Social Security (Up-rating of Benefits) Bill

(Limited Text - Ministerial Extracts only)

2nd reading
Tuesday 13th October 2020 Grand Committee

Moved by

[Baroness Stedman-Scott]

That the Grand Committee do consider the Social Security (Up-rating of Benefits) Bill before Second Reading.

Relevant document: 25th Report from the Delegated Powers Committee.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

My Lords, I take this opportunity to thank all noble Lords for the positive engagement and feedback they have provided thus far. From the conversations I have had with many noble Lords, I believe there is a genuine desire across the House to tackle the matters addressed by the Bill. 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, our doors are always open.

It is unlikely to have escaped noble Lords’ attention that this is a short Bill. While short and technical, it is an important piece of legislation that will avoid a state pension freeze and benefit millions of pensioners by granting the Secretary of State powers to implement an increase in state pension rates in the 2021-22 financial year. It will also allow for increases for the poorest pensioners who are in receipt of pension credit, as well as uprating widows’ and widowers’ benefit under the industrial death benefit scheme.

Each year, the Secretary of State is required by law to conduct a review of most state pension rates and certain other benefit rates to determine whether they have retained their value in relation to the general level of earnings. If there has been an increase in earnings, there is a requirement to uprate these rates at least in line with that increase. However, if there has been no increase in earnings, there are no legal powers to bring forward an uprating order to increase these rates.

Since 2011, the Government have used average weekly earnings growth for the year from May to July as the basis for the review. The figures published by the Office for National Statistics earlier today confirmed that for the year from May to July 2020, earnings fell by 1%. Given this decline in the general level of earnings due to the coronavirus pandemic, the Bill temporarily amends the Social Security Administration Act 1992 to grant discretionary powers to the Secretary of State to increase pension and benefit rates linked to earnings even if there has been no growth in earnings. The provision lasts for one year only.

The Bill must receive Royal Assent by mid-November if it is to have any practical effect. If the Bill does not receive Royal Assent by the time the Secretary of State conducts her review of benefit rates, the existing provisions will apply and state pensions will be frozen. The Secretary of State must complete her review before 27 November, which is a hard deadline for the IT systems across the DWP that implement the increases, to allow them to take effect in April 2021.

The Bill covers the basic state pension, the new state pension, the standard minimum guarantee in pension credit, and widows’ and widowers’ benefits under the industrial death benefit scheme. These are the benefits that are linked in primary legislation to earnings. The Bill does not extend to benefits that are linked to prices. The Secretary of State will review those under the existing powers in the 1992 Act.

This is a technical Bill and, provided that it receives Royal Assent by mid-November, it will ensure that the state pension is not frozen in 2021-22. It will allow the Government to increase the level of the safety net for the poorest pensioners in pension credit and the rates of widows’ and widowers’ benefits under the industrial death benefit scheme. I beg to move.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

My Lords, I start by thanking all noble Lords who have taken part in the debate today. This House has a great deal of experience in pensions and social security, which has been well demonstrated today. I join noble Lords in congratulating the noble Lord, Lord Field, and the noble Baroness, Lady Stuart, on their excellent maiden speeches. There is no concept of regretting having them in this House. The House is further enriched by their experience, wisdom and integrity, which I can say is bombproof. The noble Lord and the noble Baroness bring with them their expertise and involvement in DWP matters, though not exclusively. That is widely respected and acknowledged. I look forward to working with them both, although I accept that that will be very challenging.

The debate today has covered a wide range of subjects, and I will try to do justice to as many points as possible. If I do not answer all questions, be assured that it is not because I do not want to; it will be because I have run out of time. My officials and I will go through those questions that I have not answered and write to each noble Lord.

