Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

2nd reading
Wednesday 13th October 2021 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for her introduction to this debate, and for her briefing and access to her officials. What a great debate—the House has come back in fine form. Once again, I have learned a huge amount from so many noble Lords. I will be going back to read the Hansard and do my homework before I reappear; I encourage the Minister to do likewise, as we are in for an interesting Committee stage.

My noble friend Lady Drake got us off to an amazing start with that wonderful look back over the history of pensions. Holding in front of us what the point of pensions policy is incredibly important.

As we heard, this Bill is needed so the Government—just for a year, we hope—can suspend the earnings-related part of the triple lock. But not only does this give today’s pensioners a lower pension next year than they expected; it bakes in a lower value of the state pension for them and for all generations in future. As many noble Lords have said, the state pension in the UK is comparatively low—not surprisingly, given we devote a smaller percentage of GDP to state pensions and pensioner benefits than most advanced economies, a point made by my noble friend Lord Sikka and the noble Baroness, Lady Janke.

The last Labour Government introduced pension credit and then, from 2002, committed to the double lock of raising the state pension by the higher of 2.5% and inflation. The impact on pensioner poverty was clear and I am willing to face down the noble Baroness, Lady Noakes—terrifying though she is—by standing up for relative poverty as the global measure which is widely recognised. Using those official figures, when Labour came to power in 1997, 29% of pensioners in the UK were living in poverty. When we left office in 2010, 14% of pensioners in GB were living in poverty. Sadly, those gains went into reverse pretty quickly. Pensioner poverty started to rise in 2012 and by last year, 18% of pensioners were once again living in poverty. To put it in numbers, that is an estimate of over 2 million poor pensioners, including over 1 million in severe poverty. The context for any change to the state pension is a growing problem of pensioner poverty.

Pension credit is key. I loved hearing the noble Baroness, Lady Noakes, talking about Baroness Castle of blessed memory and my late and much-loved dear friend Baroness Hollis, who would have been here. Your Lordships can only imagine the speech Baroness Hollis would be giving today. The Minister must at least think she has been spared that, but we all miss her and wish we were here to hear it. What a joy it would have been.

However, I have to do my best. On my bad days, I just channel Baroness Hollis and I will try to bring forward what she might have said in this debate. One thing she would have done is to push the Minister, irrespective of history, on what has been done about the take-up of pension credit. Six out of 10 is absolutely disgraceful; 40% of those pensioners are not getting the money, the TV licences or the passported benefits. What are the Government doing about it? Can the Minister bring us up to date?

As my noble friend Lady Drake and others mentioned, the triple lock applies only to the flat-rate state pension, not to the second state pension or pension credit. So far, the Government have passed through the triple lock increases so that the same cash amount in the state pension increase was put on to pension credit. But of course that means even when the state pension keeps up with earnings, pension credit does not. It is a larger amount and therefore a smaller percentage, so the pension is not keeping up with it. Can the Minister explain the rationale for not having pension credit in the pensions lock, and tell us why the Government decided to do that?

As we heard, the Government came to power on the back of a manifesto promise to maintain the triple lock. Let us look at the argument for ditching it now. The Secretary of State said:

“This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions”.—[Official Report, Commons, 20/9/21; col. 62.]


The reference period for earnings growth for the triple lock is the year-on-year change in average weekly earnings for the period May to July, which, as we have heard, was 8.3% this year. There seem to be two key drivers for that high rate. The first is the base effect. In May to July last year, many workers were on furlough or had their hours reduced, pushing down weekly wages. This year, with fewer people on furlough and hours getting back to normal, weekly wages are higher. So the increase is higher year on year. The second is “compositional effects”, which are about the make-up of the workforce. During the pandemic, more low-earners lost their jobs, so the average of the weekly wages of those who were left was higher.

The ONS did some modelling on this, stripping out both the base and the compositional effects, a point referred to by the noble Baroness, Lady Altmann, and it came up with a range of 3.6% to 5.1%, representing underlying earnings growth. Presumably the Secretary of State could have chosen to use a figure in that range had she wished. Since it is primary legislation, she can legislate for whatever she wants. It is not as though she could be JR’d on previous legislation; she is creating the legislation. Why did the Government not think about using that? They could also have looked at other ways of modelling earnings growth; for example, over a longer period, which I raised last year when we were discussing the emergency Bill. Why did the Government reject those alternatives?

The Secretary of State for Work and Pensions has been at great pains to assure us that while earnings growth might look enormous, it really is not, because of base effects, compositional effects, Covid and so on—it is barely visible to the naked eye; it is tiny. Unfortunately, at the same time, the Prime Minister was going around television studios saying that earnings growth was enormous. I quote him:

“Never mind life expectancy; never mind cancer outcomes; look at wage growth.”


It cannot simultaneously be racing ahead of inflation or be misleading and in fact tiny. Can the Minister tell us which it is? Is wage growth racing ahead of inflation or is it barely inching up and not really there at all, with nothing to see?

While we are on the subject of working-age incomes, we have to talk about universal credit. I am sure the Minister did not really expect to get through the Bill talking only about pensions; if she did, she will have been disappointed. She will have heard the extraordinary concerns expressed around the House. I know that I have been banging on about the 20 quid for a long time, but it is not just me—this is coming from every Bench in this House. It is coming from the right reverend Prelate the Bishop of Durham. Everywhere I go, people raise it with me and talk about it all the time. That is because nearly 6 million people are losing a lot of money. Everybody has heard about it and people know that they cannot afford to do that.

It was a delight to welcome back the noble Lord, Lord Freud. In a fashion, the band is getting back together again. I have missed disagreeing so dramatically with him over so many years, but now he comes back and I am agreeing with him. It really is not fair. The noble Lord absolutely hit the nail on the head. As I said at the beginning, the welfare state is there to support people, for example, when they lose their jobs, but the only reason why the Government had to stick extra money into it when the pandemic hit was that they knew that it was not enough to live on. If it had been enough to live on, presumably it would have done its job perfectly well—that is what the automatic stabilisers in the economy are for. The point is that the Government knew that so much money had been taken out of the system that it was not enough to live on, and they had to do it. I do hope that George Osborne reads today’s Hansard—I think I might send it to him. Where is he now? Is he at the Standard? I will send him a copy just in case he misses it—I would hate that. But it really is a powerful point.

The Economist says this week:

“The loss of £1,040 a year is the biggest single cut to social security since the foundation of the modern welfare state.”


That is quite a hit. I was glad to hear the noble Lord, Lord Shinkwin, and my noble friend Lady Lister trying to crack this issue that jobs are just the answer. I have a rant which I do, sadly, even at dinner parties as well as in politics. The whole point of the welfare state and of in-work benefits, of universal credit and tax credits before it, is that they are there not just to supplement low hourly rates; they are there because a lot of people, as a result of their circumstances—they may have disabilities, caring responsibilities or young kids—cannot earn enough in the hours they can supply to meet their outgoings, but the state wants them not to starve and to be connected to the labour market and to stay that way if they can. Talking just about jobs is deliberately misleading when so many people are either in work or are not able—I shall stop the rant there; the point has been made well enough by others before me.

All this is happening at a time when Britain is facing a cost of living crisis. Poorer families spend more of their income on food and fuel. As my noble friend Lord Hendy said, the point is that they spend this. Not only has this money been taken away from those families; it has been taken out of economies all around the country. I live in County Durham, where a lot of money has been taken out of the local economy. People who have this much money have to spend every penny; they cannot afford to save it, so it is hitting the economy as well as their pockets. The £20-a-week cut is happening just as food prices are going up and fuel costs are sky-rocketing, and in the run-up to a rise in national insurance, which also hits people of working age. The Economist analysed government forecasts and suggested that real-terms household net incomes are heading for the longest decline since the mid-1970s. Things are getting bad out there. The Government should not have cut this. I hope they are listening very hard to the message around the House.

I come back to the specifics of the Bill. Some people are affected both by the universal credit cut and by this Bill, because they are couples where one person is over state pension age and the other is under. Can the Minister tell us how many people are in that position? What assessment has she made of the impact of the Bill on pensioner poverty and on the number of pensioners heading for fuel poverty this winter?

