Social Security (Up-rating of Benefits) Bill

Baroness Sherlock Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Tuesday 27th October 2020 Lords Chamber

[Baroness Janke (LD) [V]]

My Lords, I too welcome the amendment of my noble friend Lord Addington. We are all interested to hear the Government’s thinking, particularly on the future of the triple lock. I am sure that we all welcome their commitment to the undertakings in their manifesto and are pleased to see the Bill. However, in recent months, a lot of doubt have been shared regarding the triple lock’s future. Some people have said to me that there seems to be an almost systematic picking at the seams of the triple lock. With the Chancellor under pressure due to the economic implications of the pandemic, we would like some reassurance from the Minister that the Government are committed to ensuring that the pension keeps its value.

The state pension is particularly important to give the poorest pensioners confidence. Everyone is suffering under the pandemic but there is no doubt that the poorest are suffering worst. We would like to know the Government’s thinking for the future. Will there be a commitment in the Bill to keep the 2.5%, as well as transparency and clarity to reassure those pensioners who are particularly dependent on the state pension? I look forward to the Minister’s reply.

[Baroness Sherlock (Lab) [V]]

My Lords, I am grateful to the noble Lord, Lord Addington, for explaining what his amendment would do, and to other noble Lords who have spoken in pursuit of clarity. The noble Baroness, Lady Altmann, raised the issue of the uprating of pension credit and the standard minimum guarantee in particular. I will return to that in more detail when I move my Amendment 3 shortly.

The Bill is permissive rather than prescriptive. The Explanatory Notes say that it will

“allow the Government to meet its commitment to the Triple Lock.”

At Second Reading, the Minister was invited by many noble Lords to tell the House if it was indeed the Government’s intention to increase the state pension in line with the triple lock, but she simply repeated the formula that the Bill

“will allow the Government to maintain their manifesto commitment to the triple lock.”—[Official Report, 13/10/20; col. GC 309.]

Had she been able to go further, she might have obviated the need for much of the debate we are having at the moment.

The Minister was also asked at Second Reading whether the Government intended to stand by the manifesto commitment to the triple lock for the rest of this Parliament. As the noble Baroness, Lady Janke, pointed out, there have been various rumours and briefings swirling around that have cast some doubt on the future of the triple lock. But answer came there none.

I realise that the Minister is in a difficult position. She probably thinks it unreasonable of us to ask her to answer these questions because the decisions are not hers, but she speaks for the Government in this House. We are being asked to fast-track this Bill to enable the governing party to fulfil a manifesto commitment, although the Government will not tell us whether they are going to fulfil it. It does not seem unreasonable to ask for a bit more clarity. I look forward to her reply.

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

My Lords, I thank the noble Lord, Lord Addington, for the first amendment and for clarifying the date to which he referred. His charm clearly works better than mine.

The purpose of the Bill is to allow the Secretary of State to increase the specified pensions and benefits for 2021-22. This then allows the Government to deliver their triple lock commitment. However, the actual rates of increase for each of these pensions and benefits are subject to the Secretary of State’s annual statutory uprating review. In presenting this urgent Bill, the Government have sought to replicate the powers given to the Secretary of State in the founding legislation, as was also the case in 2009.

This amendment would also apply the triple-lock formula to the pension credit standard minimum guarantee and to widows’ and widowers’ industrial death benefit for 2021-22. The triple-lock commitment does not apply to those benefits. By convention, the relevant widows’ and widowers’ benefits keep pace with the basic state pension.

In previous years the Government have sought to match the basic state pension cash increase in the pension credit standard minimum guarantee, where this increase has been higher than an amount generated by the increase in average earnings; that is the statutory minimum for uprating the standard minimum guarantee. As a result, the standard minimum guarantee for a single person is now nearly £10 a week higher than it would otherwise have been. For a couple, it is nearly £15 a week higher. The decision on how to uprate the standard minimum guarantee next April will be made during the Secretary of State’s uprating review and will be announced in November. These rates too will be subject to the Secretary of State’s statutory review in November.

The noble Baronesses, Lady Altmann and Lady Janke, asked whether the Government are going to honour their commitment to the triple lock and introduce the 2.5% element. As I have said, the Bill makes technical changes for 2020-21 which will ensure that state pensions can be uprated even though there has been no growth in earnings. This will allow the Government to maintain their manifesto commitment to the triple lock, including the 2.5% element.

