Relevant document: 25th Report from the Delegated Powers Committee
Clause 1: Up-rating of state pension and certain other benefits following review in tax year 2020-21
1: Clause 1, page 1, leave out lines 11 to 16 and insert “must lay before Parliament the draft of an order which increases each of the amounts referred to in subsection (1) above by a percentage no less than—
(a) the difference between the general level of earnings at the beginning of the period under review and the general level of earnings at the end of that period,(b) the difference between the general level of prices at the beginning of the period under review and the general level of prices at the end of that period, or(c) 2.5%,whichever is the greater.”Member’s explanatory statement
This amendment would probe whether the relevant benefits for the tax year 2020-21 should be up-rated in line with the “triple lock” of the higher of increases in prices, increases in earnings or 2.5%.
My Lords, this is nothing more than a probing amendment to clarify the Government’s thinking. There is a commitment that the Government will uprate pensions and other benefits in line with practice. However, the economic situation may not trigger that increase via the triple lock and so we do not know what will happen. Without it being stated that that will automatically be in place through the triple lock, we do not know quite what the Government’s intentions are for this year. And what happens next year? What is going on? Some information on the Government’s ongoing intentions would help here.
In the middle of the coronavirus crisis, we sometimes forget that there will probably be a world afterwards. I am not sure whether this is being glass-half-full on this occasion, but are we committed to the triple-lock or something like it? We should look at this issue, or at least pay half an eye to it, because of generational fairness, which is the idea floating at the back of this debate. This Government, and others, I hope, must ask: are we going to continue to make sure that the basic pension is enough to live on and will be a little more than it is now in the future? That might encourage people to buy in.
I look forward to the Minister’s reply and thank her for pointing out before I rose to my feet, with her devastating and scything charm, the slight change to my explanatory statement, in which I originally got the wrong year. I seek the Government’s thinking on this. It is an opportunity for the Minister to provide clarity on the process that will apply if the economic situation does not respond in line with the legislation. I beg to move.
My Lords, I thank the noble Lord, Lord Addington, for his explanation of the amendment and echo his request for some clarity from my noble friend the Minister. Is she able to give us an idea of the Government’s thinking on the future uprating of pensions?
Clause 1, before proposed subsection (2A), relates to the basic pension and the standard minimum guarantee. At the moment, the triple lock does not apply to the standard minimum guarantee and pension credit. Were the amendment to be inserted, it would ensure that the poorest pensioners, who are normally those we might wish to protect the most, would get the benefit of the full triple lock. The overall issue on which I should like clarification from my noble friend is whether she can give us an idea of the Government’s thinking on the 2.5% element of the triple lock. Is that likely to continue in the light of what is happening in the rest of the economy? If so, is there any thinking within the department on ensuring that the pension credit is also uprated by the full 2.5%?
I congratulate my noble friend on pointing out what I was going to mention about the relevant 2021-22 tax year. The thrust of this probing amendment is of interest to the Committee and I look forward to her response.
My Lords, I too welcome the amendment of my noble friend Lord Addington. We are all interested to hear the Government’s thinking, particularly on the future of the triple lock. I am sure that we all welcome their commitment to the undertakings in their manifesto and are pleased to see the Bill. However, in recent months, a lot of doubt have been shared regarding the triple lock’s future. Some people have said to me that there seems to be an almost systematic picking at the seams of the triple lock. With the Chancellor under pressure due to the economic implications of the pandemic, we would like some reassurance from the Minister that the Government are committed to ensuring that the pension keeps its value.
The state pension is particularly important to give the poorest pensioners confidence. Everyone is suffering under the pandemic but there is no doubt that the poorest are suffering worst. We would like to know the Government’s thinking for the future. Will there be a commitment in the Bill to keep the 2.5%, as well as transparency and clarity to reassure those pensioners who are particularly dependent on the state pension? I look forward to the Minister’s reply.
My Lords, I am grateful to the noble Lord, Lord Addington, for explaining what his amendment would do, and to other noble Lords who have spoken in pursuit of clarity. The noble Baroness, Lady Altmann, raised the issue of the uprating of pension credit and the standard minimum guarantee in particular. I will return to that in more detail when I move my Amendment 3 shortly.
The Bill is permissive rather than prescriptive. The Explanatory Notes say that it will
“allow the Government to meet its commitment to the Triple Lock.”
At Second Reading, the Minister was invited by many noble Lords to tell the House if it was indeed the Government’s intention to increase the state pension in line with the triple lock, but she simply repeated the formula that the Bill
“will allow the Government to maintain their manifesto commitment to the triple lock.”—[Official Report, 13/10/20; col. GC 309.]
Had she been able to go further, she might have obviated the need for much of the debate we are having at the moment.
The Minister was also asked at Second Reading whether the Government intended to stand by the manifesto commitment to the triple lock for the rest of this Parliament. As the noble Baroness, Lady Janke, pointed out, there have been various rumours and briefings swirling around that have cast some doubt on the future of the triple lock. But answer came there none.
I realise that the Minister is in a difficult position. She probably thinks it unreasonable of us to ask her to answer these questions because the decisions are not hers, but she speaks for the Government in this House. We are being asked to fast-track this Bill to enable the governing party to fulfil a manifesto commitment, although the Government will not tell us whether they are going to fulfil it. It does not seem unreasonable to ask for a bit more clarity. I look forward to her reply.
My Lords, I thank the noble Lord, Lord Addington, for the first amendment and for clarifying the date to which he referred. His charm clearly works better than mine.
The purpose of the Bill is to allow the Secretary of State to increase the specified pensions and benefits for 2021-22. This then allows the Government to deliver their triple lock commitment. However, the actual rates of increase for each of these pensions and benefits are subject to the Secretary of State’s annual statutory uprating review. In presenting this urgent Bill, the Government have sought to replicate the powers given to the Secretary of State in the founding legislation, as was also the case in 2009.
