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(8 months, 1 week ago)
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Arrangement of Business
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The Deputy Chairman of Committees (Lord Ashton of Hyde) (Con)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Human Medicines (Amendments Relating to Coronavirus and Influenza) (England and Wales and Scotland) Regulations 2024
(8 months, 1 week ago)
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Lord Evans of Rainow
That the Grand Committee do consider the Human Medicines (Amendments Relating to Coronavirus and Influenza) (England and Wales and Scotland) Regulations 2024.
Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee
Lord Evans of Rainow (Con)
My Lords, these important regulations were laid before the House on 10 January 2024 and I am grateful to be leading the debate on them.
In autumn 2020, in response to the Covid-19 pandemic and following a public consultation, the Government introduced several temporary amendments to the Human Medicines Regulations 2012 to support the deployment of Covid-19 and flu vaccinations. The instrument we are debating today seeks to amend the temporary provisions in the Human Medicines Regulations—Regulations 3A, 19 and 247A—in order to maintain these provisions and support the ongoing delivery of Covid-19 and influenza vaccinations.
I will briefly set out what each of these regulations does. Regulation 3A enables trained healthcare professionals or staff under the supervision of healthcare professionals to conduct the final stage of assembly, preparation and labelling of Covid-19 vaccines, without requiring additional marketing authorisations or manufacturers’ licences, provided that vaccines are supplied under NHS arrangements or by suppliers of medical services to His Majesty’s Armed Forces. The measure also allows for the reformulation and reassembly of authorised Covid-19 vaccines without the need for additional marketing authorisations.
Regulation 19 has enabled Covid-19 and flu vaccines to be moved safely between premises by providers operating under NHS arrangements or suppliers of medical services to His Majesty’s Armed Forces without the need for a wholesale dealer’s licence. Regulation 247A provides a mechanism to expand the workforce who are legally and safely able to administer a Covid-19 or flu vaccine without the input of a prescriber, using an approved protocol. Regulations 3A and 19 have sunset provisions, which mean that they will cease to have effect on 1 April 2024 unless they are extended. Regulation 247A is permitted for use only during a pandemic.
These regulations play a vital role in both the Covid-19 and the flu vaccination programmes. The measures have helped enable Covid-19 and flu vaccines to be safely deployed at speed and scale. They have also ensured that there is sufficient workforce available to administer vaccines.
The Government are committed to protecting people who are most at risk of Covid-19. We are guided by the independent Joint Committee on Vaccination and Immunisation in our approach. While for most people Covid-19 is thankfully a much less serious risk than it was when these regulations were first enacted, vaccines remain the most effective line of defence for those at greatest risk from the Covid-19 virus. In the latest autumn vaccination campaign, more than 11.8 million Covid-19 vaccines were administered by NHS England in the period after national bookings opened on 11 September last year. In addition, over 18 million flu vaccinations were administered in England during the latest autumn campaign, with over 4.5 million people receiving their flu and Covid-19 vaccinations at the same appointment.
Given the continuing importance of these vaccination programmes in protecting public health, the Government have engaged widely to determine whether to retain the provisions in the Human Medicines Regulations beyond their current period. Following initial engagement with key stakeholders, including NHS England, the Government ran a public consultation, from 7 August to 18 September 2023, on proposals to temporarily extend these regulations until 1 April 2026 while a permanent solution is developed. For Regulation 247A, this also involves removing condition A from the regulation, which requires there to be a pandemic. This proposal was based on feedback, including from NHS England, that without these regulations the Covid-19 and flu vaccination services would be negatively impacted and could not continue to be delivered at the scale required. Overall, from the 220 respondents to the consultation, a high level of support was shown for these proposals across all nations.
For Regulation 3A, 89% of respondents agreed that the regulation should be extended. The flexibility provided by this provision continues to play an important role in the Covid-19 vaccination programme due to the supply chain arrangements and the way in which the vaccinations are packaged. Covid-19 vaccinations are not available as a pre-filled syringe and so each vaccine administered continues to require final-stage preparation before administration to patients. The consultation found that the flexibilities have allowed for the safe assembly and preparation at the pace and scale required within the programme. It also found that Regulation 3A improves the operational delivery of Covid-19 vaccines through a safe and effective framework, increases efficiency within the system and allows for delivery at scale, in turn helping to improve access and more effectively using the workforce.
There was also a high level of support in the consultation response for the proposal to extend Regulation 19, with 91% agreeing that this regulation should be extended. Many respondents had commented that, due to vaccines being more easily moved between sites, vaccine wastage had been reduced, helping to reduce the environmental impact of our vaccination programmes—something that we are obviously keen to encourage. At the same time, these regulations were found to have brought about a more efficient use of resources and improved patient access to vaccines, including through co-administration. As I mentioned, 4.5 million people had both their Covid-19 and flu vaccinations at the same time during the last autumn campaign.
For Regulation 247A, a similarly high level of support was seen in the consultation responses: 82% agreed with the proposal to remove condition A from the regulation, which requires there to be a pandemic to be used, and 82% also agreed that this should be time- limited to April 2026. Many respondents cited that Regulation 247A provided a safe and effective mechanism to improve the delivery of Covid-19 and flu vaccines during the pandemic. The measures were also found to have played an important role in reducing workforce pressures, facilitating an increase in the capacity to deliver hundreds of millions of Covid-19 and flu vaccinations and releasing qualified healthcare professionals to deliver other care across the system.
The temporary amendments to the Human Medicines Regulations have been and continue to be vital to the successful delivery of the Covid-19 vaccination programme. To not extend these provisions would have a significant impact on the delivery of current vaccination programmes. Without these provisions, some NHS vaccination activities would need to cease, which would likely have a negative impact on the uptake of these vaccinations.
Therefore, the Government propose to temporarily extend the provisions provided by these regulations to 1 April 2026, while a more permanent solution is developed. In the case of Regulation 247A, the Government also propose to remove the requirement that there should be a pandemic or imminent pandemic when the medicine is supplied. I beg to move.
Lord Allan of Hallam (LD)
My Lords, the instrument seems entirely sensible and I suspect that many of us who have come here to debate it will join in a chorus of approval. I had anticipated that some people might have been here to talk about the evils of emergency regulation, which we are, in a sense, extending today, or even the evils of vaccination programmes—we would have had a lively debate around that. However, it seems that we are only going to be talking about the specific matters before us in the regulations, which is helpful.
It begs the question, which the Minister opened up in his introduction, of what the Government’s plans are for the longer term. The Government essentially face a choice: they can decide to have a single-tier system for the regulation of vaccination programmes, or a two-tier system, of which there are two variants.
The single tier would be that the additional flexibility that has been introduced should apply to all vaccines all the time. I can see that there might be a case for that. The Minister has explained why the Government feel confident that lifting some of the requirements on preparation and licensing for warehousing et cetera has been beneficial. That begs the question: if it is beneficial here, could that be safely changed for all vaccines all the time? Those are the first two parts of it—Regulations 3A and 19(4)(a) to (4)(c).
The second regulation the Minister referred to was Regulation 247A on who can deliver vaccines and making the most of the workforce. I can see that there may be a case for one of the following variants of the two-tier system. The first would be to have a set of criteria to decide when an epidemic is sufficiently serious that we are willing to introduce the extra flexibility. That would be a pandemic-targeted measure. If the Government are thinking in those terms, I hope that we can get on with it rather than waiting until we have a pandemic and going back to having emergency legislation.
If we have a choice between pre-planned legislation and emergency legislation, I think we in this House would always prefer pre-planned. We have a known unknown; we do not know what the new pandemic might look like, but we know that we are likely to get something that requires a mass vaccination programme. If there are criteria for when that programme would kick in in an emergency epidemic situation, it would be helpful if the Minister could give some indication of the Government’s thinking on that.
The second model would simply be that, when a vaccination programme is too big, we have an expanded workforce. The inclusion of influenza takes us into that territory. The influenza vaccine is not in response to a pandemic; influenza is an annual epidemic. Essentially I hear the Minister to be saying that we could not deliver all the flu vaccines we want to deliver without the relaxed model that the pandemic opened up for us in relation to the personnel who can deliver vaccines. If that is the case, it would make sense to get on with it and say that the criteria are that, once we need to deliver more than X million vaccines, we will move to the regime where a larger range of vaccinators can deliver them. It would make sense to do that in a planned way rather than as a reactive measure.
I want to raise another point with the Minister, which I hope he might be able to help us to think about. Do the Government have research under way into the different approaches? Whenever we are thinking of vaccination programmes—I am firmly in the pro-vax camp, if there is such a thing—overriding all this is that patient safety remains critical. If you support vaccination, you are very strongly motivated to make sure that the evidence is there to prove that it is safe.
Through the pandemic we were all part of a wonderful experiment. This is probably the single best-recorded health event in human history, which enables people to study all the different variations. I was jabbed by a soldier in uniform, by my GP, and by a pharmacist. We have had an incredible array of different models for delivering vaccination, not just in the UK but in lots of other countries. My assumption is that clever academics and epidemiologists are studying the cost benefits of all those different models and that that information can be used to inform which future models we want. I hope that the long-term successor regime we will have after 2026 will be informed by that. Does the Minister have any insights into that, and can he give us any pointers, or at least assure us that this kind of research is taking place, so that when we finally settle on a post-2026 regime it will be informed by the evidence?
I am thinking of the debate yesterday and looking across at the noble Baroness, Lady Merron. When I am talking about post 2026, perhaps I ought to direct some of my questions to the Labour Front Bench as well. This year, I might get into the habit of saying, “The Minister and the noble Baroness, Lady Merron”. If they have any thinking on the post-2026 vaccination regimes, it would be helpful to hear that.
Those are my points. Can the Minister give us any insights into the Government’s thinking about whether they are tending towards a single-tier regime with more flexibility for all vaccinations, or a two-tier regime based on the criteria of emergency or simply of scale, so that vaccination programmes larger than X are delivered in a different way from smaller vaccination programmes?
There is also that question about the research. I would like some assurance that we are trying to get some kind of silver lining from the cloud of Covid by taking all the wonderful data we have collected and ensuring that the future efforts we have to make are informed by our experience of the efforts of those incredible teams of vaccinators of all sorts who have been working busily on these programmes over the last three years or so.
Baroness Merron (Lab)
My Lords, our health and care staff, scientists and others in public services, and those who volunteered, did so much to keep the public safe and to vaccinate millions across the country as quickly as possible to save lives and drive down cases of Covid-19. They finally allowed us to end lockdowns and reclaim our lives, and I pay tribute to them all.
I thank the Minister for setting out today the provisions of these regulations, which are to update legislation pertaining to the movement and supply of Covid-19 and influenza vaccines. The changes, as he said, seek to extend the sunset clauses of Regulations 3A and 19 to 1 April 2026 and to alter Regulation 247A to extend its provision, also until 2026, instead of the current restriction on its use to being only during a pandemic. Extending these provisions, which will also allow the NHS to continue to use an expanded workforce, is important to continuing to allow the deployment of safe and effective Covid-19 and influenza vaccines at the pace and scale required to keep us all protected. The draft regulations aim to build on the work of the Covid-19 vaccine rollout across the country, and we certainly support them.
As the Minister said, the consultation last year confirmed that the provisions have found considerable favour with stakeholders in the health and care sector. Regulation 247A appears to have reduced workforce pressures while increasing flexibility in the workforce and providing opportunities for career progression. On all fronts, that has to be a good thing.