We on these Benches understand the difficult situation with the anomaly in earnings, but it is surely up to the Government to find a way to deal with that while maintaining the earnings link to which they committed. That means being transparent about what is going on. When the Secretary of State announced the change, she reminded the House that she had had to legislate last year because earnings were negative. I will let the Minister explain the details to the noble Baroness, Lady Smith, but, essentially, if earnings are negative, the Government cannot apply the triple lock at all because there is not the provision in the original legislation, so the Secretary of State was right to do that. She said:

“This year, as restrictions have lifted and we experienced an irregular statistical spike in earnings over the uprating review period, I am clear that another one year adjustment is needed”.—[Official Report, 7/9/21; col. 185.]


Last year’s Bill set aside the earnings link because, otherwise, Ministers could not have increased pensions at all, as earnings growth was negative. The implication is that this is just a similar move this year, but let us be clear: last year, the Government rushed through emergency legislation so they could keep their manifesto commitment to the triple lock. This year, they are rushing through emergency legislation to break their manifesto commitment to the triple lock. They are not the same thing. There is a question of trust here and, I have to say, this is the third time in a few months. It is telling which manifesto commitments get dropped. There is something about priorities going on here. First, we had the overseas aid cut, then we had the national insurance rise, and now we have the triple lock, which Ministers repeatedly said they would protect. This Bill may be for one year, but we will be watching like hawks to see whether the Prime Minister and the Chancellor come back for more. As the noble Lord, Lord Freud, knows to his cost, once Prime Ministers and Chancellors get into the habit of dipping into the welfare budget like it is some sort of piggy bank which they can raid for their favourite projects, they tend to come back again and again, because that is what they have been doing up until now. It will not happen again if this House can do anything about it.

We will drill down into all these issues and more in Committee so that the House can understand the impact of the Bill and its interaction with other government decisions that are being made at the moment and have been made in the recent past. For today, I thank all noble Lords for a brilliant debate. I hope the Minister can answer the questions put to her and give us some assurances. I look forward to her reply.

Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

[Baroness Lister of Burtersett (Lab)]

My Lords, at Second Reading I accepted the Government’s case for not increasing pensions by 8% or so, and I called for a review of the triple lock, because of the arbitrary nature of the triple element of the lock—that is, the 2.5%—while emphasising the importance of maintaining pensions and related benefits relative to average earnings as a general principle. I therefore support Amendments 1 and 2, which are consistent with that argument.

At Second Reading, as we have heard, the Minister argued that there was no robust methodology for establishing what the underlying increase in earnings had been this last year. But surely the ONS range of estimates, on which these amendments are based, is at least based on some kind of methodology, which is more than one can say about 2.5%, which can be used to increase pensions should it exceed earnings and prices. As it is, the jettisoning of earnings this year has given rise to understandable fears that the earnings link might be abandoned altogether in the longer term, just as it was by the Conservative Government in 1980, leading to a steady deterioration in the position of pensions relative to average earnings during the following two decades.

Moreover, the case for basing pensions on the underlying increase in earnings is the stronger, given what is happening to inflation, which is addressed by Amendment 4. All the indications are that inflation is going to rise above the 3.1% on which the uprating will be based. The Bank of England’s chief economist has warned that it could go as high as 5% in the next few months. For pensioners and others reliant on social security, the effective rate of inflation is likely to be higher still, given the differential impact of inflation when the increase in basics such as fuel and food, which constitute a disproportionate part of low-income budgets, is a key driver of inflation, as already mentioned. I raised this issue at Second Reading and asked the Minister whether she would undertake to look at how the problem might be addressed, but she did not respond then or in her subsequent letter.

The other day, the Chancellor said:

“I know that families here at home are feeling the pinch of higher prices and are worried about the months ahead. But I want you to know, we will continue to do whatever it takes, we will continue to have your backs—”


whatever that means—

“just like we did during the pandemic.”

The amendments we are debating here today would be one way of doing whatever it takes. I hope, therefore, that the Minister will take them seriously and, if she does not accept any of them, explain how the Government will do whatever it takes to protect those reliant on social security in the face of rising inflation.

Finally, on pension credit, the subject of Amendment 3, I believe that the uprating should be protected legally. But I would like to return briefly to the issue of take-up raised at Second Reading by the noble Baroness, Lady Bennett of Manor Castle, which also has implications for later amendments on pensioner poverty. I welcome the willingness of Ministers—and our Minister in particular—to discuss with Peers ways of improving the lamentably low take-up rate. I had understood that it had been agreed that one way of doing so was to include a suitably arresting and well-designed leaflet or similar in communications with pensioners. I have received a couple of communications from the DWP since then, neither of which has drawn my attention to pension credit. Just last week, the letter I received about the winter fuel allowance made no mention at all of pension credit. Could the Minister tell us whether the idea of such a leaflet has been abandoned and, if so, why?

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baronesses, Lady Altmann and Lady Janke, for introducing their amendments, and all noble Lords who have spoken. We had a good discussion at Second Reading about the way the Government have gone about trying to find an alternative to the triple lock that would deal with the impact of the pandemic on earnings data. But I think it is fair to say that the Minister will have worked out from the contributions that this has not entirely satisfied noble Lords around the House as a way forward.

Let me look briefly at the three sets of issues raised by the amendments in this group. Amendments 1 and 2 from the noble Baroness, Lady Altmann, would replace the provisions of this Bill with the provision to uprate using an earnings measure designed to reflect an underlying rate of earnings growth. Amendment 1 sets that at 3.8%, being chosen as the midpoint in the range of this now famous blog by the ONS. I suspect the person who wrote it must be wondering whether they will ever blog again. But that blog suggested a range that—if you were to strip out the base and compositional effects—would give an indication of underlying basic earnings growth.

Amendment 2 takes a similar but less prescriptive approach, leaving it to the Secretary of State to pick a number informed by that same ONS piece of work. Given that a number of noble Lords have expressed scepticism about the Government’s defence—that one of the reasons they do not want to move away from average weekly earnings is fear of legal action—could the Government rehearse again exactly what they are worried about and why? I think that would be helpful, because, clearly, noble Lords are not persuaded by that.

I do not think anyone is very happy with where the Government have landed. My noble friend Lady Drake contributed, I have to say, another piece of astonishing, wonderful analysis. I say to the noble Baroness, Lady Wheatcroft, that I think it is possible that my noble friend is an even greater expert than the noble Baroness, Lady Altmann, based on the strength of her contribution. We have huge expertise in this House, and we are greatly blessed by it. My noble friend summarised the matter when she said that, essentially, in this Bill, the Government have contrived to find a way forward in which they apply neither the triple lock nor the earnings indexation on which the triple lock is meant to build.

The quote from the PPI about what would have happened if the triple lock had been applied over two years was interesting. When we debated the Social Security (Up-rating of Benefits) Bill 2020, I asked whether the Government had considered some sort of smoothing process, such as applying the principles of the triple lock over two years instead of one. I went back and read Hansard again today, and the Minister said—I paraphrase—it was all a bit uncertain. But that would have avoided the methodological complexity and any associated legal risks that Ministers are worried about, since presumably, they are using an established measure—immune, I imagine, to legal test. I ask the Minister again: did the Government consider it? Looking back, does she think that might have been a safer way forward?

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I believe that I have covered all the points that noble Lords have raised, and I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Sherlock (Lab)]

My Lords, I have two quick questions. I am not advocating smoothing, but the Minister’s argument against it was that there would be a compositional effect. From memory, the base effect was many times more than the compositional effect, in terms of the impact on earnings data. The composition effect was less than 1% and the base effect was 3% or 4%, so is that really an argument?

The second question is something I have always wondered. The argument she gave to noble Lords who asked about timing was that two of the reasons why it had to be decided now were that the computers must be programmed in November and that the order usually has to be put through in January. What would happen if the computers had been programmed and the order was rejected by Parliament?

[Baroness Stedman-Scott (Con)]

I will have to come back to the noble Baroness on her latter point, as I do not know at the moment.

[Baroness Sherlock (Lab)]

On base and compositional effects, is not the compositional effect on which she was relying as a defence against smoothing very small? Does not the base effect account for most of the difference in earnings data?

[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.

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Moved by

[Baroness Sherlock]

5: Clause 1, page 2, line 11, at end insert—
“(3) Within six months of the passing of this Act, the Secretary of State must publish a review of the impact of this Act on pensioner poverty.(4) This review must be laid before both Houses of Parliament, and a Minister of the Crown must arrange to make a statement.”Member’s explanatory statement
This amendment requires the Government to carry out an assessment of the impact of the Government’s chosen policy option on levels of pensioner poverty.

