Benefit Cap: Review

Debate between Baroness Smith of Newnham and Baroness Stedman-Scott

Wednesday 3rd November 2021 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I will deal with the latter point first. The Government are fundamentally against universal support or universal basic income: it is the wrong approach for the people of the UK. It would mean that there was no incentive to work; it would not target those in greatest need, and it would fail to take into account the significant additional costs faced by many individuals. As for the people mentioned by my noble friend, it would be easy to write them off, but our absolute commitment is to say that the best route out of poverty—the best route for these people—is, where they can, to get work.

I was passed today just one story about a single father from Scotland who lives remotely, 25 miles from his nearest Jobcentre Plus, for whom finding work was almost impossible. However, his work coach found him a Kickstart job: they absolutely threw the kitchen sink at the flexible support fund and got him advance costs to enable him to travel. He is now working on the Kickstart scheme, which is proving to be very good for him.

[Baroness Smith of Newnham (LD)]

My Lords, the Minister rightly says that getting people into work is the best way out of poverty, but the noble Lord, Lord Farmer, asked about those who cannot work. Will the Government undertake to look into the statistics for those people who cannot work and look again at the benefit cap for them? I also note that December 2024, by which time the Minister says there has to be a review, may well be after the next general election, which may mean that the Secretary of State will never bother engaging in a statutory review.

[Baroness Stedman-Scott (Con)]

The Secretary of State is required by law to do a review, so I do not see how she is going to get out of it—but perhaps the noble Baroness knows more than me. I know that the Secretary of State is a robust lady and is on the money, and she cares more about unemployed people than some people give her credit for—so let me just park that with you. It is important to know. I am exhausted now.

I have already agreed to go back to the department on the point that the noble Baroness, Lady Lister, made about impact and so on, and I will do so. I thank the noble Baroness for the reminder.

Social Security (Up-rating of Benefits) Bill

Debate between Baroness Smith of Newnham and Baroness Stedman-Scott

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I thank all noble Lords who have spoken today. Their contributions have been eloquent and focused. The House has great knowledge of and experience in pensions and social security, which has truly been demonstrated today.

The debate has been wide-ranging and has covered a number of topics. I want to address some of the key points that were raised. If I do not manage to cover them all, noble Lords have an undertaking that I will write after this Second Reading and we will meet again, when they will have further opportunity to drill down into the detail.

I reiterate that this Bill is not concerned, although noble Lords are, with benefits linked to prices, such as universal credit. Uprating decisions for those benefits will be made under the existing provisions in the Social Security Administration Act 1992 as part of the Secretary of State’s annual uprating review in the autumn. The UC points that noble Lords have made are out of scope of the Bill, but out of respect for those who have raised the issues, I will endeavour to respond to them all. They will then be brought before both Houses through the annual uprating order, which is subject to the affirmative statutory instrument procedure and it would not be right for me to pre-empt that review.

The Bill sets aside the link between earnings growth and the uprating of the basic state pension, the full rate of the new state pension, the standard minimum guarantee in pension credit and survivors’ benefits in industrial death benefit. It does this for 2022-23, and for 2022-23 only. In place of the earnings link, it requires the Secretary of State to increase the relevant pensions at least in line with price inflation, or by 2.5%, whichever is higher. We have discussed the reasons for this approach linked to the unique effects of the Covid-19 pandemic over the last two years of earnings growth.

The noble Baroness, Lady Drake, raised the 1979 pension level. It is difficult to make comparisons back to 1979, when price indexation was introduced—the pensions landscape has changed significantly since then. She also asked whether the state pension was fit for purpose. The new state pension forms a clear foundation for individuals’ private savings to provide for the retirement they want. Together, the new state pension and automatic enrolment to workplace pensions provide a robust system for retirement provision for decades to come. The overall trend in the percentage of pensioners living in poverty is a dramatic fall over recent decades: there are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than in 2009-10, and we want to maintain that achievement.

