Social Security Benefits Up-rating Order 2017

Baroness Thomas of Winchester Excerpts

Tuesday 21st February 2017 Grand Committee

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I am grateful to the Minister for that helpful opening statement. I will make one or two comments on what he has said.

However, I will also spend a moment—if I do not impose too much on the Committee—talking about the process available to us as parliamentarians more generally to observe, be confident of, and have assurances about, how the annual social security spend is surviving some of the impositions arising from the Government’s more general fiscal rule—to save £12 billion during this Parliament. That is a significant sum. I absolutely acknowledge—and the Minister was right to explain this, under the terms of the order—that sensible provision has been made for our retired population. The pension rates, the triple lock—everything that he has explained—make perfect sense and sit well with the requirements of that part of our population that is past retirement age.

However, we must have some concerns whether proper provision that, arguably, is being made for those over retirement age, is also being made for those of working age. I want to focus on paragraph 4.3 of the Explanatory Memorandum. In the final sentence—this will come as no surprise to any of us—it is accepted that the main rates of benefit are frozen at their 2015-16 rates, under the 2016 Act. They were not part of the Secretary of State’s review. My opening question derives from the fact that I have been doing uprating statements for as long as anybody—since I first entered Parliament in 1983. They used to be very big occasions, because they were responsible for disbursing huge amounts of public money, and that is still the case. We are, however, getting to the position where I am no longer confident that the protection provided by Section 150 of the Social Security Administration Act is the assurance that it used to be.

As a policymaker, legislator and parliamentarian, I always had confidence that Secretaries of State for Social Security or Work and Pensions sat down once a year and thought carefully, on advice from the detailed research that Secretaries of State have available to them, about whether what was being proposed to Parliament was adequate for the purpose. I do not think we can say that any more, and if that is even halfway true, we as policymakers and the Opposition need to be looking at other ways, if we cannot get assurance from Section 150 of the 1992 Act, to discover what the Government are doing in the department and in their discussions with the Treasury to make proper provision for the rest of this Parliament. This is the only occasion that I can think of when we can do that, although I understand that under the strict terms of the order, I might be on the cusp of what is technically in order.

The plea I make to the Minister—he may not have an answer for this more general question—is that in his new role and as part of a new and very capable ministerial team within what is effectively a new Government taking a fresh look at responsibilities for social protection, he should reflect carefully on how he and his colleagues will be able for the rest of this Parliament to give me the assurance that is absent now that we have restricted consideration for annual review.

My second question relates to the change that we made some years ago, moving to the CPI from the RPI measure. It is significant, historical and very easy to miss. I notice that in its April 2015 data review, the Office for Budget Responsibility calculated that as a result of that single change there was reduction in spend of £5.2 billion a year by 2019-20. I do not expect the Minister to have this figure at his fingertips, but it is very important that for the rest of this Parliament we track the estimates made by the Office for Budget Responsibility and the Department for Work and Pensions of the cumulative results of that single change, which is so significant for all benefits. Monitoring that is part of the work we should be doing.

In the uprating statements for the rest of this Parliament, will the Minister be good enough to monitor exactly how the £12,000 million social security spending reduction is being effected in practice? Where is that money being saved? I know that it is an estimate. That has been made clear by the OBR, the IFS and others. We need to know the relative savings achieved from the freeze, the new two-child limit, the cuts to universal credit, the cuts to ESA and the reduced household benefit cap. If we do not have that information in debates of this kind for the rest of this Parliament, we will be at a significant disadvantage in trying to work out what lower-income households are facing.

I have one further point before I finish, but I shall be brief because I think I am pushing my luck slightly. The order does not contain any reference to working-age benefits. There is a real risk in using cash limits to set benefit upratings in future, but we are getting into a habit of doing that. We froze benefits on a cash basis in 2013-14, and we are doing so now. Two things happen with that. First, the Government are transferring the risk of inflation to benefit recipients, and I do not think that is fair because no one can truly judge what is going to happen to inflation. Colleagues may have more to say about that. Secondly, there is no way of knowing exactly where the saving will be if you rely on inflation. The Government are in a much safer position if they take decisions that can lead to calculations and assessments of what is expected in future.

I am no economist, but I do not think you need to be one to understand that inflation is increasing. The impact of that will bear down on working-age families, particularly those with children. The IFS and the Resolution Foundation have done some excellent work trying to point out the risks that we as a country will be running for the next three or four years. The Child Poverty Action Group reminded us in a recent leaflet that child benefit has risen since the 2010s to where we are now by something like 2%, whereas costs will have risen for the client group that CPAG seeks to represent by about 35% between 2010 and 2020. These are forecasts, and of course forecasts can be wrong, but they are frightening in what we may be facing, particularly for families with children in the lower income brackets.

My plea is that we look at this more carefully and that, if these uprating statements are less useful technically in looking at the totality of the benefit spend, the Minister in his new position goes back and discusses this with his departmental colleagues. He has vast resources, he has some very experienced, talented and clever research people in the department, and I am sure he can help them to ensure that we avoid some of the really regressive scenarios painted by some pressure groups, which know what they are talking about. If we do not, Parliament will find it more difficult in future to be confident that we know exactly what is happening and the disposition of what is an essential policy area for the safety-net provision for low-income families in the UK.

[Baroness Thomas of Winchester (LD)]

My Lords, I hesitate to intervene after the powerful speech from my noble friend Lord Kirkwood, but the DWP bus does not come along very often, so I fear I must take this very small chance to jump on it. The Explanatory Memorandum was actually very helpful, which has not always been the case with DWP statutory instruments. Often the DWP has not had many accolades for its Explanatory Memorandums being helpful, so I would like to say that this one was. At the very end of the memorandum, paragraph 11.2 says:

“Small businesses, like all employers, meet the costs of Statutory Sick Pay without reimbursement but are able to access the services of the Fit for Work Service, a free occupational health service funded by Government for employees absent from work through ill health for four weeks or more”.


Can the Minister tell the Committee whether that service is being taken up? Small businesses are not always good at knowing what the law is, and I know that many of them have never heard of the access to work service for the employment of disabled people. That is very important if the Government want to halve the disability unemployment rate. I would like an update on the fit for work service, which I know was designed by Dame Carol Black, and I would be happy for the Minister to write to me.

--- Later in debate ---

Lastly, I turn to the questions raised by the noble Baroness, Lady Thomas. First, I thank her for her praise for the Explanatory Memorandum. It is a rare experience to have one praised. I will not take the credit for myself but will certainly pass it back to those in the department who are responsible for drafting it. In my naive way, very many years ago when I first came here, I always thought that Explanatory Memorandums were what they said and made life simpler in understanding an order. I have come to realise that that is not necessarily the case, but it is nice to have that praise on this occasion. Secondly, she asked me a detailed question on statutory sick pay. She may remember—I certainly do; it is ingrained on my heart—the Statutory Sick Pay Act 1991, or it may have been 1992, I forget which. To that extent, I once had great knowledge about SSP. I tried to find the paragraph she was referring to in either the Explanatory Memorandum or the order, but I am not sure I found it.

[Baroness Thomas of Winchester]

It was on the back page.

[Lord Henley]

I will have to write to the noble Baroness to assure her on that point.

I appreciate that the noble Baroness, Lady Sherlock, would prefer a greater and longer debate on freezing benefits. As I said, I do not think that this is either the time or the place.