Social Security Benefits Up-rating Order 2023

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Wednesday 22nd February 2023 Grand Committee

[Baroness Lister of Burtersett (Lab)]

My Lords, I welcome the Minister to this annual outing for us social security geeks and thank him for meeting me earlier this week. Of course I welcome the uprating of benefits and the benefit cap in line with inflation, even though it is no more than convention that leads us to expect it when it comes to the benefits themselves. I realise that the Government were under some pressure from within the Conservative Party to limit the increase to that in average wages, and it is to their credit that they withstood that pressure.

However, there is a real danger that, come April, some of the media will go to town on the 10.1% increase as if it somehow represents a bonus for claimants not enjoyed by those in paid work. It is therefore important that the Government make clear the context of the increase and also that, for two-fifths of universal credit claimants, their UC is topping up earnings. The issue was raised in the Commons debate on the regulations by Conservative MP Jerome Mayhew, who said it had been raised by his constituents on the grounds that they felt it was unfair, but he explained why

“it is fair. That is because it is morally right to protect the purchasing power of those very poorest families at an absolute level, even when other people in employment are suffering as well. I think it is right, because personal inflation is at its highest in the poorest families and food inflation is responsible for a higher percentage of their spending”.—[Official Report, Commons, 6/2/23; col. 706.]

Mr Mayhew made a strong moral case and rightly pointed to how, when energy and food prices are rising faster than overall inflation, those on low incomes suffer most. According to the Child Poverty Action Group, of which I am honorary president, in 2023-24 benefits will be 14% higher in cash terms than in 2021-22, but over the same period prices will be 21% higher for low-income families, so despite the uprating in line with overall inflation, they will be worse off. The Resolution Foundation warns that even as inflation starts to fall, food price inflation, currently running at nearly 17%, will continue to pose a particular problem for low-income families, as will high energy costs.

There are a number of further important points that help put this April’s uprating in context and serve to strengthen Mr Mayhew’s case. First, claimants have had to live on benefits plunging in value over the past year as a result of an increase last April of a mere 3.1%, despite our best efforts in both Houses, when inflation was expected by the OBR to average 10.1% over that period. According to the Joseph Rowntree Foundation, as a result 2022 saw the greatest fall in the value of the basic rate of unemployment benefit since 1972, when annual uprating began. The Minister has, as I expected, pointed to the additional cost of living payments that have been made and to the extension of the discretionary household support fund available from local authorities but, welcome as they are, neither provides the certainty and security that an increase in weekly benefits provides. One Citizens Advice adviser cited in a just published report spoke for many when they described the support fund as

“a very small sticking plaster on a very big wound”,

and because the cost of living payments take no account of family size, couples with two or more children will be worse off despite them, according to the CPAG. I will leave to the forthcoming debate on the additional payments Bill the other problems associated with one-off payments.

Just how difficult this past year has been for families in receipt of benefits was underlined in an open letter to the Prime Minister and the Chancellor yesterday from a group of organisations which called on them not to let this become the “new normal”. Resolution Foundation research highlights the emotional distress suffered by many in receipt of benefits and that one-third of poorer household feel that their health has been negatively affected by the cost of living crisis.

This all underlines the point that we made last year about the shortcomings of an annual uprating based on inflation around half a year earlier, especially at a time of high inflation and given that universal credit can be uprated much more quickly. Nigel Mills, a Conservative member of the Work and Pensions Committee, was one of those who expressed exasperation at this state of affairs in the Commons debate. He said:

“Now that we know that more of the legacy benefits will be continued on late into this decade, surely it is time to try to get a system that means we can do an uprating that reflects the real cost of living at the time that income comes in.”—[Official Report, Commons, 6/2/23; col. 687.]


His plea was echoed by Sir Stephen Timms, the chair of the committee that last year called for reform but to no avail, but it was ignored by the Minister in his closing speech. I know that the Minister addressed that in his opening speech, but I ask him to take this point back to the department and have another look at it.