This amendment would also apply the triple-lock formula to the pension credit standard minimum guarantee and to widows’ and widowers’ industrial death benefit for 2021-22. The triple-lock commitment does not apply to those benefits. By convention, the relevant widows’ and widowers’ benefits keep pace with the basic state pension.
In previous years the Government have sought to match the basic state pension cash increase in the pension credit standard minimum guarantee, where this increase has been higher than an amount generated by the increase in average earnings; that is the statutory minimum for uprating the standard minimum guarantee. As a result, the standard minimum guarantee for a single person is now nearly £10 a week higher than it would otherwise have been. For a couple, it is nearly £15 a week higher. The decision on how to uprate the standard minimum guarantee next April will be made during the Secretary of State’s uprating review and will be announced in November. These rates too will be subject to the Secretary of State’s statutory review in November.
The noble Baronesses, Lady Altmann and Lady Janke, asked whether the Government are going to honour their commitment to the triple lock and introduce the 2.5% element. As I have said, the Bill makes technical changes for 2020-21 which will ensure that state pensions can be uprated even though there has been no growth in earnings. This will allow the Government to maintain their manifesto commitment to the triple lock, including the 2.5% element.
The noble Baroness, Lady Janke, asked by how much the state pension will be increased this year. The Bill enables the Secretary of State to uprate state pensions in 2021-22. Every autumn, the rate of state pension increase is subject to the Secretary of State’s uprating review to which I have already referred. It would not be right to pre-empt the outcome of this review. The triple lock is a manifesto commitment under which the rate of the state pension will increase by the highest of the growth in earnings and prices, or 2.5%.
The noble Baronesses, Lady Altmann and Lady Sherlock, raised the uprating of pension credit. Without this Bill, the core component of pension credit—the standard minimum guarantee—will be frozen in 2021-22. The decision on how to uprate the standard minimum guarantee will be made during the Secretary of State’s uprating review. Your Lordships will have the opportunity to debate the uprating of the state pension, pension credit and other benefits when the draft order implementing the Secretary of State’s decision is brought before Parliament for approval in the normal way. I therefore ask the noble Lord to withdraw the amendment.
I thank the Minister for her reply. I take it that the intention is to continue as we are for the moment. We will hold the Government to this. It is also quite clear from this short debate that changes to benefits should be brought in at the same time, as they work together under the current system.
It might have been a little optimistic to expect some sort of long-term vision from the Minister in this House at this point, but we must bear this in mind in our discussions. We have not really covered the generational fairness point. Unless we get young people to buy in because they think they have something to look forward to, there will be trouble. The stroppy youth of today is the deciding voter in a few years’ time. I hope that we can draw more of this out in the debate on this Bill. I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
We now come to Amendment 2. I remind noble Lords again that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this amendment to a Division should make that clear in the debate.
2: Clause 1, page 1, line 24, at end insert—
“(2C) No power may be exercised under this or any other Act so as to exempt persons not ordinarily resident in Great Britain, but who reside in a country with which there is a reciprocal social security arrangement requiring up-rating, from entitlement to up-rating increases granted by an order made by virtue of subsection (2A).”Member’s explanatory statement
This amendment would ensure that this up-rating applied to all overseas pensioners who reside in a country with a reciprocal social security arrangement, including any whose pensions have previously been frozen in accordance with Government policy.
My Lords, I make no apology for returning to the subject which I raised at Second Reading: the injustice of frozen UK pensions overseas. First, I thank my noble friend the Minister for kindly arranging a meeting with me and some of her officials. I am grateful to her for listening so intently. I understand that she is unlikely to be able to accede to my request in this debate.
This amendment is not the one I should like to have tabled, but the ever-helpful Table Office pointed out that the amendment I wanted to table would not be within the scope of the Bill. I should like to have used the amendment tabled in the other place by the Scottish National Party:
“(2C) No power may be exercised under this or any other Act so as to exempt persons not ordinarily resident in Great Britain from entitlement to up-rating increases granted by an order made by virtue of section (2A) of this Act.”
In his reply, my honourable friend Guy Opperman, the Pensions Minister, rejected the amendment, saying that
“this is a long-standing policy pursued by successive post-war Governments, who have taken the view that priority should be given to those living in the United Kingdom in drawing up expenditure plans for pensioner benefits. There are no plans to change that policy. The up-rating of the state pension is intended to provide support for pensioners who live in the UK.”—[Official Report, Commons, Social Security (Up-rating of Benefits) Bill, 1/10/2020; col. 578.]
His statement was factually incorrect, as we know that uprating exists for those who live outside the UK but only in countries where there is a reciprocal agreement. My amendment seeks to clarify this. I trust that my noble friend can do so this afternoon.
At Second Reading, I followed my noble friend Lord Trenchard. He mentioned the unfair situation with regard to those who have served this country in the Armed Forces. I spoke of my home town of Uxbridge, with its strong RAF connections. Among the several case studies I shall mention this afternoon, I want to recall that of Wing Commander Harry Penny. He was the commanding officer of RAF Uxbridge in his last years in the UK before he emigrated to Australia. Interestingly, when he arrived in Australia, he was encouraged to continue making national insurance voluntary contributions to boost his national insurance record, and so ended up with a full UK pension when he reached 65 in the 1980s. He was never advised that it would be frozen.
As we approach Remembrance Sunday, I am sure that all noble Lords will be aware of the Battle of Kohima, and the deeply moving words from the Kohima memorial will be uttered around the world. Patricia Coulthard was present at the Battle of Kohima, and she is now fighting for veterans who retired abroad and have had their state pensions frozen. Ms Coulthard, who moved to Australia to be near her two children, told our Prime Minister earlier this year that she receives just £46 a week. That payment contrasts with the full state pension in the UK today of £175.20 per week. This amazing 99 year-old lady is just one of the more than 60,000 veterans who also suffer from frozen pensions. Ms Coulthard cared for soldiers who were injured at Dunkirk, before being sent to India, where she served in a jungle field hospital during the Battle of Kohima, in which around 4,000 of the British and Indian forces lost their lives. She suffered malaria, dysentery, fever and pleurisy, but she remembers her comrades and experiences with pride.