[Baroness Sherlock (Lab)]

I rise to move Amendment 5, in my name, and to speak to the other amendments in this group. I tabled Amendments 5, 6 and 7 for two reasons: to try to plug what seems to be a serious knowledge gap in this legislation, and to highlight the wider concern about the growing rates of pensioner poverty and the worsening cost-of-living crisis.

It seems evident that the Bill must have an effect on pensioner poverty, because it will not only give today’s pensioners a lower pension next year than they expected but it will affect the value of the state pension for them and for future generations of pensioners for ever, as it is the base from which future percentage increases will take place. As noble Lords have already said today, that is a low base, since the UK pension is comparatively low.

The last Labour Government were able to achieve big reductions in pensioner poverty, in large part by introducing pension credit. At Second Reading I asked the Minister what action the Government would be taking to increase the take-up of pension credit, since at that point the last figures that I had seen suggested that only six in 10 of those eligible were claiming it. In response, the Minister picked just one figure and talked about take-up by value, and only for the guaranteed minimum standard pension credit. She did not talk about the aspect that most people talk about: the proportion of people who could claim pension credit who are actually doing so—in other words, take-up by volume.

I am sure the Minister will appreciate that that matters a great deal. With some benefits, if you only get a small amount then some people might choose not to claim. But the thing about pension credit is that if you get it at all, it is a passport to other really important benefits, including council tax credit, help with health and energy costs, and of course the free TV licence for the over-75s. It therefore matters that everyone gets pension credit if they are entitled to it.

I think the latest figures show that take-up for pension credit is still only 63%. Will the Minister confirm that? If so, what are the Government doing to boost it, including the leaflets mentioned by my noble friend Lady Lister? There were lots of other ideas—what is happening about those?

Since 2012 pensioner poverty has started rising again. Official figures show that some 18% of pensioners were living in poverty last year. That amounts to around 2.1 million poor pensioners, with over 1 million of those living in severe poverty. Has the Minister seen the report in June by Independent Age which found that people aged 85 and over have the highest rate of poverty among pensioners, at 22%? There are big regional variations; London has by far the highest rate of pensioner poverty, at 25%, but there are worries about rising poverty in the north.

In September, Age UK published research which found that, since 2012-13, the number of women pensioners living in poverty has increased from 990,000 to 1.25 million—an extra 260,000 women living in poverty. This is especially remarkable given that, because the state pension age was going up at that time, the actual number of female pensioners fell by 800,000. So we have 800,000 fewer female pensioners and yet 260,000 more female pensioners living in poverty. Can the Government explain that and tell us what they are doing about it? Age UK also found that older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.

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[Baroness Sherlock (Lab)]

My Lords, I am very grateful to all noble Lords who have signed my amendments. I thank the noble Baronesses, Lady Boycott and Lady Altmann, and my noble friend Lady Drake and others. I am most grateful to those who spoke.

My noble friend Lady Drake summed up the problem when she said: “There are going to be a lot of old people this winter with very little money, sitting in cold houses, worrying that they will not get the help they need.” I think there really will be.

Listening to the noble Baroness, Lady Boycott, I was very moved by the vision. I think that her parents must be terribly proud. They took her out to do meals on wheels when she was young and she in her turn is now doing such amazing work supporting people who cannot afford to eat. I really commend her for that—it was a wonderful image.

Like the noble Baroness I have been involved with many organisations such as churches and others that do food banks. I know how older people do not like to use food banks and how difficult it is. I think how shameful it is that we have come to the point where they have to, or indeed anyone has to, on the scale that we have in our country. We have somehow lost our way.

The worrying levels of pensioners on low income and those approaching low income should really concern us. My noble friend Lady Drake mentioned a figure from the PPI. If we are heading for a quarter of all people approaching retirement being unlikely to receive even the minimum income level, something has gone badly wrong. What has happened to the vision that was meant to lift people away from that situation? Can the Minister tell us what has gone wrong there?

The noble Baroness, Lady Altmann, and the noble Baroness, Lady Janke, in her amendment, mentioned women pensioners in particular. Those drivers of the gender pay gap are driving the gender pensions gap as well. If we do not get things right earlier on, we are not going to be able to put it right later. This means that it is not just a legacy problem. It has been clear from the comments and contributions from noble Lords tonight that this is not a problem just of older systems in days when, for example, caring was not recognised. This is happening now and is going to drive pensioner poverty into the future.

On the question of poverty measurements, I am so grateful to my noble friend Lady Lister who has literally written the book on poverty and is therefore in a very strong position to be able to take apart the Government’s arguments. It just does not work to say that relative poverty is some hopeless measure that no one uses when, frankly, it is used robustly by academics all over this country, Governments and international bodies. It has been used over very long periods for longitudinal studies. It is fine to use other measures as well. It is fine, as the noble Baroness, Lady Stroud, has done in her work, to look at baskets of measures. However, simply to say that relative poverty does not matter and cannot be measured is not a credible stance if we are to have a serious conversation about social policy.

The point about trends was really well made. Even if the noble Baroness does not like measures year to year, in 1997, pensioner poverty in the UK was at 29%; in 2010 it was 14% and in 2012 it starts to rise. Last year it was 18%. There are huge trends there. Something is happening with pensioner poverty and the Government cannot simply turn a blind eye to it.

The Government argue that they cannot do an impact assessment and that they have data such as households below average income. That is nonsense. HBAI is simply a statement of the state of income across the nation. It is not a measure of the impact of any legislation. Whenever the Government do an impact assessment, of course they have to make assumptions about what will happen and how people will respond. It is called modelling. All I am asking is for them to do it on things they do not want to do it on, as well as the things they do want to do it on. That does not seem to me to be an unreasonable request.

To be honest, a lot of the people that we are talking about here are so close to the poverty line that I do not think it would be very hard to make assumptions about what was going to happen to their income, and how far they are going to draw down extensively on assets, as a result of measures the Government are taking.

The Minister says that we do not have time to discuss pension credit take-up tonight. This is the Committee stage of a Bill in which we are meant to do line-by-line analysis. We have been asking this for quite a long time and if we do not have time to do it tonight then, frankly, proceedings should carry on at another time when we do have time to do it. It should not be that we do not get to discuss things and to have questions answered because the timing, which was entirely in the Government’s hands, is such that the noble Baroness feels that we do not have time to discuss it tonight. Take-up of pensioner credit is fundamental to pensioner poverty. This is a group of amendments about pensioner poverty so I think it would have been helpful if she had anything else to say on that.

I am disappointed that the Minister is not willing to move on this. These are gentle, simple and reasonable amendments. If the Government will the ends of this, they should will the ability to assess the impact of their ends. I hope that the noble Baroness will revisit this idea and be more willing to accept it before we come back to these matters later in the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Lords, Lord Sikka and Lord Davies of Brixton. Given the hour, I will be brief. I very much endorse the comments of the noble Lord, Lord Davies, about this Clause 1 stand part debate seeking to ask the other place to think again, and indeed to ask your Lordships’ House to debate this.

I would be more radical than either noble Lord who preceded me. I believe that the state pension should be set at a level where no pensioner is living in poverty—that is looking at the relative poverty levels, as outlined and widely discussed by the noble Baroness, Lady Lister. That would mean abolishing the contributory principle. Our debate tonight has demonstrated how discriminatory and actively massively unfair that is—because, as worked through now, it largely acknowledges only contributions through paid work. We know that many people, particularly women, make huge contributions to our entire society and future through care, community work and other activities which are simply not recognised in our pension system. This is leaving huge numbers, particularly of women, in a state of living that our whole society should regard as not acceptable.

I agree again with the noble Lord, Lord Davies, that the triple lock is far from perfect. We have talked about heating costs. Of course, another way in which we have very much failed our pensioners is the quality of the housing stock that they are living in. Reference has been made to the quality of council housing, but we also have a huge problem with more and more pensioners now living in private housing due to the huge privatisation of our housing stock through right to buy. Those people are living in extremely poor conditions and are placed in very difficult circumstances in that housing.

