Social Security (Up-rating of Benefits) Bill

Baroness Altmann Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

Moved by

[Baroness Altmann]

1: Clause 1, page 1, line 6, leave out from “if” to end of line 8 and insert “the Secretary of State had determined that the general level of earnings obtaining in Great Britain had increased by 3.8%.”
Member’s explanatory statement
This amendment would remove the provision substituting “prices” for “earnings” and retains the earnings link for the 2022-23 year by stipulating the Government will assume earnings have risen by 3.8% for the purposes of uprating. This reflects analysis from an ONS blog suggesting that the underlying rate of earnings growth was between 3.2% and 4.4%. The figure of 3.8% is chosen as the mid-way point in that range.

[Baroness Altmann (Con)]

My Lords, I shall speak to Amendments 1, 2 and 3. I have to say to my noble friend that I truly believe that the legislation already allows for the provisions that we are trying to enshrine in this Bill. I actually do not believe that the Bill is necessary. It was passed through the other House on the basis of a false premise: that keeping the triple-lock earnings protection would require a pension uprating of more than 8%, at an Exchequer cost of around £5 billion.

However, we are amending Section 150A of the Social Security Administration Act 1992, and Section 150A(8) specifically states that

“the Secretary of State shall estimate the general level of earnings in such manner as he thinks fit.”

Given that we are supposed to be uprating benefits that are vital to the living standards of millions of pensioners —I am particularly concerned about the poorest pensioners, who are dealt with by Amendment 3—it is regrettable that the Secretary of State and the Government have chosen not to use the option in the Bill allowing them to estimate a level of earnings that would have allowed for what I think all noble Lords would agree is an exceptional impact from the measures taken in connection with the Covid-19 pandemic. That event is pretty unprecedented but could be allowed for when talking about uprating benefits that so many millions of our citizens rely wholly—or almost wholly—upon to be able to afford to live.

In my attempts to persuade and impress upon the Government that it is not too late to retain the triple-lock earnings link, I have tried to suggest ways in which we can still do this in the Bill, and I am most grateful to my friend, the noble Baroness, Lady Wheatcroft, who has supported me on Amendment 1. I stress that these are all probing amendments, but this one tries to help the Government by suggesting a level that could be used to reflect an actual level of earnings increase across the economy which is adjusted—in a way that has already been explained by the ONS in a recent publication—for the distortions relating to earnings figures in the normal measure, which has always been average weekly earnings.

The ONS analysis, which looked at the base effects and the composition effect, suggested that actual earnings growth was not more than 8% but was between 3.2% and 4.4%. I have just picked a number at the middle of the range: 3.8% is a figure that could be inserted into the Bill. The Secretary of State is at liberty to choose an alternative figure that she feels—perhaps with the advice of her officials and all the excellent analysts that the department has—would better reflect the actual number, but that itself would still preserve the earnings link that is so important, as we discussed at Second Reading. So, that is Amendment 1, which specifies that the general level of earnings obtaining would be 3.8% for the purposes of just this one year, which is what we are trying to do.

Amendment 2 is truly cross-party: I am hugely grateful for the support of the noble Baronesses, Lady Smith, Lady Drake and Lady Wheatcroft. Again, this amendment intends to maintain the link between pension uprating and earnings while still explicitly accounting for the problem that, I believe, the Government have been advised to beware of, which is that not using average weekly earnings and not changing primary legislation to permit not using average weekly earnings could open the Government to challenge. I stress that I am also hugely grateful to my noble friend the Minister, who has engaged so constructively with noble Lords across the House, and to her officials, who have been very patient and generous with their time in going through these issues with those of us who feel so concerned about the social-policy and pensioner-poverty implications of potentially setting a dangerous precedent that, actually, increasing by earnings does not necessarily need to happen if the Government do not like the figure one year.

Amendment 2 aims to enshrine in the Bill a provision that says that, for this year only, those benefits—the basic state pension, the new state pension, pension credit, the minimum guarantee and the other smaller pensions, such as category B, category D and so on—need to rise in line with earnings, but that that level of earnings can be adjusted in light of

“the impact of the COVID-19 pandemic on the level of earnings for the previous year”.

That, again, would open the way for the Government to maintain the earnings link and use an adjusted figure, while addressing the potential concern about being challenged if primary legislation is not changed.

At the moment, the decision seems to have been taken that, if average weekly earnings—the specific statistic produced by the ONS, which has always been used in the past—are not used, the only alternative is to drop the earnings link altogether. These amendments are designed to show that that is not the only alternative. Even though, within the legislation, it is okay to use a figure that the Secretary of State adjusts as she sees fit, this would explicitly state that.

I am puzzled that the officials still seem to think that this could be open to challenge. Very few people would disagree with the idea that average weekly earnings statistics, as reported in the 8%-plus range, were not distorted in some way and that it is not acceptable to adjust them in any way. Indeed, in the figures that have come out for average weekly earnings, the three months that were compared with three months from last year—April, May and June—were all at around 8.8%, but the more recent July and August figures, which have already come out, were significantly below that. They have come down to around 5% or below, so there is an element of MPs having made a decision without recognising that there are alternatives. I propose that we suggest to the other place that there is an alternative that allows retention of the manifesto commitment to maintain the triple lock and, more importantly, of the earnings link.

