Social Security Benefits Up-rating Order 2021
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Baroness Stedman-Scott
That the Grand Committee do consider the Social Security Benefits Up-rating Order 2021.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, the draft Social Security Benefits Up-rating Order 2021 and the Guaranteed Minimum Pensions Increase Order 2021 were laid before this House on 18 January. In my view, the provisions in these orders are compatible with the European Convention on Human Rights.
The Guaranteed Minimum Pensions Increase Order is an entirely technical matter that we attend to each year. It provides for formerly contracted-out defined benefit occupational pension schemes to increase their members’ guaranteed minimum pension which built up from April 1988 to April 1997 by 0.5%. This is in line with the increase in the general level of prices as at September 2020.
The Social Security Benefits Up-rating Order reflects the Government’s continuing commitment to support working families and pensioners across the nation, especially during a particularly challenging time for many. It will increase the basic state pension and the new state pension in line with the triple lock; increase the pension credit standard minimum guarantee in line with the cash increase to the basic state pension; increase working-age benefits in line with prices; and increase carer’s benefits and benefits intended to meet additional disability needs in line with prices.
In November, Parliament passed the Social Security (Up-rating of Benefits) Act. Without this legislation, state pensions would have remained at 2020-21 levels, because under the existing legislation there is no power to bring forward an uprating order to increase these rates in the absence of an increase in the level of earnings. The legislation allows for state pension, pension credit and widows’ and widowers’ benefit in industrial death benefit rates to be uprated for the 2021-22 financial year, benefiting millions of pensioners.
Under the Government’s triple lock commitment, the basic state pension will continue to be uprated by the highest out of earnings, prices or 2.5%. This year, the Government will draw on the power in the Social Security (Up-rating of Benefits) Act to maintain this commitment to the triple lock. The triple lock has been an invaluable tool in combating pensioner poverty and demonstrates this Government’s commitment to pensioners. This year, the basic state pension will increase by 2.5%, which is the highest of the triple lock figures. The basic state pension will rise to £137.60 a week for a single person. From April this year, the basic state pension will be over £2,050 a year higher in cash terms than in April 2010.
Five years ago, the Government introduced the new state pension, which provides a transparent and sustainable foundation for private saving and retirement planning for people reaching state pension age from 6 April 2016 onwards. We have also committed to increasing the new state pension by the triple lock. From April 2021 the full rate of the new state pension will increase to £179.60 per week.
Turning to the additional state pension, from April state earnings-related pension schemes and the other state second pensions, as well as protected payments in the new state pension, will rise by 0.5% in line with prices.
We are continuing to take steps to protect the poorest pensioners. This includes the pension credit standard minimum guarantee, the means-tested threshold below which pensioner income should not fall. The pension credit standard minimum guarantee will rise by 1.9% to match the cash increase in the basic state pension. Therefore, from April 2021, the single-person rate of this benefit will rise to £177.10, providing a valuable safety net to pensioners.
Working-age benefits will increase in line with prices—or 0.5%. This includes people receiving jobseeker’s allowance, employment and support allowance, income support, housing benefit and universal credit. Those benefits linked to child tax and working tax credits will also be uprated in line with those benefits. This increase to working-age benefits is in addition to the unprecedented support that this Government have provided to those affected by Covid-19. To support individuals through this challenging time, we have mobilised our welfare system with a wide-ranging package of measures worth more than £7 billion, benefiting millions.
The uprating review did not include a decision on the £20 per week uplift to universal credit and working tax credits, announced by the Chancellor as a temporary measure in March 2020. The uplift was enacted for one year under different legislation to support those facing the most financial disruption as a result of the Covid-19 public health emergency, so it is not referenced in the order. This is still being kept under review in light of the ever changing situation we find ourselves in.
Universal credit work allowances will also rise in line with prices. This means that an individual is able to earn more before their universal credit payment is reduced and directs additional support to some of the most vulnerable low-paid working families.