Another theme of the Commons debate was the extent to which the benefits being uprated meet or do not meet the needs of those who rely on them. I think I have raised this issue in just about every uprating debate I have participated in, but it has taken on a renewed urgency given the growing evidence of hardship. Indeed, the APPG on Poverty, which I co-chair, is currently undertaking an inquiry into benefit adequacy. Bright Blue is one of many organisations that have recently drawn attention to this issue. In a recent article for Conservative Home, its head of research noted that

“the baseline level of support is inadequate in helping people avoid destitution.”

Similarly, the Joseph Rowntree Foundation concluded in its poverty report that

“the basic rates of benefits are inadequate and do not allow recipients to meet their essential needs.”

Have the Government’s considered the recommendation from Bright Blue and others that there should be a Low Pay Commission-type body to advise government on benefit rates?

Although it has been a failing of successive Governments to have uprated benefits without questioning whether the rates are adequate to meet people’s needs, the situation has been made worse by the cuts made over the past decade, which have reduced the value of working-age and children’s benefits and, particularly for families with children, have broken the link between need and entitlement. That is another reason why inflation-proofing is justified now.

However, one key benefit is not being inflation-proofed: the local housing allowance. Despite the Work and Pensions Secretary representing the freezing of the allowance as maintenance in cash terms at the elevated rates agreed for 2021—as if it were a bonus—the fact is that the value of the LHA has been cut for the third year running when average private rents increased by between 8.6% and 10.5% between September 2020 and September 2022, according to a highly critical Secondary Legislation Scrutiny Committee report. Although that freeze is covered by separate regulations, it affects the impact of the regulations that we are debating today because it means that claimants must use more of their basic benefit to cover their housing costs. I argued this earlier in Oral Questions but neither of the questions I asked were replied to by the Minister, and he may well bow his head in shame at that.

[Baroness Sherlock (Lab)]

He could answer them now.

[Baroness Lister of Burtersett (Lab)]

Yes, he could. Incidentally, the concern that this freeze is causing was evident from the unprecedented number of unsolicited briefings that I received for my Question.

According to the IFS—these figures are different from the ones I used earlier—just 8% of low-income private renters now have all their rent covered by housing benefits, compared with almost half in the mid-1990s. For 32% of them, the amount of rent not covered by housing benefits eats up at least one-third of their non-housing-benefits income, a situation faced by just 14% of the group in the mid-1990s. I ask the Minister not to say again that those affected can turn to discretionary housing payments because, as they are discretionary and cash-limited, they do not provide the security that is needed. The DHP budget was cut by 29% last year, leaving many authorities struggling to meet demand, according to Shelter.

Another related way in which the link between need and entitlement has been broken is the benefit cap, which, along with the two-child limit, hits larger families particularly hard. Of course, it is very welcome that the cap will for the first time be uprated in line with inflation this year, but that will cover only one year’s inflation. According to calculations done for me by the Library, the rates contained in the regulations will still leave the cap 9.8% less than it would have been had it been uprated in line with inflation since it was set at its current level in 2016. How is that fair? Whatever one thinks of the cap—I agree with the noble Lord, Lord Freud, that it is an excrescence—at the very least, its level should be maintained in real terms annually. I hope that it will be from now on for as long as it exists.

Social Security (Up-rating of Benefits) Bill

Debate between Baroness Sherlock and Baroness Lister of Burtersett

Committee stage
Tuesday 26th October 2021 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, at Second Reading I accepted the Government’s case for not increasing pensions by 8% or so, and I called for a review of the triple lock, because of the arbitrary nature of the triple element of the lock—that is, the 2.5%—while emphasising the importance of maintaining pensions and related benefits relative to average earnings as a general principle. I therefore support Amendments 1 and 2, which are consistent with that argument.

At Second Reading, as we have heard, the Minister argued that there was no robust methodology for establishing what the underlying increase in earnings had been this last year. But surely the ONS range of estimates, on which these amendments are based, is at least based on some kind of methodology, which is more than one can say about 2.5%, which can be used to increase pensions should it exceed earnings and prices. As it is, the jettisoning of earnings this year has given rise to understandable fears that the earnings link might be abandoned altogether in the longer term, just as it was by the Conservative Government in 1980, leading to a steady deterioration in the position of pensions relative to average earnings during the following two decades.

