Social Security Benefits Up-rating Order 2022
(Limited Text - Ministerial Extracts only)
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Baroness Wilcox of Newport (Lab)
My Lords, for the second time today I am substituting for my noble friend Lady Sherlock, whose expertise in these matters is well known to the House. I will do my best to convey our position.
When the Social Security (Uprating of Benefits) Bill, now Act, was debated in this place last year by my noble friend Lady Sherlock, she highlighted how the suspension of the earnings element of the triple lock for the upcoming tax year would impact millions. This point has been made several times since. I share her concerns, those of my noble friend Lord Davies, and the concerns of others who have spoken in tonight’s debate.
Over the last decade, this Government have failed pensioners. The last Labour Government reduced pensioner poverty by over a million people. In the 12 years since, the number and rate of pensioners living in poverty has soared. In 2010, 14% of pensioners, totalling 1.6 million, lived in poverty. In the year before the pandemic, it was 18%. Some areas are far worse than others. Here in London, over one in four pensioners lives in poverty, totalling almost 300,000 people. Other regions, such as the East Midlands, the north-east, the north-west and the West Midlands, have poverty rates of over 19% among the over-65s. Therefore, of course, the number of pensioners in debt has risen too, by over half a million since 2010, so far.
Things have got harder since these pre-pandemic numbers, and pensions are one part of this. Following the uprating order being made last week, the increase to state pensions and benefits signed into law is 3.1% from next month. The basic pension rises from £141.85 a week for a single pension or £226.85 for a couple. The full rate of the new state pension will rise to £185.15 a week but, with earnings rising at 8.3%, the Government keeping their manifesto promise and maintaining the triple lock would have meant that the basic state pension would instead be rising to £149 for individuals, £238.30 for couples, and the full rate of the new state pension to £194.50. For an individual on the basic state pension, this is a difference of approximately £370, almost £600 for a couple, and close to £485 for those on the full rate of the new state pension—even higher than the difference with the Bank of England’s CPI uplift that my noble friend has highlighted already, which is expected to peak around 7.25% in April 2022 when the uprating takes effect.
What is undeniable is that the cost of living has increased by far more than 3.1%, and the Government breaking their promise has made it harder for pensioners. This hit for pensioners comes on top of several other factors, either caused or not addressed by this Government, that have made life harder for those struggling to get by.
On a related note, the Government continue to act too slowly to repay state pension underpayments to over 100,000 older women, leaving many thousands of them without the pension they deserve and barely enough to live on. At any time, pensioners who have worked hard their entire life should expect to be paid what they are owed at the right time but, with compounding difficulties, the impact is even more severe.
The main thing making things harder for pensioners at this time is the cost of living crisis and energy prices. Age UK warned that rising energy prices will lead to some of the poorest pensioners, for whom the cold could be particularly dangerous, rationing their heating. There was no mention today by the Chancellor of energy prices for heating oil, for example, in the spring Statement—but then it is an unregulated sector of the energy market. Cold weather payments and the warm home discount scheme fail to reach those who need them because they are not claiming pension credit.
As a result, three-quarters of older people in the UK—almost 10 million people—are worried about this cost of living crisis. Over half of those surveyed by Age UK said they will have to heat their home less, a quarter said they would have to choose between heating their home and the food they buy if their energy bills continue to go up, and two in five are having to cut back. What can they do other than go into debt or simply not pay their bill?
What is more, the £20 uplift to universal credit being stopped will continue to impact couples where only one is at state pension age. There are around 1.3 million working pensioners who will be asked to pay the poorly thought-out health and social care levy. Pension credit is another area of concern, with 850,000 eligible families missing out on almost £2,000 per year on average, and the number of eligible couples falling dramatically between 2019 and 2020 from the number the Government told us to expect.
While I have drifted away from the pensions uprating, my point is that the Government’s broken promise is not just a broken promise but one more burden on millions of pensioners at a time when it is simply the last thing that they need. The consequences will not be small; they will be pensioners unable to heat their homes, struggling to put food on the table, and managing increased debt in their efforts to prevent that. While this order has already passed, this does not have to be the fate for pensioners. I recognise the Minister’s sincerity, as noted by my noble friend Lady Lister, but I hope she will follow by setting out the steps the Government will be taking to avoid these outcomes.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I would like to re-emphasise what happened today in the spring Statement. The Chancellor announced an additional £500 million for the household support fund from April 2022 to help households, including pensioners, with the cost of essentials such as food, clothing and utilities. This is in addition to the £500 million we have already provided since October, bringing the total funding to £1 billion. The Chancellor also announced a cut in fuel duty at 5p per litre. Customers will benefit from savings worth over £5 billion over the next year compared to uprating fuel duty in 2022-23. This will save average car drivers, many of whom are pensioners, around £100. I confirm that the Government will continue to keep the situation under review, recognising the high level of current uncertainty, including monitoring the ongoing impact of the Russia-Ukraine conflict on the economy, and will be ready to take further steps if needed to support households.
