Social Security Benefits Up-rating Order 2022

Baroness Wilcox of Newport Excerpts

Wednesday 23rd March 2022 Lords Chamber

The impact of not uprating the benefits that we are talking about, and the pensions and so forth, will fall on diminishing demand in the most impoverished places in our country. The impact of that will be great: it will cause more shops to close, more pubs to close, more facilities to be ended. Councils will recover even less in rateable value and so forth. The impact is magnified by the failure to maintain the levels of income that my noble friends have described.

[Baroness Wilcox of Newport (Lab)]

My Lords, for the second time today I am substituting for my noble friend Lady Sherlock, whose expertise in these matters is well known to the House. I will do my best to convey our position.

When the Social Security (Uprating of Benefits) Bill, now Act, was debated in this place last year by my noble friend Lady Sherlock, she highlighted how the suspension of the earnings element of the triple lock for the upcoming tax year would impact millions. This point has been made several times since. I share her concerns, those of my noble friend Lord Davies, and the concerns of others who have spoken in tonight’s debate.

Over the last decade, this Government have failed pensioners. The last Labour Government reduced pensioner poverty by over a million people. In the 12 years since, the number and rate of pensioners living in poverty has soared. In 2010, 14% of pensioners, totalling 1.6 million, lived in poverty. In the year before the pandemic, it was 18%. Some areas are far worse than others. Here in London, over one in four pensioners lives in poverty, totalling almost 300,000 people. Other regions, such as the East Midlands, the north-east, the north-west and the West Midlands, have poverty rates of over 19% among the over-65s. Therefore, of course, the number of pensioners in debt has risen too, by over half a million since 2010, so far.

Things have got harder since these pre-pandemic numbers, and pensions are one part of this. Following the uprating order being made last week, the increase to state pensions and benefits signed into law is 3.1% from next month. The basic pension rises from £141.85 a week for a single pension or £226.85 for a couple. The full rate of the new state pension will rise to £185.15 a week but, with earnings rising at 8.3%, the Government keeping their manifesto promise and maintaining the triple lock would have meant that the basic state pension would instead be rising to £149 for individuals, £238.30 for couples, and the full rate of the new state pension to £194.50. For an individual on the basic state pension, this is a difference of approximately £370, almost £600 for a couple, and close to £485 for those on the full rate of the new state pension—even higher than the difference with the Bank of England’s CPI uplift that my noble friend has highlighted already, which is expected to peak around 7.25% in April 2022 when the uprating takes effect.

What is undeniable is that the cost of living has increased by far more than 3.1%, and the Government breaking their promise has made it harder for pensioners. This hit for pensioners comes on top of several other factors, either caused or not addressed by this Government, that have made life harder for those struggling to get by.

On a related note, the Government continue to act too slowly to repay state pension underpayments to over 100,000 older women, leaving many thousands of them without the pension they deserve and barely enough to live on. At any time, pensioners who have worked hard their entire life should expect to be paid what they are owed at the right time but, with compounding difficulties, the impact is even more severe.

The main thing making things harder for pensioners at this time is the cost of living crisis and energy prices. Age UK warned that rising energy prices will lead to some of the poorest pensioners, for whom the cold could be particularly dangerous, rationing their heating. There was no mention today by the Chancellor of energy prices for heating oil, for example, in the spring Statement—but then it is an unregulated sector of the energy market. Cold weather payments and the warm home discount scheme fail to reach those who need them because they are not claiming pension credit.

As a result, three-quarters of older people in the UK—almost 10 million people—are worried about this cost of living crisis. Over half of those surveyed by Age UK said they will have to heat their home less, a quarter said they would have to choose between heating their home and the food they buy if their energy bills continue to go up, and two in five are having to cut back. What can they do other than go into debt or simply not pay their bill?

What is more, the £20 uplift to universal credit being stopped will continue to impact couples where only one is at state pension age. There are around 1.3 million working pensioners who will be asked to pay the poorly thought-out health and social care levy. Pension credit is another area of concern, with 850,000 eligible families missing out on almost £2,000 per year on average, and the number of eligible couples falling dramatically between 2019 and 2020 from the number the Government told us to expect.

While I have drifted away from the pensions uprating, my point is that the Government’s broken promise is not just a broken promise but one more burden on millions of pensioners at a time when it is simply the last thing that they need. The consequences will not be small; they will be pensioners unable to heat their homes, struggling to put food on the table, and managing increased debt in their efforts to prevent that. While this order has already passed, this does not have to be the fate for pensioners. I recognise the Minister’s sincerity, as noted by my noble friend Lady Lister, but I hope she will follow by setting out the steps the Government will be taking to avoid these outcomes.