Finally, I turn to disability benefits. Carers and those who face additional costs as a result of their disability will see their benefits increase in line with prices from April 2021 to ensure that they continue to get the support they need. These benefits are: disability living allowance, attendance allowance, carer’s allowance, incapacity benefit and personal independence payment. In addition, the carer and disability-related premiums paid with pension credit and working-age benefits, the employment and support allowance support group component, and the limited capability for work and work-related activity element of universal credit will also increase by 0.5%. The Government remain committed to protecting the most vulnerable.
To conclude, in this order the Government propose to spend an extra £2.7 billion in 2021-22 on increasing benefit and pension rates. With this spending, we are maintaining the triple lock, increasing spending on pensioner benefits by £2.2 billion and upholding our commitment to the country’s pensioners; helping the poorest pensioners who count on pension credit; and ensuring that working-age benefits maintain their value in relation to prices. This is in addition to the comprehensive support package already put in place to support those affected by the pandemic, providing essential support to disabled people and carers. On this basis, I beg to move.
Baroness Stedman-Scott (Con)
My Lords, I begin by thanking all noble Lords who have spoken in the debate. They have demonstrated their vast experience of and commitment to the issues we have been talking about. The debate has covered a number of topics and, as ever, I will try to respond to them in the time available. However, I assure noble Lords that if that is not possible, I will write to them with answers to the questions put.
Let me start by answering the question put by the noble Baroness, Lady Bowles, and my noble friend Lady Altmann: whether the Government are committed to the triple lock. We are committed to ensuring that older people are able to live with the dignity and respect they deserve, and the state pension is the foundation of their support. As with all aspects of Government policy, we keep tax rates and spending under review, and any decision on future changes will be taken as part of the annual Budget process in the context of the wider public finances.
The noble Baroness, Lady Drake, and my noble friend Lady Altmann raised the issue of whether the standard minimum guarantee should be uprated by the same percentage as the state pension. It is right that we should protect the incomes of the poorest pensioner households receiving the standard minimum guarantee. That is why this year we are increasing the guarantee by 1.9% to ensure that, as in previous years when the triple lock has applied to the state pension, pensioners see the benefit of the cash increase in the basic state pension.
I come now to the point about pension credit which was raised by virtually all noble Lords. I thank the noble Lord, Lord Foulkes, for his contribution and for his reminder that this is a work in progress. After his Question about pension credit, we did meet, along with the Minister for Pensions, and we agreed on the actions to take away. We have written to the BBC. Officials have had a meeting with its representatives and we are awaiting the outcome of that meeting. As I say, this is a work in progress. At that meeting we also agreed to review advertising in places such as post offices and GP surgeries. That is a commitment, but there is little point in doing that while Covid is in full flow as not many pensioners are going into these places. However, we will revisit that as soon as things change.
The Minister for Pensions, Guy Opperman, also made a commitment to review all the correspondence sent by the DWP to see how we can change the wording in order to encourage people to apply for pension credit. The review has taken place and there are a few things we need to grapple with. When we write to people about attendance allowance and then about pension credit, we do not want the messages to become confused or for one to overtake the other. Again, officials are working on this. I can give an absolute commitment that when all this work has been completed, we will meet with the same noble Lords we met before as well as with stakeholders to advise them of the outcomes and actions arising from our deliberations.
The noble Baroness, Lady Drake, asked whether pension credit take-up had increased as a result of the BBC policy on free TV licences. I am told that it is too early to tell whether the BBC announcement about changes to the licence concession has translated into an increase in take-up. As I have said, the Minister for Pensions has written to the director-general of the BBC about its collaborating on pension credit. The noble Baroness, Lady Drake, and my noble friend Lady Altmann talked about the further campaign; I believe I have answered that question.