Roger Edwards risked his life for his country in the Falklands War, taking part in some of the conflict’s most hazardous operations, including the SAS raids on Pebble Island and Goose Green and the retaking of South Georgia. Roger is 70 now, and if he lives to a ripe old age, he could potentially end up being out of pocket by as much as £7,000 a year. Mr Edwards, who was born in Wiltshire, did not lose his full pension entitlement because he moved to a foreign country with no connection with the UK. No, he lives in the very place he risked his life for: the Falkland Islands. Yes, it is a UK overseas territory. This means he has full British citizenship. Yet that has not stopped the UK Government freezing his basic state pension. Mr Edwards is not alone. There are 42 people living on those islands with a frozen UK pension, about half of whom are military veterans.
Elsewhere in our overseas territories, our fellow citizens living in places as diverse as Montserrat and the Caribbean and the South Atlantic island of St Helena also have to make do with frozen pensions. Bizarrely, however, this policy does not apply to all 14 overseas territories. For example, those living in Bermuda, 5,800 miles north of the Falklands, and one of the world’s wealthiest places, enjoy the triple lock pension increases that their counterparts in the UK receive. All told, there are around 680 UK pensioners living in UK overseas territories with frozen pensions, even though they have made the same national insurance contributions as their UK peers.
That we have pensioners and military veterans such as Patricia Coulthard living on as little as £46 a week is utterly shameful and must serve as a wake-up call to end this callous, cruel and immoral policy without delay. However, it is not just our veterans who suffer this injustice. I have mentioned before that there is deep concern that members of the Windrush generation who spent their working lives in the UK but retired abroad are also losing out through frozen pensions.
I could continue with lots of cases of individuals. Around half a million are so affected. However, I contend that it is only right that every pensioner is more than a number on a spreadsheet in Westminster—or Whitehall, to be more correct—and it is high time that the Government held up their end of the bargain and gave all pensioners the pensions to which they are entitled. Many pensioners said they did not know the situation when they left the country. Today, there is information on GOV.UK about what the effect of going abroad will be on their entitlement. A government spokesperson said:
“The government continues to uprate state pensions overseas where there is a legal requirement to do so—for example in countries where there is a reciprocal agreement that allows for uprating.”
However, it appears that that information has not always been available for those leaving our shores. It is time we changed our policy, as the time-honoured reason given for this shameful state of affairs has been nothing but a blister on this country’s good name for fairness.
I know that appealing to successive Governments to do the right thing has simply not worked. There have sometimes been warm words at best, but certainly no action. I want to suggest to the Government something they could and should do to be more positive about it. How about proactively trying to get reciprocal agreements? Having left the EU seems to be the perfect time to think about it. Apparently, the last time an agreement was signed was in 1992, with Barbados. In 1992, I was still a slim young man selling furniture in Uxbridge, and although, luckily, through the miracle of Zoom your Lordships cannot see my current frame, I am sure you will realise that that was a long time ago. I have changed somewhat, but the Governments of the day still resolutely refuse even to try to rectify this situation. I would say to the Government that I would be happy to be part of any team to get these agreements signed and sealed, and with a substantial number of new ones, perhaps they will concede that all UK pensions abroad should be treated equally and fairly. However, I fear that the will is not there.
I have seen a communication from a Canadian MP, who states:
“I am told that the UK has continually declined overtures to open this issue and that it will not consider the indexation of UK pensions paid into Canada. I understand that a number of Members of Parliament have raised this issue in recent months. Canada first opened the door to this possibility with the UK when the Conservatives were in government in 2013, and the UK declined our offer to enter into negotiations about this.”
I cannot say whether that is the case. Perhaps we can have some clarification on that and, indeed, on whether any other overtures by other countries have been rejected similarly.
In the Second Reading debate it was a great pleasure to hear the maiden speech of the noble Lord, Lord Field of Birkenhead, who, among many of his achievements in the other place, chaired the Select Committee on Social Security. In one of its reports on this issue, under his chairmanship, it was stated that it is a political question, which includes, but is not distinct from, a moral question. As always, the noble Lord put his experienced finger on the button.
I feel I have detained the House long enough on this, but I would like to ask whether Civil Service pensions are similarly frozen. Indeed, are those of Members of Parliament frozen? I wonder whether if any of my former colleagues decided to emigrate for whatever reason—I know that one or two of them threaten to do it periodically—they would be so pleased if they knew that their pensions would be frozen. Are service pensions the same? Perhaps my noble friend can find the answer to that and see whether it is just the state pension that discriminates in this way.
I add that if a UK pensioner returns to the UK for a holiday or some other reason, for the period that they are here, the pension will be paid at the updated sum—assuming, of course, that they contact the pension centre. Again, this discriminates against those who are too elderly to travel and those who cannot afford it, the very people we should be fully supporting.
This issue has been around for far too long, and it is about time that we as a Parliament and a nation decided that it should be resolved and that discrimination in our pension system should be abolished for all time.
I thank the noble Lord for his interesting and eloquent speech. I remember that at Second Reading he was equally impassioned, and it is very good that he has put this amendment down. On the face of it, the policy seems extremely unjust, unfair, inconsistent and totally unjustifiable. Can the Minister give us more of an explanation of how it happened? It seems like some kind of anomaly. How many pensioners are affected in total? What is the future outlook? What would be the implications if this amendment were to be agreed to? I, too, looked at the debate in the other place, and I found the Minister’s response dismissive and completely uninformative, so it would be very good if we could have a bit more information about this current situation.
The noble Lord mentioned veterans in particular. It again seems completely unjust and completely lacking in any kind of compassion or gratitude for what those people have done for their country. Again, perhaps we could be allowed to know how many of these people are veterans.