Finally and briefly, on Amendment 3, I am again grateful for the support of the noble Baronesses, Lady Drake, Lady Smith of Newnham and Lady Wheatcroft. This amendment is specifically aimed at the poorest pensioners—those who rely on pension credit. This credit has never been triple locked, so they have never benefited from that protection directly, although there has been a cash-terms increase to keep the pension credit a little more in line with the new state pension. Since its introduction nearly 20 years ago, it has always had to be linked to the level of average earnings. Suddenly, for one year, because of the pandemic, we are removing that protection even from the poorest pensioners. Typically, they are the oldest pensioners. The majority of them will be women who are not living on very much money; we are talking about £177.50, or thereabouts, a week, as the single pension-credit minimum-income guarantee level.

If nothing else, I am proposing that we do not abandon the earnings link for those poorest pensioners, so I have inserted a provision in page 1, line 8, at the end,

“for the purposes of paragraphs (za) to (c) … only”

of Section 150A(1) of the Social Security Administration Act 1992. That would exclude this Bill from applying to the pension credit minimum income guarantee. It would, I stress, still allow the Secretary of State the discretion to use a different level of earnings than average weekly earnings should she decide to do that for reasons of policy, such as not having too big a differential or too big excess of pension credit over the new state pension. However, the main principle that I am trying to preserve within these amendments is the importance to pensioners, in the context of pensioner poverty and a state pension that is pretty much the lowest in the developed world, that the promised protection is in line with earnings. That is crucial. We must, in my view, not set a dangerous precedent, even for one year. We can take alternative measures to account for the distortions of the pandemic. I beg to move.

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I should point out to the Committee that if Amendment 1 is agreed to, I cannot call Amendment 2 by reason of pre-emption.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

That is another technical point that, rather than give an incorrect answer, I will come back to the noble Baroness on.

[Baroness Altmann (Con)]

My Lords, I thank my noble friend for her detailed response and clear efforts to address the issues that have been raised, and I thank all noble Lords who have spoken on this important group of amendments.

I am still struggling to understand the rationale for not retaining the earnings link. Noble Lords are being asked to accept that, because estimating the pandemic’s distorting impact on earnings is rather difficult, the Department for Work and Pensions, the Office for National Statistics, the OBR and the legions of statistical experts we have at our disposal could not come up with a figure that the Secretary of State could use to allow for such adjustments without being at risk of being considered irrational. I really struggle with that concept.

Nobody is suggesting that the Secretary of State knows an answer that everybody would agree to. However, in the face of rising pensioner poverty, rising inflation, the lowest state pension in the developed world and the problems we can foresee coming next year, with the poorest pensioners being unable to afford the basic costs of living, it is concerning that we are deciding to remove a critical part of their protection which was promised in our manifesto, and which is not unaffordable, on the premise that it is too difficult to adjust the numbers.

I accept that the figure of 3.8% in Amendment 1 was based on an ONS blog; it was the only figure available that was a remotely official statistic. However, Amendments 2 and 3 contain important provisions that would allow the Secretary of State to use all the resources at her disposal to come up with a number that adjusts average earnings correctly and fairly, in a way on which maybe not everyone would agree but that would at least retain the vital principle of the earnings protection that pensioners have always been promised and, in the case of pension credit, that the poorest pensioners have always relied upon.

I shall withdraw my amendment, but I hope we can have further discussions between now and Report and perhaps work out a way forward based on the important principles of social security policy that we have always stuck to in the past. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

--- Later in debate ---

Pensioners with lower incomes, particularly women, will be very sensitive to those index changes, and yet we have no impact assessment on this matter of considerable importance. Rather than just debate endlessly, the amendment is calling for the Government and the Minister to lay some analysis about the impact on pensioner poverty. Rather than having an argument, could the Minister not just accept the intent of my noble friend Lady Sherlock’s amendment and provide that report, so that we can all clearly show where we are going on trying to protect our poorest pensioners?

[Baroness Altmann (Con)]

My Lords, very briefly, I have added my name to Amendments 5 and 6 and I support the thrust of these amendments. I urge my noble friend the Minister to look seriously at the merits of investigating the poverty levels that are rising among pensioners. Indeed, I urge her to accept some of these looking at the gender issues—so not just pensioner poverty but relative pensioner poverty between men and women—in her new role as Minister for Women, on which I congratulate her. I support these amendments and I look forward to hearing my noble friend’s comments.

[Lord Davies of Brixton (Lab)]

My Lords, I just want to add that we have a complete lack of information on these proposals. As a matter of law, when the regulations come, they have to be accompanied by a report from the Government Actuary. In effect, we are making the decision now—the regulations are just a carry-on of the Act—and it is really unfortunate that we do not have before us the information that Parliament has decided should be available to us when we deal with these regulations.