. That might explain why there has been no impact assessment. Where is the impact assessment, given we have 2 million pensioners living in poverty and the triple lock is abandoned? That is a staggering oversight and complacency on stilts towards pensioner poverty.
For all those reasons, I support the reasoned amendment from the Scottish National party. This cut, falling on pensioners, will push more pensioners into poverty. The Government know that. The cut disadvantages women, who are more likely to be poorer in retirement. The Government know that. It is yet another kick in the teeth for WASPI women. Just like with the universal credit cut, this Government are imposing cuts that they know will cause real financial distress, but they go ahead anyway. What does that tell you, Mr Deputy Speaker, about their vision of society? The only conclusion that can be drawn is that they do not care about the people they are supposed to serve. No other conclusion can be drawn. This Government have no interest in the greater good, only in sectional interests. That is why inequality is rising and will continue to rise. No wonder support for independence is rising. Increasingly, the people of Scotland want no more of this Government. Scotland needs a Government who govern for all the people with all the powers of an independent country. That is what the people of Scotland will choose.
Mick Whitley (Birkenhead) (Lab)
I draw the attention of the House to my entry in the Register of Members’ Financial Interests. Across the country, the British people are waking up to the fact that a Tory promise is an empty promise. From tax hikes on the lowest earners to drastic reductions in our food and environmental standards, and now the triple lock on pensions, this Government have made it absolutely clear that their manifesto commitments just are not worth the paper they are written on.
This latest U-turn could hardly have come at a worse time. Having endured immense suffering during the pandemic, retired people are now being forced to grapple with the fallout of the Government’s incompetence, from rising inflation to food shortages, and now we have soaring energy prices just as we enter the coldest months of the year. Pensioners are being told they must survive on the lowest state pensions in all of Europe.
The last Labour Government proudly set themselves the goal of ending pensioner poverty in our country, and when they left office, the number of retired people in poverty was at a historic low. After more than a decade of Conservative Governments, nearly a fifth of pensioners are languishing in poverty, with women and black and minority ethnic pensioners disproportionately affected. As the nights draw in and temperatures begin to fall, many older people in my constituency of Birkenhead will be forced to choose between putting a hot meal on the table and heating their homes. As they do, they will undoubtedly be asking themselves how they can ever trust this Government again.
The Secretary of State has justified this measure as a temporary response to the extraordinary conditions created by the pandemic and said that it is impossible to accurately estimate underlying earnings growth. She must now commit to publishing the advice she has been given on this issue.
Millions of people across our country are filled with a sense of dread at the prospect of the coming winter, from overworked and underpaid healthcare workers to families struggling to get by on universal credit. Pensioners are not being and will not be spared from a cost of living crisis that is engulfing our poorest and most vulnerable communities, but that will be nothing compared with the suffering that will be inflicted on retired people in winters to come if the triple lock is not reinstated again in 2023.
As Age UK has warned, we have simply no hope of tackling pensioner poverty without an absolute commitment to the triple lock. As many of my retired constituents look fearfully to the future, I call on the Secretary of State to reaffirm her commitment to the triple lock and to guarantee to the House that this Bill will not be the first step in doing away with this vital safeguard altogether.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
As my hon. Friend the Member for Glasgow East (David Linden) said in his excellent speech from the Front Bench, the UK lags far behind most other industrialised countries when it comes to what its Government spend on its older people and their pensions. Most of the EU spends more. The US spends far more. The vast majority of OECD countries spend more.
It should be clear that that is not an accident of history or just an outcome of circumstances; it is the result of decades of deliberate policy decisions by Governments here, including the current Administration. I must ask the question: what exactly is the point of a triple lock, if at any time the Secretary of State and her Cabinet colleagues can jimmy it open and bust open promises that were made not just once, but multiple times over many years?
Just three months ago the Prime Minister’s official spokesman told us,
“we are committed to the triple lock”,
when asked a direct question about its removal. That pledge existed only for as long as it actually meant anything—as soon as actual expenditure on pensions was involved, those promises disappeared quicker than a Prime Ministerial bridge.
This attack on pensioners’ living standards should not be looked at in isolation. As the families of many pensioners are being hammered by rising energy prices, soaring food prices and shortages, regressive tax raids, the scrapping of free TV licences and the shameful cuts to universal credit, this Bill is just the latest attack on the social contract and the welfare state. Those rising energy prices threaten to put more pensioner households into fuel poverty, and removing the triple lock will magnify that impact. Already more than half of single pensioners live in fuel poverty, while 13% of older households live in extreme fuel poverty. Those numbers will undoubtedly grow if today’s Bill is passed. In a wealthy, energy-rich country such as ours, that is an absolute disgrace.
The Bill is not only a betrayal of older people around the country, but economically illiterate. The Government are reducing the spending power available in our economy at the very time our industries need that consumer spending as part of the recovery from covid. The same argument can be said for the shameful cut in universal credit, which could be happening at scarcely a worse moment for all the reasons I have outlined. Moreover, we know that almost every penny of that uplift went directly into the economy, because people had to keep food on the table, clothe their children, keep the lights on and stay warm. The Government will look back on this moment with deep regret, I guarantee it. The political consequences will only be outweighed by the social and human consequences.
The £4.5 billion that the Government propose to keep from pensioners is money that could be circulating in our economy, supporting jobs and businesses on our high streets, stimulating demand in our producers and manufacturers and supporting the recovery. With this change, that money will be lost from our economy and from the job-creating cycle. Pensioners in this country, as has been outlined already, should know that what is offered by the UK Government, and the system they have created, is far below almost every EU country. This Bill is another attempt to decouple the UK from the European and global mainstream, in social security as in so many other areas of life.
Attacking the welfare state has been this Government’s hallmark since the current Prime Minister came to office, since his predecessor came to office, and since her predecessor came to office. Indeed, one can look through the books of Tory Prime Ministers going back decades and pick out one ideological attack after another, not least the disgraceful way that successive UK Governments have treated the WASPI women. If this cut saw the money saved kept in the DWP budget, the Government could at least argue that they were diverting money to different priorities—I do not accept that that would be necessary, but it would at least have some logic to it. However, that is not what is happening. Instead, the Government’s social security policies, combined with the more general havoc they are wreaking on the economy, will leave millions of pensioner households worse off.
In conclusion, the Bill is more evidence of how the UK’s welfare state is becoming something for the history books, rather than a living system. We are a long, long way from the days of Beveridge and the five giants. It is not a route we in Scotland wish to continue down. The UK is sowing the seeds of its own demise by providing its own contrast between an island that forces pensioners and millions more into deeper and deeper poverty while the fat cats continue to collect the cream, with a Europe where security of retirement is a fundamental right supported by the state. In case you have not got the gist yet, Madam Deputy Speaker, I will be voting for the amendment.
Jim Shannon (Strangford) (DUP)
It is a pleasure to speak in this debate and to follow others who have made points very clearly. I support trying to get our finances on an even keel after the massive unexpected expenses of covid, yet something within me balks at what again seems to be a raid on pensioners’ incomes. Is it not so that the Library statistics outline that the potential costs of uprating the triple-locked elements of the state pension by 2.5%, instead of 8.3%, saves £5 billion in state pension expenditure in 2022-23? That seems to be the greater consideration, rather than fairness and equity. Perhaps the Government should be giving more indications of the effect, especially on pensioners.
I spoke to the Minister before the debate. He was kind to come to confirm some matters with me. When he winds up the debate, will he confirm the impact, how this Bill will affect Northern Ireland and how the process will go forward? Northern Ireland pensioners are paying more for products due to the intransigence of the EU perhaps, and they need this additional funding to pay sharply rising costs. Items that cost £1 just a while ago now cost £1.29. We must address the deficit, but that cannot be done fairly through overly taxing those who have paid all their lives and having them shoulder more of the burden than those who can afford to pay more.
I endorse the comment of the hon. Member for North Ayrshire and Arran (Patricia Gibson) on the WASPI women; my constituency very much falls into the category of others. I think her words were “poorer in retirement”, and I see some of my constituents in that same place.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
I want to raise the plight of the 4% of UK pensioners who are excluded from the Bill and have had their state pensions frozen because they happen to live in the wrong country. All pensioners who have paid their dues should be entitled to the full uprated state pension, yet half a million British pensioners living around the world have been left behind year on year. Does the hon. Member agree that it is disgraceful to be leaving our pensioners in that situation without dignity, financial security and respect and that the Government must address those frozen pensions?
Jim Shannon
I wholeheartedly endorse that. It is always good to have these debates to which others bring their knowledge and information, and the hon. Lady highlights something that clearly needs to be addressed. Perhaps the Minister can give us an indication on that when he concludes the debate.
We should be cementing, investing and encouraging business growth that pays into the Treasury in a natural manner. The hon. Member for North East Fife (Wendy Chamberlain) referred to her reasoned amendment, which I think shows what those of us on the Opposition Benches are thinking. This is a difficult topic, and I am aware of the pressure of covid-19 on the economy and how my grandchildren—and perhaps their children—may be paying for it throughout their lifetimes. However, I am concerned about how we recoup the money. It cannot be through overly taxing those who have paid all their lives and seeing them shoulder the burden more than those who can afford to pay more. We need—this seems to be a slogan—to stop squeezing the middle class. We should be investing in and encouraging business growth.
Others have referred to pension credit. When I am on the doorstep or at a social occasion, there is not an occasion when I do not speak to someone in that bracket and ask them, “Are you getting all your benefits? Are you getting your tenant’s allowance? Are you getting your pension credit?” Unfortunately, more often than not, many of those people are not getting their benefits. The Government have a role to play in ensuring that those who are not aware of a benefit know that they should be getting it. Will the Minister remind us of where we stand on that?
The figures for Northern Ireland are quite scary: 15% of pensioners—some 43,000 people—are in fuel poverty and overall poverty. That concerns me. Perhaps the Minister can address that. The right hon. Member for East Ham (Stephen Timms) when referring to universal credit mentioned in passing his reasoned amendment, which was not selected. He also said that, whenever furlough ends, many families will find themselves in a difficult position. I subscribe to that view, as does probably everyone on the Opposition Benches. In Northern Ireland, we are facing gas bill rises of some 35% as winter comes in hard, and those who live in Housing Executive or housing association accommodation that has been converted to gas heating face the double whammy of not just how their pensions are affected but by the cut to universal credit, and they will be squeezed more than ever. Pensioners will therefore be impacted unfairly. This winter will see increasing pressure on pensioners and many more than the 15% will fall into that category.
The right hon. Member for East Ham also referred to those in work, and I will give one quick example from a constituent. This lady said:
“You make a third of your money when you do overtime for the benefit you lose, so I am paid £3 an hour in real terms. While I do take the overtime offered to me if I am able to do it, I can also understand why others don’t. Making up £20 a week is not as easy as many would have us believe today.”
I have long opposed the cut to universal credit, especially as we are coming into winter, when there are additional costs. For the sake of working families in my constituency, I must add my voice to those calling for the money saved by this uprating change and other methods to be factored into the ability of families to afford the gas price increase. We are thinking of capping the pension increase for the most vulnerable sector of people without a real review of how their living costs will increase this year. I do not feel that we can comfortably do that with the limited information provided. Given the increase in the cost of living, as I think the right hon. Member for East Ham said, many will face the stark choice of whether they have a meal or turn the heat on. Those are cold realities for many people.
As we see rises in the cost of living in Northern Ireland, with 20% rises in the cost of food and fuel in the next few weeks, I say with great respect to the Minister and the Government that I must support my pensioners and stand with them. I will support the reasoned amendment and oppose the Bill. The Bill is not right, so I cannot support it.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Thank you, Madam Deputy Speaker, for calling me to close the Bill’s Second Reading for the Opposition. We have heard many good speeches, but, before I turn to them, I want first to deal with the central case that the Government have made for the legislation.
As my hon. Friend the Member for Reading East (Matt Rodda) set out in opening for Labour, Opposition Members accept that there has been an anomaly in the earnings data due to the pandemic, and we recognise that a solution is required. I have listened carefully to passionate speeches from colleagues across the House, but I simply do not believe that anyone in the UK believes that wages are rising at 8.3% in real terms across the board. If I were to put that case to my constituents, I think they would very much question my judgment. However, as we said since the announcement was made, the duty is on the Government to explain why their preferred solution—a move to uprating by inflation or 2.5%—is the right one. That duty is particularly important because the triple lock was a Conservative manifesto commitment and, as many hon. Members pointed out, the announcement to break it has come after a series of decisions to break other Conservative manifesto commitments. It is therefore reasonable that the burden of proof lies on the Government and that the threshold for support should be high.
We have had some valuable contributions. The hon. Member for Glasgow East (David Linden) was right to highlight the trust in the Government stemming from the decisions of the last few months. He was also right to point out figures that show that the number of pensioners living in poverty taken by the measurement that he indicated—those living with an income below 60% of the median after their housing costs—is rising. Given that we know overall spending on pensions is going up every year by quite considerable numbers, why are we also seeing that rise in poverty? That is a question for us all and one on which we may need more time in future.
The hon. Member favours auto-enrolment, and I very much agree. The question is about how to do that in a post-pandemic environment. He will understand, however, that I cannot agree when he posits that Scottish independence might be the solution to some of those problems, because an independent Scotland would clearly face some difficult economic decisions in its own right. I do not think it is necessarily helpful to put that across.
David Linden
Yes, an independent Scotland would face difficult economic decisions, but does the hon. Member accept that the central point of independence is about people in Scotland—the people who live and work there—making those economic decisions?
Jonathan Reynolds
I understand the basis of any nationalist claim for any sense of self-determination, but—this debate may be taking us a little away from the pensions uprating discussion, Madam Deputy Speaker—we all live on these islands together and, when we look at difficult economic decisions, the strength that we have by being a Union is of benefit to us all. [Interruption.] I will come to the speech by the hon. Member for North Ayrshire and Arran (Patricia Gibson), but I do not think there is time for a debate on Scottish independence as part of our discussion of pension upratings.
The hon. Member for Runnymede and Weybridge (Dr Spencer) made a brave case that the Government might actually lose trust if they held to their manifesto commitments, and I admired the style in which he did it. He wanted a wider debate on the earnings lock, but I would respectfully have to disagree with him on that. I do believe there is a need to maintain the value of the state pension and the objectives of the triple lock are ones we should keep to—many of the reforms in Parliament since I have been here have been based on a provision for the triple lock to take place—but I did appreciate his speech.
The hon. Member for Amber Valley (Nigel Mills) made, as ever, a thoughtful contribution. He questioned the ability—my hon. Friend the Member for Reading East raised this in his opening remarks—to analyse the underlying wage trend taking away the impact of the pandemic. The hon. Member for Amber Valley will know that that has been an open question, and several organisations have tried to do a piece of work on it. Ultimately, I do agree that it is challenging to do so in a way that is unchallengeable, and that is a fair point to make when looking at possible alternatives.
My right hon. Friend the Member for East Ham (Stephen Timms), the Chair of the Select Committee, pointed out that pensioner poverty is rising, as the hon. Member for Glasgow East did, and I think that has to be central to our discussions. My right hon. Friend the Member for East Ham made the point repeatedly that the question must be how we can increase the take-up of pension credit. He has raised this point consistently, and I know there has been some engagement with the Government Front Bench on it, but I think there is strong support for his words from all sides whenever he raises it. Of course, I believe he was absolutely right to raise the juxtaposition of the decision today with the cut to universal credit, and I believe the case is getting stronger every single day not to proceed with the Government’s cut.
The hon. Member for Wantage (David Johnston) raised pension upratings in the past. He will not, I think, mind my saying that if we look at the position say in 1997, when the Labour Government came to power, we see that a third of all pensioners back then lived in poverty. There was a very strong correlation in those days between growing old and being in poverty, and that was reduced to record low levels by the end of that Labour Government, so the record has to be considered in the round. However, I do agree with him, and I have said this myself, that I reject discussion of pension uprating as an issue of intergenerational conflict. I think it is very much about the value of the state pension when today’s workers do retire, and we should never forget that.
The hon. Member for North Ayrshire and Arran also highlighted the lack of trust stemming from recent Government decisions to break successive manifesto commitments. She obviously strongly opposes this measure. I think what is required is more engagement with the issue of whether the data we have before us is a true and accurate reflection of what we believe is happening in our constituencies. I have said very clearly to her that I do not believe that level of wage growth is the real picture, certainly in a constituency such as mine. Where I do agree with her is that coming, as this decision has, after other manifesto commitments have been broken, that is the context in which our constituents will look at what is happening.
My hon. Friend the Member for Birkenhead (Mick Whitley) also reflected on the run of broken promises and how this has come across to the public. He is absolutely right on pensioner poverty and absolutely right to demand transparency from the Government on this decision and commitments to reassure his constituents.
The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) raised the cost of living, and I think that case is getting stronger every day. Again, we will not dwell on it, but I do not believe his analysis of independence as the answer to that is the right way forward.
The hon. Member for Strangford (Jim Shannon) was not convinced of the Government’s case either. He was also right to raise particular issues in Northern Ireland about the post-Brexit trading situation and the impact on his people as a result—something about which I think all the House shares concerns. Of course, he is again absolutely right about the impact of the universal credit cut.
However, there is no doubt that the most valuable contribution and perhaps the one of most interest was from the former Secretary of State for Work and Pensions the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith). Again, we have heard in the debate, and it is something I have said myself, that the triple lock is not a straightforward question of an intergenerational clash, and I know some people have concerns about linking the two issues together. However, I do believe he was right to raise—and to attempt to have his own amendment on—the impact of that universal credit cut, which we discussed in depth last week. I believe that the case against it gets stronger with every single day, and I would appeal to noble Lords in the other place to give this matter the due consideration that has not quite been possible today, but is still very valid.
On the reasoned amendment moved by the hon. Member for North East Fife (Wendy Chamberlain), this is an opportunity to discuss the wider context in which this decision has been taken and it makes reference to the universal credit cut that is imminent. However, while the amendment makes passing reference to that, its main argument is that there has been no anomaly, which is not the position of the Labour Front Bench. I can tell the House that I have had my own discussions with the Office for National Statistics, and I am very satisfied that the case for the 8.3% figure is, frankly, unsound.
I know there is an argument for simply insisting on a rise of 8.3%, but I do not believe that that is a responsible course of action. We make the case for the Government to change course on the universal credit cut, but that is because the Government can do so, it is the right decision and it is very much in the national interest, but I do not think, frankly, that the same factors apply to the decision before us today. Again, it goes back to whether we ultimately believe that that is the correct rate of wage growth or earnings growth across the economy as a whole.
For that reason, I will not be supporting the reasoned amendment, and I do not see much merit in dividing the House on Second Reading. However, we will be seeking to interrogate the Minister during future stages of the Bill, and we will be looking for the reassurances and that transparency we have sought since the original decision and announcement were made. Therefore, we look forward to the remaining stages of the Bill.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I thank the 13 colleagues who have contributed to a wide-ranging debate. The Bill makes technical changes to set aside the earnings link for 2022-23. We will instead increase the relevant pensions and benefits by at least the higher of inflation or 2.5%. This approach will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living, but it will also take into account the difficult decisions elsewhere across public spending.
The practical reality is that many issues were raised tonight, not least pensioner poverty. I would respectfully remind the House that pensioner poverty is going down, not up. As a result of the triple lock since 2010, the full yearly basic state pension has increased by £2,050 in cash terms. There are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, as compared with 2009-10, and material deprivation—an alternative way of measuring poverty—is at an all-time low of 6% of pensioners.
Guy Opperman
One second.
It is worth reminding ourselves that the spending on state pension used to be £99 per person, and less than £60 billion in total—when in fact the right hon. Gentleman was the Pensions Minister under the Labour Government. Those figures are now up to £137 or to £179, and to £105 billion.
Stephen Timms
I am very grateful to the Minister for giving way, and I am delighted he is still in his post. He talked about pensioner poverty, but rather idiosyncratically, he is using the absolute measure. The much more widely used measure is the relative measure of poverty, on which the analysis of Independent Age is based, and on that much more widely used measure, pensioner poverty is of course going up.
Guy Opperman
I am not going to repeat the points I have made, but I manifestly disagree with the right hon. Gentleman. I would point out that we could add on the £24 billion of top-ups that this Government put forward over and above the £105 billion of state pension, so with respect we are in disagreement. There is also a significant degree of support for winter fuel, NHS prescriptions, free eye tests, the over-75s free TV licence and a variety of other matters.
Guy Opperman
No, not for the moment.
SNP Members raised many points, and I want to address them. No mention was made, surprisingly, of the powers under sections 24, 26 and 28 of the Scotland Act 2016, which give the Scottish Government the ability to intervene on such matters, should they wish to do so, including the WASPI matters. No mention was made in answer to my hon. Friend the Member for Moray (Douglas Ross), who asked what currency an independent Scottish pension would be paid in. No mention was made of the ability to pay Scottish pensions upon independence, because of course answer there is none.
Reference was made to pension credit take-up, and I want to address the points made.
Guy Opperman
I am about to answer the points the hon. Lady raised specifically, if she will bear with me.
Pension credit take-up was raised. We are doing a variety of things on that, including the pension credit awareness day in June, the engagement with the BBC—I met its chief executive only last week—the stakeholder roundtable in May, and the working group established with all the key partners in this matter, let alone the various other ways in which we have changed things and the over 11 million communications to pensioners up and down the country. The Government are proud of their record.
Guy Opperman
I will give way to the hon. Gentleman for the last time, because I respect him so much.
Jim Shannon
I appreciate the Minister’s response tonight in relation to pension credit, but in Northern Ireland 15% of pensioners are consistently in fuel poverty and poverty overall. Is the Minister prepared to give extra emphasis to Northern Ireland and help us beat that pensioner poverty?
Guy Opperman
I am reminded by the Secretary of State that that is a transferred matter, and the hon. Gentleman will be aware that pension credit take-up is increasing, as is the amount of pension credit going to individuals.
I must turn briefly to the reasoned amendment, which was put forward by a solitary Lib Dem—admittedly, there are not many of them in 2021 so I understand that. It used to be a serious party—a party that understood the fiscal pressures facing Government. Now, to be blunt, it is being reduced to a party of protest, with, it seemed to me, about 15% of its MPs conducting their party conference in the backroom of a Travelodge somewhere on a business park. The practical reality is that the party of Asquith, Gladstone, even Ashdown, is now putting forward something devoid of ideas. It is a party of protest. and we do not agree with it in any way.
We are proud of the fact that last year, when we had no obligation to do so, we took the dramatic and important decision to raise the state pension by 2.5%. We will be raising the state pension by prices or 2.5% when this Bill passes, and pensioners will be protected on an ongoing basis, so I commend the Bill to the House.
Question put, That the amendment be made.
Social Security (Up-rating of Benefits) Bill
Monday 20th September 2021
(3 years, 2 months ago)
Commons ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 20 September 2021 - large print - (20 Sep 2021)
19:46 - The Committee divided: - Ayes: 58 / Noes: 304 - Question accordingly negatived.
20:04 - The House divided: - Ayes: 303 / Noes: 52 - Question accordingly agreed to.
The Chairman of Ways and Means (Dame Eleanor Laing)
Before I ask the Clerk to read the title of the Bill, I should explain that although the Chair of the Committee would normally sit in the Clerk’s chair during a Committee stage, I will remain in the Speaker’s chair while we still have the screens around the Table. I will be carrying out the role not of Deputy Speaker, but Chairman of the Committee. The occupant of the chair during the Committee stage should be addressed as the Chair of the Committee, rather than as Deputy Speaker.
Clause 1
Up-rating of state pension and certain other benefits following review in tax year 2021-22
Question proposed, That the clause stand part of the Bill.
The Chairman
With this it will be convenient to discuss the following:
Clause 2 stand part.
New Clause 1—Review of public health and poverty effects—
“(1) The Secretary of State must review the public health and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the day on which this Act is passed.
(2) A review under this section must consider—
(a) the effects of the provisions of this Act on the levels of relative and absolute poverty in the UK,
(b) the effects of the provisions of this Act on socioeconomic inequalities and on population groups with protected characteristics as defined by the Equality Act 2010,
(c) the effect of uprating benefits in line with price inflation instead of earnings growth under this Act on inter-generational income distribution and fairness,
(d) the effects of the provisions of this Act on life expectancy and healthy life expectancy in the UK, and
(e) the implications for the public finances of the public health effects of the provisions of this Act.”
This new clause would require a review of the impact of temporarily linking the state pension and other benefits covered by this Bill with price inflation rather than earnings growth.
New clause 2—Review—
“(1) The Secretary of State must, no later than 6 months after the date on which this Act is passed, lay before Parliament a report containing an assessment of the impact of this Act on levels of poverty among pensioners in—
(a) Scotland,
(b) Wales, and
(c) England.”
This new clause would require the Secretary of State to lay before Parliament an assessment of the impact of the uprating next year by price inflation instead of earnings growth on levels of pensioner poverty in Scotland, Wales and England (the Bill does not extend to Northern Ireland).
Guy Opperman)
This is a short, two-clause Bill that sets out the way in which we will go from a triple lock to a double lock. I have set this matter out on Second Reading in great detail and I respectfully beg to move.
Matt Rodda
I want to speak to the new clauses tabled in the name of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) and the hon. Member for Glasgow East (David Linden).
As we heard on Second Reading, there are a number of important areas that the Government seem to have overlooked. Those failures and omissions are part of a pattern of behaviour by the Prime Minister and his Government. They show a casual approach to their responsibilities. As a result of that behaviour, they are undermining trust in the Government. The Government’s approach could have a damaging effect on millions of pensioners and indeed on the public as a whole.
Before turning to the amendments, it is worth considering the fact that the Government have still not offered any reassurance on their commitment to the triple lock in the long term. It is still not clear whether Ministers are leaving the door open to scrapping this important policy. I ask the Minister and the Secretary of State to set out a meaningful commitment to the triple lock, justify the decision to remove the earnings link, and explain why the Government have not found a way to keep the link, such as by providing a link to earnings over a longer period of time. With three broken promises in just a few short weeks, the Government have little credibility left and they now need to rebuild trust in this important area of policy, and in their work as a whole.
On the new clauses, colleagues from across the House are right to raise concerns about pensioners, particularly those on lower incomes. Recent research published by the Joseph Rowntree Foundation reiterates this. While there was a “dramatic reduction” in pensioner poverty between 1997 and 2012, the last few years have seen that progress “unravel”. House of Commons Library research shows that before housing costs, 19% of pensioners were living in poverty. After taking housing costs away, 18% were living in poverty. The problem is much worse for women than for men. Women make up—
James Gray (North Wiltshire) (Con)
On a point of order, Dame Eleanor. I am sorry to interrupt the hon. Gentleman, but I am just a little puzzled. I understood, looking at the Annunciator, that we were discussing clause 1 stand part, rather than amendments to clause 1. I just wondered precisely what we are doing here.
The Chairman
I thank the hon. Gentleman for his very reasonable point of order. Although each part of the Committee stage stands separately, I have decided that, as laid out in the selection list which should be available in the Lobby, we will discuss all matters in one group, especially as this is a short Bill with only four separate matters for discussion. The hon. Member for Reading East (Matt Rodda) is therefore absolutely in order to refer to any part of the Bill during this part of the proceedings.
Matt Rodda
In conclusion, these are sensible amendments which recognise the risks in the approach being taken by the Government. They offer a way of providing important information to Ministers and they could indeed alert them to potential problems with the Government’s approach. The new clauses also offer important safeguards for pensioners, and I hope the Government will consider them thoroughly. Given the Government’s dreadful record of playing fast and loose with manifesto commitments, it is the very least we can expect from them.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I rise to speak to new clause 1 in my name and on behalf of my colleagues.
New clause 1 compels the Secretary of State to assess the impact of the Bill on poverty, inequality and, subsequently, our health. In particular, I request that a report be laid before the House within six months of the passing of the Act, and that the effects of the provisions in the Act on socioeconomic inequalities and population groups with protected characteristics as defined by the Equality Act 2010 are considered.
We have heard a lot in recent months—it seems like many years—about levelling up and building back better. We even heard from the Prime Minister himself that he supports Professor Sir Michael Marmot’s call to build back fairer. To do that, however, we need the Government to be able to assess whether their policies will actually do that. We heard, in the Work and Pensions Committee, that that is difficult to do. I argue very strongly that that is not the case and I know there are many others who would argue similarly.
The House will recall that, in February 2020, Sir Michael published his review of health equity in England 10 years after his initial study. In it, he revealed that instead of narrowing, health inequalities, including how long we are going to live and how long we will live in good health, have actually got worse. Most significantly, his analysis showed that, unlike the majority of other high income countries, our life expectancy was flatlining. For the poorest 10% of the country it was declining and women were particularly badly affected. We heard earlier that 2 million pensioners live in relative poverty today; among women of state pension age it is one in five. For women of colour, the figure is even higher. Black and Asian pensioners are also twice as likely to be living in poverty as white pensioners.
Sir Michael also emphasised that it is predominantly the socioeconomic conditions that people are exposed to, not the NHS, that will determine their health status and how long they live. Analysing the abundant evidence available, he attributed the shorter lives of people in poorer areas, including in parts of my constituency in Oldham and in the north-west as a whole, to the disproportional Government cuts to local public services, including cuts in social security support that they have experienced since 2010.
And then the pandemic hit. As a former public health consultant, I can say this with absolute certainty: it was always a question of when, not if there was going to be a pandemic. The lack of pandemic preparedness, going back to the Cygnus report and before, as well as the woeful pandemic management, laid bare the pre-pandemic structural inequalities that are rife across the country.
Many believe that the structural inequalities driven by the Government cuts that I have referred to, including social security cuts, will be found responsible for the UK’s high and unequal covid death toll, with the fifth worst covid mortality rate in the world and the worst in the EU. In an early analysis of the reasons for that, Sir Michael’s Covid review last December summarised four key pre-pandemic factors.
The first was pre-existing and widening inequalities in social and economic conditions, particularly in power, money and resources; Sir Michael stated that those inequalities in life had led to inequalities in health. The second was our governance and political culture, not just before the pandemic but during it, which he described as divisive, damaging social cohesion and de-emphasising the importance of the common good. The third was Government austerity over the last 10-plus years; he referred particularly to cuts to social security and local authority budgets, including in adult and children’s social care, public health and education. The final factor was our pre-existing poor and declining health.
Sir Michael makes a number of recommendations to build back fairer, including increasing the adequacy of social security spending. Our focus in this debate has been on state pensions, but the cuts of £36 billion to working-age social security support over the past 11 years and the impact that they will have on increasing poverty rates—including as a result of the universal credit cut that we are expecting—must not be underestimated.
Improving our health and wellbeing must be a priority for this Government and an outcome of all our policies, including our economic and public spending and social security. My new clause is about ensuring that the Secretary of State recognises that and publishes a review of the impact of social security spending on poverty, inequality and, ultimately, our health. Given that the Prime Minister and Health Secretary have already stated that they support Sir Michael’s recommendations and that this is a means to implement levelling up, I hope that the Secretary of State will adopt my new clause in the Bill.
David Linden
I do not seek to detain the Committee for long, not least because I spoke on Second Reading and because there are only two amendments before us.
In speaking to my new clause 2, which stands in my name and that of my hon. Friends, I also offer support to new clause 1, which stands in the name of the hon. Member for Oldham East and Saddleworth (Debbie Abrahams). In truth, the two new clauses, although worded differently, seek to do much the same thing: hold the Tory Government’s feet to the fire, not simply allow them to stick their head in the sand when it comes to pensioner poverty.
I bitterly regret that the Bill got a Second Reading, particularly with the help of Scottish Tory MPs, but as the Bill will soon be an Act, it is now incumbent on us to ensure that at least Ministers fully understand the sheer impact of such bad legislation on our constituents and the consequences of this Government’s ditching yet another manifesto pledge to pensioners about the triple lock.
Patricia Gibson
Does my hon. Friend share my disappointment with the Minister, who talked earlier about how the Scottish Government should top up the income that pensioners would be deprived of? The Minister knows full well—if he does not, it is worrying— that section 28 of the Scotland Act 2016 forbids the Scottish Government from topping up pensioners’ benefits except
“by reason of old age.”
I am sure that the Minister is well aware of that.
Does my hon. Friend also share my view that rather than expecting the Scottish Government and the Scottish Parliament to continually clean up the injustices of this Government, we would be far better off having all the powers to prevent injustices in the first place?
David Linden
I would caution the Minister that my hon. Friend, a former teacher, is not someone whose office or classroom he would want to be summoned to for a telling off. She has quite eloquently set him right on what I am sure was inadvertent misleading of the Committee.
I will return to new clause 2, because I would not want to stray too far from matters before the Committee. My new clause would require the Secretary of State to lay before the House an assessment of the impact on levels of poverty of the uprating of state pensions next year by price inflation instead of earnings growth.
During the Brexit referendum, we were repeatedly told that Parliament would be taking back control. My new clause would merely require Ministers to be transparent and lay before Parliament an impact assessment of poverty, which I am sure any responsible Government would undertake. If indeed Parliament is taking back control, I am sure that agreeing to the new clause will be no problem at all for the Minister; I therefore hope that he will not oppose it. I commend new clause 2 to the Committee.
Guy Opperman
The answer to the question asked by the hon. Member for Glasgow East (David Linden) is that this is a one-year-only Bill and that the triple lock will resume after its duration. In respect of the requirement for a report, he and the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) should be aware that the Department already collects and publishes a wide range of data in this policy area, which is published annually in the HBAI—households below average income —series of reports. In fact, I have a copy here, which is available on gov.uk; the most recent report is dated 25 March 2021. I can assure the Committee that the Government will continue to publish actual data on public health and poverty as it becomes available, but no specific data would be available by May 2022, as is sought.
I will not go into what the powers are under sections 24, 26 and 28 of the Scotland Act 2016, but I can assure the hon. Member for North Ayrshire and Arran (Patricia Gibson) that I disagree with her view. I maintain that the powers are there under the Act.
In the circumstances, I ask hon. Members not to press their new clauses.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
New Clause 2
Review
“(1) The Secretary of State must, no later than 6 months after the date on which this Act is passed, lay before Parliament a report containing an assessment of the impact of this Act on levels of poverty among pensioners in—
(a) Scotland,
(b) Wales, and
(c) England.”—(David Linden.)
This new clause would require the Secretary of State to lay before Parliament an assessment of the impact of the uprating next year by price inflation instead of earnings growth on levels of pensioner poverty in Scotland, Wales and England (the Bill does not extend to Northern Ireland).
Brought up, and read the First time.
David Linden
I beg to move, That the clause be read a Second time. I know that the hon. Members who suspended proxy voting and brought back in-person voting will be very keen to vote tonight, so I would like to divide the Committee on the new clause, which stands in my name and in that of my hon. Friends.
Question put, That the clause be read a Second time:—
Matt Rodda
As we start this debate on Third Reading, I want to reflect on what we have discussed so far in this important piece of legislation. The House has considered a number of issues relating to the Bill, and we will soon pass it over to the other place. Before we do so, we still have an opportunity to improve the legislation and to stand up for the interests of pensioners. Even at this late stage, I would like to ask the Government to consider a series of sensible, helpful points made from across the House. Taken together, these measures could make a substantial difference to the Bill.
The Government are breaking a manifesto promise. Parties across the House supported the triple lock in their manifestos in 2019, and this is a question of trust. Breaking their promise on the triple lock is the third time the Government have broken a manifesto commitment in just a few weeks. Trust in this Government has fallen dramatically, and I am afraid to say that their reputation is in tatters. We understand the difficult situation with the anomaly in earnings. However, it is down to the Government to find a way to protect the triple lock and deal with the anomaly in the earnings data.
We have asked Ministers to take a few simple steps to address the issue. First, we have asked them to be honest about the data showing a temporary increase in earnings. Secondly, we have asked them to find a way to address it while maintaining the earnings link. We have suggested using an average rising earnings over a longer period of time. Thirdly, if the Government are to address the anomaly, will they report back on the impact on pensioners’ incomes and take a real interest in the difficulties faced by millions of pensioners on low incomes? Those are all sensible measures that should be part of the good governance of this country.
We have discussed this issue in some detail today, and the Government must be clearer with pensioners. However, there is no need to take it further today and we would not want to divide the House on Third Reading. I remind Conservative Members that trust in the Government is wearing very thin, so let us hope that they will now listen to the House and to the public and show that they are concerned about such important matters.
David Linden
I have already outlined my view of the Bill on Second Reading. I am disappointed that the Government chose to reject our new clause 2 in Committee, but in the interests of brevity I will not go over old ground, not least because I am conscious that we have more legislation to consider this evening.
As is customary, I want to thank all hon. and right hon. Members for the good-natured if robust debate that we have had during proceedings on the Bill. I also want to thank and pay tribute to the ever helpful Clerk of Legislation for their support and advice to me and our lead researcher on the Bill, Zoe Carre, who will be leaving Westminster for pastures new next month. I hope you will indulge me for a moment, Madam Deputy Speaker, when I say that Zoe has been a pleasure to work with on the inclusion and wellbeing team and will be sorely missed by all of us in the SNP group in this place.
By passing this Bill unamended tonight, the House will be agreeing with the very legislation that allows the Government to break their promise to our constituents that there would be a triple lock on pensions. The SNP will continue to stand firm against this Tory Government’s attack on the pensions triple lock, because we believe that an adequate state pension is essential to ensuring dignity and fairness in retirement. It is clear that the British Government will continue to ride roughshod over our pensioners and that the only way to protect Scotland’s pensioners from more Tory austerity is with the full powers of independence. I look forward to making that case during the upcoming referendum, which we all know is on the horizon. I just wonder whether those in the no campaign will be as misleading this time when it comes to pensions, because if they are, they will need plenty of polish for their brass necks.
Guy Opperman
I want to put on record my thanks to my private office and the policy teams at the Department for Work and Pensions. I also want to make it very clear that this is a one-year Bill, by reason of the pandemic, and that the triple lock will resume after the Bill’s duration. We increased the state pension by 2.5% last year and we will increase it by 2.5% on prices this year. We spend £129 billion on pensioners—that is £105 billion on the state pension and £24 billion on the top-up benefits—and this Government will continue to support pensioners now and on an ongoing basis. I commend the Bill to the House.
Question put, That the Bill be now read the Third time.
Social Security (Up-rating of Benefits) Bill
Monday 11th October 2021
(3 years, 1 month ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Amendment Paper: Committee of the whole House Amendments as at 20 September 2021 - large print - (20 Sep 2021)
Social Security (Up-rating of Benefits) Bill
Wednesday 13th October 2021
(3 years, 1 month ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 20 September 2021 - large print - (20 Sep 2021)
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, each year the Secretary of State is required by the Social Security Administration Act 1992 to undertake a review of social security and state pension rates to consider whether benefits have kept pace with inflation or, in some cases, the increase in earnings. This review is due to begin shortly, and the Secretary of State will report to Parliament in November.
The Bill before us suspends for one year the requirement to undertake a review of trends in earnings and to increase certain rates in line with those trends. This is because the effects of the Covid-19 pandemic have caused distortions in the labour market, which have been reflected over two years in highly atypical trends in earnings growth. Last year, they slumped by 1%; this year, we expect them to increase by over 8%.
The Bill therefore replaces the link with earnings, for one year only, with a requirement to increase these rates at least in line with the increase in prices, or by 2.5%, whichever is higher. The relevant rates are: the basic state pension; the full rate of the new state pension; the standard minimum guarantee in pension credit; and survivors’ benefits in industrial death benefit. Normally, the Secretary of State considers a specific reference period to measure earnings growth as part of her review. That same earnings reference period has been used for the past decade.
In preparing for the review last year, we saw an unprecedented fall in average earnings as a result of the Covid-19 restrictions we introduced to protect lives and the NHS. That is why we changed the law for one year to set aside the earnings link; otherwise, these state pensions would have remained frozen. The Secretary of State then decided to increase most of the relevant rates by 2.5%, once she had completed her assessment of the increase in prices, which was 0.5%, as measured by the consumer prices index.
As we prepare for this year’s review, the economic context is very different now that our economy and businesses have reopened. Figures published by the Office for National Statistics yesterday confirm an increase in earnings of 8.3%, which is over two percentage points higher than at any time over the last two decades. These growth figures have been distorted due to the slump in wages at the start of the Covid-19 pandemic, along with millions of people having moved off furlough and back into work. The Government do not believe that it would be fair to younger taxpayers to increase these rates by such a high percentage, on top of the 2.5% increase last year, when earnings slumped by 1% and inflation stood at 0.5%.
Therefore, I am seeking the agreement of noble Lords to set aside the earnings link once more in 2022-23. I stress that this is for 2022-23 only; after that, the link with earnings growth will be restored. As I mentioned earlier, in place of the earnings link, the Bill requires the Secretary of State to increase the relevant rates at least in line with inflation, or by 2.5%, whichever is higher. We will know what the relevant CPI figure is on 20 October, prior to Committee.
While we await the actual figure, I can give noble Lords an indication of the increases that will apply to these rates if inflation in the year to September 2021 were 3.3%. This is in the range expected by internal analysis. The full rate of the new state pension would increase by around £309 a year, or around £5.95 a week. The basic state pension and the higher rate of the industrial death benefit would increase by around £237 a year, or around £4.55 a week. The single rate of the standard minimum guarantee in pension credit would increase by around £304 a year, or around £5.85 a week, and the couple rate would increase by around £463 a year, or around £8.90 a week. The additional state pension is not included in the Bill, since the Social Security Administration Act 1992 already provides that it must be increased annually in payment, at least in line with the increases in prices.
I was pleased to meet several of your Lordships between First and Second Readings to discuss the Bill. We covered a number of important matters, including the future of the triple lock, different ways of measuring earnings growth in the economy, the take-up of pension credit, progress on reducing pensioner poverty, and the effects of state pension uprating on the National Insurance Fund. I am sure that these issues will arise in our discussions today, and I look forward to addressing them in more detail in my closing remarks. It is my sincere hope that we can continue to engage in this way as the Bill progresses through the House. Should any noble Lord wish to discuss any part of the Bill between its stages, my door is always open. I propose to hold a further all-Peers briefing in between Second Reading and Committee—details of this will be forthcoming.
In conclusion, the Government believe that it was right to legislate to protect the value of the state pension in 2021-22, despite the decline in earnings by younger taxpayers, who met the cost of doing so. The Government believe that it is right to protect the value of the state pension again in 2022-23, while also protecting the interests of younger taxpayers by suspending, for one year, the link with earnings growth in the unprecedented circumstances brought about by the Covid-19 pandemic. I beg to move.
Baroness Drake (Lab)
My Lords, I recognise that while the 8.3% increase in earnings figure will reflect the exceptional pandemic impact on labour markets, it will not account for all of that increase. I have two real concerns flowing from this Bill and the public debate surrounding it: first, the growing assertion that pensioners have been excessively benefiting over recent years; and, secondly, that the removal of the earnings uplift for this year may be a Trojan horse for removing earnings on a permanent basis.
The state pension provides both an income for existing pensioners and a firm foundation on which workers can save and build for their income in retirement. Providing such a foundation was an integral part of pension policy reforms, which included increasing savings through auto-enrolment and raising the state pension age. It was the stated premise for the new state pension introduced in 2016. The Government presented it to Parliament as supporting pension savings so that current generations of workers had a decent foundation on which to build for retirement.
A fall in the value of the state pension against average incomes impacts existing pensioners but makes future pensioners poorer as their private pension savings would go to replacing the fall in the state pension, rather than improving their overall retirement income. Earnings are an essential part of the uprating formula to avoid future generations becoming poorer relative to average or median incomes and because of the spread of means testing.
Figures published by the DWP and the ONS reveal that in 2020 benefit income, including state pension, was the largest component of total gross income for both pensioner couples and single pensioners. It was 57% for single pensioners, and nearly two-thirds of the total income for single female pensioners was benefit income.
Pensioner poverty, when measured against median disposable income, has risen from 13% to 18%. That dominance of the role of state pension income will persist long into the future and may well increase. Although income from occupational pensions was 32% of total gross income for pensioner couples and 27% for single pensioners, those figures are likely to fall as future generations have declining access to more generous occupational pensions.
Looked at from a regional perspective, in the majority of regions in England, pensioner couples have average weekly incomes below the UK pensioner couple average. This includes the north-east, the north-west, the east Midlands, the West Midlands, Yorkshire and Humber, and London.
Pensioner incomes have been stable for 10 years. In 2020
“pensioners had similar average incomes after housing costs … to … 2010”—
a statement I lifted from the DWP’s own figures and statements. Pensioner average income did increase significantly between 1995 and 2010, which also saw the introduction of the pension credit minimum income guarantee for the most impoverished pensioners.
Although it is clearly beneficial, we should be measured about the extent of the impact of the triple lock, particularly given that most current pensioners reached state pension age before the new state pension was introduced in 2016. For them, the triple lock does not apply to all of their state pension. It does not apply to the state second pension element and yet this accounts for 20% of state expenditure.
The triple lock has also operated at a time of significant cuts to health and social care spending, on which older people are so very dependent. These cuts will have contributed to the slowing down of improvements in life expectancy. We have yet to see how the NHS backlog aggravates that trend. A just-published Imperial College report now reveals falling life expectancy in urban areas such as Leeds, Newcastle, Manchester, Liverpool and others.
Pension credit, the means-tested, minimum income guarantee for the poorest pensioners—for which nearly 2.5 million are eligible but only 1.5 million claim—is not covered by the triple lock. The Government mitigated that omission by an underpin of a cash increase, but not by extending the triple lock. Pension credit is also a passport to other benefits such as reduced council tax and a free TV licence, which some 1 million of the poorest pensioners are missing out on. In the other place, the Minister advised that the department was engaged in a publicity campaign to raise awareness, but there are no figures available on any increase in pension credit claims occurring as a result. That underclaiming will be contributing to the rise in pensioner poverty.
Of course, the state pension has to be sustainable, and there are two key levers for controlling expenditure. One is making the state pension less generous over time, the other is increasing the state pension age. We risk losing sight of the significant accelerated rises in the state pension age already introduced, with more to follow. The number of pensioners has seen a fall. The full basic state pension is 10.3% higher than if it had been earnings-linked since 2011, but some of that gain will be clawed back through benefits and not applying an earnings uplift for this year.
We need to see this in total. Successive Governments allowed the value of the basis state pension to decline relative to earnings, from 26% in 1979 to around 16% by 2008. The Labour Government agreed to restore the earnings link, and the triple lock has resulted in the basic state pension rising from 17% of average earnings in 2011 to 19% in 2020. However, the new state pension has now replaced the basic state pension and the second state pension, and it applies to those reaching state pension age from 2016. It was set, as reported by the Government and the DWP, at a value just above the pension credit guaranteed income for the poorest pensioners, indexed by earnings, which the Government stated was sustainable and reduced pensioner benefit expenditure over the long term as a percentage of GDP, even taking into account the triple lock.
There is a cohort of retired people who are clearly better off, with access to generous occupational pensions, but that should not affect the perceptions of the financial position of pensioners as a whole. For the top fifth of pensioners, the largest source of income was their occupational pension, and they received a larger percentage of their income from earnings. Legitimate intergenerational fairness concerns, when looking at the most well-off pensioners, may be better addressed through the tax regime and national insurance rules for those working over the state pension age. Indeed, the Government have taken such a step in applying the 1.25% national insurance levy to the earnings of those over the state pension age. Weakening the state pension would be regressive, hurting those pensioners who most depend on it, and having the least impact on those who have a larger alternative source of income.
Turning to my second concern: the removal of the earnings uplift provision, even for a year, may be a Trojan horse for its permanent removal. When at the meeting that the Minister referred to, I asked whether there was a guarantee that it would be restored. I had the rather ambiguous answer that that will have to be argued next year.
The OECD figures reveal that in the UK, the average earner receives a replacement rate of income of 28.4% at retirement from the state pension, well below the OECD average of 58.6% and the EU average of 63.5%. However, in the UK, when workplace pensions are included, the net replacement rises to 61% compared to OECD and EU averages of 65.4% and 67% respectively. That tells us that the UK pension system relies heavily on private pension saving to fill the gap. Auto-enrolment is intended to maintain such a reliance, but it can do so only if the state pension is maintained as a firm foundation for those savings, at least holding its value over the long term against earnings. Otherwise, the savings of younger workers will be covering the fall in their state pension rather than improving their retirement income, and they cannot fill that gap.
Private pension contributions above the statutory minimum will be impacted by the rise in national insurance contributions. There will be a substitution effect, particularly in the private sector where, prior to the pandemic, some 60% or more of workers were in SMEs and a very significant proportion of them in small and micros. Therefore, it is very important that this combination of the firm foundation and private savings is protected.
Can the Minister tell us—for the record and on the record, unequivocally—whether the Government are committed to maintaining the state pension as a firm foundation, holding its value against average earnings over the long term as a minimum upon which future workers, including young workers, can build for their retirement? Can the Minister also confirm that this Government will not reduce the value of the basic state pension relative to average earnings?