I agree with the noble Lord, Lord Sikka, that the cost of not going forward with ending the triple lock for this year—£4.7 billion—is very modest in the overall scheme of things. We have bailed out the banks. When Covid-19 hit, we bailed out many businesses. Surely we should look to bail out our pensioners.

I finish by noting that, when we talk about £14 a week, I agree with the noble Lord, Lord Sikka. There is a relatively small number of people in our society for whom £14 a week is small change, but there are very large numbers of people and pensioners for whom it is literally a matter of life and death. I invite noble Lords to consider our excess winter deaths, many of which occur among pensioners.

[Baroness Sherlock (Lab)]

I will be very brief. I thank my noble friend Lord Sikka for introducing this debate. We all share an underlying concern about the living conditions for poorer pensioners. I will not dwell on pensioner poverty; I made a perfectly long—arguably overlong—speech on the last group of amendments about this very subject.

Because the Bill has only two clauses and Clause 2 is the commencement clause, I suspect that, in coming back, the Minister will be tempted to focus on the fact that this may be regarded as a wrecking amendment because it would remove the entire contents of the Bill. We on this side accept that there is a difficulty in looking at and using the data for the earnings measure without adjustment, so that is not the position that we are in. I encourage her, when she responds, to answer and speak to the underlying concerns about pensioner poverty that have been expressed noble Lords, and perhaps give some assurance to the House about how the Government will tackle that, as well as looking at the immediate issue.

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[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Stroud, for introducing Amendment 9 and speaking so passionately on its content. We tried everything to get an amendment on universal credit into scope, so I am not surprised that, despite all her ingenuity and application, the noble Baroness was unable to get anything past the clerks. I have some sympathy for the efforts that must have gone into that; the nearest I could get was Amendment 6 in my name on mixed-age couples—“close but no cigar” is, I think, the technical term for it.

I understand that these issues are complex and sensitive. I have learned a lot today, in fact, about what happens in practice. Having listened to both the Leader and the noble Baroness, Lady Stroud, I now understand that, in effect, the House will decide the admissibility of an amendment only at the point at which it decides whether or not to accept or vote for it. So basically, we will not find out tonight at all. Given that, I will take the opportunity to talk yet again about universal credit; I have been banging on about it for quite a long time. I will do so briefly.

I have been talking about this £20 for a boringly long time. I cannot tell noble Lords how happy I am to have such an illustrious array of support coming in behind the issue—what a delight that is. It has been very interesting to listen to some of the contributions, which I passionately agree with. I am grateful to the noble Lord, Lord Crisp, for pointing out the impact of this cut on health, to the noble Baroness, Lady Boycott, for pointing out the impact on food, people’s poverty, and the quality of their lifestyles, and to the noble Lord, Lord Shinkwin, for pointing out the impact on disabled people.

I still believe that it is not just bad but one of the most shocking decisions to remove £20 a week from universal credit at the point at which we are dealing with the effects of a pandemic which, as the noble Lord, Lord Porter, pointed out, has decimated communities, and is still having that effect. People have lost jobs and hours. We are in a cost-of-living crisis. To proceed at this point with what the Economist called

“the biggest single cut to social security since the foundation of the modern welfare state”,

frankly, beggars belief.

I warn the Minister that, the next time she tries to defend this cut by pointing to the £500 million discretionary fund, I am going to get up and quote the noble Lord, Lord Freud, at her. I may even look at a combination of the noble Lord, Lord Freud, and my noble friend Lady Lister—if I am honest, not an alliance I have seen a lot of in the past, but I shall be quoting them at her together. Frankly, at that point, she should just put up her hands and give up; if the two of them are agreed, she may be on to a loser.

The other defence that will be used—indeed, it is already starting to be—is about what is happening with the rise in the national living wage. Obviously, it is good that the Government have accepted the Low Pay Commission recommendation and that the minimum national living wage will rise, but this simply does not make up for the universal credit cut, for three basic reasons.

First, there are well over 5 million adults on universal credit, but only 2 million people get the national living wage and many of those do not get universal credit. Secondly, it is not enough. The Resolution Foundation has done the sums and a full-time worker on universal credit who gets the national living wage would see their pre-tax pay rise by just over £1,000 as a result of this increase. However, their take-home pay would go up by only £265 because of the UC taper, because they pay more tax and will be paying more national insurance come April. Losing £1,040 and gaining £265 is not a win. That is in cash terms. In fact, most of that increase will have to go to cover the cost of inflation in any case.

The noble Baroness, Lady Stowell of Beeston, may be right and the Chancellor may be doing something in the Budget. None of us knows what is going to happen. Maybe he will knock a couple of percentage points off the taper rate. I really hope he cuts the taper rate but that will not be enough to make up for the damage that this cut has wrought.

The third point is that improvements in the living wage and the taper rate help only those in work. Just 38% of adults in families on universal credit are employed. What happens to the rest? What about the sick and disabled people who are not able to work? What about those with caring responsibilities? How are they meant to feed their kids and heat their home? What happens to them? Let us not forget the hit to local economies when families who have to spend every penny they get suddenly have £1,000 less to spend a year in local shops and businesses because it has been taken away from them.

That is enough for one day. We have had a very interesting debate. I shall read Hansard with care. Perhaps the Chancellor will take the advice of the noble Lord, Lord Shinkwin. Perhaps the best favour he could do for the Leader of the House and the Minister is to take this problem away from them by acting tomorrow. We look forward to seeing that. I hope the Minister can give us some hints.

[Baroness Stedman-Scott (Con)]

My Lords, we will have to wait until the Chancellor gets up to speak to find out what he has to say in his Statement. I thank my noble friends Lady Stroud and Lord Freud, and the noble Baronesses, Lady Janke and Lady Boycott, for their amendment. My noble friends Lady Stroud and Lord Freud were, of course, prominent architects of universal credit and noble Lords will, I am sure, join me in appreciating their depth of knowledge and strength of feeling on the issue. I know from all that has been said that others in this House share many of their concerns. I will not take time to repeat them now.

I must inform your Lordships that this amendment, if passed, would challenge the broader constitutional balance between the two Houses of Parliament. I am sure it is not the intention of noble Lords to open such a Pandora’s box, but I would be failing in my duty to your Lordships’ House if I did not clearly spell out the unintended effects.

Since the other place has already approved the Bill, I urge your Lordships not to risk its effects being negated by ping-pong between the Houses that takes us beyond the hard deadline for reprogramming the relevant DWP IT systems. This amendment deals with matters of public expenditure which are the province of the elected Chamber. It also effectively asks this House to decide how that Chamber should conduct its business, what it should debate, what it should choose to vote on and when that should be done—in this case, within one month of Royal Assent.

Taking into account all the constitutional points I have raised, I invite my noble friend to withdraw her amendment and, if she feels unable to do so, I strongly urge noble Lords not to vote in its favour.

Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

Report stage
Tuesday 2nd November 2021 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I will speak to the other amendment in this group: Amendment 5, in my name and that of the noble Baronesses, Lady Janke, Lady Altmann and Lady Boycott. But first, I want to comment on Amendments 1 and 7 and thank the noble Baroness, Lady Altmann, for her introduction and explanation of them.

Noble Lords will remember that in Committee, the noble Baroness, Lady Altmann, tabled an amendment which simply excluded pension credit entirely from the effects of the Bill. The Minister opposed this on lots of grounds, but probably the main one was that the earnings growth had been distorted as a result of the pandemic, and therefore it would not be an appropriate way to increase pension credit. The noble Baroness has come back with Amendments 1 and 7, which would require the Government to uprate pension credit with reference to earnings but adjusted for the effects of the pandemic.

As the noble Baroness mentioned, I am quite sure the Minister will get up and say that the Government do not believe a figure can be found which will be robust enough to use as a measure of underlying earnings growth. We will come back to the substantial discussion on that point in the third group, but, in short, Labour accepts that there is a distortion in the earnings data, but we think the Government should go back and try harder to find an alternative way to deal with this without ditching the earnings link and the manifesto commitment to the triple lock—and, indeed, losing the trust of the nation while they do so. Our view is that that should be done for the state pension, which we will come back to in the third group.

In the meantime, we need the Government to face into the growing problem of pensioner poverty and to develop a longer-term strategy for tackling it. Amendment 5 would force the Government to start by assessing the impact of the Bill on pensioner poverty within six months of the Bill passing, followed by a Statement to both Houses of Parliament.