I note that the impact assessment highlights the positive expected value of these regulations and concludes that vaccinations are a powerful and beneficial tool in tackling viruses and diseases such as influenza and Covid-19. The impact assessment also refers to the work to move towards a permanent approach, which will likely alter these provisions again in the future. Can the Minister provide noble Lords with more detail about the progress the department has made in its planning for a more permanent approach?
The important matters of vaccine take-up, hesitancy and misinformation have of course come to the fore of late, given the recent measles outbreak across the country. All these matters have impacted in that too few have been protected against a potentially deadly virus. I recently asked the noble Lord, Lord Markham, as the Minister in the Chamber, about using pharmacists to vaccinate against measles through the delivery of the MMR vaccine, which he welcomed. I wonder whether the Minister today could undertake today to let me know what response the department gave to my suggestion. I appreciate that I had directed that question to the noble Lord, Lord Markham, but I am sure that the Minister will be able to assist, even if it is after this debate.
The Government have been called on to extend this winter’s Covid vaccination booster programme to 12 million people in the 50 to 64 age cohort. Can the Minister explain why the provision was not extended to that age cohort? What is the assessment of the impact of this on the health of both that group and those beyond it? Can the Minister share any details about whether and when Covid-19 vaccinations will be available privately?
Last winter, influenza admission rates were 2.6 times higher for those who live in the most deprived areas than for those who live in the least deprived areas, while Covid-19 admission rates were 2.1 times higher. The rate of emergency hospital admissions for influenza was 1.6 times higher for black British people and other minority ethnic groups than for white ethnic groups. What are the Government doing to address these inequalities?
Finally, can the Minister confirm what the Government are doing to tackle the vaccine misinformation that continues to be shared so widely across the country? As I said, we support this draft statutory instrument so that we can ensure the supply, and improve the take-up of, safe and effective Covid-19 and influenza vaccines at the pace and scale required.
Lord Evans of Rainow (Con)
My Lords, I am most grateful to noble Lords; in closing, I thank all noble Lords for participating in this debate. We always have healthy questions and, I hope, answers in this Room.
Extending these provisions will ensure that the important flexibilities established by these regulations are maintained, thereby supporting the continued safe and effective deployment of Covid-19 and flu vaccines to the pace and scale required. The Government will continue to work with system partners to consider fully a long-term mechanism to support the delivery and administration of Covid-19 and flu vaccines. This process is already under way; any new measures will of course be subject to public consultation. However, in the immediate term, given the high level of support expressed in the consultation, there is an ongoing need to support the continued safe and effective supply, distribution and administration of Covid-19 and flu vaccines by maintaining the existing provisions provided by these regulations to April 2026.
Let me answer to the specific questions that I was asked by the noble Lord, Lord Allan of Hallam and the noble Baroness, Lady Merron. They asked what the longer-term plans are for these regulations. It is important that we retain current flexibilities to continue to protect those at greatest risk, but we agree on the importance of long-term solutions, working with the system partners to undertake a fuller consideration of long-term plans. We do not want to pre-empt that process but can confirm that we will be informed by a full consultation, including in the House. We will certainly have opportunities to discuss this issue at length.
The noble Lord, Lord Allan, talked about his experience during Covid, as I presume most of us in this place experienced. He mentioned that he had injections from a solider, a nurse and another person, indicating that he had three injections. I remember, from my experience before I came to this place, how successful it was. It was a very British experience: it was in a community hall, with which we are all familiar, and a car park. We all queued in the rain, very British-like, ready to go in. We were met and greeted by volunteers; that was the first thing I noticed. The local CCG banners were around; it was very orderly and very dignified—very British. From what I remember, there was no soldier; they were NHS personnel, clearly identified, and we were all sifted through. The lessons that I took from it were that it is local but also national, and it is about volunteering as well. We have to work together on this, with government, local NHS provision and good vaccine provision working together, but you are reliant on volunteers to do it. In my experience, it worked very well.
As for who can deliver the vaccines and the flexibilities, as I indicated, in my experience and that of the noble Lord, it is healthcare professionals who deliver them. We discussed this yesterday in the Chamber, and the noble Baroness mentioned pharmacists. It is clear that other qualified and well-trained individuals, under supervision from healthcare professionals, can and should be able to do this. The lesson learned is that you can extend the number of individuals under supervision —who are very well trained—to make sure that there are no bottlenecks and you can open it up. That is the big lesson we can take from Covid.
This was introduced after the initial planning and preparation for a flu pandemic in 2016 so, on the noble Lord’s point about preferring to have pre-planned systems—the known unknowns, as he said—we have to be mindful of the unknown unknowns. We planned for influenza, not Covid-19. We in this House and elsewhere try our best to plan for the future but it is difficult. However, we can certainly learn from that and, as the noble Lord said, this has been well documented for the Government and the nation. So we have to learn the lessons from the planning for influenza from 2016 to 2019—only three years. God forbid that we have another pandemic, but we hope we will know about that. It is about making provision so that we can extend the workforce to deliver those vaccines.
On the specific question that the noble Baroness asked my noble friend Lord Markham, I will endeavour to get a specific answer if she has not already received one. She talked specifically about MMR, which we discussed previously. Some communities are perhaps vaccine-reluctant, for whatever reason. We mentioned that, in the black and ethnic minority communities, social deprivation has a lot to do with it in certain areas of the country—inner cities—as does misinformation.
Both the noble Lord, Lord Allan of Hallam, and the noble Baroness, Lady Merron, mentioned disinformation, which we have talked about before. Social media has a positive effect on our lives but, unfortunately, it is very easy to develop conspiracy theories from it. The Government are committed to tackling Covid-19 vaccine misinformation. At a national level, the Government, NHS England and UKHSA work together to create a range of personalised and accessible communications from trusted sources to maximise awareness, understanding and confidence in vaccines. At a local level, the NHS works with community leaders to design bespoke materials and services suited to their local populations, which may include outreach initiatives aimed at improving confidence and trust in the vaccines.
The conspiracy theories come from all sorts of places. The vaccines are perfectly safe. There may be occasions when individuals have allergic reactions to them, but this does not mean that people should not be vaccinated or that your children should not be vaccinated for MMR. I am afraid that one of the battles of the 21st century is trying to make sure that that disinformation does not have a detrimental effect on our children.
On what the Government have been doing, over 149 million Covid-19 vaccination doses were administered in England between December 2020 and 2023. This has saved tens of thousands of lives, significantly reducing the pressure on the NHS and allowing the economy and society to reopen. Since 11 September, when the latest autumn booster programme commenced, more than 11.8 million Covid-19 jabs have been delivered, providing vital protection to those at greater risk of severe illness.
To summarise, I believe that the long-term plan is to give that flexibility proactively. We cannot predict the future, but we can certainly learn from Covid-19, from 2020 to 2022, that the ability to expand a vaccine and its administration is critical, getting it in the right place at the right time. On the question asked by the noble Baroness, Lady Merron, about hard-to-reach communities, it is about communication and going through community leaders, but it is also about having the wherewithal so that people are not suspicious of going to a local community hall, where they will be welcomed by volunteers perhaps and injected by the appropriate people. We hope that can wear down this reluctance to take up life-saving vaccines.
Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024
(8 months, 1 week ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, these two sets of regulations are made each year to set the national insurance contributions—NICs—rates, limits and thresholds and to update tax credits, child benefit and the guardian’s allowance. First, the Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024, which I will refer to, if I need to, as the social security SI, sets the NICs rates, limits and thresholds of a number of NICs classes for the 2024-25 tax year with all limits and thresholds remaining fixed at their existing level. The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund, if required for the same tax year, which is a transfer of wider government funds to the National Insurance Fund, and for the veterans employer NICs relief to be extended for a year until April 2025. The scope of the regulations under discussion today is limited to the 2024-25 tax year.
NICs are social security contributions. They allow people to make contributions when they are in work and to receive contributory benefits when they are not working—for example, after they have retired or if they become unemployed. NICs receipts fund these contributory benefits, as well as supporting funding the NHS.
I will begin with NICs for employed and self-employed people. The primary threshold and lower profits limit are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. At Autumn Statement 2022, the Government announced their intention to maintain the primary threshold’s alignment with the income tax personal allowance, with both rates being fixed at £12,570 until 2028.
Fixing the primary threshold at £12,570 does not affect an individual’s ability to build up entitlement towards contributory benefits, such as the state pension. For employees, this is determined by the lower earnings limit, which will remain at £6,396 per annum or £123 per week in 2024-25, and for self-employed people by the small profits threshold, which will remain at £6,725 in 2024-25. Fixing these thresholds will mean that more low-earning working people will gain entitlement to contributory benefits and build up qualifying years for their state pensions.
The upper earnings limit, the point at which the main rate of employee NICs drops to 2%, and the upper profits limit, the point at which the main rate of self-employed NICs drops to 2%, are aligned with the higher rate threshold for income tax at £50,270 per annum. It was announced previously that these thresholds would be fixed until April 2028 as part of the Government’s commitment to supporting the public finances.
These decisions are starting to pay off, with inflation falling, growth more resilient than expected this year and debt forecast to reduce. This makes it possible to return some money to working taxpayers, while keeping the public finances on track. As part of the Government’s long-term plan to grow the economy and reform the tax system, we are cutting taxes for 29 million working people. From 6 January 2024 onwards, the main employee rate of national insurance contributions was cut from 12% to 10% and, from 2024, the main rate of class 4 NICs for the self-employed will be reduced from 9% to 8%. These cuts have already been legislated for.
At Autumn Statement 2023, the Government also announced that, from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay class 2 but will continue to accrue and receive access to contributory benefits, including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the state pension, through a national insurance credit, without paying NICs as they currently do. Those with profits under £6,725 who choose to pay class 2 NICs voluntarily to get access to contributory benefits, including the state pension, will be able to continue to do so.
Turning to employer NICs, the secondary threshold is the point at which employers start paying employer NICs on their employees’ salaries. At Autumn Statement 2022, the Chancellor announced that this threshold will remain at £9,100 in 2023-24 and will be fixed at this level until 2028. This supports the public finances while ensuring that the largest businesses pay the most. The employment allowance, which the Government raised from £4,000 to £5,000 in April 2022, means that the smallest 40% of businesses with an employer NICs liability pay no employer NICs at all. The employment allowance supports our smallest businesses to grow by helping them with employment costs. The thresholds for employers of employees eligible for NICs relief—the relief for employers of under-21s, under-25 apprentices, veterans and new employees in freeports and investment zones—have also been fixed in these regulations at their 2023-24 levels.
The majority of national insurance contributions are paid into the National Insurance Fund, which is used to pay state pensions and other contributory benefits. The Treasury has the ability to transfer funds from wider government reserves into the National Insurance Fund. The regulations also therefore make provision for a transfer of this kind, known as a Treasury grant, of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2024-25. A similar provision will be made in respect of the Northern Ireland National Insurance Fund. The Government Actuary’s Department report, which was laid alongside these regulations, states that the Treasury grant is not forecast to be required in 2024-25, so it is being legislated for as a precautionary measure, because the Government consider it prudent to make provision at this stage. This is consistent with previous years.
The regulations also make provision for the NICs relief for employers of veterans to be extended for a year until April 2025. This measure means that businesses pay no employer NICs on salaries up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role. This relief is part of the Government’s commitment to make the UK the best place in the world to be a veteran and it is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer.