The noble Baroness, Lady Janke, asked by how much the state pension will be increased this year. The Bill enables the Secretary of State to uprate state pensions in 2021-22. Every autumn, the rate of state pension increase is subject to the Secretary of State’s uprating review to which I have already referred. It would not be right to pre-empt the outcome of this review. The triple lock is a manifesto commitment under which the rate of the state pension will increase by the highest of the growth in earnings and prices, or 2.5%.

The noble Baronesses, Lady Altmann and Lady Sherlock, raised the uprating of pension credit. Without this Bill, the core component of pension credit—the standard minimum guarantee—will be frozen in 2021-22. The decision on how to uprate the standard minimum guarantee will be made during the Secretary of State’s uprating review. Your Lordships will have the opportunity to debate the uprating of the state pension, pension credit and other benefits when the draft order implementing the Secretary of State’s decision is brought before Parliament for approval in the normal way. I therefore ask the noble Lord to withdraw the amendment.

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[Baroness Sherlock (Lab) [V]]

My Lords, I thank the noble Lord, Lord Randall of Uxbridge, for explaining his amendment to us. He is a strong advocate for this cause and I am very sympathetic to the position in which many pensioners find themselves. However, it is a difficult issue, which successive Governments have struggled to resolve.

Perhaps I may ask the Minister some specific questions. First, we have heard that 500,000 people living in other countries are affected in this way. Can the Minister confirm that figure? How much does she believe that it would now cost to change the rules?

Secondly, the noble Lord, Lord Randall, both today and at Second Reading, highlighted two particularly difficult sets of cases. The first was the position of veterans. Today, he mentioned Harry Penny, Roger Edwards, Patricia Coulthard and others, and I am still thinking about Anne Puckridge, whom he mentioned at Second Reading—the 95 year-old World War II veteran whose pension was frozen when she moved to Canada at the age of 76 to be near her family. It is hard to see the justice in those who fought for this country being denied the pensions that they earned simply because they moved abroad to be with their families in their later years and did not realise what would happen. Do the Government know how many veterans are in this position?

The noble Lord also mentioned at Second Reading the case of Monica Phillips, who emigrated to the UK in 1959 as part of the Windrush generation. After 37 years working here, she returned to Antigua to look after her mum and her pension was then frozen. Again, do the Government know how many of the Windrush generation are affected by this measure? Have they looked into it?

Thirdly, the noble Lord, Lord Randall, also raised today the issue of reciprocal agreements in the wake of Brexit. I have to say to him that I have pursued that issue for some time but have got precisely nowhere. All that Ministers will ever say is that they hope to get a deal, so the position will be as set out in the negotiating documents. However, I will be very interested to see whether he gets any more information than I have been able to obtain.

This issue is so difficult because so many people assume that their pension is determined by what they pay in national insurance contributions rather than where they live when they retire. Therefore, can the Minister assure the Committee that the position is now made abundantly clear to all pensioners, especially as they approach pension age? I look forward to her reply.

[Baroness Stedman-Scott (Con)]

My Lords, I turn to the amendment to Clause 1 tabled by my noble friend Lord Randall of Uxbridge. As he is aware, it would in practice have no effect because it simply commits the Government to uprating UK state pensions, as they do now.

However, my noble friend spoke passionately at Second Reading, and again with great passion and commitment today. He eloquently shared with us the case studies of people impacted by the lack of reciprocal arrangements and the freezing of pensions. The long-standing policy of successive Governments for over 70 years has been that UK state pensions are payable worldwide and are uprated in countries overseas where there is a legal requirement to do so—for example, in countries where the UK has a reciprocal agreement that requires uprating. I look forward to the debate on the issue but, first, I would like to make some points about our reciprocal agreements with other countries.

The UK has reciprocal agreements with several countries, and most of these require uprating. There are only two reciprocal agreements which do not allow for uprating: those with Canada and New Zealand. A similar agreement existed with Australia until early 2001, when the Australian Government withdrew from it. Unlike the UK, Canada and New Zealand have residence-based state pensions. The reciprocal agreements with them broadly allow for periods of residence, employment or contributions in one country to be considered as periods of residence, et cetera, in the other for the purposes of entitlement to a state pension.

The systems in New Zealand and Canada are also means-tested to some extent. For example, New Zealand takes overseas pensions fully into account in its superannuation schemes. New Zealand law also requires that notional income is calculated if a pensioner does not claim his or her state pension from an overseas country. This means that any future state pension increases would be taken into account and the moneys would go to the respective Treasuries, so pensioners on the lowest incomes are unlikely to benefit from increases in their UK state pension. It might also mean an increased tax bill for some overseas residents and the loss of their welfare benefits in their chosen country of residence. This Government believe that our responsibility is to pensioners living in this country, rather than effectively making payments to other Treasuries.