The noble Lord, Lord Blunkett, kicked us off with the intergenerational fairness point, which is understandable, and nearly all noble Lords have referred to it. We have recently seen rises in the living standards of pensioners, but we must remember that not all pensioners are in the same position. Over 1 million current pensioners rely solely on the state for their income. While the majority of pensioners have a fixed income, particularly those who rely on the state pension, people of working age are able over time to improve their incomes through work. The noble Baroness, Lady Janke, reminded us that today’s working-age people are tomorrow’s pensioners, and future generations of pensioners will also benefit from the way in which the state pension is uprated today.

The noble Lord, Lord Blunkett and Lord Shipley, and the noble Baroness, Lady Lister, asked why working-age benefits are not increased by the same levels as pensions. As required by law, the Secretary of State will review working-age benefit levels as part of an uprating review in November and assess whether they have retained their value in relation to prices.

The noble Lord, Lord Addington, and other noble Lords, including the noble Viscount, Lord Trenchard, mentioned the triple lock. For 2021-22, the Bill makes technical changes, which will ensure that state pensions can be uprated, even though there has been no growth in earnings. This will allow the Government to maintain their manifesto commitment to the triple lock. All noble Lords asked why we should not do that for two years. Let me be clear: for 2022-23, we are dealing with a huge amount of uncertainty. No one can predict with confidence what earning trends will be over the course of next year, which will be the relevant index for uprating decisions for the following April. Of course, we hope that earnings will increase as the economy recovers, and the Secretary of State will look at this issue when she conducts a statutory annual review of earnings, prices and benefit rates in 2020-21. That will also be the process by which annual uprating decisions will be made in future years, and any decisions will be taken in the context of the wider public finances.

I turn to the contribution by the noble Baroness, Lady Greengross. She asked whether workers aged over 65 should pay national insurance and tax. This is now a matter for the Treasury rather than for the DWP, but I reassure the noble Baroness that we are very much in favour of people working for as long as they can, because it is good for their health and well-being. As my noble friend Lady Altmann knows well, that is why we have the strategy on fuller working lives. I pay tribute to the noble Baroness, Lady Greengross, for the way she champions more mature workers—I must not say “older” because I would probably get in trouble. I thank her for all she has done in that field.

My noble friend Lord Bourne of Aberystwyth mentioned the Social Metrics Commission. Work to develop the experimental statistics has been suspended in the current circumstances, and the DWP’s focus is on activity that supports making payments and critical service lines. In the current uncertain climate, we are unable to predict when our work looking at poverty measures will resume.

The noble Baronesses, Lady Lister and Lady Drake, and my noble friend Lord Bourne of Aberystwyth asked what we were doing in relation to working-age benefits. As I have said, and I say it again to confirm, as required by law, the Secretary of State will review working-age benefit levels as part of her uprating review in November. However, we have done a lot in government to support people at this difficult time, including the plan for jobs, increasing the universal credit rate, investing over £9 billion of extra support to protect people’s incomes, removing the seven-day waiting period and relaxing the universal credit minimum income floor. The Government are committed to doing all that they can.

The right reverend Prelate the Bishop of St Albans mentioned the deep poverty issue that came out in various reports. This Government are helping those who need support the most. I do not want to repeat myself, but I say again: we are putting £9 billion into the welfare system.

I refer to the letter that 50 charities wrote to the Chancellor asking for the £20 uplift to be made permanent and extended to legacy benefits. Many people have championed retaining the £20 extra, and we are not a bit surprised by that. DWP Ministers have worked closely with our Treasury counterparts throughout the pandemic response and will continue to do so.

I pay tribute to faith groups, which do the most amazing work with the most vulnerable, especially in this difficult time.

The point that the noble Lord, Lord Field, made about modern day slavery is outside the scope of the Bill, but it is a major priority for society and this Government. His points are well made, as are those of the noble Baroness, Lady Meacher.

The noble Baroness raised the point about the standard minimum guarantee, and the noble Baroness, Lady Sherlock—she is my friend—raised it, too. It is right that we protect the incomes of the poorest pensioner households receiving the standard minimum guarantee. That is why in previous years, when the triple lock has applied to the state pension, we have increased the standard minimum guarantee by more than the percentage increase in average earnings to ensure that they see the benefit of the cash in the increase in the state pension.