I will refer to the second statutory instrument, the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024, as the “tax credits SI”. The Government are committed to delivering a welfare system that is fair for claimants and taxpayers, while providing a strong safety net for those who most need it. These regulations will ensure that the benefits for which Treasury Ministers are responsible and that His Majesty’s Revenue and Customs delivers are uprated by inflation, in April 2024. Tax credits, child benefit and guardian’s allowance will increase in line with the consumer prices index, or CPI, which had inflation at 6.7% in the year to September 2023. Uprating by the preceding September’s CPI is the Government’s typical approach.
In summary, the proposed legislation fixes all the limits and thresholds for NICs at their 2023-24 levels for the 2024-25 tax year. It makes provisions for a Treasury grant, extends NICs relief for veterans’ employers and increases the rates of tax credits, child benefit and guardian’s allowance in line with prices. This legislation enacts announcements from the Autumn Statement and previous fiscal events. I beg to move.
Baroness Lister of Burtersett (Lab)
My Lords, I will make a couple of brief points about child benefit. While of course I welcome the inflation-proofing after all the speculation there has been about it, it is important to put on record that it still represents a cut in the real value of child benefit since 2010, according to the Child Poverty Action Group, of which I am honorary president. Even allowing for this uprating, child benefit needs to rise by 25% to restore its real value.
I can remember when child benefit was introduced. I was working at the Child Poverty Action Group at the time, and child benefit replaced personal tax allowances as well as the family allowance. The Conservative Party then accepted the argument that child benefit should be thought of as, in effect, a tax allowance for children and treated the same as personal tax allowances. An increase in the real value of child benefit now could represent an effective way to target a tax cut on those below the tax threshold, whose needs are the greatest. Given that there is all this speculation about tax cuts, that would be my recommendation.
I realise that this is not part of the SI that we are debating, but the speculation that the Chancellor is also looking, for the Budget, at the high-income charge on child benefit is relevant. The threshold has not been uprated since the charge was introduced in 2013, so fiscal drag means that a growing number of basic rate taxpayers are now affected, whereas it was originally intended purely for those who are considered better off. Could the Minister give us an update on the numbers who have been pulled into the charge—perhaps not now, because I recognise that she may not have the figures here, but in a letter, because it would be good to know where exactly we are at?
Personally, I would like to see the end of the high-income charge on child benefit, because it compromises important principles of universality in child benefit and of independent taxation, as the Women’s Budget Group pointed out. At the very least, the threshold should be restored to its original value. I hope the Minister will convey that message to the Treasury.
Lord Sharkey (LD)
My Lords, I will speak first to the draft social security contributions SI. Let me say at the outset that we support this instrument. However, we regret the announcement in the 2022 Autumn Statement that all NIC rates that are in line with income tax will be fixed at the 2023-24 levels until 2027-28.
This instrument is simply part of the long and damaging freeze of all the main personal tax thresholds across the entire period of the OBR forecast. HMT’s policy paper of 21 November 2022—Income Tax Personal Allowance and the Basic Rate Limit, and Certain National Insurance Contributions Thresholds from 6 April 2026 to 5 April 2028—is relevant here. The paper notes the fixing of thresholds up to and including the 2027-28 tax year, after which the default position is that they will rise by CPI inflation. It then goes on to say:
“This measure is expected to bring 92,000 individuals into Income Tax and 55,000 into paying NICs by 2027 to 2028”.
It also asserts:
“This measure is not expected to impact on family formation, stability or breakdown”.
These are very strong assertions. Can the Minister set out the evidence for them?
Lord Livermore (Lab)
My Lords, in the 2022 Autumn Statement, the Chancellor announced that national insurance contribution thresholds that are in line with income tax will be fixed at their 2023-24 levels until 2027-28. As the Office for Budget Responsibility pointed out at the time, the freeze to national insurance thresholds and limits meant that
“all the main personal tax thresholds are now frozen in cash terms across our entire forecast period”
through to 2027-28.
Those freezes to allowances, limits and thresholds provide the context for the debates that we now frequently have about the rising tax burden. As Paul Johnson from the Institute for Fiscal Studies said, the changes made at the 2023 Autumn Statement
“won’t be enough to prevent this from being the biggest tax-raising parliament in modern times”.
The fact is that, after 25 tax rises in this Parliament alone, the tax burden remains on course to reach its highest-ever level at least since the Second World War. One of the central reasons for that is the freeze on income tax and national insurance thresholds through to 2027-28. This fiscal drag means that, on average, personal taxes will go up by £1,200 per household even after the 2% cut to national insurance.
To take one example, the impact of the Government’s freezes to thresholds on low and middle earners is stark. As the noble Lord, Lord Sharkey, mentioned, consumer finance expert Martin Lewis recently said that, even with the reduction in national insurance, people on incomes of between £12,500 and £26,000 will be worse off, looking at this year in isolation, as a result of threshold freezes and fiscal drag. Does the Minister agree with Mr Lewis on that point?
The Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations set the annual rates of working tax credit and child tax credit and the weekly rates of child benefit and guardian’s allowance for the coming financial year. Amid a damaging cost of living crisis, we support the increases, as any help for people who are struggling in the face of persistently high energy, food and housing costs is particularly needed. It is welcome that these social security payments are being uprated by the usual amount, September’s inflation figure. Months of uncertainty about the Government’s plans caused enormous anxiety at a time when household budgets were stretched to breaking point.
My noble friend Lady Lister spoke expertly about child poverty, as she always does. We know that 8 million households received their final means-tested cost of living payment this month. That support has been critical for millions across this country, including many children. I would therefore be grateful if the Minister could say what assessment the Government have made of the impact that the end of the cost-of-living payment will have on levels of child poverty.
Baroness Vere of Norbiton (Con)
I am grateful to all noble Lords who have taken part in this short debate today. I will try to get through as many questions as possible—there are definitely one or two to which I do not currently have the answer, but I will do my best.
Turning to the points raised by the noble Baroness, Lady Lister, I recognise that she has been working in the field of child poverty, child benefit and child benefits more broadly for a long time and brings with her an awful lot of expertise. She focused very much on child benefit. I would say that child benefit is just one of many interventions that the Government can and do make to help families. There is a range of different supports, and she will have seen that at spring Budget 2023, the Chancellor announced that the Government will extend the free hours offer so that eligible working parents in England will be able to access 30 hours of free childcare per week for 38 weeks per year from when their child is nine months old to when they start school.
So it is not only about cash payments which come in the form of child benefit; and it is also the case that, looking at where we are now compared with where we were back in 2010, for example, we have made progress on poverty. The Government feel that the best way to get people—and children in particular—out of poverty is by living in homes where people are able to work. We know that there are now just under 1 million vacancies, and our approach is very much to try to get people into work, particularly full-time work, to reduce the risk of poverty. That is why our intervention in childcare is so important. We know that in 2021-22, children living in workless households were five times more likely to be in absolute poverty after housing costs than those where all adults worked. The latest available data shows that in 2021-22, there was only a 5% chance of children being in absolute poverty after housing costs where both parents worked full time, compared with 52% where one or more parents in the couple was in part-time work only. That is why our focus on all sorts of different interventions to support the family is really important.
The latest statistics show that, in 2021-22, there were 1.7 million fewer people in absolute poverty after housing costs compared with 2009-10, including 400,000 fewer children. We are heading in the right direction but, of course, we must continue to do further work in this area. I welcome the work that the Government have done on universal credit: it is a very good set of reforms that endeavours to support people when they need it most to help them back to work.
The noble Baroness, Lady Lister, mentioned the high-income child benefit charge. I am pleased that she agrees about the principle of individual taxation—I know that many people would like to put it on household income, but that would mean a change of thinking at the Treasury about how one taxes individuals. The adjusted net income threshold of £50,000 ensures that the Government support the vast majority of child benefit claimants. I will write to the noble Baroness if I have information about how many lower-rate taxpayers have been pulled into that area—but we are talking about a threshold of £50,000, which is a fair amount of money.
The noble Lord, Lord Sharkey, asked a number of questions, some of which I caught but some of which my brain did not quite catch. I will write to him, but, on the Treasury grant, as I said in my opening remarks, the Government are just being prudent by including it in the statutory instrument. At this moment, the Government Actuary report forecasts that the balance of the NIF will be £80.9 billion at the end of 2024-25, which is a significant surplus.
The GAD also projects that the NIF will be in overall surplus until at least 2028, but the balance can fluctuate because it will depend on economic factors and policy changes—for example, what might happen with increases to the state pension. The Government have increased the state pension by 8.5%, in line with inflation and the highest element of the triple lock. So I will write to the noble Lord on the threshold at which the Treasury would intervene—but we are not expecting to at this moment in time. We monitor the balance of the NIF very closely and we stand ready to include a top-up grant, should we feel that the forecast for that particular year gives the impression that it might be needed.
The noble Lord talked about veterans. The Government obviously keep all taxes and reliefs under review. We have decided to extend this for another year, and the cost of that extension is approximately £5 million for the next year. But it is also fair to say that the Government regularly conduct research and evaluation as part of their role in keeping policies such as this relief under review. When an evaluation is complete, it will be published in due course and decisions can then be taken at that point.
The noble Lord, Lord Livermore, mentioned the current economic climate, without mentioning the unprecedented economic shocks that the UK economy has had to weather. Of course, the response to this was often deemed to be insufficient by the party opposite, so I am not entirely sure where we would be had it been in power. I suspect that we might be in an even more sorry economic state, because we are now turning a corner. We are absolutely seeing really positive change in our economy, and I believe that will continue.
It is worth looking at the broader impact of the freezing of the NICs threshold, alongside income tax. Quite frankly, when many people get their payslips, they just look at how much money they gave the Government. They do not necessarily focus on whether it is NICs or tax; it is just money they do not have and cannot spend because the Government are spending it for them.
But, since 2010, the Government have improved the lot of lower-earning people. We have nearly doubled the personal allowance since 2010, and it is 30% higher in real terms. That ensures that some of the lowest earners do not pay income tax. Indeed, around 30% of people do not pay income tax at all. This has also meant that it is estimated that over 3 million people will be taken out of tax by 2023-24, compared with the threshold rising in line with inflation from 2010-11. So the Government have increased the thresholds by more than inflation over a very long period of time, which has really benefited the lowest earners.
Given these unprecedented economic shocks, the Government have had to take difficult decisions, which I believe are bearing fruit. I hope that other noble Lords can recognise that. It remains the case that a UK employee can earn more money before paying income tax and social security contributions than an employee in any other G7 country. Let us not fall into the trap of thinking that we are massively overtaxed in this country.
As I say, we see the economy turning a corner and inflation falling. We hope that we can return some money to taxpayers, because I agree that it is not a comfortable feeling knowing that, in the past, we have had to raise taxes to help the nation get through the unprecedented economic shocks that we have weathered. However, now that we are in slightly sunnier uplands, I hope we will be able to do more in future. I will write with further responses to questions which I have not covered but, for the meantime, I commend this instrument to the Committee.
Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024
(8 months, 1 week ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024.
Bank of England Levy (Amount of Levy Payable) Regulations 2024
(8 months, 1 week ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Bank of England Levy (Amount of Levy Payable) Regulations 2024.
