Social Security (Up-rating of Benefits) Bill

Baroness Wheatcroft Excerpts

Committee stage
Tuesday 26th October 2021 Lords Chamber

[The Deputy Chairman of Committees (Lord Russell of Liverpool) (CB)]

I should point out to the Committee that if Amendment 1 is agreed to, I cannot call Amendment 2 by reason of pre-emption.

[Baroness Wheatcroft (CB)]

My Lords, I have put my name to the first three amendments because I believe that doing away with the earnings link would be a really dangerous step. I am grateful to my noble friend Lady Altmann for doing such a lot of work on these amendments and providing the Government with a percentage, 3.8%, which should of course be acceptable. Nobody in this House knows more about pensions than the noble Baroness, and she has introduced this measure so effectively that I can be relatively brief.

Relying on CPI inflation, which would happen if we did away with the earnings link, will act to the detriment of pensioners, as it does not accurately reflect how those pensioners who rely most heavily on their state pensions spend their money. Last month, for instance, the greatest downward pressure on inflation came from hotels and restaurants. It is the basics of life which absorb pensioner incomes, though, not hotels and restaurants. Their money goes on food, fuel and housing, yet we know that the September CPI figure, which would be used to determine the inflation figure for pensions, does not and cannot take account of the increases that are going to dawn on food, fuel and housing prices over the next few months. Earnings are a good guide to where basic costs will go, and we should maintain the link for pensions.

Pensioner poverty is on the rise again. In June this year, Age UK reported that more than 2 million pensioners were living in poverty. We know that very many of those might qualify for extra benefits but do not apply for them, either through too little knowledge or too much pride, so it is crucial that the basic pension—currently, shamefully, the lowest in the OECD in relation to earnings—should rise significantly. There will be some who do not need the extra cash—members of that ever-reducing band with the benefit of a defined benefit pension, or those with an investment income—but the fact that they have more money does not mean that the basic state pension should not rise at a reasonable level: the tax system can claw back the excess. Would it not have been sensible to have made sure that the levy to pay for NHS and social care reform would come from income tax rather than from national insurance, which pensioners do not pay at the moment? I believe that those pensioners who are in work should pay.

However, these amendments make sense. They work as a package and therefore I support them.

Social Security (Up-rating of Benefits) Bill

Baroness Wheatcroft Excerpts

Report stage
Tuesday 2nd November 2021 Lords Chamber

[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.

[Baroness Wheatcroft (CB)]

My Lords, I have put my name to Amendments 1 and 7 in this group, as well as to Amendments 3 and 4 which will be debated later. I am delighted to follow the noble Lord, Lord Rooker. He spoke sanely about what these amendments would do and why they should do it.

The noble Baroness, Lady Altmann, made the case very clearly. There are 2 million pensioners living in poverty and 1 million in extreme poverty. Noble Lords need to know that this Bill would put more people in this position. We should not be passing it unamended.

I find the arguments against our amendments pitifully thin—I am sorry, but I do. I remind the House that, in Committee, the Minister, who wants to do the right thing, said:

“The Government’s triple lock manifesto commitment remains in place”.—[Official Report, 26/10/21; col. 738.]


I know that that is a reference to the fact that we are told that the suspension will be for only one year, but that is not good enough. If you suspend the earnings lock for one year, the cumulative effect goes on, so the commitment is lost.

The commitment was to keep the earnings lock in place because earnings might well be greater than inflation—particularly CPI inflation—and there is no doubt that that will be the case. After all, the Government keep telling us that they want a high-wage economy. But they do not seem to want higher increases for pensioners. We know that, in most cases, these people’s spending is very curtailed. It goes predominantly on fuel and on food. Those are constituents of the CPI, but they are not in the same proportion as they are in pensioners’ spending. Therefore, increases in fuel and food prices hit pensioners harder.

I am still bemused as to how, in Committee, the Minister was able to tell us that,

“we are not currently expecting widespread, significant and sustained increases in consumer food prices in the coming months”.—[Official Report, 26/10/21; col. 740.]

I do not know what she knows, but the supermarkets certainly are. These price rises are already coming through. They are not yet fully reflected in the CPI, but we know that prices in the shops are going up. And the more that wages go up in this new, high-wage economy where we are encouraging drivers of HGVs to demand more money—which the Government say they deserve—the more this will feed through into increased food prices.

We need to make sure that our pensioners can eat. I do not want to be responsible for pensioners going hungry —or even hungrier than they have been in the past—and I do not believe that the Minister does either. It is imperative that we do what should not be beyond the wit of any Government and come up with a number that approximates effectively to where underlying earnings have gone in the last year. I have every confidence that the ONS can do this. Indeed, CPI is not quite as robust as the Minister would have us believe; it is often adjusted after a few months, or even a year, because a lot of numbers have to be adjusted as new information comes through. We could come up with an adjusted earnings figure which would enable the Government to maintain their manifesto commitment, which I am sure it would really like to do. It would enable the rest of us to ensure that pensioners –those on pension credit, as well those on the basic pension—lead a slightly better life. This is all part of the levelling-up agenda.

[Baroness Lister of Burtersett (Lab)]

My Lords, in speaking briefly in support of Amendment 5, although I also support the other amendments in this group, I will spare noble Lords the full lecture on the use of relative and so-called absolute poverty measures that I gave in Committee. As the Minister completely ignored the point in her response to that group of amendments in Committee, I return to it now. In discussing an assessment of the Bill’s impact on pensioner poverty—which is certainly necessary—we should be clear how we measure poverty.

