Social Security Benefits Up-rating Order 2023
(Limited Text - Ministerial Extracts only)
Read Full debate
Viscount Younger of Leckie
That the Grand Committee do consider the Social Security Benefits Up-rating Order 2023.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
My Lords, I shall speak also to the draft Benefit Cap (Annual Limit) (Amendment) Regulations 2023 and the draft Guaranteed Minimum Pensions Increase Order 2023. All three draft instruments relate to the way in which pension and benefit rates are increased, and in my view the provisions of all three are compatible with the European Convention on Human Rights.
The Social Security Benefits Up-rating Order increases state pensions and benefits by 10.1% from April 2023, in line with the increase in the consumer prices index in the year to September 2022. The draft Benefit Cap (Annual Limit) (Amendment) Regulations also increase the four benefit cap levels by 10.1% in April 2023, in line with the increase in benefit rates. The Guaranteed Minimum Pensions Increase Order sets out the annual percentage by which the relevant part of an individual’s contracted-out occupational pension must be increased. The relevant part is the guaranteed minimum pension that was earned between 1988 and 1997. Occupational pension schemes are required to increase these, where they are in payment, by 3% for the tax year 2023-24.
By way of history and context, the Committee will know that inflation in the year to September has been the conventional measure used by Governments since 1987 in reaching a decision on how to increase the rates of state pensions and benefits. This is the latest figure that can be used to allow for the necessary operational and IT changes to be made across the DWP, HMRC and local authorities so that the new rates can come into force the following April.
This year, more than ever, it is imperative that these rates are increased so that we protect pensioners and people on low incomes. Putin’s illegal war in Ukraine and two years of a global pandemic mean that we and our partners across the G7 face levels of price inflation unprecedented in recent times. Strategically, the Prime Minister has made clear his commitment to halve the level of inflation this year, and on 9 February the Governor of the Bank of England told the Treasury Select Committee that he expects inflation to fall rapidly this year to somewhere below 5%.
More immediately, the draft uprating order ensures that state pensions and benefits keep pace with the increase in the cost of goods and services over the longer term. For this year’s uprating, the September CPI figure of 10.1% is forecast to be higher than actual inflation in the following year, but this follows two years where the opposite has been true. Using a consistent index ensures that these fluctuations even out so that state pensions and benefits retain their purchasing power over time.
In the shorter term, the Government acknowledge that further help is needed alongside the twin longer-term strategies of bearing down on inflation and uprating benefits consistently over time. The Government are therefore making provision for further cost of living payments in addition to the annual uprating. I will say more about these payments later, which I am sure the Committee realises are already well-rehearsed in this House.
Let us turn now to the detail of the draft Social Security Benefits Up-rating Order 2023. First, on state pensions, due to the Government’s commitment to the triple lock for 2023-24, the basic and new state pension will be uprated by the highest of earnings, prices or 2.5%. Consequently, as the increase in prices is the highest, state pensions will increase by September’s CPI of 10.1% for 2023-24. As a result, from April 2023 the full basic state pension will increase to £156.20 per week for an individual. The full rate of the new state pension will increase to £203.85 a week.
Other components of people’s state pension awards, such as those previously built under earnings-related state pension schemes, including the additional state pension, will also increase by 10.1%. The safety net for pensioners on low incomes, which is the pension credit standard minimum guarantee, will also increase by 10.1%, rising to £201.05 for a single pensioner and £306.85 a week for a couple.
I know that the take-up of pension credit is a matter of particular interest across the House and to members of this Committee. Noble Lords raised the matter on several occasions with my predecessor and noble friend, Lady Stedman-Scott. I thought I might share the latest position to be helpful to the Committee. Since April 2022, the Government have undertaken a substantial and sustained communications campaign to raise awareness of pension credit and to promote take-up. Since the awareness campaign began, weekly pension credit applications are on average 73% higher compared to the year before. Noble Lords will also be encouraged to learn that the latest statistics show that more households were in receipt of pension credit in August 2022 than in May 2022. This is despite the fact that the eligible population for pension credit is declining, as the new state pension lifts more pensioners above the basic level of the means test.