The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, these draft regulations will ensure the implementation of the Bank of England levy following the passage of the Financial Services and Markets Act 2023, which made provision for the replacement of the cash ratio deposits scheme with this levy. Currently, the Bank of England’s monetary policy and financial stability functions, including work on resolution, international policy, financial stability and strategy, and risk and monetary analysis, are funded by the cash ratio deposits, or CRD, scheme. Under the scheme, banks and building societies with eligible liabilities greater than £600 million are required to place a proportion of their deposit base with the Bank of England on a non-interest-bearing basis. The Bank of England invests these funds in gilts and the income generated is used to meet the cost of its monetary policy and financial stability functions.
However, due to lower than expected yields from gilts, the CRD scheme has not generated sufficient income to fully fund the Bank’s policy functions. The shortfall has been funded by the Bank’s capital and reserves. Alongside this, the scheme has led to higher than expected deposit sizes and a lack of certainty for deposit payers.
Following a review of the scheme, the Government set out their intent to replace the CRD scheme with the Bank of England levy. This will provide greater certainty to firms on their contributions, create a simpler and more transparent funding mechanism for the Bank and ensure that the shortfall in funding is addressed moving forward. Sections 70 and 71 of the Financial Services and Markets Act 2023 amend the Bank of England Act 1998 to make provision for the replacement of the CRD scheme with the Bank of England levy.
The instrument under consideration by the Committee today makes provision for the eligible institutions that do not have to pay a levy, how the cost is apportioned between the eligible institutions that do have to pay it and how appropriate adjustments will be made for years in which there is a new levy payer. The instrument does not set the overall amount of the levy. The Bank determines which of its policy functions will be funded by the levy and the amount that it reasonably requires in conjunction with the funding of those functions for the levy year.
Under the regulations, the new levy year will begin on 1 March 2024, to align with the Bank of England’s financial year. An indicative timeline for the levy year is included in the Bank of England’s levy framework document. This sets out that the first invoice will be issued to firms in July 2024, with payment due in August 2024. This payment will cover the 2024-25 levy year.
Under the levy, for each year, the Bank of England will estimate the amount it needs to meet its policy costs. It will add any shortfall from the previous year and deduct any surplus. This is the anticipated levy requirement. The Bank will require institutions to submit data about their eligible liabilities and will usually take an average of the data provided between 1 October to 31 December in the previous year to calculate an institution’s eligible liabilities.
If an eligible institution has an average liability base up to and including £600 million, it will not pay any levy that year. If the institution’s average liability base exceeds £600 million, it will obviously pay the levy. This is the same as under the CRD scheme, therefore ensuring that the levy is fair as only the largest institutions, which benefit most significantly from the Bank’s monetary policy and financial stability functions, will pay. The costs that an institution will pay under the levy will be apportioned according to the size of the institution’s eligible liabilities, meaning that larger institutions pay a larger share of the costs. This is the same as under the CRD scheme and ensures that there will be no relative winners or losers under the new levy.
If an institution did not meet the threshold for paying the levy in the previous year but it does for the current year, the regulations stipulate that this firm will be treated as a new levy payer. The SI allows the Bank to treat new levy payers differently so that they contribute to the estimated policy costs for that specific year, and do not have to contribute to any shortfall from the previous year or gain any benefit from any surplus. This is a fair and proportionate approach.
This SI delivers a fairer and more transparent funding mechanism for the Bank of England’s policy functions. The regulations have been widely consulted on and the levy is supported by financial firms. I beg to move.
Lord Sharkey (LD)
My Lords, it is obviously unacceptable that the Bank of England should be making a loss on its supervisory activities regarding the banking sector. We are happy to support this SI’s correction of that situation.
Before we allow the Bank to charge companies more, should we not ask ourselves whether there are any efficiencies that could or should be made in the Bank’s supervisory routines and systems? Could the Minister say whether the Bank has asked itself that question? If it has, perhaps the Minister could tell us what the answer was and how it was arrived at. If it has not asked the question, why not?
We note that the consultation on the levy produced only one relevant response—from, we assume, UK Finance. This response made five points; the Bank addressed four. The first was the rate of selldown of the Bank’s gilt portfolio. The concern appeared to be that this selldown would significantly increase the Bank’s costs and therefore the levy required. The Bank seemed to think that this was not an issue, but its explanation seemed very complex. May I ask the Minister for a “beginner’s guide” explanation? Is the industry right to worry about the levy increases potentially arising from a gilts selldown and, if not, why not?
The second point raised in the consultation response seemed the most important. The respondent suggested that the non-bank financial institutions, NBFIs, could in future be added as eligible levy-paying institutions in Schedule 2ZA to the Bank of England Act 1998. These NBFIs certainly seem large enough to be added. At the Managed Funds Association Global Summit in Paris in May last year, it was estimated that NBFIs now represent about 50% of global financial assets.
Addressing this point, the Bank simply says that the formal review referred to in paragraph 14.1 of the EM
“is expected to include assessment of which institutions are regarded as eligible to pay the Levy”.
I note the words “is expected to”. I also note that this review is five years away. Is not the growing size of the NBFI sector a reason for the Bank’s supervisory oversight to be much more extensive? Is it not simply unfair that NBFIs should get a free supervisory ride?
The third issue raised in the consultation and addressed by the Bank was the desirability, for planning purposes, of a five-year budget plan to help institutions plan their own budgets. The Bank has agreed to consider what is a perfectly reasonable request, but can the Minister say when it will have a substantive response to that comment from the consultation?
The fourth issue concerned the reference period; the Minister has mentioned this. The Bank concluded that the proposed reference period—the same period used for the PRA levy—is the appropriate one. Speaking of the PRA, can the Minister explain to us how the Bank of England levy and the PRA levy work together, as well as how double-charging is avoided?
Finally, why does this SI contain no coming-into-force date or commencement provisions?
Lord Livermore (Lab)
My Lords, we fully support the replacement of the current cash ratio deposit and the proposed mechanics of the levy. We therefore support this statutory instrument.
I have only one question, related to the timing of this measure. As I am sure the Minister would agree, providing the banking sector with certainty is essential to securing the confidence needed to incentivise investment in the real economy. Can she therefore provide clarity on when this SI will come into force?
Baroness Vere of Norbiton (Con)
I am grateful to noble Lords for sharing their thoughts on this SI. It is a simple switchover from one scheme to another, but I recognise that there are points that deserve a bit more insight. I hope that, by the end of my closing speech, I will have an answer to the question about the coming-into-force and commencement date, including why that has not happened.
I turn to the comments from the noble Lord, Lord Sharkey. He made good points about the amount of money that will be spent on these policy functions. I asked the same question. It is clear to me that the Bank of England is independent and sets its own budget but does so in a prudent way. Each year, as I said in my opening remarks, the Bank determines the scope of the policy functions that should be funded and, therefore, what the total levy will be. However, the Bank’s policy costs to be recovered through the levy will require approval by the Bank’s Court of Directors, which is a bit like its board, I suppose, and which is responsible for the efficient use of funds—not only those raised by the levy but across the whole of the Bank’s budget.
The levy will also feature as part of already established arrangements for regular discussions between the Bank and the Treasury covering the Bank’s financial position. The Bank continues to be accountable to Parliament in respect of its finances and budget in various ways, including but not limited to through its annual report and accounts—some significant detail about this will be set out its report and accounts—and through regular public appearances by governors and members of the court before the Treasury Select Committee.
I will now embark on a guide to the cost of transition; let us see how we do. When the Bank moves from the CRD scheme to the levy, institutions will get their deposits back as there is no longer a legal basis for the Bank to hold deposits. Through this, a total of £13 billion in cash ratio deposits will be returned to firms. They will be returned as remunerated reserves as the Bank intends to hold on to the gilt portfolio that it has purchased under the scheme and allow this to roll off naturally. This is the most appropriate course of action; I suspect that that also means it is the cheapest. It means that, during a transition period, the Bank will need to pay a bank rate on the remunerated reserves. This is a policy cost that will be covered by the levy. The cost of the transition between the CRD scheme and the levy per year will depend on the rate at which the legacy CRD gilts mature or are sold. This is because the income available from the legacy CRD gilt portfolio will reduce the amount being recouped by the Bank under the levy.
Non-Domestic Rating (Rates Retention: Miscellaneous Amendments) Regulations 2024
(8 months, 1 week ago)
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Baroness Scott of Bybrook
That the Grand Committee do consider the Non-Domestic Rating (Rates Retention: Miscellaneous Amendments) Regulations 2024.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, these regulations make changes to key elements of the business rates retention system by actioning policy decisions that have already been taken. The business rates retention system has been in operation for over 10 years. Through it, local authorities keep 50% of the business rates that are collected in their areas, subject to redistribution, with the other 50% being paid over to central government.
Under the system, if a local authority sees its business rates income fall significantly in a year, it can receive protection in the form of a safety net payment. The cost of making safety net payments is met within the system. This is done by levying a percentage of the business rates income of those local authorities whose business rates income has significantly increased.
Such arrangements under the system are governed according to the underlying legislative framework. Each year we make changes to this framework in response to the wider policy environment—for example, following a revaluation or adjustments to the tax. This instrument makes the necessary amendments and, while they are technical, the reasons for them are easily explainable.
Before I go into the details of the instrument, however, I will briefly address why it was withdrawn and re-laid. Unfortunately, following the initial laying of the instrument, there was a need to withdraw and re-lay it to correct a minor error made in its drafting. We did this to ensure that payments are made to councils on the right basis. After this, we were made aware of a risk of delay to the instrument’s progress through Parliament. This could have arisen if the JCSI had queried why we had left cells in a table blank, rather than explicitly setting values at zero. In anticipation of this, we re-laid the instrument with zeros in the schedule to provide greater clarity to the reader. This will ensure that we do not delay paying local authorities what they are expecting. This instrument is the resulting version and I am grateful to all parties for their consideration in making it possible.
I will now focus on the details of the instrument. Several sets of regulations set out the detailed rules which underpin the operation of the business rates retention system. This instrument makes changes to two of them. These are the Non-Domestic Rating (Rates Retention) and (Levy and Safety Net) Regulations.
The rates retention regulations provide for the core administration of the system and determine how payments are calculated and then made between local authorities, and between local authorities and central government. The levy and safety net regulations are more particular. They set out, in detail, the safety net and levy mechanisms that I have already mentioned.
I will now describe the reasons that amendments to the regulations are necessary, as well as what they entail. First, we must make changes in response to the 2023 business rates revaluation. As many noble Lords will be aware, revaluation is a key facet of the tax, allowing for changes in the market to flow through to the amounts paid by taxpayers. The reason we need to adjust for revaluations is to avoid abrupt increases or decreases in local authorities’ funding via the business rates retention system. This would otherwise result from the aggregated change in the amounts that local authorities collect from businesses.
The actions we are taking to neutralise the impact of the 2023 revaluation can be summarised as follows. First, we are adjusting top-up and tariff figures—the figures which redistribute income around the system. Secondly, we are adjusting the calculation of levy rates; to recalculate levy rates, we must also restate local authorities’ business rates baselines. These are the share of rates income we expect a local authority to have access to.
The year 2023 was somewhat busy for the business rates retention system. Not only did the revaluation take place, but also Royal Assent to the Non-Domestic Rating Act. I am sure that many noble Lords have fond memories of the debates during its passage through the House. As with most changes made to the workings of business rates as a tax, those made by the 2023 Act impact how the business rates retention system is administered.