The phasing out of the triple lock was raised by the noble Baronesses, Lady Sherlock and Lady Drake, my noble friends Lady Altmann and Lady Stowell, and the noble Lord, Lord Davies. After that, the legislation will revert to the existing requirement to increase these rates at least in line with earnings growth. The noble Baroness, Lady Smith, suggests that this may change because of Brexit. No, the link with earnings will apply.

I pay tribute to the noble Baroness, Lady Greengross, for her commitment to the more mature in our society and her consistent efforts to represent them. The triple lock commitment was raised by the noble Baronesses, Lady Greengross, Lady Drake and Lady Smith, my noble friend Lady Stowell and the noble Lord, Lord Davies. The Bill needs to be seen in the context of the Covid-19 pandemic and the Government’s approach over the two years of the pandemic. After this year, the legislation will revert to the existing requirement to uprate at least by earnings growth, and the Government’s triple lock manifesto commitment remains in place—there is no turning back.

The noble Baronesses, Lady Sherlock, Lady Lister and Lady Smith, raised the possibility of a poverty impact assessment. They asked whether the department had produced an assessment of the effects on pensioner poverty of increasing these rates by 2.5% in 2021-22 and then by 2.5% or in line with inflation, whichever is higher, in 2022-23. The department collects and publishes a wide range of data on income and poverty, which are released annually in the reports on Households Below Average Incomes and a report with estimates of pensioner poverty covering 2021-22 and 2022-23 will be published in 2023 and 2024 respectively. In the absence of actual data, the only way to provide an assessment would be to forecast and model how many pensioners might have their income lifted above the various low-income levels under an earnings uprating versus an inflation uprating. Assumptions would need to made about how each individual pensioner’s income will change in the future under each scenario. This would require making assumptions about, for example, how each pensioner might change their behaviour around other sources of income, such as draw-down of income from investments or a change in earnings when faced with different amounts of state pension, which is virtually impossible to do with accuracy. These projected incomes would then need to be compared to projections of the various income thresholds, which are themselves extremely uncertain.

For absolute poverty, the threshold is increased each year by inflation during that particular 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 year. For relative poverty, the threshold is determined by changes in median income across the whole population. Given the volatility in the economy and labour market, again this is impossible to do accurately. Therefore, there is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty levels is likely to be misleading, due both to uncertainty about the economy and pensioners’ behavioural response to various levels of state pension.

I know that the noble Baroness, Lady Sherlock, has been waiting for this figure: drumroll—I am going to give it to her now. She asked specifically how many couples in receipt of universal credit include a partner in receipt of a state pension. We estimate this number to be around 50,000 mixed-age couples claiming universal credit in 2022-23.

The noble Baronesses, Lady Sherlock, Lady Janke, Lady Drake, Lady Greengross and Lady Lister, and my noble friend Lady Noakes, all raised the issue of pension credit take-up. We have had debates about this in the House and I promised to take action, which we have done. I know how passionate all noble Lords are about increasing pension credit take-up—I am in that club too. The Government are working with partners to raise awareness of pension credit and the department conducted a media day in June with support from Age UK and the BBC, in particular. We continue that engagement with the BBC, and I met the Minister for Pensions and the director-general of the BBC a few weeks ago to discuss how we can do even more to encourage people to claim what they are entitled to. I am no expert in social media, but I will take away the point made by the noble Baroness, Lady Greengross, and raise it. Furthermore, the Minister for Pensions and I held a stakeholder round table in May. Following that, the department established a working group involving organisations such as Age UK, Independent Age and British Telecom, as well as the BBC, to explore innovative ways to reach eligible pensioners. The group will meet again on 19 October.

We are also improving our direct communications. Earlier this year, more than 11 million pensioners in Great Britain received information about pension credit and this highlighted that an award of pension credit, as has already been said, can open the door to a range of other benefits, such as housing benefit, help with council tax and heating bills and help with NHS costs, as well as a free TV licence for the over-75s. We will continue to do this work and will be encouraging people in every way we can to claim their entitlements, building on some promising recent figures. According to the latest data, for the financial year ending in 2019, 77% of the total amount of the guarantee credit—the safety-net element of pension credit—that could have been claimed was claimed, up from 66% two years previously.