The noble Lord mentioned government reciprocal agreements. That is right, but again, you need the political will, and whether that is there seems in doubt.
This certainly is a moral question. Here, I would like to mention the fact that many UK citizens are not allowed to vote, unlike in other countries. For example, France has an MP for citizens living abroad. I feel that if these people were able to exercise their vote, there might be a bit more political will to do justice for them all.
My Lords, I thank the noble Lord, Lord Randall of Uxbridge, for explaining his amendment to us. He is a strong advocate for this cause and I am very sympathetic to the position in which many pensioners find themselves. However, it is a difficult issue, which successive Governments have struggled to resolve.
Perhaps I may ask the Minister some specific questions. First, we have heard that 500,000 people living in other countries are affected in this way. Can the Minister confirm that figure? How much does she believe that it would now cost to change the rules?
Secondly, the noble Lord, Lord Randall, both today and at Second Reading, highlighted two particularly difficult sets of cases. The first was the position of veterans. Today, he mentioned Harry Penny, Roger Edwards, Patricia Coulthard and others, and I am still thinking about Anne Puckridge, whom he mentioned at Second Reading—the 95 year-old World War II veteran whose pension was frozen when she moved to Canada at the age of 76 to be near her family. It is hard to see the justice in those who fought for this country being denied the pensions that they earned simply because they moved abroad to be with their families in their later years and did not realise what would happen. Do the Government know how many veterans are in this position?
The noble Lord also mentioned at Second Reading the case of Monica Phillips, who emigrated to the UK in 1959 as part of the Windrush generation. After 37 years working here, she returned to Antigua to look after her mum and her pension was then frozen. Again, do the Government know how many of the Windrush generation are affected by this measure? Have they looked into it?
Thirdly, the noble Lord, Lord Randall, also raised today the issue of reciprocal agreements in the wake of Brexit. I have to say to him that I have pursued that issue for some time but have got precisely nowhere. All that Ministers will ever say is that they hope to get a deal, so the position will be as set out in the negotiating documents. However, I will be very interested to see whether he gets any more information than I have been able to obtain.
This issue is so difficult because so many people assume that their pension is determined by what they pay in national insurance contributions rather than where they live when they retire. Therefore, can the Minister assure the Committee that the position is now made abundantly clear to all pensioners, especially as they approach pension age? I look forward to her reply.
My Lords, I turn to the amendment to Clause 1 tabled by my noble friend Lord Randall of Uxbridge. As he is aware, it would in practice have no effect because it simply commits the Government to uprating UK state pensions, as they do now.
However, my noble friend spoke passionately at Second Reading, and again with great passion and commitment today. He eloquently shared with us the case studies of people impacted by the lack of reciprocal arrangements and the freezing of pensions. The long-standing policy of successive Governments for over 70 years has been that UK state pensions are payable worldwide and are uprated in countries overseas where there is a legal requirement to do so—for example, in countries where the UK has a reciprocal agreement that requires uprating. I look forward to the debate on the issue but, first, I would like to make some points about our reciprocal agreements with other countries.
The UK has reciprocal agreements with several countries, and most of these require uprating. There are only two reciprocal agreements which do not allow for uprating: those with Canada and New Zealand. A similar agreement existed with Australia until early 2001, when the Australian Government withdrew from it. Unlike the UK, Canada and New Zealand have residence-based state pensions. The reciprocal agreements with them broadly allow for periods of residence, employment or contributions in one country to be considered as periods of residence, et cetera, in the other for the purposes of entitlement to a state pension.
The systems in New Zealand and Canada are also means-tested to some extent. For example, New Zealand takes overseas pensions fully into account in its superannuation schemes. New Zealand law also requires that notional income is calculated if a pensioner does not claim his or her state pension from an overseas country. This means that any future state pension increases would be taken into account and the moneys would go to the respective Treasuries, so pensioners on the lowest incomes are unlikely to benefit from increases in their UK state pension. It might also mean an increased tax bill for some overseas residents and the loss of their welfare benefits in their chosen country of residence. This Government believe that our responsibility is to pensioners living in this country, rather than effectively making payments to other Treasuries.
The agreements with Canada and New Zealand were negotiated and agreed some time ago. The pattern of the UK’s reciprocal agreements with other countries is historic. It is based in part on Commonwealth ties but also on the political context at the time of concluding the agreement. That gives rise to inconsistencies. For example, we have an agreement with some Caribbean countries, such as Jamaica, but not with others. The agreement with Jamaica requires uprating. It has been suggested by some that uprating could form part of discussions on future free trade agreements—for example, with Australia and Canada. However, state pensions are not in scope of free trade agreements.
There are no plans to change the policy on uprating UK state pensions overseas. The Government have not entered into a new reciprocal social security agreement since 1992, as my noble friend Lord Randall referred to, and have no plans to enter into new agreements.
The noble Baroness, Lady Sherlock, asked about the number of pensioners living in frozen-rate countries. It is approximately 500,000. I regret that I do not have any numbers for veterans.
My noble friend Lord Randall raised, as did other noble Lords, the question of a moral obligation to rectify this anomaly. The policy on this issue is long-standing, as I have already said, and one of successive Governments. It has been in place for some 70 years and, although I know this will disappoint noble Lords, there are no plans to change it.
My noble friend and the noble Baroness, Lady Sherlock, talked about the impacts on the Windrush generation. UK state pensions are payable worldwide to eligible people based on their NI record. I regret to tell the noble Baroness that we do not know the number of people affected among the Windrush community.
My noble friend Lord Randall asked about pensioners who are resident overseas who have paid their NI contributions, so pensions payable abroad should be fully indexed. The rate of contribution paid is never earned entitlement to the indexation of pensions payable abroad. This reflects the fact that the UK scheme is primarily designed for those living in the UK.
