Social Security Benefits Up-rating Order 2024

Baroness Lister of Burtersett Excerpts

Tuesday 27th February 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, in my opinion, the provisions in the instrument are compatible with the European Convention on Human Rights. The Social Security Benefits Up-rating Order increases relevant state pension rates by 8.5%, in line with the growth in average earnings in the year to May-July 2023. It will also increase most other benefit rates by 6.7%, in line with the rise in the consumer prices index in the year to September 2023.

The order commits the Government to increased expenditure of £19 billion in 2024-25. It ensures that state benefits maintain their value relative to the increase in the cost of goods and services. It means that most state pensions will gain value relative to that increase. Indeed, the proposed increase to state pensions would be the second highest on record—second only to the increase last April.

This will meet the Government’s commitment to the triple lock, benefiting pensioners who are already in receipt of basic and new state pensions, and younger people who are building up future entitlements as a foundation for private saving. It will raise the level of the safety net in pension credit beyond the increase in prices, and it will maintain the purchasing power of benefits to help with additional costs arising from disability.

For those receiving support linked to participation in the labour market, the Government announced a range of employment and conditionality measures at the Autumn Statement. These measures maintain and improve work incentives. This allows us now to strike a balance in support of those who are in low-paid work, who are looking for work or who are unable to work by linking the increase in the rates of universal credit to the increase in prices.

I will now address state pensions in more detail. The Government’s commitment to the triple lock means that the basic and full rate of the new state pension are uprated by the highest of the growth in average earnings, the growth in prices or 2.5%. This will be 8.5% for 2024-25, in line with the conventional average earnings growth measure. As a result, from April 2024, the basic state pension will increase from £156.20 to £169.50 a week, and the full rate of the new state pension will increase from £203.85 to £221.20 a week. All additional elements of the state pension will rise by 6.7%.

The Government are committed to supporting pensioners on the lowest incomes. The order therefore also increases the safety net provided by the pension credit standard minimum guarantee by 8.5% from April 2024. For single pensioners, this means it will increase from £201.05 to £218.15 a week, and for couples it will increase from £306.85 to £332.95 a week.

I turn now to universal credit, jobseeker’s allowance and employment and support allowance. The Social Security Administration Act 1992 gives the Secretary of State discretion on whether to increase the rates of benefits such as these, which are linked to participation in the labour market. Given the employment and conditionality measures I mentioned earlier, he has decided to strike a balance in support by also increasing the rates of these benefits by 6.7%, in line with the increase in the consumer prices index.

As a further measure to reinforce work incentives, the monthly amounts of universal credit work allowances will also go up by 6.7% from April 2024. They will increase from £379 to £404 a month for those also receiving support for housing costs, and from £631 to £673 a month for those not receiving support for housing costs. Noble Lords are aware that these are the amounts a household can earn before their universal credit payment is affected if they have children or if they have limited capability for work. The 6.7% increase will also apply to statutory payments, such as statutory maternity pay, statutory paternity pay and statutory sick pay.

I turn finally to benefits for those with additional disability needs and those who provide unpaid care for them. The rates of personal independence payment, disability living allowance and attendance allowance will increase by 6.7% from April 2024, in line with the increase in the cost of goods and services. As we have debated previously in other contexts, the Government recognise the vital role played by unpaid carers. This order also increases the rate of carer’s allowance by 6.7%, from £76.75 to £81.90. Unpaid carers may also access support through universal credit, pension credit and housing benefit. All these include additional amounts for carers, which will also increase by 6.7%. For a single person, the carer element in universal credit will increase from £185.86 to £198.31 a month. The additional amount for carers in pension credit and the carer premium in the other income-related benefits will increase from £42.75 to £45.60 a week.

In conclusion, the draft Social Security Benefits Up-rating Order 2024 implements the Government’s commitment to the triple lock. It provides for a real-terms increase in the value of the safety net in pension credit, it maintains the purchasing power of benefits for additional disability needs and for people providing unpaid care to people with those needs, and it strikes a balance in universal credit by maintaining both work incentives and the purchasing power of benefit income. I commend this instrument to the Committee.

[Baroness Lister of Burtersett (Lab)]

My Lords, I of course welcome the inflation-proofing of benefits and the temporary lifting of the local housing allowance freeze in April, but—I fear this speech is a series of “but”s—I find it, frankly, insulting to those affected. I should say that the Minister is not included in this but, from the Prime Minister down, the uprating is constantly lauded by Ministers as a record amount, an additional support, as if it represents a great act of generosity which somehow justifies the lack of action on a number of other fronts. The inflation-proofing of benefits should be the default position, avoiding the months of speculation, fuelled by government sources, that have caused considerable uncertainty and anxiety for benefit recipients in and out of work.

Moreover, there is a number of reasons why the increase in line with inflation is far from generous. The Resolution Foundation points out that the uprating will do no more than restore benefits to their real value on the eve of the pandemic. While there were flaws in the cost of living payments, which we discussed last year, their loss now means that many households on universal credit will be worse off in cash terms. The foundation estimates that the typical household in the poorest quarter of the working-age population could face an income fall of 2% next year. The following year, on current assumptions, private renters will face a further freeze in the local housing allowance, which, according to Citizens Advice, is an important factor in the increase in the number facing a negative budget—that is, where income does not cover essential spending.