The delinking of the small business and non-domestic rating multipliers has the biggest impact on the retention system. Currently, the non-domestic rating—standard—multiplier is equal to the small business multiplier plus a supplement figure. From April this will change as these multipliers are delinked. This means that the two multipliers can be changed independently of each other, and therefore at different rates.
The reason for the significant impact this has on the business rates retention system is because each year we have used the change in the value of the small business multiplier to adjust key figures within the system. Under a system of linked multipliers, the change in the small business multiplier represented the change in the tax rate for all properties. As multipliers will no longer be linked, we have had to identify a new way to uprate these figures. After consultation with local authorities and other stakeholders, we will do this using a new weighted average formula. This calculates uprating figures for each local authority based on the proportion of rateable value on each multiplier in that authority’s area. The instrument applies this new formula to the relevant figures in the regulations. These are top-up and tariff figures, baseline funding levels and the City of London offset.
I have already provided a quick description of what top-up and tariff figures are. For the sake of clarity, I will do the same now for baseline funding levels and the offset. Baseline funding levels are a measure of each local authority’s need. They are uprated each year to ensure that the safety net eligibility threshold, measured as a percentage of the baseline funding level, takes account of inflationary increases. The offset, meanwhile, is a small amount of business rates income outside the system that the City retains, in acknowledgement of its high daytime, but low resident, populations. Alongside delinking the multipliers, the Non-Domestic Rating Act also introduced new or amended existing reliefs for ratepayers—specifically, heat network relief and improvement relief, and doubling the rural relief from 50% to 100%.
Furthermore, we must take account of other tax measures that were not delivered through the 2023 Act —namely, the retail, hospitality and leisure relief for 2024-25, which was announced at Autumn Statement 2023, and the green plant and machinery exemption. The Government compensate local authorities for reliefs and exemptions. If they did not, they would unfairly cost local authorities as their income from business rates would fall. However, when calculating levy and safety net payments, it is essential that we recognise that local authorities have already been compensated for their losses due to the awarding of reliefs and exemptions. Otherwise, some local authorities may receive substantial increases in safety net payments despite already receiving compensation or may underpay the amount of levy on growth that they owe. This instrument makes sure that the appropriate compensation given to local authorities is included in levy and safety net calculations.
In continuation with the theme that 2023 was a year of change for the business rates retention system, the year also saw the Government transfer the power to grant certain types of relief from billing authorities to mayoral development corporations in Hartlepool and Middlesbrough, following a request from the Tees Valley mayor. Given that authorities receive a share of business rates income in their area, authorities could lose out from the relief awarded if the mayoral development corporation took up those powers. While we have already provided for billing authorities to be compensated, now we are extending the compensation to major precepting authorities.
Lastly, we are making a change to the levy and safety net calculations for the Greater London Authority. The share of income which we will use to calculate levy and safety net payments going forward for the authority is its 20% share. This is its share under the 50% rates retention system. Using its 20% share in this calculation brings it into line with other increased rates retention authorities.
To conclude, it would not be a mischaracterisation to describe these regulations as technical. Nevertheless, they pick up wider policy changes and, in doing so, make several important updates to the administration of the business rates retention system. It is very important that these changes are made to the system so that authorities retain the income from it that they are anticipating and on which they have budgeted. I commend these regulations to the Committee.
Baroness Pinnock (LD)
My Lords, I draw the Committee’s attention to my interests as a councillor and a vice-president of the Local Government Association. I thank the Minister for her detailed introduction. The Liberal Democrats support these technical changes. I do not know how we could oppose them without having a very detailed understanding of all the complexities of the changes that the Minister has outlined today. As she said, the purpose is to ensure that local authorities receive the correct payments from business rates, which are a very important source of income for local authorities.
This is indeed a very technical SI, and the formulae for calculating the redistributive mechanisms are also very complex, as I have read in the paper that we are considering. However, it seems to me that the greater the complexity, the greater the likelihood of unintended inequities creeping in. So my first point to the Minister is this: the Explanatory Memorandum states:
“There is no, or no significant, foreseen impact on the public sector”
and that the intention is to
“minimise the impacts on local authorities as far as is practicable”.
Now, as the Minister will know, local authorities are in very challenging financial times, so every penny in the council coffers will make a difference. Can the Minister put parameters on
“as far as is practicable”?
Are we talking thousands or hundreds of thousands of pounds? I hope it is not millions. What are the parameters that the Government have used for describing
“as far as is practicable”?
I appreciate it will never be absolutely precise, because it is so complex.
The Minister will appreciate that business rate income is a very important source of funding. On the other hand, councils have a responsibility to ensure vibrant high streets. The result of that is councils wanting business rate bills to be reduced to help retailers. There were some changes in the last piece of legislation to which this SI refers to do that. It was reported last year in the Times, and referenced on Report on the Bill, that some retailers have business rates bills that are equal to or higher than their rental costs. That cannot be right. It leads me to suggest that root and branch reform of the business rates system is urgently needed.
Part of the solution to this gross unfairness is the way that the existing system overly favours online retailers that operate from very large warehouses. An example could be Amazon. The Minister will repeat that the Government have adjusted business rates so that these giants of the retail world pay a bigger share towards the local services they use, but these changes were minimal, resulting in a drop in the financial ocean for large online retailers. For example, it cost Amazon £29 million when its business model is in the billions. Yet the system still overwhelmingly favours online retail, despite government commitments in the levelling-up Act to reinvigorate the high street.
A radical change to create a fairer balance between what is known as “bricks and clicks” would go a long way to achieving what the Government are committed to doing—and which I support—as regards the high street. So can the Minister provide any hope at all that such a change is somewhere on the agenda? It is a key lever in reinvigorating our high streets and ensuring that major online retailers pay a fair share.
The Minister in response may point to small business rate relief. She would be absolutely right that many small shops have 100% rate relief, but that just further emphasises the point that I make. Any system that relies on substantial reliefs and complex redistribution mechanisms while failing to capture income from completely new business types—the online businesses—is ripe for fundamental reform.
I appreciate that this has gone slightly off-piste but, when we are considering the redistribution of business rates, which are a very important element of local government funding, it seems to me that we should use any opportunity we can to remind the Government that, to achieve some of their key objectives, a fundamental reform of business rates is absolutely essential. However, I support the technical changes that are introduced by this statutory instrument.
Baroness Taylor of Stevenage (Lab)
My Lords, I draw attention to my interests in the register as a vice-president of the Local Government Association and as a serving councillor on Stevenage Borough Council and Hertfordshire County Council. I thank the Minister for her introduction to this statutory instrument and I am very grateful for her explanation of the relaying of it, which was informative.
I suppose that this instrument is necessarily complex and technical in content, but, if we look through it, we see that in many ways it demonstrates exactly how far business rates—or non-domestic rates, as we have to call them—have got from their objectives. They are intended to ensure that businesses make a contribution to the communities that allow them to thrive, to link them with the people and public services of their local area. They should recognise the differentiation between small, start-up and local businesses and the multinational corporates, when in fact non-domestic rates sometimes penalise them in inverse proportion to their ability to pay. They should also ensure that areas wishing to improve, increase or regenerate economic activity are able to vary the business rates to incentivise according to local circumstances.
Looking through the pages of mathematical formulae and complex calculations in this SI, I say that it would not be surprising if any average business doing so felt that we had somewhat lost the plot. The complexities of the system do not really benefit most councils, either, although we appreciate the funding that comes from them. For example, my borough raises over £61 million in non-domestic rates but, after all these calculations and the turning of the Government’s sausage machine, we get around £4 million of that—in spite of having three of the most deprived wards in the country.
So we need to refocus business rates back on to what they were intended to do. That is why they are part of Labour’s plan to support the vast majority of businesses in this country that are SMEs. They employ 16.7 million people and boost our economy by £2.4 trillion; they breathe life into our high streets; they deliver services that make our life easier: and they provide the goods we need to thrive. While SMEs welcomed the support they got during Covid, many of them now feel neglected as they struggle to survive the cost of living crisis, the recession and the complexities of this business rates system, which can seem utterly overwhelming, as the noble Baroness, Lady Pinnock, set out.
Labour’s plan for small businesses will be an important milestone in recognising their value to the economy and the essential role that they have in ensuring the economic growth that we need. We will undertake a fundamental reform of business rates, which will reshape this antiquated system and refocus it on business not bureaucrats’ objectives. We want to make sure that bricks-and-mortar businesses do not continue to pay disproportionately more than their online competitors. We want to take the burden from high streets and the businesses that sit at the heart of our communities, such as the local café that makes our morning coffee, the mortgage broker on our high street who went above and beyond to help you get your first home, the plumbers who come out of hours when you have water pouring through the ceiling. We want a new system that incentivises businesses to invest, rather than discourages them doing so. Our plan for business rates sits within a comprehensive plan for small business, which tackles all the issues that our many conversations with those businesses have told us are key to their future.
We had the chance to speak on the wasted opportunity to revise non-domestic rates during last year’s debates on the Bill, as the Minister said. We recognise that, for now, this technical paper is necessary to put in place the mechanism for the current system, so we will not be putting forward any formal objections, but I have some questions for the Minister. Can she comment any further on the Government’s plans to shift the current disproportionate burden of non-domestic rates taxation from small local businesses to online corporates or, potentially, on alternative forms of income for local government, including an e-commerce levy, with the funding retained by local government?
The retailers that we know and love on our high street, such as M&S, Boots, WHSmith and small, local businesses, seem to have a dramatic penalty in the business rates system over big online retailers such as Amazon. The current top-up and tariffs system is now outdated and, in view of the extraordinary cuts to which local government has been subjected, it often penalises areas of deprivation just because areas around them may be more economically vibrant. Can the Minister comment on what recent assessment has been carried out on the validity of the tariffs and top-up system?
What progress has been made on the Government’s promised consultation on business rates avoidance and evasion? The LGA, for example, has called for a review of exemptions, such as where businesses happen to be located on farms, and further clamp-downs on business rates avoidance, along the lines of those introduced in Wales and Scotland, to ensure that the rules on reliefs, such as empty property and charitable relief, are applied fairly.
The Minister knows that the LGA is also in favour of giving councils more flexibility on business rates reliefs, such as charitable and empty property relief, and the ability to set their own business rates multipliers or, at the very least, to set a multiplier above and below the nationally set multiplier. Have the Government given any further consideration to those proposals? Lastly, could she comment on the glacial speed of the appeals process, which distorts council finances and reserves, as councils often have to hold funds for not just months but years while they wait for the outcome of business rate appeals?
As I said, we understand that this instrument is necessary to move forward non-domestic rates for this year, but we hope that there is an understanding that sticking plasters, even complicated and technical ones such as this, are the problem and not the solution.
Baroness Scott of Bybrook (Con)
My Lords, I thank the noble Baronesses seated opposite for their contributions. A number of questions came up. First, the noble Baroness, Lady Pinnock, and, I think, also the noble Baroness, Lady Taylor, asked about complexity. We accept that the administration of the system has become necessarily complex over time in response to all the changes to policy and tax that have happened. This will be an ongoing thing. Whatever the system is, as changes happen, it becomes more complex. While every mechanism cannot be made accurate pound to pound, as the noble Baroness, Lady Pinnock, would like, we minimise the risks to the system from any major changes that would affect a local authority’s budget as much as possible. Of course, we are always happy to talk to local authorities if they feel that they have a problem with their business rates.
