Social Security (Up-rating of Benefits) Bill

Baroness Janke Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, I begin by apologising to your Lordships for not taking part in Second Reading due to the volume of Bills currently before your Lordships’ House.

I will be very brief. I rise to offer the Green group’s support for the intention of all these amendments. I express my pleasure in following the noble Baroness, Lady Drake, and stress her point that we are not talking about a contest between generations here. There are some very poor people among our older communities, and they deserve not to live in poverty, but that does not mean taking money away from the young. I also stress the point made by the noble Baroness, Lady Wheatcroft, about how pensioner poverty is rising and that we should have a society where no pensioner is living in poverty.

I particularly want to address Amendment 3, which is the one I would most like to have attached my name to, had there been space. It is crucial: pension credit gets so many people to at least a basically decent, not awful, standard of living, but the fact is that that is useful only if you actually get it. I had a conversation—or a debate—with the Minister about a year ago. At that stage, the rate of pension credit take-up was 60%; that meant about a million pensioners were not receiving pension credit who would have been entitled to it. That was money the Government were not paying out—about £3 billion. It was estimated that it was costing the NHS and social care a spend of £4 billion. So not paying pension credit is actually costing the Government money. Can the Minister now—or later in writing, sharing it with other Peers—update me, a year later, on whether those figures still hold? Have the Government planned, as they did not plan a year ago, a programme to promote pension credit to ensure that those who are entitled to it take it up?

[Baroness Janke (LD)]

My Lords, as the noble Baroness, Lady Bennett, says, all these amendments seek to protect pensioners against price increases during a temporary suspension of the triple lock. I very much welcome the proposals made in Amendments 1, 2 and 3, and particularly welcome the proposal to include pension credit in the link with earnings.

I want to speak to Amendment 4 in my name, which seeks to base the uplift on the predicted increase as forecast by the Bank of England for April 2022. My amendment proposes that, as the pension increase will be in April 2022 and the previous pension increase was in April 2021, the best measure would surely be price increases between those two dates.

Circumstances have changed considerably since the Bill completed its passage through the Commons, including rising costs, rising inflation, unreliability of supply chains and the various pressures brought about by those circumstances. While we do not know what inflation will be by next April, there is plenty of reason to think that it will be higher than currently—that is sadly what the Bank of England thinks. For example, the energy cap went up 12% on 1 October, and is expected to go up again next April. I do not think the Government should be happy that these cost rises are not included in the inflation figure that they have used.

We know that pensioners, and older pensioners in particular, tend to spend more time at home and feel the cold more, and so energy bills tend to be a higher share of their household budgets. Given soaring energy costs, pensioner inflation is likely to be higher than average inflation. This is another reason to think that just linking to September’s average figure, when setting the state pension rate, is the answer to the wrong question. I know that some Members will think that using a forecast is not as robust as using an outturn, but this legislation is only for one year, so really we are not setting a precedent. In fact, I am reliably informed that, in the 1980s, the DWP used to use forecast inflation for benefit uprating.

Mention was made in the previous debate of the need to implement the new rates as quickly as possible. This really does not take as long, in this day and age; there are processes in place to make it much easier. Surely it would not take long for the preferred body—the Bank of England or the OBR—to come up with an inflation forecast; presumably the Budget will bring new inflation forecasts in any case.

If the Government are committed to protecting pensioners against rising prices when they set the pension in 2022, they should see that this is a more transparent, easily understood method of ensuring that pensioners are protected against the expected rise in prices, costs and pressures in the year ahead.

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[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.

[Baroness Janke (LD)]

My Lords, I thank the noble Baroness, Lady Sherlock, for her amendments and for the information she has drawn to our attention. I share her concern at the lack of impact assessments of the proposed uplift on the most affected groups. The increasing pensioner poverty that we are all aware of and the poor take-up of pension credits, which are important as a passport to other benefits, are matters we are all extremely concerned about. I agree that pension increases are fast outstripped by rising costs, and I certainly fear a winter crisis, with increased energy prices and their effect on those who most need heat to keep their homes healthy and warm.

