Social Security Benefits Up-rating Order 2019

Baroness Lister of Burtersett Excerpts

Tuesday 5th March 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, in my view the provisions in this order are compatible with the European Convention on Human Rights.

The Social Security Benefits Up-rating Order 2019 reflects the Government’s continuing commitment to: increase the basic and full rate of the new state pensions by the triple lock; increase the pension credit standard minimum guarantee in line with earnings; and increase carers’ benefits and benefits intended to meet additional disability needs in line with prices.

On the basic state pension, the Government’s continuing commitment to the triple lock means that, this year, the basic state pension will continue to be uprated by the highest of: earnings, prices, or 2.5%. The triple lock has been an invaluable tool in combating pensioner poverty. Maintaining it ensures that pensioners receive the financial security and certainty that they deserve.

This year, the increase in average earnings was the highest of the triple lock figures. As a result, the basic state pension will increase by 2.6%, rising from £125.95 to £129.20 a week for a single person. Consequently, from April this year, the basic state pension will be over £1,600 a year higher than in April 2010. We estimate that the basic state pension will be around 18.4% of average earnings—one of its highest levels relative to earnings for over two decades.

Three years ago, the Government introduced the new state pension, which provides a transparent and sustainable foundation for private saving and retirement planning for people reaching state pension age on or after 6 April 2016. We have also committed to triple lock the full rate of the new state pension. Therefore, from April 2019, the full rate of the new state pension will increase from £164.35 to £168.60 a week. This is approximately 24% of average earnings.

On the additional state pension, this year state earnings-related pension schemes and the other state second pensions, as well as protected payments in the new state pension, will rise by 2.4%, in line with prices. In addition, we are continuing to take steps to protect the poorest pensioner households, including through the pension credit standard minimum guarantee—the means-tested threshold below which pensioner income should not fall. This will rise by 2.6%, in line with average earnings. From April 2019, the single person threshold will rise from £164.35 to £167.25 a week—more than £1,800 a year higher than it was in 2010. Pensioner poverty continues to stand at one of the lowest rates since comparable records began. These measures will help us keep it that way.

In the 2018 Autumn Budget Statement, the Chancellor announced additional assistance for those on universal credit. As such, universal credit work allowances will rise by £1,000 once they have been increased by prices. This measure raises the amount someone can earn before their universal credit payment is reduced and directs additional support to some of the most vulnerable, low-paid, working families.

Finally, I turn to disability benefits. The Government continue to make sure that carers and people who face additional costs as a result of their disability will get the additional support they need. So, disability living allowance, attendance allowance, carer’s allowance, incapacity benefit and the personal independence payment will all rise by 2.4%, in line with the increase in prices. In addition, the carer and disability-related premia paid with pension credit and working-age benefits, the employment and support allowance support group component and the limited capability for work and work-related activity element of universal credit will also increase by 2.4%. These increases will continue to ensure that our welfare system provides the most support to the people who most need it.

In conclusion, in this order the Government propose to spend an extra £3.7 billion in 2019-20 to increase benefit and pension rates. With this spending, we are maintaining our commitment to protect the country’s pensioners through the triple lock and helping the poorest pensioner households who count on pension credit. We are also ensuring that people on universal credit can earn more before their payment is reduced and providing essential support to disabled people and carers. On this basis, I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, last week I received notification from the Pension Service of the increase in my pension from 8 April, under the triple lock. If I were a hard-pressed mother, claiming child benefit and most other working-age benefits, I would not have been so fortunate.

It has become something of a tradition in these uprating debates that some of us focus on the benefits that are not being uprated because of the benefits freeze. I am sure it will come as no surprise to the Minister that I do not plan to break the tradition. It is particularly pertinent this year, given the growing pressure from a number of quarters to end the freeze a year early. I welcome the real increase in the work allowance, after it was defrosted last year. I hope that the Government will start thinking about a second earner work allowance as a targeted way of addressing child poverty and encouraging more women into paid work.

As my noble friend Lady Sherlock spelled out in the earlier tax credit uprating debate, with her customary forensic skill, the freeze has had a much greater impact on working-age benefits than was originally anticipated at the time of the Welfare Reform and Work Act 2016. This is because of higher than expected inflation, due largely to the outcome of the referendum. According to the Resolution Foundation, the overall, cumulative, real cut in benefits will amount to around 6% by this coming benefit year. The total saving to the Treasury is around £4.4 billion. That is £4.4 billion being taken out of the purses and wallets of some of the poorest members of our society.

According to House of Commons Library calculations for Neil Gray MP, the higher than anticipated inflation rate means that around £1.2 billion is being cut this coming year over and above that originally budgeted for. The Joseph Rowntree Foundation has warned that maintaining the freeze for this final year will mean 10.7 million people living in poverty missing out on £220 to help cover the increased cost of living, and as many as 200,000 more being locked into poverty. The scenario will be even worse in the event of a no-deal Brexit.