For those below state pension age, this order increases the personal and standard allowances of benefits, including universal credit. Noble Lords will be aware that there is no statutory requirement for the Secretary of State to increase these rates. However, to protect the most vulnerable in the current economic situation, he has decided to increase them by 10.1%, in line with the consumer prices index in the year to September 2022.
The monthly amounts of universal credit work allowances, which is the amount that a person with children or limited capability for work can earn before their universal credit payment is affected, will also increase in April by 10.1%. This too is a discretionary decision on the part of the Secretary of State. For those eligible for a work allowance who are receiving support with housing costs, the allowance will increase to £379 per month. For those eligible for a work allowance who are not receiving support for housing costs, it will increase to £631 per month.
Additionally, the order increases statutory payments by 10.1%. These include statutory adoption pay, statutory maternity pay, statutory paternity pay, statutory shared parental pay, statutory parental bereavement pay and statutory sick pay.
Turning to another important area, that of disability and carer’s benefits, the Government will continue to ensure that carers and people who face additional costs because of their disability get the support that they need. The Government recognise the vital role that unpaid carers play, and carer’s allowance will increase from April by 10.1% to £76.75 per week. Unpaid carers may also access support through universal credit, pension credit and housing benefit, all of which include additional amounts for carers.
For a single person, the carer element in universal credit will increase to £185.86 a month from April, while the additional amount for carers in pension credit and the carer premium in other income-related benefits will increase to £42.75 a week. Benefits for those who have additional costs as a result of disability or health conditions will also increase by 10.1%. These include disability living allowance, attendance allowance and PIP—the personal independence payment.
I turn to the draft Benefit Cap (Annual Limit) (Amendment) Regulations, which will also increase each of the four benefit cap levels by 10.1%. This will ensure that all households see an increase in their benefit following uprating. The national benefit cap levels will be £22,020 a year for couples and lone parents, and £14,753 for single people. For households living in Greater London the levels will be £25,323 a year for couples and lone parents, and £16,967 for single people. Just to put this in perspective, it means that households will be able to receive benefits up to the equivalent gross earnings value of around £26,500, or £31,300 in London.
Viscount Younger of Leckie (Con)
My Lords, I start by thanking the Committee in general for its overall support for these regulations. I also thank various Peers, including the noble Baroness, Lady Lister, and the noble Lord, Lord Davies, who made some very kind remarks about me coming into this particular role; I appreciate it. I was more than prepared for the fact that a good number of questions would arise from these regulations, of which there are three; I will of course do my best to answer them.
Let me start, in what I hope is not too discordant a way, by taking some issue with what the noble Baroness, Lady Sherlock, said. There is no question that there is no way in which we have played fast and loose with this; that is a bit unfair. A huge amount of thought has gone into this. I think the Committee has acknowledged that we have moved in the right direction by raising many of these benefits by 10.1%.
Baroness Sherlock (Lab)
Let me just clarify: I was not suggesting that the Government played fast and loose this year. I was talking about previous years when they broke with uprating and did not uprate at all, not this year. I am sorry if I did not make that clear.
Viscount Younger of Leckie (Con)
That is fine; I accept that. I think we can leave it at that.
I will start by tackling a couple of issues that were raised by the noble Baroness, Lady Sherlock, towards the end of her speech. She made some good points that completely chime with what the Government think. We totally understand that a number of individuals are suffering as a result of the war in Ukraine, the pandemic and cost of living issues generally. I completely acknowledge that; I hope the Committee understands that.
Let me start on why childcare has not been included; perhaps I can help. Regardless of the number of hours that they work, eligible parents can claim back up to a generous 85% of their childcare costs each month, up to the maximum amount of £646 for one child and £1,108 for two or more children. The vast majority of UC claimants receiving a childcare element do not hit the UC childcare caps. In fact, between August 2020 and July 2021, 92% of universal credit claimants receiving a payment for the UC childcare element were eligible to receive the full 85% of their childcare before the earnings taper.
