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.