The agreements with Canada and New Zealand were negotiated and agreed some time ago. The pattern of the UK’s reciprocal agreements with other countries is historic. It is based in part on Commonwealth ties but also on the political context at the time of concluding the agreement. That gives rise to inconsistencies. For example, we have an agreement with some Caribbean countries, such as Jamaica, but not with others. The agreement with Jamaica requires uprating. It has been suggested by some that uprating could form part of discussions on future free trade agreements—for example, with Australia and Canada. However, state pensions are not in scope of free trade agreements.

There are no plans to change the policy on uprating UK state pensions overseas. The Government have not entered into a new reciprocal social security agreement since 1992, as my noble friend Lord Randall referred to, and have no plans to enter into new agreements.

The noble Baroness, Lady Sherlock, asked about the number of pensioners living in frozen-rate countries. It is approximately 500,000. I regret that I do not have any numbers for veterans.

My noble friend Lord Randall raised, as did other noble Lords, the question of a moral obligation to rectify this anomaly. The policy on this issue is long-standing, as I have already said, and one of successive Governments. It has been in place for some 70 years and, although I know this will disappoint noble Lords, there are no plans to change it.

My noble friend and the noble Baroness, Lady Sherlock, talked about the impacts on the Windrush generation. UK state pensions are payable worldwide to eligible people based on their NI record. I regret to tell the noble Baroness that we do not know the number of people affected among the Windrush community.

My noble friend Lord Randall asked about pensioners who are resident overseas who have paid their NI contributions, so pensions payable abroad should be fully indexed. The rate of contribution paid is never earned entitlement to the indexation of pensions payable abroad. This reflects the fact that the UK scheme is primarily designed for those living in the UK.

My noble friend Lord Randall raised the issue of consistency across countries, and a particular point about Canada. Canada has a bilateral agreement with the UK that does not cover uprating. The UK sought a reciprocal agreement with Canada that included uprating, but this was rejected as legislation prevented Canada paying its pensions overseas.

My noble friend Lord Randall and other noble Lords raised the issue of the Government’s moral duty to uprate state pensions overseas. The decision to move abroad is voluntary and remains a personal choice, dependent on the circumstances of the individual. For a number of years, advice has been provided to the public that the UK state pension is not uprated overseas except where there is a legal requirement to do so.

Given that the amendment states that any uprating order made under the Bill would uprate abroad in cases where there was already a legal requirement to do so, I urge my noble friend to withdraw it because it has no practical effect, given that the Government are already required to do that in law. However, I welcome the opportunity he has presented to debate the broader issue of uprating overseas.

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Moved by

[Baroness Sherlock]

3: Clause 1, page 1, line 24, at end insert—
“(2C) No draft order laid before Parliament under subsection (2A) may be made in the form of the draft unless the Secretary of State has laid before Parliament—(a) a report containing an assessment of the existing levels of pensioner poverty in each of the regions and nations of Great Britain, and(b) a statement outlining the expected impact of the draft order on pensioners with the lowest incomes.”Member’s explanatory statement
This amendment would prevent a draft order under inserted subsection (2A) from being made unless the Secretary of State has published a report outlining current levels of pensioner poverty across the regions and nations of Great Britain and a statement outlining the expected impact of the Government’s chosen policy option on these poverty levels.

[Baroness Sherlock (Lab) [V]]

My Lords, I made it clear at Second Reading that we support this Bill, and I have no wish to delay its implementation, so Amendment 3 is a probing amendment. I have tabled it to make sure that we get a chance to address the issue of pensioner poverty, which was raised by many noble Lords at Second Reading but did not get a substantive response, no doubt because time was tight. Fortunately, we have all the time in the world in Committee.

The number of poor pensioners had fallen significantly, largely down to the introduction of pension credit, but it is now a cause for concern again. The Government’s own figures show that 1.9 million pensioners are living in relative poverty, so this is something that we should all be concerned about. People who have worked all their lives should not be worrying in old age about how to make ends meet.

There are broader policy concerns too, such as the evidence showing that people on lower incomes have lower life expectancy and fewer years of healthy life after retirement. That is bad for the individual, but it is also bad for the state. Research by the Joseph Rowntree Foundation has shown that these health inequalities have an effect on state spending, leading to higher costs to the NHS and social care services. Has the Minister read the interesting recent report based on research commissioned from Loughborough University by Independent Age which suggests that the underclaiming of pension credit is costing the Government roughly £4 billion a year in increased NHS and social care costs? What does she make of that?