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[Baroness Lister of Burtersett]

On the point about encouraging women back into work, which I very much agree with, would the Minister be willing to take away my point about work allowance? At present, second earners have little incentive to get back into paid work. She made the point that we need all adults to be in paid work to have the full impact on poverty. I do not expect her to say that the Government are going to do that but perhaps she might consider my point when developing universal credit policy.

[Baroness Buscombe]

Yes, I noted somewhere in my papers and will say now that of course it is right that we look at every way to incentivise the second earner to go back into the workplace; that is very much our thinking at the moment. We are looking to find different ways to help and incentivise people. We also have to think about affordability. We touched on that when we debated these uprating measures a year ago; it has to be taken into account as well. The noble Baroness, Lady Janke, talked about how much was spent at the last Budget, but actually quite a large proportion of that—£4.5 billion—went towards the work that we are doing at the Department for Work and Pensions in supporting people, so we have to ensure—

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[Baroness Buscombe]

Again, I thank my noble friend. It is a very important point. I often come across people who actually want to work on zero-hours contracts. They want to work in a flexible way so that they can work around their childcare arrangements or caring responsibilities. We live in a complex space. This is where I think the universal credit system is so brilliant, although we constantly seek to improve as we develop it. We inject every two weeks, on average, a new piece of software into that system to improve it, on the basis that everybody’s situation is different. We therefore have to have a system that can be as flexible as possible in responding to people’s way of working and their family arrangements, which are many and varied and can of course change literally overnight. People may then need to turn, maybe overnight, to our support and help.

That is why we are working hard to ensure that we can support the system in a way that provides for those who are in most need. We will not always agree about every benefit in it, but I hope noble Lords will accept that we at the Department for Work and Pensions are doing our best to develop many policies to encourage and empower people to go into the workplace to provide for their children, and therefore to have fuller lives and fulfil every opportunity for their potential.

[Baroness Lister of Burtersett]

I sense that the Minister is about to sit down—I apologise if she was not—but I made one point on which I asked her to respond. It would be a new policy but would not cost anything, other than the administrative costs of doing it. It would be to routinely publish the poverty depth statistics, which would help to answer for the future the question that my noble friend Lady Sherlock asked, which has not been answered. What attempts are the Government making, or have they made, to measure the impact on poverty of this freeze?

[Baroness Buscombe]

My Lords, the Welfare Reform and Work Act 2016 was supported by a number of impact assessments that considered the whole picture of the Government’s welfare reforms. Any estimate of the impact will fluctuate whenever the number of people claiming benefit, or assumptions about the economy, turn out differently from the forecasts at the time. Although CPI for this year is higher than anticipated, at the time of the impact assessment for 2017-18 CPI was lower than expected. Since the impact assessment for the Welfare Reform and Work Act, we have seen employment reach record levels. If people choose to move into work or to increase their hours, they may mitigate or never experience the notional loss. In total, freezing benefits and tax credits overall is expected to result in £3.5 billion of savings in 2019-20, but the 2015 impact assessment shows a saving from the benefit freeze this year of around £1.4 billion.

I reassure the noble Baroness, Lady Sherlock, that I will share with my colleagues the points that have been raised in this debate. We constantly review whether we have the right policies, what we can do to change them and what our constraints are given that we are just one of numerous departments. We account for 25% of the entire government budget. Therefore, it is always a tough challenge for us to influence change. I have huge respect for the previous and current Secretaries of State, who have been able to encourage the Chancellor of the Exchequer to make some changes.

A question was asked about those with a disabled child. All those qualifying for the disabled child addition also qualify for disability living allowance or personal independence payments, which are exempt from the freeze. Another question was asked about the two-child element. We believe that families on benefits should face the same financial choices when deciding to grow their family as those supporting themselves solely through work. A benefits structure adjusting automatically to family size is unsustainable. I think I have answered almost everything—

[Baroness Lister of Burtersett]

My noble friend asked a rather pertinent question: do the Government think that these benefits are too high?

[Baroness Buscombe]

My Lords, no; I can answer that very simply. We do not think that the benefits are too high, but we feel strongly that we have to focus them where the need is greatest.

I hope that noble Lords will agree that we have had a full debate, much of which has related to matters other than the uprating itself. The social security uprating order will provide an extra £3.7 billion of support for the most vulnerable in 2019-20. The triple lock on the state pension will provide an extra £3.6 billion for pensioners. The uprating of disability living allowance, personal independence payments and carer’s allowance are worth £0.7 billion in 2019-20 alone. The increase in universal credit work allowances by £1,000 will provide 2.4 million working families with an extra £630 a year from April 2019. This Government have a track record of increasing their generosity in welfare spending. Since 2016, they have invested more than £9.5 billion in universal credit. I thank all those who have taken part in this debate. I beg to move.