Baroness Stowell of Beeston (Con)
My Lords, it is a great privilege to follow the noble Baroness, Lady Drake, a renowned expert in this field, as indeed are many other noble Lords participating in today’s debate, unlike myself. Some of her points were very interesting. Clearly, she approached this argument from a position of expertise based on wide financial and economic knowledge. My contribution will be very much principle-based, but from listening to her, there is some common ground between us, although what I have to say is rather different.
My noble friend the Minister made a strong case for suspending the pension triple lock for one year only. The key argument for me is one of fairness, something which pensioners will recognise too if they look at this from the perspective of their own experience. However, I share with the noble Baroness, Lady Drake, the view that this should be a suspension for one year only, and I would certainly seek my noble friend’s confirmation that this is not a step towards permanently breaking the triple lock.
I make this point particularly on behalf of the over-75s—the silent generation, as they are described by researchers—and on behalf of older baby-boomers. When people comment on this who are not necessarily as informed and expert as the noble Baroness and many others here today, reference is made to what is seen as recent generosity to pensioners by way of pension payments. What gets overlooked is that older pensioners contributed a lot throughout their working lives.
These pensioners faced and overcame many challenges. I am talking not about the war but about growing up in an era when being poor meant that you went without or, maybe later, having to bring up a family on a three-day week. I am talking about the kind of people who did not enjoy free university education either. Although they may have bought their homes, which have gone up in value during the past few decades, before the 1980s getting a mortgage was probably harder than it is today. My point is that they got through all that without the advantage of the kind of benefits which are available today or were put in place after 1997 and caused among a lot of people a real sense of unfairness.
I agree with others that we need to make sure that our pensions and benefits system keeps pace with the changing world, which should include reviewing pensions policy as today’s younger boomers get older—but on that I would defer very much to the experts who will contribute to today’s debate. However, if we work on the general principle of fairness and that contribution is important to the legitimacy of the welfare system and to people’s willingness to keep paying in even at times in their life when they are not in receipt of benefits, we should also recognise the experience of today’s older pensioners.
As I have said, I am sure that many noble Lords can and will make a better economic case than me to justify the point that I am making, and some noble Lords may want to have an economic argument to claim that I am wrong, but I think that older pensioners, especially at a time when we are suspending the triple lock, need to hear us recognised not just what they have contributed in financial terms but that they have coped in situations without the kind of support that families and younger people receive now. Just to be clear, I am not arguing for a return to the past nor am I calling for us all to get nostalgic; the world is a very different place now and today’s challenges are different. However, it might give older pensioners some confidence in the future that they are not going to see and yet hope for their children and grandchildren if we parliamentarians argue that there are lessons about financial management, getting our priorities right and making choices which they taught us and we must not forget. Indeed, they need and want us to promote those lessons as principles which remain as valid today as they have always been. I say all this because I think these are things which we know and sometimes take for granted, but that does not mean that they are not points that are worth restating and which people need to hear us say.
To pursue the principle of fairness, I want to ask my noble friend the Minister a question about working-age people. I know that she, like me, believes that it must always pay people to get work: work must always pay and it must always be the best option. As we come out of a phase where people have got used to support such as furlough, when people may need to take on extra hours because of the end of the temporary uplift in universal credit and when we face rising energy costs and other cost of living increases, what is the Government’s position on reviewing and changing the universal credit taper rate so that people can enjoy greater returns for more hours at work?
Baroness Smith of Newnham (LD)
My Lords, the noble Baroness, Lady Drake, talked about a Trojan horse. With the Trojan horse bearing the Greeks, at least those in Troy thought they were getting something that was beneficial. With this Bill, I am wondering what the benefit could possibly be to anybody.
The Minister and the noble Baroness, Lady Stowell, suggested that the Bill is about fairness, but I suggest that there is something rather more insidious here. The Bill is allegedly to make a change for a year. The same has been said about overseas aid. The same person, perhaps, has been drafting memos to Ministers saying that this is all because of Covid and is for just one year. However, for those people who will lose the uplift for this one year, just like for those people overseas who will lose the benefits of overseas aid “for just this one year”, this does not feel fair. It feels incredibly painful.
My real concern is this: how can anybody be sure that this so-called one-off proposal is one-off? As the Minister has already told the House, it is not exactly a one-off because the Government had a one-off change last year, when they said that they wanted to change in order to be more generous. I am not quite sure in what way they were being generous last year. As I understand it, the triple lock has three elements. The earnings component was negative last year and inflation was at 0.5%, but the 2.5% uplift would have been in place anyway, so I am not sure why any change was required. Perhaps the proposals for 2022-23 are indeed a one-off.
All the reasons that the Secretary of State has given for the proposals relate to Covid. They all seem to suggest that the potential rise in wages or earnings of around 8% is because of the return to work from furlough and the end of the Covid arrangements. In that sense, the Secretary of State might be right. She said that the rate of increase in earnings is “unprecedented” and a
“distorted reflection of earnings growth.”—[Official Report, Commons, 7/9/21; col. 185.]
How has she come up with this assertion? Is she sure of it? Can the Minister explain to the House whether the Secretary of State has done this analysis herself or engaged somebody else to analyse how far the increase in earnings in 2021 is associated with Covid? Could it not be that some of the rise in earnings is because of Brexit? After all, many of the EU nationals working in the United Kingdom before Covid, which just about coincided with Brexit and began just before the end of the transition period, have not come back to work here, and employers are now being urged to increase wages, particularly for those who drive heavy goods vehicles, for example. That is not about Covid. It is about the long-term consequences of Brexit. Nobody can claim that that is the impact of a year.
If those consequences are indeed for the medium to long term, can the Minister explain to the House what preparations the Government are making for the scenario in which earnings continue to rise in what the Secretary of State might think of as “unprecedented” or “distorted” ways? What safety and security can she give to pensioners who thought they were supported by the triple lock that they will not be told next year, yet again, “This is another anomaly and we just have to make a change for just another year”? Once a precedent has been set, the danger is that it becomes a tradition and never changes.
Of course, that does not happen the other way round. On the temporary uplift in universal credit, the Government said, “Oh, we’ve got to take that away because it was only temporary”. I believe that the noble Baroness, Lady Stroud, will talk about this in more detail later in the debate, but I add my support to anybody in your Lordships’ House and elsewhere who will make a case for keeping the £20 uplift because taking money away from people—particularly the most vulnerable in society—is far more difficult than if you never gave them that £20 in the first place.
Many of the people who have benefited from the £20 uplift were not on universal credit before the start of the current crisis. They have had to go and seek universal credit only since the start of the pandemic. It is very easy for the Secretary of State to say, “They can work a little bit longer; they can do more hours.” But they might already be working as many hours as are legally possible. They need the support, and we should think about being generous.
I have a few questions for the Minister. There is not an impact assessment on these proposals, because we are told it is just for one year, so an impact assessment is not required. It may not be required, but it would be good practice, and it would help many of us making these decisions to understand what the impact is going to be. Perhaps the impact will not be as great as some of us fear. If pensioners who are concerned about the loss of the triple lock could be reassured, surely that would be in even the Government’s interest. So, could the Minister explain why there is not going to be an impact assessment and whether it would not be a good idea to have one?
The triple lock, a very good policy brought in by the coalition—originally a Liberal Democrat proposal—was so good that the Conservatives put it in their manifesto for 2019. So it is a government pledge. Members of your Lordships’ House, if asked to support the triple lock, would presumably feel honour bound under the Salisbury/Addison convention to support it. How can we then be asked to turn away from it? Why should we? As a Member of the Opposition Benches, I could think it is great that a Government are not delivering on their manifesto pledges; as a Liberal Democrat, I know all too well the difficulties that can face a political party that turns away from its manifesto pledges. But as a Member of your Lordships’ House—somebody who is tasked with legislating on behalf of the most vulnerable—surely it is incumbent on me, and every Member of your Lordships’ House, not to play politics but to think about the implications of turning our back on this pledge.
I understand that 8% might be too much to increase pensions by this year, but perhaps a middle way could be found. Could the Minister please think about that, take it back to her department, talk to the Secretary of State and consider whether a slightly better proposal could be brought back and whether amendments could be brought forward in Committee? If the Government do not bring amendments, the Opposition Benches will and perhaps some Members of her own Benches will as well.
Baroness Greengross (CB)
My Lords, I agree with the Government that the state pension triple lock needs reforming—but not, I am afraid, with these proposals. As many Members will know, I have spent much time recently with colleagues in the Intergenerational Fairness Forum, which I am privileged to chair, considering a new system for funding social care, with the aim of fostering intergenerational cohesion and mutual support across the generations—something I think we all agree would be extremely positive. One of the forum’s recommendations was that the pensions triple lock be replaced permanently by a double lock, whereby it rises in line with average earnings or with inflation, whichever is the highest. We propose that any revenue saved by this measure should be ring-fenced and redeployed to fund social care.
We believe that our proposed double lock is justified because since 2010 the brunt of social security and tax credit changes has been borne by people of working age. We also agree with the House of Commons Work and Pensions Select Committee that, provided the state pension is maintained at the current proportion of average earnings, the aim of the Government to ensure a decent minimum income for people in retirement to underpin private savings will have been achieved. A double lock would also continue to protect people depending on the state pension against any periods of high inflation—a risk that, as we know, we may once again be facing.
We have strongly recommended that, alongside the state pension double lock, the Government should undertake a major social marketing campaign to encourage greater take-up of pension credit by those who are entitled to have it. It is dreadful that the estimated rate of pension credit take-up is just 60% and I hope the Minister will be able to give me an assurance that the Government have concrete plans to improve take-up of this vital benefit.
If these two measures were combined, pensioners living in poverty would be better supported, as they are entitled to be under the pension credit rules, while other pensioners would make a fairer contribution to the burden borne by wider society at a time when public expenditure is constrained. They would also share the benefits of economic growth, when it occurs, by retaining the historical link between pensions and average earnings. This combination of measures supports intergenerational fairness and social cohesion.
The Lord Bishop of Durham
My Lords, when I read the title of the Bill I thought, “Good: we will have before us a measure that covers the wide issues of the uprating of the wide range of social security benefits we have, most notably pensions, universal credit and perhaps the question of legacy benefits.” So I was very disappointed to discover that, actually, the scope of the content was purely to do with pensions.
In relation to pensions, I have sympathy with the proposals tackling a specific issue that appears to have emerged as something of an anomaly, given our recent experience of the pandemic. I think the triple lock was probably the right move when it was introduced and it has served pensioners well. However, I now have questions as to whether having such a lock in one part of the social security system actually prevents both the Treasury and the Department for Work and Pensions from truly looking at the system and its funding as a rounded whole—although I note with care the comprehensive and careful input of the noble Baroness, Lady Drake, and that of the noble Baroness, Lady Greengross, just now on the double lock. But this is an uprating Bill for the system, it is not about changing the system, so with some reluctance I accept the proposals in the Bill.
However, I now turn to my deep disappointment with the Bill. I join many noble Lords in raising a concern that the Bill does not address the universal credit uplift cut. I recall the debate in this Chamber back in February, in which many Peers expressed their concern that a Bill would not address what is historically one of the most significant cuts to social security benefits. The letter sent by the Minister outlining the content of this Bill began by stating:
“Every year, the Secretary of State for Work and Pensions is required to undertake a review of social security rates to consider whether benefits have kept pace with inflation or earnings increases.”
When we are considering a Bill that is so conscious of inflation and the broad economic environment, my question to the Minister is: why is this argument not being applied across the board? Why, since the Government are so consciously accounting for the economic environment for pensioners, are they not doing the same for benefit claimants, which they have stated in their letter they are obliged to do? The removal of the £20 uplift in universal credit and the quiet 0.5% increase in universal credit are tiptoeing around a serious issue affecting hundreds of thousands of lives and pushing many—including an estimated 290,000 children—back into poverty.
I have to say to the Minister that I have lost count of how many people have thanked me for speaking out on the universal credit cut. I was not going to speak in this debate; it was that public pressure that made me do so. Hence, if this House can legitimately find a way of ensuring that, through this Bill, the other place is given the opportunity to properly debate the £20 cut, I would support that. If there is no such mechanism, we might have highlighted a deficit in our polity. I also support the question asked by the noble Baroness, Lady Stowell, on the earnings taper in universal credit.
I support what is in the Bill—slightly reluctantly, as I have said—but I am deeply concerned at its massive omissions. These mean that hundreds and thousands will not be adequately supported through our social security system this winter and into the year ahead.
Baroness Altmann (Con)
My Lords, I declare my interests as in the register. I would also like to put on record my thanks to my noble friend the Minister and her officials for the very helpful and thoughtful engagement that she has had on this topic with interested Peers.
This is the fourth time since 2014 that legislation for uprating of pensions is being changed, yet this time there is no impact assessment or explanation of the impact on pensioner poverty. We are being asked to approve this—the House of Commons already has—before knowing what the CPI figure that may well be used instead of the 2.5% figure will be. I echo concerns about this setting a dangerous precedent.
However, I would like to help my noble friend, her department and all in your Lordships’ House, including the right reverend Prelate the Bishop of Durham, to see that this legislation is based on a false premise and is unnecessary. It is simply not the case that this Bill is needed to avoid an 8%-plus increase in the state pension or the pension credit. Section 150A of the Social Security Administration Act 1992 requires the Secretary of State to consider “earnings”, but the law does not define this term.
The ONS has already very helpfully produced an adjusted figure to take account of the base effects from last year and the exceptional impact of the pandemic on average weekly earnings, which is the traditional measure that has been used for uprating. It has also estimated the composition effect. It has come up with an adjusted earnings figure in the range of 3.2% to 4.4%. My noble friend from the Front Bench has already suggested that the CPI figure that will be released next week could be around 3.3%.
Using the adjusted earnings figure could avoid this—draconian, in my view—legislation, which tears up years of protection for pensioners and breaks a manifesto commitment. I am sure that those of us on these Benches are particularly concerned about that. Using the adjusted earnings figure would still potentially allow significant cost savings of £3 billion or more relative to using the unadjusted earnings figure, which, as I have tried to explain, is not necessary.
We hear that this is for only one year and that there may well be a restoration of the earnings link. However, the triple lock—I agree with noble Lords who have already mentioned this—is not an ideal uprating mechanism in any case, especially since the new state pension. It is the 2.5% figure that is the anomaly; it has no social or economic justification. Yet we are being asked to remove the earnings link, which I am convinced from many years of working on pensions policy is the most important part of pension uprating, because the 2.5% figure was used last year.
The UK state pension is hardly a king’s ransom. It is the lowest in the OECD, as the noble Baroness, Lady Drake, explained, and still below the 1979 levels, relative to average earnings. Millions of pensioners have no or very little income other than the state pension. Indeed, the pension credit designed for the poorest pensioners has always been uprated only by average earnings; it has never been triple-locked. The triple lock was a political construct that did not properly protect the poorest pensioners, yet here we are being asked to remove the earnings protection from the pension credit.
We have been down this road before. In 1979 Mrs Thatcher removed the earnings link from the basic state pension. As others have said, at that time it was worth 26% or so of average earnings. Subsequent to that, in 2010 it was worth 16% of average earnings. At the time there was some justification for removing the earnings link because we introduced a very generous state earnings-related pension, so that could carry the earnings uprating for pensioners.
The state earnings-related pension scheme, subsequently replaced by the state second pension, did provide earnings protection for many pensioners. However, millions—particularly the poorest pensioners, the lowest earners and mostly women—do not have the earnings-related bit of the state pension because they were not credited into it, they were not in the labour force long enough, they were caring for others, and so on.
We are therefore left looking at the basic state pension, the pension credit and the new state pension in this Bill because the additional parts are uprated only by prices, which is appropriate as they are mostly earnings-linked anyway. I argue that we are setting a very dangerous precedent if we fail to recognise the importance of protecting the poorest pensioners against falling behind the rest of society in earnings.
Let me give some figures. Average earnings are £540 per week. The basic state pension, after the triple-lock increases since the 2011 changes, which I supported at the time, is now £137.60 per week. The new state pension, which was brought in to encompass and incorporate the earnings-related bit of the state pension and the basic state pension for future pensioners, is now £179.60 per week. The pension credit, which the poorest and usually oldest pensioners rely on, is £177.10. We are not talking about well-off pensioners here.
We are now debating not increasing the state pension, their pension or the pension credit in line with average earnings, as adjusted by the ONS. This breaks a triple promise to pensioners. Breaking the triple lock, as proposed in the Bill, breaks only one of those promises. From the triple lock it retains the prices commitment and the 2.5% commitment—although I find that figure difficult to justify—but it breaks three promises: first, the triple-lock manifesto commitment, a political promise; secondly, the legal commitment to increase pensions at least in line with earnings; and thirdly, the legal commitment to increase pension credit at least in line with earnings.
We could still honour all these promises without the risks that this legislation entails if we used the adjusted figure. I urge my noble friend on the Front Bench, her department and noble Lords in this House to see what the CPI figure is when it is released next week. If, as expected, it is around the 3.3% level, I urge them to bear it in mind and to recognise that using the adjusted earnings figure would be a better way to amend legislation. It could, perhaps, be explicitly stated in primary legislation that the earnings index used should be at the discretion of the Secretary of State and could be adjusted in exceptional circumstances. I also urge my noble friend to consider the dangers of taking this protection away from pension credit.
Finally, I echo the call for a formal, comprehensive review of pensioner benefits and uprating to assess the triple lock, including the retention of the minimum 2.5%, and for rolling tax-free benefits such as winter fuel payments into a higher state pension which would then be taxable. This would allow us to avoid this constant round of having to amend legislation because previous commitments to uprating had caused problems.
I hope that we will be able to improve this Bill. I am very much looking forward to hearing the words of my noble friends Lady Stroud and Lord Freud on the issue of the uprating to universal credit.
Lord Davies of Brixton (Lab)
My Lords, I echo the thanks offered to the Minister for the open way in which she has presented these proposals and for the extent to which she has been prepared to talk to us about them. It gives me great pleasure to follow the noble Baroness, Lady Altmann. She made a compelling case; not quite compelling enough for me to agree with it but, for the life of me, I do not understand why the Government do not agree with it. It seems a straightforward way for them to proceed. I hope that there will be further debate on this in Committee.
Other speakers have and will draw attention to the Government’s shameful decision to break their election manifesto promise to retain the triple lock, as my noble friend Lady Drake has made clear. I want to talk about what the triple lock is for, why we have it, why it is important and why it should apply to the increase to the state pension in 2022.
The triple lock was introduced by George Osborne in his Budget speech, following the formation of the coalition Government in 2010. He promised that, from 2011, the basic state pension would be linked to earnings. He went on to say that pensioners would
“be protected by our new triple lock, which will guarantee each and every year a rise in the basic state pension in line with earning or prices or a 2.5% increase, whichever is the greater.”—[Official Report, Commons, 22/6/10; col.180.]
This was the first time the phrase was used in Parliament.
This was not the Chancellor’s idea, as the noble Baroness, Lady Smith of Newnham, pointed out. We have to acknowledge that the structure of the triple lock was included in the coalition’s programme for government as an almost word-for-word lift from the Liberal Democrats’ 2010 manifesto. The link to earnings was in the Tory manifesto but the triple lock was not. Credit where credit is due to the Liberal Democrats, although I think it was probably as much of a surprise to them as it was to the rest of us that they turned out to have the opportunity to make good on their commitment. What is not clear from the manifesto, the coalition Government agreement or the Budget speech is what the triple lock was for, apart from general comments about fairness to pensioners or that pensioners deserved dignity and respect in old age.
The implication is clear: many thought of it in pragmatic terms of keeping pensioners’ income in line with those who are in work, while avoiding the embarrassment of an under-inflation increase or one of 75p. But any triple lock based on the highest of three separate figures is bound to result in what is described as the ratchet effect; in other words, over time, the pension covered by the triple lock is bound to increase by more than the increases determined by each of the individual elements, including earnings. In other words, the job of the triple lock is not just to protect pensioners in terms of earnings or prices: it is, over time, to achieve real increases in their incomes when measured against either of these indices. I argue that this ratchet effect is an inherent part of the triple lock which is enshrined in legislation. It is not an anomaly, a statistical quirk or something to be discarded when it is no longer convenient. It is an inherent feature of the triple lock—a feature, not a bug.
Whether you agree or not depends on whether you think that the state basic pension or the new state pension are currently high enough. If you think that they are, you do not need the triple lock, but if you want to see them increased, as I do, then the triple lock has a proven track record of gaining ground on that objective. It is not pretty but it appeared to work.
Again, some credit has to be given to Governments over the last 11 years, during which, because of the ratchet effect rather than any explicit policy decisions, there has been an increase in the state basic pension from 17% of average full-time earnings to 19% in 2020. That is too little and too slow, but it is real, nevertheless. Perhaps we could have a debate about what level of flat-rate state pension we need and what should be the target when we have a ratchet effect, but it is clear that 19% is not enough; it is well short of the 26% that was reached back in 1979. These benefits are not just inadequate; there is a long way to go before they become adequate. We definitely still need the triple lock. I am prepared to take something better and faster to replace it, but it is what we have got.
It is important to emphasise that the key advantage of the ratchet—of moving towards an adequate level of the flat-rate state pension—is that it is automatic. Until now at least, it has not been affected by short-term political considerations. I am afraid that the record of all Governments between 1979 and 2010 demonstrates that we cannot rely on ad hoc decisions to achieve increases in state flat-rate pensions. We need a mechanism that, like the triple lock, builds in a presumption that, over time, there will be increases in real terms.
This brings us to the increases due in 2022, as determined by this Bill. I believe that we can and should stick to the triple lock, as provided in legislation. Taking the increases to be made in 2021, 2022 and 2023 provides an ideal opportunity to achieve a significant increase in flat-rate pensions towards a more adequate level. This can be only a good thing. No doubt, it will be pointed out that this has to be paid for, but for today’s debate I will dodge that issue, although I understand that my noble friend Lord Sikka will touch on it. I would like to make clear, however, that I support increases in taxation for those with the broadest shoulders to meet clear social need and, in particular, the restoration of the Treasury supplement to the national insurance fund.
I want to direct a few remarks to another feature of the triple lock. Too often in these discussions there is the implication that it applies to the totality of state pensions—people have repeatedly said today that the triple lock applies to state pensions. That is not correct: it applies only to the flat-rate elements. The rest of each individual state pension—whether the additional pension, increases for deferment or the graduated pension—is increased only in line with CPI. In practice, this means that those pensioners with smaller state pensions, for whom the flat-rate pension is a larger proportion of income, get a higher percentage increase. Equally, those with higher state pensions get a smaller percentage increase. This effect is magnified when you take pensioners’ other incomes into account, where the increases that they receive tend to be in line with prices or less.
I have done some calculations of the impact on pensioners’ incomes if we stick with the existing triple lock. Using data on pensioners’ incomes and looking at single pensioners, I estimate that a pensioner at the lower end of the income scale—most of whom, of course, are women—on the first decile of income distribution will see an increase of about 7.5% if we stick with the triple lock. If we net off the expected increase in CPI of around 3.5%, the poorest pensioners get a 4% increase in price terms and less in earnings. Even after that increase, they will still be on only £170 a week total income.
A pensioner at the higher end of the income scale, on the ninth decile, will see an increase of about 4.5% in their overall pension. If we net off the expected increase in CPI of about 3.5%, the poorest pensioners will get a 1% increase in price terms—in earnings terms it probably means a standstill—but the better-off pensioners are, if anything, still falling behind. So the triple lock gives the greatest proportionate help to the poorest pensioners.
I want to draw the attention of the House to a serious defect in the triple lock that needs to be addressed. There is not enough time today to go into the details, but it needs to be understood that the triple lock discriminates between pensioners like myself, who receive the basic state pension, and those who reached their state pension age on or after 6 April 2016 and are entitled to the new state pension. As the rule stands, we older pensioners will receive smaller increases than those who retired more recently, even where our rights are identical. It looks likely in the coming year that this will not be a problem, but in the longer term it is a real issue, and it will not go away.
Lord Freud (Con)
My Lords, this Bill is designed to control pension spending and I am broadly in agreement with its direction. However, as the right reverend Prelate the Bishop of Durham has just pointed out, there is another pressing issue in social security: the removal of the £20 a week from universal credit at a time when pricing pressures on the poorest are intensifying.
There is a backstory here. Between 2010 and 2016, the Government were running two parallel welfare strategies. The first was from within DWP. The aim of the team was to transform the legacy systems that by then were falling apart, and the centrepiece of the reform was universal credit. The second policy emanated from the Chancellor, who was determined to cut the levels of benefit. With the Treasury acting as his enforcer, he aimed to take out £30 billion of welfare payments each year as part of an austerity strategy. That austerity was selectively targeted, with welfare recipients bearing a disproportionate burden. To summarise, our strategy in the DWP was to streamline and simplify while the Chancellor’s approach was to cut and complicate. So the £20-a-week uplift last year was not simply a response to Covid-19 but a way of dealing with the general erosion of the levels of benefit.
If we take away the Chancellor’s complexities, universal credit is one of the most important reforms, if not the most important, of the coalition Government. In its essence, it gets rid of all the separate benefits that had been trapping people in particular silos. It allows people the flexibility of life in the real world. Talk to any front-line DWP staff and they say the same thing: “At last, a system that works with the grain, not one that we have to struggle around.” That is why I think it is essential to keep it on a proper footing with an adequate basic payment; I say “adequate” because an additional £20 a week is hardly generous. In that regard, I have a single question to ask my noble friend the Minister: could she tell us the department’s central estimate, given the taper and the projections for employment, of how much the £20 uplift would cost to maintain in the next financial year?
I know this House believes in universal credit. It made herculean efforts during the passage of the original Bill and many of its best proposals were incorporated in the ensuing 2012 Act; I know that, because I made sure they were. However, speaking now to my colleagues on these Benches, I say this: universal credit is a major reform that is to the credit of the Conservative Party, and it is the height of foolishness to destroy that legacy in the name of a false austerity from a decade ago inherited by the current Chancellor. Many Conservative MPs feel exactly the same way, and, alongside my noble friend Lady Stroud, I will be endeavouring to ensure during the passage of this social security Bill that those MPs have a chance to vote their support for an adequate provision of universal credit.
Baroness Lister of Burtersett (Lab)
My Lords, it is a genuine pleasure to follow the noble Lord, Lord Freud, which is not something I thought I would be saying. Although the Bill is about the triple lock, it would not be right in the present circumstances to ignore the wider questions about the uprating of social security benefits that he mentioned, as did the right reverend Prelate.
First, however, I am on record as calling for a public debate about the triple lock’s future, not least because the risk of poverty is now higher among children than among pensioners. That said, the rise in recent years in relative pensioner poverty, mentioned by my noble friend Lady Drake, reinforces the case made by a number of bodies and noble Lords, including today, for a proper strategy to improve the take-up of pension credit, which research by colleagues at Loughborough University indicates could reduce pensioner poverty significantly. Ministers have responded with a number of welcome measures, but they fall short of the kind of strategy called for. What progress has been made in improving take-up?
Despite the rise in pensioner poverty, I accept that it would be difficult to justify an 8% or so pensions increase, given the artificial nature of that figure. Speaking personally—I stress that this is a personal view—it is time for a review of the triple lock. The triple element of 2.5% is an arbitrary figure, as the noble Baroness, Lady Altmann, implied. The case has been made by a number of bodies for reverting to an earnings/prices double lock, which was abolished by the incoming Conservative Government in 1980, but with a smoothed earnings link that would maintain pensions at an agreed percentage of average earnings while ensuring that they did not lose their value at times when inflation outstripped earnings, a point made by the noble Baroness, Lady Greengross.
One reason why I believe it is time to review the triple lock is the growing gap between pensions and benefits for working-age people and their children, which, as we have heard, have been subject to a decade of cuts and freezes. As the Centre for Social Justice and others have made clear, this is the context in which we have to understand the widespread support for the retention of the £20 uplift to universal credit.
Given the likely effects of such a cut on many people in vulnerable circumstances, is it not extraordinary that Ministers tell us there has been no impact assessment on the grounds that the £20 was temporary and therefore an assessment was not required? If there has been no impact assessment, how was it that a Whitehall official was able to tell the Financial Times that internal modelling showed that the impact will be catastrophic in terms of increased poverty, homelessness and reliance on food banks?
I ask the Minister, who I know is a humane person, to put herself in the shoes of a mother struggling to make ends meet. If she first claimed UC since the start of the pandemic, the uplift, which was very welcome, is all that she will have known. If she is a longer-term claimant, she will remember how much more difficult it was to manage before it was added. Either way, she would really struggle now.
Academic research and evidence from civil society groups shows both the difference that the £20 has made and that life on UC has still been a struggle with it. Most recently, a large, nationally representative survey of claimants undertaken by the Welfare at a (Social) Distance project showed that half of UC claimants were food insecure and a quarter severely so even before the removal of the uplift. Not only will removing the £20 push many more people into poverty, as the Legatum Institute and others have warned, but it is likely to worsen deep poverty as UC recipients are pushed further below the poverty line.
To make matters worse, as debated yesterday, the cut coincides with an increase in inflation, particularly in basics that represent a disproportionate chunk of claimants’ budgets. As the Resolution Foundation has pointed out, much of this increase will probably come too late to be incorporated into the uprating of UC based on the September inflation rate. Will the Minister undertake to look at how this problem might be addressed?
Ministers seek to justify the withdrawal of the £20 on the grounds that the priority must now be to get people back into reasonably paid work. Of course this is important, but nearly two-fifths of UC recipients are already in paid work and increasingly it is not providing an insurance against poverty. Also, as the New Policy Institute has shown, a significant proportion of recipients have caring responsibilities that limit the amount of paid work, if any, they can do. For instance, it is been estimated that more than 300,000 informal carers will be affected by the cut. Telling them to work extra hours to make up the loss is simply not realistic. Moreover, we know that hardship can undermine job-seeking efforts when energies are depleted by the exhausting struggle to get by on an inadequate income. There is evidence that the £20 has helped with job-seeking, so even in terms of the Government’s own priorities the cut is likely to be counterproductive.
The Government have tried to counter the growing pressure to retain the £20 by announcing a new temporary local authority household support fund—a fig leaf waved prominently by the Minister yesterday. A discretionary fund is not an appropriate, efficient or secure way to meet everyday needs that cannot be met because of the cut to benefits, as the former Secretary of State Sir Iain Duncan Smith has pointed out. Although talk of a possible cut in the taper is welcome, it will not target additional help on those in greatest need.
The Government have also tried to argue that the country cannot afford to maintain the £20 without a tax rise—indeed, according to the Prime Minister, “There is no alternative”. But the Centre for Social Justice has argued that the cost, which it suggests is in any case overstated by the Treasury, is not onerous and the consequences of withdrawing the money
“outweigh the benefits from any saving.”
Of course there is an alternative because the decision to withdraw the £20 is a political choice. The cost is but a fraction of the annual £36 billion or more that has been estimated had been cut from social security benefits pre-pandemic. The refusal to go some way towards making good that loss speaks millions about the Government’s priorities.
Not all benefit recipients benefited from the £20 uplift. Some lost out because of the benefit cap and others because they were in receipt of legacy or related benefits. The research on food insecurity, to which I referred earlier, found a sharp rise among the latter group during the pandemic but not among those who received the extra £20, which is significant. Disabled people in particular lost out as a result of the refusal to extend the uplift to legacy and related benefits. In this context, will the Minister say why the research commissioned from NatCen on the usage of health and disability benefits, which I understand was completed last year, has not been published or even referred to in the recent Green Paper Shaping Future Support, consultation on which has just ended? In an extraordinary exchange between the chair of the Work and Pensions Select Committee and the Secretary of State, the latter failed to give a reasoned answer to this question and the former suggested that the department may be in breach of government protocol on the publication of social research. The Government have certainly committed a breach of trust with the 120 disabled people who took part in the research in good faith, having been assured that the findings would be made publicly available.
What are the Government trying to hide? From the bid pack and the draft interview guide, it is clear that a wealth of data would have been generated about the extent to which the needs of those in receipt of health and disability benefits are, or are not, being met. Surely, as the Disability Benefits Consortium has argued, all this evidence should have been published to help inform the consultation on the Green Paper, which totally failed to address the crucial question of the adequacy of disability benefits. Will the Minister undertake to publish it now to inform the next stage of the process?
It is with this more general question of adequacy, which the noble Lord, Lord Freud, mentioned, that I want to conclude. I am very happy to echo the words of another former Work and Pensions Secretary, Stephen Crabb, who suggested in the Commons that the £20 uplift constituted “a recognition that the” UC
“standard allowance … was too low to provide anything like a decent, respectable level of income replacement”,
and he warned:
“It is that question of adequacy to which I think we will return time and again”,
for
“Anyone who thinks that we have generous benefits in this country is wrong.”—[Official Report, Commons, 15/09/21; col. 1004.]
Indeed, the IFS described their level as,
“unusually thin by international standards”.
Two Lords committees have called for a review of benefit levels. The Economic Affairs Committee concluded that UC is too low and
“should be set at a level that provides claimants with dignity and security.”
The Select Committee on Food, Poverty, Health and Environment called for benefits uprating to take account of official dietary guidance to ensure that claimants can afford to meet it. It cited written evidence from the Government that suggested the current benefit rates:
“derive from a review in the 1980s,”
but that review did not consider the adequacy of benefit rates. Indeed, according to the late Professor John Veit-Wilson there has been no such review of adequacy since the 1960s.
We have had review after review of benefits, yet it appears no Government for more than half a century have asked themselves whether the rates they set each year actually meet claimants’ needs. The one independent benchmark we have, provided by Loughborough University for the Joseph Rowntree Foundation, indicates that UC rates are well below what the general public deem to be an acceptable minimum standard of living.
As Stephen Crabb underlined, the outcry over the withdrawal of the £20 uplift means it is high time that we considered the underlying question of benefit adequacy. A prominent slogan at the Conservative Party conference was “build back better”. Restoring UC to its original meagre level is hardly building back better for our fellow citizens living in some of the most vulnerable circumstances, nor is it consistent with promises of levelling up, as a number of Conservative MPs have pointed out. If the Government continue to refuse to do the right thing, at the very least they could now promise a proper review of benefit adequacy as the first step towards building back better for those struggling to get by.
Lord Flight (Con)
My Lords, I support the Bill, which reflects a common-sense appraisal of the issues. Covid has caused an artificial boost in wages and potentially an 8% rise in state pensions. While excluding wage increases from the increased formula—now limited to the greater of 2.5% and inflation—the inflation figure is still likely to provide a significant rise in state pensions.
From the Bill, it is not wholly clear what are the relevant years’ figures for calculation. Pension increases will be limited to the greater of inflation and 2.5% per annum, but it is not clear whether the increased pension for 2022-23 will be based on the data for 2021-22 or 2022-23. I would be grateful if the Minister would clarify this. Whichever year it is, either inflation or 2.5% is likely to be lower than the increase in wages, but the rise in inflation in 2022-23 may be larger than anticipated. The impact of Covid is expected to cause an artificial boost in wages and the 8% rise if applied to state pensions is hard to justify in comparison with other groups.
The triple lock has been generous to pensioners. Since 2010, the state pension has increased by 35%, versus 22% for inflation and 27% for earnings. State pensions are now at their highest relative to earnings in 24 years. Relative pensioner poverty has reduced. The state pension bill for 2021-22 was £105 billion, up from £70 billion in 2010, before the triple lock was implemented. Some 60% of UK welfare spending is now on pensions. If the triple-lock formula was not changed, pensioners may have two years of high pension increases. The Government had to act to avoid this and to limit state pension increase costs. I have not encountered much criticism of the decision to cut to only two possible locks.
The point is made that the UK state pension is less generous than EU state pensions, but European pensions do not include most of the additional benefits for UK pensioners: tax-free pension contributions worth £50 billion per annum, free winter fuel allowance, free eye tests, free TV licences, free bus passes, free NHS treatment and no NI if you are working aged 65 or more. Relatively few UK pensioners now remain in absolute poverty.
The triple lock is an expensive and unsustainable policy in the longer term, which ill suits the present economic climate. There is surely a strong case in the future for scrapping pension locks and setting state pension increases in line with inflation. The existence of the three options, under triple lock, tends to deliver higher state pension increases than increases in wages, and those increases are in line inflation or of 2.5%. I hope the Bill will be treated by the House with appropriate inquiry.
Lord Hendy (Lab)
My Lords, I rise to make a short point. The Treasury estimate is that the Government will save £5 billion next year by this change. That is to be added to the £6 billion that they save from not renewing the uplift to universal credit. That is £11 billion. Other noble Lords and noble Baronesses, in particular my noble friend Lady Lister, have described the impact that will have on the recipients of universal credit and pensioners.
I want to look at a point on the other side of the account book. This £11 billion is money that is spent by the recipients. It is spent in shops on goods and services. It is spent on food, clothes, heating and rent. It is all spent, every penny of it—or almost every penny of it. The names of the pensioners who are going to lose out on this are not names that you will find in the Pandora papers. This is not money that is stuck away, or invested in shell companies, banks or building societies. It is money that is spent in the local economy. What assessment have the Government made of the loss of these billions of pounds to the local economies in which people actually live?
Baroness Noakes (Con)
My Lords, I do not like breaking manifesto commitments, so my support for the Bill is tinged with regret, but I do wholeheartedly support it. I am clear that Covid has created significant complications for the triple lock two years running. Last year, as we have heard, earnings growth was negative, which under the law should have resulted in a zero increase in pensions. My right honourable friend the Secretary of State for Work and Pensions brought legislation to ignore that and awarded a 2.5% increase. This year she has faced artificially high earnings growth and has wisely chosen to ignore that too, so she will make the determination based on the higher of 2.5% and CPI inflation. We should not look at this year in isolation.
I agree with my noble friend Lady Stowell, that the Bill is fair. In particular, it is fair to pensioners, whose income will be protected in real terms. Last year, their income increased above the rate of CPI inflation. This year it will be no worse than CPI inflation. Next year we should be able to return to the normal formula, so that if earnings growth continues, pensioners too will benefit. Noble Lords will know that this Government are committed to a high-wage economy, not a low-wage one. This is good news not only for those in work but also, through the triple lock, for pensioners as well.
While I support what the Government are doing in the Bill, I have never been keen on the triple lock, mainly because I believe that writing formulae into legislation is just a recipe for trouble. The last two years, in relation to pensions, are proof of that. We need to stop virtue signalling in legislation because good intentions often collide with reality and corrective legislation then serves to magnify the problem. So, I would take it out of legislation.
Some have tried to make a case that pensioners are particularly badly treated and that pensioner poverty is increasing, but those who do that tend to use selective measures of relative poverty and are highly selective about segments of the total pensioner population. If we look at absolute measures of poverty, there are 200,000 fewer pensioners living in absolute poverty than there were 10 years ago. We will probably never eliminate relative poverty, but we can and should focus on absolute poverty.
In addition, we should not look only to the basic state pension to ensure that pensioners receive an adequate income. In the long run, access to further pension income, by virtue of automatic enrolment, should be a significant element of pensioner income. In the short term, as other noble Lords have referred to, pension credit is important. As the noble Baroness, Lady Drake, pointed out, it is important not only for the increased income that it gives to some of the poorest old people, but also because it acts as a gateway to further significant benefits. It is therefore a real shame that the latest estimates from DWP show that nearly £2 billion each year is unclaimed and 1 million households are losing out.
I took part in the pension credit legislation when it was introduced in your Lordships’ House almost exactly 20 years ago. Two highly expert and redoubtable Baronesses—both no longer with us, sadly—were on the Labour Benches. On the Front Bench was Baroness Hollis of Heigham and behind her was Baroness Castle of Blackburn. Baroness Castle disliked means-tested benefits and knew that pensioners in particular worried about the stigma attached to claiming benefits. She worried—and she was very worried—that 20% would go unclaimed, a figure in line with other similar benefits at the time. Baroness Hollis refused to give the Government’s estimate for pension credit take-up. Baroness Castle must be turning in her grave at the fact that nearly 40% do not claim.
On our Benches, we pressed Baroness Hollis to say how the Government would ensure that pensioners got what they were entitled to without the Government incurring massive administrative costs. It is fair to say that we got no sensible answer to that question at the time and I believe that it still needs to be answered. The Government have said all the right things but I am not sure that their record on this is one to be proud of. Can my noble friend the Minister say what the Government’s strategy is for pension credit uptake and when we will see real improvements in the rate?
Covid-19—or rather the Government’s response to it—has had a massive negative impact on our economy that cannot be ignored. Support to individuals and businesses has cost over £400 billion and debt has risen to around 100% of GDP. While the economy is now recovering well, there is a lot of work to do to restore economic and fiscal health. In the meantime, the Government are going to have to make some hard decisions. In relation to this Bill, I believe that the Government have got it right with the state pension. It is a fair increase and a fair outcome for taxpayers.
Before concluding, I must say something about the universal credit uplift because several noble Lords have tried to drag the issue of its removal into this Bill. I believe that is a category error. It is quite unrelated to the level of the state pension and I sincerely hope that noble Lords will respect the narrow purpose of this Bill and not try to impede its passage towards Royal Assent.
Lord Sikka (Lab)
My Lords, it seems that there is a competition among Ministers to find novel ways of hurting the most vulnerable people in our society. After the cut in universal credit, the hike in income tax through frozen allowances and the new Johnson tax of 1.25%, the Government are clearly gunning for senior citizens. They have already taken away the free TV licence for the over-75s and are raising the age for free prescriptions in England from 60 to 66. The next instalment of the triple blow for seniors is to suspend the triple lock. I cannot support this cruel Bill.
The average UK wage is around £31,461 a year. The full state pension at the moment is £9,350, but only four out of 10 retirees receive it. Some 2.1 million pensioners receive less than £100 a week in state pension, most of whom are women. The actual average state pension, as Age UK has just reminded us, is £8,000 a year or roughly 25% of average earnings. This is the lowest among industrialised nations, with the average being around 60% in OECD countries. The Office for Budget Responsibility said that by 2022-23, the state pension would form around 4.6% of GDP. Germany already allocates 10% of its GDP to the state pension.
A 2019 study noted that despite the triple lock the proportion of elderly people living in severe poverty in the UK is five times what it was in 1986. This is the largest increase among major western European countries. A major reason for this, as has already been pointed out, is the legacy of the Thatcher Government, who broke the link between pensions and earnings by cancelling the 18% supplement provided by the Treasury. We have never really made up that lost ground. Will we ever make up the lost ground from this proposed suspension of the triple lock?
The low state pension condemns millions to a life of poverty, insecurity and early death. According to Age UK, despite the triple lock, 2.1 million pensioners—18%—in the UK live in poverty. Some 1.25 million of these are women. The poverty rate has risen since 2012-13, when only 1.6 million pensioners—13%—lived in poverty. Some 33% of Asian retirees and 30% of black retirees, compared with 16% of white retirees, also struggle to make ends meet.
Malnutrition—or undernutrition, as some people would call it—affects over 3 million people in the UK and 1.3 million of these are over 65. Around 25,000 older people die each year due to cold weather and here we are busily reducing their income.
Rather than lifting retirees out of poverty, the Government are going to suspend the triple lock. They say that they cannot afford whatever the cost is, which may be up to £5 billion. That is certainly less than the £8.5 billion subsidy given to profiteering train companies last year.
Governments have bailed out banks and provided £895 billion of quantitative easing to speculators. However, when it comes to helping senior citizens, the usual call is “We can’t afford it”—as though we can afford misery, squalor and early death. This is how the Government cheated 3.7 million women out of their promised state pension by raising the retirement age. The same slogans are being marshalled again.
Let us be clear. The Government can create any amount of money they wish to shape a society which is good for all of us. If that money creation is inflationary, they can remove some of it from the rich through redistribution—a phrase that all Ministers and the Prime Minister have carefully avoided, even during their party conference.
The extra £5 billion that is needed for the triple lock is already available. The 2020-21 cost of paying the state pension to 12.4 million retirees is £101.2 billion compared with £98.7 billion for 2019-20. If you look at the National Insurance Fund accounts for the year to 31 March 2020—the most recent information—they show a cumulative surplus sitting there of £37 billion. That is more than enough to meet the triple lock obligation of £5 billion. Will the Minister explain why this surplus is not being used to honour the triple lock?
The state pension, as has been pointed out, is a major—and in many cases the only—source of income for many people. It will be even more so in the future. Relentless attacks on workers and trade unions have sapped people’s ability to save for private pension schemes. Today, workers’ share of GDP in the form of wages and salaries is around 49.4%. It was 65.1% in 1976. That is the biggest decline in any industrialised nation over that period. Even before Covid, 14.5 million people were living in poverty. Household debt is currently £1.7 trillion. Young people saddled with student debt and astronomical housing costs are unlikely to accumulate wealth and will be forced to rely upon the state pension for their retirement.
The UK’s six richest people have wealth equivalent to that of 13 million citizens. The richest 1% have 23% of all wealth, the top 10% have 44% and the poorest 50%, who are being condemned to a low state pension, have just 9%; the poorest fifth of society have only 8% of the total income, and the top fifth have 40%.
The ministerial reply to one of my Written Questions on 21 January 2021 was that 18.4 million individuals in this country have an annual income of less than the annual tax-free allowance, which currently stands at £12,570. The Institute for Fiscal Studies states that
“only 58% of the adult population (those aged 16 or over) receive enough income to pay income tax”,
so 42% of adults pay no income tax because their income is already too low. How will they buy into these private pension schemes? Two days ago, during the debate on the Health and Social Care Levy Bill, the Minister said that 6.2 million people have earnings below the primary threshold for national insurance. How are these people going to save for so-called private pension schemes?
Even if impoverished people manage to put a few pennies into a pension scheme, the tax system works against them. At the moment, 1.5 million individuals are enrolled in a private pension scheme and receive zero tax relief because their annual income is less than the annual personal allowance. I hope the Minister will explain why people at the bottom of the ladder are being treated this way and not getting any help whatever.
This is a stark reminder of the inequalities in the UK. Present and future generations will rely upon the state pension more than ever before, and it is vital that it does not condemn them to poverty. I am opposed to suspension of the triple lock.
The state pension is too low. In July this year, we heard the Prime Minister say that he finds it hard to live on his £160,000 salary; last week, Peter Bottomley MP said that he cannot really survive on an MP’s salary of £82,000. My reply is that they should try living on the £8,000 a year state pension and see how they get on—welcome to the real world. Perhaps the Minister would want to take up the offer of living on the state pension—I do not know, but I await a reply. We must lift retirees out of poverty and not only maintain the triple lock but go beyond it. We need to align the state pension with the living wage, and that should be enshrined in a future Bill of Rights. Nobody in a rich country should be living on such a low income.
I have already pointed out that the Government have plenty of resources to achieve these aims. They could utilise the £37 billion surplus in the national insurance fund; they could restore the 18% Treasury supplement which was removed by the Thatcher Government. They could find the money by taxing capital gains in exactly the same way as earned income, which would raise £17 billion a year more and another £8 billion in national insurance contributions—at the moment, unearned income is exempt from national insurance. They could tax dividends in the same way as earned income, which would raise another £5 billion in taxes plus another £1 billion in national insurance. They could extend the current 12% rate of national insurance contributions to earned incomes above £50,300, which would raise another £14 billion a year. The Wealth Tax Commission told us earlier this year that, with an asset threshold of £2 million, a wealth tax could raise up to £80 billion a year. Billions could also be raised by extending the scope of financial transactions tax.
These few examples show that the Government’s claim of not being able to afford the triple lock has no substance. It is a bogus claim which simply falls apart when examined. None of the examples that I have given requires an increase in the basic rate of income tax or the 40% rate of income tax, or an increase in national insurance contributions for the masses. It seems that the Government lack any will. They find it so easy to hurt the most vulnerable people, and that should not be accepted by anybody in the country. I will not support this Bill in any way whatever.
Lord Shinkwin (Con)
My Lords, I fully support the primary purpose of this Bill, subject to the proviso that these measures are for one year only. The Government’s message to pensioners is clear: we support you and we will take account of your circumstances—for example, if you are on pension credit.
I echo my noble friend Lord Freud and the right reverend Prelate the Bishop of Durham in their implicit suggestion that this Bill also serves another important purpose. For me, as a disabled person, it provides the Government with the perfect opportunity to send a similar message of support to disabled people: namely, that we will support you to live your life independently and to realise your potential. My fear is that, by removing the £20 per week uplift to universal credit, or UC, the Government are sending the opposite message. We risk saying to almost half a million disabled households—according to figures from the Legatum Institute—that we do not actually care if you are plunged into poverty.
I welcome this opportunity to congratulate the Minister for Disabled People, Chloe Smith, on her appointment to her new role, but I do not envy her the task that she has inherited. I am referring, of course, to the aftermath of the publication of the Government’s National Disability Strategy. As missed opportunities go, I am afraid that it does not get much bigger. The strategy was an opportunity to reset completely the Government’s relationship with disabled people. Regrettably, it was squandered. The strategy was little more than yet another list of planned consultations, reviews and half-hearted commitments.