We heard from the noble Baroness, Lady Boycott, about how poor pensioners do not want to claim food —they do not want free food, they would rather starve than do that—and I believe that that is certainly an element in the uptake of pension credit. Again, we all worry that we are going to see more and more food banks and people unable to feed themselves as costs rise. The noble Baroness, Lady Drake, raised the whole issue of regional poverty and inequality. Certainly, when you look at the statistics across the regions, they are quite breath-taking. I believe we need much more information, as the noble Lord, Lord Davies, said, particularly about regional inequality. I wonder why we do not have this information when the Government have such a strong levelling-up agenda. How will they address these issues without adequate information on which to base decisions?

My amendment in this group highlights the unfairness experienced by many women as result of the pension gender gap. I will point out the current situation. The average pension pot for a woman aged 65 is one-fifth of that of a 65 year-old man. Women receive £29,000 less state pension than men over 20 years and this deficit is set to continue, closing by only 3% by 2060. Many women are wholly dependent on the state pension and as a result of this situation, we should take a particular interest in conducting impact assessments on the uprating of pensions on poverty. I support the measures proposed in this group and look forward to the Minister’s response.

[Baroness Stedman-Scott (Con)]

My Lords, I thank the noble Baronesses, Lady Sherlock, Lady Drake, Lady Boycott, Lady Altmann and Lady Janke, for raising important issues through these amendments and I reassure the Committee that we are committed to ensuring economic security at every stage of life, including when one reaches retirement.

On Amendments 5 and 8, tabled by the noble Baronesses, Lady Sherlock and Lady Janke, on publishing a poverty impact assessment, the department collects and publishes a wide range of data on income and poverty which are released annually in the reports in the households below average income series. Noble Lords raised the issue of pension credit take-up. Time does not allow me to go into the detail, but I undertake to have a further pension credit update when we can have more time to discuss and answer the questions that noble Lords wish to have answered.

In the absence of actual data, the only way to provide an assessment in advance of those dates 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 be made about how each individual pensioner’s income would change in 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 drawdown of income from investments or a change in earnings, when faced with different amounts of state pension, which is virtually impossible to do.

Those projected incomes would then need to be compared with projections of the various income thresholds, which are themselves extremely uncertain. For absolute poverty, the threshold is increased each year by inflation; and 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, this is impossible to do accurately. There is a very high risk that any analysis seeking to forecast the number of pensioners moving above or below these projected poverty thresholds would be misleading due to uncertainty about both the economy and pensioners’ behaviour in response to various levels of state pension.

I turn to Amendment 6 and the specific request of the noble Baroness, Lady Sherlock, for a review of the impact of the Bill on mixed-age couples, and point to some practical concerns. Mixed-age couples in receipt of universal credit are a very small group, and data sources are limited. It is therefore not possible to identify these couples and analyse changes in health inequalities and homelessness for this group.

Further, the Government believe it is important for both individuals and wider society that people below state pension age remain in the labour market and continue saving for their own retirement. That is why, where a member of a couple is below state pension age and the couple are on a low income, support is provided through universal credit rather than pension credit. Providing support where it is needed through universal credit ensures that the same incentives to work and save for retirement apply to the younger partner in a mixed-age couple as apply to other people of the same age. Where the younger partner is unable to work because of disability or caring requirements, they may qualify for additional amounts and will not be subject to any work-related conditionality.

This approach is based on clear evidence about the importance of employment, particularly where it is full-time, in substantially reducing the risks of poverty and in improving long-term outcomes for families and children. In 2019-20, adults below state pension age in households where all adults were in work were six times less likely to be in absolute poverty, after housing costs, than adults in a household where nobody works.