My noble friend Lady Altmann and the noble Baroness, Lady Lister, raised the possibility of a review of the triple lock. I must say that the Government have no plans to undertake a review; we are committed to the triple lock for the remainder of this Parliament.

An important issue raised by many noble Lords concerns a different measure of earnings. Several noble Lords asked why the Secretary of State does not use her discretion under the existing legislation to use an adjusted index of earnings growth to exclude the effects of the Covid-19 pandemic, or why the Government did not include such an adjusted index in th Bill. The answer is that there is no robust methodology for establishing such an adjusted index. The existence of such a methodology would be crucial in assessing the degree of legal risk attached to veering from the conventional index, which continues to provide an accurate reflection of growth in earnings.

 

The Office for National Statistics has not published official statistics for any alternative estimates of earnings growth; it has published just a range of estimates of the potential scale of base and compositional effects caused by the Covid-19 pandemic. However, it has concluded that there is no robust method for producing a single figure for a measure of underlying wage growth that accurately takes account of temporary effects due to the pandemic that all experts could reach agreement on. This lack of an agreed robust analytical basis for an alternative figure means that there is a legal risk in breaking with precedent in the measure of earnings used. I am quite sure that we will wish to discuss this further between the Bill’s stages—and we will.

My noble friend Lady Altmann has been a great advocate on the issue of pensioner poverty among women; in fact, she was referred to by the noble Lord, Lord Sikka. She asked about reforms to the state pension. These reforms have put measures in place to improve state pension outcomes for most women. More than 3 million women stand to receive an average of £550 more per year by 2030 as a result of the recent reforms. Women live longer than men on average and therefore receive pension payments for longer.

The noble Baroness, Lady Sherlock—she is a noble friend—was very animated in her contribution. Indeed, she was racing away; one of the things I have to work hard on is keeping up with her. We might have a chat about that another time. She asked whether wage increases are racing against inflation, am I correct? The response is that wages are increasing at 8.3% while inflation is at 3.3%, so wages are much higher. I am sure the noble Baroness will give me a list.

My noble friend Lady Noakes raised the issue of relative versus absolute poverty. The Government believe that absolute poverty is a better measure of living standards than relative poverty, which can provide counterintuitive results. The absolute poverty line moves with inflation so provides a better measure of how the income of pensioners compares with the actual cost of living.

My noble friends Lady Altmann and Lord Flight, and the noble Baronesses, Lady Drake and Lady Janke, asked about state pension comparisons with EU countries and others. This comparison is misleading due to differences in the pension systems. There are many factors to take into account, including different tax systems, different healthcare systems, different pension ages, the cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at concessionary rates. In her contribution, the noble Baroness, Lady Janke, commented that other countries get them, so I suspect that this is another issue on the agenda for further discussion.

The noble Lord, Lord Davies, the noble Baroness, Lady Drake, and my noble friends Lady Altmann and Lady Stowell asked about the state pension versus the basic state pension. The new state pension system has been designed so that no more money is being spent now than under the previous one, and care has been taken to ensure fairness to both groups while delivering a sustainable system for the future.

The noble Baroness, Lady Janke, and my noble friends Lady Stowell and Lady Stroud raised the issue of the UC taper rate. All I can say at the moment is that no decision has been taken on it.

The noble Baroness, Lady Smith, asked why we needed a Bill last year. The Social Security Administration Act 1992 does not refer to 2.5% and, for the benefits in this Bill, refers specifically to earnings growth. Without suspending that link, the state pension would have been frozen.

My noble friend Lady Stowell referred to the state pension for over-75s. We are committed to supporting all pensioners, including those over 75. We spend more than £129 billion—5.7% of GDP—on benefits for pensioners, which includes spending on the state pension. It is also supported by further measures for older people, including the provision of a free bus pass, free prescriptions, winter fuel payments and cold weather payments.

My noble friend Lord Flight asked for clarification on the year. It is the CPI in the year to September 2021, so it will be 2021 data—the most up-to-date data we can use—for our hard IT deadline in November.