A commission which I chaired, made up of senior businesspeople from the private sector, academics and disability rights campaigners, produced a report specifically to feed into the strategy. Our report contained well over 100 exhaustively researched and oven-ready measures. The title of the report was Now Is the Time. In response, the title of the Government’s strategy might just as well have been “Now Is Not the Time”—not the time for equality of opportunity, not the time for ambition and not the time for the promised transformation of the lives of the UK’s more than 14 million disabled people.
I put it to my noble friend the Minister that now is indeed the time, in this Bill, to, at the very least, offer some reassurance to disabled people that their concerns about the end of the UC uplift have been heard and are being addressed.
Research to which I have referred shows that, of the 840,000 households projected to fall back into poverty by the ending of the UC uplift, 450,000—over half—include a disabled adult or child. Given that disabled people make up only 20% of the population, the impact of the removal of the UC uplift on disabled people is so disproportionate that it practically beggars belief. So I ask my noble friend the Minister if an impact assessment was done specifically on this, and, if so, that she put a copy in the Library. If one was not carried out, I would be very grateful if she could say why not.
The Government need to join the dots and decide what message they want disabled people to hear. I applaud the Prime Minister’s levelling-up vision of giving everyone the chance to realise their potential. Of course he is right, but is that what disabled people are actually hearing in practice when they are hit by the double whammy of the end of the UC uplift and the increase in tax if they are in work? Is that the message that they are getting from a national disability strategy, spun to the media with the headline figure of £1.6 billion—less than 1% of which is actually new money—which lacks a road map towards the measurable outcome of equality of opportunity? For me, as a Conservative, that surely must be our goal, rather than damaging the legacy to which my noble friend Lord Freud referred.
In conclusion, the Government need to seize the opportunity that this Bill presents to reset their relationship with disabled people, starting with a rethink of the impact on them in particular of the end of the UC uplift. I look forward to my noble friend’s response.
Lord Desai (Non-Afl)
My Lords, it is an eternal message: to him who has shall be given more, but from him who does not have will be taken away what little he has.
We have money to give people stamp duty holidays but we do not have money to retain the £20 allowance that people on universal credit were given. We always have money to buy banks that are going bankrupt. Remember that, in 2008, we bought banks that had more or less mismanaged their affairs, such as the Royal Bank of Scotland and Lloyds Bank; money was there to buy those banks—no questions asked, and nothing examined about whether it had been right or not—because they were rich, and the rich can always be saved. We have just had a report that test and trace cost billions, and that a lot of money was wasted. Why? Because the people involved were friends of the Government.
It is only an issue when it comes to the poor. First of all, the Government boast about the triple lock and get a lot of kudos for being very generous. What is wrong with giving 6.6%? If earnings are rising by 6.6%, that is good, so let us give 6.6%. It is not going to break the bank or bankrupt the Government. We already have a 100%-plus debt-to-GDP ratio, so what is a couple of billion more? It will get lost in errors and omissions. It is the will that is lacking. These are not the Government’s votes and these are not the Government’s friends. Their party was not created to help the poor.
Whatever they may pretend, this is a disgraceful Bill, as the noble Lord, Lord Sikka, said. A tax of 1.25% has already been put on national insurance and it will, as I said, be increased to 2.5% in no time whatever.
On the other side, we are not willing to give even 6.6% for one year. When a promise is made, in order to fulfil that promise you have to take the consequences of what you said. You cannot say, “We have a triple lock but will give only the lowest of the three numbers because we really can’t afford to give poor people any more money. We have far too many rich people waiting to claim, and they are our priority.” I see no excuse whatever for making promises that seem generous and then, when push comes to shove, for the flimsiest reasons, not fulfilling the promise: “Oh, no, we didn’t actually mean earnings. We only meant 2.5% or less.” Why do they not say that the triple lock means that the lowest of the three will be given, because that is what was always intended? “We don’t intend to give the poor any more money but, since we have to, we shall give the least that we can afford. We prefer of course to give nothing but, since these people are around, we will give them some money.”
Gas prices are rising. If the rate of inflation goes to 6% or 7%, will the Government fulfil their promise to raise it by the rate of inflation, or will they say, “We didn’t mean that, not 7% inflation; 2.5% is the best we can do”? Why do they not stop pretending and say that zero is what they will give people in need because their friends in the gas companies are going out of business and the Business Secretary has said he will arrange with the Treasury to bail them all out? All the gas companies that face bankruptcy will be bailed out but the poor will not be bailed out. That is the logic. Unfortunately, that is the world we live in.
When election time comes, they will become generous, and then after the election the promises will be broken. That is the way it is, and I think that will continue in this levelling-up business. I do not know who they are levelling up; certainly not those in need.
Baroness Stroud (Con)
My Lords, it is interesting that this is the Social Security (Uprating of Benefits) Bill. It could have been a Bill on pensions and the uprating of benefits, but it is not; it is the Social Security (Uprating of Benefits) Bill. While much of the discussion today has been focused on the triple lock, as has been implied, I want to focus on a different element of social security: namely, the universal credit £20 uplift. In a recent poll undertaken by iPolitics, only 3% of the British public said that the cut should come in this year and at this time. This is a staggeringly low number, particularly in the light of the twin instabilities caused by the rising cost of living and the global pandemic from which we are just emerging.
Let us just take a moment to look at each of the arguments put forward for dismantling the uplift and those against. I have heard it said by many that this £20 was for a crisis moment only, but we need to be honest here. The reality is that the pandemic made visible what had been invisible to many: that our safety net is in fact at its lowest value ever since its creation. Having been founded at 20% of the median wage, it is now at a value of 12%. This became visible to people whose lives would normally never have been touched by the welfare state, so the Government stepped in to protect new claimants and the public at large from being shocked by the level of welfare. But it is right to be shocked by the level of welfare, which creates a permanent state of crisis for many. Let us not delude ourselves that the crisis is over, particularly as energy prices and inflation both rise, creating a perfect storm.
We have an opportunity to think again and do something about this in the Bill. All six Conservative former DWP Secretaries of State since 2010 have written to say that this £20 uplift investment should remain. I have heard it said that the £20 uplift has to go to protect work incentives. This is a totally specious argument if you understand anything about universal credit. It may be an argument for increasing the work allowance, or lowering the taper rate, but it cannot be an argument for protecting work incentives. The work allowance always makes it pay to take work, and the taper rate always rewards progression in work. To be honest, if you wanted to strengthen work incentives, you would put the £20 into the work allowance and lower the taper rate from 63% to 60%, or even 55%, as was in the original design.
I have also heard it said that there are no poverty impacts from the removal of the £20 uplift. To be honest, this is the most staggering of all arguments. It can be said in only a technical sense because, in 2016, the Government abolished their official measure of poverty and have yet to replace it. But, by any measure of poverty, relative or absolute, if you take £20 a week away from those on low incomes, a proportion of them will move into poverty. If you use the measure recommended by former Secretary of State for the DWP Amber Rudd, the Work and Pensions Committee chairman, Stephen Timms, and the Office for National Statistics—namely, the Social Metrics Commission measure of poverty, in which I declare an interest—to analyse the removal of the £20 uplift, you will see in the cold light of day the impacts on 840,000 people, 290,000 children and 450,000 people in a family that includes a disabled person, either an adult or a child. Granted, a proportion of these will take the 1 million available jobs, and many will take advantage of any upskilling that is available, building this high-wage, high-skill economy.
But if the Government really believe their own narrative, they know that they would never need to pay the £20 uplift because people would move beyond it. The fact that they say that they cannot afford the £20 uplift reveals that they know that it will take time to get there and, in the meantime, many vulnerable households will experience a cost-of-living storm and very real hardship.
But my real concern is for those to whom we say, “The welfare state is your safety net”: those with disabilities that my noble friend Lord Shinkwin so eloquently referred to and those with children aged two and under, with whom we have a social contract. We say, “You are valued by our society, and we want to support you, even though we do not expect you to work”. Those in this group have just lost £20 per week, are not expected to work and are about to experience rising inflation and higher energy bills in the midst of a pretty dark winter. If we do nothing else, the £20 uplift must be restored for this group. My other concern is that this seems to be news to those in government when I tell them, although not to my noble friend the Minister, who has spent a lifetime seeking to protect those who are vulnerable.
What is to be done? I have, first, a question for the Government and, secondly, a possible way forward. Following my noble friend Lady Altmann’s speech, I have a question: could my noble friend the Minister clarify whether there are any savings from the Bill and, if so, what figure is being scored? My understanding is that there are no or low savings scored against the Bill. It has been laid before this House because of a concern that earnings are at around 8%—but it is also my understanding that the Treasury and OBR earnings are scored at 4.9% and that the ONS adjusted earnings may even be as low as 3.2%. Given that CPI is anticipated to be about 3.2%, apart from the Bill possibly being unnecessary, there appear to be no or low savings connected with it.
However, it is also my understanding that, were the Bill to be delayed, the basic state pension would be uprated by actual earnings, at about 8%, in which case, by the DWP’s own admission, savings would be worth between £4 billion and £5 billion, which could be reinvested into UC, were it to be saved. It would help those of us seeking to lay amendments, and those advising us, to have an accurate understanding of the savings from the Bill.
I now move to a possible way forward. It is no secret that I am seriously concerned about the removal of the £20 uplift, but I am also really concerned about the democratic deficit connected with the removal of this uplift. The removal of it was brought about by the sunset clause on secondary legislation, which means that it just died, without a vote in the other place. If Brexit was about anything, it was about taking back control—about active democratic decision-making. If Members of the other place actively want to make this choice to let the £20 uplift die, then this House would respect that, but it should be an active choice because they are the ones answerable to their constituents.
So it is my understanding that there are two ways of giving the other place this active choice. One is through an amendment to the Bill, and the other is through an amendment to the process Motion of the Bill. Either way, it is likely that there will be much discussion about scope and precedent but, ultimately, scope and precedent are servants of the democratic process, and this is a social security uprating Bill, not just a pensions uprating Bill. This is a self-governing House, and this is a moment for us to work across party divides to uprate our social security in order to protect the most vulnerable of this nation at a time when the cold winds of inflation and high energy bills are swirling around them. If there is a way to bring forward such an amendment—and I believe that there is—it is my intention to do so in Committee.
Baroness Janke (LD)
My Lords, it is always a great pleasure to follow the noble Baroness, Lady Stroud, with all her knowledge and experience in this field. I very much support her arguments and hope that we can, through the Bill, create an opportunity for the Government to think again. I also pay tribute to all other noble Lords who have argued for the reinstatement of the £20 uplift: the noble Lords, Lord Freud, Lord Desai and Lord Shinkwin, the noble Baroness, Lady Lister, and, of course, the right reverend Prelate the Bishop of Durham, who has long campaigned for changes to benefits. All have eloquently stated the case, and we on this side will give our full support to them in seeking to restore this.
I first thank the Minister for her engagement with us all in preparation for the Bill. As others have said, it seeks to amend the triple lock for the second time, albeit temporarily, for another year. As my noble friend Lady Smith said, the triple lock was a key Lib Dem achievement during the coalition. It is an essential tool to protect pensioners from the effects of the devaluation of the state pension, which has occurred since the loss of the link with earnings in 1979. As the noble Baroness, Lady Drake, and the noble Lord, Lord Davies, said, it has improved things, although it has been slow. I would not agree that it needs to be reviewed; it needs to stay because it still has to do its job.
I also welcome the Government’s declared commitment to the triple lock and, like others here today, I would very much welcome an assurance from the Minister that the Bill is no more than a temporary measure. The noble Baroness, Lady Drake, was particularly keen to have that assurance, while the noble Baroness, Lady Stowell, made a strong case for older pensioners, who are usually poorer, and the need for their confidence in messages from the Government when looking to the futures of their children and grandchildren. I would certainly support her request for a review of the taper of universal credit. My noble friend Lady Smith would like an assurance that this is not just another “temporary measure” being brought in under the curtain of the need to do things differently as a result of the pandemic.
In supporting the triple lock, I would say there are usually three main reasons given for abandoning it. The first is the idea that pensioners are now so well off that they do not need it; secondly, that young people are losing out compared with the elderly; and, thirdly, that the country cannot afford it. As others have said, there are 2.1 million pensioners in poverty who depend on the state pension and very many others who are far from being well off. Allowing the state pension to devalue will severely impoverish them further. If many pensioners are rather too well off, surely progressive taxation is the way to ensure that they are not gaining excess advantage at the taxpayer’s expense.
As far as young people are concerned, many will not have the benefit of private pensions and will depend upon a state pension. They will benefit only from a state pension that keeps its value and will suffer enormously if the state pension is allowed to devalue, as it did before 2010.
The UK has one of the lowest pensions in Europe, as the noble Lord, Lord Flight, mentioned. In the UK, spending on it is 5.9% of GDP; the Office for Budget Responsibility suggests that will increase to just under 8% in 2057-58. In many European countries, investment in pensions is much higher. In Germany, for instance, it is 10% of GDP. The noble Lord also made the point that other countries do things slightly differently, but I point out to him that they also make similar benefits available to their pensioners, as we do in this country.
The measures in today’s Bill need a second look by the Government. Since the Bill was debated in the House of Commons, some circumstances have changed. A key development is the surge in price inflation. The new chief economist at the Bank of England has warned of higher inflation being around for longer than previously thought. Current predictions from the Bank of England put inflation at 4% for the last quarter of 2021 and at over 4% for the first two quarters of 2022.
The September inflation figure will not capture any of the following: increases in energy prices which happen between September 2021 and April 2022, when the pension increase is paid; the April 2022 council tax increase, when councils are already talking about extra increases next year because of social care cost pressures and the expectation that local government is unlikely to receive a particularly generous settlement, despite council services having been cut severely over recent years; and other inflationary pressures, perhaps arising directly from the energy price hikes as the supply chain becomes more expensive, which will feed through into food and other prices. Given that food, energy and council tax are likely to account for a lot of the spending of pensioners, and older pensioners in particular, inflation by next April is bound to be higher than this September, as the Bank of England predicts. As a result, if the Bill is not amended it will condemn pensioners to a cut in their real standard of living. They cannot just work an extra two hours, as the Secretary of State famously recommended to people affected by the universal credit cut.
I support the noble Baroness, Lady Altmann, in her request for a comprehensive review of pensions and would examine her suggestion of looking at the adjusted earnings figure. I certainly do not believe that what is contained in the Bill is fair to pensioners, as the noble Baroness, Lady Noakes, does. I will just touch on the point made by the noble Lord, Lord Hendy, about the importance of people having money in their pockets if they are to make any contribution to any economic recovery following the pandemic.
We have heard the reservations of many Members about these measures and, in the changed circumstances we now face, the Government need to take the necessary time to revisit these proposals. I hope that during Committee we will agree amendments that will not impoverish the poorest pensioners, who may be facing unprecedented external financial pressures, and arrive at a realistic increase that will ensure the newly emerging pressures are fully taken into account.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for her introduction to this debate, and for her briefing and access to her officials. What a great debate—the House has come back in fine form. Once again, I have learned a huge amount from so many noble Lords. I will be going back to read the Hansard and do my homework before I reappear; I encourage the Minister to do likewise, as we are in for an interesting Committee stage.
My noble friend Lady Drake got us off to an amazing start with that wonderful look back over the history of pensions. Holding in front of us what the point of pensions policy is incredibly important.
As we heard, this Bill is needed so the Government—just for a year, we hope—can suspend the earnings-related part of the triple lock. But not only does this give today’s pensioners a lower pension next year than they expected; it bakes in a lower value of the state pension for them and for all generations in future. As many noble Lords have said, the state pension in the UK is comparatively low—not surprisingly, given we devote a smaller percentage of GDP to state pensions and pensioner benefits than most advanced economies, a point made by my noble friend Lord Sikka and the noble Baroness, Lady Janke.
The last Labour Government introduced pension credit and then, from 2002, committed to the double lock of raising the state pension by the higher of 2.5% and inflation. The impact on pensioner poverty was clear and I am willing to face down the noble Baroness, Lady Noakes—terrifying though she is—by standing up for relative poverty as the global measure which is widely recognised. Using those official figures, when Labour came to power in 1997, 29% of pensioners in the UK were living in poverty. When we left office in 2010, 14% of pensioners in GB were living in poverty. Sadly, those gains went into reverse pretty quickly. Pensioner poverty started to rise in 2012 and by last year, 18% of pensioners were once again living in poverty. To put it in numbers, that is an estimate of over 2 million poor pensioners, including over 1 million in severe poverty. The context for any change to the state pension is a growing problem of pensioner poverty.
Pension credit is key. I loved hearing the noble Baroness, Lady Noakes, talking about Baroness Castle of blessed memory and my late and much-loved dear friend Baroness Hollis, who would have been here. Your Lordships can only imagine the speech Baroness Hollis would be giving today. The Minister must at least think she has been spared that, but we all miss her and wish we were here to hear it. What a joy it would have been.
However, I have to do my best. On my bad days, I just channel Baroness Hollis and I will try to bring forward what she might have said in this debate. One thing she would have done is to push the Minister, irrespective of history, on what has been done about the take-up of pension credit. Six out of 10 is absolutely disgraceful; 40% of those pensioners are not getting the money, the TV licences or the passported benefits. What are the Government doing about it? Can the Minister bring us up to date?
As my noble friend Lady Drake and others mentioned, the triple lock applies only to the flat-rate state pension, not to the second state pension or pension credit. So far, the Government have passed through the triple lock increases so that the same cash amount in the state pension increase was put on to pension credit. But of course that means even when the state pension keeps up with earnings, pension credit does not. It is a larger amount and therefore a smaller percentage, so the pension is not keeping up with it. Can the Minister explain the rationale for not having pension credit in the pensions lock, and tell us why the Government decided to do that?
As we heard, the Government came to power on the back of a manifesto promise to maintain the triple lock. Let us look at the argument for ditching it now. The Secretary of State said:
“This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions”.—[Official Report, Commons, 20/9/21; col. 62.]
The reference period for earnings growth for the triple lock is the year-on-year change in average weekly earnings for the period May to July, which, as we have heard, was 8.3% this year. There seem to be two key drivers for that high rate. The first is the base effect. In May to July last year, many workers were on furlough or had their hours reduced, pushing down weekly wages. This year, with fewer people on furlough and hours getting back to normal, weekly wages are higher. So the increase is higher year on year. The second is “compositional effects”, which are about the make-up of the workforce. During the pandemic, more low-earners lost their jobs, so the average of the weekly wages of those who were left was higher.
The ONS did some modelling on this, stripping out both the base and the compositional effects, a point referred to by the noble Baroness, Lady Altmann, and it came up with a range of 3.6% to 5.1%, representing underlying earnings growth. Presumably the Secretary of State could have chosen to use a figure in that range had she wished. Since it is primary legislation, she can legislate for whatever she wants. It is not as though she could be JR’d on previous legislation; she is creating the legislation. Why did the Government not think about using that? They could also have looked at other ways of modelling earnings growth; for example, over a longer period, which I raised last year when we were discussing the emergency Bill. Why did the Government reject those alternatives?
The Secretary of State for Work and Pensions has been at great pains to assure us that while earnings growth might look enormous, it really is not, because of base effects, compositional effects, Covid and so on—it is barely visible to the naked eye; it is tiny. Unfortunately, at the same time, the Prime Minister was going around television studios saying that earnings growth was enormous. I quote him:
“Never mind life expectancy; never mind cancer outcomes; look at wage growth.”
It cannot simultaneously be racing ahead of inflation or be misleading and in fact tiny. Can the Minister tell us which it is? Is wage growth racing ahead of inflation or is it barely inching up and not really there at all, with nothing to see?
While we are on the subject of working-age incomes, we have to talk about universal credit. I am sure the Minister did not really expect to get through the Bill talking only about pensions; if she did, she will have been disappointed. She will have heard the extraordinary concerns expressed around the House. I know that I have been banging on about the 20 quid for a long time, but it is not just me—this is coming from every Bench in this House. It is coming from the right reverend Prelate the Bishop of Durham. Everywhere I go, people raise it with me and talk about it all the time. That is because nearly 6 million people are losing a lot of money. Everybody has heard about it and people know that they cannot afford to do that.
It was a delight to welcome back the noble Lord, Lord Freud. In a fashion, the band is getting back together again. I have missed disagreeing so dramatically with him over so many years, but now he comes back and I am agreeing with him. It really is not fair. The noble Lord absolutely hit the nail on the head. As I said at the beginning, the welfare state is there to support people, for example, when they lose their jobs, but the only reason why the Government had to stick extra money into it when the pandemic hit was that they knew that it was not enough to live on. If it had been enough to live on, presumably it would have done its job perfectly well—that is what the automatic stabilisers in the economy are for. The point is that the Government knew that so much money had been taken out of the system that it was not enough to live on, and they had to do it. I do hope that George Osborne reads today’s Hansard—I think I might send it to him. Where is he now? Is he at the Standard? I will send him a copy just in case he misses it—I would hate that. But it really is a powerful point.
The Economist says this week:
“The loss of £1,040 a year is the biggest single cut to social security since the foundation of the modern welfare state.”
That is quite a hit. I was glad to hear the noble Lord, Lord Shinkwin, and my noble friend Lady Lister trying to crack this issue that jobs are just the answer. I have a rant which I do, sadly, even at dinner parties as well as in politics. The whole point of the welfare state and of in-work benefits, of universal credit and tax credits before it, is that they are there not just to supplement low hourly rates; they are there because a lot of people, as a result of their circumstances—they may have disabilities, caring responsibilities or young kids—cannot earn enough in the hours they can supply to meet their outgoings, but the state wants them not to starve and to be connected to the labour market and to stay that way if they can. Talking just about jobs is deliberately misleading when so many people are either in work or are not able—I shall stop the rant there; the point has been made well enough by others before me.
All this is happening at a time when Britain is facing a cost of living crisis. Poorer families spend more of their income on food and fuel. As my noble friend Lord Hendy said, the point is that they spend this. Not only has this money been taken away from those families; it has been taken out of economies all around the country. I live in County Durham, where a lot of money has been taken out of the local economy. People who have this much money have to spend every penny; they cannot afford to save it, so it is hitting the economy as well as their pockets. The £20-a-week cut is happening just as food prices are going up and fuel costs are sky-rocketing, and in the run-up to a rise in national insurance, which also hits people of working age. The Economist analysed government forecasts and suggested that real-terms household net incomes are heading for the longest decline since the mid-1970s. Things are getting bad out there. The Government should not have cut this. I hope they are listening very hard to the message around the House.
I come back to the specifics of the Bill. Some people are affected both by the universal credit cut and by this Bill, because they are couples where one person is over state pension age and the other is under. Can the Minister tell us how many people are in that position? What assessment has she made of the impact of the Bill on pensioner poverty and on the number of pensioners heading for fuel poverty this winter?
We on these Benches understand the difficult situation with the anomaly in earnings, but it is surely up to the Government to find a way to deal with that while maintaining the earnings link to which they committed. That means being transparent about what is going on. When the Secretary of State announced the change, she reminded the House that she had had to legislate last year because earnings were negative. I will let the Minister explain the details to the noble Baroness, Lady Smith, but, essentially, if earnings are negative, the Government cannot apply the triple lock at all because there is not the provision in the original legislation, so the Secretary of State was right to do that. She said:
“This year, as restrictions have lifted and we experienced an irregular statistical spike in earnings over the uprating review period, I am clear that another one year adjustment is needed”.—[Official Report, 7/9/21; col. 185.]
Last year’s Bill set aside the earnings link because, otherwise, Ministers could not have increased pensions at all, as earnings growth was negative. The implication is that this is just a similar move this year, but let us be clear: last year, the Government rushed through emergency legislation so they could keep their manifesto commitment to the triple lock. This year, they are rushing through emergency legislation to break their manifesto commitment to the triple lock. They are not the same thing. There is a question of trust here and, I have to say, this is the third time in a few months. It is telling which manifesto commitments get dropped. There is something about priorities going on here. First, we had the overseas aid cut, then we had the national insurance rise, and now we have the triple lock, which Ministers repeatedly said they would protect. This Bill may be for one year, but we will be watching like hawks to see whether the Prime Minister and the Chancellor come back for more. As the noble Lord, Lord Freud, knows to his cost, once Prime Ministers and Chancellors get into the habit of dipping into the welfare budget like it is some sort of piggy bank which they can raid for their favourite projects, they tend to come back again and again, because that is what they have been doing up until now. It will not happen again if this House can do anything about it.
We will drill down into all these issues and more in Committee so that the House can understand the impact of the Bill and its interaction with other government decisions that are being made at the moment and have been made in the recent past. For today, I thank all noble Lords for a brilliant debate. I hope the Minister can answer the questions put to her and give us some assurances. I look forward to her reply.
Baroness Stedman-Scott (Con)
My Lords, I thank all noble Lords who have spoken today. Their contributions have been eloquent and focused. The House has great knowledge of and experience in pensions and social security, which has truly been demonstrated today.
The debate has been wide-ranging and has covered a number of topics. I want to address some of the key points that were raised. If I do not manage to cover them all, noble Lords have an undertaking that I will write after this Second Reading and we will meet again, when they will have further opportunity to drill down into the detail.
I reiterate that this Bill is not concerned, although noble Lords are, with benefits linked to prices, such as universal credit. Uprating decisions for those benefits will be made under the existing provisions in the Social Security Administration Act 1992 as part of the Secretary of State’s annual uprating review in the autumn. The UC points that noble Lords have made are out of scope of the Bill, but out of respect for those who have raised the issues, I will endeavour to respond to them all. They will then be brought before both Houses through the annual uprating order, which is subject to the affirmative statutory instrument procedure and it would not be right for me to pre-empt that review.
The Bill sets aside the link between earnings growth and the uprating of the basic state pension, the full rate of the new state pension, the standard minimum guarantee in pension credit and survivors’ benefits in industrial death benefit. It does this for 2022-23, and for 2022-23 only. In place of the earnings link, it requires the Secretary of State to increase the relevant pensions at least in line with price inflation, or by 2.5%, whichever is higher. We have discussed the reasons for this approach linked to the unique effects of the Covid-19 pandemic over the last two years of earnings growth.
The noble Baroness, Lady Drake, raised the 1979 pension level. It is difficult to make comparisons back to 1979, when price indexation was introduced—the pensions landscape has changed significantly since then. She also asked whether the state pension was fit for purpose. The new state pension forms a clear foundation for individuals’ private savings to provide for the retirement they want. Together, the new state pension and automatic enrolment to workplace pensions provide a robust system for retirement provision for decades to come. The overall trend in the percentage of pensioners living in poverty is a dramatic fall over recent decades: there are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10, and we want to maintain that achievement.
The phasing out of the triple lock was raised by the noble Baronesses, Lady Sherlock and Lady Drake, my noble friends Lady Altmann and Lady Stowell, and the noble Lord, Lord Davies. After that, the legislation will revert to the existing requirement to increase these rates at least in line with earnings growth. The noble Baroness, Lady Smith, suggests that this may change because of Brexit. No, the link with earnings will apply.
I pay tribute to the noble Baroness, Lady Greengross, for her commitment to the more mature in our society and her consistent efforts to represent them. The triple lock commitment was raised by the noble Baronesses, Lady Greengross, Lady Drake and Lady Smith, my noble friend Lady Stowell and the noble Lord, Lord Davies. The Bill needs to be seen in the context of the Covid-19 pandemic and the Government’s approach over the two years of the pandemic. After this year, the legislation will revert to the existing requirement to uprate at least by earnings growth, and the Government’s triple lock manifesto commitment remains in place—there is no turning back.
The noble Baronesses, Lady Sherlock, Lady Lister and Lady Smith, raised the possibility of a poverty impact assessment. They asked whether the department had produced an assessment of the effects on pensioner poverty of increasing these rates by 2.5% in 2021-22 and then by 2.5% or in line with inflation, whichever is higher, in 2022-23. The department collects and publishes a wide range of data on income and poverty, which are released annually in the reports on Households Below Average Incomes and a report with estimates of pensioner poverty covering 2021-22 and 2022-23 will be published in 2023 and 2024 respectively. In the absence of actual data, the only way to provide an assessment would be to forecast and model how many pensioners might have their income lifted above the various low-income levels under an earnings uprating versus an inflation uprating. Assumptions would need to made about how each individual pensioner’s income will change in the future under each scenario. This would require making assumptions about, for example, how each pensioner might change their behaviour around other sources of income, such as draw-down of income from investments or a change in earnings when faced with different amounts of state pension, which is virtually impossible to do with accuracy. These projected incomes would then need to be compared to projections of the various income thresholds, which are themselves extremely uncertain.
For absolute poverty, the threshold is increased each year by inflation during that particular year. As demonstrated in recent months, inflation is currently extremely volatile and there is a high level of uncertainty about what its level is likely to be over the next year. For relative poverty, the threshold is determined by changes in median income across the whole population. Given the volatility in the economy and labour market, again this is impossible to do accurately. Therefore, there is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty levels is likely to be misleading, due both to uncertainty about the economy and pensioners’ behavioural response to various levels of state pension.
I know that the noble Baroness, Lady Sherlock, has been waiting for this figure: drumroll—I am going to give it to her now. She asked specifically how many couples in receipt of universal credit include a partner in receipt of a state pension. We estimate this number to be around 50,000 mixed-age couples claiming universal credit in 2022-23.
The noble Baronesses, Lady Sherlock, Lady Janke, Lady Drake, Lady Greengross and Lady Lister, and my noble friend Lady Noakes, all raised the issue of pension credit take-up. We have had debates about this in the House and I promised to take action, which we have done. I know how passionate all noble Lords are about increasing pension credit take-up—I am in that club too. The Government are working with partners to raise awareness of pension credit and the department conducted a media day in June with support from Age UK and the BBC, in particular. We continue that engagement with the BBC, and I met the Minister for Pensions and the director-general of the BBC a few weeks ago to discuss how we can do even more to encourage people to claim what they are entitled to. I am no expert in social media, but I will take away the point made by the noble Baroness, Lady Greengross, and raise it. Furthermore, the Minister for Pensions and I held a stakeholder round table in May. Following that, the department established a working group involving organisations such as Age UK, Independent Age and British Telecom, as well as the BBC, to explore innovative ways to reach eligible pensioners. The group will meet again on 19 October.
We are also improving our direct communications. Earlier this year, more than 11 million pensioners in Great Britain received information about pension credit and this highlighted that an award of pension credit, as has already been said, can open the door to a range of other benefits, such as housing benefit, help with council tax and heating bills and help with NHS costs, as well as a free TV licence for the over-75s. We will continue to do this work and will be encouraging people in every way we can to claim their entitlements, building on some promising recent figures. According to the latest data, for the financial year ending in 2019, 77% of the total amount of the guarantee credit—the safety-net element of pension credit—that could have been claimed was claimed, up from 66% two years previously.
My noble friend Lady Altmann and the noble Baroness, Lady Lister, raised the possibility of a review of the triple lock. I must say that the Government have no plans to undertake a review; we are committed to the triple lock for the remainder of this Parliament.
An important issue raised by many noble Lords concerns a different measure of earnings. Several noble Lords asked why the Secretary of State does not use her discretion under the existing legislation to use an adjusted index of earnings growth to exclude the effects of the Covid-19 pandemic, or why the Government did not include such an adjusted index in th Bill. The answer is that there is no robust methodology for establishing such an adjusted index. The existence of such a methodology would be crucial in assessing the degree of legal risk attached to veering from the conventional index, which continues to provide an accurate reflection of growth in earnings.
The Office for National Statistics has not published official statistics for any alternative estimates of earnings growth; it has published just a range of estimates of the potential scale of base and compositional effects caused by the Covid-19 pandemic. However, it has concluded that there is no robust method for producing a single figure for a measure of underlying wage growth that accurately takes account of temporary effects due to the pandemic that all experts could reach agreement on. This lack of an agreed robust analytical basis for an alternative figure means that there is a legal risk in breaking with precedent in the measure of earnings used. I am quite sure that we will wish to discuss this further between the Bill’s stages—and we will.
My noble friend Lady Altmann has been a great advocate on the issue of pensioner poverty among women; in fact, she was referred to by the noble Lord, Lord Sikka. She asked about reforms to the state pension. These reforms have put measures in place to improve state pension outcomes for most women. More than 3 million women stand to receive an average of £550 more per year by 2030 as a result of the recent reforms. Women live longer than men on average and therefore receive pension payments for longer.
The noble Baroness, Lady Sherlock—she is a noble friend—was very animated in her contribution. Indeed, she was racing away; one of the things I have to work hard on is keeping up with her. We might have a chat about that another time. She asked whether wage increases are racing against inflation, am I correct? The response is that wages are increasing at 8.3% while inflation is at 3.3%, so wages are much higher. I am sure the noble Baroness will give me a list.
My noble friend Lady Noakes raised the issue of relative versus absolute poverty. The Government believe that absolute poverty is a better measure of living standards than relative poverty, which can provide counterintuitive results. The absolute poverty line moves with inflation so provides a better measure of how the income of pensioners compares with the actual cost of living.
My noble friends Lady Altmann and Lord Flight, and the noble Baronesses, Lady Drake and Lady Janke, asked about state pension comparisons with EU countries and others. This comparison is misleading due to differences in the pension systems. There are many factors to take into account, including different tax systems, different healthcare systems, different pension ages, the cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at concessionary rates. In her contribution, the noble Baroness, Lady Janke, commented that other countries get them, so I suspect that this is another issue on the agenda for further discussion.
The noble Lord, Lord Davies, the noble Baroness, Lady Drake, and my noble friends Lady Altmann and Lady Stowell asked about the state pension versus the basic state pension. The new state pension system has been designed so that no more money is being spent now than under the previous one, and care has been taken to ensure fairness to both groups while delivering a sustainable system for the future.
The noble Baroness, Lady Janke, and my noble friends Lady Stowell and Lady Stroud raised the issue of the UC taper rate. All I can say at the moment is that no decision has been taken on it.
The noble Baroness, Lady Smith, asked why we needed a Bill last year. The Social Security Administration Act 1992 does not refer to 2.5% and, for the benefits in this Bill, refers specifically to earnings growth. Without suspending that link, the state pension would have been frozen.
My noble friend Lady Stowell referred to the state pension for over-75s. We are committed to supporting all pensioners, including those over 75. We spend more than £129 billion—5.7% of GDP—on benefits for pensioners, which includes spending on the state pension. It is also supported by further measures for older people, including the provision of a free bus pass, free prescriptions, winter fuel payments and cold weather payments.
My noble friend Lord Flight asked for clarification on the year. It is the CPI in the year to September 2021, so it will be 2021 data—the most up-to-date data we can use—for our hard IT deadline in November.
Now we come on to the £20 uplift. Virtually all noble Lords made reference to this. To start with, I must confess and confirm again—I know that this will rankle—that this was a temporary measure. People knew when it started that it would end. We extended it for six months, and it was an important measure to help people facing the greatest financial disruption to get the support they needed. In line with other emergency support that we rolled out at pace, the uplift helped protect livelihoods through the worst of the pandemic. The support we put in place did what it was intended to do, despite the biggest recession in 300 years. It is worth noting that unemployment is much lower than feared, at 4.6%, and for some, household savings are £197 billion higher. The poorest working households were supported the most.
I have been asked to make reference to something mentioned by the noble Baroness, Lady Smith. No money is being taken away because we budgeted to spend a certain amount. The increase of 2.5% or the rate of inflation, whichever is higher, will be applied. I just want to give a reminder that the Lib Dem Minister at the time, Steve Webb, supported this in legislation.
Baroness Smith of Newnham (LD)
The Minister said that I was wrong and that no money has been taken away. I meant that it has been taken away from the individuals who benefited from the £20-a-week uplift but will now receive £20 a week less.
Baroness Stedman-Scott (Con)
I am sorry if I did not make that point clearly. I agree with the noble Baroness. People were told that it would be there for a period of time but was not for ever. We extended it because the pandemic went on; we have therefore paid up what we committed to pay. We did not say that we would give it for ever but then took it away.
Baroness Janke (LD)
I have a question. First, the Minister mentioned Sir Steve Webb, a former Minister. He too has pointed out that, since the Commons discussed this issue, the circumstances have changed and the indicators are that price rises will be much higher—something that the Minister did not address when she replied on that part of the Bill. Secondly, could the Minister write to me and tell me why exactly this Bill must have its Third Reading by November?
Baroness Stedman-Scott (Con)
I thank the noble Baroness for pointing out the clarification on her previous colleague, Steve Webb. I will certainly write to her and, later, I will come on to the issue of gaining Royal Assent by November.
Let me turn to my noble friends Lord Freud and Lady Stroud. I thank my noble friend Lord Freud for the passion and knowledge with which he speaks. I pay tribute to his achievements as Minister for Welfare Reform. I must, however, reiterate that the Bill does not concern benefits linked to prices, such as universal credit—but thank God we had universal credit when the pandemic came. We will be for ever in the noble Lord’s debt for making that happen. If I may say so, we will also be for ever in the debt of Baroness Hollis for the challenge that she provided in that; we all miss her.
In answer to my noble friend’s question, making the uplift payment permanent would cost £6 billion; this is the equivalent of adding 1p to the basic rate of income tax, in addition to an increase of 3p in fuel duty.
I have been really pleased to engage with my noble friend Lady Stroud. We have worked together on many projects, and I have found our conversations really useful and helpful. I know that she has strong views on the universal credit uplift, and that dialogue will continue. As I said, the Bill is very short and not concerned with benefits—I do not say that to annoy people—so the Government would not encourage her to try to draw a false link between the two separate matters. Again, the universal credit uplift was always intended to be temporary.
Lastly, I remind noble Lords of the need for Royal Assent by 22 November. This will allow the Secretary of State to conduct a statutory review using the new powers in time for the DWP to meet its hard deadline of 26 November for reprogramming its computer systems, to ensure that the new rates of benefit and pensions are payable from April 2022. Any delay to this Royal Assent deadline will result in the review being completed under existing legislation committing the Government to uprate by at least 8.3%, which would not be fair to the current and future generations of taxpayers.
Baroness Altmann (Con)
Can my noble friend clarify that the existing legislation permits the use of an alternative measure to 8.3%, and that the Secretary of State has discretion to choose to use a figure from the ONS that reflects the adjustment to earnings that the Bill is trying to ex out?
Baroness Stedman-Scott (Con)
My noble friend has made this point on a number of occasions; other noble Baronesses and noble Lords have too. Before I bang a nail in, I think it is best that I write to noble Lords about that to make sure it is absolutely clear on that basis. I hope they will accept that.
My noble friends Lord Shinkwin and Lady Stroud raised the issue of a UC uplift impact assessment. The legislation enacting the temporary uplift, including its eventual removal, was approved by both Houses. No impact assessment was conducted when the uplift was introduced, as it was by law a temporary measure, as I have already said. No assessment was conducted on the reversion to the underlying rates of universal credit.
Do I have only 20 minutes for this? No? Okay, I am in charge. We will not be here for another half an hour. I want to pay respect to everybody, but I certainly do not want to abuse the House’s good will.
I hope the noble Lord, Lord Sikka, will take this in the spirit in which it is meant: I thank him for the master class in economics. I hope the Chancellor will read Hansard, and I am sure he will be in touch if he wants to take it further.
Lord Sikka (Lab)
I thank the Minister. I do not know what the tuition fee would be or whether it would have gone up by then. Can she please explain why the £37 billion surplus on the National Insurance Fund account is not being used to pay even £8 billion or £10 billion in extra pensions?
Baroness Stedman-Scott (Con)
This is a pretty challenging question, and I do not know. I will go away and find out, write to the noble Lord and place a copy in the Library.
I will stop soon, but I want to come back to my noble friend Lord Shinkwin and the disability Green Paper. This issue is not in the scope of the Bill, as he will know. I assure him that I will raise his concerns with my ministerial colleagues. We have been blessed with the appointment of Chloe Smith. I have talked to her about my noble friend and I know she will meet him—because there will be trouble if she does not.
Without being disrespectful to anybody else, I would like to hold a further briefing and answer all the unanswered questions. I hugely appreciate the time and intent of all noble Lords, and I commend the Bill to the House.
Social Security (Up-rating of Benefits) Bill
Tuesday 26th October 2021
(3 years ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 54-I(Rev) Revised marshalled list for Committee - (25 Oct 2021)
Baroness Altmann
Member’s explanatory statement
This amendment would remove the provision substituting “prices” for “earnings” and retains the earnings link for the 2022-23 year by stipulating the Government will assume earnings have risen by 3.8% for the purposes of uprating. This reflects analysis from an ONS blog suggesting that the underlying rate of earnings growth was between 3.2% and 4.4%. The figure of 3.8% is chosen as the mid-way point in that range.
Baroness Altmann (Con)
My Lords, I shall speak to Amendments 1, 2 and 3. I have to say to my noble friend that I truly believe that the legislation already allows for the provisions that we are trying to enshrine in this Bill. I actually do not believe that the Bill is necessary. It was passed through the other House on the basis of a false premise: that keeping the triple-lock earnings protection would require a pension uprating of more than 8%, at an Exchequer cost of around £5 billion.
However, we are amending Section 150A of the Social Security Administration Act 1992, and Section 150A(8) specifically states that
“the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”
Given that we are supposed to be uprating benefits that are vital to the living standards of millions of pensioners —I am particularly concerned about the poorest pensioners, who are dealt with by Amendment 3—it is regrettable that the Secretary of State and the Government have chosen not to use the option in the Bill allowing them to estimate a level of earnings that would have allowed for what I think all noble Lords would agree is an exceptional impact from the measures taken in connection with the Covid-19 pandemic. That event is pretty unprecedented but could be allowed for when talking about uprating benefits that so many millions of our citizens rely wholly—or almost wholly—upon to be able to afford to live.
In my attempts to persuade and impress upon the Government that it is not too late to retain the triple-lock earnings link, I have tried to suggest ways in which we can still do this in the Bill, and I am most grateful to my friend, the noble Baroness, Lady Wheatcroft, who has supported me on Amendment 1. I stress that these are all probing amendments, but this one tries to help the Government by suggesting a level that could be used to reflect an actual level of earnings increase across the economy which is adjusted—in a way that has already been explained by the ONS in a recent publication—for the distortions relating to earnings figures in the normal measure, which has always been average weekly earnings.
The ONS analysis, which looked at the base effects and the composition effect, suggested that actual earnings growth was not more than 8% but was between 3.2% and 4.4%. I have just picked a number at the middle of the range: 3.8% is a figure that could be inserted into the Bill. The Secretary of State is at liberty to choose an alternative figure that she feels—perhaps with the advice of her officials and all the excellent analysts that the department has—would better reflect the actual number, but that itself would still preserve the earnings link that is so important, as we discussed at Second Reading. So, that is Amendment 1, which specifies that the general level of earnings obtaining would be 3.8% for the purposes of just this one year, which is what we are trying to do.
Amendment 2 is truly cross-party: I am hugely grateful for the support of the noble Baronesses, Lady Smith, Lady Drake and Lady Wheatcroft. Again, this amendment intends to maintain the link between pension uprating and earnings while still explicitly accounting for the problem that, I believe, the Government have been advised to beware of, which is that not using average weekly earnings and not changing primary legislation to permit not using average weekly earnings could open the Government to challenge. I stress that I am also hugely grateful to my noble friend the Minister, who has engaged so constructively with noble Lords across the House, and to her officials, who have been very patient and generous with their time in going through these issues with those of us who feel so concerned about the social-policy and pensioner-poverty implications of potentially setting a dangerous precedent that, actually, increasing by earnings does not necessarily need to happen if the Government do not like the figure one year.
Amendment 2 aims to enshrine in the Bill a provision that says that, for this year only, those benefits—the basic state pension, the new state pension, pension credit, the minimum guarantee and the other smaller pensions, such as category B, category D and so on—need to rise in line with earnings, but that that level of earnings can be adjusted in light of
“the impact of the COVID-19 pandemic on the level of earnings for the previous year”.
That, again, would open the way for the Government to maintain the earnings link and use an adjusted figure, while addressing the potential concern about being challenged if primary legislation is not changed.
At the moment, the decision seems to have been taken that, if average weekly earnings—the specific statistic produced by the ONS, which has always been used in the past—are not used, the only alternative is to drop the earnings link altogether. These amendments are designed to show that that is not the only alternative. Even though, within the legislation, it is okay to use a figure that the Secretary of State adjusts as she sees fit, this would explicitly state that.
I am puzzled that the officials still seem to think that this could be open to challenge. Very few people would disagree with the idea that average weekly earnings statistics, as reported in the 8%-plus range, were not distorted in some way and that it is not acceptable to adjust them in any way. Indeed, in the figures that have come out for average weekly earnings, the three months that were compared with three months from last year—April, May and June—were all at around 8.8%, but the more recent July and August figures, which have already come out, were significantly below that. They have come down to around 5% or below, so there is an element of MPs having made a decision without recognising that there are alternatives. I propose that we suggest to the other place that there is an alternative that allows retention of the manifesto commitment to maintain the triple lock and, more importantly, of the earnings link.
Finally and briefly, on Amendment 3, I am again grateful for the support of the noble Baronesses, Lady Drake, Lady Smith of Newnham and Lady Wheatcroft. This amendment is specifically aimed at the poorest pensioners—those who rely on pension credit. This credit has never been triple locked, so they have never benefited from that protection directly, although there has been a cash-terms increase to keep the pension credit a little more in line with the new state pension. Since its introduction nearly 20 years ago, it has always had to be linked to the level of average earnings. Suddenly, for one year, because of the pandemic, we are removing that protection even from the poorest pensioners. Typically, they are the oldest pensioners. The majority of them will be women who are not living on very much money; we are talking about £177.50, or thereabouts, a week, as the single pension-credit minimum-income guarantee level.
If nothing else, I am proposing that we do not abandon the earnings link for those poorest pensioners, so I have inserted a provision in page 1, line 8, at the end,
“for the purposes of paragraphs (za) to (c) … only”
of Section 150A(1) of the Social Security Administration Act 1992. That would exclude this Bill from applying to the pension credit minimum income guarantee. It would, I stress, still allow the Secretary of State the discretion to use a different level of earnings than average weekly earnings should she decide to do that for reasons of policy, such as not having too big a differential or too big excess of pension credit over the new state pension. However, the main principle that I am trying to preserve within these amendments is the importance to pensioners, in the context of pensioner poverty and a state pension that is pretty much the lowest in the developed world, that the promised protection is in line with earnings. That is crucial. We must, in my view, not set a dangerous precedent, even for one year. We can take alternative measures to account for the distortions of the pandemic. I beg to move.
The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)
I should point out to the Committee that if Amendment 1 is agreed to, I cannot call Amendment 2 by reason of pre-emption.
Baroness Wheatcroft (CB)
My Lords, I have put my name to the first three amendments because I believe that doing away with the earnings link would be a really dangerous step. I am grateful to my noble friend Lady Altmann for doing such a lot of work on these amendments and providing the Government with a percentage, 3.8%, which should of course be acceptable. Nobody in this House knows more about pensions than the noble Baroness, and she has introduced this measure so effectively that I can be relatively brief.
Relying on CPI inflation, which would happen if we did away with the earnings link, will act to the detriment of pensioners, as it does not accurately reflect how those pensioners who rely most heavily on their state pensions spend their money. Last month, for instance, the greatest downward pressure on inflation came from hotels and restaurants. It is the basics of life which absorb pensioner incomes, though, not hotels and restaurants. Their money goes on food, fuel and housing, yet we know that the September CPI figure, which would be used to determine the inflation figure for pensions, does not and cannot take account of the increases that are going to dawn on food, fuel and housing prices over the next few months. Earnings are a good guide to where basic costs will go, and we should maintain the link for pensions.
Pensioner poverty is on the rise again. In June this year, Age UK reported that more than 2 million pensioners were living in poverty. We know that very many of those might qualify for extra benefits but do not apply for them, either through too little knowledge or too much pride, so it is crucial that the basic pension—currently, shamefully, the lowest in the OECD in relation to earnings—should rise significantly. There will be some who do not need the extra cash—members of that ever-reducing band with the benefit of a defined benefit pension, or those with an investment income—but the fact that they have more money does not mean that the basic state pension should not rise at a reasonable level: the tax system can claw back the excess. Would it not have been sensible to have made sure that the levy to pay for NHS and social care reform would come from income tax rather than from national insurance, which pensioners do not pay at the moment? I believe that those pensioners who are in work should pay.
However, these amendments make sense. They work as a package and therefore I support them.
Baroness Drake (Lab)
My Lords, I will speak to probing Amendments 2 and 3 in this group. The triple lock is not legislated for; it rests on a commitment given by successive Governments since 2011. However, indexing pensions at least in line with earnings is legislated for. Through this Bill, the Government are neither applying the triple lock nor the underpin of earnings indexation. Both have gone as a consequence of this Bill—albeit that the Government say that they will not do it next year.