My noble friend Lord Randall raised the issue of consistency across countries, and a particular point about Canada. Canada has a bilateral agreement with the UK that does not cover uprating. The UK sought a reciprocal agreement with Canada that included uprating, but this was rejected as legislation prevented Canada paying its pensions overseas.
My noble friend Lord Randall and other noble Lords raised the issue of the Government’s moral duty to uprate state pensions overseas. The decision to move abroad is voluntary and remains a personal choice, dependent on the circumstances of the individual. For a number of years, advice has been provided to the public that the UK state pension is not uprated overseas except where there is a legal requirement to do so.
Given that the amendment states that any uprating order made under the Bill would uprate abroad in cases where there was already a legal requirement to do so, I urge my noble friend to withdraw it because it has no practical effect, given that the Government are already required to do that in law. However, I welcome the opportunity he has presented to debate the broader issue of uprating overseas.
My Lords, I have had no requests to speak after the Minister.
My Lords, I normally find that if I do not have high expectations, I will not be readily disappointed. I thank my noble friend the Minister for her replies. I was not expecting any great change to 70 years of the government policy of all parties, but this is something that we should be looking at. As was said, perhaps the Conservative manifesto commitment to give the vote to people living overseas may be the incentive for us to look again at this issue.
I am disappointed that there seems to be no desire to try to get reciprocal agreements. I take the point that free trade agreements will not include this sort of thing, but diplomacy between countries, even if it is not actually in the agreement, is something that we should be looking at. I urge those countries, particularly the Commonwealth countries, that know we want to do trade with them to consider this; we might just sneak it into the conversation that they might be more willing to be helpful if they had a look at some of these things.
As I said, I was not expecting anything. I am grateful for the other contributions to this debate. This is an issue that I will not let go—although not on Report, I am sure noble Lords will be delighted to know—and I will take it up at any opportunity until it is solved. I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
We now come to the group beginning with Amendment 3. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate. Anyone wishing to press this or anything else in the group to a Division should make that clear in the debate.
3: Clause 1, page 1, line 24, at end insert—
“(2C) No draft order laid before Parliament under subsection (2A) may be made in the form of the draft unless the Secretary of State has laid before Parliament—(a) a report containing an assessment of the existing levels of pensioner poverty in each of the regions and nations of Great Britain, and(b) a statement outlining the expected impact of the draft order on pensioners with the lowest incomes.”Member’s explanatory statement
This amendment would prevent a draft order under inserted subsection (2A) from being made unless the Secretary of State has published a report outlining current levels of pensioner poverty across the regions and nations of Great Britain and a statement outlining the expected impact of the Government’s chosen policy option on these poverty levels.
My Lords, I made it clear at Second Reading that we support this Bill, and I have no wish to delay its implementation, so Amendment 3 is a probing amendment. I have tabled it to make sure that we get a chance to address the issue of pensioner poverty, which was raised by many noble Lords at Second Reading but did not get a substantive response, no doubt because time was tight. Fortunately, we have all the time in the world in Committee.
The number of poor pensioners had fallen significantly, largely down to the introduction of pension credit, but it is now a cause for concern again. The Government’s own figures show that 1.9 million pensioners are living in relative poverty, so this is something that we should all be concerned about. People who have worked all their lives should not be worrying in old age about how to make ends meet.
There are broader policy concerns too, such as the evidence showing that people on lower incomes have lower life expectancy and fewer years of healthy life after retirement. That is bad for the individual, but it is also bad for the state. Research by the Joseph Rowntree Foundation has shown that these health inequalities have an effect on state spending, leading to higher costs to the NHS and social care services. Has the Minister read the interesting recent report based on research commissioned from Loughborough University by Independent Age which suggests that the underclaiming of pension credit is costing the Government roughly £4 billion a year in increased NHS and social care costs? What does she make of that?
Taking pensioner poverty seriously means that when Ministers talk about their plans for the triple lock for the state pension, they should also be ready to talk about their plans for uprating the standard minimum guarantee in pension credit. That is the reason this amendment suggests that the uprating should be accompanied by a report on the implications for poverty. If pension credit is not uprated by an equivalent amount to the triple lock, the benefit of the increase in the state pension enabled by this Bill will be enjoyed in full, as I have said before, by many Members of this House, but not by the poorest pensioners, who will have it clawed back from pension credit.
Pension credit is key to tackling poverty because as well as topping up weekly income for poor pensioners it can be a passport to other benefits—housing benefit, council tax reduction, the cold weather payment and now the free TV licence for the over-75s. That could be worth up to £7,000 for some pensioners. Do not take my word for it. In giving evidence to the Scottish Social Security Committee on 23 January, a senior DWP official said
“In the UK, 16 per cent of pensioners are in poverty. If all those pensioners claimed pension credit, housing benefit and the council tax reduction—especially the council tax reduction—that would reduce the 16 per cent to almost zero.”
The latest DWP paper on take-up that I could find came out last February but covered the period 2017-18. It said that only six in 10 of those eligible for pension credit are claiming it. That means 1.2 million eligible families did not claim the benefit and only 70% of the total amount of pension credit that could have been claimed was claimed—only 70%. That means that up to £2.5 billion of pension credit is going unclaimed, amounting to around £2,000 a year for each family who would be entitled to receive pension credit but did not claim. This take-up rate has basically stalled for a decade. It is crystal clear that, if the Government care about pensioner poverty—and they should—they need to care about the take-up of pension credit.
I am talking more than I expected to about this because we had a rather unsatisfactory debate in Oral Questions yesterday. In response to a Question from my noble friend Lord Foulkes, the Minister was not able to offer any indication that the DWP has a proper strategy for increasing pension credit take-up. It is not enough simply to say that Ministers want people to apply. The DWP did run a 12-week campaign starting in February but, as my noble friend Lord Foulkes pointed out yesterday, that campaign, plus online claims and the threat of losing free TV licences, resulted in fewer than 30,000 of those lost million-plus people making a claim.