So we believe that our policy provides fairness in the welfare system between those receiving out-of-work benefits and those in work by putting in place a reasonable cap on the childcare costs that a household can have reimbursed through UC, in each assessment period. We believe that the childcare policy aligns with the wider government free childcare offer in England and our similar funded early learning offers in the devolved nations. We keep childcare under review. We know that childcare costs are extremely high; I am certainly aware of that. I cannot add anything more to that, only that the Committee should be aware that we are aware of these issues. I will stick with that.
Secondly, the noble Baroness, Lady Sherlock, raised a perfectly reasonable point about food back usage. I am aware from a previous Oral Question in the Chamber of various Peers’ strong concerns and the comments that have been made. I chime with those as well. As the noble Baroness knows, food banks are independent, charitable organisations and our department does not have a role in their operation. What she and the Committee should know is that we are looking to give some feedback from a series of questions posed by the Family Resources Survey. We hope that these will be published next month and will give the Government some idea about usage. It is very much our wish that food banks are not needed. We need to continue to work as hard as we can to look at the reasons behind their usage. We can all guess what they are; I have given some flavour of that this afternoon.
On the same theme, I will touch on inflation. This leads to a number of important points raised by noble Lords, in particular the extremely good point from the noble Baroness, Lady Lister, on the increase in food prices. We are all concerned about the price of certain food items rising particularly steeply. Like many countries around the world, and as the noble Baroness knows, the UK faces the challenge of high inflation. We will continue to provide support through cost of living payments, which have been well rehearsed in this Committee and in the Chamber, while increasing state pensions, benefits and the benefit cap levels by 10.1%.
To help the Committee, the CPI stood at 10.1% for the 12 months to January 2023, down from 10.5% in December. This monthly decline was principally driven by lower rises in motor fuel. The Bank of England predicts that the CPI will continue to fall. The OBR states that government action has limited the severity of the recession and protected 70,000 jobs, and that it will take 3.4 percentage points off inflation by the end of March. This will contribute to a fall in inflation, which, as the Prime Minister has said, is expected by mid-year.
This leads quite neatly on to some of the points raised by the noble Baroness, Lady Lister, and the noble Lord, Lord Davies. To paraphrase, the general gist of their question was: why can we not uprate more frequently using a more up-to-date CPI figure? That is a fairly reasonable question. The Secretary of State undertakes an annual review of benefits and pensions. As I mentioned earlier, the CPI in the year to September is the latest figure that the Secretary of State can use. This is crucial to allow sufficient time for the required operational changes before new rates can be introduced at the start of a new financial year.
All benefit uprating since April 1987 has been based on this particular timing. Given the volumes involved, the technical and legislative requirements and the interdependencies across government, we state very firmly that it is not possible to undertake the uprating exercise any later than currently timetabled. I do not say this to be particularly cheeky but I wonder whether the comments might not have been quite so critical of this timing issue for the higher uprated figure had there been real evidence today of a much lower level of inflation, so all those people would be getting more than the level of inflation—perhaps I should not go there.
I turn to the local housing allowance—the LHA—which was raised by the noble Baroness, Lady Lister, and others; yes, we had 10 minutes on this in the Chamber earlier. I am not sure that I can really add to what I have said. I genuinely believe that the £1 billion that we invested in 2020 to provide support for private renters by increasing the rate to the 30th percentile was the right thing to do. It is a fact that it has been frozen but it is also a fact that the discretionary housing payments—DHPs—and homelessness protection grants are helpful. I say again that we believe it is right that we defer to local councils and local authorities to make the right decisions in terms of how to target the funds that we have given them, including to people who are generally suffering and are on the lowest incomes. It is up to them to decide what to do.