It is not surprising, therefore, that the removal of both is causing concerns that the Bill is trailing the Government’s consideration of lowering the value of the state pension going forward. While recognising the anomaly in the data behind the 8.3% earnings figure, the pandemic will not account for all of that increase. The decision to raise the state pension by the consumer price index in response to the anomaly comes without any analysis of how that change might impact the value of the state pension in relation to actual earnings.
In fact, the Pension Policy Institute has done such an analysis and, assuming that the CPI increase is of the order of 3%, which it is, the PPI’s recent analysis stated:
“Increasing the State Pension by CPI means that overall, State Pensions will rise by less than the real increase in earnings over the past two years. An alternative approach would have been to consider the rise in earnings over two years to give a more realistic estimation of real wage increases without the artificial impact of the pandemic impact in the year on year earnings statistics. This would need a pension increase of 5.3% in 2022 to match the increase in earnings since the setting of the State Pension level in 2020. Increasing the State Pension by this amount would save £3.1bn in 2022”.
So, increases in pensions will not reflect the real rise in hourly wages over that two-year period—which rows against the clear intention of the underpin of earnings indexation that is in the legislation.
The PPI approach of considering earnings over two years would reduce much of the methodology challenge in establishing an adjusted earnings index for one year, which the Minister refers to as the Government’s main defence for the approach they are taking. In fact, we have not heard a proper explanation from the Government as to why they could not consider different approaches. Several could have been taken, such as looking at earnings over the two-year period. So can the Minister give a fuller explanation of why they cannot take a different approach to that contained in this Bill? How do the Government intend to address the fall in the value of pensions against earnings over the last two years?
The triple lock was intended to address the extended fall in the value of the basic state pension. As the Minister states in her letter of 25 October, following Second Reading,
“the triple lock was introduced in order to boost the value of the basic state pension”.
It was to recover from those years of decline against earnings—a sort of accelerator, to get back to a reasonable comparative position.
With the Library’s help, I looked at the hypothetical value of the basic state pension and the pension credit as if they had been uprated in line with earnings, rather than the triple lock, since 2011. Currently, that triple-lock boost delivered a basic state pension of approximately £18 higher a week than it would have been if it had been indexed by earnings alone. When the Bill passes, in 2023 the basic state pension boost will fall to approximately £12 a week higher than if uprated by earnings alone. The pension credit minimum income guarantee, targeted on the poorest pensioners, is approximately £14 a week higher currently than it would have been if uprated by earnings alone. In 2022-23, it will be only £6.79 a week higher.
I am sure that the Government will produce more precise figures than mine, because their ability to do so is greater than mine, but what I am absolutely confident that they will not be able to contradict is that there will be a clawback from the cash value of the current triple-lock boost. The pension credit minimum income guarantee is targeted on the poorest pensioners and, as the noble Baroness, Lady Altmann, said, it is not uprated by the triple lock, although earnings uprating is legislated for. The Government have mitigated that omission by applying the underpin of a cash increase, to give what they feel is a fair increase, rather than conceding the full principle of the triple lock.
However, many older pensioners still face declining incomes, and women are particularly sensitive to changes in the state pension indexation. On average, women are more likely than men to have lower incomes at older ages: 60% of those in relative poverty over the age of 65 are women; and women are more likely to be eligible for pension credit—so there will be a direct gender impact if one starts to tamper with less generous indexation, and there is nothing about future accrual of pensions that suggests that that gender bias would not persist.
Pensioner poverty is rising, and we are now seeing falling life expectancy in areas with the greatest incidence of pensioner poverty. We have accelerated the state pension age; pensioner poverty is rising; and in those areas, life expectancy is falling. That trend was emerging before the pandemic—before anybody says, “Well, it’s the product of the pandemic”, no, that trend was there. I am sure it has been accelerated, but it was there before.
So why are the Government not taking a different approach to the uprating of pension credit targeted on the poorest pensioners and applying a cash increase greater than the value of the uprating by CPI? There need be no complicating legal or methodological issues in doing so. There is a clear precedent for the Government choosing to apply a cash increase.
Some argue that the triple lock unfairly advantages older people and should be scrapped for reasons of intergenerational fairness. But not all older people are experiencing a higher standard of living—older pensioners even less so. In 2020, benefit income was the largest component of income for both pensioner couples and single pensioners, and nearly two-thirds of the total income for single female pensioners.
In fact, younger people arguably have more to gain from the triple lock than older people because, when the state second pension was replaced by the new state pension in 2016, which will apply to future pensioners, its full value then was set at around 24% of average earnings—and that is low in comparison with any other advanced economy. But that is the base on which one is looking to make private savings work. To achieve a replacement income in retirement of 45% for the average earner, privately saving 8% under auto enrolment, the new state pension needs to be nearer 30% of average earnings. The Government argued when they introduced the new state pension that it was set because it was part of a package, together with the triple lock and the accelerated increases in the state pension age, which have been banked.
Again, research by the Pensions Policy Institute indicates that, without the triple lock, it will be harder, at least until the new state pension rises above a certain level, for young workers to achieve an adequate income in retirement, because it is the base on which their private savings will assist in securing them an income in retirement, and the dominance of the role of the state pension in pensioner income will persist long into the future.
Baroness Bennett of Manor Castle (GP)
My Lords, I begin by apologising to your Lordships for not taking part in Second Reading due to the volume of Bills currently before your Lordships’ House.
I will be very brief. I rise to offer the Green group’s support for the intention of all these amendments. I express my pleasure in following the noble Baroness, Lady Drake, and stress her point that we are not talking about a contest between generations here. There are some very poor people among our older communities, and they deserve not to live in poverty, but that does not mean taking money away from the young. I also stress the point made by the noble Baroness, Lady Wheatcroft, about how pensioner poverty is rising and that we should have a society where no pensioner is living in poverty.
I particularly want to address Amendment 3, which is the one I would most like to have attached my name to, had there been space. It is crucial: pension credit gets so many people to at least a basically decent, not awful, standard of living, but the fact is that that is useful only if you actually get it. I had a conversation—or a debate—with the Minister about a year ago. At that stage, the rate of pension credit take-up was 60%; that meant about a million pensioners were not receiving pension credit who would have been entitled to it. That was money the Government were not paying out—about £3 billion. It was estimated that it was costing the NHS and social care a spend of £4 billion. So not paying pension credit is actually costing the Government money. Can the Minister now—or later in writing, sharing it with other Peers—update me, a year later, on whether those figures still hold? Have the Government planned, as they did not plan a year ago, a programme to promote pension credit to ensure that those who are entitled to it take it up?
Baroness Janke (LD)
My Lords, as the noble Baroness, Lady Bennett, says, all these amendments seek to protect pensioners against price increases during a temporary suspension of the triple lock. I very much welcome the proposals made in Amendments 1, 2 and 3, and particularly welcome the proposal to include pension credit in the link with earnings.
I want to speak to Amendment 4 in my name, which seeks to base the uplift on the predicted increase as forecast by the Bank of England for April 2022. My amendment proposes that, as the pension increase will be in April 2022 and the previous pension increase was in April 2021, the best measure would surely be price increases between those two dates.
Circumstances have changed considerably since the Bill completed its passage through the Commons, including rising costs, rising inflation, unreliability of supply chains and the various pressures brought about by those circumstances. While we do not know what inflation will be by next April, there is plenty of reason to think that it will be higher than currently—that is sadly what the Bank of England thinks. For example, the energy cap went up 12% on 1 October, and is expected to go up again next April. I do not think the Government should be happy that these cost rises are not included in the inflation figure that they have used.
We know that pensioners, and older pensioners in particular, tend to spend more time at home and feel the cold more, and so energy bills tend to be a higher share of their household budgets. Given soaring energy costs, pensioner inflation is likely to be higher than average inflation. This is another reason to think that just linking to September’s average figure, when setting the state pension rate, is the answer to the wrong question. I know that some Members will think that using a forecast is not as robust as using an outturn, but this legislation is only for one year, so really we are not setting a precedent. In fact, I am reliably informed that, in the 1980s, the DWP used to use forecast inflation for benefit uprating.
Mention was made in the previous debate of the need to implement the new rates as quickly as possible. This really does not take as long, in this day and age; there are processes in place to make it much easier. Surely it would not take long for the preferred body—the Bank of England or the OBR—to come up with an inflation forecast; presumably the Budget will bring new inflation forecasts in any case.
If the Government are committed to protecting pensioners against rising prices when they set the pension in 2022, they should see that this is a more transparent, easily understood method of ensuring that pensioners are protected against the expected rise in prices, costs and pressures in the year ahead.
Lord Davies of Brixton (Lab)
My Lords, there are two issues being discussed in Committee that I particularly want to address. First, what should be the provisions to determine the operation of the triple lock? Secondly—a distinct issue—what is the desirable level of the fixed-rate state pension, and how can we get there? These are clearly linked but distinct issues, which is why I sought to have them grouped apart. In this group, Amendments 1 to 4, we are dealing with the first issue. The question is: how should the triple lock work? We need to thank the noble Baroness, Lady Altmann, for her work in producing these amendments, as well as the Minister, for the immense amount of time and effort she has put into explaining the Government’s position.
On the clause stand part debate, I will say that I am in favour of the 8% increase; I will explain why at that stage. However, as I said at Second Reading, given the Government’s clear and unambiguous commitment in their election manifesto to sticking by the triple lock, I do not understand why they are not prepared to adopt one of the approaches proposed by the cross-party group of noble Baronesses before us today. Unfortunately, of course, we have a Government who are now in the habit of breaking their promises; in this case in a relatively blatant fashion and, as has been explained, unnecessarily.
The Minister should understand that her Government’s refusal to give any consideration to any of these proposals is why there is so much fear—in this House and more generally—that this is not a one-off, that a precedent will be set that will be attractive to austerity-minded Chancellors in future, and that other excuses for breaking the link will be found. This is clearly not a party-political point. No one could accuse Age UK of being partisan, but it has said that
“it’s asking a lot for older people to believe that any scaling back of the triple lock would only be temporary, rather than permanent.”
The organisation goes on to point out that
“some of the prominent voices arguing for a suspension of the triple lock in response to the pandemic, are the same people who have called for its abolition in the past.”
The only way for the Government to mitigate these widespread concerns is to demonstrate commitment, either by sticking to the current legislation or, more likely in practice, through an appropriate amendment to this Bill. Such an amendment is now necessary to demonstrate the Government’s continued commitment —in practice and not just in fine words—to the key earnings element of the triple lock.
We must thank the Minister for her letter—which eventually reached me—and her explanation of why the Government believe that it is so difficult to adopt another definition of the earnings increase that would satisfy Section 150A of the Social Security Administration Act 1992. I am also glad to have had meetings with the Minister, at her instigation, to discuss the issue in detail. I thank her. But the case essentially comes down to “legal risk”. Unfortunately, I still find the argument less than compelling. On the face of it, the choice of the index is a decision for the Secretary of State. Subsection (8) could not be more definitive:
“The Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”
This puts it in the hands of the Secretary of State, so long as, that is, she does it in a way that is not irrational.
In truth, it is the decision to drop any link to earnings that is irrational—and, anyway, if it were correct that the Secretary of State’s choice is so open to challenge, it would be surprising that it has not been challenged in the past. For example, the prices index is based on a single month, September, whereas earnings are based on the three-month average from May to July. What sense does that make and why has one or other choice not been challenged? Earnings indices, along with those for prices, are inherently a matter of judgment and interpretation. It is not as though there is one true earnings index buried under the data that might ultimately be revealed in the course of legal action. Is any court really going to substitute its judgment for that of the Secretary of State? I am afraid that the excuses being offered for why the Government are unwilling to accept the approach suggested in these amendments bear all the hallmarks of post hoc-ism, the sort of clutching-at-straws justification that is commonly introduced to justify a decision that has already been made. The Minister has to understand that this is exactly why so many people continue to doubt the Government’s protestations that this is simply a one-off.
For these reasons, I shall support Amendments 2 and 3, in the spirit of helping the Government out of a hole that they have dug for themselves. Unfortunately, although I often agree with the noble Baroness, I am against Amendment 4. Just to give a brief history lesson, the idea of predicting prices figures is fatally flawed. I criticised it back in 1975 when my pensions hero, Barbara Castle, tried it, and I am against it now. Unfortunately, we are not allowed to use visual aids in this Chamber, but those noble Lords who have to hand the House of Commons briefing document can turn to page 22 and see a graph of the real value of the basic pension against earnings. Noble Lords will see that in 1975, when Barbara Castle was Secretary of State, there was a sharp downward dip, which is when they decided to adopt a projected rather than a hard figure. I am against it—I am sorry, because I am sure that the intentions are the best, but it gives too much scope for the Government to adjust the figures.
Baroness Lister of Burtersett (Lab)
My Lords, at Second Reading I accepted the Government’s case for not increasing pensions by 8% or so, and I called for a review of the triple lock, because of the arbitrary nature of the triple element of the lock—that is, the 2.5%—while emphasising the importance of maintaining pensions and related benefits relative to average earnings as a general principle. I therefore support Amendments 1 and 2, which are consistent with that argument.
At Second Reading, as we have heard, the Minister argued that there was no robust methodology for establishing what the underlying increase in earnings had been this last year. But surely the ONS range of estimates, on which these amendments are based, is at least based on some kind of methodology, which is more than one can say about 2.5%, which can be used to increase pensions should it exceed earnings and prices. As it is, the jettisoning of earnings this year has given rise to understandable fears that the earnings link might be abandoned altogether in the longer term, just as it was by the Conservative Government in 1980, leading to a steady deterioration in the position of pensions relative to average earnings during the following two decades.
Moreover, the case for basing pensions on the underlying increase in earnings is the stronger, given what is happening to inflation, which is addressed by Amendment 4. All the indications are that inflation is going to rise above the 3.1% on which the uprating will be based. The Bank of England’s chief economist has warned that it could go as high as 5% in the next few months. For pensioners and others reliant on social security, the effective rate of inflation is likely to be higher still, given the differential impact of inflation when the increase in basics such as fuel and food, which constitute a disproportionate part of low-income budgets, is a key driver of inflation, as already mentioned. I raised this issue at Second Reading and asked the Minister whether she would undertake to look at how the problem might be addressed, but she did not respond then or in her subsequent letter.
The other day, the Chancellor said:
“I know that families here at home are feeling the pinch of higher prices and are worried about the months ahead. But I want you to know, we will continue to do whatever it takes, we will continue to have your backs—”
whatever that means—
“just like we did during the pandemic.”
The amendments we are debating here today would be one way of doing whatever it takes. I hope, therefore, that the Minister will take them seriously and, if she does not accept any of them, explain how the Government will do whatever it takes to protect those reliant on social security in the face of rising inflation.
Finally, on pension credit, the subject of Amendment 3, I believe that the uprating should be protected legally. But I would like to return briefly to the issue of take-up raised at Second Reading by the noble Baroness, Lady Bennett of Manor Castle, which also has implications for later amendments on pensioner poverty. I welcome the willingness of Ministers—and our Minister in particular—to discuss with Peers ways of improving the lamentably low take-up rate. I had understood that it had been agreed that one way of doing so was to include a suitably arresting and well-designed leaflet or similar in communications with pensioners. I have received a couple of communications from the DWP since then, neither of which has drawn my attention to pension credit. Just last week, the letter I received about the winter fuel allowance made no mention at all of pension credit. Could the Minister tell us whether the idea of such a leaflet has been abandoned and, if so, why?
Baroness Sherlock (Lab)
My Lords, I thank the noble Baronesses, Lady Altmann and Lady Janke, for introducing their amendments, and all noble Lords who have spoken. We had a good discussion at Second Reading about the way the Government have gone about trying to find an alternative to the triple lock that would deal with the impact of the pandemic on earnings data. But I think it is fair to say that the Minister will have worked out from the contributions that this has not entirely satisfied noble Lords around the House as a way forward.
Let me look briefly at the three sets of issues raised by the amendments in this group. Amendments 1 and 2 from the noble Baroness, Lady Altmann, would replace the provisions of this Bill with the provision to uprate using an earnings measure designed to reflect an underlying rate of earnings growth. Amendment 1 sets that at 3.8%, being chosen as the midpoint in the range of this now famous blog by the ONS. I suspect the person who wrote it must be wondering whether they will ever blog again. But that blog suggested a range that—if you were to strip out the base and compositional effects—would give an indication of underlying basic earnings growth.
Amendment 2 takes a similar but less prescriptive approach, leaving it to the Secretary of State to pick a number informed by that same ONS piece of work. Given that a number of noble Lords have expressed scepticism about the Government’s defence—that one of the reasons they do not want to move away from average weekly earnings is fear of legal action—could the Government rehearse again exactly what they are worried about and why? I think that would be helpful, because, clearly, noble Lords are not persuaded by that.
I do not think anyone is very happy with where the Government have landed. My noble friend Lady Drake contributed, I have to say, another piece of astonishing, wonderful analysis. I say to the noble Baroness, Lady Wheatcroft, that I think it is possible that my noble friend is an even greater expert than the noble Baroness, Lady Altmann, based on the strength of her contribution. We have huge expertise in this House, and we are greatly blessed by it. My noble friend summarised the matter when she said that, essentially, in this Bill, the Government have contrived to find a way forward in which they apply neither the triple lock nor the earnings indexation on which the triple lock is meant to build.
The quote from the PPI about what would have happened if the triple lock had been applied over two years was interesting. When we debated the Social Security (Up-rating of Benefits) Bill 2020, I asked whether the Government had considered some sort of smoothing process, such as applying the principles of the triple lock over two years instead of one. I went back and read Hansard again today, and the Minister said—I paraphrase—it was all a bit uncertain. But that would have avoided the methodological complexity and any associated legal risks that Ministers are worried about, since presumably, they are using an established measure—immune, I imagine, to legal test. I ask the Minister again: did the Government consider it? Looking back, does she think that might have been a safer way forward?
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I thank noble Lords for their amendments and my noble friend Lady Altmann for her courteous note explaining her reasons for tabling her amendments.
Amendment 1 in the name of my noble friend Lady Altmann, would increase the benefits in this Bill by an adjusted earnings figure of 3.8%. My comments are also highly relevant to Amendments 2 and 3, also in the name of my noble friend Lady Altmann, which retrospectively increase the benefits in this Bill in line with an adjusted earnings figure and excludes the standard minimum guarantee from the Bill, increasing it by existing legislation instead.
The principal difficulty with these amendments is that they rely on a commentary from the Office for National Statistics, which, by its own admission, is intended to give a sense of the context in which the current earnings growth figures have arisen. The highly caveated range of figures in this commentary is, I am afraid, simply not robust enough to form the basis for an uprating decision. It does not have official status but features in a blog, already referred to, that the ONS published alongside its usual earnings statistics, starting in July this year. The blog explains:
“There are a number of ways you can try to strip out these base effects, but no single method everyone would agree on. We have tried a couple of simple approaches … Neither approach is perfect … Our calculations of an underlying rate are there to help users understand base and compositional effects, but … there remains a lot of uncertainty about how best to control for these effects”
so they need to be treated with caution. I submit to noble Lords that decisions affecting billions of pounds of public expenditure should not be grounded in a range of possible estimates in an environment where it is acknowledged that no single method can be agreed on.
A further point is that the ONS has calculated its range of adjusted underlying earnings growth for a measure of regular pay. The usual measure of earnings used for uprating is total pay, which is regular pay plus bonuses, because this gives a more complex picture of earnings, in which bonuses can play an important part. There are no such problems with CPI, which is a robust national statistic and provides a clear and sound basis for this year’s uprating with no need for any adjustments.
In the light of this, the Government decided that the most transparent and robust way to proceed in this exceptional second year of the pandemic is to suspend the link between earnings for one year and instead uprate the relevant state pensions by at least 2.5% or in line with CPI, whichever is the higher. Noble Lords will recall that we also suspended the earnings link last year because otherwise the relevant state pensions would have been frozen. I accept that the circumstances in the two years are different, with a slump in wages followed by a spike, but the Government consider an unrepresented spike in state pensions to be unfair to younger taxpayers this year, just as last year they considered the slump or freeze in state pensions to be unfair on pensioners, even though the cost of uprating was borne by younger taxpayers.
Under this Bill, the Secretary of State must increase the relevant pension rates by at least 3.1%, assuming a 3.1% increase is applied to the current rate of the basic state pension in 2022-23. This would mean that the full yearly rate would have increased since 2010 by £570 more than if it had been uprated with earnings and £720 more than if it been uprated with prices. That is over £2,300 more in cash terms than in 2010.
Finally, I remind the Committee that this Bill applies for one year only. From 2023-24, the legislation will revert to the existing requirement to uprate at least by earnings growth. The Government’s triple lock manifesto commitment remains in place.
Amendment 3, tabled by my noble friend Lady Altmann, seeks to exclude the pension credit standard minimum guarantee from the provisions of the Bill so that the underlying legislation would apply. This would mean uprating the standard minimum guarantee in line with the growth in earnings rather than, as provided by the Bill, not less than the higher rate of 2.5% or inflation, which we now know is 3.1% for the reference period used for uprating.
In structural terms, the standard minimum guarantee is linked to earnings so that pensioners on the lowest income share in rising national prosperity. However, as we have discussed, the earnings growth figures for this year have been inflated by the temporary slump in wages last year, followed by an unprecedented rebound as the economy and businesses have reopened and millions have moved off furlough and returned to work. The reasons for suspending the earnings link just for 2022-23 therefore apply as much to pension credit as they do to the state pension.
The Government recognise that the standard minimum guarantee in pension credit is the safety net for pensioners on the lowest incomes. I accept that that is therefore different from the contributory state pension, which provides a foundation for private saving, notably through auto-enrolment. However, the measures the Government took last year, together with those in this Bill, will ensure that the safety net for pensioners on the lowest incomes more than keeps pace with inflation. Over the two years of the pandemic, it will have increased by more than the increase in prices. It was increased by 1.9% in April 2021, when the CPI for the relevant uprating review period was 0.5%, and will be increased by 3.1% from April 2022, in line with the relevant rate of CPI this year. We believe this strikes a fair balance over the two years between the interests of pensioners and those of younger taxpayers.
I should also point out that this amendment would undermine one of the key aims of the 2016 reforms that introduced the new state pension. From the outset, the full rate of the new state pension has been set above the basic means test, which is the single rate of standard minimum guarantee, in order to provide a clear foundation for private saving. Currently, the full rate of the new state pension is £2.50 a week higher than the standard minimum guarantee in pension credit. This amendment would lift the single rate of the standard minimum guarantee above the rate of the new state pension and so bring more pensioners into the scope of means testing. If the standard minimum guarantee was increased in line with earnings growth of 8.3%, the single rate would increase by £14.70 to £191.80 a week. That is £6.65 a week more than the full rate of the new state pension if that rate increases by 3.1% in line with the provisions of this Bill.
I know my noble friend Lady Altmann does not agree that we would need to increase the standard minimum guarantee by as much as 8.3%, but we have discussed the reasons why the Government do not consider there is a robust alternative measure of earnings that could be relied on instead. As we have made clear, the Bill is for one tax year only. After that, the standard minimum guarantee in pension credit would continue to increase at least in line with earnings from 2023-24.
On Amendment 4, in the name of the noble Baroness, Lady Janke, which would uprate the benefits included in the Bill by April 2022 CPI figures, I understand the noble Baroness’s concerns over trends in price inflation and welcome the discussion we have had on the issue. I of course sympathise with the thinking behind this amendment. The Government would like to use the most up-to-date indices when it comes to the annual uprating process, but this is bound by a number of practical concerns which mean that the most up-to-date index we can use is the one for the year to September, which is published in October each year.
The Secretary of State’s uprating review needs to be completed by late November due to IT deadlines and the need to commence inputting the new rates into the department’s numerous computer systems. There are also interdependencies with HMRC and local authorities, which require the rates before Christmas. Additionally, there is a requirement to follow the correct legislative process. The new rates are included in the uprating order, which needs to be debated in Parliament before they come into force in the new tax year.
Finally, on average, September’s CPI is higher than in the following April half the time, and lower half the time. This has a long-term smoothing effect, provided the same index is used each year, as it is for benefits ordinarily linked to prices, such as attendance allowance and the additional state pension. The CPI for September 2020 was 0.5%, but in April 2021 it was 1.5% However, in each of the previous three years, the September CPI used for uprating was higher than the CPI figure for the following April. In these years, pensions saw a slightly higher increase than they would have done if it had been possible to wait and use the April CPI figure.
The Government’s intention with the Bill is to suspend the earnings link for one year but retain the price limb of the triple lock. This is to ensure that the purchasing power of state pensions is preserved, while protecting younger taxpayers from funding an increase that would otherwise be exaggerated by the statistical anomaly thrown up by the second year of the Covid-19 pandemic.
Baroness Sherlock (Lab)
My Lords, I have two quick questions. I am not advocating smoothing, but the Minister’s argument against it was that there would be a compositional effect. From memory, the base effect was many times more than the compositional effect, in terms of the impact on earnings data. The composition effect was less than 1% and the base effect was 3% or 4%, so is that really an argument?
The second question is something I have always wondered. The argument she gave to noble Lords who asked about timing was that two of the reasons why it had to be decided now were that the computers must be programmed in November and that the order usually has to be put through in January. What would happen if the computers had been programmed and the order was rejected by Parliament?
Baroness Stedman-Scott (Con)
I will have to come back to the noble Baroness on her latter point, as I do not know at the moment.
Baroness Sherlock (Lab)
On base and compositional effects, is not the compositional effect on which she was relying as a defence against smoothing very small? Does not the base effect account for most of the difference in earnings data?
Baroness Stedman-Scott (Con)
That is another technical point that, rather than give an incorrect answer, I will come back to the noble Baroness on.
Baroness Altmann (Con)
My Lords, I thank my noble friend for her detailed response and clear efforts to address the issues that have been raised, and I thank all noble Lords who have spoken on this important group of amendments.
I am still struggling to understand the rationale for not retaining the earnings link. Noble Lords are being asked to accept that, because estimating the pandemic’s distorting impact on earnings is rather difficult, the Department for Work and Pensions, the Office for National Statistics, the OBR and the legions of statistical experts we have at our disposal could not come up with a figure that the Secretary of State could use to allow for such adjustments without being at risk of being considered irrational. I really struggle with that concept.
Nobody is suggesting that the Secretary of State knows an answer that everybody would agree to. However, in the face of rising pensioner poverty, rising inflation, the lowest state pension in the developed world and the problems we can foresee coming next year, with the poorest pensioners being unable to afford the basic costs of living, it is concerning that we are deciding to remove a critical part of their protection which was promised in our manifesto, and which is not unaffordable, on the premise that it is too difficult to adjust the numbers.
I accept that the figure of 3.8% in Amendment 1 was based on an ONS blog; it was the only figure available that was a remotely official statistic. However, Amendments 2 and 3 contain important provisions that would allow the Secretary of State to use all the resources at her disposal to come up with a number that adjusts average earnings correctly and fairly, in a way on which maybe not everyone would agree but that would at least retain the vital principle of the earnings protection that pensioners have always been promised and, in the case of pension credit, that the poorest pensioners have always relied upon.
I shall withdraw my amendment, but I hope we can have further discussions between now and Report and perhaps work out a way forward based on the important principles of social security policy that we have always stuck to in the past. I beg leave to withdraw the amendment.
Baroness Sherlock
“(3) Within six months of the passing of this Act, the Secretary of State must publish a review of the impact of this Act on pensioner poverty.(4) This review must be laid before both Houses of Parliament, and a Minister of the Crown must arrange to make a statement.”Member’s explanatory statement
This amendment requires the Government to carry out an assessment of the impact of the Government’s chosen policy option on levels of pensioner poverty.
Baroness Sherlock (Lab)
I rise to move Amendment 5, in my name, and to speak to the other amendments in this group. I tabled Amendments 5, 6 and 7 for two reasons: to try to plug what seems to be a serious knowledge gap in this legislation, and to highlight the wider concern about the growing rates of pensioner poverty and the worsening cost-of-living crisis.
It seems evident that the Bill must have an effect on pensioner poverty, because it will not only give today’s pensioners a lower pension next year than they expected but it will affect the value of the state pension for them and for future generations of pensioners for ever, as it is the base from which future percentage increases will take place. As noble Lords have already said today, that is a low base, since the UK pension is comparatively low.
The last Labour Government were able to achieve big reductions in pensioner poverty, in large part by introducing pension credit. At Second Reading I asked the Minister what action the Government would be taking to increase the take-up of pension credit, since at that point the last figures that I had seen suggested that only six in 10 of those eligible were claiming it. In response, the Minister picked just one figure and talked about take-up by value, and only for the guaranteed minimum standard pension credit. She did not talk about the aspect that most people talk about: the proportion of people who could claim pension credit who are actually doing so—in other words, take-up by volume.
I am sure the Minister will appreciate that that matters a great deal. With some benefits, if you only get a small amount then some people might choose not to claim. But the thing about pension credit is that if you get it at all, it is a passport to other really important benefits, including council tax credit, help with health and energy costs, and of course the free TV licence for the over-75s. It therefore matters that everyone gets pension credit if they are entitled to it.
I think the latest figures show that take-up for pension credit is still only 63%. Will the Minister confirm that? If so, what are the Government doing to boost it, including the leaflets mentioned by my noble friend Lady Lister? There were lots of other ideas—what is happening about those?
Since 2012 pensioner poverty has started rising again. Official figures show that some 18% of pensioners were living in poverty last year. That amounts to around 2.1 million poor pensioners, with over 1 million of those living in severe poverty. Has the Minister seen the report in June by Independent Age which found that people aged 85 and over have the highest rate of poverty among pensioners, at 22%? There are big regional variations; London has by far the highest rate of pensioner poverty, at 25%, but there are worries about rising poverty in the north.
In September, Age UK published research which found that, since 2012-13, the number of women pensioners living in poverty has increased from 990,000 to 1.25 million—an extra 260,000 women living in poverty. This is especially remarkable given that, because the state pension age was going up at that time, the actual number of female pensioners fell by 800,000. So we have 800,000 fewer female pensioners and yet 260,000 more female pensioners living in poverty. Can the Government explain that and tell us what they are doing about it? Age UK also found that older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.
Baroness Boycott (CB)
My Lords, I am pleased to support this amendment in the name of the noble Baroness, Lady Sherlock. I thank her for that incredibly good and detailed outline of what the problem is.
I want to speak briefly as the chair of the charity Feeding Britain, where I succeeded the wonderful Frank Field—the noble Lord, Lord Field of Birkenhead. We began three years ago to support the rollout of affordable food projects. We originally held the assumption that most of the people who would want it would be working-age groups, disabled people or families with kids, but that assumption proved to be wrong. We have 80 affordable food projects in our network. In many of them, between 30% and 40% of the members are pensioners on low incomes. They either could not or would not use a food bank. Pensioners find it extremely difficult to go to a food bank. I think that when you have paid your taxes and national insurance all your life, to find yourself at 85 having to ask someone whether they will give you a can of baked beans is both humiliating and almost impossible. Indeed, we have heard stories of many people who would really rather go without than have to endure that.
In Glasgow, where we have set up many affordable food projects, we have now set them up particularly in areas where there are lot of pensioners. People have really been supported by this. One said to us: “It’s been a godsend, really, because all the prices are going up—electricity, the cost of food and the lot.”
When I was a kid, my parents both did meals on wheels, and I used to go round with them once a week and deliver meals to people’s houses. It was kind of a joy; my parents really enjoyed it. When I chaired the London Food Board, I spent a lot of time seeing what we could do to bring meals on wheels back. The reality is that no councils have any money for this anymore. As always happens when it is about food, it is a budget that gets cut, or the costs go up and it becomes not many people, so it gets struck off the list of things that you could do. One thing we could do would be to start looking at a service like that.
As the noble Baroness, Lady Sherlock, pointed out about energy, you have to pay a lot to be poor in this country. It is certainly true of food. If I go to a shop, I can buy a large size of washing powder or rice or whatever it happens to be. If you are scraping along on very little money, you pay a great deal more. We did a survey in Greenwich which pointed out that your average shop would cost you 30% to 40% more in your corner store than if you had been able to go to your local Aldi. You pay a price to be poor. That is really terrible, and it is why I support the amendment in the name of the noble Baroness, Lady Sherlock.
Baroness Lister of Burtersett (Lab)
My Lords, these amendments raise important issues about the impact of the Bill on poverty. I simply want to raise a point about the measure of poverty that should be used.
At Second Reading, in her response to the debate the Minister referred to a fall in pensioner poverty since 2009-10 as measured by the so-called absolute poverty measure, and she did so again earlier this evening. In fact, it is not a measure of absolute poverty as such but is better described as an anchored measure which measures any change by adjusting the 2010-11 poverty line for inflation. In contrast, the House of Commons Library briefing, using the relative poverty measure, recorded an increase in pensioner poverty from an historic low of 13% in 2011-12 to 18% in 2019-20, as my noble friend Lady Sherlock said. With reference to Amendment 8, single female poverty is higher than the overall figure—a point already made.
However, the Minister was dismissive of the use of a relative measure, stating:
“The Government believe that absolute poverty is a better measure of living standards than relative poverty, which can provide counterintuitive results”.—[Official Report, 13/10/21; col. 1885.]
Criticisms of the relative poverty measure as potentially counterintuitive have tended to focus on when it is used for short-term, year-on-year comparisons, but, in this case, we are talking about a rise in relative poverty over a period of eight years, which surely should have triggered some alarm bells in the department.
Relevant here is a recent Work and Pensions Committee report. Although its focus was on measuring child poverty, what it has to say is relevant also to pensioner poverty. It states:
“The Secretary of State is of course right to say that a relative measure can, in the short term, produce counter-intuitive results—but it has great value for assessing long term trends. We are concerned to see Ministers focusing on a single measure, rather than drawing on the rich information offered by DWP’s own set of income-based measures, which combines relative, ‘absolute’ and broader material deprivation statistics … Ministers should reaffirm their commitment to measuring poverty through all four measures”.
Similarly, I have a Written Answer from the Minister’s predecessor, dated May 2018, which states:
“No one measure of poverty is able to fully capture the concept of a low standard of living in all economic circumstances.”
Yet increasingly, Ministers use the so-called absolute measure, as if it is the only appropriate measure. Will the Minister reaffirm that commitment as called for by the Work and Pensions Committee? After all, I remind her that, when he was leader of the Conservative Party, David Cameron explained:
“We need to think of poverty in relative terms—the fact that some people lack those things that others in society take for granted. So I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty.”
Can the Minister explain why that is no longer the case? What has changed, other than that the Government’s record on poverty looks worse using the relative poverty measure that Mr Cameron championed?
Baroness Drake (Lab)
My Lords, I will speak to Amendment 3. To quote from a publication by the Institute for Fiscal Studies,
“We’ll know we are on the way to levelling up when differences in health and life expectancy across the country start to drop. Sadly, that’s one measure of inequality that has clearly been moving in the wrong direction over the past decade.”
Associated with those growing inequalities is pensioner poverty, which, as we have heard, has risen from 13% to 18% and is likely to rise even further. For older pensioners, the rise is even higher. With the rising energy and food costs that we can all see coming down the track, there will be a lot of old people this winter with very little money, sitting in cold houses, fearing that they will not get any help when they fall ill. That will be the reality for many thousands of people in the coming winter months.
We know that there is a major problem generally of households on low incomes with rising debt who will not be able to weather the storm of the growing cost-of-living problems that we are beginning to see. Then again, looked at from a regional perspective, in the majority of regions in England pensioner couples have average weekly incomes below the pensioner couple average, and we are seeing this problem in particular regions: in the north-east, the north-west, east Midlands, West Midlands, Yorkshire and indeed in London, which now has the highest relative level of pensioner poverty. As Imperial College research now shows us, life expectancy is falling in urban areas in these regions—in Leeds, Newcastle, Manchester, Liverpool and other areas. Cuts to health and social spending will have contributed to that trend, and we have not yet experienced a winter with the backlog that the NHS is dealing with.
Pensioners with low incomes are more sensitive to indexation changes because they are more dependent for their income on those benefits. Yet we have seen no assessment of the impact of suspending the triple lock, or indeed what could be the implications of decisions the Government will take next year or the year after, given that through the Bill they have suspended both the triple lock and the legislative underpin of earnings. We know that projected levels of pensioner poverty will vary according to the uprating provisions applied to the state pension, given its dominance in pensioner income. If you play negatively with pensioner income, pensioner poverty will go up. That sensitivity to indexation will continue to increase, as fewer and fewer pensioners reach state pension age without the generous defined benefits or defined contribution pensions which, in the past, cushioned the fall in the state pension that occurred under successive Governments.
Pensioner poverty is not a legacy issue. State pension is and remains a dominant source of income for the majority of both current and future pensioners. Research by the Pensions Policy Institute—your Lordships can tell that I am a governor—reveals that the UK is currently on course for a quarter of people approaching retirement being unlikely to receive even a minimum income. Of the 11 million people in the UK between the age of 50 and state pension age, around 3 million will not receive a minimum income.
Baroness Altmann (Con)
My Lords, very briefly, I have added my name to Amendments 5 and 6 and I support the thrust of these amendments. I urge my noble friend the Minister to look seriously at the merits of investigating the poverty levels that are rising among pensioners. Indeed, I urge her to accept some of these looking at the gender issues—so not just pensioner poverty but relative pensioner poverty between men and women—in her new role as Minister for Women, on which I congratulate her. I support these amendments and I look forward to hearing my noble friend’s comments.
Lord Davies of Brixton (Lab)
My Lords, I just want to add that we have a complete lack of information on these proposals. As a matter of law, when the regulations come, they have to be accompanied by a report from the Government Actuary. In effect, we are making the decision now—the regulations are just a carry-on of the Act—and it is really unfortunate that we do not have before us the information that Parliament has decided should be available to us when we deal with these regulations.
Baroness Janke (LD)
My Lords, I thank the noble Baroness, Lady Sherlock, for her amendments and for the information she has drawn to our attention. I share her concern at the lack of impact assessments of the proposed uplift on the most affected groups. The increasing pensioner poverty that we are all aware of and the poor take-up of pension credits, which are important as a passport to other benefits, are matters we are all extremely concerned about. I agree that pension increases are fast outstripped by rising costs, and I certainly fear a winter crisis, with increased energy prices and their effect on those who most need heat to keep their homes healthy and warm.
We heard from the noble Baroness, Lady Boycott, about how poor pensioners do not want to claim food —they do not want free food, they would rather starve than do that—and I believe that that is certainly an element in the uptake of pension credit. Again, we all worry that we are going to see more and more food banks and people unable to feed themselves as costs rise. The noble Baroness, Lady Drake, raised the whole issue of regional poverty and inequality. Certainly, when you look at the statistics across the regions, they are quite breath-taking. I believe we need much more information, as the noble Lord, Lord Davies, said, particularly about regional inequality. I wonder why we do not have this information when the Government have such a strong levelling-up agenda. How will they address these issues without adequate information on which to base decisions?
My amendment in this group highlights the unfairness experienced by many women as result of the pension gender gap. I will point out the current situation. The average pension pot for a woman aged 65 is one-fifth of that of a 65 year-old man. Women receive £29,000 less state pension than men over 20 years and this deficit is set to continue, closing by only 3% by 2060. Many women are wholly dependent on the state pension and as a result of this situation, we should take a particular interest in conducting impact assessments on the uprating of pensions on poverty. I support the measures proposed in this group and look forward to the Minister’s response.
Baroness Stedman-Scott (Con)
My Lords, I thank the noble Baronesses, Lady Sherlock, Lady Drake, Lady Boycott, Lady Altmann and Lady Janke, for raising important issues through these amendments and I reassure the Committee that we are committed to ensuring economic security at every stage of life, including when one reaches retirement.
On Amendments 5 and 8, tabled by the noble Baronesses, Lady Sherlock and Lady Janke, on publishing a poverty impact assessment, the department collects and publishes a wide range of data on income and poverty which are released annually in the reports in the households below average income series. Noble Lords raised the issue of pension credit take-up. Time does not allow me to go into the detail, but I undertake to have a further pension credit update when we can have more time to discuss and answer the questions that noble Lords wish to have answered.
In the absence of actual data, the only way to provide an assessment in advance of those dates would be to forecast and model how many pensioners might have their income lifted above the various low-income levels under an earnings uprating versus an inflation uprating. Assumptions would need to be made about how each individual pensioner’s income would change in future under each scenario. This would require making assumptions about, for example, how each pensioner might change their behaviour around other sources of income, such as drawdown of income from investments or a change in earnings, when faced with different amounts of state pension, which is virtually impossible to do.
Those projected incomes would then need to be compared with projections of the various income thresholds, which are themselves extremely uncertain. For absolute poverty, the threshold is increased each year by inflation; and for relative poverty, the threshold is determined by changes in median income across the whole population. Given the volatility in the economy and labour market, this is impossible to do accurately. There is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty thresholds would be misleading due to uncertainty about both the economy and pensioners’ behaviour in response to various levels of state pension.
I turn to Amendment 6 and the specific request of the noble Baroness, Lady Sherlock, for a review of the impact of the Bill on mixed-age couples, and point to some practical concerns. Mixed-age couples in receipt of universal credit are a very small group, and data sources are limited. It is therefore not possible to identify these couples and analyse changes in health inequalities and homelessness for this group.
Further, the Government believe it is important for both individuals and wider society that people below state pension age remain in the labour market and continue saving for their own retirement. That is why, where a member of a couple is below state pension age and the couple are on a low income, support is provided through universal credit rather than pension credit. Providing support where it is needed through universal credit ensures that the same incentives to work and save for retirement apply to the younger partner in a mixed-age couple as apply to other people of the same age. Where the younger partner is unable to work because of disability or caring requirements, they may qualify for additional amounts and will not be subject to any work-related conditionality.
This approach is based on clear evidence about the importance of employment, particularly where it is full-time, in substantially reducing the risks of poverty and in improving long-term outcomes for families and children. In 2019-20, adults below state pension age in households where all adults were in work were six times less likely to be in absolute poverty, after housing costs, than adults in a household where nobody works.
As our economic recovery gathers pace and with vacancies at record levels, the focus of our expanded multi-billion-pound Plan for Jobs is helping people who can work to move into and to progress in work wherever possible. However, recognising that some people continue to require extra support this winter, we have announced the new household support fund.
On Amendment 7, tabled by the noble Baroness, Lady Sherlock, to publish an assessment of the impact of the Bill on those receiving the state pension, with reference to their ability to pay energy bills, energy prices are one of the factors built into the CPI measure, which is used in the assessment of annual uprating of benefits not covered by this Bill, such as personal independence payments and jobseeker’s allowance. In aggregate, where benefit rates are increased in line with CPI, the increases in those prices are reflected over time in the increases in benefit rates. The energy price cap will continue to protect millions of customers this winter, saving 15 million households up to £100 a year. Additionally, suppliers are prohibited from disconnecting customers of pensionable age between October and March, ensuring that pensioners have continuous supply during the coldest months.
I ask the noble Baroness, taking account of the points I have made, to withdraw her amendment.
Baroness Sherlock (Lab)
My Lords, I am very grateful to all noble Lords who have signed my amendments. I thank the noble Baronesses, Lady Boycott and Lady Altmann, and my noble friend Lady Drake and others. I am most grateful to those who spoke.
My noble friend Lady Drake summed up the problem when she said: “There are going to be a lot of old people this winter with very little money, sitting in cold houses, worrying that they will not get the help they need.” I think there really will be.
Listening to the noble Baroness, Lady Boycott, I was very moved by the vision. I think that her parents must be terribly proud. They took her out to do meals on wheels when she was young and she in her turn is now doing such amazing work supporting people who cannot afford to eat. I really commend her for that—it was a wonderful image.
Like the noble Baroness I have been involved with many organisations such as churches and others that do food banks. I know how older people do not like to use food banks and how difficult it is. I think how shameful it is that we have come to the point where they have to, or indeed anyone has to, on the scale that we have in our country. We have somehow lost our way.
The worrying levels of pensioners on low income and those approaching low income should really concern us. My noble friend Lady Drake mentioned a figure from the PPI. If we are heading for a quarter of all people approaching retirement being unlikely to receive even the minimum income level, something has gone badly wrong. What has happened to the vision that was meant to lift people away from that situation? Can the Minister tell us what has gone wrong there?
The noble Baroness, Lady Altmann, and the noble Baroness, Lady Janke, in her amendment, mentioned women pensioners in particular. Those drivers of the gender pay gap are driving the gender pensions gap as well. If we do not get things right earlier on, we are not going to be able to put it right later. This means that it is not just a legacy problem. It has been clear from the comments and contributions from noble Lords tonight that this is not a problem just of older systems in days when, for example, caring was not recognised. This is happening now and is going to drive pensioner poverty into the future.
On the question of poverty measurements, I am so grateful to my noble friend Lady Lister who has literally written the book on poverty and is therefore in a very strong position to be able to take apart the Government’s arguments. It just does not work to say that relative poverty is some hopeless measure that no one uses when, frankly, it is used robustly by academics all over this country, Governments and international bodies. It has been used over very long periods for longitudinal studies. It is fine to use other measures as well. It is fine, as the noble Baroness, Lady Stroud, has done in her work, to look at baskets of measures. However, simply to say that relative poverty does not matter and cannot be measured is not a credible stance if we are to have a serious conversation about social policy.
The point about trends was really well made. Even if the noble Baroness does not like measures year to year, in 1997, pensioner poverty in the UK was at 29%; in 2010 it was 14% and in 2012 it starts to rise. Last year it was 18%. There are huge trends there. Something is happening with pensioner poverty and the Government cannot simply turn a blind eye to it.
The Government argue that they cannot do an impact assessment and that they have data such as households below average income. That is nonsense. HBAI is simply a statement of the state of income across the nation. It is not a measure of the impact of any legislation. Whenever the Government do an impact assessment, of course they have to make assumptions about what will happen and how people will respond. It is called modelling. All I am asking is for them to do it on things they do not want to do it on, as well as the things they do want to do it on. That does not seem to me to be an unreasonable request.
To be honest, a lot of the people that we are talking about here are so close to the poverty line that I do not think it would be very hard to make assumptions about what was going to happen to their income, and how far they are going to draw down extensively on assets, as a result of measures the Government are taking.
The Minister says that we do not have time to discuss pension credit take-up tonight. This is the Committee stage of a Bill in which we are meant to do line-by-line analysis. We have been asking this for quite a long time and if we do not have time to do it tonight then, frankly, proceedings should carry on at another time when we do have time to do it. It should not be that we do not get to discuss things and to have questions answered because the timing, which was entirely in the Government’s hands, is such that the noble Baroness feels that we do not have time to discuss it tonight. Take-up of pensioner credit is fundamental to pensioner poverty. This is a group of amendments about pensioner poverty so I think it would have been helpful if she had anything else to say on that.
I am disappointed that the Minister is not willing to move on this. These are gentle, simple and reasonable amendments. If the Government will the ends of this, they should will the ability to assess the impact of their ends. I hope that the noble Baroness will revisit this idea and be more willing to accept it before we come back to these matters later in the Bill. In the meantime, I beg leave to withdraw the amendment.
Lord Sikka (Lab)
My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle and my noble friend Lord Davies of Brixton for their support for this proposal. My motives are very simple—to address poverty among our senior citizens. I should like to see an 8.3% increase in the state pension, although 8.3% of little is still very little. It is not going to make an enormous difference to the Government’s finances—I shall deal with that issue in a moment.
Previously, Governments have broken the link between earnings and state pension, which has had disastrous intergenerational consequences. As has already been mentioned, in the 1980s, the Thatcher Administration broke the link between earnings and the state pension, and we never recovered from it. This is another example of where, once that link is broken, we will never really recover from it; the Minister so far has not said that in future the backlog will somehow be made up. Nothing has been said about that.
The current full state pension at the moment is £9,350 a year, and only four out of 10 retirees receive it. The average state pension is about £8,000 a year and, as has already been pointed out, is around 24% or 25% of the earnings. It is the lowest among industrialised nations, and by not increasing the state pension in line with average earnings we are going to condemn it to remain low.
According to the OBR, in one of the documents I came across, it said that by 2022-23 the UK is expected to allocate around 4.6% of its GDP to the state pension. That is considerably less than the European Union or OECD countries, and Germany already allocates about 10%. Why is it that the Government are content for such low allocation to the state pension? What happened to the billions that the Government took from 3.8 million women by raising their state pension age from 60 to 66? What happened to the billions that the Government said would be saved by coming out of the European Union? Why have those resources not been used to lift our senior citizens out of poverty?
Some 2.1 million pensioners receive a state pension of less than £100 a week, and most of these are women. Some gender issues have already been discussed. Currently, female pensioners receive on average 16% less state pension than men; the Government use the pretence of equality to raise the state pension age for women, but women still receive less.
A low pension inevitably means that there are consequences. For example, some 1.3 million senior citizens are undernourished. Every year, 25,000 or sometimes more senior citizens die from cold because they simply cannot afford to heat their homes or buy adequate food. As has been pointed out, this Bill has not been accompanied by an impact assessment from the Government to show the effects on the lives of our senior citizens.