When mentioning poverty, the Minister constantly uses the so-called “absolute measure”, and no doubt she has been briefed to do so today. I say so-called because it is better described as an anchored measure, anchored to the poverty line in 2010-11 adjusted for inflation, but taking no account of changes in living standards in the intervening period. In doing so, she ignores what has happened using the more commonly used relative measure, which is part of the suite of official measures.

--- Later in debate ---

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I would first like to apologise to your Lordships’ House for being unable to speak on the Bill at Second Reading and in Committee due to direct participation in Select Committee work. I am very pleased to follow my noble friend Lady Lister and to congratulate the noble Baroness, Lady Altmann, on bringing forward these cross-party amendments.

Although we in Northern Ireland make our own social security legislation, in all instances it replicates legislation here because the money comes from here. I look across the Chamber at the noble Lord, Lord Dodds; he and I were former Ministers in the Northern Ireland Executive with responsibility for pensions and all social security matters. We may have had the flexibility to bring in slight amendments, but we had to adhere strictly to the principles and policies because of the issue of parity.

I am pleased to support these amendments because, like my noble friend Lady Lister, I believe that pensioner poverty is deepening. In Northern Ireland, I see it day in, day out; people—particularly pensioners, many of whom have paid in over their lifetime’s work through national insurance contributions and tax—now find themselves reliant on the use of food banks. To say the least, the pandemic has worsened their situation; it has made mental illnesses more acute and people are unwell, and they also have less money for important items such as foodstuffs, which they require to survive.

I support these amendments because they are important for protecting pensioners, including the poorest, in line with an earnings figure that is adjusted for pandemic distortions. Protecting women and those who are the poorest in our society should be a mandatory obligation on all of us. There is a duty of responsibility to reject the proposal to remove the triple lock pension system. I say to the Minister and the Government Front Bench that this decision will impact most on those women who find themselves in the greatest level of poverty, who have already been subject to their entitlement to a pension dropping from the age of 60 to the age of probably 66 or 67, as per the Pensions Act 1995 of this Parliament.

I am therefore very happy to support these important amendments. There is a duty of integrity to protect all parties’ manifesto commitments and to amend the uprating Bill to ensure that all pensioners—people who have provided for all of us—are duly protected in the best financial way.

[Baroness Wheatcroft (CB)]

My Lords, I put my name to these two amendments for all the reasons that have just been outlined by the noble Baroness, Lady Altmann, and others who have spoken. It seems absolutely the right thing to do, on behalf of 12 million pensioners, to ask the other place to think again, after it spent just two and a half hours considering how to penalise 12 million people in this country.

It is only right that the link to earnings which was part of the manifesto promises should be preserved. In 1979, the Government of Margaret Thatcher abandoned that link. It was restored again in 2011, but the effects live on and, today, pensions are still below their relationship to earnings in 1979. The argument that this is a one-off does not hold water.

I will not repeat the argument that I used in the first group of amendments, save to say that this is not the time when we should make our pensioners poorer; when we can afford, apparently, to make bankers richer, and enable them to drink more champagne as they fly on short-haul flights in the UK, we really need to think again about whether pensioners should be made poorer. Make no mistake about it: the way inflation is headed, pensioners will be poorer.

The Minister talked about the CPI, but she was looking backwards. It is no good telling pensioners what prices have been; when we are talking about the money they will get in the future, the conversation needs to relate to where prices are going. Prices are going up much faster than the rate by which we are talking about raising pensioner income. For those reasons, it is absolutely right that this House should ask the other place to think again.

[Baroness Greengross (CB)]

My Lords, I support the amendment in the name of the noble Baroness, Lady Altmann. I share with her the many years that we have been working on these issues, and I am anxious that we get the balance right on pension policy.

Amendment 3, which would restore the link between pension uprating and earnings, is essential. This link was removed back in 1980. It resulted in many years of pension rates failing to increase at the same rate as average earnings. At that time, I was at Age Concern England, where we ran campaigns calling for an end to pensioner poverty and for the link with wage movement to be restored. Sadly, when this link was finally restored, in 2011, it was done as part of the triple lock, whereby pensions would increase by average earnings increases, inflation or 2.5%, whichever of the three was the higher. For the last decade, wage movement has been stagnant, and the rate of inflation also quite low. At a time when wages were not increasing, we called on workers to pay for the triple lock, creating, in my view, intergenerational unfairness.

At Second Reading, I spoke about the Intergenerational Fairness Forum report, which made a number of recommendations, including that the triple lock be replaced with a double lock, whereby pensions increase at the rate of average earnings or inflation, whichever is the greater. I refer to my interests as stated in the register, and in particular to my role as president of the Pensions Policy Institute. In 2019, this organisation released a report entitled Generation veXed, which found that people born between 1966 and 1980, who entered the workforce before automatic enrolment and who have worked during a challenging economic climate, have poorer levels of retirement savings when compared with the generation that went before them. This Generation X cohort have been asked to fund the current triple lock, while their ability to save for their own retirement has been, sadly, rather poor.

Retirement policy requires a balance and should not change with each electoral cycle. The situation we find ourselves in today, with the Covid-19 pandemic, is that the Government expect significant wage movement. Of course, this is due not only to the pandemic; it is due also to rising prices caused by Brexit, which will put pressure on employers to increase wages.

Amendment 3 would ensure that the link between pensions and earnings was retained, but it would allow the Secretary of State to make adjustments in situations like the one we face this year. I support the amendment as a sensible solution to the situation we are facing at the present time, but I reiterate my belief that, in future, we should abandon the triple lock and specifically the 2.5% uplift, and instead have a double lock based on earnings and inflation. If in future there is concern that earnings are again not increasing, rather than implement a 2.5% increase for pensions the Government should instead look at their economic and employment policies to ensure that earnings and pensions are both increasing at a decent rate.