The noble Baroness, Lady Meacher, challenged us by asking what we would do next year if there was a spike in earnings. We are dealing with a huge amount of uncertainty, so no one can predict with confidence what earning trends will be over the course of next year. Of course, we hope that earnings will increase as the economy recovers.

My noble friend Lord Randall, the noble Viscount, Lord Trenchard, and the noble Baroness, Lady Meacher, raised the issue of uprating pensions overseas, and I have to say that they made their points very well. The policy on this issue is a long-standing one of successive Governments. The current policy has been in place for around 70 years and, while noble Lords will be disappointed, there are no plans to change this.

The noble Baroness, Lady Drake, raised the issue of pensioner poverty rising and asked why we had not done more to support the poorest pensioners. The Government are committed to action to alleviate levels of pensioner poverty. For current pensioners, that includes the contribution of the triple lock, the new state pension and pension credit.

Noble Lords asked how we intend to uprate pension credit. Without this Bill, the core component of the pension credit standard minimum guarantee will be frozen in 2021-22. The decision on how to uprate the standard minimum guarantee will be made during the Secretary of State’s uprating review, which I have already referred to. Noble Lords will understand that it is not right to pre-empt the outcome of the review. I can also tell noble Lords that the department and the Minister for Pensions are doing as much as they can to raise awareness of pension credit. If any noble Lords have ideas for how we can improve that, we are very open to receiving them.

The noble Baroness, Lady Drake, asked for a comment on the report from the Resolution Foundation. We have provided an extra £9.3 billion in welfare support to help those most in need, as I have said. We have already taken steps to ease the burden of universal credit debt payments, including reducing the maximum deduction from 40% to 30% of a standard allowance, and from October 2021 we will reduce this further to 25%. We will also double the time available to repay advances to 24 months.

The noble Lord, Lord Shipley, referred to an uprating order introduced in the Commons in January. The figures will be announced to Parliament in late November after the Secretary of State’s review of benefit rates. The noble Lord raised the much-debated subject of universal basic income. This Government do not believe that a universal basic income would provide the right sort of support. Universal credit targets those in the greatest financial need. I confirm yet again that there is no intention to introduce universal basic income.

The noble Baroness, Lady Stuart of Edgbaston, raised the issue of the gender gap in pensions. Reforms to the state pension 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.

My noble friend Lady Altmann questioned whether it was fair that a higher rate is protected by the triple lock under the new state pension. She talked about the difference in uprating treatment between those under the new state pension and those under the old one. It is not possible to make direct comparisons between the two systems in this way. The new system has been designed so that no more money is being spent than under the previous system. Care has been taken to ensure fairness to both groups while delivering a sustainable system for the future. Although some people may get a larger amount uprated by the triple lock, they will not have access to other elements of the previous system; for example, a lower state pension age and the ability to build a higher state pension through the additional state pension.

My noble friend also raised the issue of state pension underpayments. We are aware of a number of cases where individuals have been underpaid a category B or basic state pension. We corrected our records and reimbursed those affected as soon as the underpayments were identified. We are checking for further cases and, if any are found, awards will also be reviewed and any arrears paid in accordance with the law. I urge anybody who believes they are being underpaid their state pension to contact the DWP.

The noble Baroness, Lady Lister, asked what the Government’s child poverty strategy is. Supporting people financially through these difficult times is currently our main focus. Our long-term ambition remains to build an economy that supports employment and ensures opportunities such as the apprenticeship scheme that the noble Lords, Lord Blunkett and Lord Field, referred to. We want people to be able to enter into work and to progress where possible, with welfare system support in their time of need. We are actively reviewing all measures at our disposal to identify how best to support people in the economic recovery. As we move to the next phase, we will continue to review our priorities. We will monitor the evolving economic and labour market situation to identify the most effective way to help people stay in or close to work, both now and in the future.