Pensioner poverty has increased so, despite the triple lock, the proportion of elderly people living in severe poverty is five times as much as it was in 1986. Again, that is the largest increase among western European countries—bearing in mind that the UK is one of the richest countries in the world. That is really an indictment of the policies that have been pursued by successive Governments.
Despite the triple lock, 2.1 million pensioners live in poverty, 1.25 million of whom are women. The poverty rate is higher now that it was in 2012-13. Many simply struggle to survive. Those retirees who try to top up their meagre state pension with part-time work will soon be hit by the Johnson tax: a 1.25% hike in national insurance. At the same time, what do we actually observe? For those rich people who make vast fortunes from capital gains and dividends, or speculation on second homes, commodities markets and securities markets, no national insurance contributions are payable on unearned income. That money could definitely be used to alleviate poverty, but the Government have not indicated any inclination to do that.
The cost of honouring the earnings link to the state pension is probably around £4.7 billion. It is miniscule compared to the cost of bank bailouts, or the £895 billion in quantitative easing. It is certainly less than the £8.5 billion subsidy handed to train companies, which are promptly paying out very high dividends. It is certainly less than the subsidies given to the oil and gas companies. Retirees are not asking for vast sums of money. All they are asking for is something to enable them to keep they heads above water. The 3.1% increase in the state pension from next April is not really enough—it is actually a backward-looking measure. It only reflects the consumer price increases, not the RPI increase, which is always higher. In fact, it only reflects the consumer price increases during the last year and does not take into account the 12% hike in the energy cap or the expected food price rises, for example. The experts are already telling us that the rate of inflation will be 5% very soon. That means the value of the expected rise is already eroded: it has vanished. So, retirees will actually be even worse off.
A triple lock based upon the existing formula could have given an increase of around 8% to 8.3%, adding up to about £14 a week in the full new state pension, instead of £5.55 a week. That is a difference of about £8.50 a week. Is that really a king’s ransom? It is probably less than what many Ministers pay for a glass of wine with their lunch. That is all retirees are asking for. I will spell out the financial consequences in a moment.
Let us also remember that retirees pay council tax, VAT, various duties and, where appropriate, income tax. Their expenditure boosts local economies and is likely to have a greater multiplier effect on the local economy because they spend the money on essentials. The best legacy for future generations is a decent state pension now, because they would be even more reliant upon it. The final salary pension schemes have all but vanished for new members, so income from occupational pension schemes will be low. People will be forced to rely upon their state pensions. Workers’ ability to save for private pensions has been severely damaged. Workers’ share of GDP has declined, from 65.1% in 1976 to 49.4% now—the biggest decline in any Western country. People just do not have the ability to save extensively for a private pension.
As others have mentioned, around 14.5 million people live in or below poverty. Household debt is some £1.7 trillion. Young people just do not have the capacity to pay high housing costs and high food costs, repay student debt and then save adequately for their retirement. That, again, is a very serious issue.
The social divide in this country is stark. Some 18.4 million individuals have an income of less than the tax-free allowance; 42% do not earn enough to pay income tax; 6.2 million people, as the Minister told us last week, do not earn enough to pay national insurance contributions. Paradoxically, however, individuals who do not earn enough to pay income tax are somehow asked to pay national insurance, while millionaires from capital gains do not pay any. The poorest people are being damaged.
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, may I make it clear that this is not an amendment? We are debating a straight question of whether Clause 1 should stand part of the Bill or not: in other words, whether it is accepted or not.
Lord Davies of Brixton (Lab)
My Lords, I am pleased to speak in support of my noble friend Lord Sikka and in favour of retaining the existing legislative provisions by leaving out Clause 1 entirely. As the noble Baroness said, it is about whether Clause 1 should appear in the Bill at all. Clearly, to leave it out would vitiate the entire Bill but it would invite the House of Commons to think again, which is the primary role of this House. The intention now is to enable those of us who believe it would be reasonable and right to go for the full 8.3% increase that the Government have stated is the appropriate figure to debate it.
The triple lock has come in for some criticism. It does not enjoy universal support. I understand some of those criticisms and perhaps, in a perfect world, it should not be necessary. We would like to live in a world where pensioners would simply share in the same increases in living standards as those enjoyed by the working population. This is not where we are. For me, the triple lock serves a dual purpose. First, it is needed to protect pensioners’ living standards. Secondly, and in some ways more importantly, it is a way of increasing the flat-rate benefits towards a more adequate level. I am glad to say that I do not have to expound at length on that point because the case has been made so clearly by my noble friend Lady Drake. It is an accelerator which will project the basic pension to a more adequate level.
What is clear is that it is not at an adequate level at present, which is why what is described as the “ratchet effect” of the triple lock is so important; of course, the same would be true of a double lock, based on prices and earnings, which is why we shall return in a moment to the important role of the 2.5% element. Introduced as a political fix at a time when inflation was somewhat higher than it has been for most of the last decade, it has turned out to be of real benefit to pensioners.
As was so clearly explained by my noble friend Lady Drake, the job of the triple lock is not just to protect pensioners in relation to earnings and prices; it is, over time, to achieve real increase in their incomes when measured against either of these indices. As I have said before, it is an inherent feature of the triple lock, not a bug. Whether you agree depends on whether you think the state basic pension or the new state pension are currently high enough. If you think they are, you might consider that we do not need the triple lock, but if you want to see them increase, as I do, the triple lock has a proven track record of gaining ground on that objective. The triple lock may not be pretty, but experience has shown us that it works. During periods when the triple lock—or, in the case in the long-distant past of the 1974-79 Labour Government, a double lock—has applied, we have seen a consistent incremental move of the state flat-rate pension towards a more adequate level.
The element of the triple lock that has attracted most criticism, not least from my noble friend Lady Lister, is the 2.5% minimum increase. It has been said that it is arbitrary and without any justification. Maybe, but so are many other figures in legislation. When we analyse the real increase that pensioners have benefited from since 2011 with the triple lock, almost half the improvement has been due to the 2.5% element. To me, that in itself justifies its inclusion. Does anyone here believe that the basic state pension should be 18% of earnings rather than 19%? It might not sound like much but, to the poorest pensioners, everything counts.
Perhaps we need a debate about what level of flat-rate state pension we need and what the target should be when we have a ratchet effect. I would favour a commission to address the issue, building on the work of the earlier Pensions Commission, which set out the present structure of pension provision in this country. The commission itself did not feel able to specify with any precision what the basic pension should be in earnings terms, but the structure it established depends as much on the level of the flat-rate element as it does on the pension produced by automatic enrolment. I am pleased, therefore, to see that more work is being done in this area, through initiatives such as those from the Living Wage Foundation and the Pension and Lifetime Savings Association, with its retirement living standards.
Particularly given the hour, now is not the time to have a full-scale debate on the conclusions of that work, although it would be valuable to do so when appropriate. What is clear from the work that has been undertaken is that 19% is not nearly enough; it is well short even of the 26% that was attained back in 1979. These benefits are not just inadequate; there is a long way to go before they can become adequate. Consequently, we definitely still need a triple lock and its ratchet effect, and I would be prepared to see something better and faster replace it. That brings us to the increases due in 2022, as determined by this Bill. I believe that we can and should stick to the triple lock, as provided in the legislation, which means the 8.3% increase. Taking the increases to be made in 2021, 2022 and 2023, this provides an ideal opportunity to achieve a significant increase in flat-rate pensions towards a more adequate level in the longer term, which can only be a good thing.
It will no doubt be pointed out that this would have to be paid for, with the figure of £5 billion per annum being quoted. My noble friend Lord Sikka has dealt with that but, for the purposes of today’s debate, I simply say that I support increases in general taxation on those with the broadest shoulders to meet this clear social need, with the obvious target of equalising what I still think of, in the old terminology, as unearned income, rather than earned income. I believe that this would best be done by the restoration of the Treasury’s supplement to the National Insurance Fund, for which there is already provision in legislation.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to follow the noble Lords, Lord Sikka and Lord Davies of Brixton. Given the hour, I will be brief. I very much endorse the comments of the noble Lord, Lord Davies, about this Clause 1 stand part debate seeking to ask the other place to think again, and indeed to ask your Lordships’ House to debate this.
I would be more radical than either noble Lord who preceded me. I believe that the state pension should be set at a level where no pensioner is living in poverty—that is looking at the relative poverty levels, as outlined and widely discussed by the noble Baroness, Lady Lister. That would mean abolishing the contributory principle. Our debate tonight has demonstrated how discriminatory and actively massively unfair that is—because, as worked through now, it largely acknowledges only contributions through paid work. We know that many people, particularly women, make huge contributions to our entire society and future through care, community work and other activities which are simply not recognised in our pension system. This is leaving huge numbers, particularly of women, in a state of living that our whole society should regard as not acceptable.
I agree again with the noble Lord, Lord Davies, that the triple lock is far from perfect. We have talked about heating costs. Of course, another way in which we have very much failed our pensioners is the quality of the housing stock that they are living in. Reference has been made to the quality of council housing, but we also have a huge problem with more and more pensioners now living in private housing due to the huge privatisation of our housing stock through right to buy. Those people are living in extremely poor conditions and are placed in very difficult circumstances in that housing.
I agree with the noble Lord, Lord Sikka, that the cost of not going forward with ending the triple lock for this year—£4.7 billion—is very modest in the overall scheme of things. We have bailed out the banks. When Covid-19 hit, we bailed out many businesses. Surely we should look to bail out our pensioners.
I finish by noting that, when we talk about £14 a week, I agree with the noble Lord, Lord Sikka. There is a relatively small number of people in our society for whom £14 a week is small change, but there are very large numbers of people and pensioners for whom it is literally a matter of life and death. I invite noble Lords to consider our excess winter deaths, many of which occur among pensioners.
Baroness Sherlock (Lab)
I will be very brief. I thank my noble friend Lord Sikka for introducing this debate. We all share an underlying concern about the living conditions for poorer pensioners. I will not dwell on pensioner poverty; I made a perfectly long—arguably overlong—speech on the last group of amendments about this very subject.
Because the Bill has only two clauses and Clause 2 is the commencement clause, I suspect that, in coming back, the Minister will be tempted to focus on the fact that this may be regarded as a wrecking amendment because it would remove the entire contents of the Bill. We on this side accept that there is a difficulty in looking at and using the data for the earnings measure without adjustment, so that is not the position that we are in. I encourage her, when she responds, to answer and speak to the underlying concerns about pensioner poverty that have been expressed noble Lords, and perhaps give some assurance to the House about how the Government will tackle that, as well as looking at the immediate issue.
Baroness Janke (LD)
My Lords, I support the triple lock and its effect of keeping the value of the state pension, which has been lost over very many years and has not yet recovered. I share the point made by the noble Baroness, Lady Sherlock, that we accept that these are special circumstances. The Minister has assured us that this is just for one year, so we take her at her word and will judge her on future actions next year.
Baroness Stedman-Scott (Con)
I assure the noble Baroness, Lady Sherlock, and the whole Committee, that the Government take the issues of living conditions and the standards of pensioners seriously. As I have relayed in previous contributions to this debate, we have done an enormous amount to try to help, but I have no doubt that that will not be enough for some. It is a work in progress, and we will see where that goes.
This clause requires the Secretary of State to review the rates of the basic state pension, the new state pension up to the full rate, the standard minimum guarantee in pension credit, and survivors’ benefits in industrial death benefit, by reference to the general level of prices in Great Britain. Under this clause, if the relevant benefit rates have not kept pace with the increase in prices, then the Secretary of State is required to increase them at least in line with that increase or by 2.5%—whichever is the higher.
This is a two-clause Bill. If the noble Lords, Lord Sikka and Lord Davies, and the noble Baroness, Lady Bennett, successfully oppose Clause 1, the Bill will fall and, as a result, these pension rates will be increased by 8.3%, which is the average weekly earnings index for the year May to July 2021. This means that, if the Bill does not achieve Royal Assent in good time, there will be an increased cost to the Exchequer of between £4 billion and £5 billion.
Taking into account the points raised, I ask the noble Lords to withdraw their opposition to the question that Clause 1 stand part of the Bill.
Lord Sikka (Lab)
My Lords, I am very grateful to all the participants in this debate, which has been very interesting. I am particularly grateful to the Minister for her comments, but the issues remain. Many of our senior citizens are condemned to poverty and, by breaking this link with earnings, we will be condemning more to poverty, not only the current generation but future generations too. Nevertheless, for the time being I would like to withdraw this amendment, but I reserve the right to bring it back.
The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)
My Lords, just to be clear, it is not an amendment.
The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)
My Lords, before my noble friend moves her amendment, it is my duty to draw the attention of the Committee to the advice I have received from the Legislation Office and ask the Committee to endorse it. It is rare for a Leader to advise the Committee in these circumstances. Since 1999, my predecessors have done so on only four occasions, and on all but one the House has endorsed the impartial advice given.
My noble friend’s amendment is not admissible under the rules governing what is relevant to a Bill. The Public Bill Office, therefore, properly and promptly advised me of that fact. Paragraph 8.56 of the Companion to the Standing Orders states that the Leader of the House
“draws the House’s attention to the advice when the amendment is called, and asks the House to endorse the advice of the Legislation Office … the admissibility of an amendment can ultimately be decided only by the House itself, there being no authority that can in advance rule an amendment out of order.”
To ensure that the advice is clear and available to all, I have placed the Clerk’s advice and my open letter to the party and group leaders about it in the Library of the House. If I may briefly assist the Committee, I will explain further why my noble friend’s amendment is not admissible before turning to the unusual decision the Committee is being asked to take.
The amendment is not within the scope of the Social Security (Up-rating of Benefits) Bill. This is because the Bill covers one narrow topic and has only one purpose: the uprating for one year of the basic and new state pension, the standard minimum element of pension credit, and survivors’ benefits in industrial death benefit. Only amendments relating to the purpose of the Bill or touching on matters closely connected with it are permitted. My noble friend may point to the title of the Bill as being broad, but I am afraid that, in this case, that is not relevant. As the Clerk’s advice says, the scope of a Bill is defined by its purposes as contained in its clauses and schedules, not the title. Bills can have what might seem to be very wide titles but be narrow in scope. The advice from the Clerk is clear and unambiguous, and I hope my noble friend will not seek to challenge it and will not move her amendment today or bring it back at a later stage.
However, the fate of the amendment is ultimately in the hands of the House, as the Companion says, so, if I may, I will end with a wider point about how we work. So far this Session, 1,144 amendments have been considered by your Lordships’ House. The fact that every amendment is debated, and every point of view considered, enhances the quality of the legislation that makes its way on to the statute book. But this works only if we all respect the rules and conventions the House has set itself. We are a self-regulating House, and we rightly take pride in that, but that does not mean there are no rules. It means Members’ good sense and restraint must be relied upon to police those rules we set ourselves in our Companion and Standing Orders.
Many Members feel incredibly strongly about particular issues that are close to their hearts but work within the rules of the House to achieve the changes they passionately believe in, because they understand the damage to the House, its reputation and standing if they do not. So I very much hope noble Lords will carefully consider their stance on this amendment. As a House, we rely on the professional and impartial advice of our clerks; we rely on the judgment of Members to abide by the few rules we have; and we rely on the House as a whole to ensure that, in the last resort, the rules are enforced.
Amendment 9
Baroness Stroud
“The universal credit uplift
(1) Within the period of one month beginning with the day on which this Act is passed, Ministers of the Crown must make arrangements to move a motion for resolution as set out in subsection (2) to be debated, and voted on, by both Houses of Parliament.(2) The resolution is to decide whether it is desirable to reinstate the £20 uplift into Universal Credit as per the modification of the standard allowance of universal credit under the Social Security (Coronavirus) (Further Measures) Regulations 2020 (S.I. 2020/371).”
Baroness Stroud (Con)
My Lords, I should like to open with one preliminary point, which is to say that, in moving this amendment, as I do, I intend no disrespect to the clerks, for whom I have the greatest of admirations. This morning, I wrote to them to tell them that I wanted to put on record how much I respect and honour the work they do, and that any action I would take today would in no way undermine that. In fact, I could not have got here without their support and advice. Moving an inadmissible amendment is not a straightforward process. Several weeks ago, I was not even aware there was such a thing as an inadmissible amendment. However, there is a serious, genuine difference of opinion which I believe should be exposed to the view of this self-regulating House.
Accordingly, I rise to move the amendment tabled in my name and the names of my noble friend Lord Freud, and the noble Baronesses, Lady Janke and Lady Boycott, whom I thank for their support. It is with a heavy heart that I have tabled this amendment to the Social Security (Up-rating of Benefits) Bill. I do not take lightly the idea of disagreeing so fervently with my Conservative Government or of stretching parliamentary convention in an elastic way, as my noble friend Lady Evans, the Leader of the House, so delicately put it. But the removal of the £20 uplift is a grave misstep and risks undermining the levelling-up agenda, leaving behind society’s most vulnerable people and putting at risk the stability of many homes up and down the country as we enter an unpredictable winter. If this House stands for anything, it is to check and challenge the work of the Government, and this is all I am seeking to do here today.
So let us look carefully at the effect of this amendment and at what has been said about it. The amendment states:
“Within the period of one month beginning with the day on which this Act is passed, Ministers of the Crown must make arrangements to move a motion for resolution as set out in subsection (2) to be debated, and voted on, by both Houses of Parliament.”
The resolution is to decide whether it is desirable to reinstate the £20 uplift in universal credit, as per the modification of the standard allowance of universal credit under the Social Security (Coronavirus) (Further Measures) Regulations 2020. The amendment, if accepted in this place and then in the other place, would require the Government to bring forward a vote on the desirability of the reinstating of the uplift in universal credit.
Two concerns have been levelled at the amendment that I will take a moment to address. The first is on the basis of scope and the impact on admissibility, and the second on the basis that it asks the House to decide how the House of Commons should conduct its business. Let us look at these in turn.
It has been said that the amendment is inadmissible. Chapter 8 of the Companion to the Standing Orders and Guide to the Proceedings of the House of Lords states:
“The Legislation Office advises on whether an amendment is admissible and it is expected that this advice will be taken. If a member insists on tabling an amendment which the Legislation Office has advised is inadmissible, that Office writes to the Leader of the House, copying the advice to the other Leaders, the Chief Whips and the Convenor.”
That happened according to due process, and the clerks were good enough to show me exactly what both letters would look like. The Companion continues:
“The Leader of the House draws the House’s attention to the advice when the amendment is called, and asks the House to endorse the advice of the Legislation Office.”
That too duly happened. The reason for this is as stated by the Companion, that
“the admissibility of an amendment can ultimately be decided only by the House itself, there being no authority that can in advance rule an amendment out of order.”
The process through which an inadmissible amendment becomes an admissible amendment is through the decision of this House. We as Members of the House have to decide.
It will be no surprise to anyone who knows me well that this is not an issue on which I have taken action lightly. I am not a natural rebel. I have spent a lot of time looking at the previous occasion on which an inadmissible amendment became an admissible amendment, which was in 2013 when Lord Hart moved an amendment on the boundaries Bill. It is the reason why we still have 650 MPs.
I have looked carefully at the arguments that were made then. Speeches made by two ennobled former Speakers of the House of Commons helped me understand this more clearly. The first was by the noble Baroness, Lady Boothroyd, who said this at the time when Lord Hart moved an inadmissible amendment that became admissible:
“If there was any success in the Speakership of the Commons during my period of office, much of it was due to the advice and support that I received from the clerks. I have to admit that there were a couple of occasions when I overruled that advice, one of which was against convention. But I did so because I thought that it was right to provide an opportunity for debate on a contentious issue which was of public interest and of concern. The roof did not fall in.
We have no such arbitrator with authority to make a decision in your Lordships’ House but we are often reminded that we are a self-regulating House. While, of course, we must examine the advice of the Public Bill Office and the clerk, there can be no authority that can in advance rule an amendment out of order. The bottom line is that the admissibility or otherwise of an amendment ultimately can be determined only by the House itself. When I spoke last year, I suggested that the Government allow this House to determine the issue for itself and I am delighted that we have the opportunity of so doing today.”—[Official Report, 14/1/13; col. 510.]
So, first, the sky did not fall in and, secondly, the admissibility or otherwise of an amendment can be determined ultimately only by the House itself. That is what I am seeking to do today.
The second speech was by Lord Martin of Springburn, who said:
“My Lords, I, too, received advice from the clerks of the House and I valued it. At the end of the day, although I did not ignore that advice, there were occasions when I said, ‘I will go in another direction’. In effect, I did not accept 100% of what the clerks had said.”—[Official Report, 14/1/13; col. 514.]
The amendment before noble Lords, which asks that the Commons thinks again about protections for some of our most vulnerable people, does exactly what this House should do: asks the Commons to think again. We have the authority to make that decision ourselves.
Lord Freud (Con)
My Lords, it is with the greatest possible reluctance that I have felt compelled to join my noble friend and former colleague Lady Stroud in putting down this amendment, which is considered inadmissible by the clerks of the House.
My noble friend Lady Stroud has discussed the issue of scope. I will focus purely on why the level of universal credit payments is so important and has been such a long-running sore that it is essential that it go through some sort of democratic process. In a word, this issue is important enough that the House may wish, on this occasion, to overturn its convention of keeping within scope. This amendment simply seeks a vote in Parliament on whether the £20 a week uplift to the standard allowance of universal credit, which lapsed this month, should be reinstated.
My argument is a simple one. After a decade of cuts initiated by the Chancellor in 2010, the standard allowance of universal credit is now simply too low to expect people to live on it. According to a Commons Library briefing in April last year, the combination of 1% increases and freezes over many years has reduced the real level of allowances by 9%. That is before a plethora of other measures: cuts to housing support, benefit caps, waiting days—thankfully, later reversed—and the two-child limit. The Chancellor targeted no less than £30 billion of annual cuts from the working-age welfare budget. Within the department we fought those cuts, but we were powerless to stop them. That is the history, and it left the level of universal credit so low that it was patently inadequate for the millions of people who flowed on to it as the pandemic struck last year. In the words of the Chancellor, Rishi Sunak, we needed to “strengthen the safety net.”
The picture is worse than a simple look at the inflation-adjusted figures suggests. The standard allowance has slipped by significantly more relative to earnings over the last decade, and the relative earnings measure is a better reflection of how much the pressure on poverty has developed. We have been here before, when the Thatcher Government decided to uprate pensions by inflation rather than earnings—and look where that brought us.
What has changed that allows the strengthened safety net to be removed? Nothing has changed—in fact, the reverse. Inflation is taking off. It is already above 3%, with the Bank of England’s chief economist warning of 5% by early next year, and the goods on which the poorest people spend disproportionately—energy, food, transport—are in the firing line. My noble friend Lady Stroud has spelled out the impact on poverty of removing the £20 uplift, putting 840,000 people into poverty, and with inflation at these levels, the impact will undoubtedly be worse. This amendment is not about the removal of a temporary uplift. It is about putting universal credit on a realistic footing.
Restoring the £20 is not cheap. My noble friend the Minister told us at Second Reading that the department’s central estimate was that it would cost £6 billion per year. I do not believe that it would be so much, since 40% of the 5.9 million people receiving universal credit are working, and many of that 2.3 million will be moving further along the taper. Nevertheless, it is a substantial sum. If it is to be paid to the poorest there will have to be cuts elsewhere to afford it, which would bring with it some hard choices. However, I am not wedded to the blanket approach of the uplift, which was bizarrely targeted. It was worth 34% to singles under 25 and only 17% for couples over 25, for example. Adjusting various rates, and perhaps the taper itself, means that there is scope to maintain the benefits of the uplift for considerably less than £6 billion.
The point about universal credit is that it is seriously efficient at directing scarce funds to the poorest people—if applied by people who understand how it works. I felt genuinely sorry for my noble friend the Minister the other week when she had to defend the removal of the uplift by citing a wretched Treasury fig leaf of £500 million, to be distributed by local authorities. How are the councils meant to know who to give it to? That £500 million would be a good start to boost universal credit’s standard allowances. I read that a further £500 million is likely to be made available to support young families in tomorrow’s Budget; another bafflingly poorly targeted use of funds. I repeat that if the Chancellor wants to help the poorest, he will get the biggest bang for his buck by funnelling the funds through universal credit.
I spent 10 years of my life working to transform our welfare system. I am utterly convinced that if you want to make long-term sustainable savings, you must take a structural approach: get the taper to a level at which people are incentivised to work, for instance; help them to earn more by making skills training available; tie together the resources needed by those with multiple problems. You will not do it by making crude cuts, as George Osborne found. He cut the basic benefits and found that the levels of PIP soared. That was not a coincidence.
My concern is that this Government simply do not understand how universal credit works. If they did, they would nurture it, not trash it in the name of a past austerity inherited from a previous Chancellor; not take out £500 million and give it to local authorities to distribute; nor even provide the same crude cash boost of £20 both to couples and to singles in the pandemic. Through this amendment, we want to give MPs a chance to decide on the future of universal credit. It would give them the opportunity to show what is meant by “levelling up”. It is right that there should be a democratic process to decide something so momentous.
My noble friend Lady Stroud and I are not planning to push the amendment to a vote at this stage. We will wait to see whether the Chancellor has some measures up his sleeve tomorrow to protect universal credit recipients. If he has not, my noble friend and I will be returning to the issue on Report.
Baroness Stowell of Beeston (Con)
My Lords, it is always a privilege to speak in your Lordships’ House, even at 11 o’clock at night. I am a great admirer of my noble friend Lady Stroud, and I am even a great admirer of my noble friend Lord Freud. I should say for the Hansard writers that I am saying that with a smile—he knows that I have a great fondness for him. They are both hugely knowledgeable and great experts in policy in this area, and I know that they have given a huge amount of practical support to people in need in lots of different contexts. They are recognised for that, and rightly so. It therefore gives me no pleasure to disagree with them today, but I do, on both the substance and the practical application of their amendment.
I start, briefly, with the substance. As my noble friend Lord Freud just said, we do not know what the Chancellor will be announcing tomorrow. I know that we have seen quite a bit trailed over the past few days in the media, but we do not know the sum total of what he will announce to alleviate pressure on families faced with rising energy costs and increases in the cost of living. If he is able to do anything with regard to universal credit, I would much rather he changed the taper rate, so that working more hours is clearly advantageous when the temporary £20 uplift comes to an end. I do not support the temporary uplift becoming permanent for various reasons.
But that is irrelevant, because it is not relevant to this Bill. With the best will in the world, it is not a question for us to answer, at least not in this context. That brings me to the practice which my noble friends are applying in order to force this issue into play. My noble friend the Leader has already set out the constitutional and conventional reasons why this approach is outside our standard procedures, and I will not repeat them, but I very much endorse all that she said, and I certainly accept the advice of the clerks. I should add that I am not one of her predecessors who ever had to face the situation she is facing today, but I have been in the Chamber in the past when a similar situation occurred, and I have had my own encounters with this House on matters to do with social security and so on, so this is not an unfamiliar situation.
Having said all that, I want to add a couple of points which I urge my noble friends Lady Stroud and Lord Freud to consider between now and Report Even though I know that they are both hugely principled, and are pursuing their cause with great sincerity, not everyone looking at what is being attempted will see it in that way. I think my noble friends are suggesting that we break our rules because Mr Speaker did not break his own when this Bill was in the other place and he was considering amendments proposed by Members of the Commons.
I am not familiar with all the detail of the goings-on in the other place, but I am aware that this Mr Speaker made a commitment when he was elected that he would be impartial and uphold the rules and conventions of the Commons. This was welcomed by that House and the Government, because it came after a very turbulent period of rules and conventions being ignored by his predecessor as Mr Speaker and by many Members of that House.
Since then, not only does the other place have a new Speaker but there has been a general election, the result of which is many new and re-elected MPs who now have the greater confidence of their electorate. The Prime Minister and the Government overlook this fact and act too often as though they are still facing the same disruptive and obstructive House of Commons pre-2019. I urge him and his ministerial team to reconsider their approach when they are engaging with the House of Commons in particular.
Even though there has been all that change down the other end of the corridor since December 2019, the House of Lords is still the same. We have not faced the electorate; we have not changed. Irrespective of what the Government think about this House, or what some noble Lords think about the Government, we have a responsibility to maintain public confidence in Parliament. Some people outside Parliament might agree with my noble friends on what they are proposing in terms of the substance on universal credit; some of them might agree with me, but what would probably unite all of them is the view that the House of Lords has no place in dictating to the House of Commons—that they elected—what its MPs should do and when.
So let us see what the Chancellor has to say tomorrow, but whatever action he takes, I really hope that my noble friends, whom I am fond of as well as have huge respect for, will not return on Report with a similar amendment to this. Because however well-intentioned and noble their cause, we have no legitimacy engaging in this matter at this time and in this way.
Baroness Boycott (CB)
I will be very brief, given the hour. As I said, I am chair of Feeding Britain, and I would like to briefly report from the front line, so to speak, on the effect of the stopping of the £20. I totally agree with the noble Lord, Lord Freud, and the noble Baroness, Lady Stroud, that this needs to be put before the other House so that there can be a vote on it.
Our experience at Feeding Britain has suggested that the £20 increase in universal credit was responsible for a drop in the number of people needing to use food banks this year—it was 17% lower than before the pandemic. Of course, we also had the school meals campaign by Marcus Rashford and various other people but, since then, in the three weeks since the increase was removed, our social supermarkets, which are affordable food projects, have started to show signs of distress.
Some of those who used to shop monthly for low-cost food, and for whom membership represented a nice insurance policy, are now there every week, if not more. Some who used to use a debit card are now using credit cards. Some of those who used to rely only on our option of low-cost food now also want help with gas and electricity. Some cannot even afford their membership fees, which are as little as £3. They are instead going without the food or having to use food banks. People are really clinging by their fingertips to avoid that nightmare scenario.
I very much agree with the noble Lord, Lord Freud, that we need skills and ways to help people try to avoid the traps that they are in, which is what our social supermarkets do. Being poor is not only an expensive thing to do in this country; it is also very hard work as you spend your life drifting from one office to another trying to find someone who can help you sort out your problems with rent, food, schools et cetera. I am very glad that this House is bringing this amendment forward, because if we do not do it, who will?
Baroness Lister of Burtersett (Lab)
My Lords, I am very grateful to the noble Baroness, Lady Stroud, for tabling this amendment. Like the noble Lord, Lord Freud —I must be careful I do not get into a habit of agreeing with him—I will focus on the substance of the issue, although I say to the noble Baroness, Lady Stowell of Beeston, that this is not about dictating to the House of Commons, as the noble Baroness, Lady Stroud, said.
Like the noble Baroness, Lady Stroud, I am disappointed that apparently no attempt was made to assess the impact of what constitutes an unprecedented overnight cut in universal credit claimants’ income, despite the Financial Times reporting that an official had told it that the impact would be “catastrophic” in terms of poverty, homelessness and, as we have already heard, food bank use.
The lack of a formal impact assessment has been criticised by the UN rapporteur on extreme poverty, Olivier de Schutter. He told the Government that as a signatory of the International Covenant on Economic, Social and Cultural Rights, they must adequately justify what he defined as a retrogressive measure by carrying out such an assessment. Indeed, he warned that it was prima facie doubtful whether the removal of the £20 uplift is a measure that conforms to international human rights laws and standards. What was the Government’s reply to him?
Olivier de Schutter clearly did not see the original temporary nature of the uplift—repeatedly cited in justification—as a conclusive argument for withdrawing it now. The other main argument deployed by Ministers has been that the priority is to get people into reasonably paid work, as if that and maintaining the uplift are somehow alternatives between which we have to choose. Given that we know that hardship can undermine job-seeking efforts, what attention has been paid to the likely impact on job seeking of increasing hardship at the stroke of a computer key? What thought has been given to the impact on the significant minority who cannot be expected to seek work or work longer hours because of caring responsibilities or lack of fitness for work?
The Government have also tried to bolster their case by pointing to the £500 million household support fund referred to by the noble Lord, Lord Freud. But a discretionary fund of this kind is totally inappropriate for meeting the kind of regular needs that the UC standard allowance is supposed to meet. It offers no security or certitude to claimants in the way that a regular payment does. Not all local authorities are well placed to administer the money, especially if they are one of the significant minority which does not even run a welfare assistance scheme. I took part in a workshop last week where one participant said that her local authority had begged her food bank to administer a previous pot of money released by the Government to it because otherwise the local authority would have to return it for lack of administrative capacity.
A further sticking plaster is more money for family hubs, which could well find themselves picking up the pieces of families buckling under the strain of the loss of the £20. If, as rumoured, the Chancellor announces a cut in the taper rate tomorrow, again while welcome, it will do nothing to target the necessary help on those worst hit. Similarly, while the proposed increase in the national living wage is welcome, as both the IFS and the Resolution Foundation have made clear, it does not compensate for the loss of the uplift, not least because many of those earning the living wage are not in households in receipt of UC.
The very fact that the Chancellor was moved to introduce the uplift—which was welcome as far as it went—was tacit recognition, as we have heard, that UC rates are too low, a point made in the Commons by former Work and Pensions Secretary Stephen Crabb. Just how low is in part attributable to a decade of cuts and freezes, which took well over £30 billion a year out of the social security system, as the noble Lord, Lord Freud, has said.
As Mr Crabb pointed out, the cut raises a more fundamental question about the adequacy of the benefits we expect our fellow members of society to live on—an issue also raised by two committees of this House. While the narrow scope of the Bill does not enable us to have the more fundamental debate about benefit adequacy that I had hoped for, the amendment at least opens up the possibility of a serious vote in both Houses on the desirability of reinstating the uplift—a question that cannot be divorced from the underlying question of the adequacy of UC to meet needs.
Such a vote is needed because, although presented as somehow inevitable, the decision to withdraw the uplift was a political choice. The fact that it was originally intended to be temporary is neither here nor there, as the UN rapporteur made clear. Temporary often becomes permanent—and so it should when the overwhelming evidence shows that, be it from the perspective of food insecurity, as we have heard, debt or general hardship, the UC standard allowance is simply, to quote Stephen Crabb,
“too low to provide anything like a decent, respectable level of income replacement”—[Official Report, Commons, 15/9/21; col. 1004.],
Although inevitably so far largely anecdotal, it is clear that claimants are extremely anxious as the money disappears out of their accounts; not all of them were even aware that it would do so. An increase in fear and anxiety is how a pastor in Burnley described it to the journalist John Harris. Therefore, I hope that this amendment will be deemed admissible by this House.
Baroness Fookes (Con)
My Lords, I find myself in a strange position tonight. I have made no secret of the fact that I believe it is a great error of judgment to end the uplift of universal credit or, at the very least, not to have brought it down by degrees. That said, I cannot agree with this method of trying to deal with the situation.
Perhaps I should explain that I spent many years in the House of Commons as a member of what was then called the Speaker’s panel of chairmen and as a Deputy Speaker there, as well as being a Deputy Speaker in this House, so I became very conscious of amendments and whether they were in or out of scope. It is important that those rules are observed, for the very good reason that, if you start to break them, anything can be added to any Bill and you can soon get into a real muddle. It does not always work in people’s favour, either.
I am very conscious of the fact that I believe that this amendment is outside the scope. We have certainly been advised so by the Legislation Office, but it was a conclusion that I came to on my own after many years’ experience of looking at amendments and seeing whether they were or were not admissible or out of scope. It is important to look at the Long Title of the Bill as the well as the short one; it is not a very long title, because it is not a very long Bill, but it makes provision
“relating to the up-rating of certain social security benefits”.
They are listed in this short Bill, and they do not cover universal credit.
For that reason, although I share many of the doubts and worries about universal credit—my noble friend Lord Freud made a most powerful case—my point is that this is not the way to deal with the situation. As we are a self-regulating House, if it comes to the point, I shall do my little bit of self-regulation and vote against any such amendment.
Lord Davies of Brixton (Lab)
My Lords, I am as keen to get home as anybody, and I was looking forward to leaving, but I would not have missed this for the world. It has been the most gripping sitting that we have had.
I have a question for the Leader of the House. I cannot add anything to the substance of the debate, and I very much agree with what has been said about universal credit, but I am concerned about what the noble Baroness said about what counts as being in scope. What was said appeared to discount the significance of the Long Title; we were told that we could amend only in terms of what was already in the Bill. Potentially, that seems extremely restrictive; in future, we could be told that something is not provided for in the Bill so we cannot introduce an amendment on that subject. In her role as speaking on behalf of the House, and not as a Minister, can I ask the Leader of the House whether it is the case that nothing has been said that is intended to restrict, now or in future, what amendments can be laid, and whether the Long Title has an important role in determining the scope of a Bill?
Lord Hodgson of Astley Abbotts (Con)
My Lords, it is very late and I have not participated in the Bill before, so I shall be extremely brief. My interest is not so much in the matter we are debating; I understand that people feel very strongly about it, on both sides, but I have no particular dog in that fight. My intervention comes because I am chairman of the Secondary Legislation Scrutiny Committee of your Lordships’ House. As is well known, we produce a report every week where we try to provide a commentary on the instruments that are coming up through the process so that your Lordships have some guide—some thoughts, some suggestions—about areas that might usefully be probed as we undertake our primary role, which is of scrutiny and the ability to hold the Government to account.
I have read my noble friend the Leader’s letter with great care and I recognise and accept the seriousness of the points she makes and has spoken about this evening; that we are a self-regulating House and how this amendment, if I may summarise what she is saying, is pushing the envelope too far. I introduce to the House the concept of Isaac Newton’s third law of motion: for every action, there is an equal and opposite reaction. I think Newton’s third law of motion may explain some of the background to the issues that we are debating so strongly tonight.
The SLSC, along with many other Members of your Lordships’ House, is increasingly concerned about the use—some might say misuse or misapplication—of secondary legislation, which, as all Members of your Lordships’ House know, and the Government very conveniently find, has a very much lower level of scrutiny. So, in summary, while my noble friend may be pushing the envelope, I think the Government have been pushing the envelope in recent months and years a great deal. What do I mean? I shall give just two examples which I think are of particular relevance to our debate this evening.
Permanent changes to our laws, which probably should be introduced by primary legislation, are being rushed through in regulations, and sometimes being rushed through under the excuse that they are needed for the pandemic. Planning regulations have nothing to do with what we are discussing today but are something that may change our high streets, perhaps for ever. They have nothing to do with the pandemic, yet are now law because of regulations made under a pandemic regulation. The noble Lord, Lord Davies of Brixton, made a point about impact assessments. Regulations with sunset clauses have no impact assessments because they are going to last for less a year, and then—surprise, surprise—they are extended, they go over the year, but still no impact assessment is produced; or impact assessments are introduced long after the debate in your Lordships’ House, when regulations are in place, and are of no real value, therefore, in influencing the way the House decides.
Last week, we looked at the Motor Vehicles (Driving Licences) (Amendment) (No. 2) Regulations 2021: these concern critical issues about road safety and no impact assessment has yet been provided. If debate and scrutiny are stifled, as they are by not providing this information, the Government must expect Members of your Lordships’ House to try to find ways to get round the point, and that is what brings us to the issue we are facing tonight. The system for scrutiny has not provided a way for a proper extent of looking at and considering issues which mean so much to people on both sides of the argument that we have been discussing for the last couple of hours.
I will not go on but will conclude by saying that while of course I understand my noble friend the Leader’s concerns and worries, I say to her gently that I think there is a view in your Lordships’ House, and outside in academia, within the Hansard Society and elsewhere, that the Government, the Executive, have made a grab for power at the expense of Parliament, the legislature, and that these actions have led to the equal and opposite reaction that we are debating tonight.
Lord Alton of Liverpool (CB)
My Lords, the noble Lord, Lord Hodgson of Astley Abbotts, has made an important contribution in your Lordships’ House, albeit at this late hour. This is a terrifically important debate; it is about our role as a House that scrutinises and about the democratic deficit the noble Baroness, Lady Stroud, referred to earlier. I begin by thanking the noble Baroness, Lady Stedman-Scott, and indeed the noble Baroness, Lady Sherlock, for coming to the Cross-Bench Peers meeting last week and setting out the arguments about scope, but also about the Bill in general.
I think there has been, across the House, outside and inside the Chamber tonight, a really important discussion about our role as parliamentarians, and what our job is in these kinds of circumstances. Ultimately, despite my incredible affection, as she knows, for the noble Baroness, Lady Fookes—I am sorry we disagree on this occasion; I have enormous respect for her, and we have spent much of our lives in both of these Houses defending democratic values—I do not think the argument is about whether or not the amendment that has been tabled tonight is in scope. It is about the position and rights of this House to reach a decision on this issue. I agree with the noble Baroness that, looking at the Title of the Bill, she is right to come to the conclusion that she has, but taking the argument that the noble Baroness, Lady Boothroyd, had put, that was advanced by the noble Baroness, Lady Stroud, in her remarks tonight, it demonstrates that in some circumstances we can reach a different conclusion.
Those circumstances, as the Leader of the House has told us, ought to be extraordinarily rare. Therefore, I do not say that I came to a short, sharp decision on this issue. Indeed, my mind is still open and I have been listening carefully. I recognise it takes some courage to persist in the face of procedural questions of custom and practice, especially in a House such as this. The noble Baroness, Lady Stroud, has given decades of commitment, along with the noble Lord, Lord Freud, to these issues. They have done this with extraordinary conviction, knowledge, courtesy and passion.
I will say a word about precedent and this issue of scope. I have also occasionally found myself in disagreement with the clerks and have, on the whole, of course, accepted their decisions. There are three questions, though, that might tilt the balance for me, and which I think apply in this case.
The first is, of course, the position of the elected House. Until I stood down from the House of Commons, I had the privilege of serving there, following my election as long ago as 1979. Within my recollection, there were a number of occasions where, on all sides, we were relieved when Members of your Lordships’ House sent back an amendment that gave us the opportunity to think again. Indeed, as recently as in the last 12 months, your Lordships persisted with an amendment to the Trade Bill on the question of genocide. At the end of a protracted process of ping-pong, an accommodation of sorts was reached between both Houses. Several senior Conservative Members, including a former party leader, expressed their thanks to your Lordships that we had given them, in another place, a chance to think seriously about an issue that had not been debated at any stage of that Bill’s progress in the House of Commons.
Secondly, what would tip me in favour of the noble Baroness’s amendment today is the support that she has received from an illustrious former Minister who dealt with these matters: the noble Lord, Lord Freud. The noble Lord will remember that I harried him when he was a Minister on an issue that went to ping-pong. It was about mesothelioma, which for personal reasons I know he felt deeply about. He defended the Government’s position, as he was right to do. We went to ping-pong and ultimately an accommodation was reached, and it went further than that: the noble Lord then introduced an entire Bill on mesothelioma. It is part of his extraordinary legacy from his time as a Minister. He is a man I enormously admire. I note too that six former DWP Secretaries of State since 2010 have said that the £20 uplift investment should remain.
Thirdly, there is the little issue of manifestos. Commitments made in government manifestos are very much in scope when we come to consider legislation. The Government’s current policy regarding uprating is entirely at variance with that commitment. It is not a trivial issue; it is something on which our colleagues in the elected House have the right to deliberate. This amendment would give the opportunity to do that in the House of Commons.
What of the substantive argument about the universal credit £20 uplift? Sir William Beveridge, who was a Member of both Houses, said it was our duty to provide a safety net—a phrase that was used by the noble Baroness earlier on—against the “giant evils”. Today, there are cuts and sears in that safety net that we must repair.
Finally, at Second Reading, the noble Baroness set out her formidable objections to the removal of the £20 uplift, but also her serious concerns about the democratic deficit. The noble Baroness, Lady Stowell, talked about public confidence and thought that if we took this decision it might erode public confidence. I think it will have precisely the opposite effect, and this is not something I argue for lightly. I certainly think we need to give it a great deal more thought.
Lord Shinkwin (Con)
My Lords, I remember being in the Chamber just under five years ago when your Lordships’ House was united in paying tribute to my noble friend Lord Freud on the occasion of his final speech as Minister for Welfare Reform. Hansard cols. 1697 to 1720 of 21 December 2016 paid testament to the esteem in which my noble friend is held. I join other noble Lords in thanking him and my noble friend Lady Stroud for their courage and tenacity both in their previous, pivotal positions in driving welfare reform and also for tabling what I regard as a crucial amendment, which we are considering this evening. So the question that I would be grateful if my noble friend the Minister would answer is: if we listened to my noble friend Lord Freud when he was a Minister, why should we not listen to him today? What has changed?
I shall briefly address this from the perspective of a disabled person. Disabled people have been disproportionately hit by the pandemic. Perhaps the biggest change since has been the recent significant and growing increase in the cost of living, to which other noble Lords have alluded. For those disabled people in particular who cannot work, the calamitous impact of the removal of the universal credit uplift, just as their need for support is growing, could hardly have been worse timed. For them, the impact of Covid—for which the uplift was introduced—not only endures but has increased considerably. It is completely fatuous to pretend otherwise.
Of course, I do not blame the Government for increases in the cost of living. It is not the Government’s fault that heating bills have risen by 12% and are expected to continue rising as we head into winter. Nor is it their fault that petrol now costs £1.43 per litre—an all-time high—and that prices at the pump are also predicted to increase further. But that does not mean that the Government can deny their responsibility to mitigate the real hardship faced by those disabled people who are unable to work and need the universal credit uplift now more than ever.
As a Conservative, I of course support efforts to bring the deficit under control but, as a disabled person, I suggest that that Conservative principle needs to go hand in hand with pragmatism. In conclusion, only MPs can fully appreciate the implications of ignoring the universal credit uplift crisis, for the simple reason that it is their severely disabled constituents and their families who are being hardest hit. They deserve the opportunity to vote to protect their most vulnerable constituents. As we have heard, this amendment would simply give them the chance to choose whether they want to take that opportunity. I urge the Government to think again and thereby make this amendment unnecessary. That is in the Government’s gift.
Lord Crisp (CB)
My Lords, I, too, congratulate the noble Baroness, Lady Stroud, for bringing this amendment to the House, together with the noble Lord, Lord Freud, and other noble Lords. They have done it in entirely the appropriate way, in recognition that there is a Budget tomorrow and other opportunities to take this whole debate forward. I have been very struck by the arguments on both sides and how well they were balanced and expressed. But I take the point of the noble Lord, Lord Hodgson, that the rules may not be quite as clear cut as they appear to be, that people will bend, expand or do something with the envelope as they see fit, and that this area needs much more discussion. I particularly agree with him on the planning laws, for example.
I want to make one substantive point which I do not think has been made yet, about the effect of this cut on health. I spent a lot of time recently in some of the poorer communities in the country working on health. In doing so, I have recognised, as we all have, the fragility of some people’s lives and the balances they need to strike to make things work. This may well knock many people on into poverty, as the noble Baroness has said. It will have an impact on physical and mental health and on other public services, and it will be damaging in the long term for society, not just for the people involved.
We have already heard one great paradox: how costly it is to be poor, and how you pay more. There is another great paradox, which is that quite a lot of cost-saving measures end up costing other budgets rather more.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to make three brief points. I wish first to join other noble Lords in paying tribute to the noble Baroness, Lady Stroud, who has shown real bravery and great leadership this evening in moving these amendments from the Government Benches, and to the noble Lord, Lord Freud, for doing likewise. I commend the others who have supported them.
My second point is constitutional and builds on what the noble Lord, Lord Hodgson, said. Noble Lords may know from history that there has been a real shift in attitudes towards innovation. In the Middle Ages, innovation was a slur, a way of attacking people, whereas in the modern world we think of it as being a wonderful thing. The Government like to celebrate innovations. We have seen lots of innovations in our constitution from the Government, but they do not seem to like what they see as other people’s innovations— even though the noble Baroness, Lady Stroud, clearly set out a number of precedents to show that what she and others are doing here is not an innovation at all.
I want to go back a considerable number of hours to the Environment Bill. Noble Lords who have covered both Bills may have seen the noble Duke, the Duke of Wellington, a Cross-Bencher and hereditary Peer, lead a very cross-party charge, to the point where the Government eventually reversed their position—crucially, after there had been a huge public outcry about water treatment and water companies dumping sewage into our rivers and oceans.
This is a weird situation arising from our dysfunctional constitution and centuries of historical accident; but it was the House of Lords that enabled the people to speak and express their views in a way that eventually changed the minds of MPs. Were your Lordships’ House to go forward from this point and enable these debates, I have no doubt that the people of this country, the voters, would speak loudly and clearly through social media, letters and phone calls to their MPs about their very strong views on the £20 universal credit uplift. Your Lordships’ House could have the opportunity to make that happen. That, I would argue, would be intensely democratic.
My third point is very brief. The Minister, sitting beside the Leader of the House, knows that the circumstances of universal credit, its inadequacy, low wages, insecure employment and zero-hours contracts have given me many opportunities to plague her by talking about a universal basic income. The noble Baroness, Lady Lister, and many others have made hugely powerful points about the dreadful human impacts of the cut to universal credit, but I ask your Lordships to consider whether you believe in the human right to life. The right to life implies access to food, shelter, heating in winter and the basics of security, and that is what this amendment is about. We are talking about basic universal human rights, and that surely has to be a matter for your Lordships’ House.