We know we have a problem. I will not go over again all the evidence from around the House that we rehearsed in Committee, but let me give a quick summary. Pensioner poverty was doing really well: it fell markedly between 1997, when it was 29% for the UK, and 2010, when 14% of pensioners in Great Britain were living in poverty. That was due primarily to the introduction of pension credit. From 2012, pensioner poverty started to rise again. Last year, 18% of our pensioners were living in poverty—that is more than 2 million pensioners now in poverty, with over a million in severe poverty.

There is a real gender pensions gap. The number of women pensioners living in poverty has increased dramatically at a time when the total number of women pensioners has fallen as a result of the state pension age going up. That is really significant. We also have a particular problem in some regions, especially London, and there is a worry about a growing problem in the north. Older people from black and Asian communities are around twice as likely to be living in poverty as white pensioners.

The context for the Bill is a cost of living crisis, with inflation rising and energy bills skyrocketing. I raised this in Committee, and the Minister responded to my concerns by saying that energy prices were built into CPI. But the prices reference point for uprating is the September CPI rate, and the energy cap was raised on 1 October. It has been raised by £139 for those paying by direct debit and a huge £153 for those on prepayment plans. Yet again, there is huge premium on being poor: the poor pay far more per person for energy than the rich.

Given the worries about pensioner poverty from around the House, and the fact that the state pension is the largest single source of income for most pensioners, it would seem obvious that Ministers should carry out an impact assessment so that they would know what effect suspending the triple lock would have on pensioner poverty. But, astonishingly, there has been no impact assessment for the Bill. When I moved a similar amendment in Committee, the Minister said it was not possible to do what we asked because it would involve modelling. She said:

“Assumptions would need to be made about how each individual pensioner’s income would change in future under each scenario.”—[Official Report, 26/10/21; col. 750.]


I accept that assumptions would have to be made—that is what happens when you model things. Is it really impossible to model the impact of this policy? If so, how does anyone model the impact of any policy on poverty? When I was a spad in the Treasury—which I accept was back when dinosaurs roamed the land—it had a TAXBEN model which it used to assess the impact of any changes in taxes and benefits. Also, in those days, the DWP had some of the best statisticians anywhere in Whitehall. I have no reason to believe that that is not the case now, although I know the department has shrunk. So, I recognise that assumptions would need to be made, but in modelling they just have to be reasonable and stated. I would even be happy with an assessment which ignored behavioural responses, if that would make it easier.

There is a common theme across all the amendments today and there are concerns from all Benches about low pensioner incomes. Our simple amendment reflects that concern. If the Minister is not convinced by all the evidence mentioned here and in Committee, I urge her simply to accept my amendment and do the work to establish the facts. If the Government want to break their manifesto commitment, at least they should be committed to gathering and publishing information about the impact of that decision. I look forward to the Minister’s reply.

[Lord Rooker (Lab)]

My Lords, I had not intended to speak. I can see why there is a logic against the noble Baroness’s amendment in some ways, although if she puts the amendment to a vote, I will support her. There was a time—I am going back some years now—when the Government were committed to a link. The consequence of that was that I had to put forward a 75p pension increase. I remember saying to Alistair Darling, my boss, “Couldn’t we make a quid? It’ll be a lot easier to explain a quid than 75p.”. He said, “No, no. The formula’s there. The Treasury said this is what we do: we stick to the formula.” So we stuck to the formula. I was always able to defend it in a way because the supplementary pension, although people did not always apply for it, was worth three quid rather than 75p, but we know about the uptake. The Treasury factor in that people do not take up benefits.

However, here it looks as though pensioners are being treated unfairly. I do not think they are because, as I shall say tomorrow in the debate on the Budget, there are so many hidden tax increases, particularly for pensioners with a very small occupational pension who are at the moment outside the tax net but who will be sucked into it because of the freezing of the personal allowance over a five-year period. Substantial numbers will be paying tax without anybody announcing a tax increase, and that is unfair. I hope that some time, when he flies in, the noble Lord, Lord Lawson, will come to support me on the basis that he supported me and Audrey Wise in 1977 to make the system workable.

However, the noble Baroness has a point. I do not intend to speak on the other amendments because there is a point where logic says you cannot take account of the pandemic. I understand the long run. For a couple of years, I did the job that the Minister is doing and I understand that Ministers are presented with a 30-year run of the consequences of any change in the figures. That has got to be the case when you are talking about pensions.

If we had the second or third-best pension in Europe, we would not be having this argument, would we? However we have one of the poorest basic pension rates of any modern economic country, but we are, so called, one of the richest. Sometimes we have to say, “Hang on a minute: let’s take a stand,” and I think today is an opportunity to do that. I know the logic is against this, but when one looks at the figures, it is an opportunity to make a change. The Government could be forced to have a look at some of the long-run consequences of having such poor pensions, where they factor in low uptake of pension credit. One of the documents produced for the Budget on changes in household incomes mentions that they factor in that people will not claim benefits to which they are entitled. That is not very fair. Today is an opportunity for the little people to hit back.

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[Baroness Stedman-Scott (Con)]

My Lords—

[Baroness Sherlock (Lab)]

My Lords, my apologies: I was too slow to leap up. I thank my noble friend Lord Davies for introducing his Motion and thank all noble Lords who have spoken. As I said in Committee, I think we all share an underlying concern, which is about the living conditions of pensioners—particularly poorer pensioners—in our society. I will not rehearse our debates on pensioner poverty, but I am grateful to my noble friend Lord Davies for opening up the question of a strategic approach to the state pension.

The assumption had been that the state pension, old or new, was the basis, or the foundation, of developing retirement income and that any private provision would be on top. Given that we have rising levels of pensioner poverty now, and looking across the landscape of current saving rates on auto-enrolment, are the Government confident that this strategy is working and that people will have adequate income in retirement on the basis of the figures that she is seeing? I should be interested to hear her response to that.

My noble friend Lord Sikka again mentioned the question of people who are struggling. We are very anxious about the cost of living facing pensioners in the difficult months ahead, which is why I very much hope that the Government are tackling pensioner poverty in the ways that we have discussed.

Taking my noble friend Lord Davies at his word, he did not in fact raise this with the intention of pressing the Government for 8.1% now but to raise the broader questions. I hope the Minister will take him on that basis and give him a response that will help to answer the kind of questions he has raised.

[Baroness Altmann (Con)]

I apologise for being even slower to rise. I will not detain the House long. I would just like to echo and support the calls for a wider review of state pensioner support. That is long overdue. Perhaps this debate will produce a willingness at the department to look again at all the elements of the way we support pensioners in this country.

--- Later in debate ---

I very much support the alternative approach of the noble Baroness, Lady Altmann. I think most of us here agree that what is proposed in the Bill is woefully inadequate. I hope that all Members of this House will support this amendment and send it back for MPs to think again.

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Altmann, for explaining her amendments, and all noble Lords who have spoken. I welcome my noble friend Lady Ritchie to the debate and thank her for sharing her perspective on Northern Ireland with us and the position of women. That was very helpful.

We had a good discussion at earlier stages of the Bill about the way the Government have gone about finding an alternative to the triple lock which will deal in some way with the impact of the pandemic on earnings data. As the noble Baroness, Lady Janke, has just indicated, I do not think many of us are very happy with where the Government have landed; I think that is safe to say. I will not rehearse all the arguments from Committee, but I am going to summarise them because noble Lords have made some very important points about poverty. There is an additional dimension to this amendment about the question of principle.

The Government came to power on the back of a manifesto commitment to the triple lock. Labour also supported the triple lock at the last election. Therefore, for all of us, the starting point is that the triple lock should apply. We on these Benches accept that the earnings growth data have been distorted by the effects of the pandemic directly, and the effects of the furlough scheme and changes in hours. But that does not mean the Government should just ditch their manifesto promises.

As my Commons colleague, the shadow Pensions Minister Matt Rodda MP put it at Second Reading:

“At the very least, Ministers should maintain an earnings link, explain their decisions, offer binding commitments to protect the triple lock and protect the incomes of less well-off pensioners.”—[Official Report, Commons, 20/0/21; col 63.]


Well, quite. Both in the Commons and in this House, Labour has made clear its view that the Government should have found a way to deal with this that maintained the earnings link. The importance of the earnings link has been very well explained by the noble Baronesses, Lady Wheatcroft and Lady Greengross, my noble friend Lady Lister, and others.