I thank all noble Lords for their contributions and the noble Lord, Lord Davies of Brixton, for moving the Motion. I also thank him for agreeing that this Motion could be debated after 9 March, when we debated the uprating order. A number of important points were raised, which I will now try to deal with. He made the point that averaging over time is no consolation. Uprating in April 2023 will take into account the rate of inflation this September, but we recognise the short-term pressures, which is why we have introduced a package worth more than £9 billion.
The noble Lord, Lord Davies, raised the issue of the cost of living and what the Government are doing to help pensioners. The Government spend more than £129 billion on pensioner benefits, which is 5.6% of GDP. In cash terms, from April, the full yearly amount of the basic state pension will be over £2,300 higher than in 2010. Over the last two years, the basic state and new state pension will have increased by more than 5.6%. Eligible pensioners will also receive support through free bus passes, free prescriptions, free TV licences, winter fuel payments, the warm home discount scheme, and cold weather payments.
The noble Lord asked about the opportunity to discuss the quinquennial review. I will write to the Government Actuary’s Department to see if it will do that with him. It is not something that is appropriate or sensible for me to do.
The noble Lord also raised the issue of the triple lock. We are not ending the triple lock. The suspension of the earnings link this year is a one-year response to exceptional circumstances and the Government remain committed to implementing the triple lock in the usual way for the remainder of the Parliament. I can confirm my Secretary of State’s statement on Monday evening that the triple lock will apply for the rest of this Parliament.
The noble Lord, Lord Davies, talked about using the National Insurance Fund to fund the triple-lock earnings increase, as did the noble Lord, Lord Sikka. The National Insurance Fund matches expected receipts to the predicted spending on contributory pensions and benefits over the medium term. There is no surplus in the fund that can simply be drawn on without consequences either for the ability to pay future liabilities or for the need for higher contributions in the future. It is therefore inaccurate to suggest that there is a surplus in the fund that can simply be drawn on. Increasing spending on today’s pensioners would pass the cost on to future generations of taxpayers.
The noble Lord, Lord Sikka, raised the point that the national insurance system is regressive. This is a matter for the Chancellor and the noble Lord has made his views on the subject very clear today.
The noble Lord also raised the issue of the cost of living, as did other noble Lords. Over the last two years we have delivered an increase of more than 5.6% to the basic and new state pension. As well as the winter fuel payment, pensioners receive a guarantee of pension credit and qualify automatically for the £140 rebate off their winter energy bill from suppliers participating in the warm home discount scheme. I will come to pension credit later in my remarks.
Older people can also benefit from the £9.1 billion that the Government will spend this year on extra measures to protect people from energy price spikes, such as the £200 energy rebate, the £150 council tax rebate and the £144 million discretionary fund available through local councils.
Pension credit came up so let me deal with that now. Pension credit would help people but, as noble Lords have said, people do not apply for it. We have to redouble our efforts to make sure that people apply for pension credit and receive it where it is due. We have undertaken a range of actions to raise awareness of pension credit, encourage pensioners to check their eligibility and make a claim. This includes the media day of action in June last year and we continue to use opportunities to promote pension credit, using proactive press activity and social media to reach potential recipients, their families and friends.
On Monday, the Minister for Pensions wrote a letter to editors of local newspapers across England, Scotland and Wales urging any readers who think they or a family member may be eligible to make a claim. There will be another day of action in June and the Pensions Minister will write to key stakeholders to seek their support for this. As well as these communication activities, we set up the pension credit working group with a range of stakeholders. It is tasked with identifying new practical initiatives that we can work on together to help pension credit take-up.
Over the last two months, more than 11 million pensioners in Great Britain will have received information about pension credit in the leaflet accompanying their annual uprating letter. It includes a prominent message that highlights that an award of pension credit not only tops up their state pension but can provide access to help with housing, heating and NHS costs and, for those over 75, a free TV licence.
Lord Sikka (Lab)
I raised a point about equality, although perhaps the Minister was coming to it; I am not sure. The Government have equalised the state pension age for men and women, but women’s state pension languishes behind men’s. Why is it not equalised? Can she undertake to give a date by which that will happen?
Baroness Stedman-Scott (Con)
I cannot undertake to say if and when that will happen, but I will write to the noble Lord and place a copy in the Library with any updated information that I can glean.
The noble Lords, Lord Sikka and Lord Shipley, raised a point about pensioner poverty. Absolute pensioner poverty, both before and after housing costs, has fallen by 200,000 since 2009.
Baroness Lister of Burtersett (Lab)
Most academics would use the relative poverty rate these days, so could the Minister give us that?
Baroness Stedman-Scott (Con)
I do not have the relative rate in front of me because the Government are using the absolute rate, but I will find out and write to the noble Baroness. The Government prefer to look at absolute poverty over relative poverty because the latter 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 fell sharply in 2021, during the pandemic.