Social Security Benefits Up-rating Order 2024
(8 months, 1 week ago)
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Viscount Younger of Leckie
That the Grand Committee do consider the Social Security Benefits Up-rating Order 2024.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
My Lords, in my opinion, the provisions in the instrument are compatible with the European Convention on Human Rights. The Social Security Benefits Up-rating Order increases relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to May-July 2023. It will also increase most other benefit rates by 6.7%, in line with the rise in the consumer prices index in the year to September 2023.
The order commits the Government to increased expenditure of £19 billion in 2024-25. It ensures that state benefits maintain their value relative to the increase in the cost of goods and services. It means that most state pensions will gain value relative to that increase. Indeed, the proposed increase to state pensions would be the second highest on record—second only to the increase last April.
This will meet the Government’s commitment to the triple lock, benefiting pensioners who are already in receipt of basic and new state pensions, and younger people who are building up future entitlements as a foundation for private saving. It will raise the level of the safety net in pension credit beyond the increase in prices, and it will maintain the purchasing power of benefits to help with additional costs arising from disability.
For those receiving support linked to participation in the labour market, the Government announced a range of employment and conditionality measures at the Autumn Statement. These measures maintain and improve work incentives. This allows us now to strike a balance in support of those who are in low-paid work, who are looking for work or who are unable to work by linking the increase in the rates of universal credit to the increase in prices.
I will now address state pensions in more detail. The Government’s commitment to the triple lock means that the basic and full rate of the new state pension are uprated by the highest of the growth in average earnings, the growth in prices or 2.5%. This will be 8.5% for 2024-25, in line with the conventional average earnings growth measure. As a result, from April 2024, the basic state pension will increase from £156.20 to £169.50 a week, and the full rate of the new state pension will increase from £203.85 to £221.20 a week. All additional elements of the state pension will rise by 6.7%.
The Government are committed to supporting pensioners on the lowest incomes. The order therefore also increases the safety net provided by the pension credit standard minimum guarantee by 8.5% from April 2024. For single pensioners, this means it will increase from £201.05 to £218.15 a week, and for couples it will increase from £306.85 to £332.95 a week.
I turn now to universal credit, jobseeker’s allowance and employment and support allowance. The Social Security Administration Act 1992 gives the Secretary of State discretion on whether to increase the rates of benefits such as these, which are linked to participation in the labour market. Given the employment and conditionality measures I mentioned earlier, he has decided to strike a balance in support by also increasing the rates of these benefits by 6.7%, in line with the increase in the consumer prices index.
As a further measure to reinforce work incentives, the monthly amounts of universal credit work allowances will also go up by 6.7% from April 2024. They will increase from £379 to £404 a month for those also receiving support for housing costs, and from £631 to £673 a month for those not receiving support for housing costs. Noble Lords are aware that these are the amounts a household can earn before their universal credit payment is affected if they have children or if they have limited capability for work. The 6.7% increase will also apply to statutory payments, such as statutory maternity pay, statutory paternity pay and statutory sick pay.
I turn finally to benefits for those with additional disability needs and those who provide unpaid care for them. The rates of personal independence payment, disability living allowance and attendance allowance will increase by 6.7% from April 2024, in line with the increase in the cost of goods and services. As we have debated previously in other contexts, the Government recognise the vital role played by unpaid carers. This order also increases the rate of carer’s allowance by 6.7%, from £76.75 to £81.90. Unpaid carers may also access support through universal credit, pension credit and housing benefit. All these include additional amounts for carers, which will also increase by 6.7%. For a single person, the carer element in universal credit will increase from £185.86 to £198.31 a month. The additional amount for carers in pension credit and the carer premium in the other income-related benefits will increase from £42.75 to £45.60 a week.
In conclusion, the draft Social Security Benefits Up-rating Order 2024 implements the Government’s commitment to the triple lock. It provides for a real-terms increase in the value of the safety net in pension credit, it maintains the purchasing power of benefits for additional disability needs and for people providing unpaid care to people with those needs, and it strikes a balance in universal credit by maintaining both work incentives and the purchasing power of benefit income. I commend this instrument to the Committee.
Baroness Lister of Burtersett (Lab)
My Lords, I of course welcome the inflation-proofing of benefits and the temporary lifting of the local housing allowance freeze in April, but—I fear this speech is a series of “but”s—I find it, frankly, insulting to those affected. I should say that the Minister is not included in this but, from the Prime Minister down, the uprating is constantly lauded by Ministers as a record amount, an additional support, as if it represents a great act of generosity which somehow justifies the lack of action on a number of other fronts. The inflation-proofing of benefits should be the default position, avoiding the months of speculation, fuelled by government sources, that have caused considerable uncertainty and anxiety for benefit recipients in and out of work.
Moreover, there is a number of reasons why the increase in line with inflation is far from generous. The Resolution Foundation points out that the uprating will do no more than restore benefits to their real value on the eve of the pandemic. While there were flaws in the cost of living payments, which we discussed last year, their loss now means that many households on universal credit will be worse off in cash terms. The foundation estimates that the typical household in the poorest quarter of the working-age population could face an income fall of 2% next year. The following year, on current assumptions, private renters will face a further freeze in the local housing allowance, which, according to Citizens Advice, is an important factor in the increase in the number facing a negative budget—that is, where income does not cover essential spending.
There is also the prospect that the uprating could coincide with the abolition of the household support fund, which has acted as both a lifeline and a sticking plaster for the holes in the social security safety net. I know that the Minister can say nothing more than that this is kept under review, but local authorities, charities and potential beneficiaries need a bit of certainty, rather than to wait for the Budget, which is only a month before the outcome of this review takes effect. I really do not understand how he can tell me in a Written Answer that the Government do not have robust data on the number of English local authorities that have closed their local welfare assistance schemes which, in his answer to my earlier Oral Question, he prayed in aid, should the household support fund be scrapped. Surely, such data should inform any review of the future of the fund. As it is, we know from End Furniture Poverty that at least 37 authorities have closed their scheme.
Lord Davies of Brixton (Lab)
It is a great pleasure to follow my noble friend Lady Lister of Burtersett. In her usual meticulous manner, she made a series of detailed points. I will just make a couple of relatively straightforward points on pensions.
There is a touch of unreality about this discussion, because I received notification of my increased state pension last week and there was nothing in there to suggest that it was subject to any further parliamentary process. Should we vote it down today, my hopes based on the notification that I had from the noble Lord’s department will be shattered. However, I suspect that we are not going to turn this down today.
I have two points. First, a lot of the coverage of this increase said that state pensions would be increased by 8.5%. I discovered that it was not actually 8.5% and might be something else only from reading the small print. The press are mainly at fault for that. I found no significant story in a national paper explaining the distinction between the 8.5% increase for the new and basic state pensions and the 6.7% for everything else.
The everything else is not trivial: it is all the additional pensions that people earned while they were in the state second pension, the retained rights that they received when the new state pension was introduced and the additional pensions that people gained because they deferred their state pension. A particular surprise to me was the 10% increase that pre-2016 retirees receive. The additional pension, the 10%, is increased by only the lower figure rather than, as I would have logically thought, the higher figure. It includes the graduated retirement pension from the Boyd-Carpenter scheme. So significant amounts are increasing and, I dare say, by only 6.5%. I say “only” because that reflects the rate of inflation. I think saying it is increasing only in line with inflation is a fair assessment of the situation.
To a certain extent, it is the fault of the press, but I think the department has a responsibility to produce greater clarity on this issue. In moving these regulations in the Commons, the Parliamentary Under-Secretary for Work and Pensions said:
“The draft order will increase relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to July 2023. It will also increase most other benefit rates by 6.7%”.—[Official Report, Commons, 31/1/24; col. 929.]
To the non-expert observer, I am sure that would suggest that all the state pension was going to increase by 8.5%, and I suggest that that was reflected in the press coverage. However, I defy the department to produce a single person whose entire benefit is just the new state pension or the basic state pension. People are bound to have some other increases, even if it is only the graduated pension scheme, so no one gets 8.7%. I thought at one stage I was going to tell the Committee what my increase was, but then I realised that with a simple bit of algebra noble Lords could work out what my state pension is, and I do not want to mention it in this debate.
Look at what the Chancellor of the Exchequer said about the Autumn Statement when he announced these increases:
“The government will … continue to protect pensioner incomes by maintaining the Triple Lock and uprating the basic State Pension, new State Pension and Pension Credit standard minimum guarantee for 2024-25 in line with average earnings growth of 8.5%”.
There is no mention that there is this large chunk of pension that will be increased only in line with inflation. It annoys me each time, and Members of the Committee have been the recipients of my annoyance on this occasion.
The other point I wish to raise has already been raised by my noble friend Lady Lister—the delay in payment. I spoke about this at some length last year, and it has not changed, but I thought that on this occasion it is worth quoting, as my noble friend mentioned, Nigel Mills MP speaking in the Commons. He is chair of the All-Party Parliamentary Group on Pensions. He described it as a “crazy process” and said:
“We have to use September’s inflation for an April increase in benefits, and we have to have an uprating order quite a while after the Chancellor has announced it in the Budget. The Work and Pensions Committee recommended that the Government bring these orders before the House earlier than February, so I commend the Government—we are still in January”.—[Official Report, Commons, 31/1/24; col. 932.]
So down the other end they got it in January, but we did not get it until February and the important point is that pensioners will not get the increase until April. That system of a September/autumn announcement and April increases has, in effect, subsisted for 40 years despite all the developments in maintaining records and the computerisation of systems.
I was glad to hear my noble friend suggest that some further thought is being given to this. In the interim it would be reasonable, to the extent that the effect of the increase could be from 1 January—although it is not possible to start the payment until April, because of the systems—for us to give the underpayment for the first three months of the year as a lump sum, at the beginning of April. I think that everyone would love to receive that.
Baroness Janke (LD)
My Lords, we too welcome the uprating of benefits and will support today’s SI but, as the noble Baroness, Lady Lister, has said, there are ever-rising numbers in poverty, as drawn to our attention by the Joseph Rowntree Foundation’s 2024 report on poverty, published a short while ago. According to its previous report, around 20% of the population were in poverty in 2020-21—around 13.4 million—of whom 7.9 million were working adults, 3.9 million were children and 1.7 million were pensioners. Poverty among people on universal credit remained high at the same time at 46%, it said,
“despite the temporary £20-a-week uplift and a resetting of Local Housing Allowance”
to better reflect the level of rents in an area. Poverty rates remained highest in the social and private rented sectors
“and much higher for households including a disabled person or an informal carer”.
The cost of living crisis is having a major effect on poorer families. The Joseph Rowntree Foundation’s cost of living tracker found the following shocking results in October 2022, across the poorest fifth of families: six in 10 families were unable to afford an unexpected expense; over half were in arrears; around a quarter were using credit to pay bills; and more than seven in 10 were going without essentials. The report found that there are elements in the benefit system that increase poverty, such as the two-child limit on income-related benefits, the benefit cap, the five-week wait for the first payment of universal credit and unrealistic debt repayment deductions. Will the Minister say what plans there are to reassess the impact of these measures? I have not been doing my job in this area for some time, yet I recall that, when I was, these measures were constantly raised as causes of poverty that need to be addressed.
The report finds that the level of benefits is inadequate for people to afford the basic essentials, which is a damning finding. It also urges a resetting of benefits that would ensure that income cannot fall below these levels through debt repayment deductions or repayment of advances. This is essential for people on benefits as a proper safety net, not just during the cost of living crisis but for anyone who is on benefits. When will a full assessment take place of the efficacy of universal credit as an adequate safety net for those who need it? What is the Minister’s response to these findings?