There is also the prospect that the uprating could coincide with the abolition of the household support fund, which has acted as both a lifeline and a sticking plaster for the holes in the social security safety net. I know that the Minister can say nothing more than that this is kept under review, but local authorities, charities and potential beneficiaries need a bit of certainty, rather than to wait for the Budget, which is only a month before the outcome of this review takes effect. I really do not understand how he can tell me in a Written Answer that the Government do not have robust data on the number of English local authorities that have closed their local welfare assistance schemes which, in his answer to my earlier Oral Question, he prayed in aid, should the household support fund be scrapped. Surely, such data should inform any review of the future of the fund. As it is, we know from End Furniture Poverty that at least 37 authorities have closed their scheme.

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[Viscount Younger of Leckie (Con)]

My Lords, I thank all those who have spoken in this short debate. Before I attend to the number of questions asked and subjects raised, I would like to say at the outset—I normally do this but, today, I give special feeling and meaning to it—that this Government really do fully recognise the challenges facing people across the country due to the higher cost of living.

Although inflation is trending in the right direction, with the Bank of England now forecasting a fall to a target rate of around 2% in three months’ time, I acknowledge that pressures on household budgets very much persist. I saw this for myself in a recent visit to the Earlsfield Foodbank. The Government are not complacent about such matters; I hope noble Lords will recognise that the Government have taken action on a number of fronts to address these concerns, which were raised by a number of Peers—four, to be precise—this afternoon. I may not be able to answer all the questions but I will do my very best.

Let me start at the outset—I do not think I have done this before—by saying that, although I acknowledge the remarks made by the noble Baroness, Lady Lister, I am generally disappointed that every single item was a negative. I am disappointed that nothing she said seemed to support what we have done in these regulations or what we are trying to do. We really are trying. There was a long litany of faults coming from the Government: that the uprating was not enough; on the loss of the cost of living payments; on the freeze in the LHA, which is all for the future as we do not like where we stand on that yet; on the household support fund; and on the benefits cap review, including why it was not being done.

The noble Baroness is right to ask questions but I say gently that there is no mention of the genuine headwinds that all Governments have been facing. This Government have not been alone in the experiences of the pandemic and coming out of it, as well as of the war in Ukraine. There was no indication of these whatever. It is a bit disappointing. I know that the noble Baroness will understand why I have said these things but I thought it would be worth mentioning them.

[Baroness Lister of Burtersett (Lab)]

I am sorry to interrupt but I started by saying that I welcomed the inflation-proofing. That is a positive. I then warned him by saying, “All the ‘buts’ are coming, I am afraid”, but it was in the context of welcoming.

[Viscount Younger of Leckie (Con)]

I appreciate that from the noble Baroness. We have undertaken a number of debates together; I hope that she did not mind me mentioning it.

However, questions are questions; I will start by attempting to answer one of them. After each uprating, household income will go down by 2% because of the ending of the cost of living payments. At the moment, the Government have no plans to extend the cost of living payments past the 2023-24 round of payments. Responding swiftly and decisively to the cost of living pressures has been a key priority for the Government. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe. Taken together, support to households to help with the high cost of living is worth £104 billion over the period 2022-23 to 2024-25.

As was mentioned earlier, reducing inflation and growing the economy are the most effective ways to build a more prosperous future for all. This Government are committed to halving the rate of inflation; they have pretty well achieved that. However, to be helpful to the noble Baroness, an evaluation of the cost of living payments is under way. This seeks to understand their effectiveness as a means of support for low-income and vulnerable households. This will be made public when it is ready.

The noble Baroness mentioned the household support fund. She probably second-guessed my answer, which is that this is kept under review in the usual way. It has been used to support millions of households in need with the cost of essentials. For example, 26 million awards were made to households in need between 1 October 2021 and 31 March 2023. More than £2 billion in funding has been provided to local authorities via the household support fund since it began—that is, October 2021. More than 10 million awards were made between 1 October 2022 and 31 March 2023.

The noble Baroness, Lady Lister, asked why we are not going to increase the benefit cap. She cited the fact that the Secretary of State has an obligation to review at least once every five years. We believe that there has to be a balance. The benefit cap provides a balanced work incentive and fairness for hard-working taxpaying households, while providing a safety net of support for the most vulnerable. She will know that the Government increased the level significantly from April 2023 following the review in November 2022. The proportion of all working-age households capped remains low, at 1.3%, and these capped households will still be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London. For single households, this is around £15,800, or £19,000 in London.

The noble Baroness, Lady Lister, asked about benefits levels and how to measure them. There is no objective way of deciding what an adequate level of benefit should be as every person has different requirements depending on their circumstances. However, we will spend £276 billion through the welfare system in Great Britain this financial year, including around £124 billion on people of working age and their children. Over the past two years, the Government have demonstrated their commitment to supporting the most vulnerable by providing one of the largest support packages in Europe, which I mentioned earlier.

The national living wage, which I also want to mention, is set to increase this April by 9.8% to £11.44, on top of the increase in April 2023 of 9.7%. This represents an increase of over £1,800 in the annual earnings of a full-time worker on the national living wage, and it is expected to benefit over 2.7 million low- paid workers.