Lord Porter of Spalding (Con)
My Lords, I have not spoken in this House for close on two years—18 months at least—through Covid. I was not intending to speak today because of the Environment Bill coming through and the things that I personally disagree with that were in it, which none of us has covered.
I have listened to my noble friends on this side in bringing forward this amendment. I understand the argument that this is the wrong place to bring through a technical argument that is in the wrong place, but, surely, we have all said that taking money away from our poorest people at this point in time and in where our communities are going is the wrong thing to do. We all know that the £20 uplift was a temporary arrangement to get our poorest people through Covid. As a country, we have not got through Covid; we are in the worst part of Covid’s impacts on our community. So I am hopeful that tomorrow the Chancellor, because he cares about our people in our country, will bring in some measures that alleviate the worst impacts of Covid on our poorest people.
But we cannot overturn all of those rules and regulations that all of you clever people understand about how this place is supposed to work. We cannot break the rules to introduce an amendment that cannot be bolted on, or else we will turn every piece of legislation into a Christmas tree. I will be the worst person in this House for doing this. Every time that you bring something through that I do not like the look of, I will put another bauble on it. That is what we are risking tonight.
I am pleased that my noble friends, who passionately care about this issue, have said that they will not press this to a Division. We must be ready to give a voice to the people outside of this Chamber, if the Government do not understand the seriousness of that return to a previous set of benefits. I will not call it a cut because it is not one; it was a temporary bringing in of alleviation for a problem. The problem has not gone away, and we must try to convince the Government that they need to slowly reduce that alleviation or, at least, re-evaluate what universal credit is supposed to be about. It is supposed to be about making sure that everyone has a decent standard of living and that, if they can work, they go to work and work harder to get more money: “If you can’t work, don’t go to work; we will look after you. But if you don’t want to go to work, we won’t look after you.” That surely has to be part of that conversation. The benefit bill should be for those who need us most. They are our friends, neighbours and families; we should look after them.
I do not see that 11.45 pm is the right time to speak much longer, even though it is the first time that I have spoken for a long time. I am sorry.
Baroness Janke (LD)
My Lords, I too will be brief. We have heard from other Members of this House on the impact of the cut to the £20 uplift in universal credit, and the effect it has on people’s lives, particularly children and, as the noble Lord, Lord Shinkwin raised, the disabled. We know that this is causing major misery and despair to many people in this country, among them the most vulnerable.
I too respect the rule of law; the rules of engagement are important. As the noble Baroness, Lady Fookes, and the noble Lord, Lord Porter, have said, if you want to be effective, the rules are important. However, when I first came into this House—I am not a very long-standing Member—there was an occasion when the House took a stand on tax credits. We have no powers, as we know, but we took a powerful stand. Certainly, it upset the then Government, and those tax credit cuts did not go ahead. What I learned from that is that, while I have great respect for the rules of this House, its procedures and its conventions, sometimes there are exceptional circumstances which sometimes demand exceptional action. That is what I believe the noble Baroness, Lady Stroud, and her supporters are taking forward at the moment.
I too hope that the Chancellor will put something in his Statement tomorrow—we will, of course, wait to hear it—but I pay tribute to the courage of Members of this House who have put their money where their mouth is. They have put themselves on the line. They believe it is so important to ask the other place to think again that they are prepared to risk a lot in order to do so. We in this House should back them.
Baroness Sherlock (Lab)
My Lords, I thank the noble Baroness, Lady Stroud, for introducing Amendment 9 and speaking so passionately on its content. We tried everything to get an amendment on universal credit into scope, so I am not surprised that, despite all her ingenuity and application, the noble Baroness was unable to get anything past the clerks. I have some sympathy for the efforts that must have gone into that; the nearest I could get was Amendment 6 in my name on mixed-age couples—“close but no cigar” is, I think, the technical term for it.
I understand that these issues are complex and sensitive. I have learned a lot today, in fact, about what happens in practice. Having listened to both the Leader and the noble Baroness, Lady Stroud, I now understand that, in effect, the House will decide the admissibility of an amendment only at the point at which it decides whether or not to accept or vote for it. So basically, we will not find out tonight at all. Given that, I will take the opportunity to talk yet again about universal credit; I have been banging on about it for quite a long time. I will do so briefly.
I have been talking about this £20 for a boringly long time. I cannot tell noble Lords how happy I am to have such an illustrious array of support coming in behind the issue—what a delight that is. It has been very interesting to listen to some of the contributions, which I passionately agree with. I am grateful to the noble Lord, Lord Crisp, for pointing out the impact of this cut on health, to the noble Baroness, Lady Boycott, for pointing out the impact on food, people’s poverty, and the quality of their lifestyles, and to the noble Lord, Lord Shinkwin, for pointing out the impact on disabled people.
I still believe that it is not just bad but one of the most shocking decisions to remove £20 a week from universal credit at the point at which we are dealing with the effects of a pandemic which, as the noble Lord, Lord Porter, pointed out, has decimated communities, and is still having that effect. People have lost jobs and hours. We are in a cost-of-living crisis. To proceed at this point with what the Economist called
“the biggest single cut to social security since the foundation of the modern welfare state”,
frankly, beggars belief.
I warn the Minister that, the next time she tries to defend this cut by pointing to the £500 million discretionary fund, I am going to get up and quote the noble Lord, Lord Freud, at her. I may even look at a combination of the noble Lord, Lord Freud, and my noble friend Lady Lister—if I am honest, not an alliance I have seen a lot of in the past, but I shall be quoting them at her together. Frankly, at that point, she should just put up her hands and give up; if the two of them are agreed, she may be on to a loser.
The other defence that will be used—indeed, it is already starting to be—is about what is happening with the rise in the national living wage. Obviously, it is good that the Government have accepted the Low Pay Commission recommendation and that the minimum national living wage will rise, but this simply does not make up for the universal credit cut, for three basic reasons.
First, there are well over 5 million adults on universal credit, but only 2 million people get the national living wage and many of those do not get universal credit. Secondly, it is not enough. The Resolution Foundation has done the sums and a full-time worker on universal credit who gets the national living wage would see their pre-tax pay rise by just over £1,000 as a result of this increase. However, their take-home pay would go up by only £265 because of the UC taper, because they pay more tax and will be paying more national insurance come April. Losing £1,040 and gaining £265 is not a win. That is in cash terms. In fact, most of that increase will have to go to cover the cost of inflation in any case.
The noble Baroness, Lady Stowell of Beeston, may be right and the Chancellor may be doing something in the Budget. None of us knows what is going to happen. Maybe he will knock a couple of percentage points off the taper rate. I really hope he cuts the taper rate but that will not be enough to make up for the damage that this cut has wrought.
The third point is that improvements in the living wage and the taper rate help only those in work. Just 38% of adults in families on universal credit are employed. What happens to the rest? What about the sick and disabled people who are not able to work? What about those with caring responsibilities? How are they meant to feed their kids and heat their home? What happens to them? Let us not forget the hit to local economies when families who have to spend every penny they get suddenly have £1,000 less to spend a year in local shops and businesses because it has been taken away from them.
That is enough for one day. We have had a very interesting debate. I shall read Hansard with care. Perhaps the Chancellor will take the advice of the noble Lord, Lord Shinkwin. Perhaps the best favour he could do for the Leader of the House and the Minister is to take this problem away from them by acting tomorrow. We look forward to seeing that. I hope the Minister can give us some hints.
Baroness Stedman-Scott (Con)
My Lords, we will have to wait until the Chancellor gets up to speak to find out what he has to say in his Statement. I thank my noble friends Lady Stroud and Lord Freud, and the noble Baronesses, Lady Janke and Lady Boycott, for their amendment. My noble friends Lady Stroud and Lord Freud were, of course, prominent architects of universal credit and noble Lords will, I am sure, join me in appreciating their depth of knowledge and strength of feeling on the issue. I know from all that has been said that others in this House share many of their concerns. I will not take time to repeat them now.
I must inform your Lordships that this amendment, if passed, would challenge the broader constitutional balance between the two Houses of Parliament. I am sure it is not the intention of noble Lords to open such a Pandora’s box, but I would be failing in my duty to your Lordships’ House if I did not clearly spell out the unintended effects.
Since the other place has already approved the Bill, I urge your Lordships not to risk its effects being negated by ping-pong between the Houses that takes us beyond the hard deadline for reprogramming the relevant DWP IT systems. This amendment deals with matters of public expenditure which are the province of the elected Chamber. It also effectively asks this House to decide how that Chamber should conduct its business, what it should debate, what it should choose to vote on and when that should be done—in this case, within one month of Royal Assent.
Taking into account all the constitutional points I have raised, I invite my noble friend to withdraw her amendment and, if she feels unable to do so, I strongly urge noble Lords not to vote in its favour.
Baroness Stroud (Con)
My Lords, I thank all noble Lords for their contributions this evening, particularly at this late hour. Who would have thought that such a gentle amendment on an issue so close the public’s heart could have generated quite so much debate?
I have listened carefully to the words of the Leader of the House and I commit myself to keep listening. It has been really helpful to have everybody’s feedback tonight. It is, however, as we all know, the eve of the Budget and I am still hopeful that inside No. 11 there may be ears to hear what we are saying tonight. It would cause me great sadness to divide the House on an issue on which we should all be so firmly united—the protection of the poorest in our society—and to do so under such contentious circumstances.
I will step back and beg leave to withdraw this amendment. But the care of the most vulnerable in our society is the rightful concern of this House. For if we stand for anything, it is to check and challenge the work of the Government, and that is all I am seeking to do today. I beg leave to withdraw my amendment.
Social Security (Up-rating of Benefits) Bill
Tuesday 2nd November 2021
(3 years ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 54-R-I(Rev) Revised marshalled list for Report - (1 Nov 2021)
17:30 - Division on Amendment 3 - Ayes: 220 / Noes: 178 - Amendment 3 agreed.
Baroness Altmann
Member’s explanatory statement
This amendment is intended to limit the application of the Bill so that it does not apply to the uprating of the pension credit standard minimum guarantee, thereby ensuring the poorest pensioners are still protected against rising earnings. It is linked with the new Clause in the name of Baroness Altmann.
Baroness Altmann (Con)
My Lords, I rise to speak to Amendments 1 and 7 in my name and those of cross-party Peers—the noble Baronesses, Lady Wheatcroft and Lady Janke, and the noble Lord, Lord Hain—to whom I am extremely grateful for their support, and also to support Amendment 5. I declare my interest as set out in the register, and I am honoured to speak in this debate in your Lordships’ House. This Bill will affect every pensioner in the UK, but in speaking to Amendments 1 and 7, I am focusing on what sometimes seems like an underclass in British society: the poorest pensioners. Amendment 1 seeks to exclude from this Bill the application of its measures to the pension credit minimum income guarantee. This is what the poorest pensioners in our land rely upon. It is a means-tested benefit, and it is not a king’s ransom. We are talking about £177.10 a week.
Pensioner poverty was already rising even before the pandemic. It is a myth that pensioners are all well off. The charity Independent Age, and figures from Age UK, show that pensioner poverty remains a significant social issue, too often skirted over by commentators. Already, more than half of single pensioners, mostly women, live in fuel poverty, while 13% of older households live in extreme fuel poverty. Those numbers will undoubtedly grow if the Bill is passed without amendment, especially as rising energy costs are hitting so many with massive increases in their bills. Official figures show that one-quarter of pensioners were in poverty in 2002, when pension credit was introduced. That proportion fell significantly thereafter, reaching a low of around 13%, but it has been rising in recent years to 16% in 2018 and 18% in 2019, even before the impact of the pandemic and the measures we are debating today.
Pension credit has never been covered by the triple lock. It has always had only earnings uprating in legislation. The Bill removes that as well. Pension credit has helped alleviate pensioner poverty, but the benefits are being unwound. Partly, this is because the take-up of pension credit has been stuck at a very low level. Forty percent of those entitled are generally too proud to claim, and try to make ends meet without having to go through a means-tested claim. But the Bill sweeps away vital earnings protection, replacing it with just a 3.1% figure, which reflects the consumer prices index that was reported for September this year, and which is actually an artificially low figure. The Budget confirmed that inflation is rising, with 4%-plus expected and the Chancellor warning of higher figures. The OBR suggests that inflation is likely to rise to 4.4% and could be significantly higher.
Amendment 1 will exclude the pension credit from the Bill and retain its earnings protection. I am not planning to divide the House on this amendment, but I may return to this issue on Amendment 7 if Amendments 3 and 4 are not accepted. Amendment 7 permits the Government to adjust the measure of earnings used to uprate the pension credit to allow for what I certainly agree, and I think most commentators would as well, are the exceptional factors that distorted the number released for average weekly earnings, which was the traditional figure used of 8.1%.
This measure is the biggest spending reduction or cost saving in the Budget. The Treasury will save £5.4 billion in 2022-23, £5.8 billion the year after, £6.1 billion the year after that, and so on. This is money that is being taken away from pensioners. Too often, Chancellors have eyed state pensions or pensioners as a tempting target to raid when they need to find large sums of money. This is about large numbers of people, but for each person, we are not talking about large sums.
However, this should not be about money. It is about people and the social welfare system. It is about trust in politicians and in our social welfare system as a whole. It is about millions of people who are often out of sight but struggling in 21st century Britain on the lowest state pension in the developed world. The pension credit level, which is lower than the new state pension, has not yet recovered to the level that the basic state pension sat at in 1979, when the earnings link was first removed. That started the whittling away of pensioner incomes and the rise in pensioner poverty.
What does it say about our country if the elderly are used to help fund Budget reductions in alcohol duty and bank taxation? Amendment 1 is about important protections for the poorest pensioners. I will return with more details on a wider level with Amendment 3, which deals with the breaking of a manifesto commitment. I also urge noble Lords to listen to this debate and to think very carefully about what this House is for. The other place dealt with these issues in two and a half hours, with very little debate. It was presented as a fait accompli. In truth, the other place was slightly misled. On 20 September, when this Bill was placed before them, MPs were given this assurance:
“This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions, while also preserving the spending power of pensioners and protecting them from increases in the cost of living.”—[Official Report, Commons, 20/9/21; col. 62.]
Perhaps that was almost believable in September, but since then, with the sharp rises in the costs of essentials and the statements in the Budget which confirm that 3.1% CPI is an exceptionally low figure, it is no longer an appropriate basis on which to vote this through.
There is also an argument being used that the Government cannot use the earnings figure of around 8% because it is too high and is distorted by the pandemic. Apparently, there is no robustly agreed methodology to adjust that figure for the pandemic. It strains credulity that, with the legions of statisticians and actuaries at the Government’s disposal, it is not possible to produce a reliable, adjusted figure that accounts for the pandemic. However, if that is indeed the case, the OBR and the ONS helpfully have produced their own statistics which could perhaps be used as the basis of such a re-estimation of average earnings.
Amendment 7 explicitly permits the Government to use an adjusted figure for 2022-23. It is put in place to meet the objections that apparently there was concern that the Government could be legally challenged should they use an adjusted figure. This measure in Amendment 7 would ensure that unless a figure was used that is entirely irrational, such a judicial review is unlikely to proceed.
I hope that we will have a good debate on these measures and can send them back to the other place for reconsideration on the basis of much fuller and more accurate information. I beg to move.
Baroness Sherlock (Lab)
My Lords, I will speak to the other amendment in this group: Amendment 5, in my name and that of the noble Baronesses, Lady Janke, Lady Altmann and Lady Boycott. But first, I want to comment on Amendments 1 and 7 and thank the noble Baroness, Lady Altmann, for her introduction and explanation of them.
Noble Lords will remember that in Committee, the noble Baroness, Lady Altmann, tabled an amendment which simply excluded pension credit entirely from the effects of the Bill. The Minister opposed this on lots of grounds, but probably the main one was that the earnings growth had been distorted as a result of the pandemic, and therefore it would not be an appropriate way to increase pension credit. The noble Baroness has come back with Amendments 1 and 7, which would require the Government to uprate pension credit with reference to earnings but adjusted for the effects of the pandemic.
As the noble Baroness mentioned, I am quite sure the Minister will get up and say that the Government do not believe a figure can be found which will be robust enough to use as a measure of underlying earnings growth. We will come back to the substantial discussion on that point in the third group, but, in short, Labour accepts that there is a distortion in the earnings data, but we think the Government should go back and try harder to find an alternative way to deal with this without ditching the earnings link and the manifesto commitment to the triple lock—and, indeed, losing the trust of the nation while they do so. Our view is that that should be done for the state pension, which we will come back to in the third group.
In the meantime, we need the Government to face into the growing problem of pensioner poverty and to develop a longer-term strategy for tackling it. Amendment 5 would force the Government to start by assessing the impact of the Bill on pensioner poverty within six months of the Bill passing, followed by a Statement to both Houses of Parliament.
We know we have a problem. I will not go over again all the evidence from around the House that we rehearsed in Committee, but let me give a quick summary. Pensioner poverty was doing really well: it fell markedly between 1997, when it was 29% for the UK, and 2010, when 14% of pensioners in Great Britain were living in poverty. That was due primarily to the introduction of pension credit. From 2012, pensioner poverty started to rise again. Last year, 18% of our pensioners were living in poverty—that is more than 2 million pensioners now in poverty, with over a million in severe poverty.
There is a real gender pensions gap. The number of women pensioners living in poverty has increased dramatically at a time when the total number of women pensioners has fallen as a result of the state pension age going up. That is really significant. We also have a particular problem in some regions, especially London, and there is a worry about a growing problem in the north. Older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.
The context for the Bill is a cost of living crisis, with inflation rising and energy bills skyrocketing. I raised this in Committee, and the Minister responded to my concerns by saying that energy prices were built into CPI. But the prices reference point for uprating is the September CPI rate, and the energy cap was raised on 1 October. It has been raised by £139 for those paying by direct debit and a huge £153 for those on prepayment plans. Yet again, there is huge premium on being poor: the poor pay far more per person for energy than the rich.
Given the worries about pensioner poverty from around the House, and the fact that the state pension is the largest single source of income for most pensioners, it would seem obvious that Ministers should carry out an impact assessment so that they would know what effect suspending the triple lock would have on pensioner poverty. But, astonishingly, there has been no impact assessment for the Bill. When I moved a similar amendment in Committee, the Minister said it was not possible to do what we asked because it would involve modelling. She said:
“Assumptions would need to be made about how each individual pensioner’s income would change in future under each scenario.”—[Official Report, 26/10/21; col. 750.]
I accept that assumptions would have to be made—that is what happens when you model things. Is it really impossible to model the impact of this policy? If so, how does anyone model the impact of any policy on poverty? When I was a spad in the Treasury—which I accept was back when dinosaurs roamed the land—it had a TAXBEN model which it used to assess the impact of any changes in taxes and benefits. Also, in those days, the DWP had some of the best statisticians anywhere in Whitehall. I have no reason to believe that that is not the case now, although I know the department has shrunk. So, I recognise that assumptions would need to be made, but in modelling they just have to be reasonable and stated. I would even be happy with an assessment which ignored behavioural responses, if that would make it easier.
There is a common theme across all the amendments today and there are concerns from all Benches about low pensioner incomes. Our simple amendment reflects that concern. If the Minister is not convinced by all the evidence mentioned here and in Committee, I urge her simply to accept my amendment and do the work to establish the facts. If the Government want to break their manifesto commitment, at least they should be committed to gathering and publishing information about the impact of that decision. I look forward to the Minister’s reply.
Lord Rooker (Lab)
My Lords, I had not intended to speak. I can see why there is a logic against the noble Baroness’s amendment in some ways, although if she puts the amendment to a vote, I will support her. There was a time—I am going back some years now—when the Government were committed to a link. The consequence of that was that I had to put forward a 75p pension increase. I remember saying to Alistair Darling, my boss, “Couldn’t we make a quid? It’ll be a lot easier to explain a quid than 75p.”. He said, “No, no. The formula’s there. The Treasury said this is what we do: we stick to the formula.” So we stuck to the formula. I was always able to defend it in a way because the supplementary pension, although people did not always apply for it, was worth three quid rather than 75p, but we know about the uptake. The Treasury factor in that people do not take up benefits.
However, here it looks as though pensioners are being treated unfairly. I do not think they are because, as I shall say tomorrow in the debate on the Budget, there are so many hidden tax increases, particularly for pensioners with a very small occupational pension who are at the moment outside the tax net but who will be sucked into it because of the freezing of the personal allowance over a five-year period. Substantial numbers will be paying tax without anybody announcing a tax increase, and that is unfair. I hope that some time, when he flies in, the noble Lord, Lord Lawson, will come to support me on the basis that he supported me and Audrey Wise in 1977 to make the system workable.
However, the noble Baroness has a point. I do not intend to speak on the other amendments because there is a point where logic says you cannot take account of the pandemic. I understand the long run. For a couple of years, I did the job that the Minister is doing and I understand that Ministers are presented with a 30-year run of the consequences of any change in the figures. That has got to be the case when you are talking about pensions.
If we had the second or third-best pension in Europe, we would not be having this argument, would we? However we have one of the poorest basic pension rates of any modern economic country, but we are, so called, one of the richest. Sometimes we have to say, “Hang on a minute: let’s take a stand,” and I think today is an opportunity to do that. I know the logic is against this, but when one looks at the figures, it is an opportunity to make a change. The Government could be forced to have a look at some of the long-run consequences of having such poor pensions, where they factor in low uptake of pension credit. One of the documents produced for the Budget on changes in household incomes mentions that they factor in that people will not claim benefits to which they are entitled. That is not very fair. Today is an opportunity for the little people to hit back.
Baroness Wheatcroft (CB)
My Lords, I have put my name to Amendments 1 and 7 in this group, as well as to Amendments 3 and 4 which will be debated later. I am delighted to follow the noble Lord, Lord Rooker. He spoke sanely about what these amendments would do and why they should do it.
The noble Baroness, Lady Altmann, made the case very clearly. There are 2 million pensioners living in poverty and 1 million in extreme poverty. Noble Lords need to know that this Bill would put more people in this position. We should not be passing it unamended.
I find the arguments against our amendments pitifully thin—I am sorry, but I do. I remind the House that, in Committee, the Minister, who wants to do the right thing, said:
“The Government’s triple lock manifesto commitment remains in place”.—[Official Report, 26/10/21; col. 738.]
I know that that is a reference to the fact that we are told that the suspension will be for only one year, but that is not good enough. If you suspend the earnings lock for one year, the cumulative effect goes on, so the commitment is lost.
The commitment was to keep the earnings lock in place because earnings might well be greater than inflation—particularly CPI inflation—and there is no doubt that that will be the case. After all, the Government keep telling us that they want a high-wage economy. But they do not seem to want higher increases for pensioners. We know that, in most cases, these people’s spending is very curtailed. It goes predominantly on fuel and on food. Those are constituents of the CPI, but they are not in the same proportion as they are in pensioners’ spending. Therefore, increases in fuel and food prices hit pensioners harder.
I am still bemused as to how, in Committee, the Minister was able to tell us that,
“we are not currently expecting widespread, significant and sustained increases in consumer food prices in the coming months”.—[Official Report, 26/10/21; col. 740.]
I do not know what she knows, but the supermarkets certainly are. These price rises are already coming through. They are not yet fully reflected in the CPI, but we know that prices in the shops are going up. And the more that wages go up in this new, high-wage economy where we are encouraging drivers of HGVs to demand more money—which the Government say they deserve—the more this will feed through into increased food prices.
We need to make sure that our pensioners can eat. I do not want to be responsible for pensioners going hungry —or even hungrier than they have been in the past—and I do not believe that the Minister does either. It is imperative that we do what should not be beyond the wit of any Government and come up with a number that approximates effectively to where underlying earnings have gone in the last year. I have every confidence that the ONS can do this. Indeed, CPI is not quite as robust as the Minister would have us believe; it is often adjusted after a few months, or even a year, because a lot of numbers have to be adjusted as new information comes through. We could come up with an adjusted earnings figure which would enable the Government to maintain their manifesto commitment, which I am sure it would really like to do. It would enable the rest of us to ensure that pensioners –those on pension credit, as well those on the basic pension—lead a slightly better life. This is all part of the levelling-up agenda.
Baroness Lister of Burtersett (Lab)
My Lords, in speaking briefly in support of Amendment 5, although I also support the other amendments in this group, I will spare noble Lords the full lecture on the use of relative and so-called absolute poverty measures that I gave in Committee. As the Minister completely ignored the point in her response to that group of amendments in Committee, I return to it now. In discussing an assessment of the Bill’s impact on pensioner poverty—which is certainly necessary—we should be clear how we measure poverty.
When mentioning poverty, the Minister constantly uses the so-called “absolute measure”, and no doubt she has been briefed to do so today. I say so-called because it is better described as an anchored measure, anchored to the poverty line in 2010-11 adjusted for inflation, but taking no account of changes in living standards in the intervening period. In doing so, she ignores what has happened using the more commonly used relative measure, which is part of the suite of official measures.
Lord Freud (Con)
I ask your Lordships’ indulgence to make a few observations following events last week, in the context of Amendment 5 on poverty, in the name of the noble Baroness, Lady Sherlock. My noble friend Lady Stroud and I are not pursuing our amendment on universal credit at this time.
I was delighted with the Chancellor's decision to improve work allowances and reduce the universal credit taper to 55%. According to my intelligence, this was very much a last-minute decision. I have always felt that there is a tipping point in terms of encouraging people to work more, and a taper of 55% is much more likely to be near that point than the 65% at which we were forced to start the new welfare system. However, I am much more concerned that the Chancellor did not feel able to improve the standard allowances, which have been eroded by 9% in real terms over the last decade, and which are now too low. There would be no point in an amendment which sought a vote on the standard allowance, since I believe that the Chancellor has done enough to eliminate any risk of rebellion among Conservative Back-Benchers on the issue. I am conscious, also, that Lady Stroud and I have tried the patience of the House by moving an amendment considered inadmissible by the Clerks.
Nevertheless, I sense that a sea change in public attitudes to welfare is now under way. In my account of the traumatic reform of the welfare system Clashing Agendas, I quote Rupert Harrison, the then-Chancellor’s chief of staff, on why the benefit cap was introduced. He told me:
“I know it didn’t make much in the way of savings but when we tested the policy it polled off the charts. We’ve never had such a popular policy.”
That was in 2010. This year, there have been a number of polls showing that most people in the country support extending the universal credit uplift. I do not believe that turn-round in attitudes has been purely because of the perceived meanness of the standard allowance. Universal credit is perceived as a fair and rationale safety net which eliminates the arbitrary nature of the legacy systems.
So, as the Chancellor contemplates the £25 billion of headroom that he is reported to have built into his Budget arithmetic, I urge him to use a small proportion of that figure to alleviate the real hardship being suffered by our very poorest citizens as soon as possible. My three-point recommendation to him is: first, restore the 9% erosion in standard allowances; secondly, tie the standard allowance to average earnings, something that we are debating in the context of pensions right now; and, thirdly, start getting rid of the excrescences such as the two-child policy and the benefit cap.
There is no need for late-night reactive decisions by a UK Chancellor on the shape of our welfare system. One of the clauses that I inserted into the Welfare Reform Act 2012 allows comprehensive trialling by the DWP of all the major elements within universal credit to discover the econometric impact of changes. For instance, the department can discover the exact optimal point of the taper, among many other aspects of the benefit. It may be that the point at which the Treasury makes the most tax and loses the least welfare revenue is a taper of 50%, for example, rather than 55%. The department can test and keep testing as society changes.
I thank my long-time colleague, my noble friend Lady Stroud, for her indefatigable efforts to find a way to help the most vulnerable in our society. Without all her energy and passion, I do not believe we would have achieved the progress that we have.
Baroness Stroud (Con)
My Lords, I shall speak to Amendment 5 in the name of the noble Baroness, Lady Sherlock. I thank and pay tribute to my noble friend Lord Freud, who I believe did a huge service in putting his weight behind the amendments last week.
This amendment speaks to the impact that changes to social security have on those who are in poverty, and it is that poverty impact which I want to focus on here. I want to put on record my thanks to the Minister for all that she did to work with the Chancellor to ensure that as we stand here today the universal credit taper rate is being lowered to 55% and the work allowance increased by £500. Those who are doing everything they can to ensure that they and their families work themselves out of poverty will benefit hugely from this budgetary intervention.
However, it goes without saying that, as my noble friend Lord Freud has just alluded to, there is a group who will not benefit from this change: those on the standard allowance, those who cannot work, those with sicknesses and disabilities. It is to that group that this House must now turn its attention. Testing this House with inadmissible amendments late at night is not the business for today, but we need to keep our focus on this issue.
The challenges that we and many across this House highlighted were the rising costs of inflation and rising fuel bills at the same time as the removal of the £20 uplift. The NICs increase will not impact on that group. A new Social Security (Uprating of Benefits) Bill is coming to the House shortly. It will cover universal credit and focus on the annual uprating of universal credit in line with inflation. We have an opportunity to argue that this should be in line with where inflation will be at the time when it is laid rather than where it was in September, in order to protect these households. There is also a fund of £500 million that has gone to local authorities to cover the colder months of the year. That should be ring-fenced and allocated to those who are on the standard allowance and unable to work or, better still, put through universal credit for that group.
Speaking specifically to the amendment, one of the reasons why the Government are struggling to deliver poverty impact assessments on pensioner poverty or working-age poverty is that they have yet to decide how they are going to define and measure poverty. This matters, and it is one of the key reasons why they have so frequently walked into trouble on issues of poverty. If only the Government realised that poverty measurement can be their friend and guide. It could have guided them through their decision-making during the pandemic and through the challenges of free school meals. I have heard it said that this cannot be done in real time, but with RTI we are so much closer to being able to measure real-time impacts and make informed choices to protect our most vulnerable people.
However, today is a day to say thank you to the Government for their investment in the lives of those who are in work and on low wages, but also to ask them to be watchful for the poverty impacts on those who cannot work—those with disabilities, children and pensioners—and to take action where vulnerability is visible.
Baroness Greengross (CB)
My Lords, I support these amendments as they support the very poorest and most vulnerable people of pension age, who are going to face the same rising costs of living as everyone else. When we come to group 3, I hope to speak in more depth about what I believe should happen with overall pension policy, but for this group, I want to focus on the most vulnerable.
When I headed up Age Concern England, we ran many campaigns calling for an end to pensioner poverty—a problem that sadly still exists today. Part of the problem is the low uptake of pension credit, something that the noble Baroness, Lady Altmann, has worked tirelessly on, building support across the House. These two amendments would ensure that, at a time when we are likely to face rising prices, our most vulnerable pensioners are supported.
Baroness Janke (LD)
My Lords, as many noble Lords have said today, these amendments are about pensioner poverty. I thank the noble Baronesses, Lady Altmann and Lady Sherlock, for tabling them and for presenting so clearly their purpose.
As others have said, we are often told that pensioners are well off and do not need the protection of the triple lock. Certainly, many pensioners with private pensions are well off by previous standards, but because of this we should not forget about the more than 2 million pensioners living in poverty, many of whom are older pensioners with more severe needs and higher heating costs. These people are dependent on the state pension and it is essential that we protect its value if they are not to be put in even more poverty.
I very much welcome what the noble Lord, Lord Freud, and the noble Baroness, Lady Stroud, have said. I thank them for their campaign and courage, and for the ways they have managed to alleviate some of the suffering due to the inadequate safety net that we have heard described. I am sure that we on this side of the House would welcome the reforms that the noble Lord, Lord Freud, talked about, and the focus of the noble Baroness, Lady Stroud, on poverty and in particular those who have not been helped by the Budget. We look forward to working with them on that.
As many other noble Lords have said, inflation is going to be higher than 3%, if we are to believe all the forecasts. We know that pensioners, and older pensioners in particular, spend more time at home and feel the cold more, and that energy bills are a higher share of their household incomes. In the light of the soaring costs of energy alone, there is good reason to believe that the proposed increase here is not only inadequate but a real-terms cut.
I will speak to Amendment 5, on the impact assessment, which is another that I have signed; the noble Baroness, Lady Sherlock, talked about it, as have others. In our late-night debate on Tuesday, we heard about the failure of the Government to really assess the impact of some of their measures and, in particular, about their use of regulations—from the noble Lord, Lord Hodgson, the chair of the Secondary Legislation Scrutiny Committee. We also heard about the lack of scrutiny of fundamental policy changes which seriously affect people’s lives. I very much hope that the Government will take on board the need for these impact assessments and have positive evidence before we inflict swingeing cuts and policies on large numbers of the population who are, in general, the most vulnerable.
To conclude, I will say a few words about women pensioners, referred to in Amendment 5. Many of us are aware of the injustices suffered by women, many of whom have not had the opportunity to amass a private pension because they have been unpaid carers for many years. Many of these women are dependent on the state pension and are among the poorest pensioners. I hope that the Government will take account of this and act on this injustice, by making sure that we have proper impact assessments and that evidence is brought to us when we are making these decisions.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I thank the noble Baronesses, Lady Altmann, Lady Janke and Lady Wheatcroft, and the noble Lord, Lord Hain, for their amendments. These amendments aim to ensure that the standard minimum guarantee is uprated by earnings rather than by CPI inflation. In order to address the Government’s concern that this would entail an increase of 8.3%, they would instead require the Secretary of State to review the rate by reference to a rate of earnings growth, adjusted to take account of the distorting impacts of the pandemic.
As I said in Committee, the Government recognise that the standard minimum guarantee in pension credit is the safety net for pensioners on the lowest incomes. I therefore also understand the concern that the incomes of pensioners in this group should continue to be supported. As has been said, the standard minimum guarantee has always been linked to earnings, originally as a non-legislative commitment and, since 2008, by law. However, it is still the Government’s view that there is no alternative earnings measure upon which uprating can be based that is sufficiently robust. If there were, there would be no reason not to apply it to all the earnings-linked pensions and benefits. There is no adjusted measure of earnings growth that has the status of an official statistic. Instead, the ONS has published a range of possible estimates, which it advises should be treated with caution.
The noble Baroness, Lady Altmann, has suggested that the Government could adopt 5% as a reliable measure of earnings growth. This is the increase in average earnings in 2021 compared to 2020, as forecast by the OBR in its economic and fiscal report. There are two issues with this measure. First, the ONS has, to date, published data only up to August 2021, so the 5% is partially based on forecast earnings for the period September to December; and forecast data, as opposed to historical data, is inherently uncertain and liable to change. Secondly, if we were to take this approach, we would also be changing the reference period for the review from May to July, year-on-year, to the calendar year. This would mean that, for next year’s review, if we reverted to using earnings growth for the year to the period May to July 2022, as we would already have accounted for May to December 2021 in the April 2022 uprating, we would be double counting. To avoid this would mean using a calendar-year measure, partially based on a forecast beyond the current review.
However, the measures that the Government took last year, together with those in this Bill, will ensure that the safety net for pensioners on the lowest incomes more than keeps pace with inflation. Over the two years of the pandemic, it will have increased by more than the increase in prices. It was increased by 1.9% in April 2021, when the CPI for the relevant uprating review period was 0.5%, and it will be increased by 3.1% from April 2022, in line with the relevant rate of the CPI this year. We believe that this strikes a fair balance over the two years between the interests of pensioners and those of younger taxpayers.
On the relationship between the full rate of the new state pension and the single rate of the standard minimum guarantee, which the noble Baroness, Lady Drake, raised in Committee, the Government believe it is right that the contributory state pension should deliver a foundation income above the level of the basic means test. This is not only so that future pensioners know that they will see the full benefit from any additional retirement saving but because, unlike pension credit, there is not the problem of take-up, which, despite the efforts of Governments of all persuasions, has persisted over time and is unlikely ever to match that of the state pension.
In Committee, the noble Baroness, Lady Drake, also made the point that, at other times, the Government have applied cash increases to the standard minimum guarantee which exceeded the statutory minimum earnings. This Bill gives the Secretary of State the same flexibility to go beyond the minimum—in this case, CPI. The “overindexation” of the standard minimum guarantee on earlier occasions was done solely to ensure that those on pension credit did not have the triple lock increase on their state pension clawed back in the means test. That is not the position we are in this year. As we have made clear, this Bill is for one tax year only. After that, the standard minimum guarantee in pension credit will continue to increase at least in line with earnings from 2023-24.
Several noble Lords referred to pension credit take-up, I have written on this to outline the action we are taking with partners and stakeholders to address this very important issue. We are particularly concerned to ensure that people are aware of the guarantee credit, which is the safety net in the pension system and our most crucial lever for bearing down on poverty levels among today’s pensioners.
Of course, pension credit is a gateway to other valuable entitlements for pensioners on low incomes, such as discounts on energy bills, cold weather payments and free TV licences for those over 75. We can make much of these advantages by encouraging people to claim what they are entitled to.
On Amendment 5, I thank the noble Baronesses, Lady Sherlock and Lady Janke, for raising these important issues. I share their concerns about pensioner poverty and about older women in poverty. I assure the House that we are committed to ensuring economic security at every stage of people’s lives, including when they reach retirement.
However, I have to inform the noble Baronesses that their amendment, as it stands, is inoperable. As the Bill takes effect only from April 2022, the data required for a review six months after the Bill’s passing will not be available. In the absence of actual data, the only way to provide an assessment would be to forecast and model how many pensioners might have their income lifted above the various low-income levels under an earnings uprating versus an inflation uprating. Assumptions would need to be made about how an individual pensioner’s income would change in the future under each scenario. This would require making assumptions about, for example, how each pensioner might change their behaviour around other sources of income, such as drawdown of income from investments or a change in earnings when faced with different amounts of state pension, which is virtually impossible to do with accuracy. These projected incomes would then need to be compared to projections of the various income thresholds, which are themselves extremely uncertain. Therefore, there is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty thresholds would be misleading due to uncertainty about the economy and pensioners’ behavioural responses to various levels of state pension.
The department collects and publishes a wide range of data on income and poverty, which are released annually in the households below average income report series. Reports with estimates of pensioner poverty covering 2021-22 and 2022-23 will be published in 2023 and 2024 respectively.
I can, however, announce today that we will publish the impact assessment for the Bill. This sets out information such as key characteristics of state pension and pension credit recipients and impact on protected groups. The Government have been convinced by the arguments made by noble Lords that this document should be made available. I congratulate the noble Baronesses and other noble Peers on their successful persistence in raising the issue. We are now in a position to provide the document in a version that incorporates the measures outlined in last week’s Budget. I will write to noble Peers after this debate with a copy of the document, which we will also place in the Libraries of both Houses.
My noble friend Lady Altmann raised the issue of CPI figures. September CPI was 3.1%; the OBR is forecasting CPI to rise and peak at 4.4% in quarter 2 next year. However, from April to August this year, CPI averaged 2.3%, so the September figure of 3.1% is halfway between the forecast peak and what CPI actually was for the first five months of this financial year.
The noble Baroness, Lady Wheatcroft, spoke about food, fuel and housing costs. Although we are expecting inflation to rise—and clearly a substantial part of this rise will be driven by the temporary rises in fuel costs —it is important to note the facts about what has actually happened to inflation over the last 12 months. Average CPI over the last 12 months has been 1.3%, but food prices actually fell by 0.6% and household fuels increased by only 0.1%. The biggest rises were in transport, at 3.9%, and communication, at 2.4%.
The noble Baroness, Lady Lister, challenged why we use absolute poverty measures. This Government prefers to look at absolute poverty over relative poverty, as relative poverty can provide counterintuitive results. Relative poverty is likely to fall during recessions, due to falling median incomes. Under this measure, poverty can decrease even if people are getting poorer. For example, some think tanks have projected that relative poverty will have fallen sharply in 2020-21 during the pandemic. The absolute poverty line is fixed in real terms, so will only ever worsen if people get poorer and only ever improve if people are getting richer.
My noble friends Lord Freud and Lady Stroud talked about the changes to universal credit, which are more than welcome. I thank my noble friends for their interventions on universal credit and I am sure that their points—and others—will have been heard clearly. In view of my remarks today, I ask the noble Baroness to withdraw her amendment.
Baroness Altmann (Con)
My Lords, I thank my noble friend for her response and all noble Lords who have spoken in this important debate. I pay tribute to the noble Baroness, Lady Sherlock, for the way in which she introduced her amendment, and I support Amendment 5 in her name and those of other colleagues.
I would like to put on record that I did not mention any figure in my remarks. That was deliberate: it is not up to me to tell the Government what figure to use to uprate. Is my noble friend saying that the Government are unable to produce an adjusted earnings measure that is rational? A judicial review would have to be based on a figure being irrational. I am sure that my noble friend is deeply uncomfortable about this debate, and I have huge sympathy for her: I know that she cares about the poorest pensioners, as she cares about so many others in our society. But I am really disappointed in the Government’s response and the rationale that they are using.
I will withdraw Amendment 1, but I might return on Amendment 7 in my name. In the meantime, I beg leave to withdraw this amendment and, again, thank my noble friend for her response and all other noble Lords for their supportive remarks.
Lord Davies of Brixton
Member’s explanatory statement
This amendment would remove the provision substituting “prices” for “earnings” and retain the earnings link for the 2022-23 year by stipulating the Government will assume earnings have risen by 8.1% for the purposes of uprating. This reflects the annual increase in the index of average weekly earnings following the practice adopted by the Secretary of State in recent years.
Lord Davies of Brixton (Lab)
My Lords, I should first mention a non-pecuniary interest as an unpaid adviser to the National Pensioners Convention. I do not want to detain the House for too long on this amendment, not because it is not important but because I want it to start a debate rather than reach a firm conclusion.
This Bill is about the increase in state pension benefits next April—more specifically, the increases in the flat-rate basic and new state pensions. But I think such a debate makes sense only in the context of what our long-term objective is for these flat-rate elements of the state system.
The Deputy Speaker (Lord McNicol of West Kilbride) (Lab)
My Lords, if Amendment 2 is agreed to, Amendment 3 will not be called due to pre-emption.
Lord Sikka (Lab)
My Lords, I support my noble friend Lord Davies of Brixton and his detailed remedy for future problems, and the call for an 8.1% increase in the state pension. DWP has not given us the median numbers, but the pre-2016 average or mean state pension is £155.08 while the post-2016 figure is £164. 23. It seems that the older you are, the lower the pension you actually get.
Discrimination against senior citizens is built into the system itself, which is wrong: 8.1% of that tiny amount is very small. A correspondent who contacted me from New Zealand said, “In New Zealand Super, there is a phrase that at 65, you get 65—at 65 you retire and you get 65% of average wage.” That is at least two and a half times more as a fraction of average wage than it is in the UK, where it is impossible for anyone really to live on it.
We have heard from many Members of your Lordships’ House that the state pension is the only or main source of income for many, many people. I do not know whether Ministers speak to ordinary people to hear their experiences of trying to manage poverty. I will read out just one message that I have received from a senior person: “I am struggling to pay my rent, buy food and pay for gas, electricity and water. TV is my only source of company and the government is now taking that away too. I can’t afford to buy a TV licence. It would be better for me to go to prison. At least I will be warm and I will also be fed.”
Earlier, the Minister rattled off a whole range of pension benefits that people can collect. Will she tell the House how a 75 year-old with no TV for company, with one heating bar in a room, with no access to the internet and with her local library shut, gets access to those benefits and asks for help? I should be very grateful if she can describe to the House how that person can make ends meet on this meagre state pension.
We have institutionalised poverty in this country and the voice of the poor is not being heard, so I fully support my noble friend’s call for a pensions commission. However, people cannot wait for that. We need an 8.1% increase now.
Baroness Sherlock (Lab)
My Lords, my apologies: I was too slow to leap up. I thank my noble friend Lord Davies for introducing his Motion and thank all noble Lords who have spoken. As I said in Committee, I think we all share an underlying concern, which is about the living conditions of pensioners—particularly poorer pensioners—in our society. I will not rehearse our debates on pensioner poverty, but I am grateful to my noble friend Lord Davies for opening up the question of a strategic approach to the state pension.
The assumption had been that the state pension, old or new, was the basis, or the foundation, of developing retirement income and that any private provision would be on top. Given that we have rising levels of pensioner poverty now, and looking across the landscape of current saving rates on auto-enrolment, are the Government confident that this strategy is working and that people will have adequate income in retirement on the basis of the figures that she is seeing? I should be interested to hear her response to that.
My noble friend Lord Sikka again mentioned the question of people who are struggling. We are very anxious about the cost of living facing pensioners in the difficult months ahead, which is why I very much hope that the Government are tackling pensioner poverty in the ways that we have discussed.
Taking my noble friend Lord Davies at his word, he did not in fact raise this with the intention of pressing the Government for 8.1% now but to raise the broader questions. I hope the Minister will take him on that basis and give him a response that will help to answer the kind of questions he has raised.
Baroness Altmann (Con)
I apologise for being even slower to rise. I will not detain the House long. I would just like to echo and support the calls for a wider review of state pensioner support. That is long overdue. Perhaps this debate will produce a willingness at the department to look again at all the elements of the way we support pensioners in this country.
Baroness Stedman-Scott (Con)
My Lords, I thank the noble Lord, Lord Davies, for his amendment. I understand his passion for retaining the link between state pension uprating and earnings growth. This passion applies even in the exceptional circumstances generated by the Covid-19 pandemic, when earnings declined by 1% one year then rebounded by 8.3% the next. By contrast, the Government increased the state pension by 2.5% last year and intend to do so by 3.1% this year. This is in view of protecting the value of the state pension despite a decline in earnings last year, protecting its purchasing power next year and having due regard to the current fiscal situation and the effects on younger taxpayers. The Bill, therefore, replaces the link with earnings for one year only with a requirement to increase these rates at least in line with the increase in prices or by 2.5%, whichever is higher.
It has been agreed by many in this House and the other place that 8.3% is an anomalous figure distorted by the slump of wages at the start of the Covid-19 pandemic and by the effects of millions of people moving off furlough back into work. The noble Lord’s suggestion of 8.1% would generate a cost of more than £4.25 billion in the year April 2022-23, relative to increasing the state pension in line with the provisions in the Bill. The Government do not believe it would be fair to younger taxpayers to increase these rates by such a high percentage on top of the 2.5% increase last year, when earnings slumped by 1% and inflation stood at 0.5%. After this year, the legislation will revert to the existing requirement to uprate at least by earnings growth, as per the Government’s triple lock manifesto commitment, and it still remains in place.
The noble Lord, Lord Sikka, raised the issue of how pensioners can access their entitlements. Noble Lords will see with the letter that has gone out today that we are committed to making sure that pensioners can access their full entitlement under pension credit. The difficulty seems to be persuading them to make a claim. We offer various ways of accruing benefits, including by telephone and post. Where necessary, the department can offer home visits. We also work with partners and stakeholders such as Age UK to help people claim, and we will continue to do so. I therefore ask the noble Lord, Lord Davies, to withdraw his amendment.
Lord Davies of Brixton (Lab)
I do not think the Minister really responded to my request to initiate a debate about the structure of pension provision. But I am not going away. I will raise this issue at every opportunity, and I hope that at some stage we will be able to have a productive discussion about what to me is the key issue. The technical details of the uprating basis are important but the structure is crucial. With the leave of the House I will withdraw my amendment, but the issue is not withdrawn.
Baroness Altmann
Member’s explanatory statement
This amendment is intended to maintain the link between pension uprating and earnings but requires the Secretary of State to make adjustments that are considered appropriate for distortions in the traditional ONS Average Weekly Earnings figures, which were caused by the exceptional pandemic effects and Government measures on the labour market.
Baroness Altmann (Con)
My Lords, I rise to move Amendment 3 and give notice that I intend to divide the House on this amendment. I am enormously grateful for the support of colleagues across the House, including the noble Baronesses, Lady Wheatcroft and Lady Janke, and the noble Lord, Lord Hain. I am, of course, grateful to my noble friend and the officials who have engaged with us over the past weeks on this Bill. However, I still believe that these amendments are necessary. Amendment 3 would retain the earnings link uprating for the state pension triple lock rather than removing it as the Bill proposes.
I appeal to noble Lords on these Benches, as well as across the House, to recognise that these amendments are seeking to protect a solemn manifesto commitment made at the 2019 general election. Amendment 3 would preserve the important social security principle and the triple-lock promise of protection for the basic and new state pensions against rises in average earnings. Amendment 4 is consequential on Amendment 3. It was accepted by the Whips yesterday but, if the Minister does not agree, I ask her to confirm that and explain why she might not accept it when she responds. It would permit the Secretary of State to adjust the traditional average weekly earnings statistics produced by the Office for National Statistics, which have been used for uprating in past years, for the effect of the pandemic, which has upwardly biased the figures.
This Bill was perhaps not necessary. In the Social Security Administration Act 1992, which we are being asked to revise through the Bill, Section 150A (8) explicitly allows the earnings statistics to be adjusted. The legislation states that when reviewing how to uprate the state pension each year:
“the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”
So this is not a question of having to use the 8.3% earnings statistic.