Baroness Sherlock (Lab)
My Lords, I thank the Minister for introducing this order and all noble Lords who have spoken. As he has explained, the Social Security Benefits Up-rating Order will increase most working-age benefits in line with CPI. We too welcome this instrument, because of course we want to see social security keep pace with prices, particularly at a time of spiking inflation and economic instability. That used to be the norm among both Labour and Conservative Governments, of course, but the past decade has seen a marked change.
There were of course the years of shame between 2013 and 2020, when most working-age benefits and tax credits were either frozen or uprated by small amounts, such as just 1%. Although today we are back to uprating mostly by CPI and occasionally by earnings, as my noble friend Lady Lister said, once again that uprating has been preceded by a period of speculation, which is deeply unhelpful. I can assume only that this is driven from somewhere inside the Government, because it happens too regularly. The speculation suggests that maybe this year the uprating will not be by the full amount or maybe will not happen at all.
As my noble friend mentioned, that speculation causes real stress and worry for people who depend on benefits and tax credits to survive. I begin to wonder: is it a strategy to allow Ministers the option of either freezing benefits or not uprating them fully so that, if they then finally do the right thing, people are supposed to be suitably grateful? As my noble friend Lady Lister pointed out, it is good that benefits are being uprated, but it is not an act of unusual generosity; it is simply a decision not to cut the value of benefits during a cost of living crisis.
This instrument, as we have heard, also increases the state pension by earnings in line with the triple lock. I accept the distinction that my noble friend Lord Davies helpfully made. The rates of basic and new state pensions will rise by 8.5%, as will the standard minimum guarantee in pension credit and the higher rate of widows’ and widowers’ pensions in industrial death benefit. However, this does not apply to a number of the others. I will be interested in the Minister’s response to that. In particular, can he explain the position on the deferred state pension? If someone chooses to defer their state pension and the pattern is that the deferred amount is uprated by CPI rather than the triple lock, are they made aware of that? When people make a decision about deferral, do they understand the consequences?
I had some other questions on pensions and pensioners but I was entirely thrown by the decision to separate these two instruments this year. Most years, we do them together in a single block, so I wrote a wonderful speech waxing lyrical and weaving in pensioners and old age, but now here I am. I shall come back, if the Minister will indulge me, to a couple of more general questions on pensioners when we come to debate the next instrument.
The context for this year’s uprating, as my noble friend Lady Lister expounded in some detail—aided ably by the noble Baroness, Lady Janke—is absolutely brutal. I will not repeat the extensive critique that my noble friend made or her unpacking of the economic climate in which so many families are living, but it is brutal. The basic fact is that there are now more than 4 million children living in poverty. There are 400,000 more children living in poverty now than when Labour left office in 2010.
One of the things that bothers me about this is that, whenever somebody raises this, the Minister—I know it is in his brief—will at some point in the response use the line that the Government believe that work is the best route out of poverty. Yet, clearly, the facts speak for themselves: more than two-thirds of children who live in poverty have parents in work. Something in that picture does not work. It is something that all of us in politics must address.
We in Labour have been looking at what we would do. We have a plan to give people a better life, so that they are able to make ends meet and have a good start for their children. We are looking at making sure that there is a breakfast club in every primary school and at giving people access to cheaper energy and an insulated home. We will reform universal credit, jobcentres and employment support so that people can get a better job with better pay. We will also have a child poverty strategy. Can the Minister tell the Committee in his response what the Government’s strategy is? What is their plan to do that? Other than simply declaring that work is the best route out of poverty, what is the Government’s plan to deal with the challenge of child poverty today? I look forward to the Minister’s response.
Viscount Younger of Leckie (Con)
My Lords, I thank all those who have spoken in this short debate. Before I attend to the number of questions asked and subjects raised, I would like to say at the outset—I normally do this but, today, I give special feeling and meaning to it—that this Government really do fully recognise the challenges facing people across the country due to the higher cost of living.
Although inflation is trending in the right direction, with the Bank of England now forecasting a fall to a target rate of around 2% in three months’ time, I acknowledge that pressures on household budgets very much persist. I saw this for myself in a recent visit to the Earlsfield Foodbank. The Government are not complacent about such matters; I hope noble Lords will recognise that the Government have taken action on a number of fronts to address these concerns, which were raised by a number of Peers—four, to be precise—this afternoon. I may not be able to answer all the questions but I will do my very best.
Let me start at the outset—I do not think I have done this before—by saying that, although I acknowledge the remarks made by the noble Baroness, Lady Lister, I am generally disappointed that every single item was a negative. I am disappointed that nothing she said seemed to support what we have done in these regulations or what we are trying to do. We really are trying. There was a long litany of faults coming from the Government: that the uprating was not enough; on the loss of the cost of living payments; on the freeze in the LHA, which is all for the future as we do not like where we stand on that yet; on the household support fund; and on the benefits cap review, including why it was not being done.
The noble Baroness is right to ask questions but I say gently that there is no mention of the genuine headwinds that all Governments have been facing. This Government have not been alone in the experiences of the pandemic and coming out of it, as well as of the war in Ukraine. There was no indication of these whatever. It is a bit disappointing. I know that the noble Baroness will understand why I have said these things but I thought it would be worth mentioning them.
Baroness Lister of Burtersett (Lab)
I am sorry to interrupt but I started by saying that I welcomed the inflation-proofing. That is a positive. I then warned him by saying, “All the ‘buts’ are coming, I am afraid”, but it was in the context of welcoming.
Viscount Younger of Leckie (Con)
I appreciate that from the noble Baroness. We have undertaken a number of debates together; I hope that she did not mind me mentioning it.
However, questions are questions; I will start by attempting to answer one of them. After each uprating, household income will go down by 2% because of the ending of the cost of living payments. At the moment, the Government have no plans to extend the cost of living payments past the 2023-24 round of payments. Responding swiftly and decisively to the cost of living pressures has been a key priority for the Government. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe. Taken together, support to households to help with the high cost of living is worth £104 billion over the period 2022-23 to 2024-25.
As was mentioned earlier, reducing inflation and growing the economy are the most effective ways to build a more prosperous future for all. This Government are committed to halving the rate of inflation; they have pretty well achieved that. However, to be helpful to the noble Baroness, an evaluation of the cost of living payments is under way. This seeks to understand their effectiveness as a means of support for low-income and vulnerable households. This will be made public when it is ready.
The noble Baroness mentioned the household support fund. She probably second-guessed my answer, which is that this is kept under review in the usual way. It has been used to support millions of households in need with the cost of essentials. For example, 26 million awards were made to households in need between 1 October 2021 and 31 March 2023. More than £2 billion in funding has been provided to local authorities via the household support fund since it began—that is, October 2021. More than 10 million awards were made between 1 October 2022 and 31 March 2023.
The noble Baroness, Lady Lister, asked why we are not going to increase the benefit cap. She cited the fact that the Secretary of State has an obligation to review at least once every five years. We believe that there has to be a balance. The benefit cap provides a balanced work incentive and fairness for hard-working taxpaying households, while providing a safety net of support for the most vulnerable. She will know that the Government increased the level significantly from April 2023 following the review in November 2022. The proportion of all working-age households capped remains low, at 1.3%, and these capped households will still be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London. For single households, this is around £15,800, or £19,000 in London.
The noble Baroness, Lady Lister, asked about benefits levels and how to measure them. There is no objective way of deciding what an adequate level of benefit should be as every person has different requirements depending on their circumstances. However, we will spend £276 billion through the welfare system in Great Britain this financial year, including around £124 billion on people of working age and their children. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe, which I mentioned earlier.
The national living wage, which I also want to mention, is set to increase this April by 9.8% to £11.44, on top of the increase in April 2023 of 9.7%. This represents an increase of over £1,800 in the annual earnings of a full-time worker on the national living wage, and it is expected to benefit over 2.7 million low- paid workers.
Guaranteed Minimum Pensions Increase Order 2024
(8 months, 1 week ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Viscount Younger of Leckie
That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2024.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)
My Lords, this order was laid before the House on 15 January. It is a routine and quite technical annual order and is usually debated alongside the Social Security Benefits Up-rating Order 2024, which we have just finished discussing. Unusually, this year, we are running the orders one after the other, as determined by the Whips’ Office. I hope the Committee will agree that this order is not considered too controversial.
The order sets out the annual amount by which the guaranteed minimum pension—the so-called GMP, which is part of an individual’s contracted-out occupational pension earned between April 1988 and April 1997—must be increased. This year, occupational pension schemes that provide GMPs are required to increase GMPs earned during that period which are in payment by 3%.
I start by giving a bit of background on GMPs. They were created to help employees save income for their retirement but in an affordable way. The state pension used to be made up of two parts: the flat-rate basic state pension and the earnings-related additional state pension. The flat-rate basic state pension was funded through national insurance and paid at the full rate to those with sufficient qualifying years of national insurance contributions, or pro rata for those with a partial record.
The second part of the state pension, the additional state pension, was linked to a person’s earnings. The higher earnings-related national insurance contributions applied to both the employee and the employer and built entitlement to an additional state pension, based on the employee’s earnings. The intention was to ensure that as many people as possible were able to save towards an earnings-related work-based pension that would supplement their basic state pension in retirement.
The additional state pension was introduced in 1978. At the time, many employers were already offering their employees a workplace occupational pension through their own scheme. Therefore, having both an earnings-related additional state pension and a company occupational pension was seen as dual provision. It was overly complicated and potentially unaffordable for employers and employees.
The then Government therefore decided to deal with this through the system of contracting out and the associated provision of guaranteed minimum pensions. Between April 1978 and April 1997, employers sponsoring salary-related schemes could contract their employees out of the additional state pension through membership of the company pension scheme, as long as that pension scheme paid its members a guaranteed minimum pension as part of their occupational pension from the scheme.
The idea was that, rather than paying additional national insurance to the state, people would instead build up a similar amount of occupational pension through their workplace pension schemes. This was the guaranteed minimum pension. It was broadly equivalent to the additional state pension foregone, and it set a level below which the occupational pension could not fall. In return, both the scheme members and the sponsoring employer of the scheme paid lower national insurance contributions. Most schemes provided pensions above this set minimum, with many providing pensions that were significantly higher. The pensions provided above the GMP have their own rules; however, the GMP provides a useful minimum benefit for members. I think that covers the relevant background to the order, which may be familiar to the Committee, and I hope this gives a sense of what was happening at the time and why the order is still important.
Moving on to the order itself, the GMPs increase order relates specifically to members who were contracted out of the additional state pension between April 1988 and April 1997. The order provides these members with a measure of inflation protection for the GMP element of an occupational pension scheme built up between 1988 and 1997.
As your Lordships may be aware, legislation states that when there has been an increase in the annual level of prices, as measured at the previous September, the order must raise the GMP element of an individual’s occupational pension that was earned between 1988 and 1997 by this percentage increase or 3%, whichever is lower. As September 2023’s consumer prices index figure was 6.7%, this means that the increase for the financial year 2024-25 will be 3%. The cap of 3% for GMPs earned between those years aims to achieve a balance between providing some measure of protection against inflation, while not increasing schemes’ costs beyond what they can generally afford.