Maybe that is because the key feature of the campaign was a video to be shown in GP surgeries and post offices—of course, we are now in a pandemic and most pensioners are not going to those places. The Minister acknowledged to me yesterday that, because of the pandemic, people were not able to access that information, but I asked if they would be running a fresh campaign instead. She said:
“At the moment there are no plans for a new campaign. We are working with stakeholders, who again are absolutely swamped by the impact of Covid, to ensure that the message gets out.”—[Official Report, 26/10/20; col. 14.]
She also said in response to other noble Lords that there were no plans for research and no plans for targets for take-up. So I ask the Minister, what is the Government’s plan to boost take-up of pension credit?
If there is no plan, I have some suggestions. First, the DWP needs a written strategy to boost pension credit take-up. It does not have one and that is a problem. They should publish one so that we can scrutinise it and hold Ministers to account. Secondly, there should be a proactive campaign targeted directly at those thought to be non-claimants, rather than just general information; it should prioritise those who need the money most and are the least likely to claim. That requires up-to-date data and good qualitative research. It also needs to be creative. I am told that, when pension credit was launched, there were roadshows in various community settings and the DWP sent out mobile vans to go around small towns and villages on market day in areas where data suggested take-up was low. Finding a Covid-secure version of that will take time, resources and creativity, and engagement with stakeholders. If, as the Minister says, stakeholders are swamped, will the Government consider funding them to get involved with this work?
Does the Minister agree with the points that I have made? Crucially, does she accept that the Government have a responsibility for tackling poverty across the UK and across the generations? I do not want to open up the debate that we had about intergenerational issues at Second Reading, although I feel very strongly about working-age benefits and working-age poverty, but it is a really interesting comparison. Because Ministers do not have a strategy for tackling child poverty—indeed, they repealed the Act that made them do so and refused to accept the internationally accepted measures of poverty—we are seeing the numbers of poor children in the UK rising. If Ministers were forcibly, legally committed to eradicating child poverty, they presumably would not have cut billions from working-age benefits.
I indicate now that I will not press this amendment to a vote, but I urge the Minister to accept it. The Committee deserves a comprehensive and serious response from the Government today. If that is not available, they could at least follow the spirit of this amendment and bring forward a report on these issues before Parliament soon. I beg to move.
My Lords, in speaking to Amendment 4, to which my name is attached, I also wish to support Amendment 3, which addresses similar issues. The aim is to understand better the impact of this Act on pensioner poverty.
According to the Joseph Rowntree Foundation, pensioner poverty has been decreasing across the UK. Given the existence of the triple lock, that should not be a surprise. Indeed, it shows the success of the triple-lock policy since 2010 in reducing pensioner poverty generally. That is something of which my party should be proud.
Yet, as we have heard from the noble Baroness, Lady Sherlock, pension credit is still needed by large numbers of individual pensioners, and we know from a Question asked yesterday by the noble Lord, Lord Foulkes, that the campaign to encourage take-up of pension credit this year seems not to have achieved very much.
As we have heard, too many people who would qualify for pension credit still do not claim it. One reason could be clawback. I think a main reason is lack of face-to-face support to assist individuals for whom digital and telephone access is a barrier. I hope the Minister will look carefully at this problem, because if the Government really want to reduce pensioner poverty, they have to will the means of doing that. As the noble Baroness, Lady Sherlock, said, we need a new campaign.
Our Amendment 4 also identifies a considerable pensions gap between men and women and calls for a specific review of the impact of the provisions of the Bill on women. I hope the Minister can agree to that.
We said at Second Reading that the Bill is primarily a technical Bill. But the amendment in my name and that of my noble friend Lady Janke adds an important dimension, which is that any further decisions on pensions uprating should be brought forward by the Government in the light of their findings from the review; in other words, we need the clear, evidence-based decision-making that Amendment 4 would provide.
My Lords, I will speak to Amendment 3, and thank the noble Baroness, Lady Sherlock, for her work on it. I have previously spoken about the importance of the Government fulfilling their promise to deliver the triple lock to pensioners, so I support the general thrust of the Bill. However, it is important that a considered approach to uprating is taken that analyses the benefits of this policy. After all, pensioners, like the rest of the population, represent a very diverse range of income levels.
Covid-19 has shaken the economic standing of much of the working population—a fate that pensioners have largely been shielded from. The taxation of future generations to pay for current pensions must be balanced with assessments that clearly outline the effectiveness of this policy. The reality is we do not have unlimited economic resources at our disposal, and trade-offs are required. I do see dangers in uprating the entire pensions scheme by 2.5%, without the necessary impact assessments, at a time when unemployment and working household debt are rising. Reviewing both the cost and relative success of this policy in determining not only whether it reduces existing levels of pensioner poverty but whether the relationship between pensioner and working household incomes throughout a given period might lend itself, in the future, to a much more targeted approach to uprating.
I expect the report’s assessment of existing levels of pensioner poverty will be reflective in assessing the efficacy of blanket uprating policies and whether considered and targeted increase in social security and relief would better account for uncertainties such as the Covid-19 crisis, which has had a disproportionate economic effect on the working-age population. Of course, pensioners need to be adequately looked after. Until a review on whether the 2.5% minimum uprating delivers intergenerational fairness, it is right that the House approves these measures.
Finally, on intergenerational fairness, which was mentioned at Second Reading, I once again call on the Government to extend April’s universal credit increase and extend this lifeline that so many across the country are relying on.
My Lords, I have only a little to add to what has been said. If you do not know how severe a problem is, you cannot do much about it. Having something that looks into the problems of pension policy is a very sensible idea. The Minister will undoubtedly say, “We are—we are doing X, Y and Z” and give us a list, but the fact is that the non-claiming of benefits is something that bedevils our system. By necessity, it is a bureaucratic system, and even if you make the bureaucracy as manageable as possible, it is still there. People who think, “Well, I should not be asking for something else”—something that the pensioner population seems to get an A grade in—means that we have poverty that leads to other problems.