When Members of the other place voted on this Bill to abandon the manifesto pledge to 12 million citizens, they did so on three bases which I believe are flawed. First, they were led to believe that no alternative was available to using the 8.3% figure but, as I have just demonstrated, the Act would permit that in any case. However, to be helpful, we have laid Amendment 4, which explicitly states that, for the year 2022-23, should the Government believe that the earnings figures are distorted, they may adjust for the effect of the pandemic.
The second basis was that the other place was told that the 3.1% figure would still protect against rises in the cost of living. Indeed, when summing up, the Minister said that the so-called double lock of CPI or 2.5%
“will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living”.—[Official Report, Commons, 2/9/21; col. 86.]
This also does not stand up to scrutiny. Since that debate, the inflation outlook has significantly deteriorated, but on further examination it is clear that September’s 3.1% CPI figure was downwardly biased by the effects of the pandemic. For example, there was a sharp fall in hotel and restaurant costs, as well as in household services, which hardly form a major part of most pensioners’ budgets. In his Budget speech, the Chancellor said that inflation in September was 3.1% but is likely to rise further. The OBR said:
“We expect CPI inflation to reach 4.4 per cent next year”
warned that it could peak at close to 5% and added that
“it could hit the highest rate seen in the UK for three decades.”
That is around 7.5%. Last month, gas and electricity bills rose by 12%. Food prices are rising, and the OBR warns of a further rise in the energy price cap next April. Yes, this is for one year only, but what a year to choose to do this, while older people are facing a cost-of-living crisis and the protection that they were relying on is being removed.
The third basis was that not doing this would cost £5 billion per year and that earnings fell last year, but pensioners received a 2.5% rise, so they will have money taken from them next year as some kind of payback. Using an adjusted figure would still save several billion pounds relative to the £5 billion cost. But after seeing alcohol and fuel duty cut in the Budget and the bank surcharge allowance raised, and adding up the amount of Exchequer savings that those measures entail, half the cost of not honouring the triple lock will cover the costs of just those three measures. I appeal to noble Lords across the House: is this really the country that we believe that we should be living in? Is that the priority for public spending?
This is also a perfect example of our role. If we are scrutinising legislation that has come over to our House and which we believe that it is flawed, that it was perhaps passed through on a false premise, or if circumstances require us to send it back for reconsideration, is that not precisely what we should be doing? Twelve million citizens depended on that commitment. We have a chance to ask the other place to reconsider, perhaps in the light of updated information. I hope that noble Lords across the House can support this.
Baroness Lister of Burtersett (Lab)
My Lords, as no one else is getting up, I will. I support Amendments 3 and 4 and congratulate the noble Baroness, Lady Altmann, on her tenacity in pressing this issue.
I have made it clear at each stage of the Bill that, while questioning the rationale for the triple lock, I strongly support the double lock that links pensions to earnings or prices as crucial to maintaining or hopefully even improving pensioners’ living standards. If under the triple lock it is possible to raise pensions by the arbitrary figure of 2.5% in some years, I do not understand why what is proposed in the amendments is deemed to be not sufficiently robust by the Government. I have yet to hear a convincing response to the very strong case made by the noble Baroness, Lady Altmann, nor have I received any letter from the Minister today. I have just checked my phone, and nothing has come through.
If, despite assurances to the contrary, and when an alternative that did not use the 8% figure was clearly available, there was a jettisoning of any earnings link, it is not surprising that this has given rise to fears that the link could be scrapped at some future point, just as it was in 1980. As has already been pointed out, the case for maintaining some form of earnings link, in line with the amendment, is all the stronger given the anticipated increase in inflation. Many people on low incomes—pensioners and others—face a bleak winter, especially if inflation rises as high as 5%, as predicted by the Bank of England’s chief economist recently—and that is before taking account of the differential impact of inflation on those on low incomes, for whom fuel and food represent a disproportionate proportion of their budget, as noted already. They will struggle during the winter months without any additional help with fuel, as called for by National Energy Action, and when they finally get their uprating next April, it will not be enough to compensate. While it is very welcome that the Government have finally agreed to produce an impact assessment of the Bill, it is a shame that we have not got it to inform our debate today.
Echoing what I said in the first group of amendments, I hope that, despite what she said earlier, when responding to these amendments, the Minister will not once again trot out the statistics based on the so-called absolute measure of poverty, when she knows full well that pensioner poverty, on the relative measure, is on the rise over a longish time period. Rather than avoid the issue of pensioner poverty, as it is experienced relative to the rest of society, the Government should be working to prevent a further increase. This amendment provides them with a means of doing so.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I would first like to apologise to your Lordships’ House for being unable to speak on the Bill at Second Reading and in Committee due to direct participation in Select Committee work. I am very pleased to follow my noble friend Lady Lister and to congratulate the noble Baroness, Lady Altmann, on bringing forward these cross-party amendments.
Although we in Northern Ireland make our own social security legislation, in all instances it replicates legislation here because the money comes from here. I look across the Chamber at the noble Lord, Lord Dodds; he and I were former Ministers in the Northern Ireland Executive with responsibility for pensions and all social security matters. We may have had the flexibility to bring in slight amendments, but we had to adhere strictly to the principles and policies because of the issue of parity.
I am pleased to support these amendments because, like my noble friend Lady Lister, I believe that pensioner poverty is deepening. In Northern Ireland, I see it day in, day out; people—particularly pensioners, many of whom have paid in over their lifetime’s work through national insurance contributions and tax—now find themselves reliant on the use of food banks. To say the least, the pandemic has worsened their situation; it has made mental illnesses more acute and people are unwell, and they also have less money for important items such as foodstuffs, which they require to survive.
I support these amendments because they are important for protecting pensioners, including the poorest, in line with an earnings figure that is adjusted for pandemic distortions. Protecting women and those who are the poorest in our society should be a mandatory obligation on all of us. There is a duty of responsibility to reject the proposal to remove the triple lock pension system. I say to the Minister and the Government Front Bench that this decision will impact most on those women who find themselves in the greatest level of poverty, who have already been subject to their entitlement to a pension dropping from the age of 60 to the age of probably 66 or 67, as per the Pensions Act 1995 of this Parliament.
I am therefore very happy to support these important amendments. There is a duty of integrity to protect all parties’ manifesto commitments and to amend the uprating Bill to ensure that all pensioners—people who have provided for all of us—are duly protected in the best financial way.
Baroness Wheatcroft (CB)
My Lords, I put my name to these two amendments for all the reasons that have just been outlined by the noble Baroness, Lady Altmann, and others who have spoken. It seems absolutely the right thing to do, on behalf of 12 million pensioners, to ask the other place to think again, after it spent just two and a half hours considering how to penalise 12 million people in this country.
It is only right that the link to earnings which was part of the manifesto promises should be preserved. In 1979, the Government of Margaret Thatcher abandoned that link. It was restored again in 2011, but the effects live on and, today, pensions are still below their relationship to earnings in 1979. The argument that this is a one-off does not hold water.
I will not repeat the argument that I used in the first group of amendments, save to say that this is not the time when we should make our pensioners poorer; when we can afford, apparently, to make bankers richer, and enable them to drink more champagne as they fly on short-haul flights in the UK, we really need to think again about whether pensioners should be made poorer. Make no mistake about it: the way inflation is headed, pensioners will be poorer.
The Minister talked about the CPI, but she was looking backwards. It is no good telling pensioners what prices have been; when we are talking about the money they will get in the future, the conversation needs to relate to where prices are going. Prices are going up much faster than the rate by which we are talking about raising pensioner income. For those reasons, it is absolutely right that this House should ask the other place to think again.
Baroness Greengross (CB)
My Lords, I support the amendment in the name of the noble Baroness, Lady Altmann. I share with her the many years that we have been working on these issues, and I am anxious that we get the balance right on pension policy.
Amendment 3, which would restore the link between pension uprating and earnings, is essential. This link was removed back in 1980. It resulted in many years of pension rates failing to increase at the same rate as average earnings. At that time, I was at Age Concern England, where we ran campaigns calling for an end to pensioner poverty and for the link with wage movement to be restored. Sadly, when this link was finally restored, in 2011, it was done as part of the triple lock, whereby pensions would increase by average earnings increases, inflation or 2.5%, whichever of the three was the higher. For the last decade, wage movement has been stagnant, and the rate of inflation also quite low. At a time when wages were not increasing, we called on workers to pay for the triple lock, creating, in my view, intergenerational unfairness.
At Second Reading, I spoke about the Intergenerational Fairness Forum report, which made a number of recommendations, including that the triple lock be replaced with a double lock, whereby pensions increase at the rate of average earnings or inflation, whichever is the greater. I refer to my interests as stated in the register, and in particular to my role as president of the Pensions Policy Institute. In 2019, this organisation released a report entitled Generation veXed, which found that people born between 1966 and 1980, who entered the workforce before automatic enrolment and who have worked during a challenging economic climate, have poorer levels of retirement savings when compared with the generation that went before them. This Generation X cohort have been asked to fund the current triple lock, while their ability to save for their own retirement has been, sadly, rather poor.
Retirement policy requires a balance and should not change with each electoral cycle. The situation we find ourselves in today, with the Covid-19 pandemic, is that the Government expect significant wage movement. Of course, this is due not only to the pandemic; it is due also to rising prices caused by Brexit, which will put pressure on employers to increase wages.
Amendment 3 would ensure that the link between pensions and earnings was retained, but it would allow the Secretary of State to make adjustments in situations like the one we face this year. I support the amendment as a sensible solution to the situation we are facing at the present time, but I reiterate my belief that, in future, we should abandon the triple lock and specifically the 2.5% uplift, and instead have a double lock based on earnings and inflation. If in future there is concern that earnings are again not increasing, rather than implement a 2.5% increase for pensions the Government should instead look at their economic and employment policies to ensure that earnings and pensions are both increasing at a decent rate.
Lord Davies of Brixton (Lab)
My Lords, I support the amendments in the name of the noble Baroness, Lady Altmann. As I made clear earlier, I am in favour of a somewhat greater increase, but I am glad to have whatever is available. I want to make two additional points.
First, there is a lack of trust in the Government. The one way in which they could assuage that lack of trust is by accepting the noble Baroness’s amendment. They really need to explain to us what the downside is of accepting the amendment. One can understand that they do not want to do it, but they need to tell us the disadvantages of adopting the approach.
My second point is a sort of response to the noble Baroness, Lady Greengross. Characterising this as between generations is a category mistake. It is between people on low incomes and people on high incomes; it is between people without much money and people with wealth. That is the redistribution required. To characterise it in terms of generations is simply wrong.
Baroness Janke (LD)
My Lords, I again thank the noble Baroness, Lady Altmann, for all her work on this issue and the comprehensive briefing that she produced—it must have taken her a very long time, but it was extremely interesting. The issue of the uplift is cogently challenged by her presentation. I know that support for the triple lock has been from all parties in this House, but we are told that it must be suspended for another year in view of the anomalous rise in average weekly earnings, as presented by the Secretary of State in the other place. As the noble Baroness said, there was little scrutiny there. Not only that, but since the Bill went through the other place, lots of developments have occurred, such as a massive increase in energy prices, pressures on supply chains and inflation predictions, which together seem a strong reason for reconsideration of the decision taken. Having signed the amendment, I too will support it today and hope that it succeeds for that reason.
Baroness Sherlock (Lab)
My Lords, I thank the noble Baroness, Lady Altmann, for explaining her amendments, and all noble Lords who have spoken. I welcome my noble friend Lady Ritchie to the debate and thank her for sharing her perspective on Northern Ireland with us and the position of women. That was very helpful.
We had a good discussion at earlier stages of the Bill about the way the Government have gone about finding an alternative to the triple lock which will deal in some way with the impact of the pandemic on earnings data. As the noble Baroness, Lady Janke, has just indicated, I do not think many of us are very happy with where the Government have landed; I think that is safe to say. I will not rehearse all the arguments from Committee, but I am going to summarise them because noble Lords have made some very important points about poverty. There is an additional dimension to this amendment about the question of principle.
The Government came to power on the back of a manifesto commitment to the triple lock. Labour also supported the triple lock at the last election. Therefore, for all of us, the starting point is that the triple lock should apply. We on these Benches accept that the earnings growth data have been distorted by the effects of the pandemic directly, and the effects of the furlough scheme and changes in hours. But that does not mean the Government should just ditch their manifesto promises.
As my Commons colleague, the shadow Pensions Minister Matt Rodda MP put it at Second Reading:
“At the very least, Ministers should maintain an earnings link, explain their decisions, offer binding commitments to protect the triple lock and protect the incomes of less well-off pensioners.”—[Official Report, Commons, 20/0/21; col 63.]
Well, quite. Both in the Commons and in this House, Labour has made clear its view that the Government should have found a way to deal with this that maintained the earnings link. The importance of the earnings link has been very well explained by the noble Baronesses, Lady Wheatcroft and Lady Greengross, my noble friend Lady Lister, and others.
But how should that be done? In the Commons, Labour suggested using an average rise in earnings over a longer period of time. In this House, I first suggested that to the Minister not in this Bill but in the passage of the Social Security (Up-rating of Benefits) Act 2020. That was the emergency Bill designed to deal with the fact that earnings were negative last year, therefore something had to be done to uprate it. This year in Committee, again I raised the question of why the Government did not smooth the effects over two years, but I got no satisfactory answer and I accept that time has moved on. So where does that leave us?
The Government will say that we cannot pin down precisely the size of the pandemic effect on earnings growth. That is true, but the best we have is the work that the ONS has done. Its modelling stripped out the two main things: the base effects and the compositional effects. If noble Lords will forgive me for “nerding” for a moment, I will explain them.
The base effect is essentially that, a year earlier, people were on furlough and worked fewer hours; when you measure earnings a year later, more of them have gone back to work and are on full hours, so earnings appear to have jumped a lot. That is one effect. The compositional effect is a change in the composition of the workforce—people on lower incomes were more likely to lose their jobs in the pandemic.
The ONS modelled stripping both of those effects out to try to get a figure for real underlying earnings growth across the year to use as a reference point. It came up with a range for that underlying growth. The Government do not like it because they think it is not robust enough to use as a measure for uprating earnings. If they do not like those figures, I suggest that it is up to the Government to go away and find some other way to show that the earnings link is being maintained. Amendment 3 does not specify any figure, and Amendment 4 merely says that the Government should use a figure for earnings chosen
“in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.”
In the Commons, my colleague, the shadow Work and Pensions Secretary, Jonny Reynolds, said:
“I do believe there is a need to maintain the value of the state pension and the objectives of the triple lock are ones we should keep to”.—[Official Report, Commons, 20/9/21; col. 84.]
That is the problem with the Government’s approach in a nutshell. Their proposals in the Bill mean stepping away from the fundamental principle that pensions should keep up with earnings. They also breach the manifesto commitment to the triple lock, which, as my noble friend Lord Davies said, is a breach of trust with the electorate—that is the third, coming after the cut in overseas aid and the national insurance rise. There must be a better way than this, and this amendment directs the Government to find it. If they do not like this wording, they can bring back an amendment in lieu.
I realise that the Bill needs to be on the statute book by 26 November, for reasons to do with IT, but that is more than three weeks away. The Government managed to get the whole Bill, in all its stages, through the Commons in a few hours, so I do not believe it is beyond their wit to be able to come up with an alternative and come back to the House in due course.
For us, this is a matter of principle. It is not just about the amounts of money. That is why we are supporting this amendment, specifically on the earnings link for the state pension. The Government should find a way to keep their manifesto promise and maintain the earnings link, and to do so in an appropriate way. I hope the Minister will accept it.
Baroness Stedman-Scott (Con)
My Lords, I thank the noble Baronesses, Lady Altmann, Lady Janke and Lady Wheatcroft, and the noble Lord, Lord Hain, for their amendment. The Government’s reasons for not adopting an altered measure of earnings have not changed. That includes the unacceptable level of risk that would be attached to changing the definition of earnings using the current legislation. I remind your Lordships again that the cost of failing to secure Royal Assent to this Bill by mid-November would be in the range of £4 billion to £5 billion.
I very much understand my noble friend Lady Altmann’s concern about a temporary suspension of the earnings link, for all the reasons she and others have so eloquently outlined. But the fact remains that the figures quoted from the Office for National Statistics have no official status and have been taken from a blog that the ONS published, alongside the usual earnings statistics, first in July this year and then in subsequent months.
The key reason why the Government cannot accept this amendment is that the ONS figures are just not robust enough to form the basis for an uprating decision. This is best demonstrated by two quotes from the ONS:
“The blog explains that there are a number of ways you can try to strip out these base effects, but there is no single method everyone would agree on. We have tried a couple of simple approaches. Neither approach is perfect … Our calculations of an underlying rate are there to help users understand base and compositional effects, but there remains a lot of uncertainty about how best to control for these effects, so they need to be treated with caution.”
Using a range of possible estimates based on a method that cannot be agreed on does not provide a sufficiently robust basis for making critical decisions about billions of pounds-worth of expenditure.
A further point is that the ONS has calculated its range of adjusted underlying earnings growth for a measure of regular pay. The usual measure of earnings used for uprating is total pay, which is regular pay plus bonuses, because this gives a more complete picture of earnings, as bonuses can play an important part in earnings. There are no such problems with CPI inflation, which is a robust national statistic and provides a clear and sound basis for this year’s uprating, with no need for any complex adjustments.
I must remind the House that this Bill is for one year only. From 2023-24, the legislation will revert to the existing requirement to uprate by at least earnings growth, and the Government’s triple lock manifesto commitment remains in place.
Finally, I point out that, if a percentage of 3.1% or more is applied in 2022-23 to the current rate of the basic state pension, this would mean that the full yearly rate will have increased since 2010 by £570 more than if it had been uprated by prices; that is over £2,300 pounds more in cash terms. In addition, people over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eye tests and NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year.
My noble friend Lady Altmann talked about the cost-of-living crisis in relation to energy and inflation. Ofgem’s energy price cap has protected consumers from the recent fluctuations in wholesale gas prices. Millions of low-income households will be supported with the cost of essentials through the £500 million household support fund. This builds on the £140 warm homes discount, which helps 2.2 million low-income households with their energy costs, and the winter fuel payment, which provides £200 toward energy bills for households with a member at or above state pension age and £300 for households with a member at or above 80 years old.
The noble Baroness, Lady Lister, talked about not receiving a letter. I am assured that the letters have gone out. If, by the end of this debate, she still has not received one, I hope she will let me know and I will make sure this is rectified. I say the same to everybody in the House: I am sure that those letters have been sent. In the light of my remarks, I ask the noble Baroness to withdraw her amendment.
Baroness Altmann (Con)
My Lords, I thank my noble friend for her response and all noble Lords who have spoken in this debate. I totally agree with the noble Baroness, Lady Sherlock, that this is a matter of principle. The noble Baroness, Lady Janke, and my noble friend Lady Wheatcroft talked about inflation pressures, which have risen significantly, making 3.1% clearly a real-terms cut in the state pension. The noble Baronesses, Lady Greengross and Lady Lister, talked about the historic precedent of removing the earnings link and the danger of setting that precedent to the rise in pensioner poverty. The noble Lord, Lord Davies, spoke about lack of trust. The noble Baroness, Lady Ritchie, talked about poverty, particularly for older women, and the impact in Northern Ireland.
The response to this is that we would be running an unacceptable level of risk in producing adjusted figures. The Minister is being asked to tell the House that there is no method that everyone could agree on; that no method is perfect, and therefore we will not do anything at all. That is not required for us to send this legislation back or to avert a legal challenge. Indeed, Amendment 4 explicitly tries to deal with that.
The state pension will always be a call on younger taxpayers and, with an aging population, it will always be a tempting target to raid. But the state pension is the basis of the majority of pensioners’ income in retirement, and it is part of the social contract in our welfare state, on which our society is based. It underpins the national insurance system. If we break that contract, even supposedly for just one year, I believe it will be setting a seriously dangerous precedent. Pensioners are not a cash machine for Chancellors to take money from when wanting to fund other projects or tax cuts elsewhere, especially not in the eye of a cost-of-living storm. I apologise to my noble friend, but I do not accept the responses that she has been asked to give us. I therefore want to test the opinion of the House.
The Deputy Speaker (Lord Brougham and Vaux)
Amendment 4 is consequential on Amendment 3.
Amendment 4
Baroness Altmann
Member’s explanatory statement
This amendment is consequential to the amendment at page 1, line 7.
Baroness Sherlock
“(3) Within six months of the passing of this Act, the Secretary of State must publish a review of the impact of this Act on pensioner poverty.(4) The review must examine, but is not limited to, the impact of this Act on women.(5) This review must be laid before both Houses of Parliament, and a Minister of the Crown must arrange to make a statement.”
Baroness Sherlock (Lab)
My Lords, on Amendment 5, I thank the Minister for having listened to our representations on the impact of this Bill and for agreeing to publish an impact assessment. I would have preferred to have had a chance to read it before making a decision. However, given the Minister has moved on this issue, I accept her assurances and will not press my amendment. I should warn her that we shall keep coming back to the matter of pensioner poverty, so I hope that the Government have plans to tackle this in the longer term. For today, I thank her and shall not press my amendment.
Lord Sikka
Lord Sikka (Lab)
My Lords, I first congratulate the noble Baroness, Lady Altmann, on winning her vote, which is a great achievement for so many people out there. I declare my interests in the Members’ register: I am an unpaid adviser to the Tax Justice Network and the people’s panel for the Convention on the Elimination of All Forms of Discrimination against Women.
I thank the noble Baroness, Lady Bennett of Manor Castle, and my noble friend Lord Davies of Brixton for supporting this amendment. I am also grateful for the support of the National Pensioners Convention, Silver Voices, the BackTo60 group and many other civil society organisations, as well as the thousands of pensioners who have written to me to support my amendment.
The amendment in the name of the noble Baroness, Lady Altmann, goes only so far. I am seeking a full 8.1% increase for our retirees, which is consistent with the commitment the Government gave in their election manifesto that
“We will keep the triple lock”.
All we have heard since is why the Government will not keep their pledge. They say things like, “It is temporary” or “We can’t afford it”, but I will debunk all those claims in a moment. Clause 1 is also contrary to the Government’s levelling-up agenda. Rather than levelling up, it impoverishes citizens and condemns millions of current and future retirees to a life of poverty and misery. There is no moral or economic rationale for this; indeed, none has been offered by any Minister so far.
The Government’s own statistics, published on 3 September 2021, say that the average weekly pre-2016 state pension is £169.21 for males, £141.98 for females, and the overall mean is £155.08. The average weekly post-2016 pension is £166.34 for males, £160.11 for females, and the overall average is £164.23. As we can see from these figures, women are especially impoverished by the way that pensions are calculated and paid. They will be hit even harder by the abandonment or, as the Minister might say, the temporary suspension of the triple lock.
The state pension is the main or sole source of income for the majority of retirees. As I have said before—I have not had any volunteers—I doubt that any Minister could actually live on that, even if this pension was to increase by 3.1% next April. Retirees have for far too long been neglected by successive Governments. Governments have taken away the right to a free TV licence for over-75s. They took away the earnings link in the 1980s, and they are taking it away again. Today, the average state pension is around £8,000 a year and only roughly 25% of earnings, and it is the lowest in the industrialised world. The full state pension—which the Minister has referred to a number of times in debates this week and last week—of £9,350 is received by only four out of 10 retirees. Some 2.1 million pensioners receive less than £100 a week, and most of those are women. Many are unable to negotiate the maze of benefits which they may well be entitled to; they are simply not really claimed.
In OECD countries, the state pension is nearly 60% of average earnings. The EU average is close to 63%, as was pointed out last week. There is a long list of countries that take better care of their retirees than the UK, including the Netherlands, Portugal, Italy, Austria, Spain, Denmark, France, Belgium, Finland, the Czech Republic, Sweden, Canada, Germany, the USA, Norway, Switzerland, New Zealand, Australia, Ireland, Chile, Japan, Poland, Mexico, Hungary, South Korea, Luxembourg and Slovakia, to mention just a few. Many of these countries are not even as wealthy as the UK, but their Governments seem to care for their citizens. Why are the Government here so indifferent to the plight of their own citizens?
Low pensions condemn our citizens to a life of misery. Some 1.3 million retirees are affected by malnutrition or undernutrition. Around 25,000 older people die each year due to cold weather, and we will no doubt hear the grim statistics for this year, possibly on 26 November when the next numbers are out. Despite the triple lock, the proportion of elderly people living in severe poverty in the UK is five times what it was in 1986, which is the largest increase among major western countries. Some 2.1 million pensioners live in poverty, and the poverty rate has actually increased since 2012-13.
The Government must keep their election pledge and increase the state pension in line with average earnings of 8.1%. The 3.1% increase is backward looking; it offers an increase only in line with past increases in the consumer prices index, which is lower than the retail prices index. It takes no account of the forecast rate of inflation of 5% and the huge increases in the price of food, energy, rents and other essentials. The rate of inflation for retirees now is probably higher than the average CPI. In many cases, the 3.1% increase will not even enable retirees over 75 to buy the TV licence that the Government have taken away from them.
The Minister has emphasised that the suspension of the triple lock is temporary. However, its effects are permanent; they affect not only the current but the future generation of retirees. Lower pensions now will definitely ensure lower pensions in the future. The Treasury’s Red Book says that by switching to a double lock, the Government will deprive retirees of £5.4 billion of pensions in 2022-23. This rises to £5.78 billion in 2023-24, £6.1 billion in 2024-25, £6.5 billion in 2025-26 and £6.7 billion in 2026-27. That amounts to £30.5 billion removed from pensioners’ pockets over the next five years. I cannot remember any other Government taking that much away from the pockets of our senior citizens. This money would be mostly spent in the local economy, which increases footfall in beleaguered town centres and has a great multiplier effect on the economy. The double lock that the Government are offering delivers huge damage to retirees and local economies. Let us not forget that retirees pay taxes too, whether it is VAT, income tax, duties, council tax or other taxes.
The best legacy for future generations is a decent state pension. Future generations will be even more reliant on the state pension. Due to the Government’s laws, the workers’ share of GDP has shrunk beyond recognition, from 65.1% in 1976 to 49.4% now. It is the biggest decrease in any industrialised country. Yet the Government expect that people will somehow be able to save for a private pension; for many, that simply will not be possible.
Lord Davies of Brixton (Lab)
My Lords, first, I congratulate the noble Baroness, Lady Altmann, on her success in getting her amendment through. I very much hope that the Government will take the opportunity to respond positively with an amendment in lieu. However, I think it is still important to continue the debate on this amendment in the name of my noble friend Lord Sikka—to which I was pleased to add my name—as evidenced by his powerful speech introducing it.
I have already spoken so my position is clear, but I want to make three brief points. First, in all humility as a new Member, I believe that this amendment is this House doing its job. We did not vote against the Bill at Second Reading, which would have killed it. This amendment effectively sends a blank sheet back to the Commons, asking it to think again, as is our constitutional right.
Secondly, the amendment makes the point that the Bill constitutes a clear abrogation of a voluntary election promise. We must keep on repeating the point; time spent doing so is not wasted. This Government have too often broken promises—every opportunity should be taken to remind people of that.
Thirdly, the pensioners who I have worked with for decades do not understand fully the workings of the legislative process. They would find it incomprehensible if I and others did not vote against this legislation when we had the opportunity to do so. When we disagree with what is being done, it is our duty as well as our right to send the Bill back to the Commons saying clearly, “Think again.”
Baroness Blower (Lab)
My Lords, like the noble Baroness, Lady Ritchie, I was unable to join the debate on the Bill at an earlier stage. At this late stage, I will not, of course, be giving anything like a technical speech; I leave that to my noble friends Lord Sikka and Lord Davies. However, I have received a volume of correspondence on this matter. In this brief intervention, I will summarise the arguments in that correspondence.
All of the correspondence provides evidence, albeit anecdotal, that the removal of the triple lock will cause serious and significant financial problems. As my noble friend Lord Sikka has said, even if the triple lock is withheld only for this year, the fact is that it will have an effect in years to come. I made the point as general secretary of the National Union of Teachers that teachers’ pay being held down affects their future incomes. We know that that happens.
I will summarise the arguments, but using my own words. Growing old, many of them said, is hard enough, as we have seen from the impact of Covid-19, without having to find extra money for food and energy bills. Nationwide, millions of current and future pensioners are being condemned to a life of poverty and even, possibly, early death. Of course, these remarks do not apply to those of us above pension age in your Lordships’ House. But, as we all know, we are not typical of the pensioner population, many of whom will suffer in a very serious way if we do not uphold the triple lock; many will be faced with significant hardship. The triple lock was, after all, a guarantee, a promise, a manifesto commitment—and it ill behoves any politician to break manifesto commitments.
Lord Hendy (Lab)
My Lords, it is a pleasure to follow my noble friend Lady Blower. I support all the amendments that have been advanced today because they all have the object of protecting the level of state pensions. I particularly support Amendment 6, moved by my noble friend Lord Sikka.
I apologise that I was out of the country last week and so missed participation in Committee. However, I hope noble Lords will allow me to develop a short point that I made at Second Reading. Because, as a Member of your Lordships’ House, I have endeavoured to restrict my participation to the issues that arise from the rights and interests of workers, I want to emphasise two reasons why the state pension is of such concern to workers. The first is that pensions are the deferred wages that workers effectively earned while they were able to work. Once retired, their capacity to earn from their labour is exhausted and pensions are essentially what sustains them. Low earnings lead to low pensions, and the pay gaps manifested in earnings are duplicated in pensions—the gender pay gap in particular, but also differentials based on ethnic origin and disability.
The impact on pensioners of the failure of pensions to keep up with the costs that they face—as noble Lords and, in particular, noble Baronesses have pointed out—will be profound. Some 25,000 of our elderly already die of the cold each year, 2 million live in poverty and 1.3 million do not get enough to eat. Life expectancy is falling in the areas with the greatest poverty.
That leads to my second point. The second reason why present pensions are also of concern to those who are currently in work is this: my noble friend Lord Sikka reminds us that the Government estimate that, by the removal of the triple lock, they will save £5.4 billion from pensioners in the year 2022-23 and some £30.5 billion over five years. That is money that, were it left in the purses and pockets of pensioners, would be spent on food, clothing, heating, rent and so on. Pensioners’ incomes are spent in their local economies. There they help to sustain the jobs of current workers, particularly in shops and local services. Make no mistake: more high street shops will close and more jobs will be lost from the failure to maintain the triple lock, and it will hit the poorest areas the hardest. The impact may be indirect but the ending of the triple lock will affect current earners as well as current pensioners.
The Minister, who is rightly respected because of her sensitivity to the plight of the less well-off, knows that well. She was kind enough to write to me and other noble Lords after Second Reading explaining her position, but her Government have no answer to the two essential points made in the debates today. The abolition of the triple lock will mean that poor pensioners and the poorest local economies in the country will be made yet poorer. Such outcomes are far from necessary, as my noble friend Lord Sikka has repeatedly demonstrated through the progress of the Bill. I therefore support his amendment and all the others that seek to salvage something from the wreckage.
Baroness Sherlock (Lab)
My Lords, I thank my noble friend Lord Sikka for introducing his amendment, and all noble Lords who have spoken.
As I have said previously, many of us around this House share an underlying concern about the living conditions of pensioners, especially poorer pensioners. We have had lengthy debates about pensioner poverty in Committee and in debating my Amendment 5, so I am not going to revisit the issue at length at this stage of the Bill. However, I am pleased that the Government have agreed to publish information about the impact of the Bill, which I hope will help us to press the case for a fresh assault on the growing problem of pensioner poverty.
I explained in earlier debates our stance on uprating and what we think is the right way forward. We do not believe the Government have presided over earnings growth of 8%, much as they would like us to think they have. We think they should find a way to deal with the earnings data distortion caused by the pandemic and look for a way forward that maintains the earnings links and uprating and fulfils their manifesto commitment to a triple lock. That is the right way forward.
There is an additional issue in how this amendment is framed. The elected House has voted for the Bill and, since it has only two clauses and Clause 2 is simply the commencement, extent and name of the Bill, to delete Clause 1 would effectively completely eviscerate the Bill. I understand how strongly my noble friend feels about this issue; we all feel strongly. The question is not what we want to happen and what we think is the right thing but how this House can best achieve a result for those who most need our help.
So although we cannot support my noble friend’s amendment, that does not in any way mean that I believe the Government have got this right; I really do not think they have. That is why we on these Benches are very happy to throw our weight behind the amendment that is going to go back to the Commons and make them look at this issue again. I urge the Government to find some way in which they can fulfil their manifesto commitment, maintain that earnings link and make sure that people out there get the uprating that they need. I hope the Government can do that.
Baroness Stedman-Scott (Con)
My Lords, this clause requires the Secretary of State to review the rates of the basic state pension, the new state pension up to the full rate, the standard minimum guarantee in pension credit and survivors’ benefits in industrial death benefit by reference to the general level of prices in Great Britain. This is in contrast to, and in place of, the provisions of the Social Security Administration Act 1992, which require a review by reference to the general level of earnings.
Under the clause, if the relevant benefit rates have not kept pace with the increase in prices the Secretary of State is required to increase them at least in line with that increase or at least by 2.5%, whichever is the higher. If there has been no increase in the general level of prices, the increase in the benefit rates must be at least 2.5%. The requirement will apply for one tax year only, after which we will revert to the existing legislation and the link with the general level of earnings will be re-established.
As this is a two-clause Bill, if the noble Lords, Lord Sikka and Lord Davies, and the noble Baroness, Lady Bennett, successfully oppose Clause 1, the Bill will fall. As a result, these pension rates will increase by 8.3%, which is the average weekly earnings index for the year to May-July 2021. That means that, if the Bill does not achieve Royal Assent in good time, there will be an increased cost to the Exchequer of between £4 billion and £5 billion.
The noble Lord, Lord Sikka, raised the issue of the state pension and government content being so low. The Government have a proven track record of helping people to plan for their retirement. We have reformed the state pension system, introducing the new state pension to be simpler, clearer and a sustainable foundation for private saving to address the fact that millions of people were not saving enough for their retirement. Automatic enrolment into a workplace pension was created to help them with their long-term pension savings. Together, the new state pension and automatic enrolment into workplace savings provide a robust system for retirement provision for decades to come. Last month the UK pensions system ranked ninth in a report by Mercer that looked at the systems of 43 countries. It measured adequacy, sustainability and integrity, and the UK Government were grouped with countries such as Sweden, Finland and Germany.
In taking into account the points that I have raised, I ask the noble Lord to withdraw his amendment.
Lord Sikka (Lab)
My Lords, I thank the Minister and all noble Lords who have participated in the debate. I shall pick up some of the points.
Earlier, the Minister referred to how pensioners can get winter fuel payments. Thousands of pensioners are tuned in and watching, and while the Minister has been talking some of them have sent me information to say that the winter fuel payment was last fixed in 2011. If it had increased in line with inflation, it would be around £159. The Government have once again chosen to hurt retirees, because there has been no increase in line with price level changes.
I have also been sent information about the Christmas bonus of £10, which was introduced in 1972. It is still £10. Pensioners would be lucky to get a plate of egg and chips and a cup of tea with that. If the bonus had been kept in line with inflation, it would now be £140—another example of how pensioners have been short-changed.
The Minister said that, from 2023 onwards, we will revert to the triple lock, but no commitment is given that the amount lost will be restored to pensioners. As I said, over the next five years, £30.5 billion will disappear. The Minister has not said that even a penny of that will be restored, so pensioners will remain on low pensions—not only current but future pensioners.
The Minister referred to the extra cost. I have suggested numerous ways by which the extra cost could be met, and they must have been evident to the Chancellor when he gave a £4 billion cut to banks. Obviously, the Government’s priority is the banks, rather than our senior citizens, who are struggling to heat their houses and eat sufficient food. The Minister talks about the new pension arrangements, but the point remains that, if you earn little and put away something, it will still bring you little. The issue of pensioner poverty is not really tackled.
My noble friend Lady Sherlock said that this clause was passed in the Commons, as many clauses are passed in the Commons before Bills arrive in this House. This House’s duty is to scrutinise legislation, give its opinion and urge the Commons and the Government to rethink, as my noble friend Lord Davies of Brixton said.
There is no invisible hand of fate which condemns our retirees to a life of poverty and misery. It is the invisible hand of political institutions that has condemned millions to a life of poverty and early death. This House should not be willing to be a part of that invisible hand, which will bring more misery to not only current but future generations.
I am not convinced by the Minister’s explanation and I should like to test the House’s opinion.
Lord Sikka
“(2) Section 1 of this Act comes into force on such day as the Secretary of State may appoint by regulations.(2A) Regulations under subsection (2) may not be made until the Secretary of State has laid a report before Parliament setting out how the National Insurance Fund would be affected if such regulations—(a) were made, and(b) were not made.(2B) Section 2 of this Act comes into force on the day on which this Act is passed.”
Lord Sikka (Lab)
My Lords, if I may say so, I am a little surprised. I did say “Content” when the question was put on the previous amendment; it may not have been loud enough for some, but the people watching out there will no doubt form their own opinion on why a vote was not allowed.
I turn to my amendment to Clause 2. It requires that suspension of the triple lock not become effective until the Government present a report to Parliament showing its effects on the National Insurance Fund account.
By a happy coincidence, the Minister wrote to me on 25 October in a joint letter, which was also copied to a number of other Members of your Lordships’ House. The background is that, during the Second Reading of the Bill on 13 October 2021, I stated that the most recent audited accounts of the National Insurance Fund, for the year to 31 March 2020, showed a surplus of £37 billion, and said:
“That is more than enough to meet the triple lock obligation of £5 billion.”
Eventually, the Minister replied:
“This is a pretty challenging question, and I do not know. I will go away and find out, write to the noble Lord and place a copy in the Library.”—[Official Report, 13/10/21; cols 1869, 1888.]
The subsequent letter from the Minister seems to deny that there is a surplus of £37 billion, or that, if there is, it is not available to fund the triple lock.
It would be helpful for me to refer to the appropriate parts of the letter, so that I can challenge and debunk the claims being made. First, the Minister said:
“The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits. The NIF operates on a multi-year basis and balances expected contributory pensions and benefits spending with forecast National Insurance income. The NIF is currently forecast to have an annual deficit in 2022/23.”
She continued:
“There is no surplus in the Fund that can simply be drawn upon. The Government Actuary’s Department recommends a surplus is kept in the NIF to cover day to day variations in expenditure. The surplus is lent to the Government while that happens—it cannot simply be spent again. When the fund runs low, the Treasury injects new money into it in order to ensure that the State Pension and other benefits are still paid. When the Fund is in surplus as it currently is, the surplus is invested in order to help pay down the national debt”.
First, let me confirm that I agree with the Minister when she said that:
“The National Insurance Fund (NIF) part-funds the NHS as well as paying for contributory State Pensions and contribution-based benefits.”
That said, the National Insurance Fund has a different accounting basis. Page 14 of the fund’s 2020 accounts states:
“An allocation for the NHS is paid over by HMRC before the contributions are paid into the NIF and therefore the NICs are shown net of the NHS element”.
That does not support what the Minister said. Page 16 of the same accounts tells us:
“The NHS allocation is paid over by HMRC to the NHS before any contributions are paid into the NIF and so the figures shown are net of this NHS allocation. The NHS allocation was £26.5 billion in 2019 to 2020 (£25.4 billion in 2018 to 2019) and forms part of the total NHS funding”.
Lord Davies of Brixton (Lab)
My Lords, perhaps the Minister could clarify what I complained about on Second Reading and in Committee, which is the way this has worked. We have not had a report from the Government Actuary, even though one on the regulations will be required. The Minister has said that there will be an impact assessment. Will it effectively include all the material that would be in the Government Actuary’s report on the regulations?
Baroness Sherlock (Lab)
My Lords, I normally think my job is basically to help the House by offering an idiot’s guide to how things work, but I think it is beyond me this evening. My noble friend has asked so many questions that I want to add only a couple.
First, I want to see whether I can understand what the Minister was saying in her letter on 25 October. I think she was saying that the national insurance scheme is financed on a pay-as-you-go basis, with contribution rates set broadly at a level necessary to meet the likely cost of contributing benefits and pensions in that year, taking into account any other payments and receipts and the need to maintain a working balance, which seems to be targeted at 16.7% of benefit expenditure. That is an oddly precise figure, whose basis completely eluded me, but maybe she can enlighten me.
The Minister’s response said the fund may be in surplus now but it was forecast to be in deficit next year so there would not be a surplus to draw on. I think her case is that the context of surplus is not meaningful, because the fund is designed to wash its face, and therefore, if income is lower or expenditure higher than expected, the Treasury tops it up and reverses those ships back out again. Is my idiot’s guide right—have I understood the Minister’s case? If so, can she answer some questions?
If there is a surplus of £37 billion, why is it so high this year? What is the projected deficit for next year, and why is it projected as that? I think my noble friend addressed my next question on the hypothecation of funds for the NHS. When the Secretary of State makes her statutory decisions on uprating, is any reference made to the state of the National Insurance Fund?
Finally, on a slightly tangential point, anyone who has ever knocked on doors during elections will know that a certain proportion of voters is still convinced that the National Insurance Fund is hypothecated at the level of the individual: “There is a savings account somewhere in the Treasury with my name on it; my national insurance contributions go into that and pay my benefits and pension when I retire.” I think that is one of the reasons why so many people are outraged when they find their state pension age pushed back or, after years of paying contributions, they finally claim benefits and find they are incredibly low—far lower than the tabloid coverage had led them for many years to believe was being offered in largesse to the poor.
In practice it is a pool system, not an individual one, and today’s workers pay for today’s pensions, not their own pension. Given that, does the Minister think there is enough transparency on the way the National Insurance Fund works? People are now paying 20% standard rate tax and 12.5% NI, so most workers are going to be paying 32.5%; and NI kicks in at a lower threshold. Does she think the Government are sufficiently accountable for all that and the way it is spent? I would be interested in her comments.
Baroness Stedman-Scott (Con)
My Lords, out of courtesy to the noble Lord, Lord Sikka, and the noble Baroness, Lady Sherlock, for the points that she has made, and to bring some clarity to the questions raised, I hope that the House will agree that I sent the letter in good faith, and will allow me to take it back to officials with the points that have been raised and come back with, I hope, the re-emphasis that is needed to clarify the position on the fund. However, I am advised that the first point raised by the noble Baroness, Lady Sherlock, in her summing up, is correct.
As the noble Lord, Lord Sikka, will be aware, there is an existing statutory requirement under the Social Security Administration Act 1992 for a GAD report on the likely effect on the national insurance fund of the draft Social Security Benefits Up-rating Order and the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations. There is no equivalent statutory requirement for this Bill, and GAD will conduct its assessment in the round based on the draft uprating order, which will include all benefits paid out of the national insurance fund, not just the ones covered by this Bill.
With respect to an assessment of the impact on the fund if this legislation is not passed, it is important that the working balance of the national insurance fund remains positive, as this ensures that there are always enough funds to pay for these benefits and allows the Government to deal with short-term fluctuations in spending or receipts. If the balance of the fund is expected to fall below one-sixth of forecast annual benefit expenditure, the Government will transfer a Treasury grant, paid from general taxation, into the fund. This ensures that benefits such as the state pension can always be paid as necessary.
I know that several noble Lords have suggested that, when in surplus, the fund can be used to increase expenditure beyond the level originally planned, but I am afraid that that is a misconception. The balance of the national insurance fund is managed as part of the Government’s overall management of public finances and reduces the need for it to borrow from elsewhere. Therefore, any additional spending from the national insurance fund would represent an increase in overall government spending and, without cuts in other areas of spend or additional taxes, an increase in government borrowing.
Not passing this Bill would not only increase state pension payments from the fund this year by an anomalously high figure of 8.3% but have a long-lasting compounded impact for decades to come as the anomalous figure would be baked into the baseline. The Government do not believe that this would be fair to younger taxpayers. Based on these arguments and the commitment that I have given to review the letter and the questions raised today, I ask the noble Lord to withdraw his amendment.
Lord Sikka (Lab)
My Lords, I am very grateful to the Minister for her explanation. I understand and agree that some margin of safety is needed in any account, but this is a £37 billion surplus, out of which only £5 billion is needed to maintain the triple lock—a small proportion. When somebody asserts that accounting numbers are perhaps not serious and I have investigated, I have normally given them the phone number of the Serious Fraud Office and said, “Maybe you’d like the bed-and-breakfast facilities at one of Her Majesty’s establishments”. However, I will not offer that to the Minister, as she has promised to return to the House with an explanation.
We need a fuller investigation and report, bearing in mind the point that my noble friend Lady Sherlock made: why have these surpluses built up? The surpluses have not always been around, but they have built up, and the Treasury’s forecast is for a vast increase for the period in which the Minister’s letter said that we were going to have a deficit. If it was so important, the Chancellor should have said something. It should have been in the Treasury and OBR documents. It is not there. I cannot help feeling that some ex-post rationale is being developed to say that we are not going to maintain the triple lock, and somehow offer an explanation.
However, in view of the Minister’s offer, I beg leave to withdraw my amendment.
Social Security (Up-rating of Benefits) Bill
Monday 8th November 2021
(3 years ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 54-R-I(Rev) Revised marshalled list for Report - (1 Nov 2021)
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, as this is a two-clause Bill and the main clause was an amendment, I will use this opportunity to thank all noble Lords for the positive engagement and feedback they have provided thus far. We have had some truly wide-ranging debates, and I deeply appreciate the House’s passion for and knowledge of social security and pensions. I am enormously grateful to my noble friend Lady Scott, who has supported me at each stage of the Bill’s progress, both on and off the Floor of the House. I extend my thanks to the noble Baronesses, Lady Sherlock, Lady Janke, Lady Altmann and Lady Stroud, and the noble Lords, Lord Sikka and Lord Davies, for their amendments, ensuring thorough scrutiny of the Bill. I extend my thanks to the countless other noble Lords who have provided an abundance of constructive support and knowledge, and I thank all noble Lords for taking part.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for her remarks and thank all noble Lords who participated in the debate on the Bill. For a short Bill, its impact is quite wide, affecting millions of people. Our debates have raised some crucial issues around approaches to uprating and the government strategy for retirement saving, and especially around the position of pensioners on lower incomes as we enter a season of spiralling prices. Not for the first time, it is possible that our deliberations may have a broader impact in parts of Westminster and Whitehall than perhaps we realise or will ever know—at least until the autobiographies of the future come to be written.
On the matter of memoirs, these proceedings have also been notable for the return to the fray of the former Minister for Welfare Reform, the noble Lord, Lord Freud, whose frank demolition of the Government’s case for social security cuts and policies such as the benefits cap will, I predict, turn out to have a half-life somewhere around that of uranium.
I thank the Minister for her concession on Report, in response to my amendment on pensioner poverty, that an impact assessment should be published. That happened on Friday. I look forward to having the opportunity, if we can, to discuss that with her and her officials in due course. Most importantly, we have amended the Bill to require the Government to find a way to adjust pension uprating and to maintain the earnings link, while making allowance for the pandemic. I urge the Government to take that seriously and to use the time they now have to find a better solution than that offered by the Bill.
Public trust in politics has taken a bit of a hit in recent times. If there were a way of pursuing this objective without dumping a manifesto commitment, we would all want that. In the meantime, I thank the Minister and her officials, colleagues across the House for their thoughtful contributions, and Dan Harris of our staff team for his marvellous support. We send the Bill back to the Commons with our best wishes, hoping that it will embrace it and hold on to it as it is.
Lord Stoneham of Droxford (LD)
My Lords, the noble Baroness, Lady Janke, apologises for not being able to be here today. She has asked me to say a few words on behalf of our group. We very much welcome that noble Lords have agreed with the amendment from the noble Baroness, Lady Altmann. We hope that it will enable MPs in the other place to think again about the need to protect pensioners from the worsening economic circumstances. In the time since the Bill’s passage through the other place, significant changes have taken place, with economic indicators leaving little doubt that pressures will grow in the months ahead. I thank all noble Lords for their contributions. I particularly welcome the cross-party working made possible by the noble Baronesses, Lady Altmann and Lady Sherlock. We have much appreciated the Minister’s helpful approach. We thank her for her openness and willingness to share information on the Bill. We extend sincere thanks and appreciation to the Bill team, who have provided us with expert professional advice at all stages.
Baroness Altmann (Con)
My Lords, I also thank my noble friend the Minister and the Bill team for all their work, and for the courtesy they have shown in meeting us many times to listen to the concerns we have expressed. I too am extremely grateful for the work across the House that was encompassed by this Bill. It has shown the House of Lords at its best. This is an issue of significant social importance where this House has shown that it believes that the other place took a decision based, perhaps, on incorrect information and has asked it to reconsider. I am particularly grateful to the noble Baronesses, Lady Sherlock and Lady Janke, my noble friend Lady Wheatcroft and others including the noble Lords, Lord Hain, Lord Davies and Lord Sikka, and the noble Baroness, Lady Drake, for their hard work. As the noble Baroness, Lady Sherlock, has said, I hope the Government will find a way to retain this amendment in the Bill and uprate state pensions by more than the 3.1%, which is clearly inadequate to protect against cost of living increases.