The cap provides schemes with more certainty, allowing them better to forecast their future liabilities, which is important when they are considering their funding requirements. If there were no limit on the increases, the higher costs could put unreasonable pressure on schemes, which could put their future viability at risk. The cumulative effect of high increases every year could be significant.
A point that has been raised previously, including in the debate last year, is the suggestion that requiring schemes to index post-1988 GMPs was introduced only to save the taxpayer money, as the indexation on earlier accruals was achieved through an uplift in the state pension. A central reason behind why the Government made this decision is that contracting out has always been about the state and the private sector working together, and that having a set amount of indexation paid for by the scheme, with additional protection provided by the state, is a sensible balance.
Let me explain how that system works. When inflation is above 3%, as it currently is, most people with GMPs earned between those years—1988 and 1997—who reached state pension age before 2016 will receive the same inflation protection as if they had not been contracted out. This means that most people who reached state pension age before April 2016 will receive a top-up of 3.7% this year through the additional state pension. In other words, they will receive 3% from their occupational pension scheme and the remainder as a top-up through the additional state pension.
Lord Davies of Brixton (Lab)
My Lords, I feel obliged to make a contribution. As I said last year, if I was on “Mastermind” my specialist subject would be the GMP. I was waiting to pounce on the Minister if he missed anything out, but he provided a very comprehensive— I leave it to others to judge whether it was a clear—explanation of the system that applies.
The only thing I want to add is that, post 2016, retirees lose out on these increases and some of them are very angry about it. However, as the Minister indicated, they gain in other ways. The continued accrual post 2016 more than compensates for the loss of these increases—except, that is, for those who retired in the year 2016-17, because they did not get any additional accrual that counted towards their pension. I pointed that out at the time when the Act was going through but, as happens all too often, nobody listened.
Baroness Janke (LD)
I thank the Minister for his explanation, which was indeed very clear on a fairly complicated issue. We support this order but, at the same time, I would like to use this opportunity to raise some issues relating to pensions.
First, I welcome the Government’s support for retaining the triple lock. Although there has been a reduction of the numbers, there are still 1.7 million pensioners in poverty and the value of the state pension is still lower in the UK than in comparable countries.
The next thing I would like an update on is: what has happened about the large number of pensioners who are entitled to pension credit but do not take it up? Some of us had frequent meetings with the Minister’s predecessor about this. There were many suggestions as to how awareness could be raised and the potential benefits of the scheme promoted among poorer pensioners. Can the Minister update us on what measures have been taken to improve take-up and what level of success the campaign has achieved to date?
We also welcome the measures to expand auto-enrolment by giving powers to end the lower earnings limit and increase the eligible age range. Can the Minister provide us with a progress report on the implementation of these measures? Are the Government planning to review the rate of contribution, which quite a few people say is too low?
Have the Government taken any action on the pensions gender gap? The average pension for a woman aged 65 is one-fifth of a 65 year-old man’s, and women receive £29,000 less in state pension than men over 20 years. This deficit is set to continue, with all else being equal, closing by only 3% by 2060. What is the Government’s response to the embedded unfairness in this system? Will the Minister tell us what progress has been made in the Government’s plans to streamline tax administration, perhaps to enable low-paid workers, who are typically women, to receive pensions tax relief on their contributions?
A lack of awareness of the value of pension assets and pension complexity, as well as the increasing number of online divorces, has led to many divorced women having no pension savings at all. Women’s pension rights are much harder hit than men’s by divorce, so has any progress been made to ensure the fair sharing of pension benefits after divorce? I look forward to the Minister’s response.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for introducing this order, and I thank all noble Lords who spoke. I say to my noble friend Lord Davies that, if I were ever to go on “Mastermind”, this would definitely not be my specialist subject. Every year I have to revise it afresh, and every year when I pick it up it is as though I have never seen it before. It is a little like the content of my physics A-level, which I could hold in my brain for the duration of the exam but which then disappeared, having left no discernible effect for the rest of my life. So I actually thought it was an incredibly clear explanation, and I commend the Minister and all those who helped him to present it—I am very impressed.
My idiot’s guide to what this does is that it tells pension schemes the percentage by which they need to uprate GMPs built up between 1988 and 1997. Some years, having done the reading, I dug deep into the technicalities of this, but this year I will ask just two rather simpler questions about it. First, I think I mostly followed the question about how much is the total benefit of uprating between different components, so how many, if any, pensioners will see below-inflation increases in their pensions as a result of the 3% cap?
Secondly, last year, I raised the way DWP deals with those who have GMPs who may have lost out when the new state pension was introduced in 2016. As we have discussed before at this stage, in 2019, the Parliamentary and Health Service Ombudsman reported on its investigation of two complaints and said that the DWP had failed to provide clear and accurate information on the issue, despite being warned, with the result that some people were not aware that they might need to make alternative provision for their retirement. The ombudsman recommended that DWP should
“review and report back its learning from our investigations”
and that, in particular, it should improve its communications on the issue.
It was August 2021 when DWP finally produced a factsheet in response on GMP and the effect of the new state pension. Last year, I asked the Minister two questions about that. First, what was the DWP doing to draw the existence of the factsheet to the attention of those who might need to know it was there? Secondly, how many people had successfully applied, or indeed applied at all, for compensation since the ombudsman’s report? I did not get any answers, either on the day or in the letter afterwards—as far as I could see.
I have been back since and crawled through the correspondence between the Select Committee and successive Pensions Ministers, of whom there have been a number. I commend the committee for its diligence in this matter. Finally, in a letter from Paul Maynard, the Minister, to Sir Stephen Timms, dated 9 January this year, I found this sentence:
“We received 50 requests for further information (between 12 August 2021 and 31 December 2023) from people who responded to the GMP factsheet”.
There was then a breakdown of those requests. But how will those figures be updated in future? Does the Minister think that 50 requests in nearly two and a half years is enough, or does it perhaps suggest the need for more proactive communication, of the kind for which the Select Committee has been calling for some years?
With the noble Baroness, Lady Janke, I would like to ask a couple of questions more broadly relating to pensions. The first is a factual question. We were due to have the latest release of national statistics on the state pension two weeks ago. They came out as part of the quarterly DWP benefit statistics release, but they seem to have been suspended. Can the Minister explain why?
On the question of pensioner poverty, also raised by the noble Baroness, Lady Janke, the Minister will know, because I say it periodically, that the last Labour Government saw a marked fall in pensioner poverty, which unfortunately then started to go into reverse when this Government came to power. Now, one in six pensioners are living in poverty. Our success was largely down to the introduction of pension credit, which ensures pensioners get a minimum level of income plus passported benefits.
As the noble Baroness, Lady Janke, said, take up is key. In January, statistics were published which looked at benefit take up. They suggest that for the financial year ending 2022, an estimated 63% of families entitled to pension credit received it. That was 3 percentage points lower than the financial year ending 2020. That suggests that there was a brief rise, but it has now gone back down to 2019 levels. Given that the Minister and his predecessor have got up and talked about how successful the pension credit take up campaign has been, have I read that correctly? Is the annual level of take up in fact going down? Please can the Minister explain that to me?
We also need to do what we can to boost the incomes of future pensioners. The noble Baroness, Lady Janke, again mentioned the Pensions (Extension of Automatic Enrolment) (No.2) Bill, which received Royal Assent with cross-party support, giving Ministers the power to abolish the lower earnings limit for contributions and reducing the age for being automatically enrolled from 22 to 18. On 18 September, the Minister told us that:
“If the House agrees to final passage today, the Government will look to play their part by consulting on how to implement the expansion of automatic enrolment at the earliest opportunity, which I hope gives some idea of the timescale to the noble Baroness, Lady Sherlock. We hope it could be later this year. We will then report to Parliament about how we intend to proceed in accordance with the provisions in the Bill”.—[Official Report, 18/9/23; col. 1201.]
When these regulations were debated in the Commons on 31 January, my honourable friend Alison McGovern asked when this would be happening and when these provisions would be put in. The Minister Paul Maynard responded thus:
“I would love to give her a date for when she will see that; “in due course” is never a good answer to give at the Dispatch Box, but I am afraid that it is the answer at this stage. However, I am pursuing this within the Department, so she has my personal pledge I am pushing it as hard as I can”.—[Official Report, Commons, 31/1/24; col. 949.]
Having pushed as hard to get that Bill through, with cross-party support, does this mean it has been kicked into the long grass? I look forward to the Minister’s reply.
Viscount Younger of Leckie (Con)
My Lords, I begin by thanking the three Peers who have spoken in this debate which was even than the previous one. I say at the outset that I appreciate the general support for these regulations. Regarding the GMP increase order, it is always helpful to be aware from the outset that your Lordships are generally supportive of what it sets out to do. Occupational pensions schemes help provide members of their scheme who have a GMP accrued between 1988 and 1997 with, as I said earlier, a measure of protection against inflation eroding the value of their pension.
At the outset, I will also give a very brief response to what was not really a question from the noble Baroness, Lady Janke, about the triple lock. We are pleased to confirm that the triple lock remains in place. I do not think that there was a question there, but I acknowledge that point.
There were a number of questions. I shall start off by answering in no particular order some questions raised by the noble Lord, Lord Davies of Brixton. As to the very specific question of how many people who contracted out will be worse off because of the loss of GMP indexation through the state scheme—he particularly mentioned 2016-17—people who reach state pension age after April 2016 will be entitled to the new state pension and will receive up to 3% from the scheme on their 1988-1997 GMP, which he will know. When looking at the reforms in the round, people may not lose out in aggregate terms because, in effect, indexation has ended for people reaching state pension age from 6 April 2016. This is because the transitional rules of the new state pension can be particularly advantageous for people who have been contracted out.
Baroness Sherlock (Lab)
I just want to understand that response. It does not sound like very many. I presume what the Minister is trying to say to the Committee is that, having looked at the denominator of how many people might expect to be eligible and how much they might get, that number does not feel disproportionate. Is that what he is saying?
Viscount Younger of Leckie (Con)
Yes—that is absolutely right. Let me see whether there is any further information that I can get to the noble Baroness on this niche matter. If I am wrong, I will write, but I will certainly write anyway. I am coming towards the end of my remarks; I have only a couple more questions to answer.
The noble Baroness, Lady Sherlock, asked where she might find the latest state pension statistics. As she may know, they are available on Stat-Xplore, but only up to May 2023. The release of updated statistics due to be published on Tuesday 13 February 2024 was suspended, as the noble Baroness alluded to in her remarks. This delay results from issues with the internal processing of state pension data after it was sent for analysis from the “Get your State Pension” system and has an impact only on statistics that are not yet published. State pension statistics previously published on Stat-Xplore in November 2023 remain reliable. Work is under way to remediate these issues, and we will publish the suspended state pension statistics as soon as we are able.
The noble Baroness also asked about the status of the auto-enrolment extension Act’s powers and the consultation. The Government remain committed to expanding the benefits of AE to younger people and helping all workers to save more for their retirement. This is why we supported the Pensions (Extension of Automatic Enrolment) Act 2023, to which the noble Baroness alluded. To cut to the quick, we intend to conduct a consultation on the detailed implementation of these measures at the right time and in the right way. That is probably not in line with what my colleague in the other place said—“in due course”—but our commitment stands to implement in the mid-2020s.
With those remarks, I will, as ever, check in Hansard that I have attempted to answer all the questions asked. The Committee should be reassured that, if I have not done so, I will write. In the meantime, I thank all three Peers for their interest.