The reason we have given people these back-ups is because they need them: they make their lives better and mean they are not as big a drain on the National Health Service or emergency care going in to support them. It is actually in the general public’s interest to make sure that people are not living in poverty: it leads to problems, to costs and to knock-ons; it makes our lives less pleasant. So, I hope that when the Minister replies, she will give us some idea of how the Government are trying to find this information, because it is needed. To make the system work well, it is needed across the board. If we do not have enough information about issues, we cannot address them. The idea of having some solid knowledge to base future planning on cannot be a bad thing.
My Lords, I too support the amendments in this group. I think they have a lot in common. The triple lock has done a great job in restoring value to the state pension, which is hugely important given that so many people are dependent on the state pension and have no other pension at all. The intention behind the amendment in my name is to have a detailed assessment of how effectively the triple lock is tackling poverty.
If we think about older pensioners particularly, and the pension credits debate, those I have been in touch with are very shamed at having to apply for means tests. Applying for benefit has a stigma for them, so I am not completely supportive of the idea of targeting in this respect. I personally believe that there are ways of ensuring that wealthier pensioners pay more, and support those who have less, other than by targeting pensioners in need and putting them through processes that they find distasteful and disturbing and give them great anxiety.
The issue of pension credits has been raised and yesterday’s Oral Question from the noble Lord, Lord Foulkes of Cumnock, certainly contributed to that debate. If a detailed analysis were done before consideration of uprating policies, this could include the inadequacy of any take-up campaign and ensure a proper monitoring process to see what is happening. Also, on the points made about pensioners in poverty, particularly women, this is an area that needs to be looked at separately. Many women—older pensioners in particular—have very little pension entitlement. The new pension has, to some extent, addressed the fact that many women have spent a great deal of time doing the caring within the family. This needs to be looked at more closely, particularly when, with increasing divorce rates, very many divorce settlements do not address the fact that the woman has contributed to her husband’s pension over the years. I would very much welcome the opportunity for a detailed analysis of the impact of the triple lock, with particular reference to poverty and its effects on women. In so saying, I support both these amendments.
My Lords, I thank all noble Lords who have contributed to the discussion on these two amendments. I want the House to understand that I share noble Lords’ concerns about pensioner poverty, and assure the House today that we are committed to ensuring economic security at every stage of their life, including when they reach retirement.
The triple lock improves incomes for current and future pensioners. Auto-enrolment into workplace pensions and action on fuller working lives will also help people towards the income that they aspire to in later life. Pension credit provides an important safety net for pensioners on low incomes. As I mentioned in our earlier debate on the amendment from the noble Lord, Lord Addington, that safety net is currently nearly £10 per week higher for a single pensioner, and nearly £15 per week higher for a pensioner couple, than it would otherwise have been if we had just increased it in line with earnings since 2010. Material deprivation among pensioners is at a record low, and the absolute poverty rate is lower than in 2010.
In the long term, it is this Government’s reform to the state and private pension systems—including the introduction of the new state pension in 2016—that will improve outcomes for all, and particularly help to reduce gender inequality in retirement income. Over 3 million women stand to receive an average of £550 more per year by 2030 after recent reforms to the state pension alone.
Under the new state pension, outcomes are projected to equalise for men and women by the early 2040s, over a decade earlier than under the old system. For future pensioners, auto-enrolment into workplace pensions has transformed pension saving for millions of workers. Our employer-led strategy on fuller working lives aims to maximise the labour market opportunities for people to earn and save for longer.
Amendment 3 prevents a draft uprating order from being laid before Parliament unless the Secretary of State has laid before Parliament
“a report containing an assessment of the existing levels of pensioner poverty in each of the regions and nations of Great Britain”,
“a statement outlining the expected impact of the draft order on pensioners with the lowest incomes.”
With respect to subsection (a) of her amendment, the noble Baroness, Lady Sherlock, will be aware that my department publishes annual estimates of pensioner poverty at a regional level in the Households Below Average Income series.
I turn to subsection (b) of Amendment 3, and will address Amendment 4 at the same time. Amendment 3(b) would require a statement outlining the expected impact of the draft order on pensioners with the lowest incomes. Amendment 4 would require the Secretary of State to report on the impact of the Bill and of the triple lock on pensioner poverty, with reference to women. The provisions in the Bill can only be used to increase the rates of state pension and certain other pensioner benefits, so its effects on pensioner incomes, and therefore pensioner poverty, can only be positive. However, I am sorry to inform noble Baronesses and noble Lords that we do not believe a report of the sort outlined in these amendments could be made with an acceptable degree of analytical robustness.
To make an assessment relating to how many pensioners might have their income lifted above the various low-income levels, assumptions would need to made about how each individual pensioner’s income will change in future. This would require making assumptions about, for example, how earnings for pensioners will change, or trends in the rate of return and drawdown of income from investments. These projected incomes would then need to be compared to projections of the various income thresholds.
The relative poverty low-income threshold in a particular year is determined by the increase or decrease in median income across all individuals in the UK. Forecasting a relative income threshold requires making assumptions about how the net income of every individual in society will change, not just of those above state pension age. Each individual’s total net income is influenced by how every different source of income, including their earnings, and their costs, such as housing costs, may change in future. Making assumptions about future changes in net income for individuals involves complex interactions between income and outgoings.
For absolute poverty, the threshold is increased each year by inflation during that year. As demonstrated in recent months, inflation is currently extremely volatile and there is a high level of uncertainty about what its level is likely to be over the next few years. In the current circumstances, with a higher level of uncertainty around the economy than usual, it is impossible to forecast individual pensioner incomes or the various low-income poverty thresholds with a reasonable degree of accuracy. Therefore, there is a very high risk that any analysis seeking to forecast the number of pensioners moving above these projected poverty thresholds is highly likely to be misleading.