But how should that be done? In the Commons, Labour suggested using an average rise in earnings over a longer period of time. In this House, I first suggested that to the Minister not in this Bill but in the passage of the Social Security (Up-rating of Benefits) Act 2020. That was the emergency Bill designed to deal with the fact that earnings were negative last year, therefore something had to be done to uprate it. This year in Committee, again I raised the question of why the Government did not smooth the effects over two years, but I got no satisfactory answer and I accept that time has moved on. So where does that leave us?

The Government will say that we cannot pin down precisely the size of the pandemic effect on earnings growth. That is true, but the best we have is the work that the ONS has done. Its modelling stripped out the two main things: the base effects and the compositional effects. If noble Lords will forgive me for “nerding” for a moment, I will explain them.

The base effect is essentially that, a year earlier, people were on furlough and worked fewer hours; when you measure earnings a year later, more of them have gone back to work and are on full hours, so earnings appear to have jumped a lot. That is one effect. The compositional effect is a change in the composition of the workforce—people on lower incomes were more likely to lose their jobs in the pandemic.

The ONS modelled stripping both of those effects out to try to get a figure for real underlying earnings growth across the year to use as a reference point. It came up with a range for that underlying growth. The Government do not like it because they think it is not robust enough to use as a measure for uprating earnings. If they do not like those figures, I suggest that it is up to the Government to go away and find some other way to show that the earnings link is being maintained. Amendment 3 does not specify any figure, and Amendment 4 merely says that the Government should use a figure for earnings chosen

“in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.”

In the Commons, my colleague, the shadow Work and Pensions Secretary, Jonny Reynolds, said:

“I do believe there is a need to maintain the value of the state pension and the objectives of the triple lock are ones we should keep to”.—[Official Report, Commons, 20/9/21; col. 84.]


That is the problem with the Government’s approach in a nutshell. Their proposals in the Bill mean stepping away from the fundamental principle that pensions should keep up with earnings. They also breach the manifesto commitment to the triple lock, which, as my noble friend Lord Davies said, is a breach of trust with the electorate—that is the third, coming after the cut in overseas aid and the national insurance rise. There must be a better way than this, and this amendment directs the Government to find it. If they do not like this wording, they can bring back an amendment in lieu.

I realise that the Bill needs to be on the statute book by 26 November, for reasons to do with IT, but that is more than three weeks away. The Government managed to get the whole Bill, in all its stages, through the Commons in a few hours, so I do not believe it is beyond their wit to be able to come up with an alternative and come back to the House in due course.

For us, this is a matter of principle. It is not just about the amounts of money. That is why we are supporting this amendment, specifically on the earnings link for the state pension. The Government should find a way to keep their manifesto promise and maintain the earnings link, and to do so in an appropriate way. I hope the Minister will accept it.

[Baroness Stedman-Scott (Con)]

My Lords, I thank the noble Baronesses, Lady Altmann, Lady Janke and Lady Wheatcroft, and the noble Lord, Lord Hain, for their amendment. The Government’s reasons for not adopting an altered measure of earnings have not changed. That includes the unacceptable level of risk that would be attached to changing the definition of earnings using the current legislation. I remind your Lordships again that the cost of failing to secure Royal Assent to this Bill by mid-November would be in the range of £4 billion to £5 billion.

I very much understand my noble friend Lady Altmann’s concern about a temporary suspension of the earnings link, for all the reasons she and others have so eloquently outlined. But the fact remains that the figures quoted from the Office for National Statistics have no official status and have been taken from a blog that the ONS published, alongside the usual earnings statistics, first in July this year and then in subsequent months.

The key reason why the Government cannot accept this amendment is that the ONS figures are just not robust enough to form the basis for an uprating decision. This is best demonstrated by two quotes from the ONS:

“The blog explains that there are a number of ways you can try to strip out these base effects, but there is no single method everyone would agree on. We have tried a couple of simple approaches. Neither approach is perfect … Our calculations of an underlying rate are there to help users understand base and compositional effects, but there remains a lot of uncertainty about how best to control for these effects, so they need to be treated with caution.”


Using a range of possible estimates based on a method that cannot be agreed on does not provide a sufficiently robust basis for making critical decisions about billions of pounds-worth of expenditure.

A further point is that the ONS has calculated its range of adjusted underlying earnings growth for a measure of regular pay. The usual measure of earnings used for uprating is total pay, which is regular pay plus bonuses, because this gives a more complete picture of earnings, as bonuses can play an important part in earnings. There are no such problems with CPI inflation, which is a robust national statistic and provides a clear and sound basis for this year’s uprating, with no need for any complex adjustments.

I must remind the House that this Bill is for one year only. From 2023-24, the legislation will revert to the existing requirement to uprate by at least earnings growth, and the Government’s triple lock manifesto commitment remains in place.

Finally, I point out that, if a percentage of 3.1% or more is applied in 2022-23 to the current rate of the basic state pension, this would mean that the full yearly rate will have increased since 2010 by £570 more than if it had been uprated by prices; that is over £2,300 pounds more in cash terms. In addition, people over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eye tests and NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year.

My noble friend Lady Altmann talked about the cost-of-living crisis in relation to energy and inflation. Ofgem’s energy price cap has protected consumers from the recent fluctuations in wholesale gas prices. Millions of low-income households will be supported with the cost of essentials through the £500 million household support fund. This builds on the £140 warm homes discount, which helps 2.2 million low-income households with their energy costs, and the winter fuel payment, which provides £200 toward energy bills for households with a member at or above state pension age and £300 for households with a member at or above 80 years old.

The noble Baroness, Lady Lister, talked about not receiving a letter. I am assured that the letters have gone out. If, by the end of this debate, she still has not received one, I hope she will let me know and I will make sure this is rectified. I say the same to everybody in the House: I am sure that those letters have been sent. In the light of my remarks, I ask the noble Baroness to withdraw her amendment.

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Tabled by

[Baroness Sherlock]

5: Clause 1, page 2, line 11, at end insert—
“(3) Within six months of the passing of this Act, the Secretary of State must publish a review of the impact of this Act on pensioner poverty.(4) The review must examine, but is not limited to, the impact of this Act on women.(5) This review must be laid before both Houses of Parliament, and a Minister of the Crown must arrange to make a statement.”

[Baroness Sherlock (Lab)]

My Lords, on Amendment 5, I thank the Minister for having listened to our representations on the impact of this Bill and for agreeing to publish an impact assessment. I would have preferred to have had a chance to read it before making a decision. However, given the Minister has moved on this issue, I accept her assurances and will not press my amendment. I should warn her that we shall keep coming back to the matter of pensioner poverty, so I hope that the Government have plans to tackle this in the longer term. For today, I thank her and shall not press my amendment.

Amendment 5 not moved.

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[Lord Hendy (Lab)]

My Lords, it is a pleasure to follow my noble friend Lady Blower. I support all the amendments that have been advanced today because they all have the object of protecting the level of state pensions. I particularly support Amendment 6, moved by my noble friend Lord Sikka.

I apologise that I was out of the country last week and so missed participation in Committee. However, I hope noble Lords will allow me to develop a short point that I made at Second Reading. Because, as a Member of your Lordships’ House, I have endeavoured to restrict my participation to the issues that arise from the rights and interests of workers, I want to emphasise two reasons why the state pension is of such concern to workers. The first is that pensions are the deferred wages that workers effectively earned while they were able to work. Once retired, their capacity to earn from their labour is exhausted and pensions are essentially what sustains them. Low earnings lead to low pensions, and the pay gaps manifested in earnings are duplicated in pensions—the gender pay gap in particular, but also differentials based on ethnic origin and disability.

The impact on pensioners of the failure of pensions to keep up with the costs that they face—as noble Lords and, in particular, noble Baronesses have pointed out—will be profound. Some 25,000 of our elderly already die of the cold each year, 2 million live in poverty and 1.3 million do not get enough to eat. Life expectancy is falling in the areas with the greatest poverty.