As our economic recovery gathers pace and with vacancies at record levels, the focus of our expanded multi-billion-pound Plan for Jobs is helping people who can work to move into and to progress in work wherever possible. However, recognising that some people continue to require extra support this winter, we have announced the new household support fund.

On Amendment 7, tabled by the noble Baroness, Lady Sherlock, to publish an assessment of the impact of the Bill on those receiving the state pension, with reference to their ability to pay energy bills, energy prices are one of the factors built into the CPI measure, which is used in the assessment of annual uprating of benefits not covered by this Bill, such as personal independence payments and jobseeker’s allowance. In aggregate, where benefit rates are increased in line with CPI, the increases in those prices are reflected over time in the increases in benefit rates. The energy price cap will continue to protect millions of customers this winter, saving 15 million households up to £100 a year. Additionally, suppliers are prohibited from disconnecting customers of pensionable age between October and March, ensuring that pensioners have continuous supply during the coldest months.

I ask the noble Baroness, taking account of the points I have made, to withdraw her amendment.

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[Baroness Janke (LD)]

My Lords, I support the triple lock and its effect of keeping the value of the state pension, which has been lost over very many years and has not yet recovered. I share the point made by the noble Baroness, Lady Sherlock, that we accept that these are special circumstances. The Minister has assured us that this is just for one year, so we take her at her word and will judge her on future actions next year.

[Baroness Stedman-Scott (Con)]

I assure the noble Baroness, Lady Sherlock, and the whole Committee, that the Government take the issues of living conditions and the standards of pensioners seriously. As I have relayed in previous contributions to this debate, we have done an enormous amount to try to help, but I have no doubt that that will not be enough for some. It is a work in progress, and we will see where that goes.

This clause requires the Secretary of State to review the rates of the basic state pension, the new state pension up to the full rate, the standard minimum guarantee in pension credit, and survivors’ benefits in industrial death benefit, by reference to the general level of prices in Great Britain. Under this clause, if the relevant benefit rates have not kept pace with the increase in prices, then the Secretary of State is required to increase them at least in line with that increase or by 2.5%—whichever is the higher.

This is a two-clause Bill. If the noble Lords, Lord Sikka and Lord Davies, and the noble Baroness, Lady Bennett, successfully oppose Clause 1, the Bill will fall and, as a result, these pension rates will be increased by 8.3%, which is the average weekly earnings index for the year May to July 2021. This means that, if the Bill does not achieve Royal Assent in good time, there will be an increased cost to the Exchequer of between £4 billion and £5 billion.

Taking into account the points raised, I ask the noble Lords to withdraw their opposition to the question that Clause 1 stand part of the Bill.

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[Baroness Janke (LD)]

My Lords, I too will be brief. We have heard from other Members of this House on the impact of the cut to the £20 uplift in universal credit, and the effect it has on people’s lives, particularly children and, as the noble Lord, Lord Shinkwin raised, the disabled. We know that this is causing major misery and despair to many people in this country, among them the most vulnerable.

I too respect the rule of law; the rules of engagement are important. As the noble Baroness, Lady Fookes, and the noble Lord, Lord Porter, have said, if you want to be effective, the rules are important. However, when I first came into this House—I am not a very long-standing Member—there was an occasion when the House took a stand on tax credits. We have no powers, as we know, but we took a powerful stand. Certainly, it upset the then Government, and those tax credit cuts did not go ahead. What I learned from that is that, while I have great respect for the rules of this House, its procedures and its conventions, sometimes there are exceptional circumstances which sometimes demand exceptional action. That is what I believe the noble Baroness, Lady Stroud, and her supporters are taking forward at the moment.

I too hope that the Chancellor will put something in his Statement tomorrow—we will, of course, wait to hear it—but I pay tribute to the courage of Members of this House who have put their money where their mouth is. They have put themselves on the line. They believe it is so important to ask the other place to think again that they are prepared to risk a lot in order to do so. We in this House should back them.