The noble Baroness, Lady Drake, and the noble Lord, Lord Foulkes, asked what we are doing to tackle the low take-up which means that 1 million pensioners will miss out on the pension credit uprating increase. More than 1.5 million older people across Great Britain already receive extra financial help through the pension credit. We want more eligible people to claim what they are entitled to, so in addition to the campaign we launched last February, we will take the actions that I have already outlined.
The noble Baroness, Lady Drake, made the point that statutory sick pay is not high enough. SSP is increased annually in line with CPI. Any greater increase in the rate of SSP would place an immediate and direct financial burden on employers at a time when we know that many of them are struggling. She also raised the question whether the rate is too low to live on. Statutory sick pay should not be looked at in isolation. Approximately 60% of employees receive more than the rate of statutory sick pay from their employer.
The noble Lord, Lord Empey, made the valid point that there are people who are prepared to accept a tax rise, even if only for a short period. I am sorry to say that I cannot make any further comment, other than to say that it is a matter for the Chancellor to take action on if he so desires.
The noble Baroness, Lady Bowles, asked whether the uprating of pension credit would be negated by changes made to other thresholds. Pension credit is not linked to the national insurance system; it takes into account income and capital according to its own rules. The noble Lord, Lord Dodds, raised the very important issue of uprating overseas pensions and the frozen pension situation. The current policy on this is a long-standing one under successive Governments; it has been in place for 70 years and with all respect to the noble Lord, we have no plans to change it.
We come now to the very topical point about the £20 uplift in universal credit. I understand noble Lords’ detailed interest in this matter, which was discussed yesterday at great length in the other place. Let me make the position absolutely clear. The £20 uplift to universal credit and working tax credit was announced by the Chancellor as a temporary measure in March 2020 to support those facing the greatest financial disruption. The measure remains in place until March 2021 and, as the Government have done throughout this crisis, they will continue to assess how best to support low-income families. That is why the Chancellor is looking at the economic and health contexts before making any decisions.
The noble Baroness, Lady Sherlock, and the noble Lords, Lord Dodds and Lord Davies, asked why the £20 uplift has not been extended to legacy benefits. Claimants on legacy benefits can make a claim for UC if they believe that they would be better off. Claimants need to check their entitlement under universal credit carefully before applying, as the legacy benefits will end when claimants submit their claim and they will not be able to return to them in the future. Again, with all due respect to noble Lords, we have no plans to extend it.
My noble friend Lord Naseby asked why the Government are no longer indexing the guaranteed minimum provision for those reaching state pension age. The additional state pension, and with it the option to contract out, ended with the introduction of the new state pension for people reaching state pension age from 6 April 2016. The calculation that provided, for benefits earned between 1978 and 1988, the effect of having their guaranteed minimum pension price protected ended as well. My noble friend also talked about the increase in national insurance contributions. Again, this is a matter for the Chancellor, but I will draw my noble friend’s points to his attention.
The noble Lord, Lord Truscott, asked whether the triple lock would be in place until the next election. As a result of the order, the Government announced measures to increase most state pension rates by 2.5%, in line with their triple lock manifesto commitment for this Parliament.
My noble friend Lady McIntosh asked about TV licence money and how the BBC has used its funding. I have an answer for my noble friend, but perhaps I may write to her, as I will on her point about ensuring that married women who have been underpaid state pension get what they are owed.
Time is short and I am sorry about that because I like to answer all the questions put to me. The noble Baroness, Lady Janke, asked about the benefit cap level, which, again, has been raised many times. The statutory duty is to review the levels of the cap in Parliament at least once a year. This will happen at the appropriate time. On the UC uplift and the reports of the Resolution Foundation, Joseph Rowntree and others, like the noble Baronesses, Lady Janke and Lady Sherlock, I am aware of them, as indeed is the department. The noble Baroness, Lady Janke, also asked about additional support for UC claimants if the uplift is not extended. We should await the outcome of the decision.
I am afraid that I will have to call time at this point. Having outlined the uprating orders for the guaranteed minimum pension and social security benefits, I commend them to the Grand Committee and I beg to move.