The noble Lord, Lord Sikka, asked why we did not recycle savings in the pandemic. This Government locked down the economy to a large extent to protect our older people. That came at an enormous cost, and I therefore cannot agree with the noble Lord that the Government have not invested to protect their senior citizens.
The noble Lord, Lord Sikka, raised the issue of women and state pensions. Reforms to the state pension have put measures in place to improve state pension outcomes for most women. Over 3 million women stand to receive an average of £550 more by 2030 as a result of recent reforms.
The noble Lord, Lord Sikka, raised the point about linking the state pension to the national living wage. The national living wage and the state pension are two very different things; the national living wage is designed to protect low-income workers and provide an incentive to work by ensuring that all workers benefit from as generous a wage as possible, and the state pension is supported by further measures for older people, which I outlined earlier in my remarks.
The noble Lord, Lord Shipley, again raised the issue of fuel poverty. We know that low-income households in homes with a low energy-efficiency rating will find it harder to heat their homes, as energy costs rise. We are addressing the energy efficiency of homes to tackle fuel poverty in the long term. Right now, measures are in place to protect consumers and mitigate the effects of debt. We are providing support with energy bills this winter through the warm home discount, winter fuel payments and cold weather payments. The noble Lord asked how we were supporting pensioners with fuel poverty. As I have read out this evening, it is through the warm home discount scheme, winter fuel payments and cold weather payments.
The noble Baroness, Lady Lister, is passionate about support for parents, and has raised the point. Although we are talking about pensions in particular, I shall say, as I have said many times before, that the best way to help people out of poverty is to help them into work. Our changes to universal credit are designed to achieve that. There is also more support for childcare costs than in the tax credits system that the universal credit system replaced. Of course, there is no requirement to seek work for those with very young children.
Baroness Lister of Burtersett (Lab)
I accept that not everybody out of work is required to seek work or able to seek work, whether because of their caring responsibilities, or whatever. I asked a very specific question. The evidence is that parents and others on benefits—and this is an uprating order about benefits as well as pensions—are already cutting back to the bone and do not know how they are going to cut back further. What are they supposed to do? That is the question that I asked, and which I asked the other day in Oral Questions of the noble Baroness, Lady Scott, and I still do not have an answer.
Baroness Stedman-Scott (Con)
The noble Baroness is right to point out that there are those on low incomes who are unable to work, and I shall talk to my noble friend Lady Scott and write with actions that the Government are taking. I do not have that information to hand.
The noble Lord, Lord Hendy, and the noble Baroness, Lady Wilcox, raised the point that we are making savings at the expense of pensioners. We have increased most state pensions by 2.5% this year, when CPI in the relevant period was 0.5%. We made primary legislation to make sure that that happened, and we locked down the economy precisely to protect our older people. I cannot therefore recognise the points made by the noble Lord and the noble Baroness.
The noble Baroness rightly raised the issue of state pension underpayments. That should not happen, and we have apologised unreservedly, but I can confirm that the department has a dedicated team working on the correction activity. Sufficient additional staffing resources have been allocated to progress this activity, and further resources are being allocated through 2022-23. The Government are fully committed to ensuring that these historical errors made by successive Governments are addressed as quickly as possible to ensure that individuals receive the state pension that they are rightfully due in law.
The noble Baroness, Lady Wilcox, raised the issue of pensioner poverty for women. Reforms to the state pension have put measures in place to improve state pension outcomes for most women, and over 3 million women stand to receive an average of £550 per year more by 2030.
On the state pension underpayments, the noble Baroness, Lady Wilcox, asked, understandably, how we are prioritising cases. Resolving these errors is a priority for the department, as I have already said, and we are committed to doing so as quickly as possible. We have started reviewing cases when the individual is alive; in doing so, we are initially focusing available resources on older cases and those who we believe are most likely to be vulnerable.
I am conscious of the time. I have mentioned many things—but I hope that noble Lords will be reassured that the Government are fully aware of the concerns that people have over rising prices, and we have taken action, where possible, to help. I finish by again thanking the noble Lord, Lord Davies, for giving me the opportunity to set out the Government’s position.
Lord Davies of Brixton (Lab)
My Lords, this has been a worthwhile debate. I am conscious of the time: I could spend a lot of time rehashing all the arguments, but I am sure we will return to them. I feel this is the first of what may well become an annual event, and I look forward to future occasions. I thank my noble friends Lord Sikka, Lady Lister, Lord Hendy and Lady Wilcox, and the noble Lord, Lord Shipley, for their contributions. If the House were in a position to take a vote, the Motion would certainly be carried, but it would be meaningless in current circumstances.
I conclude by saying that I am sure the Minister had to mention the Spring Statement, but the truth is that the Spring Statement did nothing for the poorest pensioners. The whole debate has been about the poorest pensioners; there was nothing material in the Spring Statement for them. In fact, it made them worse off, by giving a further little upward shift to inflation. I thank the Minister very much for her reply, and I am sure we will continue the debate. I beg leave to withdraw the Motion.