The noble Baroness, Lady Lister, and others talked about the benefit freeze. The Secretary of State will review all benefit levels as part of the uprating in November. The noble Baroness has been tenacious and has shown great energy in talking to us about the benefit cap. We had an all-Peer session yesterday on this. We made it very clear that both the Minister for Employment and the Minister for Welfare Delivery stand ready to engage further. To clarify the Government’s position, we believe that, where possible, it is in the best interest of children to be in working households. The benefit cap provides a clear incentive for parents to move into work, and a child living in a household where every adult is working is about five times less likely to be in relative poverty than a child in a household where nobody works.

The noble Baroness, Lady Lister, asked about the assessment the Government have made about the call from the Joseph Rowntree Foundation, the Trussell Trust and Save the Children to increase the child component of universal credit and tax credit. The Government have implemented an unprecedented support package, including the job retention and self-employment income protection schemes, to help families cope with the financial impact of Covid-19. We will continue to monitor the evolving economic and labour market situation to identify the most effective way to help people stay in work or close to work, both now and in the future.

I thank the noble Lord, Lord Loomba, for raising the issue of television licences for those aged over 75 during the pandemic. The Government are deeply disappointed that the BBC has chosen to restrict the over-75 licence fee concession to those in receipt of pension credit. We recognise the value of free TV licences to the over-75s and believe that they should be funded by the BBC.

The noble Viscount, Lord Trenchard, asked why the pattern of countries where the uprated pension is paid is not consistent. Despite appearing random—with some uprated and non-uprated countries in close proximity, for example—the uprating policy is determined by the differing social security arrangements for the countries concerned. For example, Canada has a bilateral agreement with the UK that does not cover uprating. The UK sought a reciprocal agreement, including uprating, with Canada but this was rejected as legislation prevented Canada paying its pensions overseas.

On pension credit take-up, my noble friend Lord Trenchard raised the point that it is all very well increasing rates of pension credit, but asked what we are doing to ensure that more pensioners are in receipt of it. This is why, in February, we launched a nationwide campaign to raise awareness of pension credit.

I thank the noble Lord, Lord Foulkes, for his unlimited support for the Bill. I am sorry that I am unable to confirm about the 2.5%, as he would like me to. I hope he will forgive me for that on this occasion.

My noble friend Lord Trenchard asked what support we are providing to older workers. We have taken legislative steps to support older workers to remain and be retained in the labour market by abolishing the default retirement age. We have strengthened things through the Fuller Working Lives partnership and appointed Andy Briggs, CEO of the Phoenix Group, as business champion for older workers. We are providing new targeted support to help people who are unemployed and have not reached the state pension age.

On the state pension being the lowest in the EU, I say to the noble Lord, Lord Foulkes, that fullfact.org investigated that claim and concluded that

“differences between their pension systems means it’s not a fair comparison.”

That makes it difficult to make meaningful comparisons between pension schemes in different countries, because there are so many fundamental differences in how they are run.

I have two points to make to the noble Baroness, Lady Sherlock, about the state pension. Again, we are dealing with a huge amount of uncertainty. We are unable to predict with confidence what earning trends will be and therefore what changes might be made. She raised the valid point that if every pensioner claimed the benefits they were entitled to, this would reduce pension poverty rates. Yes, and we encourage everyone to claim what they are entitled to, including their council tax reductions.

The Bill reflects the Government’s commitment to maintaining pensioners’ incomes in these difficult times. Provided it achieves Royal Assent by mid-November, it will ensure that state pensions are not frozen in 2021-22. It will also allow for the uprating of the safety net in pension credit and widows’ benefits in industrial death benefit. I thank noble Lords for their contributions. I commend the Bill to the Committee and ask that it be given a Second Reading.

[The Deputy Chairman of Committees (Lord Lexden) (Con)]

My Lords, if I might be permitted a personal comment, I add my congratulations to those made in this debate to my friends of long standing, the noble Lord, Lord Field, and the noble Baroness, Lady Stuart, on their maiden speeches in this House.