Moreover, the case for basing pensions on the underlying increase in earnings is the stronger, given what is happening to inflation, which is addressed by Amendment 4. All the indications are that inflation is going to rise above the 3.1% on which the uprating will be based. The Bank of England’s chief economist has warned that it could go as high as 5% in the next few months. For pensioners and others reliant on social security, the effective rate of inflation is likely to be higher still, given the differential impact of inflation when the increase in basics such as fuel and food, which constitute a disproportionate part of low-income budgets, is a key driver of inflation, as already mentioned. I raised this issue at Second Reading and asked the Minister whether she would undertake to look at how the problem might be addressed, but she did not respond then or in her subsequent letter.

The other day, the Chancellor said:

“I know that families here at home are feeling the pinch of higher prices and are worried about the months ahead. But I want you to know, we will continue to do whatever it takes, we will continue to have your backs—”


whatever that means—

“just like we did during the pandemic.”

The amendments we are debating here today would be one way of doing whatever it takes. I hope, therefore, that the Minister will take them seriously and, if she does not accept any of them, explain how the Government will do whatever it takes to protect those reliant on social security in the face of rising inflation.

Finally, on pension credit, the subject of Amendment 3, I believe that the uprating should be protected legally. But I would like to return briefly to the issue of take-up raised at Second Reading by the noble Baroness, Lady Bennett of Manor Castle, which also has implications for later amendments on pensioner poverty. I welcome the willingness of Ministers—and our Minister in particular—to discuss with Peers ways of improving the lamentably low take-up rate. I had understood that it had been agreed that one way of doing so was to include a suitably arresting and well-designed leaflet or similar in communications with pensioners. I have received a couple of communications from the DWP since then, neither of which has drawn my attention to pension credit. Just last week, the letter I received about the winter fuel allowance made no mention at all of pension credit. Could the Minister tell us whether the idea of such a leaflet has been abandoned and, if so, why?

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baronesses, Lady Altmann and Lady Janke, for introducing their amendments, and all noble Lords who have spoken. We had a good discussion at Second Reading about the way the Government have gone about trying to find an alternative to the triple lock that would deal with the impact of the pandemic on earnings data. But I think it is fair to say that the Minister will have worked out from the contributions that this has not entirely satisfied noble Lords around the House as a way forward.

Let me look briefly at the three sets of issues raised by the amendments in this group. Amendments 1 and 2 from the noble Baroness, Lady Altmann, would replace the provisions of this Bill with the provision to uprate using an earnings measure designed to reflect an underlying rate of earnings growth. Amendment 1 sets that at 3.8%, being chosen as the midpoint in the range of this now famous blog by the ONS. I suspect the person who wrote it must be wondering whether they will ever blog again. But that blog suggested a range that—if you were to strip out the base and compositional effects—would give an indication of underlying basic earnings growth.

Amendment 2 takes a similar but less prescriptive approach, leaving it to the Secretary of State to pick a number informed by that same ONS piece of work. Given that a number of noble Lords have expressed scepticism about the Government’s defence—that one of the reasons they do not want to move away from average weekly earnings is fear of legal action—could the Government rehearse again exactly what they are worried about and why? I think that would be helpful, because, clearly, noble Lords are not persuaded by that.

I do not think anyone is very happy with where the Government have landed. My noble friend Lady Drake contributed, I have to say, another piece of astonishing, wonderful analysis. I say to the noble Baroness, Lady Wheatcroft, that I think it is possible that my noble friend is an even greater expert than the noble Baroness, Lady Altmann, based on the strength of her contribution. We have huge expertise in this House, and we are greatly blessed by it. My noble friend summarised the matter when she said that, essentially, in this Bill, the Government have contrived to find a way forward in which they apply neither the triple lock nor the earnings indexation on which the triple lock is meant to build.

The quote from the PPI about what would have happened if the triple lock had been applied over two years was interesting. When we debated the Social Security (Up-rating of Benefits) Bill 2020, I asked whether the Government had considered some sort of smoothing process, such as applying the principles of the triple lock over two years instead of one. I went back and read Hansard again today, and the Minister said—I paraphrase—it was all a bit uncertain. But that would have avoided the methodological complexity and any associated legal risks that Ministers are worried about, since presumably, they are using an established measure—immune, I imagine, to legal test. I ask the Minister again: did the Government consider it? Looking back, does she think that might have been a safer way forward?