Lord Sikka (Lab)
My Lords, I echo the words of the previous speakers. I hope that the Government will act on the recommendations of this House. I am also grateful to the Minister for the impact analysis, which I received on Friday night. I should be grateful if in future we could have a better quality of data. For example, it refers to weekly mean benefits, which do not tell us much about the societal impact or distribution. It would be very helpful, for example, to know the median figure and to have some further analysis in the appropriate financial brackets. Table 4 refers to the number of people eligible, pre-2016, for the new state pension but does not tell us how many actually receive the full amount. Once again, could I please request a fuller analysis, which would not only provide greater transparency but enable us to call the Government to account? It could be in the form of a statement of the number of individuals receiving, for example, a pension of less than £100 per week, those receiving between £100 and £120, and so on in other brackets. A better quality of analysis would enrich the debate.
Baroness Stedman-Scott (Con)
My Lords, I am grateful for the remarks made by all noble Lords today. Our discussions have been thoughtful and powerful. Above all, they have demonstrated the commitment across your Lordships’ House to protect the income of pensioners and to bear down on pensioner poverty. The Bill now goes to the other place to consider the amendments put forward by this House. I look forward to our consideration of its reasons on the Bill’s return. As always, I note the challenge of the noble Baroness, Lady Sherlock. I will take the observations of the noble Lord, Lord Sikka, on the impact assessment back to the department, as I have done with all the other points he has raised. Finally, I thank all noble Lords who have spoken today and at earlier stages. I also thank the officials who have supported me in our discussions.
Social Security (Up-rating of Benefits) Bill
Monday 15th November 2021
(3 years ago)
Commons ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 15 November 2021 - (15 Nov 2021)
18:45 - The House divided: - Ayes: 300 / Noes: 229 - Question accordingly agreed to.
18:59 - The House divided: - Ayes: 299 / Noes: 53 - Question accordingly agreed to.
Madam Deputy Speaker (Dame Eleanor Laing)
I must draw the House’s attention to the fact that financial privilege is engaged by both Lords amendments. If the House agrees to either Lords amendment, I shall ensure that the appropriate entry is made in the Journal.
Clause 1
Up-rating of state pension and certain other benefits following review in tax year 2021-22
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move, That this House disagrees with Lords amendment 1.
Madam Deputy Speaker
With this it will be convenient to consider the Government motion to disagree with Lords amendment 2.
Guy Opperman
The Social Security (Up-rating of Benefits) Bill is a one-year Bill by reason of the pandemic. Last year, as you will be aware, Madam Deputy Speaker, we changed the law for one year to increase state pensions by 2.5% at a time when average earnings had fallen and consumer price inflation had increased by half a percentage point. If we had not taken this action, state pensions would have been frozen.
This year, average earnings growth is estimated to be unusually high, distorted by the cumulative effects of a natural economic reaction to the coronavirus pandemic and the response to the supportive measures introduced by the Government to protect livelihoods. The figure for average weekly earnings from May to July—the measure used for uprating earnings-linked benefits—has grown at 8.3%, which is over two percentage points higher than at any time over the past two decades. Recognising this covid-related distortion, the Government are setting aside the earnings link for one more year, 2022-23, and continuing the double lock of at least inflation or 2.5%. The triple lock will be applied again in the usual way for the basic and new state pensions from the following year.
Stephen Timms (East Ham) (Lab)
Of course I understand why the Government have decided not to increase the state pension by 8%, but is it still their intention that the value of the state pension should, over time, at least keep track with earnings?
Guy Opperman
The right hon. Gentleman will be aware that we remain committed to the triple lock. This is a one-year-only Bill. This will be a continuation of the policy that the Government introduced as part of the coalition in 2010 and have continued to pursue on an ongoing basis since then. There is no intention to change that.
Guy Opperman
I will make some progress.
It is right that I address these Lords amendments, Madam Deputy Speaker, because, as you rightly outlined, they engage financial privilege in that they interfere with the financial arrangements made by the elected House of Commons. That alone, I respectfully submit, is sufficient reason to disagree with the Lords amendments. However, it is also right that I address directly the point that was made by the House of Lords that invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%. I assure the House that there is no robust way of calculating them as if they were not.
The independent Office for National Statistics has responsibility for producing economic statistics to the highest possible standards. ONS experts investigated whether it was possible to produce a single robust figure for underlying earnings growth that stripped out impacts from the pandemic, and concluded that it was not possible. Alongside the actual earnings growth figures, the ONS suggested a possible indicative range of 3.6% to 5.1%. These figures do not have national statistics status. Indeed, the ONS itself includes heavy caveats on the issue and advises caution in approaching it. The Bank of England also cast doubt on identifying a figure that could be relied on. The ONS said:
“There are a number of ways you can try to strip out these base effects, but no single method everyone would agree on. We have tried a couple of simple approaches…Neither approach is perfect…Our calculations of an underlying rate are there to help users understand base and compositional effects, but…there remains a lot of uncertainty about how best to control for these effects.”
It said that the statistics therefore “need to be” treated “with caution”.
We believe it would be reckless in procedure and in law for this or any other Government to set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That is why the Government have decided to suspend the earnings link in this year of exceptional and anomalous earnings growth. Instead, we decided to apply a double lock underpinned by the established consumer prices index published and approved by the ONS. This approach was also recommended by the Social Market Foundation and other commentators, and very strongly by this House on Second Reading, Report and Third Reading. That is the legislation that this House passed to the Lords, and that is the legislation I would urge this House to send back to the Lords.
I remind the House that over the two years of the pandemic the Government will have ensured that the pensions covered by this Bill will have increased by much more than prices, by reason of the 2.5% increase last year and the link to CPI this year. In those circumstances, I commend this House to reject the House of Lords amendments and agree that we proceed with this one-year Bill by reason of the pandemic.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Whatever else could be said about the House of Lords, it is a place that genuinely contains a great deal of expertise on the subject of pensions. We are fortunate to have that expertise in Parliament and we should be prepared to listen to it. Having studied the exchanges in the Lords, I feel that the Government’s positions on this matter have not held up well under scrutiny, and the debate has moved on considerably since we last discussed it here.
Labour will therefore vote to accept the amendment put forward by the former Conservative Pensions Minister Baroness Altmann, which was well argued and handsomely carried, but which also most closely reflects our own position on these matters. That is to say, we accept, as I have said clearly and repeatedly, the Government’s case that the true figure of earnings growth in the UK is not 8.3%. It would be absurd to maintain that that is what is happening to our constituents’ wages right now. Labour supports the triple lock. We believe the Government’s manifesto commitment should be binding and that the connection to earnings in the uprating decision for this year should remain.
In her remarks, Baroness Altmann made it clear that she was not proposing a specific uprating figure by proposing this amendment. That is important. It seems to me that all Conservative MPs could vote for this amendment, honour their own manifesto commitment, and still address the problem of how the pandemic has distorted the earnings data. It would just require the Government to effectively make an assessment of whether real wage growth is higher or lower than CPI inflation, and, if higher, use that figure.
When we last held a debate on this in the Commons, the Government said that that would not be legally sound, but the Lords debate knocked that down fairly easily. As Baroness Altmann said, for a judicial review to occur, the figure the Government used would have to be found to have been brought about by the Government acting irrationally. That is something we can never rule out with this Government, but it should be more than possible to avoid that. If I may say so, one of the reasons the Government lost this vote so badly in the Lords was their tendency to rely on short-term, inconsistent arguments to bounce from one day’s headlines to another’s.
Guy Opperman
The hon. Gentleman criticises the Government for not coming up with a solution, when he is unable in any way to come up with a solution or figure himself, as are the Office for National Statistics, the Bank of England and all other reputable organisations. In fact, the House of Lords did not come up with a figure, so what, pray, if he would enlighten the House, is the precise figure that he would see pensions increase by?
Jonathan Reynolds
I am grateful for the Minister’s intervention. I am about to explain why he has got himself and the Government into this position.
Jonathan Reynolds
With respect, the Minister just needs to listen to this point. He stands at the Dispatch Box and, like all Ministers, tells us that black is white. For instance, when the Government reacted to the crisis of their own making—when we saw the pumps run dry and the shelves go sparse—they claimed to the country that this was a secret masterplan towards a high-wage economy that they had had all along. Now, we are having to see the Minister and the Government tie themselves in knots again, because he has been sent here to make the case, which we have heard him put very well, that the figure is too distorted and therefore we need this primary legislation, yet—and this is the problem, Minister—according to the Prime Minister, wages are up, workers have never had it so good and that is why the Government can cut £20 a week from universal credit. They are making two completely opposing arguments. We do not even know whether the Government believe that wages are rising faster than inflation. I politely say to the Minister that they cannot expect to have it both ways.
I will repeat a number of points that colleagues may have heard me say before, but I feel they need to be repeated in light of some of the media comments on the Bill. The uprating of the state pension is relevant to millions of pensioners in this country, but it is wrong to present it as an issue of intergenerational unfairness. That is because these decisions are also fundamentally about how we ensure that the state pension is indexed and retains real value for people who are in work today when they come to retire. This Government have been grossly unfair on people of working age, but frankly that is due to the burden of taxes they have inflicted on workers, rather than through the operation of policies such as the triple lock.
I hope the Minister took on board the comments made about pensioner poverty in this House and the other place. The Government’s use of what they call absolute poverty, which in reality is a measure of poverty relative to a fixed line in 2010, is unsatisfactory because not only does it ignore the statistical evidence, which is that pensioner poverty is now rising after it fell considerably under Labour, it also limits a serious debate on the drivers of that rise. The big picture is that the OBR predicts that as a country we will be spending an extra £6 billion a year, year-on-year, on pension-age benefits every year up until 2024-25. That is the year that the forecasts in the welfare trends report go up to, so it will likely continue to rise after that. Pensioner poverty is going up as spending rises substantially. We should be having a much more substantive debate about that, looking at housing costs, energy prices, food and access to good financial and investment advice. The way in which the Government present their own progress means that any real wage growth over the last decade allows them to claim that poverty has declined, so when the Minister says that 200,000 pensioners have been lifted out of poverty since 2010, the reality is that that is a very poor level of performance compared with all previous Governments. Poverty is always relative, because it is a measure of whether someone has the means to live a fulfilling life in the society of which they are a member. That is not just a left-of-centre viewpoint, but one that until recently was accepted by Conservatives, too.
However, to return to the matter at hand, the House of Lords has sent us an amendment that should genuinely command the support of the whole House. It requires the Government to maintain the earnings link in their manifesto promise, while still making allowance for the pandemic. This Government have dragged politics through the gutter in recent weeks, with stories of sleaze, corruption, contracts for donors and second jobs from Caribbean islands. I could go on, but the point is that public trust in this place matters. When the Government muddy our democracy in the way that they have, they cannot then turn to the public and ask voters to simply take them at their word. For public trust to return, the first step has to be for the Government to keep their promises. Today, Labour will therefore support the amendment that would allow the Government to keep their promise on the pensions triple lock.
The Lords have sent us a very reasonable set of measures, and frankly I see no logical reason not to support them if we want to protect the link between earnings and pensions. If the Government are unable to do so, they should admit what is really going on: they are using the pandemic as a smokescreen to scrap the triple lock and pocket the savings. They should cut the obfuscation, keep their promises and vote for the Lords amendments.
Duncan Baker (North Norfolk) (Con)
As the MP for North Norfolk, which has some of the highest numbers of older people in the country, you can understand, Madam Deputy Speaker, why I want to speak briefly in this debate. First, we have come back to basics. I was a finance director and a chartered accountant before I came into this place, so I have a reasonable grasp of statistics, and it is fair to say that this Government have, to the tune of around £400 billion, safeguarded the country through a pandemic that no one ever expected. Not only that, but the national debt sits at some £2.2 trillion, so it is understandable that we are sitting here this evening being extremely careful and prudent about what we do with our public finances.
The electorate, as we have seen many times before, will forgive a Government many things, but they will not forgive a Government being reckless with the public finances. We have to understand that, much as we would like to increase pensioners’ pay, every 1% increase costs the Exchequer a billion pounds. To put that in perspective, with an increase of some 8% to 9%, we are looking at an increase of some £8 billion to £9 billion. I can therefore see entirely how that would sit when we have to look in the eye of a prison officer, a police officer, a teacher, a firefighter or any other public sector worker who has seen their pay frozen for the past year. That is the real context. It is about fairness and a statistical anomaly caused by the dip, coming off furlough on to 100% pay and when the ONS statistics were taken. It has given rise to this one-off statistical anomaly.
What the House of Lords has proposed is sensible, and I took that to the Secretary of State to ask whether we could do something to still honour the framework of the triple lock, while ensuring that we have a sensible parameter to measure it by. The answer that came back was exactly the same as the one the excellent Minister just gave: we need a robust metric. We cannot just move the goalposts and cherry-pick a point in time because the argument does not fit at the moment. Many of my constituents have written to me about this issue, and when a detailed reply has gone back to them, a great number understand why we have this one-off double lock.
In summing up, I say two things to the Minister. First, woe betide us if we do not honour the triple lock next year. We have some of the best public finances recovery in the G7, as the Chancellor said the other week, so we must get back to giving our pensioners the pay increases they absolutely deserve, because they have paid in all their lives. Secondly, it would be wonderful to go into the next election with the resounding message that our pensions are good, honest pensions that people have earned all their lives, at a level that people can be proud of compared with Europe. Too often, our pensioners feel that is not necessarily the case. I would like the Minister to ensure that we put our pensioners at the front of the queue as we come out of this pandemic. I wholly understand what he has said this evening. I will be rejecting the Lords amendment, because it is sensible to maintain the public purse in the best possible way at a time like this, so that our country can rebound from where we are at the moment.
David Linden (Glasgow East) (SNP)
It is a pleasure to follow the hon. Member for North Norfolk (Duncan Baker), who spoke about the risks of throwing a billion pounds about here and there. I know he was not in the previous Parliament, when the Government were propped up by the Democratic Unionist party, but I recall them having no great difficulty finding a billion pounds down the back of the sofa. Indeed, I think the hon. Member for Strangford (Jim Shannon) was worth about £100 million, which is probably more than Messi.
Unlike the Minister, I am glad to see the Bill back in the House this evening, because the amendments passed by their lordships give the Government an opportunity to perform a U-turn with ermine grace and charm. Before it went back to the other place, the Bill as originally drafted facilitated the British Government breaking yet another manifesto commitment, namely the pensions triple lock, which I remind the House all parties in this Chamber committed to at the election fewer than two years ago. Thankfully, the Bill was amended in the other place, and I am grateful to Baroness Altmann for Lords amendments 1 and 2, which seek to restore the earnings link.
As we are relatively short on time, I will not go over some of the meatier issues that I outlined on Second Reading, including the Government’s repeated breach of their manifesto commitments, the worrying trends in pensioner poverty, pension comparisons with OECD countries and the—at best—disappointing lack of action on pre-existing equalities that are baked into our pension system. In speaking in favour of the Lords amendments, I will outline why the SNP continues to vote to respect its 2019 election manifesto commitment and why the Budget has changed things, which may result in more Opposition Members voting tonight than on Second Reading.
The Minister will have familiarised himself with the House of Lords Official Report, but in the interests of completeness and for the benefit of Hansard, I remind the House of what Baroness Altmann said on the cost of living crisis, which affects all the constituents we seek to represent in this House. She reminded the other place of the Government’s view that
“the 3.1% figure would still protect against rises in the cost of living.”—[Official Report, House of Lords, 2 November 2021; Vol. 815, c. 1140.]
She quoted the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman) who said that that figure
“will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living”.—[Official Report, 20 September 2021; Vol. 701, c. 86.]
However, the goalposts have moved, and the fiscal outlook is much bleaker. The Chancellor conceded in the Budget that inflation in September was already at 3.1% and would rise further. The Office for Budget Responsibility has gone further, predicting that consumer prices index inflation will reach 4.4% next year. It went on to say that inflation
“could hit the highest rate seen in the UK for three decades”,
which the House will know is about 7.5%. In reality, the Bank of England’s chief economist is forecasting 5%. To be blunt, the facts have changed and the Government must now change their position at least to reflect the fiscal outlook, if not to respect their manifesto commitment.
Pensioners across these islands are not immune from rising energy and food costs, and we know that inflation is biting hard for some of the most vulnerable people in our constituencies as we approach a harsh winter. Last month, energy bills rose by 12%, and food bills have also risen, so the Government must think again.
Jim Shannon (Strangford) (DUP)
The 12% figure is not reflected in Northern Ireland, where energy prices have risen by some 30%, and the cost of living has also risen by 20%. Does the hon. Gentleman agree that, for that reason, we must support the Lords amendments for the pensioners?
David Linden
I will avoid going into energy policy in Northern Ireland, given previous actions, but the hon. Member is right to place that on the record. His constituents in Strangford should be grateful to him not just for making that point but for backing the Lords amendments when we come to the Division.
The Red Book suggests that, by scrapping the triple lock, the Treasury will save £5.4 billion in 2022-23, £5.8 billion in 2023-24 and £6.1 billion in 2024-25. The Chancellor is clearly balancing the books on the backs of pensioners who continue to get a raw deal from a pensions system that they have paid into their whole lives. I caution the Minister that that is an electorally courageous move for a party that has generally enjoyed higher levels of support among pensioners. Indeed, I will be particularly interested to see how our Scottish Conservative colleagues try to sell this latest broken promise to the electorate north of Coldstream.
The SNP wholeheartedly opposes the British Government’s triple lock betrayal and urges the House to support the Lords amendments. There may be a couple of hundred extra MPs in the Division Lobby with us tonight compared with the last time the House looked at this in September, but we know that the Tory Government will use their majority to plough ahead and vote down their lordships’ amendments regardless. My constituents in Glasgow East will therefore conclude once again that the House does not work for pensioners and it certainly does not work for Scotland. The only way to do things differently is with the normal powers of independence, and I suspect that this tawdry Bill will only hasten that cause further.
Stephen Timms
In my intervention on the Minister, I asked if it remained the Government’s intention that the value of the state pension should, over time, at least keep track with earnings. He declined to confirm that it did, so it may be that the Government’s policy has changed. Ever since Adair Turner’s pensions report was published in 2006, Government policy has been that the state pension should keep track with earnings, not just with prices as was previously the case. I suppose we must conclude that there has been a change in approach.
Stephen Timms
I will gladly give way to the Minister. Hopefully he will clarify the position.
Guy Opperman
I think the right hon. Member misheard or misunderstood me. This is a one-year-only Bill; after that, we revert to the current legislation and state pensions will increase at least in line with earnings. That is what I thought I made clear.
Stephen Timms
The Minister did indeed say that in response to my intervention, but that does not answer the question. The question was: do the Government intend the value of the state pension, over time, at least to keep track with earnings? I was hoping that he would reaffirm that. I do not think that is controversial—it is a policy long held by the Labour Government, the coalition Government and this Government—and I hoped that he would say that that was still their intention, even though in the current year, for reasons that we all understand, the value of the state pension will fall significantly behind the increase in earnings.
As I hope I made clear in my intervention, I think it is entirely reasonable not to increase the state pension by 8% this year; I completely understand the case for not doing that. It looks as though we will get an increase of around 3%, in line with CPI. The hon. Member for Glasgow East (David Linden), who spoke for the SNP, talked about the likely rates of inflation, and, depending on increases in prices and earnings next year, it is quite likely that the state pension will never catch up with earnings unless there is a catch-up initiative of some kind. The Lords amendments would provide such a mechanism. If there is not a catch-up at some point, that would be contrary to the Government’s long-held intention that the state pension should at least keep track with earnings. The fact that—as the Minister has now told the House twice—it will get back in line with the triple lock next year does not solve the problem, because there is a significant backwards move this year. Will there be a catch-up initiative at some point? It looks and sounds as though there will not.
Keeping the value of the state pension going up in line with earnings was a key pillar of the new pensions framework set out in the report by Adair Turner and his fellow commissioners John Hills and Jeannie Drake, published in 2005 and 2006. The settlement’s key elements were that the state pension should keep track with the increase in earnings over time, and auto-enrolment. It was accepted by the Government then and by every Government since.
The importance of that needs to be spelled out. It is not just about being more generous to pensioners and helpful to older people. It is important because it ensures a sound foundation for pension saving, so that people auto-enrolled into pension saving through that successful initiative, which we have all celebrated, are not being encouraged by the state into a bad deal. If the value of the state pension will no longer at least keep track over time with earnings, some people will be better off spending their money now, rather than saving into the pension pot that they are being auto-enrolled into, and later relying on the means-tested safety net of pension credit.
If the state pension slips behind earnings, modest pensions accrued through auto-enrolment will become worthless, because those who claim them in due course will not get above the means-tested threshold and they will still have to depend on pension credit for their income in retirement, and the fact that they have saved into a pension will do them no good at all. That will be a growing problem if the level of the state pension is allowed to slip behind the increase in earnings.
If that does happen, people who are looking forward and saving but are going to end up with fairly modest pensions should instead spend the money at the time they earn it, rather than save it in a pension that, in the end, is not going to take them above the means-tested threshold and so will not give them any additional income. That is why what the Minister is arguing for is such a threat to the success of auto-enrolment. Auto-enrolment will no longer be a sound basis for pension saving if the level of the state pension is allowed to drift below the level of earnings.
People must be able to trust in the state pension under the policies of the Government. They have been able to do so up to now, and now they will not. That raises a pretty fundamental question about the future of the Government’s pensions policy. There is a real danger in allowing, almost by sleight of hand albeit for reasons that we all understand and sympathise with, the state pension to fall permanently behind the increase in earnings and weakening the pension framework that, as far as we all know, is still the basis of the Minister’s policy.
We should not allow that to happen. We need either a measure, and the Minister needs to reassure us that there will be, such as a catch-up initiative to make sure that the state pension over time—not this year, but by next year or the year after—will keep track with the increase in earnings, or the House needs to accept the amendment agreed with a significant majority in the other place, because that keeps the pension framework in place and keeps it effective. There is a real worry if there is a significant falling behind. If there is a 3% increase in the state pension at a time when earnings have gone up by 8%, that will be a one-off 5% fall in the state pension behind the level of earnings. Depending on what happens to earnings growth, which will certainly not carry on at 8%, and on inflation rises next year, that fall could well be locked in for good and the pension framework will have been weakened.
I hope that I have made it clear why this is actually quite important. It is not just about whether we are being generous enough to pensioners. The question is: are we keeping in place a robust and reliable framework for pension saving based on which people can plan with confidence for the future?
John McDonnell (Hayes and Harlington) (Lab)
May I say that we in the Opposition, and I think Members on both sides of the House, take pride in the expertise of my right hon. Friend the Member for East Ham (Stephen Timms)? Time and again, as Chair of the Work and Pensions Committee, he has warned the House —both sides of the House, at times—about the approach that needs to be taken if we are to have a stable social security and pensions regime. I pay tribute to the work he does.
I am an ardent advocate of the coalition Government’s policy on the triple lock. That seems somewhat ironic, given the history of this policy, but I am. The historical background is that I was a total opponent of Mrs Thatcher’s breaking of the link between pensions and earnings. To be frank, the state pension still has not recovered from breaking that link. I was elected in 1997, and at the end of Conservative rule in 1997 the basic state pension would have been 50% higher in value if Mrs Thatcher had not broken the earnings link in 1980.
From 1997, I prepared alternative Budgets to the new Labour Budgets. Gordon Brown had a sense of humour about that, and when I was on a platform with him recently—when I was the shadow Chancellor—he said, “Actually, he’s always been the shadow Chancellor,” because I was producing alternatives to his Budgets. In every alternative Budget, I put forward the restoration of the link between earnings and pensions. I did so because the breaking of that link had undermined the progress we had seen until then in improving the state pension and lifting pensioners out of poverty. That is why I was a strong supporter of the triple lock when the coalition Government introduced it. Despite a decade of the triple lock, however, the basic state pension would still be 37% higher if the earnings link had been maintained. That means that today a single pensioner on the basic state pension would be £2,662 a year better off, and a pensioner couple would be £4,277 a year better off, if the link had not been broken by Mrs Thatcher all those years ago.
According to figures on pensioner poverty from Age UK, there are 2.1 million pensioners living in poverty in our country at the moment, up from 1.6 million in 2014—a 30% increase. What is interesting about this, and not shocking to some in this House, is that the majority of pensioners living in poverty are women. In addition, pensioners from black and Asian communities are about twice as likely to be living in poverty.
What I find interesting are some of the individual examples we can bring to the House about what this means. I remember that, the last time energy prices rose, I had a constituent who used her bus pass to stay on the bus all day to keep warm. Such stories about the reasons why people were living in such fuel poverty were not uncommon. I remind the House that this year fuel bills are increasing on average by £139 and they are expected to rise again next year, so I predict that we will have more of our pensioner constituents going cold this winter and, if we are not careful, in future winters as well, especially as, as has been said, inflation is now likely to be 4% and some are even predicting 5%.
I just wonder what this row is all about, because I support the amendments. I would have given the 8%, because I do not believe that people should break the principle of a manifesto commitment in such circumstances and I believe the additional top-up would have worked. However, the Altmann amendment is moving towards a 5% increase and the Government will award a 3% increase, so the difference we are talking about—this is the argument—is about £2.75 a week. Even if we went to the full amount of the 8%, there would only be an additional £7 a week between the 3% and the 8%. Are we really having a row in this House about robbing pensioners of £2.75 a week? I just find it unbelievable that we can even contemplate that.
I have seen the range of costings, but I have examined the DWP estimates on the effect of the Altmann amendment. They said it would cost £1.3 billion in ’22-23; that was in comparison with the uprating with prices. I was in the House a few weeks ago. We are arguing about an additional £1.3 billion for pensioners. Actually, a £25 billion corporate tax break was given away by the Chancellor in the Budget. It will be £12.5 billion next year.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. This debate has to finish at 6.51 pm and I intend to bring the Minister in at about 6.46, so I ask the two remaining speakers to take about six minutes each.
Wendy Chamberlain
When we first debated the changes to the triple lock in September, the Secretary of State suggested we take advice from my friend the former Pensions Minister, Steve Webb—with whom I speak from time to time, the Secretary of State, who is now in her place, and the Minister will be happy to know. We usually do so when he is highlighting cases of people having lost out on entitlements due to failures in DWP systems.
As well as holding the DWP portfolio for my party, I am here to serve the interests of my constituents and I can tell Members that I have not received a single email or letter supporting the suspension of the triple lock. I have, however, received email after email asking me to fight to maintain it and pointing out that our state pension is already the lowest in Europe, with people worrying how they are going to make ends meet this coming winter.
On Second Reading, the Secretary of State told us this suspension was to deal with a one-off anomaly caused by the pandemic. I wonder whether she or the Minister actually engaged with the Prime Minister on this in advance of Second Reading, because his comments on the subject do not align with that argument. The Prime Minister has told a very different story, where quickly rising wages are not just desirable but an intended outcome of Brexit. So I have to ask: whose explanation should Parliament believe on these wage increases? Do the Minister and the Secretary of State align with the Prime Minister on this now and if so why are the Government intent on leaving pensioners behind, far too many of whom are already on or below the poverty line?
I am happy to support the Bill as it has returned to us from the other place, which has worked admirably across the Benches to find this compromise. The Chair of the Select Committee, the right hon. Member for East Ham (Stephen Timms), reminded us in his considered contribution that this is not just about pensioners now; it is about the young, people who cannot get on to the housing ladder and whose wages have been suppressed. We in this place need to ensure that the decisions we make about pensions now give people the reassurance in future that there will be a sustainable state pension for them to live on. The Bill in its current form acknowledges the distortions to the labour market caused by the pandemic, but also acknowledges that inflation is rising. Under that Bill, pensioners will be able to keep the heat on and afford their weekly shop.
I acknowledge that the hon. Member for North Norfolk (Duncan Baker) at least tried to justify the Government’s position this evening, but I note that no other Conservative Back Bencher has had the appetite to do so. There is a simple choice before the House today. I cannot support the Government’s amendments, which will cause such harm to so many.
Patricia Gibson
I rise to support Lords amendments 1 and 2. The Tory Government’s abandonment of the link between earnings and pensions, smashing the triple-lock manifesto commitment, is truly disgraceful. We are told this is necessary because this year’s earnings measure is “skewed and distorted”. There are many things swirling around Westminster that are skewed and distorted, but the triple lock is not one of them. The UK Government commitment to the triple lock remains, we have been told today by the Minister, but he will understand that that assurance is met with widespread scepticism because today he is here to tell us why their breaking the triple lock must proceed.
We in the SNP tabled an amendment to this Bill requiring the Secretary of State to assess, and be held accountable on, the impact that the legislation would have on levels of poverty among pensioners in each of the devolved nations. It was shamefully voted down by the Tories, and Labour abstained, which it will have to justify to pensioners across the UK. Pensioners across the UK, and certainly in Scotland, have been watching carefully and will not easily forgive that betrayal.
This Government have not listened to pensioners and they have not listened to Members of this House who have defended the triple lock. I doubt they will listen to the Lords either, but I sincerely hope the Minister will prove me wrong.
We have been told today by the hon. Member for North Norfolk (Duncan Baker) that this would be “reckless” with taxpayers’ money. I find that insulting and wrong-headed, as will many of my constituents. What we have heard shows that the fiscal restraint we are told is necessary is being balanced on the back of pensioners, such as those in my constituency. We have heard from my hon. Friend the Member for Glasgow East (David Linden) about how money can always be found, and we need only look at the DUP deal to see that. Money can be found when it is considered necessary.
Politics is about choices and choosing to break promises. Hard commitments made to pensioners about the triple lock are being broken. We are watching and our constituents are watching and they do not approve. The Government tell us that wages are rising, as we have heard, and we know that inflation is rising, so what justification is there to break the triple lock—to change the goalposts in the middle of the game?
Patrick Grady (Glasgow North) (SNP)
Not only are the Government breaking their manifesto commitment and doing away with the triple lock, but already pensioners—our constituents—are in receipt of one of the lowest state pensions in the whole of Europe. Does my hon. Friend share my confusion that Conservative Members often seem to think that the current state pension is an argument for the Union, as if, if Scotland were independent, it would be even worse?
Patricia Gibson
I absolutely agree with my hon. Friend that one of the so-called Union dividends is a pension that is a pithy amount compared with those in other developed nations.
There is genuine fear that this abandonment of the triple lock will lead to permanent and more damaging actions against pensioner incomes. The state pension is by far the largest source of income for millions of UK pensioners, and the triple lock has kept that secure throughout the pandemic. To break it now, as inflation creeps up and the cost of living becomes increasingly challenging, is a shocking attack on pensioner incomes, and it is part of a wider and increasingly obvious narrative from this Government. It is crystal clear, because we have the evidence. We know that women born in the 1950s had their pension age increased with little or no notice; we have seen unacceptable state pension payment delays for new retirees, causing genuine financial hardship and suffering; we have more than 2 million older people living in poverty; and with the triple lock abandoned, many pensioners are set to be £520 less well off next year. All of that will do untold damage to pensioners.
I again urge the Government to stop attacking pensioner incomes and at least keep one of their promises to the electorate by retaining the triple lock and preventing more of our pensioners from suffering hardship in old age. There is an opportunity today to do the right thing. The Government must take this opportunity, and they must take it with good grace.
Guy Opperman
I thank all colleagues for their contributions. The factual reality of the situation is that this Government are spending £129 billion on pensioners. That is £105 billion on the state pension and £24 billion extra on the various add-ons for pensioners, including winter fuel; free eye tests; bus passes; free NHS, obviously; pension credit—I could go on in great detail. My hon. Friend the Member for North Norfolk (Duncan Baker) asked whether the triple lock will return. I can assure him that that is the case.
John McDonnell
On that point, it is almost as though the state pension is a charitable donation to pensioners. They paid for it, working throughout their lives, through their taxes, their national insurance—their contributions. Some of them served on our behalf in the armed forces. They paid for this; it is not some charitable donation by the Government.
Guy Opperman
There is so much that I could reply to; I could genuinely take some considerable time replying to the right hon. Gentleman. Let us start with this. During the last Labour Government, in which time the right hon. Member for East Ham (Stephen Timms), who is a former Pensions Minister, another former Pensions Minister who is in the Chamber, and the right hon. Member for Hayes and Harlington (John McDonnell) were Members, did they in any way link the state pension to earnings? Not on one single occasion over 13 years. It is this Government—the coalition Government and this Conservative Government—who have linked it to earnings.
The right hon. Gentleman talks about the state pension. That is paid for by the working taxpayer on an ongoing basis. The working taxpayer is paying more for the state pension, and it is a larger state pension than ever before; £129 billion is spent—[Interruption.] A hundred and twenty-nine billion. He does not want to hear it, because it is the largest state pension there has ever been. Thirteen years of a Labour Government, and what did they do? They never linked it to earnings. I remember the 75p increase in state pension by Gordon Brown. It is astonishing, the hubris that the right hon. Gentleman comes up with.
The factual reality is that there was never a situation where the Labour Government did anything like the coalition and Conservative Governments did. I asked the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), who represents the Opposition, to come up with a figure. You can search Hansard for as long as you like, Madam Deputy Speaker; answer came there none. There was not a single figure. The factual reality is that the Opposition have no idea how they would approach this, they have not come up with an individual figure, and they are not able to do anything—
David Linden
With a view to trying to bring the heat down just a little, let me ask the Minister this. He mentioned the commitment that the triple lock would return next year. Would he be willing to put on the record that, if the triple lock does not return next year, he will resign from ministerial office?
Guy Opperman
It is in the Bill that it only lasts for one year. The hon. Gentleman should really read the Bill. It is not that difficult; it only runs to two pages and two clauses.
Guy Opperman
No. I have given way once already to the right hon. Gentleman, and I have answered his point on two occasions.
The Bill is for one year only. After that, it will revert to the current legislation, and state pension will increase at least in line with earnings. The triple lock will, I confirm, be applied in the usual way for the rest of the Parliament. I would point out to the House that last year, earnings fell by 1% but we still legislated to allow state pensions to be increased by 2.5%. As a result of the triple lock, as I say, the full yearly basic state pension is £875 more than if it had been uprated solely by earnings. The increase is £2,050 in cash terms.
Guy Opperman
No. This is a two-clause Bill introduced by reason of the pandemic. The law will last for only one year before reverting. I commend the progress made by the Government on this issue, and I invite the House to reject the Lords amendments.
Question put, That this House disagrees with Lords amendment 1.
Social Security (Up-rating of Benefits) Bill
Tuesday 16th November 2021
(3 years ago)
Lords ChamberRead Full debate Social Security (Up-rating of Benefits) Act 2021 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 66-I Marshalled list for Consideration of Commons Reasons - (16 Nov 2021)
Baroness Stedman-Scott
That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I know it will be a disappointment to my noble friend Lady Altmann and others in this House that the Commons has disagreed with Lords Amendments 1 and 2. I ask that this House does not insist on its amendment for two reasons.
First, we have discussed at length the reason why the Government do not believe that they should set a precedent for uprating benefits or pensions using a methodology that is not robust and for which there is no consensus. That would be the position with an adjusted measure of earnings growth, which is why the Government decided to apply a double lock, underpinned by the established consumer prices index, which is published by the ONS. This approach was also recommended by the Social Market Foundation.
Secondly, Royal Assent is needed by 22 November 2021. This will allow the Secretary of State to conduct her statutory review using the new powers in time for the DWP to meet its hard deadline of 26 November for reprogramming its computer systems. This will ensure that the new rates of benefits and pensions are payable from April 2022. While I welcome the intentions behind the amendment, we cannot accept it. That is why I ask that the House does not insist on Amendments 1 or 2. I beg to move.
Lord Davies of Brixton (Lab)
My Lords, it is a matter of real regret that the Commons has not accepted the amendments to the Bill proposed by your Lordships’ House, but it is worth taking this opportunity to stress that not only have the Government broken a freely given promise to the electorate but, as has been clearly explained, they have done so totally unnecessarily. They could have lessened, if not avoided, the concern caused by breaking their promise by taking this opportunity to reaffirm clearly their commitment to the earnings element of the triple lock. It baffles me why they failed to do so.
I will not repeat all the arguments, despite the importance of the issue, but I have one more question for the Minister. The problem is that the Government are trying to have it both ways. On the one hand, they say they remain committed to all three elements of the triple lock—prices as measured by the CPI, average earnings and the 2.5% minimum. They want us to believe that this was an exceptional case that justified special rules being applied, and that they still deserve the electoral kudos that comes from standing by their promises. On the other hand, they have in practice made it clear that there are exceptional circumstances in which they can break the commitment.
We know they are prepared to break the triple lock, but we do not know under what conditions. We know what they were in this case; Ministers in this House and in the Commons have explained on several occasions the special circumstances which they believe applied. The noble Baroness the Minister said at Second Reading that
“the effects of the Covid-19 pandemic have caused distortions in the labour market, which have been reflected over two years in highly atypical trends in earnings growth.”—[Official Report, 13/10/21; col. 1847.]
We know the Government believe that highly atypical trends in earnings growth are sufficient justification for breaking the earnings link. We do not know how atypical earnings growth needs to be in future before they decide again to break the link. Can the Minister tell us more about what counts as atypical earnings growth? How atypical does it need to be to justify breaking the promise?
However, it is not just earnings growth that might be considered atypical. What counts as atypical growth in prices? This is not a hypothetical issue. Most of us here have become familiar with what many in this House might regard as consistently low rates of inflation, but who knows what is to come, with the unwinding of quantitative easing and other pressures on the economy? How do we know that the Government, when faced with a significantly higher rate of inflation than we have experienced in the last 25 years, will not decide that this too is atypical?
As I say, this is not hypothetical. Based on the OBR forecast for the Budget, it looks likely that the state pension increase in April 2023, which we will discuss next November, will be based on price increases rather than earnings or the fixed 2.5%. The latest Bank of England forecast, released earlier this month, suggests that next September—the relevant month for measuring the CPI—the increase will nudge 5%. Perhaps it will be higher, given this Government’s lack of economic competence. We do not know. In any event, an increase of this order would be significantly higher than the experience of the last few years. Earlier this year, not long ago, the September 2022 increase was expected to be only around 2%—it could be argued that this is more typical. I do not want to put ideas in the Minister’s mind, but I must ask how atypical the CPI increase next September has to be before it too will be considered atypical enough for the Government to decide that it justifies breaking the Conservative Party’s manifesto commitment to the triple lock?
The Minister needs to tell us that this year’s broken promise is truly a one-off and that the commitment to the CPI-linked increase will be adhered to, whatever next September’s increase. If we are not given such a commitment—which I suspect we will not be—then, in truth, we must conclude that we have a return to decisions about increases in the state pension being made on an ad hoc annual basis. History tells us that the inevitable outcome is that pensioners will suffer.
Lord Sikka (Lab)
My Lords, the outcome of the vote in the Commons is immensely disappointing. It condemns millions of retirees to a life of poverty and misery. At around 25% of average earnings, the UK state pension is already the worst in the industrialised world. It is the main or only source of income for the majority of retirees, and their lives will be even harder, especially those of women. Women never got pension equality: the retirement age was increased but their pension was never equalised with that of men. Thousands will die this winter because people will have to make the harsh choice between eating and heating, and the first statistics will be emerging fairly soon. Our retirees are being hammered from every corner, whether it is on pensions or winter fuel payments, which are unchanged since 2011, or the Christmas bonus, which is unchanged since 1972, or the loss of the free TV licence for the over-75s.
In 2021-22, the state pension increased by 2.5%, and the rate of inflation, we are now told, turned out to be 3.1%—that is the way it works. For 2023, the Government are proposing an increase in the state pension of 3.1%, and the rate of inflation is, as my noble friend Lord Davies of Brixton said, likely to be 5%. That means that there is a real erosion of the purchasing power of the state pension. Pensioners are not catching up; they are being left even further behind, and all that awaits them is a life of poverty.
The Government’s arguments about affordability were comprehensively debunked in this House. It was shown that there are numerous ways—not least a £37 billion surplus in the national insurance account. A Government which claimed not to be able to afford the triple lock two weeks ago gave away £54 billion in tax cuts, including a £4 billion tax cut to the banks, which are already awash with money and do not know what to do with the £895 billion of quantitative easing either.
The Government have really skewed priorities. Personally, I would have liked to see the state pension increase by 8.3%, which would have enabled a bit of a catch-up, but I was happy to support the amendments of the noble Baroness, Lady Altmann. Yesterday, the Minister in the other place said—and the noble Baroness the Minister referred to this again—that the figure for wage growth is not “robust”. The Minister has never told us what the characteristics of a robust statistic are. In social sciences, there is no such thing which cannot be refuted. What characteristics does she assign to the word “robust”? Is the government data on unemployment robust? Is it not contestable? Is the government data on inflation not contestable? Are the Government’s claims about levelling up not contestable? I do not know what she means by that.
We were told that wage growth data were not really reliable. Lots of resources are available to the ONS and it has come up with a number between 3.6% and 5%. It says that underlying wage growth is in that range. Why is that number not considered to be robust? If the ONS is deemed to be incapable of producing a robust number for wages, why should we trust any of its other numbers which inform government policies?
Lord Stoneham of Droxford (LD)
My Lords, I will be brief and speak on behalf of my noble friend Lady Janke, our Front-Bench spokesman on this Bill. Unfortunately, she cannot be here today.
First, I will say that we are glad that the Government have reconfirmed their commitment to the triple lock in the long term throughout all these discussions. We are disappointed that the Commons have rejected these amendments. The Government had an excellent opportunity to maintain their manifesto commitment while taking into account the special circumstances of the pandemic. We will not be pursuing this amendment —we accept that this has to be accepted—but we thank the noble Baroness, Lady Altmann, for the work that she has done.
We are concerned that pensioners will not be protected from the effects of the economic pressures now coming from inflation. The Governor of the Bank of England is very uneasy about the situation and we want to know whether the Government are prepared to keep an open mind and look particularly at the case of the poorest pensioners as time goes on in the next few months, when these pressures will come to a head. More importantly, we are extremely supportive of the maintenance of the triple lock in the longer term.
Lord Desai (Non-Afl)
My Lords, we have been hearing lately that the House of Lords is a rather useless body and that the other place is better—but twice recently your Lordships’ House has asserted that it cares more for the people than the other place. The noble Duke, the Duke of Wellington, stood up for the right of the citizen to clean water, asserting that against what the Commons had said. We also stood up for the triple lock and had that rejected.
I have a very simple suggestion for the Government. Since they have no intention of helping pensioners, why can they not be honest and say that the triple lock simply means that we will raise pensions by the lowest number of the three which are here, unless it is higher than the Bank of England target of 2% inflation? The 2% inflation that the Bank of England has chosen as its target is not a statistic. It is not disputable because they have made it up. It will always stay at 2%. So the Government could at least guarantee to be honest; they could just give 2% and run away. They should not give false promises and then not fulfil them.
Lord Rooker (Lab)
My Lords, I will briefly follow the introduction made by the noble Lord, Lord Desai. I will not address the issue—I did that the last time we sat—but there is a wonderful clarity about this issue. With ignorant journalists in the media calling for the abolition of your Lordships’ House, this issue shows, above all, that we will always be an irritant to the Government, whatever party is in power. It was the same when I was over there; the House is an irritant. The clarity with this issue, particularly for those of us who do the Peers in Schools programme, it that it is a wonderful example that is very easy to explain of the fact that the Commons always has the last word.
So, whatever the arguments about the composition and powers of this place—and the idea that we can legislate at will, which we cannot—this example gives wonderful clarity on the fact that the Commons always has the last word. Our job is to ask MPs to think again and again, and sometimes again—I have known examples of three occasions. But the fact of the matter, which the elected Chamber cannot run away from, however it is dressed up, is that the Commons has the last word—and I think that is to your Lordships’ advantage for the way we operate.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for introducing her Motion and all noble Lords who have spoken. I am going to get a new T-shirt for Christmas: “Proud to Be an Irritant”. Perhaps they should start selling them in the House of Lords gift shop; they might sell quite well. A nice note for the noble Lord, Lord Desai.
I must say that I am disappointed. The House voted by a healthy majority for the amendment in the name of the noble Baroness, Lady Altmann, which would have kept the link between pensions and earnings. It is worth noting that the amendment won support from around the House, whereas the Government were able to persuade only 13 Members who do not take the government Whip to vote against. The reason is clear: the case was unpersuasive.
The Government came to power on the back of a manifesto commitment to the triple lock, which we also supported at the last election, as did the Liberal Democrats and other major parties. The Government now want to ditch it for next year on the grounds that the rise in earnings over the year to last summer was artificially high as a result of Covid. We accept that earnings growth was distorted as a result of the pandemic, but that does not mean that the Government should just ditch their promises. They could and should have found a way to maintain the earnings link in pensions while adjusting for the Covid effect.
I will not relitigate this but, during the passage of the Bill, we looked at lots of ways we could do it, and lots of constructive suggestions emerged, and in the end the House coalesced around a very reasonable amendment in the name of the noble Baroness, Lady Altmann, with cross-party support, which simply said that the Government should use a figure for earnings chosen
“in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.”
It could not have been more reasonable, and it left the Government considerable latitude: we were not telling the other place what to do but simply giving them a chance to think again.
But the Government flat out rejected that. The Pensions Minister in the other place did comment on the merits of the amendment, but he caricatured it by saying that it
“invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%.”—[Official Report, Commons, 15/11/21; col. 359.]
So are the Government now saying that earnings growth actually is 8.3%? If so, why are they ditching the triple lock? And if it is not 8.3%, why did they not take the chance this House afforded them to look at alternatives?
The Minister again mentioned time pressure, so I put to her again a question I put at an earlier stage in the Bill. She told noble Lords there were two reasons why it was so time-critical. The first was that the computers have to be changed by a date—I think it was 26 November, or another date late this month that was the last date that computers could be changed to adjust the rates for next year. She also said that the House will then have to approve the uprating order, which we normally do in the spring. So what happens if they change the computers deep in the bowels of DWP and then the House chooses to reject the uprating order? What happens then?
While we are here, by refusing to look again, we are left with a Bill which will uprate pensions by the CPI inflation rate prevailing last September. Meanwhile, we all know that the costs of things that all pensioners use—food and fuel, for example—are spiralling up. Pensioner poverty is on the rise again. The last Labour Government managed to bring it way down, but it started to rise again in 2012. It is now on the rise and it will get worse yet.
I am sorry to say that this short Bill is a mistake. It steps away from the earnings link and, in walking away from their manifesto commitment for the third time, the Government are breaking trust with the electorate. Why are they so determined to do it? Ministers tell us that it is for one year only. Great, but I worry that their refusal to be creative in finding a way to deal with the fallout from the pandemic raises fears that they really are planning to walk away from this longer term.
My noble friend Lord Rooker is, as always, right. We have done what we can. We have asked the elected House to think again. The Government whipped their people to say that they did not want to do so. I think they are wrong. Pensioners will pay the price for this and they will not likely forget this breach of trust. I hope the Government think it was worth it.
Baroness Stedman-Scott (Con)
My Lords, I thank all noble Lords for their contributions. To answer the question put by the noble Lord, Lord Davies, about the Government believing in the long-term earnings link, yes, this Bill is for one year only. After that, it will revert to the current legislation, and state pensions will increase at least in line with earnings. The triple lock will be applied in the usual way for the remainder of the Parliament. We believe that 8.3% is atypical growth, just as we considered minus 1% to be atypical last year, which is why we increased state pensions by 2.5% instead.
Again, to the noble Lord, Lord Davies, inflation is forecast to be higher than 3.1%. Do pensioners not need a higher increase? The uprating order for all benefits will take effect from April 2022 and, last year, pensioners saw an increase of 2.5% when CPI for the uprating review period was 0.5%. Average actual CPI over the first six months of this financial year was lower, at 2.4% at the Budget, and the OBR forecast that CPI would average 4.1% for the second six months of this financial year. If this turns out to be the case in September, the CPI figure will be a good reflection of average inflation over whole of 2021 and 2022.
The noble Lord, Lord Sikka, said that the state pension is the lowest in the developed world and is still below the 1979 level relative to average earnings. This comparison is misleading. There are many factors to take into account: tax systems, healthcare systems, pension ages, cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at a concessionary rate. The Government provide considerable additional support for pensioners. People over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eyesight tests, NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year. In addition, the BBC has made provisions so that those aged 75 or over who are in receipt of pension credit are eligible for free TV licences.
To answer the question put by the noble Baroness, Lady Sherlock, if there is no Royal Assent, we need to use the current legislation at 8.3%.
Baroness Stedman-Scott
Moved by
That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.
Baroness Stedman-Scott (Con)
My Lords, I have already spoken to Motion B:
“That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.”
I beg to move.
Royal Assent
Wednesday 17th November 2021
(3 years ago)
Lords ChamberRead Full debate Read Hansard Text Amendment Paper: HL Bill 66-I Marshalled list for Consideration of Commons Reasons - (16 Nov 2021)