[The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)]

My Lords, I would like to re-emphasise what happened today in the spring Statement. The Chancellor announced an additional £500 million for the household support fund from April 2022 to help households, including pensioners, with the cost of essentials such as food, clothing and utilities. This is in addition to the £500 million we have already provided since October, bringing the total funding to £1 billion. The Chancellor also announced a cut in fuel duty at 5p per litre. Customers will benefit from savings worth over £5 billion over the next year compared to uprating fuel duty in 2022-23. This will save average car drivers, many of whom are pensioners, around £100. I confirm that the Government will continue to keep the situation under review, recognising the high level of current uncertainty, including monitoring the ongoing impact of the Russia-Ukraine conflict on the economy, and will be ready to take further steps if needed to support households.

I thank all noble Lords for their contributions and the noble Lord, Lord Davies of Brixton, for moving the Motion. I also thank him for agreeing that this Motion could be debated after 9 March, when we debated the uprating order. A number of important points were raised, which I will now try to deal with. He made the point that averaging over time is no consolation. Uprating in April 2023 will take into account the rate of inflation this September, but we recognise the short-term pressures, which is why we have introduced a package worth more than £9 billion.

The noble Lord, Lord Davies, raised the issue of the cost of living and what the Government are doing to help pensioners. The Government spend more than £129 billion on pensioner benefits, which is 5.6% of GDP. In cash terms, from April, the full yearly amount of the basic state pension will be over £2,300 higher than in 2010. Over the last two years, the basic state and new state pension will have increased by more than 5.6%. Eligible pensioners will also receive support through free bus passes, free prescriptions, free TV licences, winter fuel payments, the warm home discount scheme, and cold weather payments.

The noble Lord asked about the opportunity to discuss the quinquennial review. I will write to the Government Actuary’s Department to see if it will do that with him. It is not something that is appropriate or sensible for me to do.

The noble Lord also raised the issue of the triple lock. We are not ending the triple lock. The suspension of the earnings link this year is a one-year response to exceptional circumstances and the Government remain committed to implementing the triple lock in the usual way for the remainder of the Parliament. I can confirm my Secretary of State’s statement on Monday evening that the triple lock will apply for the rest of this Parliament.

The noble Lord, Lord Davies, talked about using the National Insurance Fund to fund the triple-lock earnings increase, as did the noble Lord, Lord Sikka. The National Insurance Fund matches expected receipts to the predicted spending on contributory pensions and benefits over the medium term. There is no surplus in the fund that can simply be drawn on without consequences either for the ability to pay future liabilities or for the need for higher contributions in the future. It is therefore inaccurate to suggest that there is a surplus in the fund that can simply be drawn on. Increasing spending on today’s pensioners would pass the cost on to future generations of taxpayers.

The noble Lord, Lord Sikka, raised the point that the national insurance system is regressive. This is a matter for the Chancellor and the noble Lord has made his views on the subject very clear today.

The noble Lord also raised the issue of the cost of living, as did other noble Lords. Over the last two years we have delivered an increase of more than 5.6% to the basic and new state pension. As well as the winter fuel payment, pensioners receive a guarantee of pension credit and qualify automatically for the £140 rebate off their winter energy bill from suppliers participating in the warm home discount scheme. I will come to pension credit later in my remarks.

Older people can also benefit from the £9.1 billion that the Government will spend this year on extra measures to protect people from energy price spikes, such as the £200 energy rebate, the £150 council tax rebate and the £144 million discretionary fund available through local councils.

Pension credit came up so let me deal with that now. Pension credit would help people but, as noble Lords have said, people do not apply for it. We have to redouble our efforts to make sure that people apply for pension credit and receive it where it is due. We have undertaken a range of actions to raise awareness of pension credit, encourage pensioners to check their eligibility and make a claim. This includes the media day of action in June last year and we continue to use opportunities to promote pension credit, using proactive press activity and social media to reach potential recipients, their families and friends.

On Monday, the Minister for Pensions wrote a letter to editors of local newspapers across England, Scotland and Wales urging any readers who think they or a family member may be eligible to make a claim. There will be another day of action in June and the Pensions Minister will write to key stakeholders to seek their support for this. As well as these communication activities, we set up the pension credit working group with a range of stakeholders. It is tasked with identifying new practical initiatives that we can work on together to help pension credit take-up.

Over the last two months, more than 11 million pensioners in Great Britain will have received information about pension credit in the leaflet accompanying their annual uprating letter. It includes a prominent message that highlights that an award of pension credit not only tops up their state pension but can provide access to help with housing, heating and NHS costs and, for those over 75, a free TV licence.