That leads to my second point. The second reason why present pensions are also of concern to those who are currently in work is this: my noble friend Lord Sikka reminds us that the Government estimate that, by the removal of the triple lock, they will save £5.4 billion from pensioners in the year 2022-23 and some £30.5 billion over five years. That is money that, were it left in the purses and pockets of pensioners, would be spent on food, clothing, heating, rent and so on. Pensioners’ incomes are spent in their local economies. There they help to sustain the jobs of current workers, particularly in shops and local services. Make no mistake: more high street shops will close and more jobs will be lost from the failure to maintain the triple lock, and it will hit the poorest areas the hardest. The impact may be indirect but the ending of the triple lock will affect current earners as well as current pensioners.

The Minister, who is rightly respected because of her sensitivity to the plight of the less well-off, knows that well. She was kind enough to write to me and other noble Lords after Second Reading explaining her position, but her Government have no answer to the two essential points made in the debates today. The abolition of the triple lock will mean that poor pensioners and the poorest local economies in the country will be made yet poorer. Such outcomes are far from necessary, as my noble friend Lord Sikka has repeatedly demonstrated through the progress of the Bill. I therefore support his amendment and all the others that seek to salvage something from the wreckage.

[Baroness Sherlock (Lab)]

My Lords, I thank my noble friend Lord Sikka for introducing his amendment, and all noble Lords who have spoken.

As I have said previously, many of us around this House share an underlying concern about the living conditions of pensioners, especially poorer pensioners. We have had lengthy debates about pensioner poverty in Committee and in debating my Amendment 5, so I am not going to revisit the issue at length at this stage of the Bill. However, I am pleased that the Government have agreed to publish information about the impact of the Bill, which I hope will help us to press the case for a fresh assault on the growing problem of pensioner poverty.

I explained in earlier debates our stance on uprating and what we think is the right way forward. We do not believe the Government have presided over earnings growth of 8%, much as they would like us to think they have. We think they should find a way to deal with the earnings data distortion caused by the pandemic and look for a way forward that maintains the earnings links and uprating and fulfils their manifesto commitment to a triple lock. That is the right way forward.

There is an additional issue in how this amendment is framed. The elected House has voted for the Bill and, since it has only two clauses and Clause 2 is simply the commencement, extent and name of the Bill, to delete Clause 1 would effectively completely eviscerate the Bill. I understand how strongly my noble friend feels about this issue; we all feel strongly. The question is not what we want to happen and what we think is the right thing but how this House can best achieve a result for those who most need our help.

So although we cannot support my noble friend’s amendment, that does not in any way mean that I believe the Government have got this right; I really do not think they have. That is why we on these Benches are very happy to throw our weight behind the amendment that is going to go back to the Commons and make them look at this issue again. I urge the Government to find some way in which they can fulfil their manifesto commitment, maintain that earnings link and make sure that people out there get the uprating that they need. I hope the Government can do that.

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[Baroness Sherlock (Lab)]

My Lords, I normally think my job is basically to help the House by offering an idiot’s guide to how things work, but I think it is beyond me this evening. My noble friend has asked so many questions that I want to add only a couple.

First, I want to see whether I can understand what the Minister was saying in her letter on 25 October. I think she was saying that the national insurance scheme is financed on a pay-as-you-go basis, with contribution rates set broadly at a level necessary to meet the likely cost of contributing benefits and pensions in that year, taking into account any other payments and receipts and the need to maintain a working balance, which seems to be targeted at 16.7% of benefit expenditure. That is an oddly precise figure, whose basis completely eluded me, but maybe she can enlighten me.

The Minister’s response said the fund may be in surplus now but it was forecast to be in deficit next year so there would not be a surplus to draw on. I think her case is that the context of surplus is not meaningful, because the fund is designed to wash its face, and therefore, if income is lower or expenditure higher than expected, the Treasury tops it up and reverses those ships back out again. Is my idiot’s guide right—have I understood the Minister’s case? If so, can she answer some questions?

If there is a surplus of £37 billion, why is it so high this year? What is the projected deficit for next year, and why is it projected as that? I think my noble friend addressed my next question on the hypothecation of funds for the NHS. When the Secretary of State makes her statutory decisions on uprating, is any reference made to the state of the National Insurance Fund?

Finally, on a slightly tangential point, anyone who has ever knocked on doors during elections will know that a certain proportion of voters is still convinced that the National Insurance Fund is hypothecated at the level of the individual: “There is a savings account somewhere in the Treasury with my name on it; my national insurance contributions go into that and pay my benefits and pension when I retire.” I think that is one of the reasons why so many people are outraged when they find their state pension age pushed back or, after years of paying contributions, they finally claim benefits and find they are incredibly low—far lower than the tabloid coverage had led them for many years to believe was being offered in largesse to the poor.

In practice it is a pool system, not an individual one, and today’s workers pay for today’s pensions, not their own pension. Given that, does the Minister think there is enough transparency on the way the National Insurance Fund works? People are now paying 20% standard rate tax and 12.5% NI, so most workers are going to be paying 32.5%; and NI kicks in at a lower threshold. Does she think the Government are sufficiently accountable for all that and the way it is spent? I would be interested in her comments.

[Baroness Stedman-Scott (Con)]

My Lords, out of courtesy to the noble Lord, Lord Sikka, and the noble Baroness, Lady Sherlock, for the points that she has made, and to bring some clarity to the questions raised, I hope that the House will agree that I sent the letter in good faith, and will allow me to take it back to officials with the points that have been raised and come back with, I hope, the re-emphasis that is needed to clarify the position on the fund. However, I am advised that the first point raised by the noble Baroness, Lady Sherlock, in her summing up, is correct.

As the noble Lord, Lord Sikka, will be aware, there is an existing statutory requirement under the Social Security Administration Act 1992 for a GAD report on the likely effect on the national insurance fund of the draft Social Security Benefits Up-rating Order and the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations. There is no equivalent statutory requirement for this Bill, and GAD will conduct its assessment in the round based on the draft uprating order, which will include all benefits paid out of the national insurance fund, not just the ones covered by this Bill.

With respect to an assessment of the impact on the fund if this legislation is not passed, it is important that the working balance of the national insurance fund remains positive, as this ensures that there are always enough funds to pay for these benefits and allows the Government to deal with short-term fluctuations in spending or receipts. If the balance of the fund is expected to fall below one-sixth of forecast annual benefit expenditure, the Government will transfer a Treasury grant, paid from general taxation, into the fund. This ensures that benefits such as the state pension can always be paid as necessary.

I know that several noble Lords have suggested that, when in surplus, the fund can be used to increase expenditure beyond the level originally planned, but I am afraid that that is a misconception. The balance of the national insurance fund is managed as part of the Government’s overall management of public finances and reduces the need for it to borrow from elsewhere. Therefore, any additional spending from the national insurance fund would represent an increase in overall government spending and, without cuts in other areas of spend or additional taxes, an increase in government borrowing.

Not passing this Bill would not only increase state pension payments from the fund this year by an anomalously high figure of 8.3% but have a long-lasting compounded impact for decades to come as the anomalous figure would be baked into the baseline. The Government do not believe that this would be fair to younger taxpayers. Based on these arguments and the commitment that I have given to review the letter and the questions raised today, I ask the noble Lord to withdraw his amendment.

Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

3rd reading
Monday 8th November 2021 Lords Chamber

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

My Lords, as this is a two-clause Bill and the main clause was an amendment, I will use this opportunity to thank all noble Lords for the positive engagement and feedback they have provided thus far. We have had some truly wide-ranging debates, and I deeply appreciate the House’s passion for and knowledge of social security and pensions. I am enormously grateful to my noble friend Lady Scott, who has supported me at each stage of the Bill’s progress, both on and off the Floor of the House. I extend my thanks to the noble Baronesses, Lady Sherlock, Lady Janke, Lady Altmann and Lady Stroud, and the noble Lords, Lord Sikka and Lord Davies, for their amendments, ensuring thorough scrutiny of the Bill. I extend my thanks to the countless other noble Lords who have provided an abundance of constructive support and knowledge, and I thank all noble Lords for taking part.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for her remarks and thank all noble Lords who participated in the debate on the Bill. For a short Bill, its impact is quite wide, affecting millions of people. Our debates have raised some crucial issues around approaches to uprating and the government strategy for retirement saving, and especially around the position of pensioners on lower incomes as we enter a season of spiralling prices. Not for the first time, it is possible that our deliberations may have a broader impact in parts of Westminster and Whitehall than perhaps we realise or will ever know—at least until the autobiographies of the future come to be written.