Baroness Lister of Burtersett (Lab)
Perhaps I can ask again the question that I asked this afternoon but in a slightly different way. Let us take somebody whose local housing allowance is well below the rent that they are paying and they are on benefits. They are probably struggling anyway because, as we have heard, benefits have been cut in real terms in recent years—if benefits had not been cut since 2010, people might have been in a better position that they are to withstand the current cost of living crisis. Let us say that they also live in an authority where the local housing allowance budget is under great strain; according to Shelter, some authorities are really struggling because demand is so high. What is the Minister’s advice to them? What should they do? There is no point saying, “Go to the local authority”, because there may not be any money there.
Viscount Younger of Leckie (Con)
I take note of that; I am certainly not dismissing what the noble Baroness says. It is a legitimate point that she raises. I hope, though, that she will acknowledge that it is right that the money we give is properly targeted to those who are in genuine need. I would like to hear of issues where they are not particularly targeted. If the money is going to people who do not need it, that is an issue, but the main thing is that the money should go to people who are genuinely in need. However, it does not just rely upon that; it relies upon the other initiatives that I have already mentioned.
To pick up on what the noble Baroness said in her remarks, the local housing allowance rates are not intended to meet all rents in all areas. In areas where rents are more expensive, those in receipt of benefits have to make the same decisions about where to live as those not claiming benefits. May I just leave it that we probably will not agree on this and that I will take away what the noble Baroness has said? It is important, I acknowledge, that local authorities follow through and give support to those who are in genuine need in all areas.
I will move on to the transitional element—that is, the uprating and the link to universal credit and transitional protection, which was raised by the noble Baroness, Lady Lister, and the noble Lord, Lord Davies. As they know, TP provides eligible claimants time to adapt to UC by protecting entitlement at the point of migration to universal credit. TP is neither intended to replicate permanently nor be an indefinite increase in benefits. I therefore acknowledge that it erodes. This ensures that UC entitlement for those managed migrations will gradually align with new claimants in the same circumstances. The noble Lord, Lord Davies, asked how many people will see a less than 10.1% increase due to the interaction with transitional protection; I will need to write to him on that point.
Baroness Lister of Burtersett (Lab)
I asked that question as well. Will the Minister write to me about how many will be affected? I had hoped that he might be able to bring those figures today.
Viscount Younger of Leckie (Con)
If I had been given advance notice of the questions, I might have been able to.
Baroness Lister of Burtersett (Lab)
The noble Viscount was. I am sorry but the very reason I raised it with him earlier this week was so that it might be possible to bring the figures today.
Viscount Younger of Leckie (Con)
In which case, I apologise. I would normally take note and come back with some answers. Of course I will include the noble Baroness; in fact, I will include any Peer who has taken part in this debate in my letters about anything that I am not able to answer.
The noble Lord, Lord Davies, and the noble Baroness, Lady Sherlock, said that the Government need to be clear about why we are raising the guaranteed minimum pensions by 3%. For the pre-2016 pensioners, the Government meet the difference; for post-2016 pensioners, we do not—however, these people benefit from transitional protection. I hope that gives some form of an answer.
The noble Baroness, Lady Sherlock, raised communication. A fact sheet covering the policy change was published on GOV.UK in August 2021—I see that she is nodding at that—which invited people to write to the department if they wanted an explanation of how they had been affected by the policy change. One request for compensation has been received so far, which is interesting. As of 25 January, we do not yet know the outcome of that claim, but I hope that provides an answer.
The noble Baroness also asked about the benefit cap increase linked to child poverty. As she will know, the Government are fully focused on tackling the root causes of poverty, such as children’s education and parental worklessness, to improve the lives of people in our country. She will know that the best way of doing that is for us to have a strong economy and get people into work. As mentioned earlier, the proposed levels will mean that households will be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London.
The noble Baroness, Lady Lister, asked about low pay and whether the Low Pay Commission—the LPC—would include in its deliberations the adequacy of benefit rates. I thank the noble Baroness and will draw the Treasury’s attention to that.
There are a number of other questions that I need to answer, but we probably need to draw a halt, as time is running short.
Baroness Janke (LD)
Please can I have some answers to my questions, perhaps in writing?
Viscount Younger of Leckie (Con)
Yes, of course. To conclude, I beg to move.