I note, however, that my department collects and publishes a wide range of data in this policy area, such as national statistics on the number and percentage of pension-age women on low incomes. This is published annually in the report on households below average incomes. The last publication covered data for 2018-19, and trends over time can be identified from this source. These trends are an important element in policy-making in the department, such as that which led to the state and private pension reforms I mentioned earlier.
The noble Baroness, Lady Sherlock, raised pensioner poverty. I am assured that since 2009-10, material deprivation for pensioners has fallen from 10% to 6% and that there are 100,000 fewer pensioners in absolute poverty before and after housing costs. To be clear, in 2021 we are forecast to spend over £126 billion a year on pensioners, including £102 billion on the state pension.
The noble Baroness also raised the Independent Age report. The figures in Independent Age’s latest report are based on assumptions about the relationship between healthcare outcomes and income and rely on survey data. We know that pension credit is often underreported in survey data; unfortunately this makes it inherently difficult to categorise groups based on receipt of pension credit or to identify pensioners who may be entitled to pension credit but who, for whatever reason, are not claiming it.
The noble Lord, Lord Shipley, asked what the Government are doing about women and the gender gap. While the triple lock continues to improve incomes for current and future pensioners, in the long term it is reforms to the pension system that will improve outcomes for women and reduce the gap.
I move to the issue of pension credit, which all noble Lords raised very eloquently and clearly. In response to the question of the noble Lord, Lord Foulkes, yesterday, I agreed to go back to the department and relay the sentiments; while I cannot give your Lordships the information on a campaign you require today, I can give an utter assurance that I will go back to the department to relay the points that have been made.
The right reverend Prelate the Bishop of St Albans asked about an impact assessment. For pensioner incomes, assumptions would need to be made about how each individual pensioner’s income will change in the future, which would require making assumptions, as I have said, about many things, such as earnings for pensioners, change in the rate of return and drawdown of income. This is most difficult.
The noble Lord, Lord Addington, and the right reverend Prelate the Bishop of St Albans quite rightly raised a point about intergenerational fairness and questioned why we should keep the triple lock for pensioners when working-age people are only getting CPI increases. We have recently seen rises in the living standards of pensioners, but we must remember that not all pensioners are in the same position: over a million current pensioners rely solely on their state income. We must not forget that today’s working-age people are tomorrow’s pensioners, and future generations of pensioners will also benefit from the way the state pension is uprated today.
I was asked how we intend to uprate pension credit. Without this Bill, the core component of pension credit—the standard minimum guarantee—will be frozen in 2021. The decision on how to uprate the standard minimum guarantee will be made during the Secretary of State’s uprating review and announced in November. It would not be right to pre-empt the outcome of that review. Taking into account the points raised, I ask the noble Baroness to withdraw her amendment.
My Lords, I have received no requests to speak after the Minister. I call the noble Baroness, Lady Sherlock.
My Lords, I am grateful to all noble Lords who have spoken to these amendments. As the noble Lord, Lord Shipley, said, if the Government will the ending or reducing of pensioner poverty, they must also will the means. I am not sure that we have heard that today—in fact, I am quite confident that we have not.
Other noble Lords made some very good points. The noble Baroness, Lady Janke, made some important points about the need to understand the impact of the triple lock on poverty. I agree very much about the need to look at particular issues faced by women facing poverty in retirement. The noble Lord, Lord Addington, is absolutely right that, if we do not have adequate data, we will not address the right questions. What is not measured is never going to be accurately addressed.
I thank the right reverend Prelate the Bishop of St Albans for his continued advocacy for those on low incomes at all ages. I wholeheartedly endorse his call for the uplift on universal credit to be extended beyond April, and I ask that this also be extended to legacy benefits. Poor workers often become poor pensioners, so all we are doing at the moment is pushing the problem even further back.
The Minister started her response by saying that she shares our concerns about pensioner poverty, although I notice that she cherry-picked her measures, citing material deprivation and absolute poverty but not the standard measure of relative poverty. If I am honest, I found her response very disappointing. She gave us reasons why the Government are doing good things on private pensions and the state reform, but most of my speech and what other noble Lords spoke about was how to address pensioner poverty in the short term by looking at things such as pension credit. She simply did not do that. I asked a number of questions and made a number of suggestions, none of which got a response at all.
I find this very disappointing because I have a lot of respect for the Minister; I believe her when she says that she will take these issues back to the department, but, in the end, as a House, we are not simply here to say things to the Minister and for her then to say them to her colleagues. When does the message come back the other way? We are one of the Houses of Parliament; it is reasonable to expect someone to come to the House, defend the decisions that their department is taking and tell us why they are not going to follow through.
If we were not in a hybrid state, I would be getting up and saying, “Could I ask the Minister to respond on that?” I cannot, and, therefore, I am constrained by the circumstances, and there is no way to pursue this. However, I ask the Minister to think very hard about how she will go about telling this House what the department has to say and how it is going to respond to our questions If not, I will look for other opportunities to do this on a regular basis and will keep on until we hear something that actually answers our questions. However, in the meantime, I beg leave to withdraw Amendment 3.
Even in the hybrid House, the Minister can respond to a final set of questions.
I say to the noble Baroness, Lady Sherlock, and all noble Lords, that I have taken on board the ideas that have been put forward about pension credit: the campaign, and the importance of how it can lift people out of poverty and improve their lives. I will go back to the department, then return and answer the questions asked by the noble Baroness. I will always make that undertaking and will never shy away from answering questions, but I would rather get the right answers rather than give a wrong one and create another little tsunami on pension credit. If the noble Baroness can accept that, I will be grateful.
I am very grateful to the Minister for coming back on this. I will look out for those responses, and for the opportunity to discuss them on the Floor of this House. I thank her for her intervention, for addressing the questions and for her constant willingness to talk to us. These things make our debates much better.
Amendment 3 withdrawn.
Clause 1 agreed.
Amendment 4 not moved.
Clause 2 agreed.
Bill reported without amendment.