On the matter of memoirs, these proceedings have also been notable for the return to the fray of the former Minister for Welfare Reform, the noble Lord, Lord Freud, whose frank demolition of the Government’s case for social security cuts and policies such as the benefits cap will, I predict, turn out to have a half-life somewhere around that of uranium.

I thank the Minister for her concession on Report, in response to my amendment on pensioner poverty, that an impact assessment should be published. That happened on Friday. I look forward to having the opportunity, if we can, to discuss that with her and her officials in due course. Most importantly, we have amended the Bill to require the Government to find a way to adjust pension uprating and to maintain the earnings link, while making allowance for the pandemic. I urge the Government to take that seriously and to use the time they now have to find a better solution than that offered by the Bill.

Public trust in politics has taken a bit of a hit in recent times. If there were a way of pursuing this objective without dumping a manifesto commitment, we would all want that. In the meantime, I thank the Minister and her officials, colleagues across the House for their thoughtful contributions, and Dan Harris of our staff team for his marvellous support. We send the Bill back to the Commons with our best wishes, hoping that it will embrace it and hold on to it as it is.

[Lord Stoneham of Droxford (LD)]

My Lords, the noble Baroness, Lady Janke, apologises for not being able to be here today. She has asked me to say a few words on behalf of our group. We very much welcome that noble Lords have agreed with the amendment from the noble Baroness, Lady Altmann. We hope that it will enable MPs in the other place to think again about the need to protect pensioners from the worsening economic circumstances. In the time since the Bill’s passage through the other place, significant changes have taken place, with economic indicators leaving little doubt that pressures will grow in the months ahead. I thank all noble Lords for their contributions. I particularly welcome the cross-party working made possible by the noble Baronesses, Lady Altmann and Lady Sherlock. We have much appreciated the Minister’s helpful approach. We thank her for her openness and willingness to share information on the Bill. We extend sincere thanks and appreciation to the Bill team, who have provided us with expert professional advice at all stages.

Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments
Tuesday 16th November 2021 Lords Chamber

[Lord Rooker (Lab)]

My Lords, I will briefly follow the introduction made by the noble Lord, Lord Desai. I will not address the issue—I did that the last time we sat—but there is a wonderful clarity about this issue. With ignorant journalists in the media calling for the abolition of your Lordships’ House, this issue shows, above all, that we will always be an irritant to the Government, whatever party is in power. It was the same when I was over there; the House is an irritant. The clarity with this issue, particularly for those of us who do the Peers in Schools programme, it that it is a wonderful example that is very easy to explain of the fact that the Commons always has the last word.

So, whatever the arguments about the composition and powers of this place—and the idea that we can legislate at will, which we cannot—this example gives wonderful clarity on the fact that the Commons always has the last word. Our job is to ask MPs to think again and again, and sometimes again—I have known examples of three occasions. But the fact of the matter, which the elected Chamber cannot run away from, however it is dressed up, is that the Commons has the last word—and I think that is to your Lordships’ advantage for the way we operate.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing her Motion and all noble Lords who have spoken. I am going to get a new T-shirt for Christmas: “Proud to Be an Irritant”. Perhaps they should start selling them in the House of Lords gift shop; they might sell quite well. A nice note for the noble Lord, Lord Desai.

I must say that I am disappointed. The House voted by a healthy majority for the amendment in the name of the noble Baroness, Lady Altmann, which would have kept the link between pensions and earnings. It is worth noting that the amendment won support from around the House, whereas the Government were able to persuade only 13 Members who do not take the government Whip to vote against. The reason is clear: the case was unpersuasive.

The Government came to power on the back of a manifesto commitment to the triple lock, which we also supported at the last election, as did the Liberal Democrats and other major parties. The Government now want to ditch it for next year on the grounds that the rise in earnings over the year to last summer was artificially high as a result of Covid. We accept that earnings growth was distorted as a result of the pandemic, but that does not mean that the Government should just ditch their promises. They could and should have found a way to maintain the earnings link in pensions while adjusting for the Covid effect.

I will not relitigate this but, during the passage of the Bill, we looked at lots of ways we could do it, and lots of constructive suggestions emerged, and in the end the House coalesced around a very reasonable amendment in the name of the noble Baroness, Lady Altmann, with cross-party support, which simply said that the Government should use a figure for earnings chosen

“in the light of reasonable adjustments to take account of the impact of the COVID-19 pandemic based on the Office for National Statistics reported earnings figure.”

It could not have been more reasonable, and it left the Government considerable latitude: we were not telling the other place what to do but simply giving them a chance to think again.

But the Government flat out rejected that. The Pensions Minister in the other place did comment on the merits of the amendment, but he caricatured it by saying that it

“invites the Secretary of State to measure earnings as if they were not actually growing by 8.3%.”—[Official Report, Commons, 15/11/21; col. 359.]

So are the Government now saying that earnings growth actually is 8.3%? If so, why are they ditching the triple lock? And if it is not 8.3%, why did they not take the chance this House afforded them to look at alternatives?

The Minister again mentioned time pressure, so I put to her again a question I put at an earlier stage in the Bill. She told noble Lords there were two reasons why it was so time-critical. The first was that the computers have to be changed by a date—I think it was 26 November, or another date late this month that was the last date that computers could be changed to adjust the rates for next year. She also said that the House will then have to approve the uprating order, which we normally do in the spring. So what happens if they change the computers deep in the bowels of DWP and then the House chooses to reject the uprating order? What happens then?

While we are here, by refusing to look again, we are left with a Bill which will uprate pensions by the CPI inflation rate prevailing last September. Meanwhile, we all know that the costs of things that all pensioners use—food and fuel, for example—are spiralling up. Pensioner poverty is on the rise again. The last Labour Government managed to bring it way down, but it started to rise again in 2012. It is now on the rise and it will get worse yet.

I am sorry to say that this short Bill is a mistake. It steps away from the earnings link and, in walking away from their manifesto commitment for the third time, the Government are breaking trust with the electorate. Why are they so determined to do it? Ministers tell us that it is for one year only. Great, but I worry that their refusal to be creative in finding a way to deal with the fallout from the pandemic raises fears that they really are planning to walk away from this longer term.

My noble friend Lord Rooker is, as always, right. We have done what we can. We have asked the elected House to think again. The Government whipped their people to say that they did not want to do so. I think they are wrong. Pensioners will pay the price for this and they will not likely forget this breach of trust. I hope the Government think it was worth it.

[Baroness Stedman-Scott (Con)]

My Lords, I thank all noble Lords for their contributions. To answer the question put by the noble Lord, Lord Davies, about the Government believing in the long-term earnings link, yes, this Bill is for one year only. After that, it will revert to the current legislation, and state pensions will increase at least in line with earnings. The triple lock will be applied in the usual way for the remainder of the Parliament. We believe that 8.3% is atypical growth, just as we considered minus 1% to be atypical last year, which is why we increased state pensions by 2.5% instead.

Again, to the noble Lord, Lord Davies, inflation is forecast to be higher than 3.1%. Do pensioners not need a higher increase? The uprating order for all benefits will take effect from April 2022 and, last year, pensioners saw an increase of 2.5% when CPI for the uprating review period was 0.5%. Average actual CPI over the first six months of this financial year was lower, at 2.4% at the Budget, and the OBR forecast that CPI would average 4.1% for the second six months of this financial year. If this turns out to be the case in September, the CPI figure will be a good reflection of average inflation over whole of 2021 and 2022.

The noble Lord, Lord Sikka, said that the state pension is the lowest in the developed world and is still below the 1979 level relative to average earnings. This comparison is misleading. There are many factors to take into account: tax systems, healthcare systems, pension ages, cost of living, access to occupational pensions and the availability of other social security benefits, as well as the provision of services and goods free to pensioners or at a concessionary rate. The Government provide considerable additional support for pensioners. People over state pension age are entitled to free winter fuel payments worth £2 billion every year, free eyesight tests, NHS prescriptions worth around £900 million every year, and free bus passes worth £1 billion every year. In addition, the BBC has made provisions so that those aged 75 or over who are in receipt of pension credit are eligible for free TV licences.

To answer the question put by the noble Baroness, Lady Sherlock, if there is no Royal Assent, we need to use the current legislation at 8.3%.