Now we come on to the £20 uplift. Virtually all noble Lords made reference to this. To start with, I must confess and confirm again—I know that this will rankle—that this was a temporary measure. People knew when it started that it would end. We extended it for six months, and it was an important measure to help people facing the greatest financial disruption to get the support they needed. In line with other emergency support that we rolled out at pace, the uplift helped protect livelihoods through the worst of the pandemic. The support we put in place did what it was intended to do, despite the biggest recession in 300 years. It is worth noting that unemployment is much lower than feared, at 4.6%, and for some, household savings are £197 billion higher. The poorest working households were supported the most.

I have been asked to make reference to something mentioned by the noble Baroness, Lady Smith. No money is being taken away because we budgeted to spend a certain amount. The increase of 2.5% or the rate of inflation, whichever is higher, will be applied. I just want to give a reminder that the Lib Dem Minister at the time, Steve Webb, supported this in legislation.

[Baroness Smith of Newnham (LD)]

The Minister said that I was wrong and that no money has been taken away. I meant that it has been taken away from the individuals who benefited from the £20-a-week uplift but will now receive £20 a week less.

[Baroness Stedman-Scott (Con)]

I am sorry if I did not make that point clearly. I agree with the noble Baroness. People were told that it would be there for a period of time but was not for ever. We extended it because the pandemic went on; we have therefore paid up what we committed to pay. We did not say that we would give it for ever but then took it away.

Armed Forces: Transition to Civilian Life

Debate between Baroness Smith of Newnham and Baroness Stedman-Scott

Tuesday 15th June 2021 Lords Chamber

[Baroness Stedman-Scott (Con)]

I am happy to tell my noble friend that while the grant is set at just over £500, the training that it can purchase can be worth thousands of pounds. The Career Transition Partnership contract-funded courses are prepaid by the MoD and it offers other courses as well. Other financial support schemes, such as the enhanced learning credits scheme, can provide up to £3,000. Further financial support of up to £175 per year can be made available through the standard learning credit scheme and the publicly funded further education/higher education scheme provides service leavers with all sorts of support for up to 10 years to a value of up to £9,000. If we need to repackage that, I will be happy to take it back to the department.

[Baroness Smith of Newnham (LD)]

My Lords, the integrated review envisages cuts to the regular forces of around 10,000. What work has the DWP done, alongside the MoD, to assess the possible implications for service personnel and their families who will be leaving the forces perhaps rather more unexpectedly than envisaged?

[Baroness Stedman-Scott (Con)]

The services offered by the DWP through the plan for jobs and other activities with the Department for Education on skills are wide-ranging, and I know that the Ministry of Defence and the DWP will work in partnership to provide the most relevant services to the people who the noble Baroness rightly says will need help.

Supporting Disadvantaged Families

Debate between Baroness Smith of Newnham and Baroness Stedman-Scott

Thursday 12th November 2020 Lords Chamber

[Baroness Stedman-Scott (Con)]

I am pleased to tell the noble Baroness that there is already a forward-looking approach that is long-term and cross-departmental, with DWP working closely with the DfE and Defra to target support to those in need. The Secretary of State set out in the other place her desire to ensure that every child has the chance to realise their full potential, and the long-term thinking in this support package will help to achieve this far more than piecemeal reform. I ask the noble Baroness to write to me if there are particular things that she would like included; I am quite prepared to make those available to the department.

[Baroness Smith of Newnham (LD)]

My Lords, clearly the additional funding is welcome, but I note that the Statement suggests that there will be additional reporting requirements and conditions for local authorities. What work have the Government done in talking to local authorities to ensure that such requirements are not overly onerous? It would be something of an own goal to have money being spent that local authorities do not have the time to disburse. In the longer term, what are Her Majesty’s Government doing to make child poverty history?

[Baroness Stedman-Scott (Con)]

The noble Baroness raises a really important point about reporting. We will need some information back for the sums of money that we will be spending. I sincerely hope that the reporting requirements will not be onerous, but that they will enable us to understand the impact of the spending and the difference it makes, and help us understand what needs to be done next. I really hope that will be case. I can only reiterate that we are working hard as a Government to make sure that children and families have the support they need in these even more difficult times.