Taking pensioner poverty seriously means that when Ministers talk about their plans for the triple lock for the state pension, they should also be ready to talk about their plans for uprating the standard minimum guarantee in pension credit. That is the reason this amendment suggests that the uprating should be accompanied by a report on the implications for poverty. If pension credit is not uprated by an equivalent amount to the triple lock, the benefit of the increase in the state pension enabled by this Bill will be enjoyed in full, as I have said before, by many Members of this House, but not by the poorest pensioners, who will have it clawed back from pension credit.

Pension credit is key to tackling poverty because as well as topping up weekly income for poor pensioners it can be a passport to other benefits—housing benefit, council tax reduction, the cold weather payment and now the free TV licence for the over-75s. That could be worth up to £7,000 for some pensioners. Do not take my word for it. In giving evidence to the Scottish Social Security Committee on 23 January, a senior DWP official said

“In the UK, 16 per cent of pensioners are in poverty. If all those pensioners claimed pension credit, housing benefit and the council tax reduction—especially the council tax reduction—that would reduce the 16 per cent to almost zero.”

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[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

My Lords, I have received no requests to speak after the Minister. I call the noble Baroness, Lady Sherlock.

[Baroness Sherlock (Lab) [V]]

My Lords, I am grateful to all noble Lords who have spoken to these amendments. As the noble Lord, Lord Shipley, said, if the Government will the ending or reducing of pensioner poverty, they must also will the means. I am not sure that we have heard that today—in fact, I am quite confident that we have not.

Other noble Lords made some very good points. The noble Baroness, Lady Janke, made some important points about the need to understand the impact of the triple lock on poverty. I agree very much about the need to look at particular issues faced by women facing poverty in retirement. The noble Lord, Lord Addington, is absolutely right that, if we do not have adequate data, we will not address the right questions. What is not measured is never going to be accurately addressed.

I thank the right reverend Prelate the Bishop of St Albans for his continued advocacy for those on low incomes at all ages. I wholeheartedly endorse his call for the uplift on universal credit to be extended beyond April, and I ask that this also be extended to legacy benefits. Poor workers often become poor pensioners, so all we are doing at the moment is pushing the problem even further back.

The Minister started her response by saying that she shares our concerns about pensioner poverty, although I notice that she cherry-picked her measures, citing material deprivation and absolute poverty but not the standard measure of relative poverty. If I am honest, I found her response very disappointing. She gave us reasons why the Government are doing good things on private pensions and the state reform, but most of my speech and what other noble Lords spoke about was how to address pensioner poverty in the short term by looking at things such as pension credit. She simply did not do that. I asked a number of questions and made a number of suggestions, none of which got a response at all.

I find this very disappointing because I have a lot of respect for the Minister; I believe her when she says that she will take these issues back to the department, but, in the end, as a House, we are not simply here to say things to the Minister and for her then to say them to her colleagues. When does the message come back the other way? We are one of the Houses of Parliament; it is reasonable to expect someone to come to the House, defend the decisions that their department is taking and tell us why they are not going to follow through.

If we were not in a hybrid state, I would be getting up and saying, “Could I ask the Minister to respond on that?” I cannot, and, therefore, I am constrained by the circumstances, and there is no way to pursue this. However, I ask the Minister to think very hard about how she will go about telling this House what the department has to say and how it is going to respond to our questions If not, I will look for other opportunities to do this on a regular basis and will keep on until we hear something that actually answers our questions. However, in the meantime, I beg leave to withdraw Amendment 3.

[The Deputy Chairman of Committees (Lord McNicol of West Kilbride) (Lab)]

Even in the hybrid House, the Minister can respond to a final set of questions.

[Baroness Stedman-Scott (Con)]

I say to the noble Baroness, Lady Sherlock, and all noble Lords, that I have taken on board the ideas that have been put forward about pension credit: the campaign, and the importance of how it can lift people out of poverty and improve their lives. I will go back to the department, then return and answer the questions asked by the noble Baroness. I will always make that undertaking and will never shy away from answering questions, but I would rather get the right answers rather than give a wrong one and create another little tsunami on pension credit. If the noble Baroness can accept that, I will be grateful.

[Baroness Sherlock (Lab) [V]]

I am very grateful to the Minister for coming back on this. I will look out for those responses, and for the opportunity to discuss them on the Floor of this House. I thank her for her intervention, for addressing the questions and for her constant willingness to talk to us. These things make our debates much better.

Amendment 3 withdrawn.